<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON AUGUST 25, 1998
REGISTRATION NO. 333-58179
_______________________________________________________________________________
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
AMENDMENT NO. 2 TO
FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
HARRIS FINANCIAL, INC.
----------------------
(Exact name of registrant as
specified in its charter)
PENNSYLVANIA 23-2889833
--------------- ----------------
(State of Incorporation (I.R.S. Employer
or Organization) Identification Number)
235 NORTH SECOND STREET
P.O. BOX 1711
HARRISBURG, PENNSYLVANIA 17105
(717) 236-4041
---------------------------------------------------
(Address, including ZIP Code, and telephone number
including area code, of registrants' principal
executive offices)
CHARLES C. PEARSON, JR.
PRESIDENT AND CHIEF EXECUTIVE OFFICER
HARRIS FINANCIAL, INC.
235 NORTH SECOND STREET
P.O. BOX 1711
HARRISBURG, PENNSYLVANIA 17105
(717) 236-4041
--------------
(Name, address, including ZIP Code, and telephone number,
including area code, of agent for service)
Copies to:
KENNETH R. LEHMAN, ESQ.
NED QUINT, ESQ.
LUSE LEHMAN GORMAN POMERENK & SCHICK, P.C.
5335 WISCONSIN AVENUE, N.W., SUITE 400
WASHINGTON, D.C. 20015
(202) 274-2000
___________________
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC. As soon as
practicable after the effective date of this Registration Statement.
<PAGE>
If the only securities being registered on this Form are being offered pursuant
to dividend or interest reinvestment plans, please check the following box [_].
If any of the securities being registered on this Form are to be offered on a
delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, other than securities offered only in connection with dividend or interest
reinvestment plans, please check the following box [x].
If this Form is filed to register additional securities for an offering pursuant
to Rule 462(b) under the Securities Act, please check the following box and list
the Securities Act registration statement number of the earlier effective
registration statement for the same offering [_].
If this Form is a post-effective amendment filed pursuant to Rule 462(c) under
the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering [_].
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box [_].
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------
PROPOSED PROPOSED
MAXIMUM MAXIMUM AMOUNT OF
TITLE OF EACH CLASS OF SECURITY AMOUNT TO OFFERING PRICE AGGREGATE REGISTRATION
TO BE REGISTERED BE REGISTERED PER SHARE OFFERING PRICE FEE
- ---------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Common Stock, par value $.01 per share 2,300,000 $26.00 $59,800,000 $17,641*
- ---------------------------------------------------------------------------------------------------------
</TABLE>
*Previously paid
The amount of registration fee is calculated pursuant to Rule 457(o) under the
Securities Act of 1933.
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR DATES
AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL FILE
A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION SHALL
THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF THE SECURITIES
ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME EFFECTIVE ON SUCH
DATE AS THE SECURITIES AND EXCHANGE COMMISSION, ACTING PURSUANT TO SAID SECTION
8(A), MAY DETERMINE.
<PAGE>
PROSPECTUS
HARRIS FINANCIAL, INC.
2,000,000 SHARES OF COMMON STOCK
Harris Financial, Inc. (the "Company") a Pennsylvania corporation, which
owns 100% of the common stock of Harris Savings Bank ("Bank"), a Pennsylvania-
chartered savings bank headquartered in Harrisburg, Pennsylvania, is offering
2,000,000 shares of its common stock, par value $.01 per share (the "Common
Stock") for a purchase price of between $19.00 and $26.00 (the "Offering Price
Range"). The Company is a majority-owned subsidiary of Harris Financial, MHC
(the "Mutual Company"), a Pennsylvania-chartered mutual holding company, which
as of May 31, 1998, owned 25,500,000 shares, or approximately 75.1%, of the
33,963,450 outstanding shares of Common Stock. At the conclusion of the
Offering, the Mutual Company will contribute to the Company 2,000,000 shares of
Common Stock, and the total number of shares of Common Stock owned by the Mutual
Company will decrease to 23,500,000 shares, or 69.2% of the Company's
outstanding shares as of May 31, 1998. The Company will cancel the contributed
shares, and in the Offering will issue 2,000,000 shares of authorized but
unissued Common Stock. ACCORDINGLY, THE OFFERING WILL NOT RESULT IN A CHANGE IN
THE NUMBER OF ISSUED AND OUTSTANDING SHARES OF COMMON STOCK. At the conclusion
of the Offering, in the sole discretion of the Company, the total number of
shares sold in the Offering (and contributed to the Company by the Mutual
Company) may be increased or decreased by up to 15% due to market and general
financial and economic conditions and demand for the Common Stock, provided that
the shares sold in the Offering may not be decreased below a number of shares
that will result in less than $38.0 million of gross Offering proceeds. Such
increase or decrease is not dependent upon whether shares are sold at the
minimum, mid-point or maximum of the Offering Price Range.
The shares are being offered pursuant to the Company's Stock Issuance Plan,
which provides that non-transferable rights to subscribe for Common Stock in a
subscription offering (the "Subscription Offering") have been granted, in the
following order of priority, to: (i) Eligible Account Holders, which includes
all depositors of the Bank with aggregate account balances of $50 or more as of
May 31, 1997 (the "Eligibility Record Date"); (ii) the Bank's employee stock
ownership plan and related trust (the "ESOP") in an amount up to 2% of the
shares of Common Stock to be sold in the Offering (as defined below); and (iii)
Supplemental Eligible Account Holders, which includes all depositors of the Bank
with aggregate account balances of $50 or more as of June 30, 1998 (the
"Supplemental Eligibility Record Date") who are not Eligible Account Holders.
Subscription rights are nontransferable. Persons found to be transferring
subscription rights will be subject to the forfeiture of such rights and
possible further sanctions and penalties. Shares of Common Stock for which
subscriptions are not accepted in the Subscription Offering may be offered for
sale in a community offering (the "Community Offering") and/or in a syndicated
offering to certain members of the general public. The Community Offering and/or
syndicated offering, if any, may commence at any time after the commencement of
the Subscription Offering. The Company retains the right, in its sole
discretion, to accept or reject any order in the Community Offering. The
Subscription Offering, Community Offering and syndicated offering are referred
to collectively as the "Offering."
The minimum purchase is $500 of Common Stock. Except for the ESOP, no
Eligible Account Holder or Supplemental Eligible Account Holder may in their
capacities as such purchase in the Subscription Offering more than $250,000 of
Common Stock, and, generally, no person together with associates of and persons
acting in concert with such person may purchase in all categories of the
Offering more than $500,000 of Common Stock; provided, however, that the maximum
purchase limitations may be increased or decreased at the sole discretion of the
Company. See "The Offering--Subscription Offering and Subscription Rights," "--
Community Offering" and "--Limitations on Common Stock Purchases."
THE SUBSCRIPTION OFFERING AND COMMUNITY OFFERING WILL TERMINATE AT 10:00
A.M., PENNSYLVANIA TIME, ON _______________, 1998 UNLESS EITHER OR BOTH ARE
EXTENDED BY THE COMPANY (AS EXTENDED, THE "EXPIRATION DATE"). The Company is not
required to give subscribers notice of any such extension. The Community
Offering must be completed within 45 days after the expiration of the
Subscription Offering unless extended by the Company. ORDERS SUBMITTED ARE
IRREVOCABLE; provided that all subscribers will have their funds returned
promptly, with interest, and all withdrawal authorizations will be canceled if
the Offering is not completed within 45 days after the expiration of the
Subscription Offering, unless such period has been extended. Such extensions
may not go beyond December 31, 2000.
<PAGE>
See "The Offering--Subscription Offering and Subscription Rights" and "--
Procedure for Purchasing Shares in Subscription and Community Offerings."
The Company has retained Ryan, Beck & Co., Inc. ("Ryan Beck"), a registered
broker-dealer, to consult with and advise the Company in connection with the
Offering. Ryan Beck has agreed to use its best efforts to assist the Company in
the solicitation of subscriptions for shares of Common Stock in the Offering.
Ryan Beck is not obligated to take or purchase any shares of Common Stock in the
Offering. See "The Offering--Plan of Distribution and Selling Commissions."
The Common Stock is traded on the Nasdaq National Market under the symbol
"HARS." On September ___, the last reported sale price of the Common Stock was
______________ per share and the closing bid and asked prices were $______ and
$________ per share, respectively.
CALL THE STOCK INFORMATION CENTER AT (800) 801-5279 IF YOU HAVE ANY QUESTIONS.
FOR A DISCUSSION OF CERTAIN FACTORS THAT SHOULD BE CONSIDERED BY EACH
PROSPECTIVE INVESTOR, SEE "RISK FACTORS" BEGINNING ON PAGE _________.
------------------------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION, THE FEDERAL DEPOSIT INSURANCE CORPORATION, THE
PENNSYLVANIA DEPARTMENT OF BANKING, OR ANY OTHER FEDERAL OR STATE AGENCY OR
ANY STATE SECURITIES COMMISSION, NOR HAS SUCH COMMISSION, CORPORATION,
DEPARTMENT, OFFICE OR OTHER AGENCY OR ANY STATE SECURITIES COMMISSION PASSED
UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.
------------------------------------
THE SHARES OF COMMON STOCK OFFERED HEREBY ARE NOT SAVINGS ACCOUNTS OR
DEPOSITS AND ARE NOT INSURED BY THE FEDERAL DEPOSIT INSURANCE CORPORATION OR
ANY OTHER GOVERNMENT AGENCY. THE COMMON STOCK IS NOT GUARANTEED BY THE
COMPANY, THE MUTUAL COMPANY OR THE BANK. THERE CAN BE NO ASSURANCE THAT
THE TRADING PRICE OF THE COMMON STOCK WILL NOT DECREASE AT ANY TIME.
<TABLE>
<CAPTION>
====================================================================================
ESTIMATED ESTIMATED FEES ESTIMATED NET
PURCHASE PRICE (1)(2) AND EXPENSES (2)(3) PROCEEDS (2)(4)
- ------------------------------------------------------------------------------------
<S> <C> <C> <C>
Minimum Per Share $ 19.00 $ .64 $ 18.36
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Midpoint Per Share $ 22.50 $ .71 $ 21.79
- ------------------------------------------------------------------------------------
Maximum Per Share $ 26.00 $ .78 $ 25.22
- ------------------------------------------------------------------------------------
Minimum Total $38,000,000 $1,279,000 $36,721,000
- ------------------------------------------------------------------------------------
Midpoint Total $45,000,000 $1,416,000 $43,584,000
- ------------------------------------------------------------------------------------
Maximum Total $52,000,000 $1,553,000 $50,447,000
====================================================================================
</TABLE>
(1) Determined by the Board of Directors in consultation with Ryan Beck. Based
on the issuance of 2,000,000 shares at a price of $19.00 per share to $26.00
per share.
(2) The total number of shares sold in the Offering (and contributed to the
Company by the Mutual Company) may be increased by up to 15% to 2,300,000
shares.
(3) Consists of the estimated costs to the Company of the Offering, including
estimated expenses of approximately $560,000, and a marketing fee to Ryan
Beck equal to 2.0% of the aggregate dollar amount of stock sold to
subscribers other than the ESOP and officers, directors and employees of the
Company and the Bank and their immediate family members.
(4) Actual net proceeds may vary substantially from estimated amounts. Includes
the purchase of shares of Common Stock by the ESOP which is intended to be
funded by a loan to the ESOP from the Company. The cost of these shares is
assumed to be deducted from the Company's stockholders' equity. See "Use of
Proceeds" and "Pro Forma Data."
THE DATE OF THIS PROSPECTUS IS SEPTEMBER___, 1998
RYAN, BECK & CO., INC.
2
<PAGE>
AVAILABLE INFORMATION
The Company is subject to the informational requirements of the Exchange
Act of 1934 (the "Exchange Act") and, in accordance therewith, files reports,
proxy statements and other information with the Securities and Exchange
Commission (the "Commission"). Such reports, proxy statements and other
information can be inspected and copied at the public reference facilities of
the Commission at Room 1024, 450 Fifth Street, N.W., Washington, D.C. 20549.
Copies of such materials can be obtained from the Public Reference Section of
the Commission at 450 Fifth Street, N.W., Washington, D.C. 20549 at prescribed
rates. The Commission maintains an Internet web site that contains reports,
proxy and information statements and other information regarding issuers who
file electronically with the Commission. The address of that site is
http://www.sec.gov. In addition, material filed by the Company can be inspected
at the offices of the National Association of Securities Dealers, Inc., Report
Section, 1735 K Street, N.W., Washington, D.C.
Prior to the completion of the organization of the Company as the Bank's
holding company, the Bank was subject to the information, reporting and proxy
statement requirements of the Exchange Act and, in accordance therewith and with
the rules and regulations of the FDIC, filed reports, proxy statements and other
information with the Federal Deposit Insurance Corporation (the "FDIC"). Copies
of such materials may be obtained at prescribed rates from the FDIC's
Registration, Disclosure and Operations Unit, 550 17th Street, N.W., Washington,
D.C. The statements contained herein as to the contents of any contract or other
document filed as an exhibit hereto are of necessary brief descriptions thereof
and are not necessarily complete. Each such statement is qualified by reference
to such contract or document.
The Company has filed with the Commission a registration statement (the
"Registration Statement"), of which this Prospectus is a part, under the
Securities Act. This Prospectus does not contain all of the information set
forth in the Registration Statement, certain portions of which have been omitted
only to the extent permitted by the rules and regulations of the SEC. In
addition, certain documents filed by the Company with the Commission have been
incorporated in this Prospectus by reference. See "Incorporation of Certain
Documents by Reference." For further information with respect to the Company
and the Common Stock, reference is made to the Registration Statement, including
exhibits thereto and the documents incorporated herein by reference. Any
statements contained herein concerning the provisions of any document filed as
an exhibit to the Registration Statement or otherwise filed with the Commission
or incorporated by reference herein are not necessarily complete, and, in each
instance, reference is made to the copy of such document so filed for a more
complete description of the matters involved. Each such statement is qualified
in its entirety by such reference. The Registration Statement may be inspected
without charge at the principal office of the Commission in Washington, D.C.,
and copies of all or part of it may be obtained from the Commission upon the
payment of prescribed rates.
The Company will provide a copy of the Stock Issuance Plan and material
incorporated by reference into the Prospectus, without charge, to any person to
whom this Prospectus is delivered, on the written or oral request of any such
person. Such requests, in writing or by telephone, should be directed to:
James L. Durrell, Executive Vice President and Chief Financial Officer, Harris
Financial, Inc., 235 North Second Street, Harrisburg, Pennsylvania 17101, (717)
236-4041. In addition, the Plan may be inspected at the offices of the Bank.
3
<PAGE>
SUMMARY
The following summary does not purport to be complete, and is qualified in
its entirety by the more detailed information contained elsewhere in the
Prospectus or in the documents incorporated by reference.
<TABLE>
<S> <C>
Harris Financial, Inc. The Company is a Pennsylvania corporation
that was formed to become the stock holding
company of the Bank in a transaction (the
"Two-Tier Reorganization") that was completed
in September 1997. In the Two-Tier
Reorganization, each share of the Bank's
common stock was converted into and became a
share of Common Stock of the Company, and the
Bank became a wholly-owned subsidiary of the
Company. The Mutual Company, which owned a
majority of the Bank's outstanding shares of
common stock immediately prior to completion
of the Two-Tier Reorganization, became the
owner of the same percentage of the
outstanding shares of Common Stock of the
Company immediately following the completion
of the Two-Tier Reorganization. As of the
date hereof, the sole activity of the Company
is the ownership of all of the issued and
outstanding common stock of the Bank. At June
30, 1998, the Company had total consolidated
assets of $2.3 billion, total deposits of
$1.1 billion and shareholders' equity of
$188.8 million.
Harris Savings Bank The Bank is a Pennsylvania-chartered stock
savings bank headquartered in Harrisburg,
Pennsylvania. The Bank is a community-
oriented institution offering traditional
deposit and loan products. The Bank's mutual
savings and loan predecessor was founded in
1886, and converted to a state-chartered
savings bank in 1991. The Bank in its current
stock form was established in January 1994,
as a result of the reorganization (the
"Reorganization") of the Bank's mutual
predecessor into a mutual holding company
structure. At the time of the Reorganization,
the Bank issued a majority of its to-be
outstanding shares of common stock to the
Mutual Company (which was formed in
connection with the Reorganization) and a
minority of its to-be outstanding shares to
stockholders other than the Mutual Company
("Minority Stockholders").
Risk Factors Attention should be given to the matters
discussed under "Risk Factors," including the
possible decline in the market price of the
Common Stock after the Offering, uncertainty
as to future growth and ability to
successfully deploy the Offering proceeds,
credit risk, adequacy of the allowance for
loan losses, possible inability to resell the
Common Stock until the issuance and receipt
of certificates, antitakeover provisions and
the mutual holding company structure, breadth
of the Offering Price Range, the potential
impact of changes in interest rates,
extensive governmental regulation of the
financial institution industry, and the
highly competitive environment in which the
Company operates.
Use of Proceeds Although the actual net proceeds from the
sale of the Common Stock cannot be determined
until the Offering is completed, it is
presently anticipated that the net proceeds
will be between $36.7 million and $50.5
million, based on the assumptions set forth
in "Pro Forma Data." The net proceeds of the
Offering will be initially invested in
federal funds and investment grade, short-
term marketable securities, and/or used for
general corporate purposes. In addition, the
Company may use a portion of the net proceeds
to (i) fund a loan of between $760,000 and
$1.0 million (assuming the sale of 2,000,000
shares) to the Bank's ESOP to purchase 2% of
the shares sold in the Offering (40,000
shares assuming the sale of 2,000,000
shares); (ii) purchase a number of shares of
restricted stock equal to 4%
</TABLE>
4
<PAGE>
of the shares sold in the Offering (80,000 shares
assuming the sale of 2,000,000 shares), which have a
value of between $1.5 million and $2.1 million based on
Offering Price Range; and (iii) purchase a number of
shares of Common Stock equal to 10% of the shares sold
in the Offering (200,000 options assuming the sale of
2,000,000 shares) that may be issued pursuant to
existing or new stock option plans. Alternately, the
Company may issue authorized but unissued shares upon
the exercise of such options.
Dividend Policy The Bank or the Company has paid quarterly cash
dividends every quarter since the completion of the
Reorganization and minority stock issuance in January
1994, and it is the current policy of the Company to
pay a quarterly cash dividend of $.055 per share of
Common Stock. During 1997, the Bank and/or the Company
paid cash dividends totaling $.1999 (as adjusted for
the Company's November 18, 1997 three-for-one stock
split) per share of Common Stock. The Company's ability
to pay dividends will depend largely on its receipt of
the Offering proceeds and cash dividends from the Bank.
Under Pennsylvania law, the Bank is generally permitted
to pay dividends out of accumulated net earnings if the
Bank's surplus would not be reduced by the payment of
such dividend. Pennsylvania law requires the Bank to
maintain surplus in an amount that is at least equal to
capital. See "Dividend Policy."
Dividends paid by the Company will be determined by the
Company's Board of Directors and will be based upon its
consolidated financial condition, results of
operations, tax considerations, economic conditions,
regulatory restrictions which affect the payment of
dividends by the Bank to the Company, business plans
and other factors. In addition, the Company's ability
to pay dividends is subject to limitations under
Pennsylvania law, and regulations of the FRB that
require the Company to maintain minimum levels of
capital. There can be no assurance that dividends will
be paid on the Common Stock or that, if paid, such
dividends will not be reduced or eliminated in the
future. The Mutual Company has waived the right to
receive dividends paid by the Company, although its
ability to do so may be restricted in the future. See
"Dividend Policy."
Management Stock The Bank's full-time employees participate in the
Benefits and Bank's ESOP which intends to purchase 40,000 of the
Management Purchase shares sold in the Offering, which shares have a value
in the Offering of between $760,000 and $1.0 million based on the
Offering Price Range. In addition, following the
completion of the Offering the Company intends to award
to employees, officers and directors at no cost to such
persons: (i) a number of shares of restricted stock
equal to 4% of the shares sold in the Offering (80,000
shares assuming the sale of 2,000,000 shares), which
have a value of between $1.5 million and $2.1 million
based on Offering Price Range, and (ii) options to
purchase a number of shares of Common Stock equal to
10% of the shares sold in the Offering (200,000 options
assuming the sale of 2,000,000 shares). Such awards
will be made pursuant to the Company's existing stock
benefit plans or new stock benefit plans implemented by
the Company. No such awards will be made for at least
six months after completion of the Offering, and the
Company will obtain stockholder approval of any such
award made within one year of the completion of the
Offering.
In addition, Management intends to subscribe for $1.3
million of Common Stock in the Offering. See "Common
Stock to be Purchased by Management."
5
<PAGE>
Market for Common Stock The Common Stock is listed on the Nasdaq National
Market under the symbol "HARS." As of May 31, 1998,
there were 10 registered market makers in the Common
Stock, 3,676 stockholders of record (excluding the
number of persons or entities holding stock in street
name through various brokerage firms), and 33,963,450
shares outstanding. As of such date, the Mutual Company
held 25,500,000 shares of Common Stock and Minority
Stockholders held 8,463,450 shares.
