As filed with the Securities and Exchange Commission on June 19, 1998
Registration No. 333-
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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM SB-2
REGISTRATION STATEMENT
UNDER THE SECURITIES ACT OF 1933
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Nittany Financial Corp.
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(Exact name of Small Business Issuer as specified in charter)
Pennsylvania 6035 23-2925762
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(State or other jurisdiction (Primary SIC No.) (I.R.S. Employer
of incorporation or Identification No.)
organization)
637 Kennard Road, State College, Pennsylvania 16801
(814) 466-6625
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(Address, including zip code, and telephone number, including area code,
of principal executive offices and principal place of business)
Mr. David Z. Richards, Jr.
President
Nittany Financial Corp.
637 Kennard Road, State College, Pennsylvania 16801
(814) 466-6625
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(Name, address and telephone number of agent for service)
Please send copies of all communications to:
Samuel J. Malizia, Esq.
MALIZIA, SPIDI, SLOANE & FISCH, P.C.
1301 K Street, N.W., Suite 700 East, Washington, D.C. 20005
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC:
As soon as practicable after this registration statement becomes effective.
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 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
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Title of Proposed Proposed Amount
Each Class of Shares Maximum Maximum Aggregate of
Securities to be Offering Price Offering Registration
To Be Registered Registered Per Unit Price(1) Fee
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Common Stock,
$.10 Par Value 611,000 $10.00 $6,110,000 $1,802.45
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(1) Estimated solely for purposes of calculating the registration fee.
The registrant hereby amends this registration statement on such date or dates
as may be necessary to delay its effective date until the registrant shall file
a further amendment which specifically states that this registration statement
shall thereafter become effective in accordance with Section 8(a) of the
Securities Act of 1933 or until the registration statement shall become
effective on such date as the Commission, acting pursuant to said Section 8(a),
may determine.
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Subject to Completion
Preliminary Prospectus Dated June 19, 1998
611,000 Shares
[LOGO] Common Stock
NITTANY FINANCIAL CORP.
a proposed holding company for
NITTANY BANK
(In Organization)
Nittany Financial Corp., a Pennsylvania corporation (the "Company"),
organized to acquire and hold all of the authorized capital stock to be issued
and outstanding of Nittany Bank, a proposed United States chartered,
FDIC-insured federal savings bank to be located in State College, Pennsylvania
(the "Bank"), is offering for sale a minimum 500,000 shares and a maximum of
600,000 shares of the Company's common stock, par value $0.10 per share ("Common
Stock") to the general public on a "best efforts" basis for a purchase price of
$10.00 per share (the "Offering"). All subscriptions funds tendered will be
deposited in an interest bearing escrow account with Roxborough-Manayunk Bank,
(the "Escrow Agent") pending completion, termination or cancellation of the
Offering. The minimum purchase subscription is 100 shares and the maximum
purchase subscription is 30,000 shares. The Offering will expire on __________
___, 1998, unless extended by the Company to __________ ___, 1998, without
further notice to subscribers. See "The Offering and Plan of Distribution." The
Company reserves the right, in its sole discretion, to change the purchase
limitations and to accept or reject any subscription for Common Stock, in whole
or in part. Prior to this Offering, there has been no market for the Common
Stock and there can be no assurance that an active and liquid market will
develop after the Offering. The initial directors of the Company purchased
40,000 shares of Common Stock for $300,000 in order to cover preoperating,
organizational and Offering expenses in a private placement (the "Private
Placement"). Additionally, approximately 10,000 to 11,000 shares of the Common
Stock will be issued to a banking holding company as partial payment of a
premium on deposits to be assumed by the Bank.
AN INVESTMENT IN THE COMMON STOCK INVOLVES SIGNIFICANT RISKS AND SHOULD BE
UNDERTAKEN AS A LONG-TERM INVESTMENT ONLY AFTER CAREFUL EVALUATION OF THE RISK
FACTORS ON PAGE 1, HEREOF, AND ONLY BY PERSONS WHO CAN AFFORD TO SUSTAIN THE
LOSS OF THEIR ENTIRE INVESTMENT.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION NOR HAS THE COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY
OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
THE SECURITIES OFFERED HEREBY ARE NOT SAVINGS ACCOUNTS OR DEPOSITS AND ARE NOT
INSURED BY THE FEDERAL DEPOSIT INSURANCE CORPORATION, THE SAVINGS ASSOCIATION
INSURANCE FUND OR ANY OTHER GOVERNMENTAL AGENCY.
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Price to Public Underwriting Discounts and Proceeds to Company
(1)(3) Selling Commissions (2) (4)
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Per Share: $10.00
Total Maximum (600,000 shares) $6,000,000 $0 $6,000,000
Total Minimum (500,000 shares) $5,000,000 $0 $5,000,000
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(1) The Offering price of the Common Stock was arbitrarily determined by the
Company.
(2) The Common Stock offered hereby will be sold on a "best efforts" basis by
the officers and directors of the Company, none of whom will receive any
commissions or other form of compensation (although such persons may be
reimbursed for reasonable expenses incurred in the Offering), and who each
qualifies under the safe harbor of Rule 3a4-1 under the Securities Exchange
Act of 1934. See "The Offering and Plan of Distribution."
(3) Does not include approximately 11,000 shares of Common Stock to be issued
to a bank holding company as partial payment of a premium on deposits to be
assumed by the Bank.
(4) Does not include estimated preoperating and organizational expenses of
$300,000 that will be paid from the proceeds of the Private Placement.
The date of this Prospectus is July ___, 1998
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Information contained herein is subject to completion or amendment. A
registration statement relating to these securities has been filed with the
Securities and Exchange Commission. These securities may not be sold nor may
offers to buy be accepted prior to the time the registration statement becomes
effective. This prospectus shall not constitute an offer to sell or the
solicitation of an offer to buy nor shall there be any sale of these securities
in any state in which such offer, solicitation or sale would be unlawful prior
to the registration or qualification under the securities laws of such state.
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ADDITIONAL INFORMATION
The Company has filed with the Securities and Exchange Commission (the
"SEC") a Registration Statement under the Securities Act of 1933, as amended,
with respect to the Common Stock offered hereby. This Prospectus does not
contain all of the information set forth in the Registration Statement. For
further information with respect to the Company and the Common Stock, reference
is hereby made to the Registration Statement and the exhibits thereto. The
Registration Statement may be examined at, and copies of the Registration
Statement may be obtained at prescribed rates from, the Public Reference Section
of the SEC, Room 1024, 450 Fifth Street, N.W., Washington, DC 20549. In
addition, the Company is required to file electronic versions of these documents
with the SEC through the SEC's Electronic Data Gathering, Analysis and Retrieval
(EDGAR) system. The Commission maintains a World Wide Web site at
http://www.sec.gov that contains reports, proxy and information statements and
other information regarding registrants that file electronically with the SEC.
The Company and the Bank have filed various applications with the
Office of Thrift Supervision (the "OTS") and the Federal Deposit Insurance
Corporation (the "FDIC"). As required by the applicable regulatory authorities,
these applications contain financial projections relating to the Bank. These
projections are not part of this Prospectus and while they are based on
assumptions that are believed to be reasonable, they should not be relied upon
by prospective investors. Prospective investors should rely only on information
contained in this Prospectus and in the Company's related Registration Statement
in making an investment decision. To the extent that information available from
the Company and information in public files and records maintained by the OTS
and the FDIC is inconsistent with information presented in this Prospectus, such
other information is superseded by the information presented in this Prospectus.
REPORTS TO STOCKHOLDERS
Upon the effective date of the Registration Statement, the Company will
be subject to the reporting requirements of the Securities and Exchange Act of
1934 (the "Exchange Act"), which includes requirements to file annual reports on
Form 10-KSB and quarterly reports on Form 10-QSB with the SEC. This reporting
obligation will exist for at least one year and may continue for fiscal years
thereafter, except that such reporting obligations may be suspended for any
subsequent fiscal year if at the beginning of such year the Common Stock of the
Company is held of record by less than three hundred persons or if the Common
Stock of the Company is held of record by less than five hundred persons and the
total assets of the Company have not exceeded $10 million on the last day of
each of the Company's three most recent fiscal years.
Regardless of whether the Company is subject to the reporting
requirements of the Exchange Act, the Company intends to furnish its
stockholders with annual reports containing audited financial information for
each fiscal year. The Company's fiscal year ends on December 31.
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Table of Contents
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Page
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Prospectus Summary....................................................................................... (i)
Highlights of the Offering............................................................................... (iv)
Risk Factors............................................................................................. 1
Use of Proceeds.......................................................................................... 4
Dividends................................................................................................ 6
Dilution................................................................................................. 6
Capitalization........................................................................................... 7
The Offering and Plan of Distribution.................................................................... 8
Branch Purchase Agreement................................................................................ 12
Unaudited ProForma Financial Information................................................................. 14
Management's Discussion and Analysis of Financial Condition and Results of Operations.................... 18
Proposed Business of the Company......................................................................... 18
Proposed Business of the Bank............................................................................ 19
Regulation............................................................................................... 25
Management of the Company................................................................................ 30
Management of the Bank................................................................................... 30
Description of Capital Stock............................................................................. 34
Legal Matters............................................................................................ 37
Experts.................................................................................................. 37
Subscription Agreement................................................................................... A-1
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NO PERSON IS AUTHORIZED TO GIVE ANY INFORMATION NOR TO MAKE ANY
REPRESENTATIONS OTHER THAN THE INFORMATION AND REPRESENTATIONS CONTAINED IN THIS
PROSPECTUS, AND IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT
BE RELIED UPON AS HAVING BEEN AUTHORIZED. NEITHER THE DELIVERY OF THIS
PROSPECTUS NOR ANY DISTRIBUTION OF THE COMMON STOCK OF NITTANY FINANCIAL CORP.
MADE HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE AN IMPLICATION THAT THERE
HAS BEEN NO CHANGE IN THE AFFAIRS OF NITTANY FINANCIAL CORP. SINCE THE DATE AS
OF WHICH INFORMATION IS FURNISHED HEREIN.
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PROSPECTUS SUMMARY
This summary does not purport to be complete and is qualified in its
entirety by the more detailed information contained elsewhere in this
Prospectus.
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Organizers....................... The organizers and initial board of directors of the Company are David
Z. Richards Jr., Samuel J. Malizia, William A. Jaffe, D. Michael
Taylor, Donald J. Musso. See "Management." The Organizers
previously purchased $300,000 of Common Stock in a Private Placement
to fund organizational, preoperating and Offering expenses and plan to
subscribe for additional shares in the Offering, for total purchases of
approximately $650,000. The Organizers reserve the right to purchase
additional shares in the Offering. The remaining shares are being offered
to the public on a first come, first served basis, subject to the right of the
Company to refuse to accept any subscription in whole or in part for any
reason. All potential investors in the Common Stock in the Offering will
have the opportunity to purchase the stock at the same price and on the
same terms.
The Company...................... Nittany Financial Corp. (the "Company") was incorporated in December
1997 to acquire and hold all of the authorized capital stock to be issued
and outstanding of Nittany Bank (the "Bank"). The Company is
currently located at 637 Kennard Road, State College, Pennsylvania,
16801. The mailing address of the Company is Calder Square, P.O. Box
10283, State College, Pennsylvania, 16805. The telephone number of
the Company at such office is (814) 466-6336. After the opening of the
Bank, the main office of the Company is expected to be located at 116
East College Avenue, State College, Pennsylvania 16801. See "Proposed
Business of the Company."
The Bank ........................ The principal business of the Bank will be to accept various types of
transaction and savings deposits from the general public and to make
mortgage, consumer, small business and other loans. See "The Bank."
As a result of the Branch Purchase Agreement, the Bank's offices will be
located at 116 East College Avenue (main office) and 1276 North
Atherton Street, State College, Pennsylvania; both locations are presently
branch offices of a regional commercial bank. See "Proposed Business
of the Bank."
Branch Purchase
Agreement........................ The Company entered into a Branch Purchase and Deposit Assumption
Agreement on March 24, 1998 (the "Branch Purchase Agreement") with
First Commonwealth Bank, a state chartered commercial bank having its
principal office in Indiana, Pennsylvania (the "Seller" or "First
Commonwealth"). Pursuant to the Agreement, the Company will assume
the deposit liabilities and purchase certain assets of two offices located at
116 East College Avenue and 1276 North Atherton Street, State College,
Pennsylvania (the "Offices"). See "Proposed Business of the Bank." See
"Branch Purchase Agreement."
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Regulatory Approval.............. The Company has pending conditional approval of its application for
permission to organize a new federal chartered stock savings bank from
the Office of Thrift Supervision (the "OTS") and must satisfy the
conditions set forth in the conditional approval (the "Conditional
Approval") before it can complete its organization of the Bank and
commence business. The Company has also pending a Commitment to
Insure Accounts (the "Commitment") of the Bank from the Federal
Deposit Insurance Corporation ("FDIC") in its capacity as administrator
of the Savings Association Insurance Fund (the "SAIF") and must satisfy
the conditions set forth therein before it can obtain FDIC insurance of its
accounts. Obtaining such insurance of accounts is a condition it must
meet in order to complete its organization of the Bank and commence
business. See "Proposed Business of the Company."
The Offering..................... The Offering consists of a minimum 500,000 shares and a maximum of
600,000 shares of Common Stock at $10.00 per share. In the Offering,
there is a minimum purchase requirement of 100 shares and a maximum
purchase limitation of 30,000 shares per subscriber including all affiliates
of such subscriber. The Offering will terminate on __________ ___,
1998, unless extended by the Organizers for an additional period ending
__________ ___, 1998, without additional notice to subscribers. The
Organizers have no present plans to seek an extension beyond
__________ ____, 1998. See "The Offering and Plan of Distribution --
Termination or Extension of Offering."
Private Placement for
Preoperating Expenses............ The Directors of the Company previously subscribed in a Private
Placement to an aggregate of 40,000 shares of the Company's Common
Stock at a price of $7.50 per share for a total of $300,000. The
$300,000, and accrued interest thereon, from the Private Placement has
been, and will continue to be, used to pay Offering, organizational and
preoperating expenses of the Company and the Bank. The lower per
share price in the Private Placement is in recognition of the significant
financial risks incurred and time and efforts expended by such persons.
Subscriptions for the Offering are placed in escrow pending the
completion of the Offering and all required regulators approvals to
commence operations. If the Offering is not completed or regulatory
conditions are not met, the money will be returned to investors. In
contrast, the subscriptions in the Private Placement have, and will
continue to be, expended prior to the receipt of all regulatory approvals
and completion of the Offering.
Use of Proceeds.................. All of the proceeds of the Offering are expected to be invested by the
Company in the common stock of the Bank. See "Use of Proceeds."
Dividends........................ It is the current intention of the Board of Directors to initially fund the
growth in assets and deposits of the Bank and not issue cash dividends.
The Company may declare dividends on the Common Stock at some time
in the future depending upon the profitability of the Company, its
regulatory and financial condition and other factors. However, no
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assurance can be given that any dividends will be declared or, if
declared, what the amount of dividends will be, or whether such
dividends, once declared, will continue. See Risk Factors "Dividends."
Market for Common Stock.......... It is not anticipated that there will be an active trading market for the
Common Stock upon completion of the Offering or that the Common
Stock will be listed on any exchange. Investors should have a long-term
investment intent. Investors may not be able to sell their shares when
they desire or sell them a price equal to or above the Offering Price.
Following completion of the Offering, it is anticipated that the Common
Stock will be traded on the OTC Bulletin Board. See "Risk Factors -
Lack of Trading Market."
Payment for Subscription......... Payments for subscriptions must be for the full amount subscribed and
must be made by check, bank draft or money order made payable to
Roxborough-Manayunk Bank, Escrow Agent for Nittany Financial
Corp.," and sent to or delivered to the office of the Company.
Subscriptions will be deemed accepted if notice of rejection is not mailed
to the subscriber within ten business days of receipt of the subscription.
See "The Offering and Plan of Distribution - Method of Subscription."
Any payments collected from subscribers will be held in an interest-
bearing escrow account. If certain conditions are not satisfied by the
Organizers on or before __________ ___, 1998, (unless the Offering is
extended to __________ ___, 1998), funds held in the escrow account,
including interest thereon after deduction of reasonable Offering expenses
if in excess of the $300,000 to be covered by the proceeds of the Private
Placement, will be refunded promptly. Funds from the escrow account
can only be disbursed to the Company following successful
consummation of the Offering and compliance with certain other
conditions. See "The Offering and Plan of Distribution - Escrow
Account."
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HIGHLIGHTS OF THE OFFERING
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Strategy......................... The State College area is currently serviced almost entirely by large,
regional financial institutions headquartered out of State College. The
Bank is being formed to again provide the area with a bank that is
operated and owned primarily by the community with the policies and
decisions of the Bank being made by people known to the customers.
In a market dominated by large, regional and statewide banks and their
branches, the Bank intends to offer the community an alternative.
Nittany Bank will be highly personalized, community oriented, financial
services company delivering the exceptional service that can only come
from responsive and local decision-making. These attributes will make
the Bank attractive to local businesses and residents by providing:
oAccessibility to the Bank's President, officers and directors, whether
during or after business hours.
oFlexibility in loan and business decisions to account for local
community and customer needs.
o Investment of depositors funds back into the community.
o Involvement in the community affairs of State College.
o Competitive products and pricing on a wide array of financial
services.
o Responsiveness to customer needs supported by an experienced and
service-oriented staff.
Community Ownership.............. The Organizers of the proposed Company and Bank who have proposed
the establishment of the Bank due to their belief that the area of State
College, Pennsylvania, is in need of a locally-headquartered financial
institution dedicated to the needs of its community. As a locally operated
financial institution, the Bank will be able to more quickly recognize the
needs of the local community, versus out-of-state and out-of-area
financial institutions, and implement services, deposits and credit
programs, that will fulfill the financial needs of the primary market area
of the Bank. See "Proposed Business of the Bank."
Economic Strength................ The present and projected population base, in addition to the growth in
the number of households and presence of the Pennsylvania State
University, are expected to provide a solid customer base for a locally
owned financial institution operating in State College. See "Proposed
Business of the Bank."
New Operation.................... As a newly established financial institution, the Bank will not be
burdened with the problem loans and liabilities that have caused some
financial institutions major problems. The Bank intends to structure
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loans and savings accounts with flexibility to react to changes in the
interest rate environment of today's economy. Further, the Bank will be
able to more easily adapt to the regulatory changes enacted over the past
few years.
Expertise of Management.......... David Z. Richards will serve as President and Chief Executive Officer.
Mr. Richards is the former President of Mifflinburg Bank & Trust Co.
and Mifflinburg Bancorp, Inc. in Mifflinburg, Pennsylvania. The Board
of Directors includes local business persons and an attorney and a
consultant who specialize in the representation of financial institutions
nationally. Members of the Board of Directors also have involvement in
local civic and non-profit organizations, including the Pennsylvania State
University. See "Management of the Company" and "Management of the
Bank."
Business Plans................... The Bank has prepared a strategic business plan to provide direction for
the Bank over the next several years. Although the Bank anticipates
numerous revisions as to tactics and possibly even to strategy, the basic
objectives of the Bank are as follows:
o The Company will pursue aggressive, but controlled balance sheet
growth with the Bank originating a broad array of lending products,
including secured one to four family residential, home equity, consumer,
small business and commercial real estate loans.
o On the liability side, the Bank anticipates attracting deposits
emphasizing core deposits and transaction accounts with competitive rates
and products, supported by high quality personal banking service.
o The Bank will seek to maintain earnings by emphasizing asset quality
and controlling expenses. The Bank will attempt to secure strategic
affiliations with other financial service providers. Fee income will be
positively impacted as these financial services assist customers.
o The Bank intends to outsource non-essential services in order to employ
a core group of banking professionals focused on customer needs.