Offering and the Plan The Board of Directors of the Company adopted the Plan
on June 16, 1998. In adopting the Plan, the Company's
Board of Directors determined that the Plan and the
Offering are in the best interest of the Company's
stockholders, and in the best interests of Minority
Stockholders. In ratifying the Plan, the Mutual
Company's Board of Trustees determined that the Plan is
in the best interest of the Mutual Company and the
Bank's depositors. The Offering will add financial
strength to the consolidated Company, thereby enhancing
the value of the Mutual Company's primary asset. The
increase in the Company's capital will increase the
Company's ability to serve as a source of strength to
the Bank, and the increase in the Company's and the
Bank's capital will provide additional protection to
the Bank's depositors. Certain of the Bank's depositors
will also be given subscription rights to purchase the
Common Stock in the Offering.
Under the terms of the Plan, at the conclusion of the
Offering, if the Company has accepted subscriptions for
2,000,000 shares of Common Stock, the Mutual Company
will contribute to the Company 2,000,000 shares of
Common Stock owned by the Mutual Company, which will
then be canceled by the Company. As a result, the
number of shares of Common Stock owned by the Mutual
Company will decrease to 23,500,000 shares, or
approximately 69.2% of the 33,963,450 shares of Common
Stock outstanding as of May 31, 1998, from 25,500,000
shares, or approximately 75.1% of the shares of Common
Stock outstanding as of such date. At the conclusion of
the Offering, in the sole discretion of the Company,
the total number of shares sold in the Offering (and
contributed to the Company by the Mutual Company) may
be increased or decreased by up to 15% due to market
and general financial and economic conditions and
demand for the Common Stock, provided that the shares
sold in the Offering may not be decreased below a
number of shares that will result in less than $38.0
million of gross Offering proceeds. Such increase or
decrease is not dependent upon whether shares are sold
at the minimum, midpoint or maximum of the Offering
Price Range. THE TOTAL NUMBER OF OUTSTANDING SHARES OF
COMMON STOCK WILL NOT CHANGE AS A RESULT OF THE
OFFERING.
Offering Priorities The Plan provides that, subject to certain purchase
limitations, subscription rights to purchase shares of
Common Stock in the Subscription Offering have been
granted to (i) Eligible Account Holders, (ii) the ESOP,
and (iii) Supplemental Eligible Account Holders. Any
shares of Common Stock for which subscriptions have not
been accepted in the Subscription Offering may, at the
sole discretion of the Board of Directors of the
Company, be offered for sale in a Community Offering.
In the Community Offering, should it be conducted,
unsubscribed shares would be offered directly to the
general public with a preference to Minority
Stockholders as of August 5, 1998, and then to those
natural persons residing in the Pennsylvania counties
of Dauphin, Cumberland, York, Lancaster, and Lebanon,
and the Maryland county of Washington (the
"Community"). Additional terms and
6
<PAGE>
conditions may be established at any time prior to the
closing of any Community Offering by the Board of
Directors of the Company.
Purchase Price and The Offering will not be consummated unless
Number of Shares subscriptions have been accepted for at least $38.0
to be Issued million of Common Stock. The Bank is offering
the Common Stock at an Offering Price Range of $19.00
to $26.00 per share, or an aggregate range of $36.8
million to $50.5 million, as established on June 25,
1998, by the Company's Board of Directors in
consultation with its financial advisor. The Board of
Directors will reevaluate the Offering Price Range at
the commencement of the Offering. The actual price at
which the Common Stock will be sold in the Offering
(the "Actual Purchase Price"), which is expected to be
within the Offering Price Range, will be determined
based on market and financial considerations. The Board
of Directors has engaged Ryan Beck, which specializes
in bank and thrift securities, to deliver to the Board
of Directors an opinion (the "Fairness Opinion"), dated
as of the consummation of the Offering, that the
pricing of the Common Stock is fair from a financial
point of view to (i) the Mutual Company and the Bank's
depositors, and (ii) stockholders of the Company
including Minority Stockholders. The Fairness Opinion
is not intended as a recommendation as to the
advisability of purchasing stock. No assurance can be
given that those who purchase shares of Common Stock in
the Offering will be able to sell such shares after the
Offering at or above the Actual Purchase Price. See
"Stock Offering--Stock Pricing, Number of Shares to be
Issued and the Fairness Opinion."
If the Actual Purchase Price is not within the Offering
Price Range and the Company determines to continue the
Offering, subscribers will be offered the opportunity
to modify or withdraw their orders, and, unless they
affirmatively respond within a designated period of
time, their funds will be returned promptly with
interest, and/or their withdrawal authorizations
canceled. If the Company determines to terminate the
Offering, subscribers' funds will be returned promptly
with interest, and/or their withdrawal authorizations
will be canceled.
Community Offering Any shares of Common Stock for which subscriptions have
not been accepted in the Subscription Offering may, at
the sole discretion of the Board of Directors of the
Company, be offered for sale in a Community Offering.
In the Community Offering, should it be conducted,
unsubscribed shares would be offered directly to the
general public with a preference first to Minority
Stockholders as of August 5, 1998, and then to natural
persons residing in the Community. Additional terms and
conditions may be established at any time prior to the
closing of any Community Offering by the Board of
Directors of the Company. The Community Offering, if
any, shall be for a period of not more than 45 days
unless extended by the Company, and shall commence
concurrently with, during or promptly after the
Subscription Offering. The opportunity to subscribe for
shares of Common Stock in the Community Offering is
subject to the right of the Company in its sole
discretion, to accept or reject any such orders in
whole or in part either at the time of receipt of an
order or as soon as practicable following the
Expiration Date.
Purchase Limitations The minimum amount of Common Stock for which any person
may subscribe in the Offering is $500. Except for the
ESOP, no Eligible Account Holder or Supplemental
Eligible Account Holder may in their capacities as such
purchase in the Subscription Offering more than
$250,000 of Common Stock, and, generally, no person
together with associates of and persons acting in
concert with such
7
<PAGE>
person may purchase in all categories of Offering more
than $500,000 of Common Stock; provided, however, that
the maximum purchase limitations may be increased (for
all subscribers or for only subscribers in the
Syndicated Community Offering) or decreased at the sole
discretion of the Company. See "The Offering--
Limitations on Common Stock Purchases."
Expiration Date The Subscription Offering and the Community Offering
for the Offering will terminate at 10:00 a.m., Pennsylvania time, on
____________, 1998, unless either or both are extended
by the Company for up to 45 days, or such additional
periods as may be approved by Pennsylvania Department
of Banking (the "Department") and, if necessary, the
FRB (as extended, the "Expiration Date"). Subscription
rights which have not been exercised prior to the
conclusion of the Subscription Offering will become
void. Orders will not be executed until all shares of
Common Stock have been subscribed for or otherwise
sold. If all shares have not been subscribed for by the
Expiration Date, unless such period is extended with
the consent of the Department, all funds will be
returned promptly to the subscribers with interest and
all withdrawal authorizations will be canceled. If an
extension is granted, subscribers will be notified of
the extension of time and of any rights of subscribers
to modify or rescind their subscriptions. If the
Offering is terminated, subscribers' funds will be
returned promptly with interest, and/or their
withdrawal authorizations will be canceled.
Procedure for To purchase shares in the Subscription Offering and
Purchasing Shares in Community Offering, an executed order form with the
the Subscription and required payment for the total dollar amount of Common
Community Offering Stock subscribed for, or with appropriate authorization
for withdrawal from savings accounts or certificates of
deposit at the Bank, must be received by the Company by
10:00 a.m., Pennsylvania time on the Expiration Date.
Order forms which are not received by such time or are
executed defectively or are received without full
payment (or appropriate withdrawal instructions) are
not required to be accepted. In addition, an order
submitted on photocopied or facsimile order forms will
not be accepted. The Company has the right to waive or
permit the correction of incomplete or improperly
executed forms, but does not represent it will do so.
Once received, an executed order form may not be
modified, amended or rescinded without the consent of
the Company unless the Offering has not been completed
by _____________________, 1998, unless such period has
been extended. IN ORDER TO ENSURE THAT ELIGIBLE ACCOUNT
HOLDERS AND SUPPLEMENTAL ELIGIBLE ACCOUNT HOLDERS ARE
PROPERLY IDENTIFIED AS TO THEIR STOCK PURCHASE
PRIORITIES, DEPOSITORS AS OF THE ELIGIBILITY RECORD
DATE AND THE SUPPLEMENTAL ELIGIBILITY RECORD DATE MUST
LIST ALL ACCOUNTS ON THE STOCK ORDER FORM GIVING ALL
NAMES IN EACH ACCOUNT AND THE ACCOUNT NUMBER.
All subscribers must subscribe for a dollar amount of
Common Stock. The total number of shares that will be
issued to a subscriber will be equal to the total
dollar amount of the subscription divided by the Actual
Purchase Price per share, subject to the applicable
purchase limitations and allocations in the event of an
oversubscription. Fractional shares will not be issued;
instead, the Company will refund any partial
subscriptions that are insufficient to purchase a whole
share.
and may be made (i) by check or money order, or (ii) by
authorization of withdrawal from savings accounts or
certificates of deposit maintained with the Bank.
Interest will be paid on payments made by check or
money order at the Bank's passbook rate of interest
8
<PAGE>
from the date payment is received until the completion
or termination of the Offering. If payment is made by
authorization of withdrawal, the funds authorized to be
withdrawn from a deposit account will continue to
accrue interest at the contractual rates until
completion or termination of the Offering, but a hold
will be placed on such funds, thereby making them
unavailable to the depositor.
Restrictions on Subscription rights are nontransferable. Persons
Transfer of receiving subscription rights may not transfer them or
Subscription Rights enter into any agreement or understanding to transfer
and Shares the legal or beneficial ownership of the subscription
rights issued under the Plan or, prior to the
completion of the Offering, the shares of Common Stock
to be issued upon their exercise. Such rights may be
exercised only by the person to whom they are granted
and only for his account. Each person exercising such
subscription rights will be required to certify that he
is purchasing shares solely for his own account and
that he has no agreement or understanding regarding the
sale or transfer of such shares. In addition, persons
may not offer or make an announcement of an offer or
intent to make an offer to purchase such subscription
rights or shares of Common Stock prior to the
completion of the Offering. The Company will pursue any
and all legal and equitable remedies in the event
management becomes aware of the transfer of
subscription rights and will not honor orders known by
them to involve the transfer of such rights.
9
<PAGE>
RISK FACTORS
The following risk factors, in addition to the information presented
in this Prospectus, should be considered by prospective investors in deciding
whether to purchase the Common Stock offered hereby.
POSSIBLE DECLINE IN THE MARKET PRICE OF THE COMMON STOCK AFTER THE OFFERING
The Actual Purchase Price per share may be more or less than the
market price of Common Stock on the date the Offering is consummated. If the
Actual Purchase Price is less than the market price for the Common Stock, some
purchasers in the Offering may be inclined to immediately sell shares of Common
Stock in order to attempt to realize any such profit. Any such sales, depending
on the volume and timing, could cause the market price of Common Stock to
decline. Additionally, because stock prices generally fluctuate over time,
there is no assurance that purchasers in the Offering will be able to sell
shares after the Offering at a price that is equal to or greater than the Actual
Purchase Price. Purchasers should consider these possibilities in determining
whether to purchase Common Stock and the timing of any sale of Common Stock.
The Common Stock is listed on the Nasdaq National Market. See "Market
Information" and "The Offering--Stock Pricing and Number of Shares to be
Issued."
UNCERTAINTY AS TO FUTURE GROWTH OPPORTUNITIES AND ABILITY TO SUCCESSFULLY DEPLOY
OFFERING PROCEEDS
The Company intends to use the net proceeds of the Offering to
increase its loan growth, primarily through its commercial business lending
program, as well as to fund the employee benefit plans discussed above (see
"Summary--Use of Proceeds" and "--Management Stock Benefits and Management
Purchases in the Offering"). The Company may also seek to expand its banking
franchise through de novo branching and by acquiring other financial
institutions or branches. The Company's ability to grow through selective
acquisitions of other financial institutions or branches will depend on
successfully identifying, acquiring and integrating such institutions or
branches. There can be no assurance the Company will be able to generate
internal growth or to identify attractive acquisition candidates, acquire such
candidates on favorable terms, successfully integrate any acquired institutions
or branches into the Bank, or increase profits sufficiently to offset the
increase in expenses that will result from an acquisition. Neither the Company
nor the Bank has any specific plans, arrangements or understandings regarding
any acquisitions at this time.
CREDIT RISK
Virtually all of the Company's credit risk lies with the Bank, which
holds all of the Company's loans and virtually all of its marketable securities.
As part of its effort to become a full-service financial institution, in 1996,
the Bank created a Business Banking Group to offer commercial business loans and
services to small businesses in the Bank's primary service area. Such loans
accounted for 14.8% of net loans receivable at June 30, 1998. This expansion
beyond traditional thrift lending, such as residential mortgage loans and real
estate-secured consumer loans, has the effect of increasing the Bank's credit
risk exposure. To accommodate this exposure, management hired skilled,
experienced commercial lenders. In addition, the Bank adopted commercial bank
underwriting, credit management and loan loss provisioning techniques.
ADEQUACY OF ALLOWANCE FOR LOAN LOSSES
The Bank establishes the allowance for loan losses based on internal
and external factors. The external factors include the general economic
condition of the Bank's market area and regulatory guidelines. The internal
factors include the current composition of the portfolio, portfolio growth
trends, and the current emphasis on commercial lending as a strategic directive.
These factors are used by the Bank to help determine the reserve necessary to
provide for unknown but existing losses within the portfolio. These assessments
are performed on a quarterly basis and the provision for loan losses is adjusted
accordingly. The commercial business loan portfolio is analyzed on an
individual loan basis and a specific reserve is developed for each known loss.
In addition, the Bank assigns an additional reserve amount for unknown, probable
losses in the loan portfolio. The mortgage and consumer loan portfolios are
each analyzed in pools
10
<PAGE>
of similar loans with similar risk characteristics. Using historical loss
experience, management determines a specific reserve for the loan pools. A
reserve for unknown but existing, probable losses is established in the manner
discussed above.
While management believes that the Bank's allowance for loan losses is
sufficient to cover losses inherent in the Bank's loan portfolio at this time,
no assurances can be given that the Bank's level of allowance for loan losses
will be sufficient to cover future loan losses incurred by the Bank or that
future adjustments to the allowance for loan losses will not be necessary if
economic and other conditions differ substantially from the economic and other
conditions used by management to determine the current level of the
allowance.
POSSIBLE INABILITY TO RESELL THE COMMON STOCK UNTIL THE ISSUANCE AND RECEIPT OF
CERTIFICATES
Until certificates for Common Stock are delivered to purchasers,
purchasers may not be able to sell the shares of Common Stock for which they
subscribe. Accordingly, during such period subscribers will bear the risk of
any decline in the market price in the Common Stock. The Company intends to
mail the certificates representing Common Stock issued in the Offering promptly
following consummation of the Offering. See "The Offering--Procedure for
Purchasing Shares in Subscription and Community Offering."
ANTITAKEOVER PROVISIONS AND THE MUTUAL HOLDING COMPANY STRUCTURE
Because the Mutual Company is required by Pennsylvania law to own a
majority of the outstanding shares of Common Stock for so long as the Mutual
Company remains in existence, an acquisition of the Company could generally not
be consummated without the approval of the Mutual Company, the Trustees of which
are also the Directors of the Company. In addition, regulatory authorities are
unlikely to approve an acquisition of the Company by another institution while
the Bank and the Company are in the mutual holding company structure. Moreover,
the Certificate of Incorporation and the Bylaws of the Bank and the Company
include certain provisions which may be considered to be antitakeover in nature
because they may have the effect of discouraging or making more difficult the
acquisition of control of the Company by means of an unsolicited tender or
exchange offer, proxy contest or similar transaction.
BREADTH OF THE OFFERING PRICE RANGE
The shares of Common Stock are being offered at an offering price that
will be within the range of $19.00 to $26.00. The price at which the Common
Stock last traded on September ___ , 1998, was $______ per share, or ___% below
the maximum of the Offering Price Range. The Actual Purchase Price at which the
shares of Common Stock will be sold in the Offering will not be determined prior
to the end of the Offering period. Accordingly, when a subscriber submits his
stock order form he or she is irrevocably offering to purchase Common Stock at
an undetermined price that may range from $19.00 to $26.00.
POTENTIAL ADVERSE IMPACT OF CHANGES IN INTEREST RATES
Because the Company's primary asset consists of 100% of the
outstanding shares of the Bank's common stock, the Company's profitability
depends primarily on the profitability of the Bank. The Bank's profitability,
like that of most financial institutions, depends to a large extent upon its net
interest income, which is the difference between interest income on interest-
earning assets, such as loans and investments, and interest expense on interest-
bearing liabilities, such as deposits and other borrowings. The Bank's net
interest income, for example, could be adversely affected if changes in market
interest rates resulted in the cost of interest-bearing liabilities increasing
faster than any increase in the yield on the Bank's interest-earning assets.
The Bank, like other financial institutions, uses a methodology that measures
its exposure to interest rate risk based on its interest rate sensitivity gap.
A gap is considered positive when the amount of interest sensitive assets
exceeds the amount of interest sensitive liabilities. A gap is considered
negative when the amount of interest sensitive liabilities exceeds the amount of
interest sensitive assets. At June 30, 1998, the Bank's cumulative one-year
interest sensitivity gap (the difference, based on certain assumptions, between
the amount of interest-earning assets anticipated by the Bank to mature or
reprice within one year and the
11
<PAGE>
amount of interest-bearing liabilities anticipated by the Bank, based on certain
assumptions, to mature or reprice within one year) as a percentage of total
assets was 5.9%. As a result, based upon the methodology used by the Bank, the
yield on interest-earning assets of the Bank may adjust to changes in interest
rates more rapidly than the cost of the Bank's interest-bearing liabilities.
Consequently, the Bank's net interest income could be adversely affected during
periods of rapidly declining interest rates. There can be no assurance, however,
that the changes in the Bank's actual net interest income will be consistent
with those projected in the methodology. See "Management's Discussion and
Analysis of Financial Condition and Results of Operations" in the accompanying
1997 Annual Report for further discussion of the Bank's exposure to interest
rate risk, as well as any shortcomings in the methodology. Changes in interest
rates also may impact the volume of mortgage loan originations as well as the
value of the Bank's loan servicing rights, investments in mortgage-backed
securities, investment securities and other interest-earning assets.
EXTENSIVE GOVERNMENTAL REGULATION OF THE FINANCIAL INSTITUTION INDUSTRY
The Bank is subject to extensive regulation by the FDIC and is
periodically examined by the FDIC to test compliance with various regulatory
requirements. Such supervision and regulation is intended primarily for the
protection of depositors and the deposit insurance fund, and not for the
maximization of shareholder value. The lending and savings activities of the
Bank are also subject to various "consumer protection" laws that impose
significant liability for noncompliance, whether intentional or not.
Accordingly, the operations and profitability of financial institutions and
their holding companies are significantly affected by legislation and the
policies of the various federal banking agencies. Since 1989, various
legislation has been enacted that imposes increased regulatory restrictions and
obligations on the operations of financial institutions and mandates the
development of regulations designed to empower regulators to take prompt
corrective action with respect to institutions that fall below certain capital
standards.
THE HIGHLY COMPETITIVE ENVIRONMENT IN WHICH THE COMPANY OPERATES
The Bank faces significant competition in its market area both in
attracting deposits and in originating loans. The Bank faces direct competition
from a significant number of financial institutions, as well as other providers
of financial services, operating in its market area, many with a state-wide or
regional presence, and, in some cases, a national presence. This competition
arises from commercial banks, savings institutions, mortgage banking companies,
credit unions, brokerage firms, mutual fund companies and other providers of
financial services, many of which are significantly larger than the Bank, and
therefore have greater financial and marketing resources than those of the Bank.
Because the Bank's business activities are concentrated in its market area, the
Bank's operations are affected by local market and economic conditions.
12
<PAGE>
HARRIS FINANCIAL, INC. AND SUBSIDIARIES
SELECTED FINANCIAL AND OTHER DATA
Set forth below are selected consolidated financial and other data of
the Company. For additional information about the Company, please refer to
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" and the Consolidated Financial Statements of the Bank and related
notes included in the 1997 Annual Report and the Quarterly Report on Form 10-Q
for the fiscal quarter ended June 30, 1998, which accompany this Prospectus.
Because the Company had insignificant assets and operations until completion of
the Two-Tier Reorganization on September 17, 1997, information as of and for
periods ending prior to such time is presented for the Bank.