Existing Operations.............. As a result of the Branch Purchase Agreement, the Bank, unlike other de
novo financial institutions which start primarily with a charter and a
building, will commence active business operations immediately from
existing operating bank offices with a deposit and customer base. In
addition to the proceeds of the Offering, the deposits assumed pursuant
to the Branch Purchase Agreement will provide an immediate source of
funds for loans and investments. The Bank also intends to continue to
employ the existing experienced personnel at the Offices who are familiar
with the operations and customers, supplemented by new senior
management.
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RISK FACTORS
IN ADDITION TO THE OTHER INFORMATION IN THIS PROSPECTUS, THE FOLLOWING
FACTORS WHICH ADDRESS THOSE RISKS MATERIAL TO THIS OFFERING AND THE COMPANY,
SHOULD BE CONSIDERED CAREFULLY IN EVALUATING AN INVESTMENT IN THE COMMON SHARES
OFFERED BY THIS PROSPECTUS. CERTAIN STATEMENTS IN THIS PROSPECTUS ARE
FORWARD-LOOKING AND ARE IDENTIFIED BY THE USE OF FORWARD-LOOKING WORDS OR
PHRASES SUCH AS "INTENDED," "WILL BE POSITIONED," "EXPECTS," IS OR ARE
"EXPECTED," "ANTICIPATES," AND "ANTICIPATED." THESE FORWARD-LOOKING STATEMENTS
ARE BASED ON THE COMPANY'S CURRENT EXPECTATIONS. TO THE EXTENT ANY OF THE
INFORMATION CONTAINED IN THIS PROSPECTUS CONSTITUTES A "FORWARD-LOOKING
STATEMENT" AS DEFINED IN SECTION 27A(i)(l) OF THE SECURITIES ACT, THE RISK
FACTORS SET FORTH BELOW ARE CAUTIONARY STATEMENTS IDENTIFYING IMPORTANT FACTORS
THAT COULD CAUSE ACTUAL RESULTS TO DIFFER MATERIALLY FROM THOSE IN THE
FORWARD-LOOKING STATEMENT.
INVESTMENT IN THESE SECURITIES INVOLVES SIGNIFICANT RISK. EACH POTENTIAL
INVESTOR SHOULD CAREFULLY CONSIDER THE FOLLOWING RISK FACTORS, AS WELL AS ALL OF
THE OTHER INFORMATION SET FORTH IN THIS PROSPECTUS.
Potential Total Loss of Investment
Subscription for the shares of the Company involves significant risk and
each subscriber should be financially able to sustain a total loss of his
investment in the shares. THE SHARES CANNOT AND WILL NOT BE INSURED BY THE FDIC
OR ANY OTHER GOVERNMENT AGENCY.
Lack of Operating History
Both the Company and the Bank are newly formed and neither has any
operating history. Accordingly, prospective investors do not have access to all
of the information that, in assessing their proposed investment, is available to
the purchasers of securities of a financial institution with a history of
operations. Because the primary asset of the Company will be the capital stock
of the Bank, the Company's operating results and financial position will be
dependent upon the operating results and financial position of the Bank. The
business of the Bank is subject to the risks inherent in the establishment of
any new business and, specifically, of a new federal stock savings bank. As a
result of the substantial start-up expenditures that must be incurred by a new
bank, the bank (and therefore the Company) may not be profitable for several
years after commencing business, if ever. See "Unaudited ProForma Financial
Information."
No Assurance of Ability to Raise Additional Capital
Although the Organizers believe the proceeds from the Offering will be
sufficient to support the initial operations and commitments of the Company
without additional financing, there can be no assurance that the proceeds of the
Offering will be sufficient to meet the future capital requirements of the
Company without additional financing. The amount of capital required will
depend, among other things, upon operating results, the growth of assets and
regulatory requirements. The Organizers have made no commitments to provide
additional funds for the operation of the Company. Therefore,
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investors should not expect the Organizers personally to provide additional
funds for the operations or capital requirements of the Company if the proceeds
of this Offering are insufficient.
Lack of Trading Market
Due to the small size of the Offering, it is highly unlikely that an active
trading market will develop and be maintained. If an active market does not
develop, an investor may not be able to sell his shares promptly or perhaps at
all, or sell his shares at a price equal to or above the Offering Price. It is
anticipated that the Company's Common Stock will be traded on the OTC Bulletin
Board. The Common Stock may not be appropriate as a short-term investment. See
"Market for the Common Stock."
Arbitrary Determination of Offering Price
The Offering price of the Common Stock has been arbitrarily determined by
the Organizers as the Company is a new enterprise. Accordingly, there can be no
assurance that the shares of Common Stock can be resold at the Offering price or
any other amount. See "The Offering and Plan of Distribution - Price and Terms"
and "Capitalization."
Dividends
The Company is a legal entity separate and distinct from the Bank. Because
the Company initially will engage in no business other than owning all of the
outstanding shares of capital stock of the Bank, the Company's payment of
dividends on the Common Stock will generally be funded only from dividends
received by the Company from the Bank, which dividends are dependent on, among
other things, the Bank's profitability. In addition, the payment of dividends
may be made only if the Bank and the Company are in compliance with certain
applicable regulatory requirements governing the payment of dividends by each of
them. No assurance can be given that dividends on the Common Stock will ever be
paid. The Company expects that earnings, if any, will be used initially for
operating capital and the Company does not foresee payment of any dividends in
the near future. THE COMMON STOCK SHOULD NOT BE PURCHASED BY PERSONS WHO NEED OR
DESIRE DIVIDEND INCOME FROM THIS INVESTMENT. See "Dividends."
Government Regulation
The Company and the Bank will operate in a highly regulated environment and
will be subject to examination, supervision and comprehensive regulation by the
OTS and the FDIC. Banking regulations, designed primarily for the safety of
depositors, may limit a federal stock savings bank's growth and the return to
its investors by restricting such activities such as the payment of dividends,
mergers with or acquisitions by other institutions, investments, loans and
interest rates, interest rates paid on deposits and the creation of branch
offices. The Bank also will be subject to capitalization guidelines set forth in
federal legislation, and could be subject to enforcement action to the extent
the Bank is found by regulatory examiners to be undercapitalized. Laws and
regulations applicable to the Company and the Bank could change at any time, and
there can be no assurance that such changes would not adversely affect the
business of the Company and/or the Bank. In addition, the cost of compliance
with regulatory requirements could adversely affect the Company's and the Bank's
ability to operate profitably. See "Regulation."
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Salaries Paid from Proceeds
In the absence of adequate revenues from operations and investments, the
salaries and benefits of the officers and employees hired will be paid from the
proceeds of the Offering. The $300,000 invested by the Organizers in the Private
Placement has been used, in part, to pay salaries and benefits during
organization, which are included in the estimate of preoperating and
organizational expenses disclosed in this Prospectus. See "Use of Proceeds" and
"Management of the Bank - Remuneration of Directors and Officers."
Competition
The Bank's primary market area will be all of the borough of State College
and the townships of College, Ferguson, Halfmoon, Harris and Patton,
Pennsylvania. See "Proposed Business of the Bank Market Area." The Bank's
primary emphasis will be on real estate, consumer and small business lending. As
of March 31, 1998, six commercial banks, one savings bank and four credit unions
had branches in State College and one commercial bank was headquartered in the
State College area. The Bank will be competing for deposits with these larger
established institutions as well as with money market mutual funds, brokerage
services, private banking and other non-traditional financial intermediaries.
The Bank will have to attract its customer base from existing financial
institutions and new residents. Many of the competitors will be much larger than
the Bank in terms of assets, have more extensive facilities and greater depth of
organizational and marketing capabilities, and may initially be able to offer a
greater range of services than the Bank. There can be no assurance that the Bank
will be able to compete successfully. See "Proposed Business of the Bank
Competition."
Possible Lack of Market Growth
The Organizers' assumptions about the viability of the Company and Bank are
based on their projections of growth in population, deposits and housing starts
in the State College area, as well as on their projections of interest rates and
operating expenses. Although these projections are based on analysis of
historical data, they are merely forecasts and may prove to be inaccurate. The
State College area has experienced stable and significant growth in population,
deposits and housing starts in recent years, but there can be no assurance that
such growth will continue in the future or that the Company will benefit from
any such growth if it does continue. See "Proposed Business of the Bank - Market
Area."
Interest Rate Risk
The operating results of the Bank will depend to a great extent upon its
net interest income, which is the difference between the interest earned on its
assets, which will be primarily loans and investment securities, and the
interest paid for liabilities, which will be primarily savings deposits. Market
interest rates for loans, investments and deposits are highly sensitive to may
factors beyond the control of the Company. Such factors include general economic
conditions and the policies of various governmental and regulatory authorities.
In addition, due to current low prevailing market interest rates, it may be
difficult for the Bank to utilize its capital to originate loans and purchase
investments at a sufficient yield. See "Proposed Business of the Bank - Lending
Activities" and "- Source of Funds."
Proposed Legislation
A bill, H.R. 10, has been passed by the U.S. House of Representatives, that
would curtail the powers of unitary thrift holding companies. Furthermore, other
proposed legislation has been considered that
-3-
<PAGE>
might eliminate the federal thrift charter under which the Bank currently
operates. If this legislation becomes law, the Bank will be forced to become a
state chartered bank or national commercial bank. If the Bank becomes a
commercial bank, its investment authority and the ability of the Company to
engage in diversified activities would be more limited and could affect the
Bank's profitability. See also "Regulation."
Possible Delay in the Opening of the Bank
The Company anticipates that the Bank will have completed all of the
regulatory conditions precedent to commencing business and will have its offices
ready for opening within 30 days after completion of the Offering. This date is
only a projection, however, and the actual opening date may be later.
Anti-Takeover Provisions
Certain provisions included in the Articles of Incorporation and Bylaws of
the Company are designed to encourage potential acquirors to negotiate directly
with the Board of Directors of the Company and to discourage takeover attempts.
Such provisions may discourage non-negotiated takeover attempts which certain
stockholders could deem to be in their best interests. These provisions also
tend to perpetuate management. See "Description of Common Stock - Certain
Anti-Takeover Provisions."
Dilution
After the Offering, the Company, subject to stockholder approval, expects
to adopt a stock option plan, with options to purchase stock equal to
approximately 10% of the outstanding shares, which will permit the Company to
grant options to officers, directors, and key employees of the Company. The
option price will be no less than the greater of the fair market value of the
Common Stock on the date the option is granted or $10.00 per share. The exercise
of options could have a dilutive effect on the stockholders' interest in the
Company's earnings and book value. The issuance of 40,000 shares of Common Stock
in the Private Placement for $300,000 to cover preoperating expenses will also
cause an immediate small decrease in the book value per share of the Common
Stock sold in the Offering. In addition, the Company may issue additional shares
of Common Stock or preferred stock in the future. Any such stock offering by its
nature could be dilutive to the holdings of purchasers in this Offering.
See "Dilution."
Direct Public Offering; No Underwriter
No commitment exists for an underwriter to purchase any shares in this
Offering. Instead, the Company is offering shares of its Common Stock directly
to the public on a "best efforts" basis and no assurance can be given that any
shares will be sold. If necessary, the Company may enter into a marketing or
consulting agreement with a registered broker/dealer to assist in the sale of
Common Stock without notice to subscribers. Currently, the Company has no such
plans to do so.
USE OF PROCEEDS
Although the amounts set forth below provide an indication of the proposed
use of funds based on the plans and estimates of the Organizers, actual expenses
may vary from the estimates. The Organizers believe that the minimum proceeds of
$5,000,000 from the Offering will satisfy the cash requirements of the Company
and the Bank for their respective first year of operations but there can be no
assurance that this will be the case. Because the Company and Bank constitute a
new enterprise, the Organizers cannot predict with any certainty to what extent
the Bank will generate revenues from investments and
-4-
<PAGE>
loan originations. As a result, the Organizers cannot predict precisely what the
actual application of proceeds will be. However, there is no assurance that the
proceeds of the Offering will be sufficient to meet the future capital
requirements of the Company without additional financing.
The net proceeds to the Company from the sale of 500,000 and 600,000 shares
of Common Stock are estimated at $5,000,000 and $6,000,000, respectively, since
the preoperating and Offering expenses estimated at $300,000 are to be paid from
the proceeds of the Private Placement. Estimated preoperating and Offering
expenses are the total of the following estimated expenses: preoperating
salaries and benefits - $148,000; marketing - $10,500; legal - $50,000;
accounting - $9,500; consulting -$20,000; printing and office supplies -
$10,000; filing fees - $20,000; and other miscellaneous operating expenses -
$32,000. As a result of delays in the Offering, regulatory comments and other
factors, expenses may be significantly greater. On the basis of the foregoing
assumptions, gross proceeds, expenses and net proceeds at the Minimum and
Maximum Offering amount would be as follows:
<TABLE>
<CAPTION>
Minimum Maximum
500,000 600,000
Shares at Shares at
$10.00 Per Share $10.00 Per Share
---------------- ----------------
<S> <C> <C>
Gross Proceeds from Private
Placement............................. $ 300,000 $ 300,000
Gross Proceeds from Offering............ 5,000,000 6,000,000
Less Estimated Preoperating and
Offering Expenses..................... (300,000) (300,000)
--------- ---------
Estimated Net Proceeds.................. $5,000,000 $6,000,000
========= =========
</TABLE>
All of the proceeds of the Offering are expected to be invested by the
Company in the Common Stock of the Bank. The Bank will use the proceeds from the
sale of its Stock to the Company for (i) investment in mortgage, consumer, small
business loans, and other loans, (ii) payment of operating expenses or (iii)
working capital purposes. Until utilized for operations, investments or lending
purposes, proceeds of this Offering will be invested in interest-bearing
investments and securities.
-5-
<PAGE>
DIVIDENDS
The Board of Directors of the Company initially expects to follow a policy
of retaining any earnings to provide funds to operate and expand the Company.
Consequently, there are no plans for any cash dividends to be paid in the near
future. The Company's ability to pay any cash dividends to its stockholders in
the future will depend primarily on the Bank's ability to pay cash dividends to
the Company. The payment of dividends may be made only if the Bank is in
compliance with certain applicable regulatory requirements governing the payment
of dividends. In addition, the payment of cash dividends by the Company is
subject to the discretion of the Company's Board of Directors, which will
consider a number of factors, including business condition. See "Regulation --
Dividend and Other Capital Distributions Limitations."
MARKET FOR COMMON STOCK
As a newly organized company, the Company has never issued capital stock,
and consequently there is no established market for the Common Stock. Following
the completion of the offering, it is anticipated that the Common Stock will be
traded on the over-the-counter market with quotations available through the OTC
Electronic Bulletin Board. If the Common Stock cannot be quoted and traded on
the OTC Bulletin Board it is expected that the transactions in the Common Stock
will be reported in the pink sheets of the National Quotation Bureau, Inc.
The development of an active trading market depends on the existence of
willing buyers and sellers. Due to the small size of the offering, it is highly
unlikely that an active trading market will develop and be maintained. Investors
should have a long-term investment intent. Investors may not be able to sell
their shares when they desire or sell them at a price equal to or above the
Offering Price.
-6-
<PAGE>
DILUTION
The following table illustrates, assuming the receipt of the common stock
subscriptions receivable, branch acquisitions shares issued, and assuming the
minimum or maximum shares to be issued in the Offering and the branch
acquisitions:
<TABLE>
<CAPTION>
500,000 600,000
Shares Shares
Minimum Maximum
------- -------
<S> <C> <C> <C>
Offering price per share $10.00 $10.00
----- -----
ProForma net tangible book value per
share at March 31, 1998 $5.62
Increase per share attributable to receiving
organizers stock subscriptions receivable 0.63
----
ProForma net tangible book value per
share after branch acquisitions, but before $6.25 6.25 6.25
Offering
Increase per share attributable to stock
issued to 1st Commonwealth to effect .78 .78
branch acquisitions price
Increase per share attributable to new
investors from Offering 2.25 2.36
---- ----
ProForma net tangible book value per
share after branch acquisitions, and after 9.28 9.39
---- ----
Offering
Dilution per share to new investors from
Offering and branch acquisitions $0.72 $0.61
==== ====
</TABLE>
CAPITALIZATION
The table set forth below shows the proforma capitalization of the Company
immediately following completion of the Private Placement and Offering as though
the Private Placement and Offering had been completed on March 31, 1998,
assuming that 500,000 and 600,000 shares of Common Stock are sold pursuant to
the Offering, after deduction of Private Placement and Offering of $300,000.
-7-
<PAGE>
PROFORMA CAPITALIZATION
<TABLE>
<CAPTION>
500,000 600,000
Shares Sold Shares Sold
----------- -----------
(In thousands)
<S> <C> <C>
Common Stock ($0.10 par value
Authorized - 10,000,000 shares; Assumed
outstanding 550,000 and 650,000 shares
(1).................................................. $ 55 $ 65
Preferred Stock ($0.10 par value)
Authorized - 5,000,000; Assumed
none outstanding.................................... -- --
Additional Paid-In Capital............................ 5,330 6,320
ProForma Retained Deficit............................. (285) (285)
--------- ----------
Total Stockholders' Equity........................ $ 5,100 $ 6,100
========= ==========
</TABLE>
- ------------------
(1) In addition to the 500,000 to 600,000 shares to be issued pursuant to the
Offering, 40,000 shares have been issued to Organizers pursuant to the
Private Placement. Also includes approximately 10,000 shares of Common
Stock to be issued to a bank holding company as partial payment of a
premium on deposits to be assumed by the Bank.
THE OFFERING AND PLAN OF DISTRIBUTION
Price and Terms
In order to pay preoperating expenses, which includes salaries, accounting,
printing, filing fees, consulting fees and legal fees, the Organizers purchased
40,000 shares of Common Stock for $300,000 in a Private Placement. The Offering
consists of a minimum of an additional 500,000 shares and a maximum of an
additional 600,000 shares of Common Stock for a purchase price of $10.00 per
share. The purchase price, although believed to be fair and reasonable by the
Organizers, by necessity was determined arbitrarily because the Company has not
yet commenced operations and cannot commence operations under applicable OTS and
FDIC regulations until after the successful completion of the Offering, receipt
of insurance of accounts, and satisfaction of all conditions of the Conditional
Approval and the Commitment. The Organizers and officers of the Company have
already purchased $300,000 in the Private Placement and are expected to purchase
additional shares in the Offering, resulting in total purchases of approximately
$650,000. The 500,000 - 600,000 shares are being offered to the public in the
Offering are subject to a minimum purchase requirement of 100 shares per
subscriber and a maximum purchase limitation of 30,000 shares per subscriber and
his affiliates. The Organizers reserve the right to increase the amount of
Common Stock they purchase in the Offering. In addition to the shares of Common
Stock issued in the Private Placement and Public Offering, approximately 10,000
shares of Common Stock will be issued pursuant to the Branch Purchase Agreement
to the holding company of First Commonwealth Bank. Subscribers should be aware
that beneficial ownership of 5% or more of the shares could obligate the owner
to comply with certain reporting and disclosure requirements of federal banking
and securities laws. For purposes of determining the maximum purchase
limitation, the term subscriber includes all persons who are affiliates of the
person submitting the subscription in question (an affiliate is a person that
directly or indirectly, controls, is controlled by or is under common control
with,
-8-
<PAGE>
the person specified). The Company reserves the right to reject any
subscription, in whole or in part, with or without cause, but will inform the
subscriber of the reason for such rejection.
The proceeds from the sale of the shares of Common Stock offered hereby
will be placed in a separate interest-bearing escrow account (the "Escrow
Account") pursuant to an escrow agreement by and between Roxborough-Manayunk
Bank, Philadelphia, Pennsylvania and the Company (the "Escrow Agreement") until
final regulatory approvals are granted. The Common Stock will not be issued and
the funds held in the Escrow Account will not be released to the Company until
successful consummation of the Offering and until all of the conditions of the
Conditional Approval and the Commitment have been satisfied and final
certification of insurance of accounts has been issued to the Company. If final
regulatory approvals are not received by __________ ___, 1998, unless extended
with the approval of the FDIC and the OTS, or if the Offering is terminated at
an earlier date, the funds available from the Escrow Account, including interest
thereon, after deduction of reasonable Offering expenses not covered by the
Private Placement, will be repaid to investors. Offering expenses include, among
others, filing fees, cost of professional and consulting services, travel
expenses and printing, postage, telephone and supply costs. The Escrow Agent is
expected to place the funds held in the Escrow Account solely in savings
deposits at its regular money market deposit account rate. Until the regulatory
authorities authorize the Organizers to use the proceeds of this Offering to
capitalize the Company, the $300,000 invested by Organizers of the Company in
the Private Placement will be used to pay for expenses incurred. Upon
disbursement of funds from the Escrow Account to the Company, the investment
earnings or losses on the Escrow Account will be the property of the Company.
Method of Subscription
All subscriptions must be made by completing a Subscription Agreement.
Additional copies of the Prospectus and Subscription Agreement may be obtained
by contacting the Company at the address set forth below. Subscriptions will not
be binding on subscribers until accepted by the Company. SUBSCRIPTIONS WILL NOT
BE ACCEPTED UNLESS ACCOMPANIED BY PAYMENT IN FULL AT THE SUBSCRIPTION PRICE. The
Company reserves the right to reject any subscription, in whole or in part, with
or without cause, but will inform the subscriber of the reason for such
rejection. The Company will refuse any subscription by sending written notice to
the subscriber by personal delivery or first-class mail within ten calendar days
after receipt of the subscription, and the subscriber's Subscription Agreement
and refund of payment will accompany such notice, together with a statement as
to the reason for such rejection. Any Subscription Agreement which is completely
and correctly filled out, which is accompanied by proper and full payment and
which is physically received at the offices of the Company by any employee or
agent of the Company, shall be deemed to have been accepted if it is not refused
as hereinbefore provided within ten business days after such receipt.
The Conditional Approval requires the Company to furnish the OTS with a
list of shareholders and certain information about their purchases. The
Conditional Approval also requires that the Company furnish the OTS with the
address of shareholders and number of shares subscribed for at least 30 days
prior to the opening date. Failure to provide the information or to indicate
that it is not applicable will result in rejection of the subscription.
All subscriptions in the Offering are subject to a 100 share minimum and a
30,000 share maximum purchase requirement per subscriber, including affiliates
of the subscriber. A completed Subscription Agreement and payment in full (made
in the manner specified below) of the total subscription price for the number of
shares subscribed should be mailed directly to the Company at the following
address:
-9-
<PAGE>
Nittany Financial Corp.
Calder Square
P.O. Box 10283
State College, Pennsylvania 16805
Subscriptions and payment in full also may be delivered in person to the
office of the Company at 637 Kennard Road, State College, Pennsylvania between
10:00 a.m. and 5:00 p.m., Monday through Friday. If the Offering is canceled,
all subscriptions will be promptly refunded. See "- Return of Subscription
Funds."
IMPORTANT: PAYMENTS MUST BE MADE IN UNITED STATES FUNDS BY CHECK, BANK
DRAFT OR MONEY ORDER PAYABLE TO "ROXBOROUGH-MANAYUNK BANK ESCROW AGENT FOR
NITTANY FINANCIAL CORP." FAILURE TO INCLUDE THE FULL SUBSCRIPTION PRICE WITH THE
SUBSCRIPTION AGREEMENT WILL RESULT IN THE SUBSCRIPTION BEING RETURNED BY THE
COMPANY.
Plan of Distribution
The shares are being offered to the public through the directors and
officers of the Company, none of whom is affiliated with a securities broker or
dealer. No commission or other sales compensation will be paid to any Organizer
in connection with the Offering. The Company has not entered into any marketing
or consulting agreement with a registered broker/dealer. If necessary, the
Company may enter into an agreement with a registered broker/dealer to assist in
the sale of Common Stock in the Public Offering, without notice to subscribers.
None of the Company's personnel participating in the Offering are
registered or licensed as a broker or dealer or an agent of a broker or dealer.
The Company's personnel will assist in sales activities in connection with the
Offering pursuant to an exemption from registration as a broker or dealer
provided by Rule 3a4-1 promulgated under the Securities Exchange Act of 1934
("Rule 3a4-1"). Rule 3a4-1 generally provides that an "associated person of an
issuer" of securities shall not be deemed a broker solely by reason of
participation in the sale of securities of such issuer if the associated person
meets certain conditions. Such conditions include, but are not limited to, that
the associated person participating in the sale of an issuer's securities not be
compensated in connection therewith at the time of participating, that such
person not be associated with a broker or dealer and that such person observe
certain limitations on his participation in the sale of securities. For purposes
of this exemption, "associated person of an issuer" is defined to include any
person who is a director, officer or employee of the issuer or a company that
controls, is controlled by, or is under common control with, the issuer.
Escrow Account
The Offering is being made subject to the requirement that at least 500,000
shares are sold. Pending receipt of insurance of accounts, payments received
from subscribers will be held in an interest-bearing escrow account maintained
with the Escrow Agent. Funds in the Escrow Account may not be reached by
creditors of the Organizers. The agreement with the Escrow Agent includes the
following provisions:
(a) Payments of subscribers will be identified to each subscriber and will
be deposited by the Escrow Agent in the Escrow Account, which shall be known as
"Nittany Financial Corp. - Stock Purchase Account," and shall be held in escrow
and disbursed, including the interest earned thereon, only in accordance with
the provisions of the Escrow Agreement.
-10-
<PAGE>
(b) The Escrow Agent will maintain its records of the Escrow Account so
that each subscriber will be entitled to FDIC insurance with respect to all
funds up to $100,000 paid by such subscriber.
(c) Funds deposited in the Escrow Account shall earn interest at the Escrow
Agent's current money market rate.
(d) Upon receipt of written confirmation that the Company has obtained FDIC
insurance of its accounts, the Escrow Agent will pay any and all funds in the
Escrow Account to the order of the Company.
In the event that such confirmation is not received by __________ ___,
1998, unless extended with the approval of the FDIC and the OTS, all funds in
the Escrow Account, including interest thereon after deduction of any reasonable
Offering expenses not covered by the proceeds of the Private Placement, will be
returned to subscribers promptly. However, if the time to satisfy the conditions
for approval of the organization of the Company is extended and written evidence
thereof is presented to the Escrow Agent, no funds shall be distributed to the
subscribers prior to the expiration date of such extension. Subscribers will not
be entitled to any return of funds prior to such date. The Escrow Agent may
conclusively rely on a certificate of the president of the Company stating the
amount of organizational expenses.
(e) The Escrow Agent will be liable only for moneys received by it and not
disbursed by it pursuant to the provisions of the Escrow Agreement.
(f) The Company has agreed to indemnify the Escrow Agent for, and to hold
it harmless against, any loss, liability or expense incurred without gross
negligence or bad faith on the part of the Escrow Agent.
(g) All interest earned and accrued on the deposited subscription funds
shall accrue for the benefit of the subscribers and the Company and the Escrow
Agent shall report such interest as having been earned by the Company. All
interest earned, after deduction of organizational expenses, shall be paid upon
disbursement as provided in paragraph (d) above.
(h) The Escrow Agent's fees will be paid by the Company and the Escrow
Agent is authorized to deduct such fees from the interest earned on the Escrow
Account.
Termination or Extension of the Offering
The Offering will terminate at 5:00 p.m., State College, Pennsylvania
Time, on __________ ___, 1998, unless extended by the Company for an additional
period ending on __________ ___, 1998. The Company may not extend the Offering
beyond __________ ___, 1998, without the approval of the OTS. If the Offering
extends beyond __________ ___, 1998, subscribers will have the right to
increase, decrease or rescind subscriptions for stock previously submitted. If
an extension to the Offering is obtained, subscribers would be provided a
supplemental offering prospectus, declared effective by the Securities and
Exchange Commission ("SEC"), and an opportunity to increase (dependent upon the
availability of shares), decrease or rescind their subscriptions. The Company
will deliver an effective prospectus to all persons to whom the securities
offered hereby are to be sold at least 48 hours prior to the acceptance or
confirmation of sale to such persons or to send such a prospectus to such
persons under circumstances that it would normally be received by them 48 hours
prior to acceptance or confirmation of the sale.
-11-
<PAGE>
The right of any person or entity to purchase shares in the Offering is
subject to the right of the Company, in its sole discretion, to accept or reject
such purchases in whole or in part. See - "Method of Subscription". The Company
currently intends to terminate the Offering as soon as it has received orders
for 600,000 shares of the Common Stock available for purchase in the Offering.
The Organizers will mail to all subscribers and other persons who have
received a Prospectus written notice of any such determination to terminate the
Offering at least seven days prior to such terminations. During this seven day
period, the Organizers may continue to accept subscriptions for up to 600,000
shares. There will be only one closing.
Return of Subscription Funds
In the event that the Offering is not consummated by __________ ___, 1998,
and the other conditions for final approval set forth in the Conditional
Approval and the Commitment are not satisfied by that date, unless extended with
the approval of the FDIC and the OTS, then the Offering will terminate on such
date and all funds, including interest thereon after deduction of any reasonable
organizational expenses not covered by the proceeds of the Private Placement,
will be promptly returned to subscribers by the Escrow Agent. Organizational
expenses include, among other things, filing fees, cost of professional and
consulting services, travel expenses and printing, postage, telephone and supply
costs. Subscribers will not be entitled to any return of funds during the
Offering period.
Stock Certificates
Promptly after receipt of final regulatory approval and authorization to do
business, the Company will cause to be mailed or delivered to each subscriber
stock certificates representing the shares of Common Stock purchased by such
subscriber.
BRANCH PURCHASE AGREEMENT
The Company entered into a Branch Purchase Agreement on March 24, 1998 with
First Commonwealth Bank, a state chartered commercial bank having its principal
office in Indiana, Pennsylvania (the "Seller"). Pursuant to the Branch Purchase
Agreement, the Company will assume the deposit liabilities and purchase certain
assets of two offices located at 116 East College Avenue and 1276 North Atherton
Street, State College, Pennsylvania (the "Offices").
The Company will pay the Seller a premium in the form of cash equal to nine
(9%) and in the form of stock equal to one (1%) times the deposit liabilities
less certain excluded deposits (i.e., jumbo certificates of deposits and IRA
accounts). Based upon deposit liabilities of $11.4 million less excluded
deposits of $983,000 at March 31, 1998, the total premium would be approximately
$935,460 in cash and $103,940 in stock. The stock issued to the Seller will be
in addition to the Common Stock sold in the Offering and will be at the $10.00
per share price. Additionally, the Bank will purchase the furniture, fixtures
and equipment at the Offices in an amount equal to the Seller's book value of
approximately $30,000.
The Offices are currently being operated under the name of Central Bank.
The office at 116 East College Avenue has 2,106 square feet of retail space plus
basement storage capability. This office will serve as the main office for The
Bank. The current lease has an annual rental of approximately $40,000 and
expires July 31, 2004. The lease may be assigned and is renewable for two
additional five year periods. The 116 East College Avenue office is located in
the heart of downtown State college, across
-12-
<PAGE>
from "Old Main" on the campus of Penn State University. Two automatic teller
machines are located at this office.
The second office of the Bank will be located in the current Central Bank
office at 1276 North Atherton Street. The branch is a leased, brick banking
facility with two dive-up banking lanes. North Atherton Street is a strategic
location in the market as both a retail commercial district and a thoroughfare
for commuting workers to the newer residential areas of the market. The building
was originally built as a branch for Landmark Savings Bank in 1987. Ten parking
spaces are assigned according to the lease, which expires on May 30, 2007. There
are four additional five year renewal periods. This office will serve as the
branch banking and lending center for the Bank. The current annual rent for the
.344 acre site and branch is $44,531. The Bank also intends to lease
approximately 1,000 additional square feet within the same facility for $21,373.
The entire facility is 3,120 square feet.
The Branch Purchase Agreement is subject to several conditions, including
the required approval of government regulatory authorities and the consent of
the landlords for the Company to assume the leases on the Offices.
The Branch Purchase Agreement may be terminated (1) by mutual agreement of
the parties, (2) inability to obtain regulatory approval, or (3) failure to
close the transaction within the earlier of September 30, 1998 or within 30 days
after the receipt of the required regulatory approvals, unless extended.
The Bank intends to make minor renovations to the facilities prior to, or
shortly after, opening. Most of the renovations will be cosmetic in nature or
will provide additional private office space within the facilities. Both
structures are in good condition.
The bank intends to contract for data processing services with LUN Data
Inc. (LUN) and the Kirchman Corporation. LUN was organized in the mid-1980's for
the purpose of serving as a data processing consortium for community banks. The
Bank will become an equal owner of the corporation with eight other
institutions. The initial purchase price for the equity share in LUN Data will
be $20,000 for 400 shares. In addition, a licensing fee for the software to the
Kirchman Corporation is estimated to be $13,000.
LUN will perform substantially all of the data services needed by the Bank.
Included in the LUN service will also be statement rendering and mailing, image
statements, telephone banking and ATM/debit card processing.
The Company presently occupies office space at 637 Kennard Road, State
College, Pennsylvania. It is expected that sometime after the opening of the
Bank, the Company will move its headquarters to 116 East College Avenue.
-13-
<PAGE>
UNAUDITED PROFORMA FINANCIAL INFORMATION
The following unaudited proforma financial information and explanatory
notes have been derived from the historical financial statements of the Company,
adjusted to give effect to the sale of the minimum number of shares and the
maximum number of shares in the Offering, and to the purchase and assumption
agreement (Agreement) with Commonwealth First Bank, regarding the branch offices
located in State College , Pennsylvania. The Unaudited ProForma Consolidated
Balance Sheet assumes that such transactions occurred on March 31, 1998, and
that the Company's application for the formation of the Bank, which will operate
these branch offices, has been approved. No consolidated proforma income
statement is presented because as of March 31, 1998, the Company has only been
in existence for approximately four months, and activity incurred through this
date has been dedicated to the formation of the Bank. The unaudited proforma
financial information is not necessarily indicative of the financial position
that would have occurred had the transactions reflected therein occurred on the
dates presented, nor are they indicative of the financial position of future
periods. The Company and Commonwealth First Bank intend that the sale of certain
assets and the transfer of the deposit liabilities of the subject branch offices
will be accounted for using the purchase method of accounting. The proforma
adjustments with respect to the Agreement are subject to change prior to the
closing date of the transactions.
-14-
<PAGE>
NITTANY FINANCIAL CORP.
PROFORMA COMBINED BALANCE SHEET
AS OF MARCH 31, 1998
(UNAUDITED)
<TABLE>
<CAPTION>
Company Company
Commonwealth ProForma As Adjusted As Adjusted
Minimum No. Maximum No. Branch Acquisitions Minimum No. Maximum No.
Company of Shares of Shares Acquisitions Adjustments of Shares of Shares
--------- ---------- ----------- -------------- -------------- ----------- -----------
ASSETS
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Cash and interest-
bearing deposits
in banks $ 146,448 $4,851,083 (a) $5,851,083 (a) $ 225,000 $10,182,540 (f) $15,405,071 $16,405,071
Premises, Furniture
and Equipment 2,649 - - 34,000 36,649 36,649
Intangible assets - - - - 1,039,400 (f) 1,039,400 1,039,400
Due from
Commonwealth - - - $11,118,000 (11,118,000) (f) - -
Deferred
organization costs 70,000 (70,000) (b) 70,000 (b) - - - -
--------- --------- ---------- ----------- ----------- ----------- ----------
TOTAL ASSETS $ 219,097 $4,781,083 $5,831,083 $11,377,000 $ 103,940 $16,481,120 $17,481,120
======== ========= ========= ========== ========== ========== ==========
LIABILITIES
Deposits $ - $ - $ - $11,377,000 $ - 11,377,000 $11,377,000
Accounts payable and
accrued expenses 70,180 (70,000) (c) (70,000) (c) - - 180 180
Advances from
organizers - - - - - - -
--------- --------- --------- ---------- ---------- ---------- ----------
TOTAL LIABILITIES 70,180 (70,000) (70,000) 11,377,000 - 11,377,180 11,377,180
-------- --------- ------- ---------- ---------- ---------- ----------
STOCKHOLDERS' EQUITY
Preferred stock - - - - - - -
Common stock 2,650 51,350 (d) 61,350 (d) - 1,039 (f) 55,039 65,039
Common stock
subscribed 1,350 (1,350) (e) (1,350) (e) - - - -
Additional paid-in
capital 296,000 4,935,000 (d) 5,925,000 (d) - 102,901 (f) 5,333,901 6,323,901
Retained deficit (49,830) (235,170) (b) (235,170) (b) - (285,000) (285,000)
-------- --------- --------- ----------- ------- ---------- ----------
250,170 4,749,830 5,799,830 - 103,940 5,103,940 6,103,940
Common stock
subscriptions
receivable (101,253) 101,253 (e) 101,253 (e) - - - -
-------- --------- ------- ----------- ----------- ---------- ----------
TOTAL STOCKHOLDERS'
EQUITY 148,917 4,851,083 5,901,083 - 103,940 5,103,940 6,103,940
-------- --------- --------- ----------- ---------- ---------- ----------
TOTAL LIABILITIES
AND STOCKHOLDERS'
EQUITY $ 219,097 $4,781,083 $5,831,083 $11,377,000 $ 103,940 $16,481,120 $17,481,120
======== ========= ========= ========== ========== ========== ==========
</TABLE>
(see notes on following page)
-15-
<PAGE>
- --------------
(a) The net cash to be received, including amounts due from organizer's stock
subscriptions receivable that were outstanding at March 31, 1998, and after
payments are made for certain costs incurred.
<TABLE>
<CAPTION>
Number of Shares Sold
-----------------------------------
Minimum Maximum
----------- -----------
<S> <C> <C>
Proceeds from offering.................................. $5,000,000 $6,000,000
Proceeds from organizer's subscriptions at March 31..... 101,253 101,253
Less:
Payment for deferred and additional organization costs.. (235,170) (235,170)
Payment for deferred offering costs..................... (15,000) (15,000)
--------- ----------
$4,851,103 $5,851,103
========= =========
</TABLE>
(b) Reflects the reclass of the deferred organization and offering costs
against the offering proceeds and available cash at March 31, 1998.
Organizational costs to be incurred are estimated to be $235,000, and will
be charged to operating expenses when paid. Such items are construed to be
start up activity expenditures, relating primarily to the regulatory
application processes for the proposed bank formation and the branch office
acquisitions. These costs are for consulting, legal , accounting and audit
services , as well as for regulatory filing fees and outside marketing
assistance. These costs also include in-formation period expenses to be
incurred for normal operations and salary and benefits of staff through the
successful completion of the stock offering and regulatory approval
processes.
(c) Reflects the payments of payables outstanding at March 31, 1998 for
offering and organizational costs.