<TABLE>
<CAPTION>
At
June 30, At December 31,
--------------------------------------------
1998 1997 1996 1995 1994 1993
------ ------ ------ ------ ------ -----------
SELECTED CONSOLIDATED FINANCIAL (In Thousands)
CONDITION DATA:
<S> <C> <C> <C> <C> <C> <C> <C>
Total assets............... $2,325,602 $2,207,059 $1,768,122 $1,255,864 $1,058,088 $1,087,006
Loans receivable, net...... 921,765 890,484 823,916 651,605 574,794 566,550
Loans held-for-sale, net... 20,395 14,886 9,053 0 0 0
Marketable securities...... 1,262,180 1,199,194 828,910 524,932 409,123 424,181
Deposits................... 1,126,150 1,146,238 1,173,423 1,073,710 910,576 937,903
Escrow..................... 14,913 8,552 8,203 4,649 5,116 11,643
Advances from FHLB-Pittsburgh
and other borrowed funds.. 960,793 852,988 419,146 17,200 0 0
Other borrowings........... 495 990 1,485 1,980 2,475 0
Stockholders' equity(1).... 188,828 179,034 152,752 151,459 135,036 107,886
<CAPTION>
Six Months Ended
June 30, Years Ended December 31,
---------------------------------------------------------------
1998 1997 1997 1996 1995 1994 1993
-------- ---------- ---------- ---------- ---------- ---------- ---------
SELECTED CONSOLIDATED (In Thousands)
OPERATING DATA:
<S> <C> <C> <C> <C> <C> <C> <C>
Interest income............ $ 80,509 $ 66,302 $ 141,067 $ 107,988 $ 80,625 $ 73,932 $ 81,020
Interest expense........... 52,351 42,331 93,085 67,326 47,696 38,241 41,409
---------- ---------- ---------- ---------- ---------- ---------- ---------
Net interest income.... 28,158 23,971 47,982 40,662 32,929 35,691 39,611
Provision for loan
losses.......... 1,400 305 610 1,957 0 0 800
---------- ---------- ---------- ---------- ---------- ---------- -------
Net interest income after
provision for loan
losses............. 26,758 23,666 47,372 38,705 32,929 35,691 38,811
Noninterest income......... 7,980 6,718 14,559 3,996 2,564 2,503 4,563
Noninterest expense........ 20,222 15,891 35,848 42,187(2) 20,776 20,793 17,966
---------- ---------- ---------- ---------- ---------- ---------- -------
Income before income taxes
and cumulative effect of
accounting changes........ 14,516 14,493 26,083 514 14,717 17,401 25,408
Income taxes............... 4,292 4,719 8,312 (517) 5,503 7,348 9,170
---------- ---------- ---------- ---------- ---------- ---------- -------
Income after taxes and
before cumulative
effect of accounting
changes............. 10,224 9,774 17,771 1,031 9,214 10,053 16,238
Cumulative effect of
accounting changes........ 0 0 0 0 0 0 1,420
---------- ---------- ---------- ---------- ---------- ---------- -------
Net income................. $ 10,224 $ 9,774 $ 17,771 $ 1,031 $ 9,214 $ 10,053 $17,658
========== ========== ========== ========== ========== ========== =======
</TABLE>
Footnotes on following page
13
<PAGE>
<TABLE>
<CAPTION>
At or for the
Six Months Ended
June 30, (3) At or for the Year ended December 31,
---------- ---------- ----------------------------------------------------------------------
1998 1997 1997 1996 1995 1994 1993
---------- ---------- ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
KEY FINANCIAL RATIOS AND
OTHER DATA:
Financial Ratios:
Return on average assets... .90% 1.04% 0.88% 0.07% 0.81% 0.93% 1.67%
Return on average equity
(1)....................... 11.10% 12.40% 10.73% 0.68% 6.34% 7.59% 17.75%
Average equity to average
assets (1)................ 8.02% 8.40% 8.21% 9.88% 12.83% 12.27% 9.42%
Asset Quality Ratios:
Non-performing assets to
total assets.............. 0.66% 0.62% 0.62% 0.72% 0.68% 0.92% 0.83%
Non-performing loans to
total loans............... 0.85% 0.69% 0.78% 0.68% 0.31% 0.54% 0.44%
Allowance for loan losses
to non-performing loans... 117.71% 141.96% 124.16% 147.95% 304.18% 204.55% 258.60%
Allowance for loan losses
to loans receivable,
net(4).................... 1.01% 0.99% 0.97% 1.01% 0.94% 1.10% 1.16%
Per Share Data (5):
Basic earnings per share
(6)....................... $ .30 $ .29 $ 0.53 $ 0.03 $ 0.28 $ 0.28 NA
Diluted earnings per
share(6).................. .30 .29 0.52 0.03 0.28 0.28 NA
Dividends per share........ .110 0.96 0.20 0.19 0.17 0.09 NA
Book value per share....... 5.56 4.86 5.29 4.54 4.50 4.03 NA
Dividend payout ratio...... 8.78% 7.53% 8.67% 141.90% 13.70% 6.44% NA
</TABLE>
- ---------------------------
(1) The balance as of December 31, 1993, represents retained earnings prior to
the Reorganization. Retained earnings are partially restricted in
connection with regulations related to the insurance of savings accounts
which require the Company to maintain certain statutory reserves.
(2) Includes $7.0 million for a one-time assessment for the recapitalization of
the Savings Association Insurance Fund.
(3) Annualized where appropriate.
(4) Excludes loans held for sale.
(5) All per share values have been adjusted to reflect the 1997 three-for-one
stock split.
(6) Basic and diluted earnings per share for 1994 include only earnings
generated subsequent to the Reorganization.
14
<PAGE>
HARRIS FINANCIAL, INC.
GENERAL
The Company is a Pennsylvania corporation that was formed to become
the stock holding company of the Bank in the Two-Tier Reorganization, which was
completed in September 1997. In the Two-Tier Reorganization, each share of the
Bank's common stock was converted into and became a share of Common Stock of the
Company, and the Bank became a wholly-owned subsidiary of the Company. The
Mutual Company, which owned a majority of the Bank's outstanding shares of
common stock immediately prior to completion of the Two-Tier Reorganization, and
stockholders other than the Mutual Company, which owned a minority of such
shares, became the owners of the same percentage of the outstanding shares of
Common Stock of the Company immediately following the completion of the Two-Tier
Reorganization. As of the date hereof, the primary activity of the Company is
the ownership of all of the issued and outstanding common stock of the Bank.
The Company through the Bank, presently operates 33 full service
offices, a mortgage banking subsidiary, an operations center and a business
center and serves depositors primarily in the five central Pennsylvania counties
of Dauphin, Cumberland, York, Lancaster, and Lebanon and in the northern
Maryland county of Washington. It serves small business borrowers in the same
area. The Bank offers mortgage loans in its market area. The Bank's mortgage
banking subsidiary headquartered in Blue Bell, Pennsylvania, offers residential
mortgages in Pennsylvania and four other states, most of which are sold in the
secondary market. The Bank provides manufactured housing loans to borrowers
throughout most of the eastern United States.
The Bank's primary lending activity continues to be the origination of
loans secured by first mortgages on owner-occupied one- to four-family
residences. At June 30, 1998, such loans totaled $550.8 million or 59.8% of net
loans receivable. The Company began originating commercial business loans in
1996 and its portfolio totaled $136.6 million at June 30, 1998. At June 30,
1998, the Company had total assets of $2.3 billion, total deposits of $1.1
billion and stockholders' equity of $188.8 million.
OPERATING STRATEGY
Over the last several years, the Bank's operating strategy has been to
change its orientation from a traditional savings bank to more closely resemble
a full service commercial bank. In the last two years, management has refined
and accelerated implementation of the strategy, which involves (i) developing a
commercial business lending expertise, (ii) increasing non-interest income
sources and amounts, (iii) developing an incentive-based sales culture in the
branch network and focusing marketing strategies on product management, (iv)
enhancing delivery systems; and (v) expanding the Bank's geographic market area.
Management seeks to implement this business strategy in a controlled manner, in
order to help ensure that the Bank maintains a consistently high asset quality
and strong capital base and preserves its reputation for professional,
community-oriented service.
In order to accomplish the objectives described above, it has been
necessary to acquire staff with the expertise to transition the Bank to a full
service financial institution. It has also been necessary to upgrade the Bank's
computer systems. Management believes that the staff and the technology
infrastructure are now in place and that the necessary initiatives are underway
to allow the Bank to achieve its business goals.
The Bank's strategic initiatives include the following :
. Strengthening the Management Team. In January 1998, Charles
Pearson was named President and CEO of the Company and the Mutual
Company. Most recently, Mr. Pearson served as President and CEO
of PNC Bank's central Pennsylvania region. Prior to that, he was
President and CEO of United Federal Bankcorp, Inc. In April 1998,
John Atkinson joined the Company in the newly-created position of
Chief Operating Officer. He previously served as head of retail
banking at PNC Bank central Pennsylvania region. Additionally,
the Bank has augmented its officer-level staff in the last two
years, hiring, among others, loan officers, a chief information
officer, a chief credit officer and a sales training manager.
Management believes that bank mergers in the Company's market
have created opportunities for the Company to recruit a number of
talented, experienced
15
<PAGE>
people, including commercial and consumer loan officers with
knowledge about and contacts within the communities served by the
Bank.
. Loan Portfolio Diversification. The Bank has historically focused
on traditional savings bank products and services, and it remains
a leading one- to four-family residential mortgage lender in its
marketplace. However, as part of the transition to a community
bank orientation, the concentration of such loans has declined
from 71.5% of the loan portfolio at December 31, 1995 to 60.4%
two years later. During the same period, commercial business
loans increased from .3% to 7.3% of the loan portfolio. Although
commercial lending subjects the Bank to more credit risk than
single family residential loans, commercial loans are generally
originated with higher interest rates and shorter maturities than
residential loans.
The Business Banking Group was established in early 1996 to
originate commercial business loans to small and mid-sized local
businesses. Its experienced lenders have taken advantage of
opportunities presented by recent bank mergers that have resulted
in dissatisfied customers of the acquired banks.
. Increased Non-Interest Income. The Bank has recently expanded its
sources and amounts of fee income in order to reduce its
dependence on net interest income. Service charge and fee income,
a primary contributor to non-interest income, increased nearly
100% from fiscal 1996 to 1997, as a result of the expansion of
the ATM network and promotion of a "High Performance Checking"
program. Net loan servicing income, also a significant component
of non-interest income, increased by 65.1% over the same time
period. The Bank intends to continue to grow its servicing
portfolio, through loans originated by its mortgage banking
subsidiary and through purchased loan servicing. Additionally,
the Bank's non-interest income is expected to benefit to a lesser
extent from the expansion/addition of non-traditional products.
For example, the Bank intends to expand its lines of securities
and insurance products and very recently began offering trust and
investment services.
. External Growth. In 1995, the Bank opened its first offices
outside of Pennsylvania through the purchase of two branches in
Hagerstown, Maryland. Recently, efforts have been made to expand
the Bank's presence in that market through a focus on commercial
business lending. In April 1996, First Harrisburg Bancor, Inc.
("First Harrisburg") was acquired and accounted for using the
purchase method of accounting for business combinations. First
Harrisburg had assets of approximately $277 million at the time
of the acquisition. The Bank expects to target promising new
geographic markets and expand coverage of existing markets,
through de novo branching and loan production offices, branch
acquisitions and acquisitions of financial institutions and
financial services companies. Consolidation of the financial
services industry may present favorable acquisition
opportunities.
. Fostering a Sales Culture. A sales training manager was recently
hired to further management's endeavors to leverage the Bank's
extensive branch network by educating personnel about banking
products, training them regarding cross-selling techniques and
rewarding their efforts through an incentive-based compensation
program. The Bank has also begun a product management program to
develop and price products intended for specific customer
segments.
. Enhanced Information and Delivery Systems. In 1997, the Bank
replaced much of its core hardware and software with more
sophisticated systems, including a personal computer network. The
upgrade, now substantially complete, is expected to increase
productivity by reducing manual applications, improving
management information and facilitating customer service. The
Bank has recently launched technological enhancements to increase
customer access to banking services. These include corporate cash
management software, an internet web site (loan, and deposit
programs and other information) and telephone voice response
banking. Improvements to these systems are underway, and internet
banking will be introduced shortly. The Bank has also expanded
its ATM network in the last two years to a total of 28, and
intends to expand to 40 ATMs by the end of 1998. Certain branch
locations have been or will be remodeled to improve service.
16
<PAGE>
<PAGE>
The Company's principal executive office is located at 235 North
Second Street, Harrisburg, Pennsylvania, and its telephone number at that
address is (717) 236-4041.
REGULATORY CAPITAL COMPLIANCE
At June 30, 1998, the Bank exceeded each of its regulatory capital
requirements. Set forth below is a summary of the Bank's compliance with the
FDIC capital standards as of June 30, 1998, on a historical and pro forma basis
assuming the sale on such date of 2,000,000 shares of Common Stock at the
indicated price per share and receipt by the Bank of 50% of the net proceeds.
For purposes of the table below, the cost of shares expected to be purchased by
the ESOP and the cost of the shares expected to be acquired by the restricted
stock plan are deducted from pro forma regulatory capital. The Federal Reserve
Board has adopted capital adequacy guidelines for bank holding companies (on a
consolidated basis) substantially similar to the FDIC capital requirements for
the Bank. On a pro forma consolidated basis after the Offering, the Company's
pro forma stockholders' equity will continue exceed these requirements.
<TABLE>
<CAPTION>
PRO FORMA AT JUNE 30, 1998, BASED UPON THE SALE OF 2,000,000 SHARES
----------------------------------------------------------------------
HISTORICAL AT MINIMUM OF MIDPOINT OF MAXIMUM OF
JUNE 30, 1998 $19.00 PER SHARE $22.50 PER SHARE $26.00 PER SHARE
---------------------------- -------------------------- -------------------- --------------------
PERCENT PERCENT PERCENT PERCENT
OF OF OF OF
AMOUNT ASSETS (1) AMOUNT ASSETS (1) AMOUNT ASSETS (1) AMOUNT ASSETS (1)
------------- ------------- ------------ ------------ -------- ---------- -------- ----------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
GAAP capital $178,101 7.95% $194,182 8.33% $197,193 8.44% $200,204 8.56%
======== ====== ======== ====== ======== ===== ======== =====
Leverage capital:
Capital level (2) $149,701 6.69% $165,782 7.34% $168,793 7.47% $171,805 7.59%
Requirement(3) 89,559 4.00% 90,293 4.00% 90,431 4.00% 90,568 4.00%
-------- ------ -------- ------ -------- ----- -------- -----
Excess $ 60,142 2.69% $ 75,489 3.34% $ 78,362 3.47% $ 81,237 3.59%
======== ====== ======== ====== ======== ===== ======== =====
Risk-based capital:
Tier 1 capital level (2)(4) $149,701 11.54% $165,782 13.17% $168,793 13.39% $171,805 13.61%
Requirement 51,894 4.00% 50,365 4.00% 50,433 4.00% 50,501 4.00%
-------- ------ -------- ------ -------- ----- -------- -----
Excess $ 97,807 7.54% $115,417 9.17% $118,360 9.39% $121,304 9.61%
======== ====== ======== ====== ======== ===== ======== =====
Total capital level (2)(4) $158,965 12.25% $175,046 13.90% $178,057 14.12% $181,069 14.34%
Requirement 103,787 8.00% 100,730 8.00% 100,866 8.00% 101,002 8.00%
-------- ------ -------- ------ -------- ----- -------- -----
Excess $ 55,178 4.25% $ 74,316 5.90% $ 77,191 6.12% $ 80,067 6.34%
======== ====== ======== ====== ======== ===== ======== =====
</TABLE>
- ---------------------------
(1) Leverage capital levels are shown as a percentage of tangible average
assets. Risk-based capital levels are calculated on the basis of a
percentage of risk-weighted average assets.
(2) Pro forma capital levels are calculated assuming that the Company funds the
restricted stock plan to enable the plan to purchase at the assumed price
in the open market a number of shares equal to 4% of the common stock sold
in the Offering and the ESOP purchases 40,000 of the shares sold in the
Offering.
(3) The current leverage capital requirement is 3% of total adjusted assets for
banks that receive the highest supervisory rating for safety and soundness
and that are not experiencing or anticipating significant growth. The
current leverage capital ratio applicable to all other banks is 4% to
5%.
(4) Assumes net proceeds are invested in assets that carry a risk-weighting
equal to the average risk weighting of the Bank's risk-weighted assets as of
June 30, 1998.
USE OF PROCEEDS
Although the actual net proceeds from the sale of the Common Stock
cannot be determined until the Offering is completed, it is presently
anticipated, based on the assumptions set forth in "Pro Forma Data" that the net
proceeds from the sale of the Common Stock will range from $36.7 million to
$50.4 million.
The Company will contribute 50% of the net proceeds of the Offering to
the Bank. Such portion of net proceeds received by the Bank from the Company
will be added to the Bank's general funds which the Bank currently intends to
utilize for general corporate purposes, including investments in short- and
medium-term investments. The Bank also intends to use such funds to increase its
loan originations. The Bank may also use such funds for the expansion of its
retail banking franchise, and to expand operations through acquisitions of other
financial institutions,
17
<PAGE>
branch offices or financial services businesses. To the extent that the expected
future awards under the Company's existing or new stock-based benefit programs
are not funded with authorized but unissued shares of Common Stock, the Company
or Bank may use net proceeds from the Offering to fund the purchase, in the open
market, of stock to be awarded under such stock-based benefit programs.
The Company intends to use a portion of the net proceeds it retains to
make a loan directly to the ESOP, with an assumed interest rate of 8.5%, to
enable the ESOP to purchase 40,000 of the shares sold in the Offering. The
remaining net proceeds retained by the Company will be invested initially in
short- and medium-term investments. The net proceeds retained by the Company may
also be used to support the future expansion of operations through branch
acquisitions, the establishment of branch offices and the acquisition of
financial institutions or their assets, or diversification into other banking
related businesses. However, the Company and the Bank have no current
arrangements, understandings or agreements regarding any such transactions.
Upon completion of the Offering, the Board of Directors of the Company
will have the authority to repurchase stock, subject to statutory and regulatory
requirements. Based upon facts and circumstances following the Offering and
subject to applicable regulatory requirements, the Board of Directors may
determine to repurchase stock in the future. Such facts and circumstances may
include but not be limited to (i) market and economic factors such as the price
at which the stock is trading in the market, the volume of trading, the
attractiveness of other investment alternatives in terms of the rate of return
and risk involved in the investment, and the opportunity to improve the
Company's return on equity; (ii) the avoidance of dilution to stockholders by
not having to issue additional shares to cover the exercise of stock options or
to fund employee stock-based benefit plans; and (iii) any other circumstances in
which repurchases would be in the best interests of the Company and its
shareholders. In the event the Company determines to repurchase stock, such
repurchases may be made at market prices which may be in excess of the Actual
Purchase Price in the Offering. To the extent that the Company repurchases stock
at market prices in excess of the per share book value, such repurchases will
have a dilutive effect upon stockholders' equity per share of Common Stock.
18
<PAGE>
CAPITALIZATION
The following table presents the historical capitalization of the
Company at June 30, 1998, and the pro forma consolidated capitalization of the
Company after giving effect to the Offering, based upon the sale of 2,000,000
shares for the price per share indicated in the table and the other assumptions
set forth under "Pro Forma Data."
<TABLE>
<CAPTION>
PRO FORMA CONSOLIDATED CAPITALIZATION
BASED UPON THE SALE OF 2,000,000 SHARES
-----------------------------------------------------
MINIMUM MIDPOINT MAXIMUM
HISTORICAL PRICE OF PRICE OF PRICE OF
CAPITALIZATION $19.00 PER SHARE $22.50 PER SHARE $26.00 PER SHARE
-------------- ---------------- ---------------- ----------------
(IN THOUSANDS)
<S> <C> <C> <C> <C>
Deposits (1).................................... $1,126,150 $1,126,150 $1,126,150 $1,126,150
FHLB advances and other borrowings.............. 961,288 961,288 961,288 961,288
---------- ---------- ---------- ----------
Total deposits and borrowed funds............... $2,087,438 $2,087,438 $2,087,438 $2,087,438
========== ========== ========== ==========
Stockholders' equity:
Common Stock, $.01 par value per share:
100,000,000 shares authorized; shares to be
issued as reflected......................... $ 340 $ 340 $ 340 $ 340
Additional paid-in capital (2).................. 29,378 66,099 72,962 79,825
Retained earnings (3)......................... 150,369 150,369 150,369 150,369
Net unrealized gain on marketable securities... 9,693 9,693 9,693 9,693
Less:
ESOP (4)..................................... (446) (1,206) (1,346) (1,486)
Restricted stock plans (5)................... (506) (2,026) (2,306) (2,586)
---------- ---------- ---------- ----------
Total stockholders' equity................. $ 188,828 $ 223,269 $ 229,712 $ 236,155
========== ========== ========== ==========
Total stockholders' equity as a
percentage of pro forma total assets........ 8.12% 9.46% 9.71% 9.95%
========== ========== ========== ==========
</TABLE>
- ---------------------
(1) Does not reflect withdrawals from deposit accounts for the purchase of
Common Stock in the Offering. Such withdrawals would reduce pro forma
deposits by the amount of such withdrawals.
(2) Reflects the sale of shares in the Offering.
(3) The retained earnings of the Company will be substantially restricted after
the Offering.
(4) Assumes that 40,000 of the shares sold in the Offering will be purchased by
the ESOP at the assumed price and that the funds used to acquire the ESOP
shares will be borrowed from the Company. The cost of the Common Stock
acquired by the ESOP is reflected as a reduction of stockholders'
equity.
(5) Assumes that, subsequent to the Offering, an amount equal to 4% of the
shares of Common Stock sold in the Offering is purchased in the open market
at the assumed price and awarded pursuant to the Company's restricted stock
plans. The cost of the Common Stock to be purchased by the restricted stock
plans is reflected as a reduction of stockholders' equity.
MARKET INFORMATION
The Common Stock is listed on the Nasdaq National Market under the
symbol "HARS." As of May 31, 1998, the Company had 10 registered market makers,
3,676 stockholders of record (excluding the number of persons or entities
holding stock in street name through various brokerage firms), and 33,963,450
shares outstanding. As of such date, the Mutual Company held 25,500,000 shares
of Common Stock and Minority Stockholders held 8,463,450 shares.