(d) Reflects stockholders' equity, after payments are made for certain
estimated costs incurred in the offering :
<TABLE>
<CAPTION>
Number of Shares Sold
----------------------------------
Minimum Maximum
----------- ----------
<S> <C> <C>
Proceeds from offering.................................. $5,000,000 $6,000,000
Less: Offering costs................................... (15,000) (15,000)
--------- ---------
Net proceeds from offering.............................. 4,985,000 5,985,000
Less: Par value of common stock........................ (50,000) (60,000)
--------- ---------
Additional Paid in Capital.............................. $4,935,000 $5,925,000
========= =========
</TABLE>
(e) Reflects receipt of cash due from organizer's for stock subscriptions
receivable outstanding at March 31, 1998.
-16-
<PAGE>
f) Reflects the effect of the branch office acquisition from First Commonwealth
as follows:
<TABLE>
<CAPTION>
<S> <C> <C>
1. Deposits and accrued interest to be assumed................................ $11,377,000
Leasehold improvements, fixtures and equipment to be acquired.............. (34,000)
Teller, vault and ATM cash funds to be acquired............................ (225,000)
Deposit premium paid in cash (9% x 10,394,000)............................. (935,460)
----------
Net cash due from First Commonwealth....................................... $10,182,540
==========
</TABLE>
2. The Company has also agreed to purchase any loans outstanding, in the
form of overdraft lines and those secured by deposits of the offices
being acquired. Management has indicated that such loans, if any, are
minimal in amount and would be purchased at a price equal to book
value from First Commonwealth.
3. Leasehold improvements, fixtures and equipment are to be purchased at
book value from First Commonwealth. This purchase price approximates
the estimated fair value of the items to be purchased. There is no
land or buildings to be purchased. The proposed bank will assume the
remaining facilities operating leases.
4. The total deposits that are to be assumed, and subject to the purchase
premium calculation exclude IRA and certificates of deposit greater
than $100,000. The deposit premium paid by the Company of 10% will be
paid in cash and stock, as follows:
<TABLE>
<CAPTION>
<S> <C>
Total premium payable in cash (9%)......................................... $ 935,460
Total premium payable in common stock of Company (1%)...................... 103,940
---------
Total premium payable............................................. $1,039,400
=========
</TABLE>
The premium to be paid in the form of stock represents 10,394 shares of
common stock of the Company, issued at a market value of $10 per share. Such
shares will be issued in addition to those shares available through the
Offering.
The intangible assets represent the deposit premium paid, classified into
two components; core deposit intangible and goodwill. The weighted average life
of these intangible assets, that will be used in subsequent periods for
amortization purposes, is estimated to be 10 years.
-17-
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
The Company was incorporated under the laws of the Commonwealth of
Pennsylvania on December 8, 1997, for the purpose of becoming a unitary savings
and loan holding company, which will own all of the outstanding shares of
capital stock of a proposed federal stock savings bank, Nittany Bank (the
"Bank"). It is anticipated, though there is no assurance, that the Company will
receive regulatory approval to open the Bank during the third quarter of 1998.
Prior to the Offering, the only material source of funds for the Company
has been private sales of the Company's common stock to the initial directors of
the Company at a price of $7.50 per share. In connection with such sales, the
initial directors purchased or subscribed to 40,000 common shares of the
Company. As of March 31, 1998, the Company had received aggregate gross proceeds
of $199,000, in addition to subscription receivables of $101,000. All
subscriptions are expected to be paid by June 30, 1998.
The Company and the Bank are newly formed and have no prior operating
history. The operating results of the Company will be dependent upon the
operating results of the Bank. The Bank will to a large extent be a first
mortgage lender on real estate and its profitability will depend in large part
on the real estate market area of its primary market area. The Bank will incur
operating expenses and there can be no assurances as to when, if ever, the Bank
will generate sufficient revenues to operate profitably. Assuming that the
minimum net proceeds from the offering are raised, the Company presently
believes that it will have sufficient capital resources to meets its commitments
over the next twelve months. See "Use of Proceeds", "Unaudited ProForma
Financial Information"; and "Branch Purchase Agreement."
PROPOSED BUSINESS OF THE COMPANY
General
The Company was incorporated under the laws of the Commonwealth of
Pennsylvania on December 8, 1997, primarily to be the holding company of the
Bank. The Company has not conducted any business activities to date other than
entering into the Branch Purchase Agreement and those necessary by the Company
to obtain regulatory approval for the Bank and to proceed with the Offering. The
Company initially will engage in no business other than owning all of the
outstanding shares of capital stock of the Bank and, as of the date of this
Prospectus, the Company does not intend to engage in any additional business.
Accordingly, the Company's initial earnings will be dependent upon dividends
received by the Company from the Bank, which dividends are dependent on the
Bank's profitability and the Bank's compliance with certain regulatory
requirements. See "Regulation - Savings Institution Regulation -- Dividend and
Other Capital Distribution Limitations."
The Company may not acquire the capital stock of the Bank without the
approval of the Office of Thrift Supervision (the "OTS"). On April 7, 1998, the
Company filed with the OTS an Application for Permission to Organize the Bank,
and on April 21, 1998 filed an Application for Branch Purchase and an
Application H-(e)1 to become the holding company for the Bank. These
Applications were filed to obtain the necessary approvals and these approvals
were conditionally granted by the OTS on __________ ___, 1998. An FDIC
Application for Federal Deposit Insurance was also filed on April 7, 1998 and
approval was conditionally granted on __________ ___, 1998. Upon satisfaction of
the conditions of the Offering and of the regulators and the release of escrowed
funds to the Company, the Company will proceed to acquire all of the shares of
capital stock of the Bank and the Company will
-18-
<PAGE>
become, subject to the Bank's compliance with certain regulatory requirements
discussed below, a unitary savings and loan holding company. As such, the
company will be subject to examination and comprehensive regulation by the OTS.
Since the Company will own only one savings bank, it generally will not be
restricted in the types of business activities in which it may engage, provided
that the Bank retains a specified amount of its assets in housing-related
investments. See "Regulation - Holding Company Regulation."
The Company is currently located at 637 Kennard Road, State College,
Pennsylvania. The telephone number is (814) 466-6336. The Company expected, upon
the opening of the Bank, to relocate to the main office of the Bank at 116 East
College Avenue, State College, Pennsylvania. At the present time, the Company
does not intend to have any employees other than its officers. The Company may
utilize the support staff of the Bank from time to time. The Company initially
will engage in no business other than owning all of the outstanding shares of
capital stock of the Bank; therefore, the competitive conditions to be faced by
the Company will be the same as those faced by the Bank.
PROPOSED BUSINESS OF THE BANK
General
The proposed business of the Bank will primarily consist of accepting
deposits and originating mortgage, consumer, small business and other loans. The
Bank intends to supplement its portfolio of loans with investment securities
deemed prudent by the Board of Directors. Upon approval of the Application for
Branch Purchase filed on behalf of the Bank, the Bank will assume the deposits
of the Offices and seek to attract new deposits. The deposits are anticipated to
be comprised of traditional demand and time deposits. The Bank intends to
aggressively offer a checking account, a passbook savings account and a money
market account at a competitive interest rate. The loans the Bank anticipates
originating will consist of adjustable and conventional fixed-rate residential
real estate mortgage loans and commercial real estate mortgage loans. The Bank
will also offer small business, home equity, and consumer loans.
The Organizers' assumptions as to the viability of the Bank, as represented
in their business plan, are based on projections of population growth, deposit
growth and housing development in the market area and adjacent communities, as
well as on assumed levels of interest rates and operating expenses. These
projections and assumptions are thus subject to the hazards of forecast and may
prove to be inaccurate. Furthermore, although the market area has experienced
significant growth in recent years, there can be no assurance this growth will
continue or that the Bank will benefit from any growth.
FDIC Conditions
On __________ ___, 1998, the Organizers received a Commitment to Insure
Accounts from the FDIC. The Commitment is also subject to certain conditions
which must be met before insurance of accounts will be granted. The Commitment
expires on __________ ___, 1998. The primary conditions imposed pursuant to the
Commitment are set forth below.
No Common Stock of the Company may be issued and the escrowed subscription
funds may not be released to the Company until all of the conditions of the
Conditional Approval and the Commitment have been satisfied and final
certification of insurance of accounts has been issued to the Bank.
The Organizers and management have made what they believe are proper and
adequate arrangements to comply with each of the conditions set forth in the
Conditional Approval and the Commitment and will
-19-
<PAGE>
present documentation to that effect to the OTS and to the FDIC. In the event
that all conditions are not satisfied by such date, the Organizers may seek
extensions of the Conditional Approval and the Commitment from the OTS and the
FDIC, respectively. Any such extension would not, however, extend the
termination date of the Offering, separate approval of which would have to be
requested from the OTS. There can be no assurances that extensions of the
Conditional Approval, the Commitment or the Offering would be granted. The
Organizers anticipate that all conditions that have not already been satisfied
will be satisfied by the time this Offering is complete or shortly thereafter.
There can be no assurance, however, that the Company will satisfy each of the
conditions. Failure to satisfy all of the conditions will result in abandonment
of the effort to organize the Company and a return of all subscriptions.
Prospects
Although investment in its Common Stock involves significant risk, the
Organizers believe that the Company will be able to compete effectively.
Furthermore, as a stock-owned institution, the Bank will not be subject to the
limitations on raising capital that have constrained mutual institutions, and
will have the opportunity to raise capital from institutional and other private
investors, especially in the current strong stock market.
As a result of several mergers throughout the past decade, small local
financial institutions which were organized and headquartered in State College
have essentially been eliminated. The Company, through the Bank, intends to fill
what it perceives to be a significant market niche that exists in State College.
State College is currently served almost entirely by large, financial
institutions, most of which are based outside of State College. The Bank will
have local owners, directors and senior management and therefore should be able
to be more responsive to the banking needs of the local community. However,
there can be no assurance that the Bank will achieve this goal.
In the current environment of bank mergers, acquisitions, and
consolidations, there is a perceived need for banks focused on the needs of the
local community. This void of community focused banks is particularly evident in
the State College area. The organizers of the proposed Bank intend to provide a
community bank oriented toward the Pennsylvania State University, local
residents and small businesses in this rapidly developing area. The face of the
Centre Region is changing dramatically, with numerous business projects
currently under constructions and/or planned for the near future. As the
residents and the businesses in the region have changed so have the banks
servicing the area.
The Bank believes that the following attributes will make the Bank
attractive to the local business people and residents:
o Direct and easy access to the Bank's President, officers and directors by
members of the community, whether during or after business hours.
o Local conditions and needs will be taken into account by the Bank when
deciding loan applications and making other business decisions affecting
members of the community.
o A personalized relationship banking approach that is supported by decision
making that is local and responsive to customer needs.
o Offering competitive interest rates and fees on passbook and checking
accounts
o Prompt review and processing of loan applications.
-20-
<PAGE>
o Depositors' funds will be invested back into the community.
o Positive involvement of the Bank in the community affairs of State College.
o Technology based services that enhance the convenience for customers to
conduct business at the Bank.
o Availability of a wide array of financial services coordinated by a team of
personal bankers dedicated to meeting customer needs.
On March 24, 1998, Nittany Financial Corp. signed the Branch Purchase
Agreement to acquire two offices and assume the deposits of an existing
commercial bank. As such, the Bank has acquired a "turnkey" operation which can
open immediately upon receipt of regulatory approval.
By acquiring these offices, the Bank will have fully-equipped offices, with
favorable rents, good locations and existing personnel and deposit customers.
The two offices will place the Bank downtown directly across from the Old Main
building of the Pennsylvania State University and in one of the primary
residential/business districts on North Atherton. The offices will provide the
Bank with ATMs, a drive-in facility and safety deposit boxes. Furthermore, the
fixed assets are being acquired at book value. Since these assets have already
been written down significantly, the Bank will be able to acquire these assets
at cost significantly below the cost to build and furnish a new office, which
will in part offset the premium paid for the deposits.
Market Area
The Bank's main office will be located at 116 East College Avenue, State
College, Pennsylvania. The Bank will have a branch office located at 1276 North
Atherton Street, State College, Pennsylvania. The Bank's primary market will be
the borough of State College and the surrounding townships of State College,
Ferguson, Halfmoon, Harris and Patton. To a much lesser degree, the Bank's
secondary market will consist of the adjacent townships of Centre County.
State College is best known for its location as the home of the
Pennsylvania State University. In addition to education, tourism, agriculture,
high tech and health care are important to the area's growing economy. Centre
County comprises 25 townships and 11 boroughs and is, area-wise, the State's
fifth largest county. State College and the five townships of College, Ferguson,
Halfmoon, Harris and Patton have a combined population of approximately 72,000.
In addition, Penn State houses more than 19,000 students. State College is 135
miles from Pittsburgh, 170 miles from Baltimore and 190 miles from Philadelphia.
Competition
Competition for deposits and loans is strong among savings institutions,
commercial banks, mortgage banks, mortgage brokers, credit unions and money
market funds. There is also increasing competition from securities firms and
other financial service corporations not traditionally engaged in the banking or
savings business. The primary factors with which institutions compete for
deposits and loans are interest rates, loan origination fees and range of
services offered.
Centre County, which includes the Bank's primary market areas is served
almost entirely by large, regional financial institutions, almost all of which
are headquartered out of the area. These financial institutions include Mellon
Bank, NA (Greensburg, PA), First Union (formerly Core States) (Charlotte,
-21-
<PAGE>
North Carolina); Northwest Savings Bank (Warren, PA), PNC Bank (Pittsburgh),
First Commonwealth Bank (Indiana, PA), Omega Bank (State College), and Mid-State
Bank (Harrisburg, PA). Reliance Bank (proposed Altoona, PA). The area also
includes Corning Employees Credit Union, Penn State Federal Credit Union, SPE
Federal Credit Union and State College Federal Credit Union. Omega Bank, with
nine branches, is the only banking institution headquartered in State College.
All of these institutions have been in existence for a longer period of
time than the Bank, are better established than the Bank and have financial
resources substantially greater than those of the Bank. The Bank will have an
existing deposit base when it commences operations, but will be competing for
deposits with these larger established institutions as well as with investment
bankers, money market mutual funds and other non-traditional financial
intermediaries. The Bank will have to attract its loan customer base from
existing financial institutions and from growth in the community.
Market Strategy
The Bank's objective will be to create a customer-driven financial
institution focused on providing value to clients by delivering products and
services matched to the clients' needs. It is believed that customers will be
drawn to a locally managed institution that demonstrates an active interest in
its customers and their business and personal financial needs.
The banking industry in the Bank's market area has experienced substantial
consolidation in recent years. Many of the area's locally owned or managed
financial institutions have either been acquired by large regional bank holding
companies or have been consolidated into branches. This consolidation has been
accomplished by increasing fees for bank services, the dissolution of local
boards of directors, management and personnel changes and, in the perception of
the Organizers, a decline in the level of customer service. With the
permissibility of interstate banking and the recent announcement of several
mergers by large financial institutions, this type of consolidation is expected
to continue. The Organizers believe that the present competitive and economic
environment is right for a new, independent, locally managed bank to service the
financial needs of residents of State College.
Lending Activities
General. The Bank intends to originate residential and commercial real
estate mortgage loans, consumer loans and small business commercial loans. The
Bank intends to originate most of its loans within the primary market area.
Loan Fees and Service Charges. In addition to interest earned on loans, the
Bank will generally recognize fees and service charges which consist primarily
of loan servicing fees and late charges. The Bank intends to have lower and
fewer fees and charges than most, if not all, of the other financial
institutions doing business in the primary market area.
Loans to One Borrower. Under applicable regulations, the Bank's maximum
loan to one borrower limit will initially be $500,000. However, the Bank may
originate larger loans and sell participation interests to other financial
institutions.
Delinquencies. The Bank's collection procedures are expected to provide
that when a loan is 15 days' past due, a late charge is added and the borrower
is contacted by mail and/or telephone and payment requested. If the delinquency
continues, subsequent efforts are made to contact the delinquent borrower.
Additional late charges may be added and, if the loan continues in a delinquent
status for 90
-22-
<PAGE>
days or more, the Bank will likely initiate foreclosure proceedings unless other
repayment arrangements are made.
Non-Performing Assets and Asset Classification. Loans will be reviewed on a
regular basis and classified in accordance with the requirements of the OTS and
the Bank. The Bank's internal classifications will be reviewed annually by an
independent, outside loan review.
Investment Activities
The Bank will be required under federal regulations to maintain a minimum
amount of liquid assets which may be invested in specified short-term securities
and certain other investments. The Bank will maintain a liquidity portfolio in
excess of regulatory requirements. Until the Bank is able to originate
sufficient loans, it expects to leverage its capital by investing deposits and
borrowed money in securities and other investments at a positive interest rate
spread exceeding the cost of its deposits and borrowings. Liquidity levels may
be increased or decreased depending upon the yields on investment alternatives
and upon management's judgment as to the attractiveness of the yields then
available in relation to other opportunities and its expectation of the level of
yield that will be available in the future, as well as management's projections
as to the short term demand for funds to be used in the Company's loan
origination and other activities. The Company intends to invest primarily in
U.S. Government and agency obligations, federal funds sold and mortgage-backed
securities.
Sources of Funds
General. Deposits will be the major source of the Bank's funds for lending
and other investment purposes. In addition to deposits, the Bank will derive
funds from amortization and prepayment of loans and securities, sale or
maturities of investment securities, operations and, if needed, advances from
the Federal Home Loan Bank ("FHLB") of Pittsburgh. Scheduled loan principal
repayments are a relatively stable source of funds, while deposit inflows and
outflows and loan prepayments are significantly influenced by general interest
rates and market conditions. Borrowings may be used on a short-term basis to
compensate for reductions in the availability of funds from other sources or on
a longer term basis for general business purposes.
Deposits. Consumer and commercial deposits will be attracted principally
from within the Bank's Primary Market Area through the offering of a broad
selection of deposit instruments including NOW, regular savings, money market
deposit, term certificate accounts (including negotiated jumbo certificates in
denominations of $100,000 or more) and individual retirement accounts and Keogh
accounts. The Bank also intends to offer a passbook account, which is generally
no longer available at other banks. Deposit account terms will vary according to
the minimum balance required, the time periods the funds must remain on deposit
and the interest rate, among other factors. The Bank will regularly evaluate the
internal cost of funds, survey rates offered by competing institutions, review
the Bank's cash flow requirements for lending and liquidity and execute rate
changes when deemed appropriate. The Bank does not anticipate obtaining funds
through brokers.
-23-
<PAGE>
Set forth below is a description of the accounts, by type and amount, for
the Offices to be acquired by the Branch Purchase Agreement at March 31, 1998.
North Atherton Office
- ---------------------
Amount at
Type of Account March 31, 1998
- --------------- --------------
(In Thousands)
Checking $ 167
NOW 642
Savings 1,772
Certificates of Deposit 2,315
Jumbo CDs 336
IRAs 161
------
Total $ 5,393
======
College Avenue Office
- ---------------------
Amount at
Type of Account March 31, 1998
- --------------- --------------
(In Thousands)
Checking $ 649
NOW 835
Savings 2,294
Certificates of Deposit 1,954
Jumbo CDs 413
IRAs 71
------
Total $ 6,214
======
Employees
The Bank anticipates having 14 full-time equivalent employees, including
two - three executive officers, when it commences operations. The executive
officers of the Company are expected to initially include the President and
Chief Executive Officer and a Senior Lending Officer. In addition, the Company
or the Bank may employ a Chief Financial Officer at or subsequent to the opening
of the Bank. The remaining employees will provide staff support in the teller,
new accounts, loan processing functions. The employees of the Bank will
concentrate on providing personal banking services to the customers of the Bank.