19
<PAGE>
The following table sets forth market price and dividend information for the
Common Stock or, prior to the completion of the Two-Tier Reorganization, the
Bank's common stock. Information is presented for each quarter of the previous
two calendar years. All information has been revised to reflect the Company's
November 18, 1997 three-for-one stock split.
<TABLE>
<CAPTION>
QUARTER ENDED HIGH LOW DIVIDENDS
------------- ---- --- ---------
<S> <C> <C> <C>
1996
----
March 31 $ 6 48/64 $ 5 59/64 $.0483
June 30 $ 6 16/64 $ 5 $.0483
September 30 $ 5 43/64 $ 4 59/64 $.0483
December 31 $ 6 13/64 $ 5 $.0483
1997
----
March 31 $ 7 37/64 $ 6 5/64 $.0483
June 30 $ 7 11/64 $ 6 3/64 $.0483
September 30 $16 27/64 $ 7 $.0483
December 31 $21 1/2 $ 15 43/64 $.0550
1998
----
March 31 $27 7/8 $ 17 6/8 $.0550
June 30 $28 1/4 $ 22 $.0550
July 1 through
September ____ $ $ $
</TABLE>
The last trade of the Common Stock on September __, 1998 was at a
price of $_______ per share and the closing bid and asked prices were $______
and $_______, per share, respectively.
DIVIDEND POLICY
GENERAL
The Bank, or, since the Two-Tier Reorganization, the Company, has paid
quarterly cash dividends every quarter since the completion of the mutual
holding company reorganization and minority stock issuance in January 1994, and
it is the current policy of the Company to pay a quarterly cash dividend of
$.055 per share. The Company's ability to pay dividends will depend largely on
its receipt of Offering proceeds and cash dividends from the Bank. Under
Pennsylvania law, the Bank is generally permitted to pay dividends out of
accumulated net earnings if the Bank's surplus would not be reduced below
certain levels by the payment of such dividend. Pennsylvania law requires the
Bank to maintain surplus in an amount that is at least equal to contributed
capital.
Dividends paid by the Company will be determined by the Company's
Board of Directors and will be based upon its consolidated financial condition,
results of operations, tax considerations, economic conditions, regulatory
restrictions which affect the payment of dividends by the Bank to the Company,
business plans and other factors. In addition, the Company's ability to pay
dividends is subject to limitations under Pennsylvania law, and regulations of
the FRB that require the Company to maintain certain minimum levels of capital.
There can be no assurance that dividends will be paid on Common Stock or that,
if paid, such dividends will not be reduced or eliminated in the future.
DIVIDEND WAIVERS BY THE MUTUAL COMPANY
The Mutual Company has generally waived the receipt of dividends
declared by the Bank, or, subsequent to the Two-Tier Reorganization, dividends
paid by the Company. The Mutual Company has not been required to obtain approval
of the FRB prior to any such waiver, and through the date hereof has not sought
or received FRB approval of
20
<PAGE>
any such waiver. In connection with the FRB and FDIC approvals of the Bank's
acquisition of First Harrisburg Bancor, Inc. and its wholly owned subsidiary,
First Federal Savings and Loan Association of Harrisburg ("First Federal"), the
Bank and the Mutual Company made several commitments to the FDIC and the FRB
regarding the waiver of dividends by the Mutual Company. These commitments
include the following: (i) Any dividends waived by the Mutual Company shall be
taken into account in any valuation of the Bank and the Mutual Company, and
factored into the calculation used in establishing a fair and reasonable basis
for exchanging Bank shares for holding company shares in any subsequent
conversion of the Mutual Company to stock form; (ii) Dividends waived by the
Mutual Company shall not be available for payment to or the value thereof
transferred to Minority Stockholders by any means including through dividend
payments or at liquidation; (iii) Beginning five years after April 19, 1996, the
date of consummation of the Bank's acquisition of First Federal, the Mutual
Company will make prior application to and shall receive the approval of the FRB
prior to waiving any dividends declared on the capital stock of the Bank, and
the FRB shall have the authority to approve or deny any dividend waiver request
in its discretion, and after such date such application may be made on an annual
basis with respect to any year in which the Mutual Company intends to waive
dividends paid by the Bank; (iv) After April 19, 1996, the date of consummation
of the Bank's acquisition of First Federal, the amount of waived dividends that
are identified as belonging to the Mutual Company shall not be available for
payment to, or the value transferred to, Minority Stockholders, either through
dividend payments, upon the conversion of the Mutual Company to stock form, upon
the redemption of shares of the Bank, upon the Bank's issuance of additional
shares, at liquidation, or by any other means; (v) The Mutual Company shall
notify the FRB of all such transactions and will make available to the FRB such
information as the FRB determines to be appropriate; (vi) The Bank will take
into account when setting its dividend rate the declaration rate in relation to
net income and the rate's effect on the Bank's ability to issue capital; and
(vii) The dividend rate will be reasonable and sustainable upon a full
conversion to stock form of the Mutual Company; (viii) In the event that the
FRB adopts regulations regarding dividends waivers by mutual holding companies,
the Mutual Company will comply with the applicable requirements of such
regulations. AFTER THE COMPLETION OF THE TWO-TIER REORGANIZATION, THE
COMMITMENTS BECAME APPLICABLE TO DIVIDENDS PAID BY THE COMPANY THAT ARE WAIVED
BY THE MUTUAL COMPANY.
If the Mutual Company decides that it is in its best interest to waive the
right to receive a particular dividend to be paid by the Company, and, if
necessary, the FRB approves such waiver, then the Company pays such dividend
only to Minority Stockholders, and the amount of the dividend waived by the
Mutual Company is treated in the manner described above. The Mutual Company's
decision as to whether or not to waive a particular dividend depends on a number
of factors, including the Mutual Company's capital needs, the investment
alternatives available to the Mutual Company as compared to those available to
the Company, and the receipt of required regulatory approvals. There can be no
assurance that (i) after the Offering the Mutual Company will waive dividends
paid by the Company, (ii) the FRB will approve any dividend waivers by the
Mutual Company after April 2001, or (iii) the terms that may be imposed by the
FRB on any dividend waiver will be favorable to Minority Stockholders.
As of the date hereof, the Mutual Company has waived the right to receive
all dividends paid by the Bank and the Company. As of April 19, 1996, the
Mutual Company had waived $9.1 million of dividends declared by the Bank, and
through June 30, 1998, had waived a total of $19.5 million of dividends paid by
the Bank and the Company.
PRO FORMA DATA
The actual net proceeds from the sale of the Common Stock cannot be
determined until the Offering is completed. However, net proceeds are currently
estimated to be between $36.7 million and $50.4 million, assuming the sale of
2,000,000 shares in the Offering. The estimated net proceeds have been
calculated based upon the following assumptions: (i) the ESOP will purchase
40,000 of the shares issued in the Offering; (ii) officers, directors, and
employees of the Company and the Bank and their immediate families will purchase
$1.3 million of Common Stock; (iii) shares not purchased by the ESOP and
officers, directors, and employees of the Company and the Bank and their
immediate families will be sold in the Subscription and Community Offering; (iv)
Ryan Beck will receive a fee equal to 2.0% of the aggregate dollar amount of the
shares sold, except that no fees will be paid on shares sold to the ESOP,
officers, directors and employees of the Company and Bank and their immediate
family members; and (v) fixed expenses incurred in connection with the Offering
will be $560,000 (actual expenses may vary from this estimate).
21
<PAGE>
Pro forma consolidated net income of the Company for the six months ended
June 30, 1998 and the year ended December 31, 1997, has been calculated based on
historical earnings for such periods, and assumes that the investable net
proceeds received by the Company and Bank were invested at 5.37% and 5.48%, the
one year Treasury Bill rate as of June 30, 1998 and December 31, 1997,
respectively. The effect of withdrawals from deposit accounts for the purchase
of Common Stock has not been reflected. The pro forma after-tax yield for the
Company and Bank is assumed to be 3.71% and 3.78% based on an effective tax rate
of 31.0%. No effect has been given in the pro forma stockholders' equity
calculations for the assumed earnings on the net proceeds.
THE FOLLOWING PRO FORMA INFORMATION MAY NOT BE REPRESENTATIVE OF THE
FINANCIAL EFFECTS OF THE FOREGOING TRANSACTIONS AT THE DATES ON WHICH SUCH
TRANSACTIONS ACTUALLY OCCUR AND SHOULD NOT BE TAKEN AS INDICATIVE OF FUTURE
RESULTS OF OPERATIONS. Pro forma consolidated stockholders' equity represents
the difference between the stated amount of assets and liabilities of the
Company computed in accordance with generally accepted accounting principles
("GAAP") after giving effect to the Offering.
<TABLE>
<CAPTION>
At or For the Six Months Ended At or For the Year Ended
June 30, 1998 December 31, 1997
-------------------------------- --------------------------
Minimum Midpoint Maximum Minimum Minimum Minimum
Price of Price of Price of Price of Price of Price of
$19.00 $ 22.50 $ 26.00 $ 19.00 $ 22.50 $ 26.00
Per Share Per Share Per Share Per Share Per Share Per Share
--------- --------- --------- --------- --------- ---------
(Dollars in thousands except per share amounts)
<S> <C> <C> <C> <C> <C> <C>
Gross proceeds............. $ 38,000 $ 45,000 $ 52,00 $ 38,000 $ 45,000 $ 52,000
Less: Offering expenses and commissions 1,279 1,416 1,553 1,279 1,416 1,553
-------- --------- --------- --------- --------- ---------
Estimated net proceeds 36,721 43,584 50,447 36,721 43,584 50,447
Less: Common Stock purchased by ESOP (760) (900) (1,040) (760) (900) (1,040)
Common Stock purchased by restricted
stock plans (1,520) (1,800) (2,080) (1,520) (1,800) (2,080)
-------- --------- --------- --------- --------- ---------
Investable net proceeds $ 34,441 $ 40,884 $ 47,327 $ 34,441 $ 40,884 $ 47,327
======== ======== ======== ======== ========= =========
Consolidated net income:
Historical $ 10,224 $ 10,224 $ 10,224 $ 17,771 $ 17,771 $ 17,771
Pro forma income on net proceeds 640 760 880 1,302 1,546 1,790
Pro forma ESOP adjustment (1) (17) (21) (24) (35) (41) (48)
Pro forma restricted stock plan adjustment (2) (52) (62) (72) (105) (124) (144)
-------- --------- --------- --------- --------- ---------
Pro forma net income (3). $ 10,795 $ 10,901 $ 11,008 $ 18,933 $ 19,152 $ 19,369
======== ======== ======== ======== ========= =========
Per share net income (4):
Historical $ 0.30 $ 0.30 $ 0.30 $ 0.53 $ 0.53 $ 0.53
Pro forma income on net proceeds 0.02 0.02 0.03 0.04 0.05 0.05
Pro forma ESOP adjustment (1) (0.00) (0.00) (0.00) (0.00) (0.00) (0.00)
Pro forma restricted stock plan adjustment (2) (0.00) (0.00) (0.00) (0.00) (0.00) (0.00)
-------- --------- --------- --------- --------- ---------
Pro forma basic net income per share (3) $ 0.32 $ 0.32 $ 0.33 $ 0.57 $ 0.58 $ 0.58
======== ======== ======== ======== ========= =========
Pro forma diluted net income per share (3) $ 0.32 $ 0.32 $ 0.32 $ 0.56 $ 0.56 $ 0.57
======== ======== ======== ======== ========= =========
Stockholders' equity:
Historical $188,828 $188,828 $188,828 $179,034 $179,034 $179,034
Estimated net proceeds 36,721 43,584 50,447 36,721 43,584 50,447
Less: Common Stock acquired by ESOP (1) (760) (900) (1,040) (760) (900) (1,040)
Less: Common Stock acquired by restricted
stock plan (2) (1,520) (1,800) (2,080) (1,520) (1,800) (2,080)
-------- --------- --------- --------- --------- ---------
Pro forma stockholders' equity (3) $223,269 $229,712 $236,155 $213,475 $219,918 $226,361
======== ======== ======== ======== ========= =========
Stockholders' equity per
share (4):
Historical $ 5.56 $ 5.56 $ 5.56 $ 5.30 $ 5.30 $ 5.30
Estimated net proceeds 1.08 1.28 1.49 1.09 1.29 1.49
Less: Common Stock acquired by ESOP (1) (0.02) (0.03) (0.03) (0.02) (0.03) (0.03)
Less: Common Stock acquired br restricted
stock plan (2) (0.04) (0.05) (0.06) (0.04) (0.05) (0.06)
-------- --------- --------- --------- --------- ---------
Pro forma stockholders' equity per share (3) $ 6.58 $ 6.76 $ 6.96 $ 6.33 $ 6.51 $ 6.70
======== ======== ======== ======== ========= =========
Offering price as a percentage of pro forma
stockholders' equity per share (3) (4) 288.75% 332.84% 373.56% 300.16% 345.62% 388.06%
Offering price as a multiple of pro forma
basic net income per share (3) 29.7x 35.2x 39.4x 33.3x 38.8x 44.8x
Offering price as a multiple of pro forma diluted
net income per share (3) 29.7x 35.2x 40.6x 33.9x 40.2x 45.7x
</TABLE>
______________________
Footnotes on following page.
22
<PAGE>
(1) Assumes that 40,000 shares of the Common Stock issued in the Offering will
be purchased by the ESOP, and that the funds used to acquire such shares
will be borrowed from the Company. The ESOP loan is assumed to be repaid in
15 equal annual installments of principal and shares are to be released to
plan participants ratably as the ESOP pays the loan. Statement of Position
93-6 requires that an employer record compensation expense in an amount
equal to the fair value of the shares committed to be released to the
employees. The pro forma net income assumes as follows: (i) 3.33% of the
ESOP shares were committed to be released during the six months ended June
30, 1998, and 6.67% were committed to be released during 1997 at an average
fair value assumed to be the price at which the shares are sold in the
Offering (ii) dividends on shares not released to the participants were
used to fund debt service payments and (iii) the Company made no other
contributions to the ESOP. If the shares were to appreciate in value over
time, compensation expense relating to the ESOP would increase. The cost of
the shares issued to the ESOP is reflected as a reduction of stockholders'
equity.
(2) Assumes that the Company's restricted stock plans purchase in the open
market a number of shares of Common Stock equal to 4% of shares sold in the
Offering at a purchase price equal to the price at which shares are sold in
the Offering. The shares of restricted stock are assumed to vest ratably
over a 10 year period, based upon the attainment of certain performance
criteria.
(3) If the number of shares sold in the Offering is increased by 15%, to
2,300,000 shares, then at the minimum, midpoint and maximum of the Offering
Price Range as of and for the six months ended June 30, 1998 pro forma net
income would be $10.9 million, $11.0 million, and $11.1 million, pro forma
diluted net income per share would be $.32, $.32, and $.33, pro forma
stockholders' equity would be $228.6 million, $236.1 million, and $243.5
million, pro forma stockholders' equity per share would be $6.74, $6.95,
and $7.17, the offering price as a percentage of pro forma stockholders'
equity per share would be 281.9%, 323.7%, and 362.6%, and the offering
price as a multiple of pro forma diluted net income per share would be
29.7x, 35.2x, and 39.4x, respectively. As of and for the year ended
December 31, 1997 pro forma net income would be $19.1 million, $19.4
million, and $19.6 million, pro forma diluted net income per share would be
$0.56, $0.57, and $0.58, pro forma stockholders' equity would be $218.8
million, $226.3 million, and $233.7 million, pro forma stockholders' equity
per share would be $6.47, $6.69, and $6.91, the offering price as a
percentage of pro forma stockholders' equity per share would be 293.2%,
335.8%, and 375.7%, and the offering price as a multiple of pro forma
diluted net income per share would be 33.8x, 39.5x, and 45.1x,
respectively. The retained earnings of the Bank will continue to be
substantially restricted after the Offering. See "Dividend Policy."
(4) Historical basic net income per share is based on 33,917,123 and 33,779,379
weighted average shares outstanding during the six months ended June 30,
1998 and the year ended December 31, 1997, respectively. Historical diluted
net income per share is based on 34,220,826 and 34,076,061 weighted average
shares outstanding during the six months ended June 30, 1998 and the year
ended December 31, 1997, respectively. Pro forma adjustments to basic net
income per share are based on historical weighted average shares
outstanding plus ESOP shares assumed to be committed to be released during
the period. Historical and pro forma stockholders' equity per share is
based on 33,964,950 and 33,790,400 total shares outstanding at June 30,
1998 and December 31, 1997, respectively. The number of shares reserved for
future issuance upon the exercise of options outstanding as of June 30,
1998 and December 31, 1997 was 303,703 shares and 296,682 shares,
respectively. The number of additional shares assumed to be reserved for
future issuance from both existing stock option plans and stock option
plans that the Company intends to implement following the completion of the
Offering is 200,000 shares. These shares are assumed to be issued from the
authorized but unissued shares of the Company. The options are assumed to
be granted at the beginning of the respective period with an exercise price
equal to the fair market value of the stock at the date of grant. Assuming
all such options were exercised at the beginning of the six month period
ending June 30, 1998, pro forma diluted net income per share for the six
month period ending June 30, 1998 would be $.32, $.32 and $.32, at the
minimum, midpoint and maximum of the Offering Price Range, respectively,
and pro forma stockholders' equity per share as of June 30, 1998 would be
$6.57, 6.76 and 6.95. Assuming all such options were exercised at the
beginning of the year ending December 31, 1997, pro forma diluted net
income per share for the year ending December 31, 1997 would be $.55, $.56,
and $.57, at the minimum, midpoint and maximum of the Offering Price Range,
respectively, and pro forma stockholders' equity per share as of December
31, 1997 would be $6.31, 6.50 and 6.69.
23
<PAGE>
COMMON STOCK TO BE PURCHASED BY MANAGEMENT
The following table sets forth information regarding intended Common
Stock subscriptions by each of the Directors and executive officers of the
Company and the Bank and their associates, and by all such Directors and
executive officers as a group. This table excludes shares and stock options
currently owned, shares to be purchased by the ESOP, and any future restricted
stock plan or stock option plan awards.
<TABLE>
<CAPTION>
As a percentage of the
Number of shares at Offering at
------------------------------- ------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Aggregate $19.00 $22.50 $26.00 $19.00 $22.50 $26.00
Purchase Per Per Per Per Per Per
Name Price Share Share Share Share Share Share
- ----------------------------------------- ---------- ------- ------- ------- ------ ------ ------
Charles C. Pearson....................... $ 200,000 10,526 8,888 7,692 0.53% 0.44% 0.38%
Ernest P. Davis.......................... 50,000 2,631 2,222 1,923 0.13 0.11 0.10
Jimmie C. George......................... 100,000 5,263 4,444 3,846 0.26 0.22 0.19
Robert A. Houck.......................... 25,000 1,315 1,111 961 0.07 0.06 0.05
Bruce S. Isaacman........................ 75,000 3,947 3,333 2,884 0.20 0.17 0.14
Robert E. Kessler........................ 45,000 2,368 2,000 1,730 0.12 0.10 0.09
William E. McClure, Jr................... 125,000 6,578 5,555 4,807 0.33 0.28 0.24
William A. Siverling..................... 100,000 5,263 4,444 3,846 0.26 0.22 0.19
Frank R. Sourbeer........................ 100,000 5,263 4,444 3,846 0.26 0.22 0.19
Donald B. Springer....................... 50,000 2,631 2,222 1,923 0.13 0.11 0.10
James L. Durrell......................... 58,000 3,052 2,577 2,230 0.15 0.13 0.11
William M. Long.......................... 25,000 1,315 1,111 961 0.07 0.06 0.05
Lyle B. Shughart......................... 25,000 1,315 1,111 961 0.07 0.06 0.05
John C. Coulson.......................... 100,000 5,263 4,444 3,846 0.26 0.22 0.19
Richard C. Ruben......................... 25,000 1,315 1,111 961 0.07 0.06 0.05
John W. Atkinson......................... 50,000 2,631 2,222 1,923 0.13 0.11 0.10
Jane B. Tompkins......................... 50,000 2,631 2,222 1,923 0.13 0.11 0.10
Andrew S. Samuel......................... 25,000 1,315 1,111 961 0.07 0.06 0.05
---------- ------- ------- ------- ------ ------ ----
All Directors and Executive Officers as
a Group (18 persons).................... $1,228,000 64,622 54,572 47,224 3.23% 2.73% 2.36%
========== ======= ======= ======= ====== ====== ====
</TABLE>
24
<PAGE>
THE OFFERING
THE DEPARTMENT AND THE FRB HAVE APPROVED THE STOCK ISSUANCE PLAN
SUBJECT TO THE SATISFACTION OF CERTAIN CONDITIONS. SUCH APPROVAL DOES NOT
CONSTITUTE A RECOMMENDATION OR ENDORSEMENT OF THE OFFERING OR THE PLAN BY THE
DEPARTMENT OR THE FRB.