Non-banking services, such as accounting, data processing and maintenance will
be outsourced to companies specializing in those areas. The Company anticipates
having the same executive officers of the Bank act as executive officers of the
Company and in the same capacity. No other employees of
-24-
<PAGE>
the Company are anticipated at this time. See "Management of the Company" and
"Management of the Bank."
Total compensation for the Bank's employees for the first full year of
operations is projected to be $398,000. In addition, the Bank intends to provide
its employees with certain benefits programs, including medical insurance, paid
vacation time and sick leave. Directors will receive no cash compensation. A
stock option plan is expected to be adopted by the Board, subject to stockholder
approval. Other benefit programs such as a profit sharing plan may also be
adopted following commencement of operations of the Bank.
REGULATION
Set forth below is a brief description of certain laws which relate to the
Company and the Bank. The description is not complete and is qualified in its
entirety by references to applicable laws and regulation.
Holding Company Regulation
General. The Company will be required to register and file reports with the
OTS and will be subject to regulation and examination by the OTS. In addition,
the OTS will have enforcement authority over the Company and any non-savings
institution subsidiaries. This will permit the OTS to restrict or prohibit
activities that it determines to be a serious risk to the Company and the Bank.
This regulation is intended primarily for the protection of the Bank's
depositors and not for the benefit of the stockholders of the Company.
Qualified Thrift Lender ("QTL") Test. Since the Company will only own one
savings institution, it will be able to diversify its operations into activities
not related to banking, if the Bank satisfies the QTL test. If the Company
controls more than one savings institution, it would lose the ability to
diversify its operations into non-banking related activities, unless such other
savings institutions each also qualify as a QTL or were acquired in a supervised
acquisition. See "- Savings Institution Regulation -- Qualified Thrift Lender
Test."
Restrictions on Acquisitions. the Company must obtain approval from the OTS
before acquiring control of any other SAIF-insured savings institution. No
person may acquire control of a federally insured savings institution without
providing at least 60 days written notice to the OTS and giving the OTS an
opportunity to disapprove the proposed acquisition.
Savings Institution Regulation
General. As a federally chartered, SAIF-insured savings institution, the
Bank is subject to extensive regulation by the OTS and the FDIC. The Bank's
lending activities and other investments must comply with various federal and
state statutory and regulatory requirements.
The OTS, in conjunction with the FDIC, will regularly examine the Bank and
prepare reports for the consideration of the Board of Directors on any
deficiencies that the OTS finds in the Bank's operations. The Bank's
relationship with the depositors and borrowers also will be regulated to a great
extent by federal and state law, especially in such matters as the ownership of
savings accounts and the form and content of its mortgage documents.
The Bank must file reports with the OTS and the FDIC concerning its
activities and financial condition, in addition to obtaining regulatory
approvals prior to entering into certain transactions such
-25-
<PAGE>
as mergers with or acquisitions of other financial institutions. This regulation
and supervision establishes a comprehensive framework of activities in which an
institution can engage and is intended primarily for the protection of the SAIF
and depositors. The regulatory structure also gives the regulatory authorities
extensive discretion in connection with their supervisory and enforcement
activities and examination policies, including policies with respect to the
classification of assets and the establishment of adequate loan loss reserves
for regulatory purposes. Any change in regulations, whether by the OTS, the FDIC
or any other government agency, could have a material adverse impact on the
Bank's operations.
Insurance of Deposit Accounts. The FDIC is authorized to establish separate
annual assessment rates for deposit insurance for members of the BIF and the
SAIF. The FDIC may increase assessment rates for either fund if necessary to
restore the fund's ratio of reserves to insured deposits to its target level
within a reasonable time and may decrease such assessment rates if such target
level has been met. The FDIC has established a risk-based assessment system for
both SAIF and BIF members. Under this system, assessments are set within a
range, based on the risk the institution poses to its deposit insurance fund.
This risk level is determined based on the institution's capital level and the
FDIC's level of supervisory concern about the institution.
Because a significant portion of the assessments paid into the SAIF by
savings institutions were used to pay the cost of prior savings institution
failures, the reserves of the SAIF were below the level required by law. The BIF
had, however, met its required reserve level during the third calendar quarter
of 1995. As a result, deposit insurance premiums for deposits insured by the BIF
were substantially less than premiums for deposits which are insured by the
SAIF. Legislation to capitalize the SAIF and to eliminate the significant
premium disparity between the BIF and the SAIF became effective September 30,
1996. The recapitalization plan provided for a special assessment equal to $.657
per $100 of SAIF deposits held at September 30, 1995, in order to increase SAIF
reserves to the level required by law. Certain BIF institutions holding
SAIF-insured deposits were required to pay a lower special assessment.
The recapitalization plan also provides that the cost of prior failures
which were funded through the issuance of Fico Bonds (bonds issued to fund the
cost of savings institution failures in prior years) will be shared by members
of both the SAIF and the BIF. This will increase BIF assessments for healthy
banks to approximately $.0125 per $100 of deposits in 1998. SAIF assessments for
healthy savings institutions in 1998 will be approximately $.0628 per $100 in
deposits and may be reduced, but not below the level set for healthy BIF
institutions.
The FDIC has lowered the rates on assessments paid to the SAIF and widened
the spread of those rates. The FDIC's action established a base assessment
schedule for the SAIF with rates ranging from 4 to 31 basis points, and an
adjusted assessment schedule that reduces these rates by 4 basis points. As a
result, the effective SAIF rates range from 0 to 27 basis points as of October
1, 1996. In addition, the FDIC's final rule prescribed a special interim
schedule of rates ranging from 18 to 27 basis points for SAIF-member savings
institutions for the last quarter of calendar 1996, to reflect the assessments
paid to the Financing Corp. (Fico Bonds). Finally, the FDIC's action established
a procedure for making limited adjustments to the base assessment rates by
rulemaking without notice and comment, for both the SAIF and the BIF.
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The recapitalization plan also provides for the merger of the SAIF and BIF
effective January 1, 1999, assuming there are no savings institutions under
federal law. Under separate proposed legislation, Congress is considering the
elimination of the federal thrift charter and elimination of the separate
federal regulation of thrifts. As a result, the Bank may have to convert to a
different financial institution charter and be regulated under federal law as a
bank, including being subject to the more restrictive activity limitations
imposed on national banks. The Bank cannot predict the impact of the proposed
legislation unless and until the legislation requiring such change is enacted.
Regulatory Capital Requirements. OTS capital regulations require savings
institutions to meet three capital standards: (1) tangible capital equal to 1.5%
of total adjusted assets, (2) core capital equal to at least 3% of total
adjusted assets, and (3) risk-based capital equal to 8% of total risk-weighted
assets. The Bank's capital ratios, which are set forth under "Historical and
ProForma Capital Compliance," will be well in excess of these requirements.
Tangible capital is defined as core capital less all intangible assets
(including supervisory goodwill), less certain mortgage servicing rights and
less certain investments. Core capital is defined as common stockholders' equity
(including retained earnings), noncumulative perpetual preferred stock and
minority interests in the equity accounts of consolidated subsidiaries, certain
nonwithdrawable accounts and pledged deposits of mutual savings associations and
qualifying supervisory goodwill, less nonqualifying intangible assets, certain
mortgage servicing rights and certain investments.
The risk-based capital standard for savings institutions requires the
maintenance of total risk-based capital (which is defined as core capital plus
supplementary capital) of 8% of risk-weighted assets. The components of
supplementary capital include, among other items, cumulative perpetual preferred
stock, perpetual subordinated debt, mandatory convertible subordinated debt,
intermediate-term preferred stock, and the portion of the allowance for loan
losses not designated for specific loan losses. The portion of the allowance for
loan and lease losses includable in supplementary capital is limited to a
maximum of 1.25% of risk-weighted assets. Overall, supplementary capital is
limited to 100% of core capital. A savings association must calculate its
risk-weighted assets by multiplying each asset and off-balance sheet item by
various risk factors as determined by the OTS, which range from 0% for cash to
100% for delinquent loans, property acquired through foreclosure, commercial
loans, and other assets.
The risk-based capital standards of the OTS generally require savings
institutions with more than a "normal" level of interest rate risk to maintain
additional total capital. An institution's interest rate risk will be measured
in terms of the sensitivity of its "net portfolio value" to changes in interest
rates. Net portfolio value is defined, generally, as the present value of
expected cash inflows from existing assets and off-balance sheet contracts less
the present value of expected cash outflows from existing liabilities. A savings
institution will be considered to have a "normal" level of interest rate risk
exposure if the decline in its net portfolio value after an immediate 200 basis
point increase or decrease in market interest rates (whichever results in the
greater decline) is less than two percent of the current estimated economic
value of its assets. An institution with a greater than normal interest rate
risk will be required to deduct from total capital, for purposes of calculating
its risk-based capital requirement, an amount (the "interest rate risk
component") equal to one-half the difference between the institution's measured
interest rate risk and the normal level of interest rate risk, multiplied by the
economic value of its total assets.
The OTS calculates the sensitivity of an institution's net portfolio value
based on data submitted by the institution in a schedule to its quarterly Thrift
Financial Report and using the interest rate risk measurement model adopted by
the OTS. The amount of the interest rate risk component, if any, to be deducted
from an institution's total capital will be based on the institution's Thrift
Financial Report filed two quarters earlier. Savings institutions with less than
$300 million in assets and a risk-based capital
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ratio above 12% are generally exempt from filing the interest rate risk schedule
with their Thrift Financial Reports. However, the OTS may require any exempt
institution that it determines may have a high level of interest rate risk
exposure to file such schedule on a quarterly basis and may be subject to an
additional capital requirement based upon its level of interest rate risk as
compared to its peers. However, due to the Bank's net size and risk-based
capital level, it is exempt from the interest rate risk component.
In accordance with the requirements of the Federal Deposit Insurance
Corporation with respect to the Application for Insurance of Deposits of Nittany
Bank, the Organizers agreed to maintain a Tier 1 Capital ratio to total
estimated assets of at least 8% and an adequate allowance for loan and lease
losses for the first three years of operation of the Bank from the date the FDIC
deposit insurance is effective.
Dividend and Other Capital Distribution Limitations. OTS regulations
require the Bank to give the OTS 30 days advance notice of any proposed
declaration of dividends to the Company, and the OTS has the authority under its
supervisory powers to prohibit the payment of dividends by the Bank to the
Company.
OTS regulations impose limitations upon all capital distributions by
savings institutions, such as cash dividends, payments to repurchase or
otherwise acquire its shares, payments to stockholders of another institution in
a cash-out merger, and other distributions charged against capital. The rule
establishes three tiers of institutions based primarily on an institution's
capital level. An institution that exceeds all fully phased-in capital
requirements before and after a proposed capital distribution ("Tier 1
institution") and has not been advised by the OTS that it is in need of more
than the normal supervision can, after prior notice but without the approval of
the OTS, make capital distributions during a calendar year equal to the greater
of (i) 100% of its net income to date during the calendar year plus the amount
that would reduce by one-half its "surplus capital ratio" (the excess capital
over its fully phased-in capital requirements) at the beginning of the calendar
year, or (ii) 75% of its net income over the most recent four quarter period.
Any additional capital distributions require prior regulatory notice. The Bank
expects to qualify as a Tier 1 institution, but there can be no assurance that
it will achieve this goal.
In the event the Bank's capital falls below the fully phased-in requirement
or the OTS notifies the Bank that it needs more than normal supervision, the
Bank would become a Tier 2 or Tier 3 institution and as a result, its ability to
make capital distributions could be restricted. Tier 2 institutions, which are
institutions that before and after the proposed distribution meet their current
minimum capital requirements, may only make capital distributions of up to 75%
of net income over the most recent four quarter period. Tier 3 institutions,
which are institutions that do not meet current minimum capital requirements and
propose to make any capital distribution, and Tier 2 institutions that propose
to make a capital distribution in excess of the noted safe harbor level, must
obtain OTS approval prior to making such distribution. In addition, the OTS
could prohibit a proposed capital distribution by any institution, which would
otherwise be permitted by the regulation, if the OTS determines that such
distribution would constitute an unsafe or unsound practice. The OTS has
proposed rules relaxing certain approval and notice requirements for
well-capitalized institutions.
In January 1998, the OTS proposed amendments to its current regulations
with respect to capital distributions by savings associations. Under the
proposed regulation, savings associations that would remain at least adequately
capitalized following the capital distribution, and that meet other specified
requirements, would not be required to file a notice or application for capital
distributions (such as cash dividends) declared below specified amounts. Under
the proposed regulation, savings associations which are eligible for expedited
treatment under current OTS regulations are not required to file a notice or an
application with the OTS if (i) the savings association would remain at least
adequately capitalized following the capital distribution and (ii) the amount of
capital distribution does not exceed an amount
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equal to the savings association's net income for that year to date, plus the
savings association's retained net income for the previous two years. Thus,
under the proposed regulation, only undistributed net income for the prior two
years may be distributed in addition to the current year's undistributed net
income without the filing of an application with the OTS. Savings associations
which do not qualify for expedited treatment or which desire to make a capital
distribution in excess of the specified amount, must file an application with,
and obtain the approval of, the OTS prior to making the capital distribution.
Under certain other circumstances, savings associations will be required to file
a notice with OTS prior to making the capital distribution. The OTS proposed
limitations on capital distributions are similar to the limitations imposed upon
national banks. The Company is unable to predict whether or when the proposed
regulation will become effective.
A savings institution is prohibited from making a capital distribution if,
after making the distribution, the savings institution would be undercapitalized
(i.e., not meet any one of its minimum regulatory capital requirements).
Further, a savings institution cannot distribute regulatory capital that is
needed for its liquidation account.
Qualified Thrift Lender Test. Savings institutions must meet a qualified
thrift lender ("QTL") test. If the Bank maintains an appropriate level of
qualified thrift investments ("QTIs") (primarily residential mortgages and
related investments, including certain mortgage-related securities) and
otherwise qualify as a QTL, the Bank will continue to enjoy full borrowing
privileges from the FHLB of Pittsburgh. The required percentage of QTIs is 65%
of portfolio assets (defined as all assets minus intangible assets, property
used by the institution in conducting its business and liquid assets equal to
10% of total assets). Certain assets are subject to a percentage limitation of
20% of portfolio assets. In addition, savings institutions may include shares of
stock of the FHLBs, FNMA, and FHLMC as QTIs. Compliance with the QTL test is
determined on a monthly basis in nine out of every 12 months.
Transactions With Affiliates. Generally, restrictions on transactions with
affiliates require that transactions between a savings institution or its
subsidiaries and its affiliates be on terms as favorable to the savings
institution as comparable transactions with non-affiliates. In addition, certain
of these transactions are restricted to an aggregate percentage of the savings
institution's capital. Collateral in specified amounts must usually be provided
by affiliates in order to receive loans from the savings institution. The Bank's
affiliates include the Company and any company which would be under common
control with the Bank. In addition, a savings institution may not extend credit
to any affiliate engaged in activities not permissible for a bank holding
company or acquire the securities of any affiliate that is not a subsidiary. The
OTS has the discretion to treat subsidiaries of savings institution as
affiliates on a case-by-case basis.
Liquidity Requirements. All savings institutions are required to maintain
an average daily balance of liquid assets equal to a certain percentage of the
sum of its average daily balance of net withdrawable deposit accounts and
borrowings payable in one year or less. The liquidity requirement may vary from
time to time (between 4% and 10%) depending upon economic conditions and savings
flows of all savings institutions. Monetary penalties may be imposed upon
institutions for violations of liquidity requirements.
Federal Home Loan Savings Bank System. The Bank will be a member of the
FHLB of Pittsburgh, which is one of 12 regional FHLBs. Each FHLB serves as a
reserve or central bank for its members within its assigned region. It is funded
primarily from funds deposited by savings institutions and proceeds derived from
the sale of consolidated obligations of the FHLB System. It makes loans to
members (i.e., advances) in accordance with policies and procedures established
by the Board of Directors of the FHLB.
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As a member, the Bank will be required to purchase and maintain stock in
the FHLB of Pittsburgh in an amount equal to at least 1% of our aggregate unpaid
residential mortgage loans, home purchase contracts or similar obligations at
the beginning of each year. The FHLB imposes various limitations on advances
such as limiting the amount of certain types of real estate related collateral
to 30% of a member's capital and limiting total advances to a member.
The FHLBs are required to provide funds for the resolution of troubled
savings institutions and to contribute to affordable housing programs through
direct loans or interest subsidies on advances targeted for community investment
and low- and moderate-income housing projects. These contributions have
adversely affected the level of FHLB dividends paid and could continue to do so
in the future.
Federal Reserve System. The Federal Reserve System requires all depository
institutions to maintain non-interest bearing reserves at specified levels
against their transaction accounts (primarily checking, NOW and Super NOW
checking accounts) and non-personal time deposits. The balances maintained to
meet the reserve requirements imposed by the Federal Reserve System may be used
to satisfy the liquidity requirements that are imposed by the OTS. Savings
institutions have authority to borrow from the Federal Reserve System "discount
window," but Federal Reserve System policy generally requires savings
institutions to exhaust all other sources before borrowing from the Federal
Reserve System.
MANAGEMENT OF THE COMPANY
The Board of Directors of the Company currently consists of the same
individuals who will serve as directors of the Bank. The Company's articles of
incorporation and bylaws require that directors be divided into four classes, as
nearly equal in number as possible. Each class of directors serves for a
four-year period, with approximately one-fourth of the directors elected each
year. The Bank's officers will be elected by the Board and serve at the Board's
discretion.
MANAGEMENT OF THE BANK
Directors
The Board of Directors of the Bank is currently composed of five members.
The Bank expects to add additional directors after opening for business. The
proposed stock charter and bylaws for the Bank require that directors be divided
into three classes, as nearly equal in number as possible. The officers are
elected annually by the Board and serve at the Board's discretion.
The following table sets forth information with respect to the directors,
executive officers, and significant employees, all of whom will continue to
serve in the same capacities after the Offering. The Bank is currently
negotiating with two individuals, one to become Vice President and Senior
Lending Officer and the other to become Vice President and Chief Financial
Officer.
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<TABLE>
<CAPTION>
Common Stock Subscriptions
Directors Age(1) Position Number(2) Percentage (2)(3)
- --------- ------ -------- -------------------------- -----------------
<S> <C> <C> <C> <C>
Samuel J. Malizia 43 Chairman of the
Board 32,435 4.99
David Z. Richards, Jr. 37 President, CEO 5,250 -- (4)
and Director
Donald L. Musso 38 Director 18,333 2.82
William A. Jaffe 59 Director and 6,375 -- (4)
Secretary
D. Michael Taylor Director 11,834 1.82
</TABLE>
- -------------
(1) At March 8, 1998.
(2) Includes shares purchased in the Private Offering.
(3) Based upon 650,000 shares (outstanding after the issuance of Common Stock
in the Private Placement, the Offering, and the Branch Purchase.)
(4) Less than 1%
There is no family relationship between any director or executive officer.