GENERAL
On June 16, 1998, the Board of Directors of the Company, by a
unanimous vote, adopted the Plan, pursuant to which the Company is offering
additional shares of common stock to Eligible Account Holders, the ESOP and
Supplemental Eligible Account Holders in a Subscription Offering, and possibly
to Minority Stockholders and certain others in a Community Offering. In adopting
the Plan, the Board of Directors has determined that the Offering is advisable
and in the best interest of the Company and its stockholders and customers. The
Plan was ratified by a unanimous vote of the Mutual Company's Board of Trustees
who determined that the Plan and the Offering is advisable and in the best
interest of the Mutual Company and the Bank's depositors, and was unanimously
ratified by the Bank's Board of Directors who determined that the Plan and the
Offering is advisable and in the best interest of the Bank and its customers.
The Offering will enable the Company and the Bank to increase their
regulatory capital. As of June 30, 1998, the Company's Tier 1 capital was 7.1%
of average assets, and the Bank's Tier 1 capital was 6.7% of average assets. See
"Regulatory Capital Compliance." Management determined to offer 2,000,000
shares rather than a larger number of shares, or a full conversion of the Mutual
Company, because management believes that the proceeds of the Offering will
provide the Company with adequate capital to implement its business strategy at
this time and that in view of its current strategy the additional capital that
would be raised in a larger offering would create pressure to make investments
that would be overly risky. Although management believes the Offering will, at
least in the short term, reduce the Company's return on average equity,
management also believes that the sale of a larger number of shares would cause
an even greater reduction in the Company's return on equity.
In addition, the Offering will provide the Company with greater
capital resources to effect future corporate transactions, including
acquisitions, and otherwise enhance the Company's ability, primarily through the
Bank, to render services to customers and the community. Although there can be
no assurances, it is expected that the Offering will also significantly increase
the number of shares of Common Stock available to trade, which should increase
the float and liquidity of the Common Stock.
Under the terms of the Plan, at the conclusion of the Offering, if the
Company has accepted subscriptions for 2,000,000 shares of Common Stock, the
Mutual Company will contribute to the Company 2,000,000 shares of Common Stock
owned by the Mutual Company, which will then be canceled by the Company. As a
result, the number of shares of Common Stock owned by the Mutual Company will
decrease to 23,500,000 shares, or approximately 69.2% of the 33,963,450 shares
of Common Stock outstanding as of May 31, 1998, from 25,500,000 shares, or
approximately 75.1% of the shares of Common Stock outstanding as of such date.
At the conclusion of the Offering, in the sole discretion of the Company, the
total number of shares sold in the Offering (and contributed to the Company by
the Mutual Company) may be increased or decreased by up to 15% due to market and
general financial and economic conditions and demand for the Common Stock,
provided that the shares sold in the Offering may not be decreased below a
number of shares that will result in less than $38.0 million of gross Offering
proceeds. Such increase or decrease is not dependent upon whether shares are
sold at the minimum, midpoint or maximum of the Offering Price Range. THE TOTAL
NUMBER OF OUTSTANDING SHARES OF COMMON STOCK WILL NOT CHANGE AS A RESULT OF THE
OFFERING.
The Offering pursuant to the Plan will add financial strength to the
consolidated Company, thereby enhancing the value of the Mutual Company's
primary asset. The increase in the Company's capital will increase the Company's
ability to serve as a source of strength to the Bank, and the increase in the
Company's and the Bank's capital will provide additional protection to the
Bank's depositors. Certain of the Bank's depositors will also be given
subscription
25
<PAGE>
rights to purchase the Common Stock issued pursuant to the Plan. Although the
Mutual Company's contribution of shares of Common Stock to the Company will
decrease the percentage of the Company owned by the Mutual Company, it will
increase the aggregate book value of the shares of Common Stock held by the
Mutual Company and will only slightly (or not at all) decrease the aggregate
earnings attributable to the shares of Common Stock held by the Mutual Company.
The Offering does not preclude the Mutual Company from conducting a mutual-to-
stock conversion in the future.
STOCK PRICING, NUMBER OF SHARES TO BE ISSUED AND FAIRNESS OPINION
The Company has determined to offer 2,000,000 shares of Common Stock
(subject to adjustment to up to 2,300,000 shares). In order to consummate the
Offering, at least $38.0 million of Common Stock must be sold. The Company's
Board of Directors, in consultation with its financial advisor, Ryan Beck, on
June 25, 1998 established an Offering Price Range of $19.00 to $26.00 per share,
or an aggregate offering range of $38.0 million to $52.0 million. The Board of
Directors will reevaluate the Offering Price Range at the commencement of the
Offering. All shares of Common Stock will be sold at the Actual Purchase Price
to be determined by the Company. The Actual Purchase Price is expected to be
within the Offering Price Range.
All subscribers must subscribe for a dollar amount of Common Stock.
The total number of shares that will be issued to a subscriber will be equal to
the total dollar amount of the subscription divided by the Actual Purchase Price
per share, subject to the applicable purchase limitations and allocations in the
event of an oversubscription. Fractional shares will not be issued; instead,
the Company will refund partial subscriptions that are insufficient to purchase
a whole share.
Unless authorized by the Company or required by the Department or the
FRB, no resolicitation of subscribers will be made unless the Actual Purchase
Price per share is less than $19.00 or more than $26.00. If the Actual Purchase
Price is not within the Offering Price Range and the Company determines to
continue the Offering, subscribers will be offered the opportunity to modify or
withdraw their order, and, unless an affirmative response is received in a
designated period of time, will have their funds returned promptly with
interest, and/or their withdrawal authorizations canceled.
The Board of Directors will establish the Actual Purchase Price based
on market and financial conditions, including the historical trading prices and
trading volume of the Common Stock. The Board of Directors will obtain a written
fairness opinion, dated as of the consummation of the Offering, to the effect
that the pricing of the Common Stock is fair from a financial point of view to
(i) the Mutual Company and the Bank's depositors, and (ii) stockholders of the
Company including stockholders other than the Mutual Company (the "Fairness
Opinion").
The Board has retained Ryan Beck to render the Fairness Opinion. Ryan
Beck was selected by the Company because of its knowledge of, experience with,
and reputation in the financial services industry. Ryan Beck has substantial
experience in the valuation of bank and thrift securities and has knowledge of
the trading markets for such securities as a result of its market-making for the
stocks of financial institutions. Ryan Beck is headquartered in New Jersey, and
has served numerous financial institutions nationwide in the capacities of
market maker, securities offering underwriter or selling agent and merger
consultant.
In arriving at its opinion, Ryan Beck intends to consider relevant
market and financial data, including, but not limited to (1) the Prospectus; (2)
the Company's Annual Report on Form 10-K for the year ended December 31, 1997
and the Bank's Annual Report on Form F-2 for the years ended December 31, 1996
and 1995; (3) the Company's Annual Report to Stockholders for the year ended
December 31, 1997 and the Bank's Annual Report to Stockholders for the years
ended December 31, 1996 and 1995; (4) the Company's Quarterly Report on Form 10-
Q for the period ended March 31, 1998 and June 30, 1998; (5) certain operating
and financial information including projections provided by management regarding
the Company's business and prospects including the pro forma impact of the
Offering; (6) historical market prices of the Common Stock and the relationship
of the market price to tangible book value per share and earnings per share; (7)
the trading volume in the Common Stock; (8) historical stock market prices
associated with all mutual holding company stocks listed on the Nasdaq National
Market in relation to tangible book value and earnings
26
<PAGE>
per share; (9) an analysis of projected fully converted valuations for savings
institutions in the mutual holding company structure, including the Company;
(10) the trading volume of all Nasdaq National Market listed mutual holding
company stocks; (11) the market for fully converted thrift equities; and (12)
other such studies, analyses, inquiries and examinations as are deemed
appropriate.
THE FAIRNESS OPINION, WHICH IS BASED ON A NUMBER OF PROJECTIONS, IS
NOT INTENDED AS A RECOMMENDATION AS TO THE ADVISABILITY OF PURCHASING SHARES OF
COMMON STOCK IN THE OFFERING. NO ASSURANCE CAN BE GIVEN THAT THOSE WHO PURCHASE
SHARES OF COMMON STOCK IN THE OFFERING WILL BE ABLE TO SELL SUCH SHARES AFTER
THE OFFERING AT OR ABOVE THE ACTUAL PURCHASE PRICE.
Ryan Beck served as the Bank's selling agent for its initial stock
offering in 1994. Ryan Beck's equity research department follows Pennsylvania
bank and thrift stocks. Since 1994, Ryan Beck has made a market in the
Company's stock. In its capacity as market maker, from time to time, Ryan Beck
may own or be short shares of Common Stock. As of the date of this Prospectus,
Ryan Beck currently does not have a material long or short position in the
Common Stock.
SUBSCRIPTION OFFERING AND SUBSCRIPTION RIGHTS
In accordance with the Plan, rights to subscribe for the purchase of
Common Stock in the Subscription Offering have been granted under the Plan in
the following order of descending priority. All subscriptions received will be
subject to the availability of Common Stock after satisfaction of all
subscriptions of all persons having prior rights in the Subscription Offering
and to the maximum, minimum, and overall purchase limitations set forth in the
Plan and as described below under "--Limitations on Common Stock Purchases."
Priority 1: Eligible Account Holders. Each depositor with aggregate
deposit account balances of $50 or more (a "Qualifying Deposit") as of May 31,
1997 (the "Eligibility Record Date," and such account holders, "Eligible Account
Holders") will receive nontransferable subscription rights to subscribe in the
Subscription Offering for Common Stock equal to up to the greater of $250,000,
or fifteen times the product (rounded down to the next whole number) obtained by
multiplying the aggregate number of shares of Common Stock issued in the
Offering by a fraction of which the numerator is the amount of the Eligible
Account Holder's Qualifying Deposit and the denominator is the total amount of
Qualifying Deposits of all Eligible Account Holders, in each case on the
Eligibility Record Date, subject to the overall purchase limitation. See "--
Limitations on Common Stock Purchases." If there are not sufficient shares
available to satisfy all subscriptions, shares first will be allocated so as to
permit each subscribing Eligible Account Holder to purchase a number of shares
sufficient to make his total allocation equal to the lesser of 100 shares or the
number of shares for which he subscribed. Thereafter, unallocated shares will
be allocated to each subscribing Eligible Account Holder whose subscription
remains unfilled in the proportion that the amount of his aggregate Qualifying
Deposit bears to the total amount of Qualifying Deposits of all subscribing
Eligible Account Holders whose subscriptions remain unfilled. If an amount so
allocated exceeds the amount subscribed for by any one or more Eligible Account
Holders, the excess shall be reallocated among those Eligible Account Holders
whose subscriptions are not fully satisfied until all available shares have been
allocated.
To ensure proper allocation of stock, each Eligible Account Holder
must list on his order form all deposit accounts in which he has an ownership
interest on the Eligibility Record Date. Failure to list an account could
result in fewer shares being allocated than if all accounts had been disclosed.
Neither the Company nor the Bank nor any of their agents shall be responsible
for orders on which all Qualifying Deposit accounts have not been fully and
accurately disclosed. The subscription rights of Eligible Account Holders who
are also directors or officers of the Bank or their associates will be
subordinated to the subscription rights of other Eligible Account Holders to the
extent attributable to increased deposits in the twelve months preceding the
Eligibility Record Date.
Priority 2: Employee Plans. To the extent that there are sufficient
shares remaining after satisfaction of subscriptions by Eligible Account
Holders, the ESOP will receive nontransferable subscription rights to purchase
27
<PAGE>
Common Stock in the Offering on behalf of ESOP participants subject to the
purchase limitations described herein. The ESOP intends to subscribe for 40,000
shares of the Common Stock issued in the Offering.
Priority 3: Supplemental Eligible Account Holders. To the extent that
there are sufficient shares remaining after satisfaction of subscriptions by
Eligible Account Holders and the ESOP, each depositor with a Qualifying Deposit
as of June 30, 1998 (the "Supplemental Eligibility Record Date") who is not an
Eligible Account Holder ("Supplemental Eligible Account Holder") will receive
nontransferable subscription rights to subscribe in the Subscription Offering
for Common Stock equal to the greater of $250,000, or fifteen times the product
(rounded down to the next whole number) obtained by multiplying the aggregate
number of shares of Common Stock issued in the Offering, by a fraction of which
the numerator is the amount of the Supplemental Eligible Account Holder's
Qualifying Deposit and the denominator is the total amount of Qualifying
Deposits of all Supplemental Eligible Account Holders, in each case on the
Supplemental Eligibility Record Date, subject to the overall purchase
limitation. See "--Limitations on Common Stock Purchases." If there are not
sufficient shares available to satisfy all subscriptions, shares first will be
allocated so as to permit each subscribing Supplemental Eligible Account Holder
to purchase a number of shares sufficient to make his total allocation equal to
the lesser of 100 shares or the number of shares for which he subscribed.
Thereafter, unallocated shares will be allocated to each subscribing
Supplemental Eligible Account Holder and whose subscription remains unfilled in
the proportion that the amount of his Qualifying Deposit bears to the total
amount of Qualifying Deposits of all subscribing Supplemental Eligible Account
Holders whose subscriptions remain unfilled.
To ensure proper allocation of stock, each Supplemental Eligible
Account Holder must list on his order form all deposit accounts in which he has
an ownership interest on the Supplemental Eligibility Record Date. Failure to
list an account could result in fewer shares being allocated than if all
accounts had been disclosed. Neither the Company nor the Bank nor any of their
agents shall be responsible for orders on which all Qualifying Deposit accounts
have not been fully and accurately disclosed.
Expiration Date for the Subscription Offering. The Subscription
Offering will expire on ____________, 1998, unless extended for up to 45 days or
such additional periods by the Bank with the approval of the Department and/or
the FRB, if necessary (as so extended, the "Expiration Date"). The Bank and the
Company are not required to give subscribers notice of any such extension.
Subscription rights which have not been exercised prior to the conclusion of the
Subscription Offering will become void.
Members in Nonqualified States or Foreign Countries. The Company will
make reasonable efforts to comply with the securities laws of all states in the
United States in which persons entitled to subscribe for stock pursuant to the
Plan reside. However, the Company is not required to offer stock in the
Offering to any person who resides in a foreign country or resides in a state of
the United States with respect to which (i) a small number of persons otherwise
eligible to subscribe for shares of Common Stock reside; or (ii) the Company
determines that compliance with the securities laws of such state would be
impracticable for reasons of cost or otherwise, including but not limited to a
request that the Company or its officers or directors, under the securities laws
of such state, register as a broker, dealer, salesman or selling agent or to
register or otherwise qualify the subscription rights or Common Stock for sale
or subject any filing with respect thereto in such state. Where the number of
persons eligible to subscribe for shares in one state is small, the Company will
base its decision as to whether or not to offer the Common Stock in such state
on a number of factors, including the size of accounts being held by account
holders in the state, the cost of registering or qualifying the shares or the
need to register the Company, its officers, directors or employees as brokers,
dealers or salesmen.
COMMUNITY OFFERING
Any shares of Common Stock not subscribed for in the Subscription
Offering may be offered for sale in a Community Offering. If a Community
Offering is conducted, it will be for a period of not more than 45 days and will
terminate on _________, 1998 unless extended by the Company and the Bank, and
may commence anytime subsequent to the commencement of the Subscription
Offering. No person, by himself or herself, or with an associate or group of
persons acting in concert, may subscribe for or purchase more than $500,000 of
Common Stock offered in the Community Offering. Further, the Company may limit
total subscriptions so as to assure that the number of shares
28
<PAGE>
available for any syndicated community offering may be up to a specified
percentage of the number of shares of Common Stock. Finally, the Company may
reserve shares offered in the Community Offering for sales to institutional
investors.
In the event of an oversubscription for shares in the Community
Offering, available shares may be allocated in the sole discretion of the
Company first to cover orders of Minority Stockholders as of August 5, 1998 and
then natural persons residing in the Community, then to cover the orders of any
other person subscribing for shares in the Community Offering so that each
person in such category of the Community Offering may receive 1,000 shares, and
thereafter, on a pro rata basis to persons in such category of the Community
Offering based on the amount of their respective subscriptions.
The terms "residence," "reside," "resided" or "residing" as used
herein with respect to any person shall mean any person who occupied a dwelling
within the Bank's Community, has an intent to remain within the Community for a
period of time, and manifests the genuineness of that intent by establishing an
ongoing physical presence within the Community together with an indication that
such presence within the Community is something other than merely transitory in
nature. To the extent the person is a corporation or other business entity, the
principal place of business or headquarters shall be in the Community. To the
extent a person is a personal benefit plan, the circumstances of the beneficiary
shall apply with respect to this definition. In the case of all other benefit
plans, the circumstances of the trustee shall be examined for purposes of this
definition. The Bank may utilize deposit or loan records or such other evidence
provided to it to make a determination as to whether a person is a resident. In
all cases, however, such a determination shall be in the sole discretion of the
Bank.
The Bank and the Company, in their sole discretion, may reject
subscriptions, in whole or in part, received from any person in the Community
Offering.
SYNDICATED COMMUNITY OFFERING
Any shares of Common Stock not sold in the Subscription Offering or in
the Community Offering, if any, may be offered for sale to the general public by
a selling group of broker-dealers, which may include Ryan Beck, to be managed
by Ryan Beck in a syndicated community offering, subject to terms, conditions
and procedures as may be determined by the Bank and the Company in a manner that
is intended to achieve the widest distribution of the Common Stock subject to
the rights of the Company to accept or reject in whole or in part all orders in
the syndicated community offering. It is expected that the syndicated community
offering, if any, will commence as soon as practicable after termination of the
Subscription Offering and the Community Offering. The syndicated community
offering shall be completed within 45 days after the termination of the
Subscription Offering and no later than 90 days after the receipt of certain
regulatory approvals, unless such period is extended as provided herein. The
Company will pay a fee of up to 6.5% of the total dollar amount of the Common
Stock sold by the selling group, which amount includes a management fee to Ryan
Beck of 1.5%.
The purchase limitations applicable to the Syndicated Community
Offering may be established by the Company at the time the Syndicated Community
Offering is conducted.
If for any reason a syndicated community offering of unsubscribed
shares of Common Stock is not advisable or cannot be effected and any shares
remain unsold after the Subscription Offering and any Community Offering, the
Boards of Directors of the Bank and the Company will seek to make other
arrangements to sell the remaining shares. Such other arrangements will be
subject to Department approval and to compliance with applicable state and
federal securities laws.
The Bank and the Company, in their sole discretion, may reject
subscriptions, in whole or in part, received from any person in the syndicated
community offering.
29
<PAGE>
PLAN OF DISTRIBUTION AND SELLING COMMISSIONS
Offering materials initially have been distributed to depositors with
subscription rights. All prospective purchasers are to send payment along with
a properly completed Order Form directly to the Bank, where such funds will be
held in a segregated savings account and not released until the Offering is
completed or terminated.
To assist in the marketing of the Common Stock, the Bank and the
Company have retained Ryan Beck, a broker-dealer registered with the National
Association of Securities Dealers, Inc. (the "NASD"). Ryan Beck will provide
advisory assistance and assist the Bank in the Offering as follows: (i) in
training and educating the Bank's employees regarding the Offering and their
roles; (ii) assisting in design and implementation of a marketing strategy; and
(iii) managing a Stock Information Center and coordinating selling efforts. For
these services, Ryan Beck will receive an advisory and management fee of
$50,000, a marketing fee equal to 2.0% of the total dollar amount of stock sold
in the Subscription and Community Offering to subscribers other than the ESOP
and officers, directors, and employees of the Company and Bank and their
immediate family members. Ryan Beck will also receive a fee equal to 1.5% of
the aggregate dollar amount of stock sold in any syndicated community offering,
which fee along with the fee payable to selected dealers shall not exceed 6.5%
in the aggregate. The Bank has made an advance payment to Ryan Beck in the
amount of $15,000. Offers and sales in the Offering will be on a best efforts
basis and, as a result, Ryan Beck is not obligated to purchase shares of the
Common Stock in the Offering.
The Bank also will reimburse Ryan Beck for its reasonable out-of-
pocket expenses associated with its marketing effort, the estimated maximum of
which is $72,500 (including legal fees and expenses up to a maximum of $57,500).
The Bank and the Company will indemnify Ryan Beck against liabilities and
expenses (including legal fees) incurred in connection with certain claims or
litigation arising out of or based upon untrue statements or omissions contained
in the offering material for the Common Stock, including liabilities under the
Securities Act of 1933.
Certain directors and executive officers of the Company and Bank may
participate in the solicitation of offers to purchase Common Stock. Such
persons will be reimbursed by the Company for their reasonable out-of-pocket
expenses, including, but not limited to, de minimis telephone and postage
expenses, incurred in connection with such solicitation. Other regular, full-
time employees of the Bank may participate in the Offering but only in
ministerial capacities, providing clerical work in effecting a sales transaction
or answering questions of a potential purchaser provided that the content of the
employee's responses is limited to information contained in the Prospectus or
other offering documents, and no offers or sales may be made by tellers or at
the teller counter. All sales activity will be conducted in a segregated or
separately identifiable area of the Bank's offices apart from the area
accessible to the general public for the purpose of making deposits or
withdrawals. Other questions of prospective purchasers will be directed to
executive officers or registered representatives. Such other employees have
been instructed not to solicit offers to purchase Common Stock or provide advice
regarding the purchase of Common Stock. The Company will rely on Rule 3a4-1
under the Exchange Act, and sales of Common Stock will be conducted within the
requirements of Rule 3a4-1, so as to permit officers, directors and employees to
participate in the sale of Common Stock. No officer, director or employee of
the Company or the Bank will be compensated in connection with his participation
by the payment of commissions or other remuneration based either directly or
indirectly on the transactions in the Common Stock.