No director or executive officer has filed a petition in bankruptcy in the past
five years, nor been convicted in a criminal proceeding. The business experience
for the past five years of each of the directors and executive officers is as
follows:
DAVID Z. RICHARDS, JR. was President and Chief Executive Officer of
Mifflinburg Bank and Trust Company of Mifflinburg, Pennsylvania from 1991 until
1997. While under his direction, Mifflinburg Bank and Trust became one of the
first financial institutions in Pennsylvania to implement digital image
technology. He also developed a unique asset management program through a
strategic affiliation with an asset management firm, supervised the construction
and opening of a new retail banking center and opened three additional offices
in new markets. From 1978 until 1990, he served in various capacities, including
Vice President and Financial Officer of The First National Bank of Danville,
Pennsylvania. While at FNB Danville, he helped pioneer many services, including
the introduction of the biweekly mortgage in the United States, and implemented
one of the first discount brokerage operations at a community bank. In 1997 he
was appointed to the Executive Committee of the Pennsylvania Bankers
Association, for which he has chaired and served on several committees. He
formerly served as President of LUN Data Inc., a multi-owned data processing
consortium. Mr. Richards is a native of central Pennsylvania who has worked as a
community banker since beginning as an intern during high school and college. He
is a graduate of Susquehanna University in Finance and The Stonier Graduate
School of Banking.
SAMUEL J. MALIZIA is the managing partner of the law firm of Malizia,
Spidi, Sloane & Fisch, P.C. (MSS&F), a law firm headquartered in Washington, DC
with a State College, Pennsylvania office. For over 18 years, Mr. Malizia has
specialized in transactional, securities and regulatory matters for financial
institutions and related entities. He has represented hundreds of institutions
nationally in connection with securities offerings, mergers and acquisitions,
corporate reorganizations, stockholder and regulatory matters. He received a
Bachelor of Science Degree with Distinction in accounting from the Pennsylvania
State University and a Juris Doctor Degree from the George Washington
University. He served as Attorney Advisor to Special Trial Judge Francis Cantrel
at the United States Tax Court and attended the Masters of Law in Taxation
program at the Georgetown University. He was associate editor of the Tax Lawyer.
He is a member of the Pennsylvania and District of Columbia bars, the U.S. Tax
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Court, U.S. Claims Court, U.S. Court of Appeals for the District of Columbia and
a member of the Federal Bar Association and American Bar Association. He is a
member of the Conference on Consumer Finance Law, several committees for
industry trade groups, and a frequent speaker at state and national league
meetings. He is the author of several articles pertaining to mutual- to-stock
conversions, mutual holding companies, mergers and acquisitions, the Community
Reinvestment Act, charter conversions, and securities offerings. He is a native
of Pennsylvania, a resident of State College and an alumnus of several
Pennsylvania State Universities organizations, including Lions Paw, Skull and
Bones Honor Society, Beta Alpha Psi and Omicron Delta Kappa.
DONALD J. MUSSO is the founder of FinPro, Inc., a consulting and investment
banking firm which specializes in providing advisory services nationally to the
financial institutions industry. Mr. Musso has a Bachelor of Science in Finance
from Villanova University and an MBA in Finance from Fairleigh Dickinson
University. Mr. Musso's corporation has represented dozens of financial
institutions nationally in connection with business plans, appraisals, asset
liability management, strategic planning, branch acquisitions and de novo
financial institutions. Prior to establishing FinPro, he had direct industry
experience, having managed the Corporate Planning and Mergers and Acquisitions
departments for Meritor Financial Group, a $20 billion dollar institution in
Philadelphia. Prior to that, he was responsible for the banking, thrift and real
estate consulting practice in New Jersey for DeLoitte, Haskins and Sells.
WILLIAM A. JAFFE is the President and owner of The Jaffe Group, a Human
Resource Consultancy, headquartered in State College, Pennsylvania, which he
established in January 1996. Previously, he was Compensation and Human Resource
Practice Leader for the Mid-Atlantic Region and/or Alexander Consulting Group.
His resume includes 21 years with Towers Perrin as a Vice President and Unit
Head. His expertise includes salary management, incentive pay, executive
compensation, human resource and related organizational effective issues. He
received his Bachelor of Arts degree in journalism from The Pennsylvania State
University and Masters of Science degree in Management from the University of
Illinois. He is an active member of several public and non-profit organizations.
He is President of The Mount Nittany Conservancy and on the Executive Committee
for the Nittany Lion Club, The Penn State College of Communications Alumni
Society, and the Penn State Hillel Foundation. He is an alumnus of several
Pennsylvania State University organizations, including Lions Paw, Skull and
Bones Honor Society and The Daily Collegian. He is a member of the American
Compensation Association and the Society for Human Resource Management. He was a
board member of Acme and Chairman of its Government Relations Committee and an
adjunct associate professor at The George Washington University from 1991 to
1995. He was an Executive Committee and Board member of several not-for-profits
in the Washington, DC area. In 1996, he was named a Penn State Alumni Fellow.
D. MICHAEL TAYLOR is an architect, real estate developer and entrepreneur,
who has resided in the State College area for more than 20 years. Mr. Taylor has
a Masters of Architecture degree from Kansas State University. Upon graduation,
he spent several years in commercial architecture for Phillips Petroleum and
other firms, specializing in retail construction for national companies. In
addition to his architecture practice, Mr. Taylor is part owner of
G-Wald-Taylor, a firm specializing in industrial pump sales to the paper and
pulp industry. Mr. Taylor resides in State College and is active in many
community organizations.
Remuneration of Directors and Officers
Director Compensation. The Organizers do not intend for the Company to pay
directors' fees until such time as the Company is profitable.
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Employment Agreement. The Company entered into an employment agreement with
David Richards to serve as President and Chief Executive Officer of the Company
and the Bank for a three-year term. Mr. Richards has received compensation since
October 31, 1997 during the Bank's organizational period at an annual rate of
$72,000. Upon the opening of the Bank, he will receive an annual compensation of
$100,000.
Pension Plan. The Bank will not initially sponsor a tax-qualified pension
plan. Initially, the Bank may implement a 401(k) plan, which initially will have
contributions only by the employee. In the future, the Bank will consider making
contributions by the Bank.
Stock Option Plan. The boards of directors expects to consider a stock
option plan (the Option Plan) following the Offering, subject to approval by the
Company's stockholders. The number of Options under the Option Plan will not
exceed 10% of the shares outstanding. The exercise price is expected to be the
fair market value of the Common Stock on the date of grant, but not less than
$10.00 per share. Options are expected to vest over three years. The Board
considers the adoption of the Option Plan to be in the best interests of the
Company and its shareholders by assisting the Company and the Bank in attracting
and retaining highly qualified individuals to serve as members of management and
the Board.
Transactions with Related Parties
After the Company commences operations, it may engage in transactions with
its Organizers, officers, employees, directors or other affiliated persons only
to the extent that such activities are permitted by, and consistent with, all
applicable state and federal regulations. OTS and FDIC regulations impose a
number of restrictions on transactions and dealings between the Company and
affiliated persons. The definition of "affiliated person" includes the Company's
directors and officers and their spouses and certain members of their immediate
families. Also included as affiliated persons are certain persons, corporations
and other organizations that have a close relationship with the Company as set
out in the regulations. All dealings between the Company and its affiliated
persons will have to comply with those regulations. The Company plans to adopt
policies designed to assure compliance with those regulations. Such
transactions, should they occur, are expected to be primarily in the nature of
loans made in the ordinary course of business such as home loans, educational
loans or consumer loans.
Malizia, Spidi, Sloane & Fisch, P.C., attorneys at law, are and will
continue providing legal services as special regulatory and securities to the
Company and the Bank. An organizer of both entities is a principal of Malizia,
Spidi, Sloane & Fisch, P.C. The agreed upon fees for services rendered in
connection with this transaction are approximately $50,000, plus reimbursable
expenses. Part of the payment for services rendered has been deferred until the
closing of the Offering. Reimbursable expenses are paid by the Company as
incurred, and billed.
FinPro, Inc. has provided consulting services and assistance to management
of the Company and Bank regarding the development of financial proforma
projections, a market feasibility study, and the application process with the
appropriate regulatory agencies and Governmental bodies. A principal of FinPro,
Inc. is also an organizer for each of the entities. The agreed upon fees for
services to be rendered approximate $20,000, plus reimbursable expenses. Part of
the payment for services rendered will be deferred until regulatory approvals
have been obtained regarding the applications for formation and the initiation
of operations by the Bank.
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DESCRIPTION OF CAPITAL STOCK
The Company is authorized to issue 10,000,000 shares of the Common Stock,
$0.10 par value, and 5,000,000 shares of serial preferred stock. The Company
does not intend to issue any shares of serial preferred stock in the Offering,
nor are there any present plans to issue such preferred stock following the
offering. The following is a summary of certain terms of the Common Stock and is
subject to and qualified in its entirety by reference to the articles of
incorporation and bylaws of the Company which are filed as exhibits to the
registration statement of which this prospectus forms a part.
Common Stock
Voting Rights. Each share of the Common Stock will have the same relative
rights and will be identical in all respects with every other share of the
Common Stock. The holders of the Common Stock will 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, if any. Each holder of the
Common Stock will be entitled to only one vote for each share held of record on
all matters submitted to a vote of holders of the Common Stock and will not be
permitted to cumulate their votes in the election of the Company's directors.
Liquidation. In the unlikely event of the complete liquidation or
dissolution of the Company, the holders of the Common Stock will be entitled to
receive all assets of the Company available for distribution in cash or in kind,
after payment or provision for payment of (i) all debts and liabilities of the
Company (including all savings accounts and accrued interest thereon); (ii) any
accrued dividend claims; (iii) liquidation preferences of any serial preferred
stock which may be issued in the future; and (iv) any interests in the
liquidation account.
Restrictions on Acquisition of the Common Stock. See "Certain Anti-Takeover
Provisions" for a discussion of the limitations on acquisition of shares of the
Common Stock.
Other Characteristics. Holders of the Common Stock will not have preemptive
rights with respect to any additional shares of the Common Stock which may be
issued. Therefore, the Board of Directors may sell shares of capital stock of
the Company without first offering such shares to existing stockholders of the
Company. The Common Stock is not subject to call for redemption, and the
outstanding shares of Common Stock when issued and upon receipt by the Company
of the full purchase price therefor will be fully paid and non-assessable.
Issuance of Additional Shares. Other than shares to be issued pursuant to
the Stock Option Plan, the Company has no present plans, proposals, arrangements
or understandings to issue additional authorized shares of the Common Stock. In
the future, the authorized but unissued and unreserved shares of the Common
Stock will be available for general corporate purposes, including, but not
limited to, possible issuance as stock dividends, in connection with mergers or
acquisitions, under a cash dividend reinvestment or stock purchase plan, in a
public or private offering, or under employee benefit plans. Normally no
stockholder approval would be required for the issuance of these shares, except
as described herein or as otherwise required to approve a transaction in which
additional authorized shares of the Common Stock are to be issued.
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<PAGE>
Serial Preferred Stock
None of the 5,000,000 authorized shares of serial preferred stock of the
Company will be issued in the Offering. After the Offering is completed, the
Board of Directors of the Company will be authorized to issue serial preferred
stock and to fix and state voting powers, designations, preferences or other
special rights of such shares and the qualifications, limitations and
restrictions thereof, subject to regulatory approval but without stockholder
approval. If and when issued, the serial preferred stock is likely to rank prior
to the Common Stock as to dividend rights, liquidation preferences, or both, and
may have full or limited voting rights. The Board of Directors, without
stockholder approval, can issue serial preferred stock with voting and
conversion rights which could adversely affect the voting power of the holders
of the Common Stock. The Board of Directors has no present intention to issue
any of the serial preferred stock.
Certain Anti-Takeover Provisions
The following discussion is a general summary of the material provisions of
the articles of incorporation, bylaws, and certain other regulatory provisions
of the Company, which may be deemed to have such an anti-takeover effect.
Provisions of the Company's Articles of Incorporation and Bylaws
Election of Directors. Certain provisions of the Company's articles of
incorporation and bylaws will impede changes in majority control of the Board of
Directors. the Company's articles of incorporation provide that the Board of
Directors of the Company will be divided into four staggered classes, with
directors in each class elected for four-year terms. Thus, it would take three
annual elections to replace a majority of the Company's board. the Company's
articles of incorporation provide that the size of the Board of Directors may be
increased or decreased only if two-thirds of the directors then in office concur
in such action. The articles of incorporation also provide that any vacancy
occurring in the Board of Directors, including a vacancy created by an increase
in the number of directors, shall be filled for the remainder of the unexpired
term by a majority vote of the directors then in office. Finally, the articles
of incorporation and the bylaws impose certain notice and information
requirements in connection with the nomination by stockholders of candidates for
election to the Board of Directors or the proposal by stockholders of business
to be acted upon at an annual meeting of stockholders.
The articles of incorporation provide that a director may only be removed
for cause by the affirmative vote of at least a majority of the shares of the
Company entitled to vote generally in an election of directors cast at a meeting
of stockholders called for that purpose.
Restrictions on Call of Special Meetings. The articles of incorporation of
the Company provide that a special meeting of stockholders may be called only
pursuant to a resolution adopted by a majority of the Board of Directors.
Absence of Cumulative Voting. the Company's articles of incorporation
provide that stockholders may not cumulate their votes in the election of
directors.
Authorized Shares. The articles of incorporation authorizes the issuance of
10,000,000 shares of common stock and 5,000,000 shares of preferred stock. The
shares of common stock and preferred stock were authorized in an amount greater
than that to be issued in the Offering to provide the Company's Board of
Directors with as much flexibility as possible to effect, among other
transactions, financings,
-35-
<PAGE>
acquisitions, stock dividends, stock splits and the exercise of stock options.
However, these additional authorized shares may also be used by the Board of
Directors consistent with its fiduciary duty to deter future attempts to gain
control of the Company. The Board of Directors also has sole authority to
determine the terms of any one or more series of Preferred Stock, including
voting rights, conversion rates, and liquidation preferences. As a result of the
ability to fix voting rights for a series of Preferred Stock, the board has the
power, to the extent consistent with its fiduciary duty, to issue a series of
Preferred Stock to persons friendly to management in order to attempt to block a
post-tender offer merger or other transaction by which a third party seeks
control, and thereby assist management to retain its position.
Procedures for Business Combinations. The articles of incorporation require
the affirmative vote of at least 80% of the outstanding shares of the Company
for any merger, consolidation, liquidation, or dissolution of the Company or any
action that would result in the sale or other disposition of at least 50% of the
tangible assets of the Company, unless the transaction has been approved by
two-thirds of the Board of Directors. Any amendment to this provision requires
the affirmative vote of at least 80% of the outstanding shares of the Company.
Amendment to Articles of Incorporation and Bylaws. Amendments to the
Company's articles of incorporation must be approved by the Company's Board of
Directors and also by a majority of the outstanding shares of the Company's
voting stock, provided, however, that approval by at least 80% of the
outstanding voting stock is generally required for certain provisions (i.e.,
number, classification, election and removal of directors; amendment of bylaws;
call of special stockholder meetings; director liability; business combinations;
power of indemnification; and amendments to provisions relating to the foregoing
in the articles of incorporation).
The bylaws may be amended by a majority vote of the Board of Directors or
the affirmative vote of the holders of at least 80% of the outstanding shares of
the Company entitled to vote in the election of directors cast at a meeting
called for that purpose.
Regulatory Restrictions. Federal regulations require that, prior to
obtaining control of an insured institution, a person, other than a company,
must give 60 days notice to the OTS and have received no OTS objection to such
acquisition of control, and a company must apply for and receive OTS approval of
the acquisition. Control, involves a 25% voting stock test, control in any
manner of the election of a majority of the institution's directors, or a
determination by the OTS that the acquiror has the power to direct, or directly
or indirectly to exercise a controlling influence over, the management or
policies of the institution. Acquisition of more than 10% of an institution's
voting stock, if the acquiror also is subject to any one of either "control
factors," constitutes a rebuttable determination of control under the
regulations. The determination of control may be rebutted by submission to the
OTS, prior to the acquisition of stock or the occurrence of any other
circumstances giving rise to such determination, of a statement setting forth
facts and circumstances which would support a finding that no control
relationship will exist and containing certain undertakings. The regulations
provide that persons or companies which acquire beneficial ownership exceeding
10% or more of any class of a savings association's stock after the effective
date of the regulations must file with the OTS a certification that the holder
is not in control of such institution, is not subject to a rebuttable
determination of control and will take no action which would result in a
determination or rebuttable determination of control without prior notice to or
approval of the OTS, as applicable.
-36-
<PAGE>
Shares Eligible for Future Sale
Upon completion of the Offering, the Company will have a minimum of 551,000
and a maximum of 651,000 shares of Common Stock outstanding. All shares of
Common Stock issued in the Offering will be available for resale in the public
market without restriction or further registration under the Securities Act,
except for shares purchased by affiliates of the Company (in general, any person
who has a control relationship with the Company) which shares will be subject to
the resale limitations of Rule 144 under the Securities Act. After the Offering,
shares of Common Stock held by affiliates will be considered "control shares",
and are eligible for sale in the public market in compliance with Rule 144.
In general, under Rule 144 as currently in effect, a person (or persons
whose shares are aggregated), including a person who may be deemed to be an
"affiliate" of the Company as that term is defined under the Securities Act, is
entitled to sell, within any three month period, a number of restricted shares
as to which at least one year has elapsed from the later of the acquisition of
such shares from the Company or an affiliate of the Company in an amount that
does not exceed the greater of (i) one percent of the then outstanding shares of
Common Stock, or (ii) if the Common Shares are quoted on the Nasdaq National
Market or a stock exchange, the average weekly trading volume of the Common
Shares during the four calendar weeks preceding such sale. Sales under Rule 144
are also subject to certain requirements as to the manner of sale, notice, and
the availability of current public information about the Company. However, a
person who is not deemed to have been an affiliate of the Company during the 90
days preceding a sale by such person and who has beneficially owned shares as to
which at least two years have elapsed from the later of the acquisition of such
shares from the Company or an affiliate of the Company is entitled to sell them
without regard to the volume, manner of sale, or notice requirements of Rule
144.
LEGAL MATTERS
The validity of the Common Stock offered hereby will be passed upon for the
Company by Malizia, Spidi, Sloane & Fisch, P.C., Washington D.C., counsel to the
Company.
EXPERTS
The financial statements of the Company included herein and elsewhere in
this Prospectus from inception to December 31, 1997, have been included in
reliance upon the report of S.R. Snodgrass A.C., Wexford, Pennsylvania,
independent certified public accountants, appearing elsewhere herein, and upon
the authority of said firm as experts in accounting and auditing. There have
been no changes in or disagreements with the accountants.
-37-
<PAGE>
Nittany Financial Corp.
INDEX TO FINANCIAL STATEMENTS
Page
----
Report of Independent Auditors.......................................... F-1
Balance Sheet........................................................... F-2
Statement of Operations ................................................ F-3
Statement of Changes in Stockholders' Equity............................ F-4
Statement of Cash Flows................................................. F-5
Notes to Financial Statements........................................... F-6
All schedules are omitted because they are not required or applicable
or the required information is shown in the financial statements or the notes
thereto.
-38-
<PAGE>
SNODGRASS
Certified Public Accountants and Consultants
[LOGO]
REPORT OF INDEPENDENT AUDITORS
------------------------------
Organizers
Nittany Financial Corp.
We have audited the accompanying balance sheet of Nittany Financial Corp. as of
December 31, 1997, and the related statements of operations, and cash flows for
the period from October 9, 1997 (inception) to December 31, 1997. These
financial statements are the responsibility of management. Our responsibility is
to express an opinion on these financial statements based on our audit.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Nittany Financial Corp. as of
December 31, 1997 and the results of its operations and its cash flows for the
period from October 9, 1997 (inception) to December 31, 1997, in conformity with
generally accepted accounting principles.
/s/S.R. Snodgrass, A.C.