PROCEDURE FOR PURCHASING SHARES
Expiration Date. The Offering will terminate at 10:00 a.m.,
Pennsylvania time, on _________, 1998, unless extended by the Company, with
prior approval of the Department and/or the FRB, if required, for up to an
additional 45 days (as extended, the "Expiration Date"). The Company may extend
the Offering without further approval or additional notice to purchasers in the
Offering. Any extension of the Offering beyond _______, 1998 would be subject
to Department and, if necessary FRB approval and subscribers would be given the
right to increase, decrease, or rescind their orders for Common Stock. If $38.0
million of Common Stock has not been sold by the Expiration Date the Company may
terminate the Offering and promptly refund all orders for Common Stock. If the
Actual Purchase Price per share is outside the Offering Price Range, purchasers
will be given an opportunity to increase, decrease, or rescind their orders.
30
<PAGE>
To ensure that each purchaser receives a Prospectus at least 48 hours
before the Expiration Date in accordance with Rule 15c2-8 of the Exchange Act,
no Prospectus will be mailed any later than five days prior to such date or hand
delivered any later than two days prior to such date. Execution of an order
form will confirm receipt or delivery in accordance with Rule 15c2-8. Order
forms will be distributed only with a Prospectus.
The Company reserves the right in its sole discretion to terminate the
Offering at any time and for any reason, in which case the Company will promptly
return all purchase orders, plus interest at its current passbook rate from the
date of receipt and cancel all authorized withdrawals from deposit accounts.
Use of Order Forms. In order to purchase the Common Stock, each
purchaser must complete an order form, except for persons purchasing in the
syndicated community offering. Any person receiving an order form who desires
to purchase Common Stock must do so by delivering (by mail or in person) to the
Company a properly executed and completed order form, together with full payment
for the shares purchased, which must be received by the Company prior to 10:00
a.m., Pennsylvania time on _________, 1998. Photo-copied or facsimile order
forms will not be accepted. ONCE TENDERED, AN ORDER FORM CANNOT BE MODIFIED OR
REVOKED WITHOUT THE CONSENT OF THE COMPANY UNLESS THE OFFERING IS NOT COMPLETED
BY ____________, 1998. THE COMPANY RESERVES THE ABSOLUTE RIGHT, IN ITS SOLE
DISCRETION, TO REJECT ORDERS RECEIVED IN THE COMMUNITY OFFERING, IN WHOLE OR IN
PART, AT THE TIME OF RECEIPT OR AT ANY TIME PRIOR TO COMPLETION OF THE OFFERING.
EACH PERSON ORDERING SHARES IS REQUIRED TO REPRESENT THAT HE IS PURCHASING SUCH
SHARES FOR HIS OWN ACCOUNT AND THAT HE HAS NO AGREEMENT OR UNDERSTANDING WITH
ANY PERSON FOR THE SALE OR TRANSFER OF SUCH SHARES. THE INTERPRETATION BY THE
COMPANY OF THE TERMS AND CONDITIONS OF THE PLAN AND OF THE ACCEPTABILITY OF THE
ORDER FORMS WILL BE FINAL.
All subscribers must subscribe for a dollar amount of Common Stock.
The total number of shares that will be issued to a subscriber will be equal to
the total dollar amount of stock for which such subscription has been accepted
divided by the Actual Purchase Price per share, subject to the applicable
purchase limitations and allocations in the event of an oversubscription.
Fractional shares will not be issued; instead, the Company will refund any
partial subscription that is insufficient to purchase a whole share.
Payment for Shares. Payment for all shares will be required to
accompany all completed order forms for the purchase to be valid. Payment for
shares may be made by (i) check or money order made payable to the Company, or
(ii) authorization of withdrawal from savings accounts and certificates of
deposit maintained with the Bank. Appropriate means by which such withdrawals
may be authorized are provided in the order forms. Once such a withdrawal
amount has been authorized, a hold will be placed on such funds, making them
unavailable to the depositor. All funds authorized for withdrawal will continue
to earn interest at the contract rate until the Offering is completed or
terminated. Interest penalties for early withdrawal applicable to certificate
accounts will not apply to withdrawals authorized for the purchase of shares;
however, if a withdrawal results in a certificate account with a balance less
than the applicable minimum balance requirement, the certificate shall be
canceled at the time of withdrawal without penalty, and the remaining balance
will earn interest at the passbook rate. In the case of payments made by check
or money order, such funds will be placed in a segregated savings account and
interest will be paid by the Bank at the current passbook rate, from the date
payment is received until the Offering is completed or terminated.
A depositor interested in using his or her IRA funds to purchase
Common Stock must do so through a self-directed IRA. Since the Bank does not
offer self-directed accounts, it will allow a depositor to make a trustee-to-
trustee transfer of Bank IRA funds to a trustee offering a self-directed IRA
program without early withdrawal penalties with the agreement that such funds
will be used to purchase the Common Stock in the Offering. There will be no
early withdrawal or IRS interest penalties for such transfers. The new trustee
would hold the Common Stock in a self-directed account in the same manner as the
Bank now holds the depositor's IRA funds. An annual administrative fee may be
payable to the new trustee. Depositors interested in using funds in a Bank IRA
to purchase Common Stock should contact the Stock Information Center at the Bank
as soon as possible so that the necessary forms may be forwarded for execution
and returned prior to the Expiration Date.
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In addition, the provisions of ERISA and Internal Revenue Service
("Service") regulations require that executive officers, directors and 10%
stockholders who use self-directed IRA funds to purchase shares of Common Stock
in the Offering, make such purchase for the exclusive benefit of the IRA
participant.
The ESOP will not be required to pay for shares purchased until
consummation of the Offering, provided that there is in force from the time the
order is received a loan commitment from an unrelated financial institution or
the Company to lend to the ESOP the necessary amount to fund the purchase.
Delivery of Stock Certificates. Certificates representing Common
Stock issued in the Offering and checks representing interest paid on
subscriptions made by check or money order will be mailed to the persons
entitled thereto at the address noted on the order form, as soon as practicable
following consummation of the Offering and receipt of all necessary regulatory
approvals. Any certificates returned as undeliverable will be held by the Bank
until claimed by persons legally entitled thereto or otherwise disposed of in
accordance with applicable law. Until certificates for the Common Stock are
available and delivered to purchasers, purchasers may not be able to sell the
shares of stock which they ordered. Regulations prohibit the Bank from lending
funds or extending credit to any persons to purchase Common Stock in the
Offering.
Other Restrictions. Notwithstanding any other provision of the Plan,
no person is entitled to purchase any Common Stock to the extent such purchase
would be illegal under any federal or state law or regulation (including state
"blue-sky" registrations), or would violate regulations or policies of the NASD,
particularly those regarding free riding and withholding. The Bank and/or its
agents may ask for an acceptable legal opinion from any purchaser as to the
legality of such purchase and may refuse to honor any such purchase order if
such opinion is not timely furnished.
RESTRICTIONS ON TRANSFER OF SUBSCRIPTION RIGHTS AND SHARES
SUBSCRIPTION RIGHTS ARE NONTRANSFERABLE. PERSONS RECEIVING SUCH
RIGHTS ARE NOT PERMITTED TO TRANSFER OR ENTER INTO ANY AGREEMENT OR
UNDERSTANDING TO TRANSFER THE LEGAL OR BENEFICIAL OWNERSHIP OF THE SUBSCRIPTION
RIGHTS ISSUED UNDER THE PLAN OR PRIOR TO THE COMPLETION OF THE OFFERING, THE
SHARES OF COMMON STOCK TO BE ISSUED UPON THEIR EXERCISE. SUCH RIGHTS MAY BE
EXERCISED ONLY BY THE PERSON TO WHOM THEY ARE GRANTED AND ONLY FOR HIS ACCOUNT.
EACH PERSON EXERCISING SUCH SUBSCRIPTION RIGHTS WILL BE REQUIRED TO CERTIFY THAT
HE IS PURCHASING SHARES SOLELY FOR HIS OWN ACCOUNT AND THAT HE HAS NO AGREEMENT
OR UNDERSTANDING REGARDING THE SALE OR TRANSFER OF SUCH SHARES. IN ADDITION,
PERSONS MAY NOT OFFER OR MAKE AN ANNOUNCEMENT OF AN OFFER OR INTENT TO MAKE AN
OFFER TO PURCHASE SUCH SUBSCRIPTION RIGHTS OR SHARES OF COMMON STOCK PRIOR TO
THE COMPLETION OF THE OFFERING. THE COMPANY WILL PURSUE ANY AND ALL LEGAL AND
EQUITABLE REMEDIES IN THE EVENT MANAGEMENT BECOME AWARE OF THE TRANSFER OF
SUBSCRIPTION RIGHTS AND WILL NOT HONOR ORDERS KNOWN BY THEM TO INVOLVE THE
TRANSFER OF SUCH RIGHTS.
THE BANK AND THE COMPANY WILL PURSUE ANY AND ALL LEGAL AND EQUITABLE
REMEDIES IN THE EVENT THEY BECOME AWARE OF THE TRANSFER OF SUBSCRIPTION RIGHTS
AND WILL NOT HONOR ORDERS KNOWN BY THEM TO INVOLVE THE TRANSFER OF SUCH RIGHTS.
LIMITATIONS ON COMMON STOCK PURCHASES
The following additional limitations have been imposed upon purchases
of shares of Common Stock. Defined terms used in this section and not otherwise
defined in this Prospectus shall have the meaning set forth in the Plan. In all
cases, the Bank shall have the right, in its sole discretion, to determine
whether prospective purchasers are "Associates," or "Acting in Concert" as
defined by the Plan and in interpreting any and all other provisions of the
Plan. All such determinations are in the sole discretion of the Bank, and may be
based on whatever evidence the Bank chooses to use in making any such
determination.
(1) The aggregate amount of outstanding Common Stock of the Company
owned or controlled by persons other than Mutual Company at the close of the
Offering shall be less than 50% of the Company's total outstanding Common Stock.
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<PAGE>
(2) Except for the ESOP, no Eligible Account Holder or Supplemental
Eligible Account Holder may in their capacities as such purchase in the
Subscription Offering more than $250,000 of Common Stock, and no person or group
of persons Acting in Concert may purchase more than $500,000 of Common Stock
issued in the Offering, except that: (i) the Company may, in its sole
discretion and without further notice to or solicitation of subscribers or other
prospective purchasers, increase such maximum purchase limitations for all
subscribers or for only subscribers in the syndicated community offering to up
to 5% of the number of shares issued in the Offering or decrease them to 1% of
the number of shares issued in the Offering; (ii) Tax-Qualified Employee Plans
may purchase up to 10% of the shares issued in the Offering; and (iii) for
purposes of this paragraph shares to be held by any Tax-Qualified Employee Plan
and attributable to a person shall not be aggregated with other shares purchased
directly by or otherwise attributable to such person.
(3) The aggregate amount of Common Stock acquired in the Offering,
plus all prior issuances by the Bank and the Company, by all Management Persons
and their Associates, and non-tax qualified employee benefit plans, exclusive of
any stock acquired by such persons in the secondary market, shall not exceed 25%
of the outstanding shares of Common Stock of the Company held by persons other
than the Mutual Company at the close of the Offering. In calculating the
number of shares held by Management Persons and their Associates under this
paragraph or under the provisions of paragraph 4 below, shares held by any Tax-
Qualified Employee Benefit Plan or any Non-Tax-Qualified Employee Benefit Plan
of the Bank that are attributable to such persons shall not be counted.
(4) The aggregate amount of Common Stock acquired in the Offering plus
all prior issuances by the Bank and the Company, by all Management Persons and
their Associates, and non-tax qualified employee benefit plans, exclusive of any
common stock acquired by such persons in the secondary market, shall not exceed
25% of the stockholders' equity of the Bank. In calculating the number of
shares held by Management Persons and their Associates under this paragraph or
under the provisions of paragraph 3 of this section, shares held by any Tax-
Qualified Employee Benefit Plan or any Non-Tax-Qualified Employee Benefit Plan
of the Bank that are attributable to such persons shall not be counted.
(5) The aggregate amount of Common Stock acquired in the Offering,
plus all prior issuances by the Bank or the Company, by any non-tax-qualified
employee plan of the Company or the Bank or Management Person and their
Associates, exclusive of any shares of Common Stock acquired by such plan or
persons in the secondary market, shall not exceed 10% of the outstanding shares
of Common Stock held by persons other than the Mutual Company at the conclusion
of the Offering. In calculating the number of shares held by Management Persons
and their Associates under this paragraph, shares held by any tax-qualified
employee plans or non-tax-qualified employee plans of the Company or the Bank
that are attributable to such persons shall not be counted.
(6) The aggregate amount of Common Stock acquired in the Offering,
plus all prior issuances by the Bank or the Company, by any non-tax-qualified
employee plan of the Company or the Bank or Management Person and their
Associates, exclusive of any shares of Common Stock acquired by such plan or
persons in the secondary market, shall not exceed 10% of the stockholders'
equity of the Company held by persons other than the Mutual Company at the
conclusion of the Offering.
(7) The aggregate amount of Common Stock acquired in the Offering,
plus all prior issuances by the Bank or the Company, by any one or more tax-
qualified employee plan of the Company, exclusive of any shares of Common Stock
acquired by such plans in the secondary market, shall not exceed 10% of the
outstanding Common Stock held by persons other than the Mutual Company at the
conclusion of the Offering.
(8) The aggregate amount of Common Stock acquired in the Offering,
plus all prior issuances by the Bank or the Company, by any one or more tax-
qualified employee plan of the Company, exclusive of any shares of Common Stock
acquired by such plans in the secondary market, shall not exceed 10% of the
stockholders' equity of the Company held by persons other than the Mutual
Company at the conclusion of the Offering.
33
<PAGE>
(9) The Boards of Directors of the Bank and the Company may, in their
sole discretion, increase the maximum purchase limitations for all subscribers
or for only subscribers in the syndicated community offering to up to 9.9%,
provided that orders for Common Stock in excess of 5% of the number of shares of
Common Stock issued in the Offering shall not in the aggregate exceed 10% of the
total shares of Common Stock issued in the Offering (except that this limitation
shall not apply to purchases by Tax-Qualified Employee Plans). If such 5%
limitation is increased, subscribers for the maximum amount will be, and certain
other large subscribers in the sole discretion of the Company and the Bank may
be, given the opportunity to increase their subscriptions up to the then
applicable limit. Requests to purchase additional shares of Common Stock under
this provision will be determined by the Board of Directors of the Company, in
its sole discretion.
(10) Notwithstanding any other provision of the Plan, no person shall
be entitled to purchase any Common Stock to the extent such purchase would be
illegal under any federal law or state law or regulation or would violate
regulations or policies of the NASD, particularly those regarding free riding
and withholding. The Company and/or its agents may ask for an acceptable legal
opinion from any purchaser as to the legality of such purchase and may refuse to
honor any purchase order if such opinion is not timely furnished.
(11) The Board of Directors of the Company has the right in its sole
discretion to reject any order submitted by a person whose representations the
Board of Directors believes to be false or who it otherwise believes, either
alone or acting in concert with others, is violating, circumventing, or intends
to violate, evade or circumvent the terms and conditions of the Plan.
THE COMPANY, IN ITS SOLE DISCRETION, MAY MAKE REASONABLE EFFORTS TO
COMPLY WITH THE SECURITIES LAWS OF ANY STATE IN THE UNITED STATES IN WHICH ITS
DEPOSITORS RESIDE, AND WILL ONLY OFFER AND SELL THE COMMON STOCK IN STATES IN
WHICH THE OFFERS AND SALES COMPLY WITH SUCH STATES' SECURITIES LAWS. HOWEVER,
NO PERSON WILL BE OFFERED OR ALLOWED TO PURCHASE ANY COMMON STOCK UNDER THE PLAN
IF THEY RESIDE IN A FOREIGN COUNTRY OR IN A STATE OF THE UNITED STATES WITH
RESPECT TO WHICH ANY OF THE FOLLOWING APPLY: (I) A SMALL NUMBER OF PERSONS
OTHERWISE ELIGIBLE TO PURCHASE SHARES UNDER THE PLAN RESIDE IN SUCH STATE OR
FOREIGN COUNTY; (II) THE OFFER OR SALE OF SHARES OF COMMON STOCK TO SUCH PERSONS
WOULD REQUIRE THE BANK OR ITS EMPLOYEES TO REGISTER, UNDER THE SECURITIES LAWS
OF SUCH STATE OR FOREIGN COUNTRY, AS A BROKER OR DEALER OR TO REGISTER OR
OTHERWISE QUALIFY ITS SECURITIES FOR SALE IN SUCH STATE OR FOREIGN COUNTRY; OR
(III) SUCH REGISTRATION OR QUALIFICATION WOULD BE IMPRACTICABLE FOR REASONS OF
COST OR OTHERWISE.
The Plan defines "acting in concert" as follows: (i) knowing
participation in a joint activity or interdependent conscious parallel action
towards a common goal whether or not pursuant to an express agreement; (ii) a
combination or pooling of votes 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; or
(iii) a person or company which acts in concert with another persons or company
("other party") shall also be deemed to be acting in concert with any person or
company who is also acting in concert with the other party, except that any Tax-
Qualified Employee Benefit Plan or Non-Tax-Qualified Employee Benefit Plan will
not be deemed to be acting in concert with any other Tax-Qualified Employee
Benefit Plan or Non-Tax-Qualified Employee Benefit Plan or with its trustee or a
person who serves in a similar capacity solely for the purpose of determining
whether stock held by the trustee and stock held by the plan will be aggregated.
The determination of whether a group is acting in concert shall be made solely
by the Board of Directors of the Company or officers delegated by such Board,
and may be based on any evidence upon which the Board or such delegatee chooses
to rely.
Under the Plan, the term "Associate," when used to indicate a
relationship with any Person, means: (i) any corporation or organization (other
than the Bank, the Company, the Mutual Company or a majority-owned subsidiary of
any 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
substantial beneficial interest or as to which such Person serves as 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, trustees, or officer of the Bank, the Mutual Company, the Company or
any subsidiary of the Mutual Company or the Company or any affiliate thereof;
and (iv) any person acting in concert with any of the persons or entities
specified in
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clauses (i) through (iii) above; provided, however, that any Tax-Qualified or
Non-Tax-Qualified Employee Plan shall not be deemed to be an associate of any
trustee, director or officer of the Mutual Company, the Company or the Bank, to
the extent provided in Section 9 of the Plan. When used to refer to a Person
other than an officer or director of the Bank, the Bank in its sole discretion
may determine the Persons that are Associates of other Persons.
Directors are not treated as Associates of one another solely because
of their board membership. Compliance with the foregoing limitations does not
necessarily constitute compliance with other regulatory restrictions on
acquisitions of the Common Stock. For a further discussion of limitations on
purchases of the common stock during and subsequent to the Offering, see "--
Certain Restrictions on Purchases or Transfer of Shares After the Offering."
BENEFITS TO MANAGEMENT IN THE OFFERING
The Bank's full-time employees participate in the Bank's ESOP which
intends to purchase 40,000 shares in the Offering. In addition, following the
completion of the Offering the Company intends to award to employees, officers
and directors at no cost to such persons: (i) a number of shares of restricted
stock equal to 4% of the shares sold in the Offering and (ii) options to
purchase a number of shares of Common Stock equal to 10% of the shares sold in
the Offering. Such awards will be made pursuant to the Company's existing stock
benefit plans or new stock benefit plans implemented by the Company. No such
awards will be made for at least six months after completion of the Offering,
and the Company will obtain stockholder approval of any such award made within
one year of the completion of the Offering.
TAX EFFECTS OF THE OFFERING
Management believes that no gain or loss will be recognized to the
Company or the Mutual Company as a result of the Offering for federal or
Pennsylvania income tax purposes.
Management believes that the Offering will not result in any federal
or Pennsylvania income tax consequences to the Company or the Mutual Company,
except to the extent discussed below. Management believes that the Mutual
Company's contribution of a portion of its shares of Common Stock, and the
subsequent cancellation of those shares by the Company, qualifies as a tax-free
contribution of capital by the Mutual Company under section 118 of the Code.
Management believes that the Mutual Company's contribution of shares to the
Company is analogous to the situation in Commissioner v. Fink, 483 U.S. 89
(1987), in which the U.S. Supreme Court ruled that where majority stockholders
voluntarily surrender a portion of their stock to a corporation in an
unsuccessful attempt to increase the corporation's attractiveness to outside
investors, and where the majority stockholders retained control of the
corporation even after the surrender, they made a non-taxable capital
contribution.
Concurrently with the Mutual Company's capital contribution, the
Company will issue and sell shares of Common Stock to the public in the
Offering. Generally, a sale of shares for cash is a non-taxable event under
Section 1032 of the Code. Management is not aware of any authority under
current law which would hold that the two concurrent transactions would be
taxable.
There is, however, the possibility that the receipt and/or exercise of
the subscription rights by Eligible Account Holders and Supplemental Eligible
Account Holders could result in taxable gain or income to the extent that such
purchase rights are determined to have a fair market value. ELIGIBLE ACCOUNT
HOLDERS AND SUPPLEMENTAL ELIGIBLE ACCOUNT HOLDERS ARE ENCOURAGED TO CONSULT WITH
THEIR OWN TAX ADVISORS AS TO THE TAX CONSEQUENCES IN THE EVENT THAT SUCH
PURCHASE RIGHTS ARE DEEMED TO HAVE ASCERTAINABLE VALUE.