- -----------------------
Wexford, PA
May 5, 1998
<TABLE>
<CAPTION>
<S> <C> <C>
S.R. Snodgrass, A.C.,
101 Bradford Road Wexford, PA 15090-6909 Phone: 724-934-0344 Facsimile: 724-934-0345
</TABLE>
F-1
<PAGE>
NITTANY FINANCIAL CORP.
BALANCE SHEET
<TABLE>
<CAPTION>
December 31, March 31,
1997 1998
---------------- ------------------
(Audited) (Unaudited)
<S> <C> <C>
ASSETS
Cash and interest-bearing deposits in banks $ 29,449 $ 146,448
Furniture and equipment - 2,649
Deferred organization costs 70,000 70,000
---------------- ------------------
TOTAL ASSETS $ 99,449 $ 219,097
================ ==================
LIABILITIES
Accounts payable and accrued expenses $ 75,226 $ 70,180
Advances from organizers 50,000 -
---------------- ------------------
TOTAL LIABILITIES 125,226 70,180
---------------- ------------------
STOCKHOLDERS' EQUITY
Preferred stock, no par value, 5,000,000 shares authorized;
none outstanding - -
Common stock, par value $ .10; 10,000,000 shares authorized,
0 and 26,500 issued and outstanding - 2,650
Common stock subscribed (0 and 13,500 shares) - 1,350
Additional paid-in capital - 296,000
Retained deficit (25,777) (49,830)
---------------- ------------------
(25,777) 250,170
Common stock subscriptions receivable - (101,253)
---------------- ------------------
TOTAL STOCKHOLDERS' EQUITY (25,777) 148,917
---------------- ------------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 99,449 $ 219,097
================ ==================
</TABLE>
See accompanying notes to the financial statements.
F-2
<PAGE>
NITTANY FINANCIAL CORP.
STATEMENT OF OPERATIONS
<TABLE>
<CAPTION>
Period From
October 9, 1997 Three Months
(Inception) to Ended
December 31, 1997 March 31, 1998
----------------- --------------
(Audited) (Unaudited)
<S> <C> <C>
INTEREST INCOME $ 295 $ 464
EXPENSES
Officer salary and benefits 19,749 20,827
Occupancy and equipment - 439
Professional services 5,908 2,238
Other 415 1,013
---------------- ------------------
Total expenses 26,072 24,517
---------------- ------------------
Loss before income taxes (25,777) (24,053)
Income taxes - -
---------------- ------------------
NET LOSS $ (25,777) $ (24,053)
================ ==================
LOSS PER SHARE - ($1.75)
AVERAGE SHARES OUTSTANDING - 13,770
</TABLE>
See accompanying notes to the financial statements.
F-3
<PAGE>
NITTANY FINANCIAL CORP.
STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
Common
Common Additional Stock
Common Stock Paid-In Subscriptions Retained
Stock Subscribed Capital Receivable Deficit Total
------ ---------- -------- ------------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
Net loss for period of October 9, 1997
(Inception) to December 31, 1997 $ - $ - $ - $ - $ (25,777) $ (25,777)
----- ------ ------- ------------- -------- --------
Balance, December 31, 1997 (Audited) - - - - (25,777) (25,777)
Sale of common stock for
cash ($7.50 per share) 2,650 1,350 296,000 (101,253) 198,747
Net loss for three months
ended March 31, 1998 (24,053) (24,053)
----- ------ ------- ------------ -------- --------
Balance, March 31, 1998 (Unaudited) $ 2,650 $ 1,350 $ 296,000 $ (101,253) $ (49,830) $ 148,917
===== ====== ======= ============ ======== ========
</TABLE>
F-4
<PAGE>
NITTANY FINANCIAL CORP.
STATEMENT OF CASH FLOWS
<TABLE>
<CAPTION>
Period From
October 9, 1997 Three Months
(Inception) to Ended
December 31, 1997 March 31, 1998
----------------- --------------
(Audited) (Unaudited)
<S> <C> <C>
OPERATING ACTIVITIES
Net loss $ (25,777) $ (24,053)
Adjustments to reconcile net loss to net cash provided
by operating activities:
Increase in accrued expenses 5,226 -
---------------- ------------------
Net cash used for operating activities (20,551) (24,053)
---------------- ------------------
INVESTING ACTIVITIES
Purchase of one year bank certificate of deposit - (10,548)
Cash paid for organizational costs - (5,046)
Purchase of equipment - (2,649)
---------------- ------------------
Net cash used for investing activities - (18,243)
---------------- ------------------
FINANCING ACTIVITIES
Advances from organizers 50,000 -
Proceeds from sale of common stock - 148,747
---------------- ------------------
Net cash provided by financing activities 50,000 148,747
---------------- ------------------
Increase in cash and cash equivalents 29,449 106,451
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD - 29,449
---------------- ------------------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 29,449 $ 135,900
================ ==================
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Noncash financing activities
Conversion of advances from organizers to common stock $ $ 50,000
Stock subscriptions receivable $ $ 101,253
</TABLE>
See accompanying notes to the financial statements.
F-5
<PAGE>
NITTANY FINANCIAL CORP.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1997 (AUDITED) AND MARCH 31, 1998 (UNAUDITED)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Organization and Basis of Presentation
--------------------------------------
Nittany Financial Corp. (the Company) was incorporated under the laws of
the State of Pennsylvania on December 8, 1997, for the purpose of becoming
a holding company, which will own all of the outstanding shares of capital
stock of a proposed federal stock savings bank with the name Nittany Bank
(Proposed Bank). The Company will be a unitary savings and loan holding
company and will own only the Proposed Bank. As of March 31, 1998, the
Company is capitalized to the extent currently considered necessary to
provide adequate funding of the ongoing organization efforts of management
in the formation of the Proposed Bank. The funds necessary to adequately
capitalize the Proposed Bank will be raised through a contemplated initial
public offering (IPO), which is discussed in greater detail in these notes.
Upon satisfaction of the conditions of the IPO and appropriate regulatory
approval is obtained, the Proposed Bank will purchase certain assets from
and will assume certain deposit liabilities related to two State College,
Pennsylvania branch offices of First Commonwealth Bank (Commonwealth).
Qualifying customer bank deposit accounts will be insured by the Federal
Deposit Insurance Corporation. The Proposed Bank will operate from these
branch offices, as a community oriented bank concentrating on consumer
residential and installment loan products and deposit services, from its
headquarters in State College, Pennsylvania. The anticipated opening of the
Proposed Bank is scheduled for the third quarter of 1998.
As of the date of these financial statements, the Company's operations have
been limited to in-formation procedures; raising capital, recruiting
officers and staff, obtaining a banking facility and working towards
obtainment of regulatory approval. Since the Company's planned principal
operations have not yet commenced, no significant revenue has been derived
therefrom. There is no assurance that the Company will be able to raise
sufficient capital to satisfy minimum regulatory capital requirements.
Further, if such capital requirements are not met, the formation of the
Proposed Bank will be delayed or not materialize, and as such, the pending
transactions with Commonwealth will not occur.
The accounting and reporting policies of the Company conform with generally
accepted accounting principles (GAAP). The preparation of financial
statements in conformity with GAAP requires management to make estimates
and assumptions that affect the reported amounts of assets and liabilities
as of the balance sheet date and income and expenses during the reported
period. Actual results could differ from those estimates.
In the opinion of management, the accompanying unaudited financial
statements of the Company contain all adjustments necessary for the fair
presentation of the Company's balance sheet, results of operations and cash
flows for the three month period ending March 31, 1998. The results of
operations for this interim period are not indicative of the results than
may be expected for a full year and could be materially different if the
Company was not an "in-formation" entity and operation.
F-6
<PAGE>
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
A summary of significant accounting and reporting policies applied in the
presentation of the accompanying financial statements follows:
Deferred Organization Costs
---------------------------
For the periods presented, the deferred organization costs represent
contractually agreed upon fees to be paid by the Company for legal and
consulting services upon receiving approval from the appropriate regulatory
authorities regarding the formation and operation of the Proposed Bank, and
the successful completion of the IPO. Such costs are for organization work
being completed as well as the IPO. Offering expenses will be charged to
stockholders' equity upon completion of the IPO. Organizational services
relating to the preparation of regulatory applications, feasibility
studies, and financial projections are considered costs of start-up
activities and will be charged to expense once paid.
Advances From Organizers
------------------------
One of the organizers of the Company loaned money to the Company to cover
organizational costs incurred during the months leading up to the Company
formally organizing and authorizing the issuance of common stock to meet
anticipated funding needs. This organizer received common stock in lieu of
reimbursement for funds advanced during the three month period ending March
31, 1998.
Income Taxes
------------
The Company has not provided for a federal income tax provision for the
period ending December 31, 1997, or for the three month period ending March
31, 1998, as the Company represents an entity in-formation and has incurred
operating losses for each period. Further, the Company is anticipating a
loss for the remainder of the start-up period to be incurred during 1998.
As such, a 100% valuation allowance for the deferred tax assets, comprised
of the tax benefits generated from the operating losses, has been recorded.
Earnings Per Share
------------------
Effective February 18, 1998, the Company formally had the ability to issue
common stock and did so with its organizers from that date through March
31, 1998. For the interim period ending March 31, 1998, earnings per share
is calculated using the weighted average number of shares outstanding from
February 18, 1998. For 1998, the Company has maintained a simple capital
structure, therefore, there are no dilutive effects on loss per share
computations.
Cash Flow Information
---------------------
Cash equivalents include amounts due from banks, and interest-bearing
deposits with banks that have original maturities of 90 days or less.
2. STOCKHOLDERS' EQUITY AND INITIAL PUBLIC OFFERING
Initial capitalization of the Company has occurred through the subscription
and issuance of common stock, in a private placement which has been
exclusively offered to the organizers of the Company during the first
quarter of 1998. As of March 31, 1998, a total of 40,000 shares, at an
offering price of $7.50 per share, have been subscribed to or issued.
F-7
<PAGE>
2. STOCKHOLDERS' EQUITY AND INITIAL PUBLIC OFFERING (Continued)
The Company intends to issue between 500,000 and 600,000 shares of common
stock at $10 per share in an initial public offering (IPO). Current shares
of common stock owned by the organizers as of March 31, 1998, and any
additional shares issued prior to the IPO, will remain issued and
outstanding. The Company anticipates purchasing all of the common stock to
be issued by the Proposed Bank with the net proceeds received from the IPO.
3. RELATED PARTY TRANSACTIONS
Malizia, Spidi, Sloane & Fisch, P.C., attorneys at law, are and will
continue providing legal and consulting services to the Company and the
Proposed Bank. An organizer of both entities is a principal of Malizia,
Spidi, Sloane & Fisch, P.C. The agreed upon fees for services to be
rendered approximate $50,000, plus reimbursable expenses. The payment for
services rendered has been deferred until the closing of the IPO.
Reimbursable expenses are paid by the Company as incurred, and billed.
FinPro, Inc. will provide consulting services and assistance to management
of the Company and Proposed Bank regarding the development of financial pro
forma projections, a market feasibility study, and the application process
with the appropriate regulatory agencies and Governmental bodies. A
principal of FinPro, Inc. is also an organizer for each of the entities.
The agreed upon fees for services to be rendered approximate $20,000, plus
reimbursable expenses. The payment for services rendered will also be
deferred until regulatory approvals have been obtained regarding the
applications for formation and the initiation of operations by the Proposed
Bank.
4. BRANCH PURCHASE AND ASSUMPTION AGREEMENT
On March 24, 1998, the Company, through its organizers, entered into a
Branch Purchase and Deposit Assumption Agreement (the Agreement), with
Commonwealth, for the acquisition of certain assets and the assumption of
certain deposit liabilities related to Commonwealth's branch offices
located at 116 East College Avenue and 1276 North Atherton Street, State
College, Pennsylvania. The effective closing date of the transactions is to
occur only after receipt of all necessary approvals from the appropriate
regulatory authorities regarding such transactions have been obtained.
Further, regulatory approval regarding the formation of the Proposed Bank,
which will operate the branch offices, must also be obtained prior to the
consummation of the Agreement. In general, the Agreement can be terminated
by Commonwealth or the Company if the effective closing date has not
occurred by the earlier of September 30, 1998 or within 30 days of the
receipt of all required regulatory approvals, unless mutually extended.
Pursuant to the Agreement, the Company, through is anticipated subsidiary,
the Proposed Bank, has agreed to: (i) assume approximately $11.4 million of
deposit liabilities; (ii) purchase, at book value, any loans from these
offices that are secured by deposit accounts and unsecured loans created by
overdraft line arrangements with a customer; (iii) purchase, at book value,
furniture, fixtures, equipment, and leasehold improvements owned by
Commonwealth and located at each branch office; (iv) purchase the safe
deposit box business conducted at the branches; (v) assume the lease
contracts for each office; and (vi) purchase all cash funds on hand at each
office.
In consideration for the assumption of the deposit liabilities, the Company
has agreed to pay Commonwealth a deposit premium of 10%. The premium will
be paid using cash (9%) and common stock of the Company (1%). As of March
31, 1998, the estimated premium due to Commonwealth at closing is valued at
$ 1.04 million.
F-8
<PAGE>
APPENDIX A
NITTANY FINANCIAL CORP.
A proposed
Holding Company for Nittany Bank
(In Organization)
State College, Pennsylvania
SUBSCRIPTION AGREEMENT
THE OFFER OF THE SECURITIES IS MADE ONLY
BY THE ACCOMPANYING PROSPECTUS
Subject to the terms and conditions of sale contained in the Prospectus
dated ______, 1998, (the "Prospectus"), the undersigned hereby subscribes for
the purchase of the number of shares shown below of the common stock ($0.10 par
value), of Nittany Financial Corp. (the "Company"), a proposed holding company
for Nittany Bank (In Organization) (the "Bank"). The purchase price is $10.00
per share and full payment is enclosed with this Subscription Agreement.
Enclosed as payment for the shares subscribed to herein is a check, bank draft
or money order payable to Roxborough-Manayunk Bank, Escrow Agent for Nittany
Financial Corp.," in the amount shown below.
Terms not otherwise defined herein shall have the same meaning as in
the Prospectus.
All subscriptions for the Offering are subject to a 100 share purchase
minimum and a 30,000 share maximum purchase limitation per subscriber. For
purposes of determining the maximum purchase limitation, the term subscriber
includes all persons who are affiliates of the person submitting this
Subscription Agreement (an affiliate is a person that directly, or indirectly,
controls, is controlled by or is under common control with, the subscriber).
Method of Subscription
All subscriptions must be made on this Subscription Agreement.
Subscriptions are not binding until accepted by the Company. The Company
reserves the right to reject any subscription, with or without cause. The
Company will refuse any subscription by sending written notice to the subscriber
by first-class mail within ten calendar days after receipt of the subscription,
and the subscriber's Subscription Agreement and refund of payment will accompany
such notice. Any Subscription Agreement which is completely and correctly filled
out, which is accompanied by proper and full payment and which is physically
received at the office of the Company by an employee or agent of the Company by
the date set forth in the Prospectus, shall be deemed to have been accepted if
it is not refused as hereinbefore provided within ten calendar days after such
receipt.
The Conditional Approval may require the Company to furnish regulators
with a list of shareholders and certain information about their purchases.
Failure to provide the information or to indicate that it is not applicable will
result in rejection of the subscription.
A-1
<PAGE>
A completed Subscription Agreement and payment in full (made in the
manner specified below) of the total subscription price for the number of shares
subscribed should be mailed directly to the Company at the following address:
Nittany Financial Corp.
Calder Square
P.O. Box 10283
State College, Pennsylvania 16805
Subscriptions also may be delivered in person to the office of the Company at
637 Kennard Road, State College, Pennsylvania between 10:00 a.m. and 5:00 p.m.
Monday through Friday.
IMPORTANT: PAYMENTS MUST BE MADE IN UNITED STATES FUNDS BY CHECK, BANK DRAFT OR
MONEY ORDER PAYABLE TO "ROXBOROUGH-MANAYUNK BANK, ESCROW AGENT FOR NITTANY
FINANCIAL CORP.," CHECKS MAY NOT BE MADE PAYABLE TO THE ORGANIZERS OF THE
COMPANY. FAILURE TO INCLUDE THE FULL SUBSCRIPTION PRICE WITH THE SUBSCRIPTION
AGREEMENT WILL RESULT IN THE SUBSCRIPTION BEING RETURNED BY THE ESCROW AGENT.
Terms of the Offering
The Company is offering a minimum of 500,000 shares and a maximum of
600,000 shares at $10.00 per share pursuant to the Prospectus. The Offering will
terminate at 5:00 p.m., State College, Pennsylvania Time, on ___________, 1998,
unless extended by the Company for an additional 90 days until __________, 1998.
The Company may extend the Offering beyond ___________, 1998, but in no event
beyond __________ ___, 1998, without the approval of the OTS. If the Offering
extends beyond __________ ___, 1998, subscribers will have the right to
increase, decrease or rescind subscriptions for stock previously submitted. The
Organizers will mail to all subscribers who have theretofore received an
Prospectus written notice of any such determination to terminate the Offering at
least seven days prior to such termination. During this seven day period, the
Organizers will continue to accept subscriptions for up to 600,000 shares. There
will be only one closing.
The Offering is being made subject to the requirements that at least
500,000 shares are sold. Pending receipt of insurance of accounts, payments
received from subscribers will be held in an interest-bearing escrow account.
Disbursement of the escrow funds to the Company will be made only upon
satisfaction of all conditions to the Offering, including receipt of FDIC
insurance of accounts.
In the event that the Offering is not consummated by __________, 1998,
unless extended to _________, 1998, and certain other conditions for final
regulatory approval are not satisfied by that date, then the Offering will
terminate on such date and all funds, including interest thereon after deduction
of any reasonable organizational expenses not covered by the proceeds of a
Private Placement to the Organizers of the Company, will be returned promptly to
subscribers by the Escrow Agent. Subscribers will not be entitled to any return
of funds during the Offering period. See "The Offering and Plan of Distribution
- - Method of Subscription" in the Prospectus.
If an extension to the Offering is obtained, subscribers would be
provided a supplemental offering prospectus, declared effective by the SEC and
an opportunity to increase (dependent upon the availability of shares), decrease
or rescind their subscriptions. The Company will deliver an effective prospectus
to all persons to whom the securities offered hereby are to be sold at least 48
hours prior to the acceptance
A-2
<PAGE>
or confirmation of sale to such persons or to send such a prospectus to such
persons under circumstances that it would normally be received by them 48 hours
prior to acceptance or confirmation of the sale.
The Company has submitted an undertaking to the SEC to deliver an
effective prospectus to all persons to whom the securities offered hereby are to
be sold at least 48 hours prior to the acceptance or confirmation of sale to
such persons or to send such circular to such persons under circumstances that
it would normally be received by them 48 hours prior to the acceptance or
confirmation of the sale.
Subscription Escrow Agreement
Pending receipt of insurance of accounts, all payments made by the
subscribers will be deposited and held in an interest-bearing escrow account
maintained with the Escrow Agent. The Escrow Account will bear interest at the
current rate paid from time to time by the Escrow Agent on its savings accounts.
The Escrow Agent will maintain the records of the Escrow Account so that each
subscriber's funds will be insured up to $100,000 by the Federal Deposit
Insurance Corporation so long as such funds are held in the escrow account.
Receipts
Not sooner than forty-eight hours after receipt of the subscriber's
Subscription Agreement and payment in full for the shares subscribed the Company
will deliver a receipt to the subscriber by first-class mail or by personal
delivery.
Stock Certificates
Within approximately seven business days after receipt of final
regulatory approval and authorization to do business, the Company will cause to
be mailed by first-class mail or deliver to each subscriber a certificate
representing the shares of common stock purchased by such subscriber.