CERTAIN RESTRICTIONS ON PURCHASE OR TRANSFER OF SHARES AFTER THE OFFERING
All Common Stock purchased in the Offering by a director or an
executive officer of the Bank or the Company and their Associates will be
subject to a restriction that the shares not be sold for a period of one year
following the Offering, except in the event of the death of such director or
executive officer. Each certificate for restricted shares will
35
<PAGE>
bear a legend giving notice of this restriction on transfer, and instructions
will be issued to the effect that any transfer within such time period of any
certificate or record ownership of such shares other than as provided above is a
violation of the restriction. Any shares of Common Stock issued at a later date
as a stock dividend, stock split, or otherwise, with respect to such restricted
stock will be subject to the same restrictions. The directors and executive
officers of the Bank and the Company and certain other persons in receipt of
material non-public information will also be subject to the insider trading
rules promulgated pursuant to the Exchange Act.
Purchases of outstanding shares of Common Stock of the Company by
directors, executive officers (or any person who was an executive officer or
director of the Bank after adoption of the Plan) and their associates during the
three-year period following the Offering may be made only through a broker or
dealer registered with the SEC, except with the prior written approval of the
Department. This restriction does not apply, however, to negotiated
transactions involving more than 1% of the Company's outstanding Common Stock or
to the purchase of stock pursuant to a stock option plan or any tax qualified
employee stock benefit plan of or non-tax qualified employee stock benefit plan
of the Bank or Company (including any employee plan, recognition plan or
restricted stock plan).
DESCRIPTION OF CAPITAL STOCK OF THE COMPANY
GENERAL
The Company is authorized to issue capital stock consisting of
100,000,000 shares of common stock, par value $.01 per share, and 10,000,000
shares of preferred stock, which may be issued in series and classes having such
rights, preferences, privileges and restrictions as the Company's Board of
Directors may determine. Each share of Common Stock will have the same relative
rights as, and will be identical in all respects with, each other share of
Common Stock. The Board of Directors of the Company is authorized to approve the
issuance of Common Stock up to the amount authorized by the Articles of
Incorporation without the approval of the Company's stockholders. A majority of
the issued and outstanding voting stock of the Company must be held at all time
by the Mutual Company. THE COMMON STOCK REPRESENTS NONWITHDRAWABLE CAPITAL, IS
NOT AN ACCOUNT OF AN INSURABLE TYPE, AND IS NOT INSURED BY THE FDIC, THE SAIF OR
ANY OTHER GOVERNMENT AGENCY. THE COMMON STOCK IS NOT GUARANTEED BY THE COMPANY
OR THE BANK. Upon payment of the purchase price for the shares of Common Stock
issued in the Offering, all such shares will be fully-paid, duly issued and
nonassessable.
COMMON STOCK
Voting Rights. The holders of the Common Stock possess exclusive
voting rights in the Company, except to the extent that shares of serial
preferred stock issued in the future may have voting rights. Each holder of the
Common Stock is entitled to one vote for each share held, except that the
Articles of Incorporation eliminates voting rights with respect to those shares
that are beneficially owned by any person in excess of 10% of the Common Stock
then outstanding excluding the Mutual Company and tax-qualified employee benefit
plans. Stockholders will not be permitted to cumulate their votes in the
election of directors.
Dividends. The holders of the Common Stock will be entitled to
receive and to share equally in such dividends as may be declared by the Board
of Directors out of funds legally available therefor.
Liquidation. In the unlikely event of any liquidation, dissolution,
or winding up of the Company, the holders of Common Stock (and the holders of
any class or series of stock entitled to participate with the Common Stock in
the distribution of assets) will be entitled to receive all assets of the
Company available for distribution in cash or in kind after the payment of all
debts and liabilities, the satisfaction of obligations to depositors having an
interest in any liquidation account maintained by the Bank, and the payment of
any accrued dividend claims. If the Company issues preferred stock, the holders
thereof may also have priority over the holders of the Common Stock in the event
of liquidation or dissolution.
36
<PAGE>
Preemptive Rights; Redemption. Holders of the Common Stock will not be
entitled to preemptive rights with respect to any additional shares which may be
issued except that under current Pennsylvania law and policy, persons who are
depositors of the Bank at the time of any subsequent stock offering may be
entitled to receive preemptive rights to purchase stock in such offering. The
Common Stock is not subject to call for redemption. If the Company determined to
issue authorized but unissued shares in the future to persons other than, or in
addition to the existing stockholders, the interests of existing stockholders
would be diluted to the extent of the additional issuance.
SERIAL PREFERRED STOCK
None of the 10,000,000 authorized shares of serial preferred stock of the
Company will be issued in the Offering. The Board of directors is authorized,
without stockholder approval, to issue serial preferred stock and to fix and
state voting powers, designations, preferences or other special rights of such
shares. If and when issued, the serial preferred stock may rank senior to the
Common Stock as to dividend rights, liquidation preferences, or both, and may
have full, limited or no voting rights. Accordingly, the issuance of preferred
stock could adversely affect the voting and other rights of holders of Common
Stock.
EXPERTS
The consolidated financial statements of the Company and its subsidiaries
as of December 31, 1997 and for the year then ended, incorporated by reference
in this Prospectus and the Registration Statement, to the extent and for the
period indicated in their report, have been audited by Arthur Andersen LLP,
independent public accountants, and are incorporated by reference herein in
reliance upon the authority of said firm as experts in giving said report.
The consolidated financial statements of the Bank and its subsidiaries as
of December 31, 1996, and for each of the years in the two year period ended
December 31, 1996, have been incorporated by reference herein and in the
registration statement in reliance upon the report of KPMG Peat Marwick LLP,
independent certified public accountants, incorporated by reference herein, and
upon the authority of said firm as experts in accounting and auditing. The
report of KPMG Peat Marwick LLP covering the December 31, 1996 financial
statements refers to a change in the accounting for mortgage servicing
rights.
LEGAL OPINIONS
The legality of the Common Stock will be passed upon for the Company by
Luse Lehman Gorman Pomerenk & Schick, P.C., Washington, D.C., special counsel to
the Company. Certain legal matters will be passed upon for Ryan Beck by Elias,
Matz, Tiernan & Herrick, LLP Washington, D.C.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents filed with the SEC are incorporated in this
Prospectus by reference:
1. The Company's Annual Report on Form 10-K for the year ended December 31,
1997 (which is attached to this Prospectus), filed with the Commission on
March 30, 1998.
2. The Company's Quarterly Report on Form 10-Q for the quarter ended March
31, 1998, filed with the Commission on May 14, 1998.
3. The Company's Quarterly Report on Form 10-Q for the quarter ended June
30, 1998 (which is attached to this Prospectus), filed with the Commission
on August 15, 1998.
4. The Company's current reports on Form 8-K filed on March 13, 1998 and
May 7, 1998
37
<PAGE>
All documents filed by the Company subsequent to the date hereof pursuant
to Section 13(a), 13(c), 14 or 15(d) of the 1934 Act prior to the termination of
the Offering shall be deemed to be incorporated by reference into this
Prospectus and to be a part of the Prospectus from the date of filing thereof.
Any statement contained in a document incorporated or deemed to be incorporated
by reference herein shall be deemed to be modified or superseded for purposes of
the Registration Statement and this Prospectus to the extent that a statement
contained herein modifies or supersedes such statement. Any such statement so
modified or superseded shall not be deemed, except as so modified or superseded,
to constitute a part of the Registration Statement or this Prospectus.
The Company will provide without charge to any person to whom this
Prospectus is delivered, on the written or oral request of any such person, a
copy of any or all documents incorporated herein by reference (except exhibits
thereto). Such requests, in writing or by telephone, should be directed to:
James L. Durrell, Executive Vice President and Chief Financial Officer, Harris
Financial, Inc., 235 North Second Street Harrisburg, Pennsylvania 17101, (717)
236-4041.
38
<PAGE>
________________________________________________________________________________
No dealer, salesman or any other person has been authorized to give any
information or to make any representation other than as contained in this
Prospectus in connection with the offering made hereby, and, if given or made,
such other information or representation must not be relied upon as having been
authorized by Harris Financial, Inc. or Harris Savings Bank. This Prospectus
does not constitute an offer to sell or a solicitation of an offer to buy any of
the securities offered hereby to any person in any jurisdiction in which such
offer or solicitation is not authorized or in which the person making such offer
or solicitation is not qualified to do so, or to any person whom it is unlawful
to make such offer or solicitation in such jurisdiction. Neither the delivery of
this Prospectus nor any sale hereunder shall under any circumstances create any
implication that there has been no change in the affairs of Harris Financial,
Inc. or Harris Savings Bank since any of the dates as of which information is
furnished herein or since the date hereof.
______________________
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
AVAILABLE INFORMATION........................................................ 3
SUMMARY...................................................................... 4
RISK FACTORS................................................................. 9
HARRIS FINANCIAL, INC. AND SUBSIDIARIES SELECTED FINANCIAL AND OTHER DATA.... 11
HARRIS FINANCIAL, INC........................................................ 12
REGULATORY CAPITAL COMPLIANCE................................................ 14
USE OF PROCEEDS.............................................................. 15
CAPITALIZATION............................................................... 16
MARKET INFORMATION........................................................... 16
DIVIDEND POLICY.............................................................. 17
PRO FORMA DATA............................................................... 18
THE OFFERING................................................................. 22
DESCRIPTION OF CAPITAL STOCK OF THE COMPANY.................................. 33
EXPERTS...................................................................... 34
LEGAL OPINIONS............................................................... 34
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE.............................. 34
</TABLE>
ATTACHMENTS
Harris Financial, Inc. 1997 Annual Report to Stockholders
Harris Financial, inc. June 30, 1998 Quarterly Report on Form 10-Q
Until ____________, 1998 or 25 days after the commencement of the Offering
of Common Stock, all dealers effecting transactions in the registered
securities, whether or not participating in this distribution, may be required
to deliver a prospectus. This is in addition to the obligation of dealers to
deliver a prospectus when acting as underwrites and with respect to their unsold
allotments or subscriptions.
2,000,000 SHARES
HARRIS FINANCIAL, INC.
COMMON STOCK
PAR VALUE $.01 PER SHARE
------------------------------
PROSPECTUS
------------------------------
September _____, 1998
________________________________________________________________________________
<PAGE>
PART II: INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
Amount
------
* Legal fees and expenses..................... $ 125,000
* Printing and mailing........................ 150,000
* Accounting fees and expenses................ 50,000
** Marketing fees and expenses................. 1,162,500
* EDGARization fees........................... 20,000
* Data processing fees........................ 30,000
* Filing fees................................. 25,340
Nasdaq listing fee.......................... 17,500
* Other expenses.............................. 19,660
-----------
* Total....................................... $ 1,600,000
===========
________________
* Estimated
** The Company has retained Ryan, Beck & Co., Inc. ("Ryan Beck") to assist in
the sale of Common Stock on a best efforts basis. Ryan Beck will be paid a
marketing fee of $50,000 plus a fee of 2% of all Common Stock sold in the
Offering, excluding shares sold to the Company's officers and directors or
employee benefit plans. Includes Ryan Beck's legal fees and legal counsel
expenses of $57,500.
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS
ARTICLE VI of the Bylaws of Harris Financial, Inc. (the "Corporation")
provides for indemnification of directors and officers of the Company as
follows:
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 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
<PAGE>
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:
(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 Article 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 Article 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 Article VI.
6.7 MODIFICATION. The duties of the Corporation to indemnify and to
------------
advance expenses to a director or officer provided in this Article 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 Article 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.
ARTICLE VIII of the Corporation's Articles of Incorporation provides for
the limitation of liability of directors and officers of the Company as follows:
A. PERSONAL LIABILITY FOR MONETARY DAMAGES. The personal liabilities
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, and
in no event shall a director be personally liable, as such, for monetary
damages for any action taken unless the director has breached or failed to
perform the duties of his office under the BCL and the breach or failure to
perform constitutes self-dealing, willful misconduct or recklessness. This
section A of Article VIII shall not apply to the responsibility or
liability of a director pursuant to any criminal statute, or the liability
of a director for the payment of taxes pursuant to Federal, State, or local
law.
B. AMENDMENTS. No amendment, modification or repeal of this Article
VIII, nor the adoption of a 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.
<PAGE>
ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES:
The exhibits and financial statement schedules filed as part of this
registration statement are as follows:
(a) LIST OF EXHIBITS
The list of exhibits immediately precedes the exhibits filed as part
of this registration statement.
(b) FINANCIAL STATEMENT SCHEDULES
No financial statement schedules are filed because the required
information is not applicable or is included in the consolidated financial
statements or related notes.
ITEM 17. UNDERTAKINGS
The undersigned Registrant hereby undertakes:
(1) To file, during any period in which it offers or sells
securities, a post-effective amendment to this registration
statement to include any additional or changed material
information on the plan of distribution;
(2) For determining liability under the Securities Act, treat each
post-effective amendment as a new registration statement of the
securities offered, and the offering of the securities at that
time to be the initial bona fide offering;
(3) To file a post-effective amendment to remove from registration
any of the securities that remain unsold at the end of the
offering;
(4) That, for the purposes of determining any liability under the
Securities Act of 1933, each filing of the registrant's annual
report pursuant to Section 13(a) or 15(d) of the Securities
Exchange Act of 1934 (and, where applicable, each filing of an
employee benefit plan's annual report pursuant to Section 15(d)
of the Securities Exchange Act of 1934) that is incorporated by
reference in the registration statement shall be deemed to be a
new registration statement relating to the securities therein,
and the offering of such securities at that time shall be
deemed to be the initial bona fide offering thereof;
(5) To deliver or cause to be delivered with the prospectus, to
each person to whom the prospectus is sent or given, the latest
annual report. to security holders that is incorporated by
reference in the prospectus and furnished pursuant to and
meeting the requirements of Rule 14a-3 or Rule 14c-3 under the
Securities Exchange Act of 1934; and, where interim financial
information required to be presented by Article 3 of Regulation
S-X is not set forth in the prospectus, to deliver, or cause to
be delivered to each person to whom the prospectus is sent or
given, the latest quarterly report that is specifically
incorporated by reference in the prospectus to provide such
interim financial information;
(6) Insofar as indemnification for liabilities arising under the
Securities Act of 1933 may be permitted to directors, officers
and controlling persons of the Registrants pursuant to the
foregoing provisions, or otherwise, the Registrants have been
advised that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as
expressed in the Act, and is, therefore, unenforceable. In the
event that a claim for indemnification against such liabilities
(other than the payment by the Registrants of expenses incurred
or paid by a director, officer or controlling person of the
Registrants in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or
controlling person in connection with the securities being
registered, the Registrants will, unless in the opinion of its
counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the questions
whether such indemnification by
<PAGE>
it is against public policy as expressed in the Act and will be
governed by the final adjudication of such issue;
(7)(a) For purposes of determining any liability under the Securities
Act, the information omitted from the form of prospectus filed
as part of this Registration Statement in reliance upon Rule
430A and contained in a form of prospectus filed by the
Registrants pursuant to Rule 424 (b)(1) or (4) or 497(h) under
the Securities Act shall be deemed to be part of this
Registration Statement as of the time it was declared
effective;
(7)(b) For the purpose of determining any liability under the
Securities Act, each post-effective amendment that contains a
form of prospectus shall be deemed to be a new Registration
Statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be
the initial bona fide offering thereof;
<PAGE>
Pursuant to the requirements of the Securities Act of 1933, Harris
Financial, Inc. certifies that it has reasonable grounds to believe that it
meets all the requirements for filing on Form S-3 and has duly caused this
Registration Statement to be signed on its behalf by the undersigned, thereunto
duly authorized, in Harrisburg, Pennsylvania, on the 18th day of August, 1998.
HARRIS FINANCIAL, INC.
By: /s/ Charles C. Pearson, Jr.
-----------------------------
Charles C. Pearson, Jr., President and
Chief Executive Officer
We, the undersigned Directors of Harris Financial, Inc. (the "Company")
hereby severally constitute and appoint Charles C. Pearson, Jr. as our true and
lawful attorney and agent, to do any and all things in our names in the
capacities indicated below which said Charles C. Pearson, Jr. may deem necessary
or advisable to enable the Company to comply with the Securities Act of 1933,
and any rules, regulations and requirements of the Securities and Exchange
Commission, in connection with the registration statement on Form S-3 relating
to the offering of the Company's Common Securities, including specifically, but
not limited to, power and authority to sign for us in our names in the
capacities indicated below the registration statement and any and all amendments
(including post-effective amendments) thereto; and we hereby approve, ratify and
confirm all that said Charles C. Pearson, Jr. shall do or cause to be done by
virtue thereof.
HARRIS FINANCIAL, INC.
By: /s/ Charles C. Pearson, Jr. By: /s/ James L. Durrell
------------------------------------- ----------------------------
Charles C. Pearson, Jr., President, James L. Durrell, Executive
Chief Executive Officer and Director Vice President and Chief
(Principal Executive Officer) Financial Officer
(Principal Financial and
Accounting Officer)
Date: August 18, 1998 Date: August 18, 1998
By: /s/ Ernest P. Davis By: /s/ Jimmie C. George
------------------------------------ ----------------------------
Ernest P. Davis, Director Jimmie C. George, Director
Date: August 18, 1998 Date: August 18, 1998
By: /s/ Robert A. Houck By: /s/ Bruce S. Isaacman
------------------------------------ ----------------------------
Robert A. Houck, Director Bruce S. Isaacman, Director
Date: August 18, 1998 Date: August 18, 1998
By: /s/ Robert E. Kessler By: /s/ William E. McClure, Jr.
------------------------------------ ----------------------------
Robert E. Kessler, Director William E. McClure, Jr.,
Director
Date: August 18, 1998 Date: August 18, 1998
<PAGE>
By: /s/ William A. Siverling By: /s/ Frank R. Sourbeer
------------------------------------ ---------------------------
William A. Siverling, Director Frank R. Sourbeer, Director
Date: August 18, 1998 Date: August 18, 1998
By: /s/ Donald B. Springer
------------------------------------
Donald B. Springer, Director
Date: August 18, 1998
<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON AUGUST 25, 1998
REGISTRATION NO. 333-58179
================================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
__________________
EXHIBITS
TO
AMENDMENT NO 2 TO
REGISTRATION STATEMENT
ON
FORM S-3
__________________
HARRIS FINANCIAL, INC.
================================================================================
<PAGE>
EXHIBIT INDEX
1 Agency Agreement with Ryan Beck***
2 Stock Issuance Plan****
4 Form of Common Stock of Harris Financial, Inc.*
5.1 Opinion of Luse Lehman Gorman Pomerenk & Schick, P.C. as to the legality of
the securities being issued****
5.2 Draft Fairness Opinion from Ryan Beck
23.1 Consent of KPMG Peat Marwick LLP
23.2 Consent of Luse Lehman Gorman Pomerenk & Schick, P.C. (set forth in Exhibit
5.1)****
23.3 Consent of Arthur Andersen LLP
23.4 Consent of Ryan Beck
24 Power of attorney (set forth on the signature pages to this Registration
Statement)
27 Financial Data Schedules**
99.1 Stock Order Form
________________
* Filed as an exhibit to the Registrant's Registration Statement on Form S-4
(Registration No. 333-22415) previously filed with the Securities and
Exchange Commission on February 26, 1997, as amended March 17, 1997.
** Previously filed with the Securities and Exchange Commission on March 30,
1998 and May 14, 1998. Such documents are incorporated herein by reference
pursuant to Rule 601 of Regulation S-K.
*** To be filed supplementally or by amendment.
**** Previously filed
<PAGE>
EXHIBIT 5.2
<PAGE>
[DRAFT]
[Month] [Day], 1998
The Board of Trustees
Harris Financial MHC
235 North Second Street
Harrisburg, PA 17105
The Board of Directors
Harris Financial, Inc.
235 North Succored Street
Harrisburg, PA 17105
The Board of Directors
Harris Savings Bank
235 North Second Street
Harrisburg, PA 17101
Members of the Board:
You have requested our opinion as to the fairness from a financial point of
view, to the Minority Stockholders (the "Minority") of Harris Financial, Inc.,
(the "Company") and the Members (i.e., depositors of Harris Savings Bank, the
"Bank") (the "Members") of Harris Financial, MHC (the "Mutual Company"), of the
price at which 2,000,000 Shares of common stock (the "Shares") are being offered
by the Company pursuant to the Plan Of Stock Issuance for Secondary Offering
(the "Offering") which was adopted by the Company on June 16, 1998.
The Shares of Common Stock are being offered in the Subscription Offering in
descending order of priority to (i) depositors whose accounts in the Bank
totaled $50 or more on May 31, 1997 ("Eligible Account Holders"), (ii) the
Bank's ESOP, (iii) depositors of the Bank with aggregate deposits of $50 or more
on June 30, 1998 ("Supplemental Account Holders"). Remaining Shares, if any,
will be sold in a Community Offering to members of the general public, with a
preference given first to Minority Shareholders as of March 31, 1998, and then
to those natural persons who are residents of the Community (collectively, the
"Subscribers").
The Offering will increase the Minority Ownership interest of the Minority to
30.8% (31.6% on a diluted basis) from 24.9% of the Company's total common stock
outstanding. The 2,000,000 shares offered will be issued by the Company and
simultaneously canceled by the Mutual Company, thus reducing the Mutual
Company's ownership interest in the Company from 75.1% to 69.2% (68.4% on a
diluted basis). Shares for the Management Recognition Plan (4% of the Shares
offered) and Stock Option Plans (10% of the Shares offered), will be issued from
authorized but unissued shares, thus arriving at the diluted Minority Ownership
interest of 31.6%.
Ryan, Beck & Co., Inc., as a customary past of its investment banking business,
is engaged in the valuation of banking and thrift institutions and their
securities in connection with mergers and acquisitions, private placements and
public offerings. The Firm is experienced in handling offerings of securities
including offerings applicable to the Mutual Holding Company structure. In
conducting our investigation and analysis of this transaction, we have met with
certain senior members of the Company's and Bank's management to discuss its
operations, financial condition and future prospects, and have reviewed and
analyzed material prepared, in connection with the Offering, including among the
other things, the following: (i) the Offering Circular; (2) the Company's
Annual Report on Form 10-K for the year ended December 31, 1997, and the Bank's
Annual Report
<PAGE>
on Form F-2 for the years ended December 31, 1996 and 1995; (3) the Company's
Annual Report to shareholders for the year ended December 31, 1997, and the
Bank's Annual Report to shareholders for the years ended December 31, 1996, and
1995; (4) the Company's Quarterly Report on Form 10-Q for the period ended March
31, 1998; (5) certain operating and financial information including projections
provided to us by management regarding the Company's business and prospects
including the pro forma impact of the Offering; (6) historical market prices of
the Common Stock and the relationship of the market price to tangible book value
and earnings per share; (7) the trading volume in the Common Stock; (8)
historical stock market prices associated with all NASDAQ NMS listed Mutual
Holding Companies in relation to tangible book value and earnings per share; (9)
an analysis of projected fully converted valuations for Mutual Holding Companies
and the Company; (10) the trading volume of all NASDAQ NMS listed Mutual Holding
Companies; (11) the market for fully converted thrift equities; (12) other such
studies analyses, inquiries and examinations as we deem appropriate. While we
have taken care in our review, investigation and analyses, we have relied upon
and assumed the accuracy, completeness and fairness of the financial and other
information provided to us by the Company or which is publicly available and
have not attempted to verify such information. We have also relied upon the
management of the Company as to the reasonableness and achievability of the
financial and operating forecasts and projections (and the assumptions and bases
therefore) provided to us, and we have assumed that such forecasts and
projections reflect the best currently available estimates and judgments of the
Company's management.
We are familiar with the limited rights conferred upon members of a mutual
holding company under current Pennsylvania and federal law and regulation. We
also assumed that the Offering and subscriptions received by Subscribers are and
will be in compliance with all laws and regulations applicable to the Company
and the Bank. We have not been retained to nor have we made or obtained any
independent evaluations or appraisals of the assets or liabilities of the Bank
or the Company.
We were not engaged to render investment advice to the Minority Stockholders of
the Company or the Subscribers or to express a recommendation or opinion to
these shareholders or any other party as to whether they should or should not
subscribe in the Offering. In addition, we express no opinion on any tax,
regulatory or accounting consequences of any aspect of the Offering to the
Subscribers or the Minority.
In conducting our analysis and arriving at our opinion as expressed herein, we
have considered such financial and other factors as we have deemed appropriate
under the circumstances. Our Opinion is based upon conditions and projections
as they exist and can be evaluated on the date hereof. Based upon and subject to
the foregoing, it is our opinion as investment bankers that the price at which
Shares are being offered is fair to the Minority and Members from a financial
point of view as of the date hereof. This Opinion is being provided to the
Board of Directors of the Bank, the Company and the Mutual Company, and is to be
used solely by the Board of Directors of the Bank, the Company and the Mutual
Company for its intended purpose. This Opinion may not be reproduced or used by
any other party for any purpose without the prior written consent of Ryan, Beck.
Very truly yours,
RYAN, BECK & CO., INC.
<PAGE>
EXHIBIT 23.1
<PAGE>
The Board of Directors
Harris Financial, inc.
We consent to the use of our report incorporated herein by reference on Form S-3
and to the reference to our firm under the heading "Experts" in the prospectus.
Our report refers to a change in the method of accounting for mortgage servicing
rights.
/s/ KPMG Peat Marwick
Harrisburg, PA
August 21, 1998
<PAGE>
EXHIBIT 23.3
<PAGE>
ARTHUR ANDERSEN LLP
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants. We hereby consent to the incorporation by
reference in this registration statement of our report dated January 20, 1998,
incorporated by reference in Harris Financial, Inc.'s Form 10-K for the years
ended December 31, 1997 and to all references to our Firm included in this
registration statement.
/s/ Arthur Andersen LLP
Lancaster, Pa.,
August 24, 1998
<PAGE>
EXHIBIT 23.4
<PAGE>
Ryan, Beck & Co.,
150 Monument Road, Suite 106
Bala Cynwyd, Pennsylvania 19004-1725
August 24, 1998
We hereby consent to the filing of the form of fairness opinion as an exhibit to
Harris Financial, Inc.'s registration statement on Form S-3 and any amendments
thereto filed with the Securities and Exchange Commission and as an exhibit to
any related applications filed with the Pennsylvania Department of Banking and
the Board of Governors of the Federal Reserve System.
Sincerely,
/s/ Michelle Darcey
Michelle Darcey
First Vice President
<PAGE>
<TABLE>
<CAPTION>
HARRIS FINANCIAL, INC.
STOCK ORDER FORM
Please read and complete this Stock Order Form.
Instructions are included on the reverse side of this form.
DEADLINE AND DELIVERY FOR OFFICE USE ONLY
- ----------------------------------------------------------------------- -----------------------------------------------------------
<S> <C>
10:00 A.M., PENNSYLVANIA TIME, ON , 1998
Please mail the completed Stock Order Form in the enclosed business
reply envelope to the address listed below or hand-deliver to any
Harris Savings Bank office. COPIES AND FACSIMILES OF STOCK ORDER FORMS
------------------------------------------ ---------- ------- ------- -------
MAY NOT BE ACCEPTED. Date Rec'd Batch # Order # Deposit
--------------------
- ----------------------------------------------------------------------- -----------------------------------------------------------
(1) COMMON STOCK SUBSCRIPTION AMOUNT (WIRES WILL NOT BE ACCEPTED)
- ------------------------------------------------------------------------------------------------------------------------------------
<CAPTION>
<S> <C>
Indicate the dollar amount of Harris Financial, Inc. common stock for which you would like to subscribe: $ ________________
------ (MINIMUM: $500.00)
<CAPTION>
<S> <C>
Please note: Assuming no oversubscription, subscribers will be allotted the largest WHOLE number of shares which the dollar
amount indicated above will purchase, based on the Actual Purchase Price per share. The Actual Purchase Price per share, to be
established after the conclusion of the Offering period, is expected to be within a range of $ and $ per share. Fractional
shares will not be issued; refunds will be made of any unused funds. If the Actual Purchase Price is outside the range,
subscribers will be resolicited and given the opportunity to increase, decrease or rescind their order for common stock. Please
refer to the Prospectus section entitled "The Offering--Stock Pricing and Number of Shares to be Issued and Fairness Opinion",
for a discussion of the determination of the Actual Purchase Price per share.
- ------------------------------------------------------------------------------------------------------------------------------------
<CAPTION>
(2) METHOD OF PAYMENT (3) PURCHASER INFORMATION
- ----------------------------------------------------------------------- -----------------------------------------------------------
<S> <C>
[_] Enclosed is a check, bank draft or money order payable to HARRIS [_] Check here if you are a Harris Savings Bank or Harris
SAVINGS BANK for $_______. Financial, Inc. director, officer or employee, or a member
of their immediate household.
[_] I authorize Harris Savings Bank to make the withdrawal(s) from CHECK THE BOX WHICH APPLIES:
the Harris Savings Bank savings or certificate account(s)* listed (a)[_] Check here if you are ordering in the Subscription
below, and I understand that the amounts I authorize below will Offering as an Eligible Account Holder with at least $50 at
not otherwise be available to me once this Stock Order Form is Harris Savings Bank on MAY 31, 1997. List below any
submitted. (THERE IS NO EARLY WITHDRAWAL PENALTY FOR THE PURCHASE account(s) you had at that date.
OF STOCK.) (b)[_] Check here if you are ordering in the Subscription
Offering as a depositor with at least $50 at Harris Savings
Bank on JUNE 30, 1998, but are NOT an Eligible Account
Holder. List below any account(s) you had at that date.
<CAPTION>
<S> <C> <C>
Account Number(s) Amount(s) (c)[_] Check here if you were NOT a depositor of Harris
----------------- --------- Savings Bank at either of the above dates, but you are
_________________ $_________________ ordering in the Community Offering as a Harris Financial,
_________________ $_________________ Inc. stockholder on AUGUST 5, 1998.
_________________ $_________________ (d)[_] Check here if you were NOT A HARRIS SAVINGS BANK
_________________ $_________________ DEPOSITOR AT EITHER OF THE ABOVE DATES, NOR a Harris
_________________ $_________________ Financial, Inc. stockholder on August 5, 1998.
TOTAL WITHDRAWAL: $_________________ ACCOUNT TITLE (NAME(S) ON ACCOUNT) ACCOUNT NUMBER
---------------------------------- --------------
__________________________________ ______________
__________________________________ ______________
*You may NOT indicate withdrawal from checking or money market __________________________________ ______________
accounts. If additional space is needed, attach a separate page.
- ----------------------------------------------------------------------- -----------------------------------------------------------
<CAPTION>
(4) STOCK REGISTRATION (PLEASE PRINT CLEARLY -- THE REGISTRATION INFORMATION YOU LIST BELOW WILL BE UTILIZED FOR SUBSEQUENT
MAILINGS, INCLUDING THE REGISTRATION OF STOCK CERTIFICATES. PLEASE MAKE SURE THE INFORMATION IS COMPLETE AND LEGIBLE.)
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C>
(First Name, Middle Initial, Last Name) (Social Security No./Tax ID# (certificate will show only this number)
- ------------------------------------------------------------ ---------------------------------------------------------------------
(First Name, Middle Initial, Last Name) (Social Security No./Tax ID#)
- ------------------------------------------------------------ ---------------------------------------------------------------------
(Street Address of first person named) (Daytime Phone Number of first person named)
- ------------------------------------------------------------ ---------------------------------------------------------------------
(City, State, Zip Code) (Evening Phone Number of first person named)
<CAPTION>
(5) FORM OF STOCK OWNERSHIP (CHECK ONE--SEE REVERSE SIDE OF THIS FORM FOR OWNERSHIP DEFINITIONS)
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
[_] Individual [_] Joint Tenants [_] Tenants in Common [_] Uniform Transfer to Minors
[_] IRA (for broker use only) [_] Corporation [_] Fiduciary (Under Agreement Dated , 199 ) [_] Other ____________________
- ------------------------------------------------------------------------------------------------------------------------------------
<CAPTION>
(6) NASD AFFILIATION (CHECK AND INITIAL ONLY IF APPLICABLE.)
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C>
[_] Check here and initial below if you are a member of the National Association of Securities Dealers ("NASD") or a person
associated with an NASD member or a member of the immediate family of any such person to whose support such person contributes,
directly or indirectly, or if you have an account in which an NASD member, or person associated with an NASD member, has a
beneficial interest. I agree (i) not to sell, transfer or hypothecate the stock for a period of 90 days following issuance; and
(ii) to report this subscription in writing to the applicable NASD member I am associated with within one day of payment for the
stock.
_______(Please initial)
- ------------------------------------------------------------------------------------------------------------------------------------
(7) ACKNOWLEDGMENT AND SIGNATURE (VERY IMPORTANT)
- ------------------------------------------------------------------------------------------------------------------------------------
I(we) acknowledge receipt of the Prospectus dated , 1998, and that I(we) have been advised to read the Prospectus
(including the section entitled "Risk Factors"). I(we) understand that, after receipt by Harris Financial, Inc., this order may
not be modified or withdrawn without the consent of Harris Financial, Inc. I(we) hereby certify that the shares which are being
subscribed for are for my(our) account only, and that I(we) have no present agreement or understanding regarding any subsequent
sale or transfer of such shares and I(we) confirm that my(our) order does not conflict with the purchase limitations and other
provisions in the Stock Issuance Plan. I(we) acknowledge that the common stock being ordered is not a deposit or savings account,
is not insured by the FDIC, and is not guaranteed by Harris Financial, Inc. or any government agency. Under penalties of perjury,
I(we) certify that (1) the Social Security #(s) or Tax ID#(s) given above is(are) correct; and (2) I(we) am(are) not subject to
backup withholding tax. (You must cross out #2 above if you have been notified by the Internal Revenue Service that you are
subject to backup withholding because of underreporting interest or dividends on your tax return).
Please sign and date this form. ONLY ONE SIGNATURE IS REQUIRED, UNLESS AUTHORIZING A WITHDRAWAL FROM A HARRIS SAVINGS BANK
------------------------------------------------------------------------------------------
DEPOSIT ACCOUNT REQUIRING MORE THAN ONE SIGNATURE TO WITHDRAW FUNDS. If signing as a custodian, corporate officer, etc.,
- -------------------------------------------------------------------
please include your full title.
____________________________________________________________ ___________________________________________________________
Signature Title (if applicable) Date Signature Title (if applicable) Date
THIS ORDER NOT VALID UNLESS SIGNED--WE RECOMMEND RETAINING A COPY OF THIS FORM FOR YOUR RECORDS
- ------------------------------------------------------------------------------------------------------------------------------------
QUESTIONS? PLEASE CALL (800) 801-5279 FROM 9:00 AM TO 4:00 PM, MONDAY-FRIDAY
STOCK INFORMATION CENTER: 235 North Second Street, Harrisburg, Pennsylvania 17101
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
STOCK ORDER FORM INSTRUCTIONS
-----------------------------
(1) COMMON STOCK SUBSCRIPTION AMOUNT--Indicate the dollar amount of Harris
-------------------------------- ------
Financial, Inc. common stock that you wish to purchase. The minimum purchase
is $500. No individual (or persons through a single subscription right) may
purchase more than $250,000 in the Subscription Offering.) No individual,
together with associates or persons acting in concert with such persons, may
purchase more than $500,000 in all categories of the Offering combined. Harris
Financial, Inc. reserves the right to accept or reject orders placed in any
Community Offering.
(2) METHOD OF PAYMENT--Payment for shares may be made by check, bank draft or
-----------------
money order payable to HARRIS SAVINGS BANK. Funds received will be cashed
immediately. You will earn interest at Harris Savings Bank's passbook rate
from the time funds are received until the Offering is consummated. Wires will
not be accepted.
You may pay for your shares by withdrawal from your Harris Savings Bank
deposit account(s). Indicate the account number(s) and the amount(s) to be
withdrawn. These funds will be unavailable to you from the time this Stock
Order Form is received, however, the funds will remain in your account and
continue to earn interest at the account's contractual rate until the Offering
is consummated. PLEASE CONTACT THE STOCK INFORMATION CENTER PROMPTLY, IF YOU
ARE INTENDING TO UTILIZE HARRIS SAVINGS BANK IRA OR KEOGH FUNDS (OR ANY OTHER
SUCH FUNDS) TO MAKE YOUR STOCK PURCHASE.
(3) PURCHASER INFORMATION--Check the applicable box. This information is very
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important because eligibility dates are utilized to prioritize your order in
the event that we receive orders for more stock than is available. List the
name(s) on the deposit account(s) and account number(s) that you held at the
applicable date. Please see the portion of the Prospectus entitled "The
Offering", for explanation of the purchase priorities in the Offering and how
shares will be allocated in the event the Offering is oversubscribed. FAILURE
TO COMPLETE THIS SECTION, COMPLETING THIS SECTION INCORRECTLY OR OMITTING
INFORMATION IN THIS SECTION COULD RESULT IN A LOSS OF ALL OR PART OF YOUR
STOCK ALLOCATION IN THE EVENT OF AN OVERSUBSCRIPTION.
(4) STOCK REGISTRATION--Please CLEARLY PRINT the name(s) and address in which
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you want the stock certificate registered and mailed. If you are exercising
subscription rights by purchasing in the Subscription Offering as a Harris
Savings Bank: (i) Eligible Account Holder as of May 31, 1997; (ii)
Supplemental Eligible Account Holder as of June 30, 1998, you must register
the stock in the name of at least one of the account holders listed on your
account as of the applicable date. However, adding the name(s) of persons who
are not account holders, or were account holders at a later date, will be a
violation of your subscription right and will result in a loss of your
purchase priority. NOTE: ONE STOCK CERTIFICATE WILL BE GENERATED PER ORDER
FORM. IF VARIOUS REGISTRATIONS AND SHARE AMOUNTS ARE DESIRED ON VARIOUS
CERTIFICATES, A SEPARATE STOCK ORDER FORM MUST BE COMPLETED FOR EACH
CERTIFICATE DESIRED.
Enter the Social Security Number or Tax ID Number of the registered owner(s).
The first number listed will be identified with the stock certificate for tax
purposes. Be sure to include at least one phone number, in the event you must
be contacted regarding this Stock Order Form.
(5) FORM OF STOCK OWNERSHIP--Please check the one type of ownership applicable
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to your registration. An explanation of each follows:
GUIDELINES FOR REGISTERING STOCK
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For reasons of clarity and standardization, the stock transfer industry has
developed uniform stockholder registrations which we will utilize in the
issuance of your Harris Financial, Inc. stock certificate(s). If you have any
questions, please consult your legal advisor.
Stock ownership must be registered in one of the following manners:
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INDIVIDUAL: Avoid the use of two initials. Include the first given name,
middle initial and last name of the stockholder. Omit words
of limitation that do not affect ownership rights such as
"special account," "single man," "personal property," etc. If
the stock is held individually upon the individual's death,
the stock will be owned by the individual's estate and
distributed as indicated by the individual's will or
otherwise in accordance with law.
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JOINT: Joint ownership of stock by two or more persons shall be
inscribed on the certificate with one of the following types
of joint ownership. Names should be joined by "and"; do not
connect with "or." Omit titles such as "Mrs.," "Dr.," etc.
JOINT TENANTS Joint Tenancy with Right of Survivorship and
not as Tenants in Common may be specified to identify two or
more owners where ownership is intended to pass automatically
to the surviving tenant(s).
TENANTS IN COMMON Tenants in Common may be specified to
identify two or more owners. When stock is held as tenancy in
common, upon the death of one co-tenant, ownership of the
stock will be held by the surviving co-tenant(s) and by the
heirs of the deceased co-tenant. All parties must agree to
the transfer or sale of shares held in this form of
ownership.
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UNIFORM TRANSFER
TO MINORS: Stock may be held in the name of a custodian for a minor
under the Uniform Transfers to Minors laws of the individual
states. There may be only one custodian and one minor
designated on a stock certificate. The standard abbreviation
of custodian is "CUST,", while the description "Uniform
Transfers to Minors Act" is abbreviated "UNIF TRAN MIN ACT."
Standard U.S. Postal Service state abbreviations should be
used to describe the appropriate state. For example, stock
held by John P. Jones under the Uniform Transfers to Minors
Act will be abbreviated:
JOHN P. JONES CUST SUSAN A. JONES
UNIF TRAN MIN ACT PA
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FIDUCIARIES: Stock held in a fiduciary capacity must contain the
following:
<TABLE>
<CAPTION>
<S> <C>
1. The name(s) of the fiduciary(ies):
If an individual, list the first given name, middle initial and last name.
If a corporation, list the corporate title
If an individual and a corporation, list the corporation's title before the individual.
</TABLE>
2. The fiduciary capacity: Administrator, Conservator,
Committee, Executor, Trustee, Personal Representative,
Custodian
3. The type of document governing the fiduciary relationship.
Generally, such relationships are either under a form of
living trust agreement or pursuant to a court order.
Without a document establishing a fiduciary relationship,
your stock may not be registered in a fiduciary capacity.
4. The date of the document governing the relationship. The
date of the document need not be used in the description
of a trust created by a will.
5. Either of the following:
The name of the maker, donor or testator OR
The name of the beneficiary
Example of Fiduciary Ownership:
JOHN D. SMITH, TRUSTEE FOR TOM A. SMITH
UNDER AGREEMENT DATED 6/9/74
(6) NASD AFFILIATION--Check the box and initial, if applicable.
(7) ACKNOWLEDGMENT AND SIGNATURE--Stock order forms submitted without a
signature will not be accepted. Only one signature is required, unless the
method of payment section of this Form includes authorization to withdraw from
a Harris Savings Bank account requiring more than one signature. If signing as
a custodian, trustee, corporate officer, etc., please include your title. If
exercising a Power of Attorney, you must submit a copy of the POA agreement
with this Form.
<TABLE>
<CAPTION>
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QUESTIONS? PLEASE CALL (800) 801-5279 FROM 9:00 AM TO 4:00 PM, MONDAY-FRIDAY
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STOCK INFORMATION CENTER: 235 North Second Street, Harrisburg, Pennsylvania 17101
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<S> <C>
THE SHARES OF COMMON STOCK ARE NOT DEPOSIT ACCOUNTS AND ARE NOT INSURED BY THE FEDERAL DEPOSIT INSURANCE
CORPORATION OR ANY OTHER GOVERNMENT AGENCY.
</TABLE>