Acknowledgements
The undersigned hereby acknowledges receipt of a copy of the
Prospectus, and represents that this Subscription Agreement is made solely on
the basis of the information contained in the Prospectus and is not made in
reliance on any inducement, representation or statement not contained in the
Prospectus. The undersigned understands that no person (including any Organizer)
has authority to give any information or to make any representation not
contained in the Prospectus, and if given or made, such information or
representation must not be relied upon as having been authorized. The
undersigned represents that this subscription is made for the benefit of the
undersigned and not for the benefit of any other person who is not identified on
this Subscription Agreement. The undersigned also acknowledges that there is in
the Offering a minimum purchase requirement of 100 shares and a maximum purchase
limitation of 30,000 shares. The undersigned is aware that ownership of 5% or
more of the outstanding Common Stock could obligate the undersigned to comply
with certain reporting and other requirements of federal and state banking and
securities laws. The undersigned understands that the shares of the Common Stock
offered by the Company are not savings accounts or deposits and are not insured
by the Federal Deposit Insurance Corporation, the Savings Association Insurance
Fund or any other governmental or private agency.
A-3
<PAGE>
This Subscription Agreement is made in consideration of the premises
set forth in the Prospectus and the subscriptions of others, and the undersigned
acknowledges that this Subscription Agreement creates a legally binding
obligation unless refused by the Company.
<TABLE>
<CAPTION>
<S> <C>
Number of shares at $10.00 per share (100 share minimum) equals $
---------- ----------------------
(Total Purchase Price)
</TABLE>
-----------------------------------------------------------
(Name(s) in which stock certificates should be registered*)
-----------------------------------------------------------
(Street Address)
-----------------------------------------------------------
(City/State/Zip Code)
( )
--------------------------------- -------------------
(Social Security or Tax I.D. No.) (Telephone No.)
- ---------------------------------------- ------------------------------------
(Date) (Signature)
- ---------------------------------------- ------------------------------------
(Date) (Signature)
*Stock certificates for shares to be issued in the names of two or more
persons will be registered in the names of such persons as joint tenants with
right of survivorship, and not as tenants in common.
If shares are to be held in joint ownership, all joint owners should
sign this Agreement. Information on the Agreement will be treated confidentially
by the Company, to the extent permitted by applicable laws and regulations.
If purchaser is a corporation or partnership, list the names of the
principals of the corporation or partnership as well as the name of the
corporation or partnership.
A-4
<PAGE>
NITTANY FINANCIAL CORP.
611,000 Shares
Common Stock
PROSPECTUS
Dated July __, 1998
THESE SECURITIES ARE NOT DEPOSITS OR ACCOUNTS
AND ARE NOT FEDERALLY INSURED OR GUARANTEED.
<PAGE>
PART II: INFORMATION NOT REQUIRED IN PROSPECTUS
Item 24. Indemnification of Officers and Directors.
Sections 1741 through 1747 of the Pennsylvania Business Corporation Act
sets forth circumstances under which directors, officers, employees and agents
may be insured or indemnified against liability which they may incur in their
capacities as such.
Provisions regarding indemnification of directors, officers, employees
or agents of the Company are contained in Article 10 of the Company's Articles
of Incorporation.
Under a directors' and officers' liability insurance policy, directors
and officers of the Company are insured against certain liabilities, including
certain liabilities under the Securities Act, as amended.
Item 25. Other Expenses of Issuance and Distribution
* Legal services..................................... $ 50,000
* Accounting fees.................................... 9,500
* Registration fees ................................. 20,000
* Printing and engraving............................. 10,000
* Consulting fees.................................... 20,000
* Blue Sky legal and filing fees..................... 5,000
* Miscellaneous...................................... 4,500
--------
TOTAL.............................................. $119,000
========
* Estimated. Includes all expenses in connection with all regulatory
applications (i.e., SEC, OTS, and FDIC).
Item 26. Recent Sales of Unregistered Securities.
Set forth below is certain information concerning all sales of
securities by the Company since inception that were not registered under the
Securities Act of 1933 (the "Securities Act").
During the first quarter of 1998, the Company offered to the Organizers
40,000 common shares at $7.50 per share for a total aggregate consideration of
$300,000. As of the date of this Prospectus, the Company had received aggregate
gross proceeds of $199,000 in addition to subscriptions receivables of $101,000.
Such subscriptions are expected to be paid by June 30, 1998.
The above sales were exempt from the registration requirements of the
Securities Act pursuant to Section 3(b) and the provisions of Rule 504 of
Regulation D.
<PAGE>
Item 27. Exhibits:
The exhibits filed as part of this Registration Statement are
as follows:
<TABLE>
<CAPTION>
<S> <C>
3(i) Amended Articles of Incorporation of Nittany Financial Corp.
3(ii) Bylaws of Nittany Financial Corp.
4 Specimen Stock Certificate of Nittany Financial Corp.
4.1 Form of Subscription Agreement (included as Appendix A to the Prospectus)
5 Opinion of Malizia, Spidi, Sloane & Fisch, P.C.*
10 Employment Agreement with David Z. Richards
10.1 Branch Purchase and Deposit Assumption Agreement (including Amendment No.
1 to Agreement)
23.1 Consent of Malizia, Spidi, Sloane & Fisch, P.C. (included in Exhibit 5)*
23.2 Consent of S.R. Snodgrass, A.C.*
27 Financial Data Schedule**
99.1 Marketing Materials*
</TABLE>
--------------
* To be filed by amendment
** Electronic filing only
Item 28. 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:
(i) Include any prospectus required by Section 10(a)(3)
of the Securities Act of 1933 ("Securities Act");
(ii) Reflect in the prospectus any facts or events which
individually or together, represent a fundamental change in the information in
the registration statement. Notwithstanding the foregoing, any increase or
decrease in volume of securities offered (if the total dollar value of
securities offered would not exceed that which was registered) and any deviation
from the low or high end of the estimated maximum offering range may be
reflected in the form of prospectus filed with the Commission pursuant to Rule
424(b) if, in the aggregate, the changes in volume and price represent no more
than a 20 percent change in the maximum offering price set forth in the
"Calculation of Registration Fee" table in the effective registration statement.
(iii) 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) File a post-effective amendment to remove from registration any of
the securities that remain unsold at the end of the offering.
<PAGE>
(4) Insofar as indemnification for liabilities arising under the
Securities Act may be permitted to directors, officers and controlling persons
of the small business issuer pursuant to the foregoing provisions, or otherwise,
the small business issuer has been advised that in the opinion of the Securities
and Exchange Commission such indemnification is against public policy as
expressed in the Securities Act, and is therefore, unenforceable. In the event
that a claim for indemnification against such liabilities (other than the
payment by the small business issuer of expenses incurred or paid by a director,
officer or controlling person of the small business issuer 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
small business issuer will, unless in the opinion of its counsel the matter has
been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Securities Act and will be governed by the final
adjudication of such issue.
<PAGE>
SIGNATURES
In accordance with the requirements of the Securities Act of 1933, the
registrant certifies that it has reasonable grounds to believe that it meets all
of the requirements for filing on Form SB-2 and authorized this registration
statement to be signed on its behalf by the undersigned, in State College,
Pennsylvania, on June 19, 1998.
NITTANY FINANCIAL CORP.
By: /s/David Z. Richards, Jr.
-----------------------------------------------
David Z. Richards, Jr.
President, Chief Executive Officer and Director
(Duly Authorized Representative)
We the undersigned directors and officers of Nittany Financial Corp. do
hereby severally constitute and appoint David Z. Richards, Jr. our true and
lawful attorney and agent, to do any and all things and acts in our names in the
capacities indicated below and to execute all instruments for us and in our
names in the capacities indicated below which said David Z. Richards, Jr. may
deem necessary or advisable to enable Nittany Financial Corp. to comply with the
Securities Act of 1933, as amended, and any rules, regulations and requirements
of the Securities and Exchange Commission, in connection with the registration
statement on Form SB-2 relating to the offering of Nittany Financial Corp.'s
common stock, including specifically but not limited to, power and authority to
sign for us or any of 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 ratify and confirm all that David Z.
Richards, Jr. shall do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this
registration statement has been signed below by the following persons in the
capacities indicated as of June 19, 1998.
/s/Samuel J. Malizia /s/David Z. Richards, Jr.
- ------------------------------- -----------------------------------------------
Samuel J. Malizia David Z. Richards, Jr.
Chairman of the Board, Director President, Chief Executive Officer and Director
and Assistant Secretary (Principal Executive, Financial and Accounting
Officer)
/s/Donald L. Musso /s/William A. Jaffe
- ------------------------------- -----------------------------------------------
Donald L. Musso William A. Jaffe
Director Director and Secretary
/s/D. Michael Taylor
- -------------------------------
D. Michael Taylor
Director
EXHIBIT 3.(i)
<PAGE>
AMENDED ARTICLES OF INCORPORATION
OF
NITTANY FINANCIAL CORP.
Article 1. Name. The name of the corporation is Nittany Financial Corp.
(hereinafter, the "Company").
Article 2. Registered Office. The address of the registered office of
the Company in the Commonwealth of Pennsylvania is 637 Kennard Road, State
College, PA 16801.
Article 3. Nature of Business. The Company is organized under the
Business Corporation Law of 1988, as amended, of the Commonwealth of
Pennsylvania (the "BCL") for the purpose of engaging in any lawful act or
activity for which a corporation may be organized under the laws of the
Commonwealth of Pennsylvania.
Article 4. Duration. The term of the existence of the Company shall be
perpetual.
Article 5. Capital Stock.
A. Authorized Amount. The total number of shares of capital stock that
the Company has authority to issue is 15,000,000 of which 5,000,000 shall be
serial preferred stock, no par value (hereinafter, the "Preferred Stock") and
10,000,000 shall be common stock, par value $.10 per share (hereinafter, the
"Common Stock"). Except to the extent required by governing law, rule, or
regulation, the shares of capital stock may be issued from time to time by the
board of directors of the Company (hereinafter, the "Board of Directors")
without further approval of stockholders. The Company shall have the authority
to purchase its capital stock out of funds lawfully available therefor.
B. Common Stock. Except as provided in this Article 5 (or in any
resolution or resolutions adopted by the Board of Directors pursuant hereto),
the exclusive voting power shall be vested in the Common Stock, with each holder
thereof being entitled to one vote for each share of such Common Stock standing
in the holder's name on the books of the Company. Subject to any rights and
preferences of any class of stock having preference over the Common Stock,
holders of Common Stock shall be entitled to such dividends as may be declared
by the Board of Directors out of funds lawfully available therefor. Upon any
liquidation, dissolution, or winding up of the affairs of the Company, whether
voluntary or involuntary, holders of Common Stock shall be entitled to receive
pro rata the remaining assets of the Company after the holders of any class of
stock having preference over the Common Stock have been paid in full any sums to
which they may be entitled.
<PAGE>
C. Authority of Board to Fix Terms of Preferred Stock. A description of
each class of shares and a statement of the voting rights, designations,
preferences, qualifications, privileges, limitations, options, conversion
rights, and other special rights granted to or imposed upon the shares of each
class and of the authority vested in the Board of Directors to establish series
of Preferred Stock or to determine that Preferred Stock will be issued as a
class without series and to fix and determine the voting rights, designations,
preferences, and other special rights of the Preferred Stock as a class or of
the series thereof are as follows:
Preferred Stock may be issued from time to time as a class without
series or in one or more series. Each series shall be designated in
supplementary sections or amendments to these Articles of Incorporation by the
Board of Directors so as to distinguish the shares thereof from the shares of
all other series and classes. The Board of Directors may by resolution and
amendment to these Articles of Incorporation from time to time divide shares of
Preferred Stock into series, or determine that the Preferred Stock shall be
issued as a class without series, fix and determine the number of shares in a
series and the terms and conditions of the issuance of the class or the series,
and, subject to the provisions of this Article 5, fix and determine the rights,
preferences, qualifications, privileges, limitations, and other special rights,
if any, of the class (if none of such shares of the class have been issued) or
of any series so established, including but not limited to, voting rights (which
may be limited, multiple, fractional, or non-voting rights), the rate of
dividend, if any, and whether or to what extent, if any, such dividends shall be
cumulative (including the date from which dividends shall be cumulative, if
any), the price at and the terms and conditions on which shares may be redeemed,
if any, the preference and the amounts payable on shares in the event of
voluntary or involuntary liquidation, sinking fund provisions for the redemption
or purchase of shares in the event shares of the class or of any series are
issued with sinking fund provisions, and the terms and conditions on which the
shares of the class or of any series may be converted in the event the shares of
the class or of any series are issued with the privilege of conversion.
The Board of Directors may, in its discretion, at any time or from time
to time, issue or cause to be issued all or any part of the authorized and
unissued shares of Preferred Stock for consideration of such character and value
as the Board of Directors shall from time to time fix or determine.
D. Repurchase of Shares. The Company may, from time to time, pursuant
to authorization by the Board of Directors and without action by the
stockholders, purchase or otherwise acquire shares of any class, bonds,
debentures, notes, scrip, warrants, obligations, evidences of indebtedness, or
other securities of the Company in such manner, upon such terms, and in such
amounts as the Board of Directors shall determine; subject, however, to such
limitations or restrictions, if any, as are contained in the express terms of
any class of shares of the Company outstanding at the time of the purchase or
acquisition in question or as are imposed by law or regulation.
-2-
<PAGE>
Article 6. Incorporator. The name and business address of the sole
incorporator is as follows:
Name Address
-------------- --------------------------------
David Richards RD #1, Johnstown Road, Box 502C
Mifflinburg, Pennsylvania 17844
Article 7. Directors. The business and affairs of the Company shall be
managed by or under the direction of the Board of Directors.
A. Number. The number of directors of the Company shall be such number,
not less than one (1) nor more than twelve (12) (exclusive of directors, if any,
to be elected by holders of Preferred Stock, voting separately as a class), as
shall be provided from time to time in accordance with the bylaws, provided that
no decrease in the number of directors shall have the effect of shortening the
term of any incumbent director, and provided further that no action shall be
taken to decrease or increase the number of directors from time to time unless
at least eighty percent (80%) of the directors then in office shall concur in
said action.
B. Classified Board. The Board of Directors shall be divided into four
classes of directors that shall be designated Class I, Class II, Class III and
Class IV. The members of each class shall be elected for a term of four years
and until their successors are elected and qualified. Such classes shall be as
nearly equal in number as the then total number of directors constituting the
entire Board of Directors shall permit, with the term of office of Class I to
expire at the first annual meeting of stockholders, the term of office of Class
II to expire at the annual meeting of stockholders one year thereafter, the term
of office of Class III to expire at the annual meeting of stockholders two years
thereafter and the term of Class IV to expire at the annual meeting of
stockholders three years thereafter. At each annual meeting of stockholders
following such initial classification and election, directors elected to succeed
those directors whose terms expire shall be elected for a term of office to
expire at the fourth succeeding annual meeting of stockholders after their
election.
Should the number of directors of the Company be reduced, the
directorship(s) eliminated shall be allocated among the classes so that the
number of directors in each class is as specified in the immediately preceding
paragraph. The Board of Directors shall designate, by the name of the
incumbent(s), the position(s) to be abolished. Should the number of directors of
the Company be increased, the additional directorships shall be allocated among
such classes so that the number of directors in each class is as specified in
the immediately preceding paragraph.
Whenever the holders of any one or more series of Preferred Stock of
the Company shall have the right, voting separately as a class, to elect one or
more directors of the Company, the Board of Directors shall consist of said
directors so elected in addition to the number of directors fixed as provided
above in this Article 7. Notwithstanding the foregoing, and except as otherwise
may be required by law, whenever the holders of any one or more series of
Preferred
-3-
<PAGE>
Stock of the Company shall have the right, voting separately as a class, to
elect one or more directors of the Company, the terms of the director or
directors elected by such holders shall expire at the next succeeding annual
meeting of stockholders.
C. No Cumulative Voting. Stockholders of the Company shall not be
permitted to cumulate their votes for the election of directors.
D. Vacancies. Subject to the rights of the holders of any series of
Preferred Stock then outstanding, any vacancy occurring on the Board of
Directors, including any vacancy created by reason of an increase in the number
of directors, shall be filled by a majority vote of the directors then in
office, whether or not a quorum is present, or by a sole remaining director, and
any director so chosen shall serve until the term of the class to which such
director was appointed shall expire and until a successor is elected and
qualified. When the number of directors is changed, the Board of Directors shall
determine the class or classes to which the increased or decreased number of
directors shall be appointed.
E. Removal. Unless otherwise required by law, a director (including
persons elected by directors to fill vacancies in the Board of Directors) may be
removed from office only for cause by an affirmative vote of not less than a
majority of the total votes eligible to be cast by stockholders. Cause for
removal by stockholders shall exist only if the director whose removal is
proposed has been either declared of unsound mind by an order of a court of
competent jurisdiction, convicted of a felony or of an offense punishable by
imprisonment for a term of more than one year by a court of competent
jurisdiction, or deemed liable by a court of competent jurisdiction for gross
negligence or misconduct in the performance of such director's duties to the
Company. At least 30 days prior to such meeting of stockholders, written notice
shall be sent to the director whose removal will be considered at the meeting.
Directors may also be removed from office in the manner provided in Sections
1726(b) and 1726(c) of the BCL, or any successors to such sections.
F. Nominations of Directors. Nominations of candidates for election as
directors at any annual meeting of stockholders may be made (a) by, or at the
direction of, a majority of the Board of Directors or (b) by any stockholder
entitled to vote at such annual meeting. Only persons nominated in accordance
with the procedures set forth in this Article 7.F shall be eligible for election
as directors at an annual meeting. Ballots bearing the names of all the persons
who have been nominated for election as directors at an annual meeting in
accordance with the procedures set forth in this Article 7.F shall be provided
for use at the annual meeting.
Nominations, other than those made by or at the direction of the Board
of Directors, shall be made pursuant to timely notice in writing to the
Secretary of the Company as set forth in this Article 7.F. To be timely, a
stockholder's notice shall be delivered to, or mailed and received at, the
principal executive offices of the Company not less than 60 days prior to the
anniversary date of the immediately preceding annual meeting of stockholders of
the Company; provided, however, that with respect to the first scheduled annual
meeting, notice by the stockholder must be so delivered or received no later
than the close of business on the tenth day following the day
-4-
<PAGE>
on which notice of the date of the scheduled meeting was mailed and must be
delivered or received no later than the close of business on the fifth day
preceding the date of the meeting. Such stockholder's notice shall set forth (a)
as to each person whom the stockholder proposes to nominate for election or
re-election as a director and as to the stockholder giving the notice (i) the
name, age, business address, and residence address of such person, (ii) the
principal occupation or employment of such person, (iii) the class and number of
shares of Company stock that are Beneficially Owned (as determined by Rule 13d-3
promulgated under the Securities Exchange Act of 1934, as amended) by such
person on the date of such stockholder notice, and (iv) any other information
relating to such person that is required to be disclosed in solicitations of
proxies with respect to nominees for election as directors, pursuant to the
Securities Exchange Act of 1934, as amended (the "Exchange Act") or any
successor thereto; and (b) as to the stockholder giving the notice (i) the name
and address, as they appear on the Company's books, of such stockholder and any
other stockholders known by such stockholder to be supporting such nominees and
(ii) the class and number of shares of Company stock that are Beneficially Owned
by such stockholder on the date of such stockholder notice and, to the extent
known, by any other stockholders known by such stockholder to be supporting such
nominees on the date of such stockholder notice. At the request of the Board of
Directors, any person nominated by, or at the direction of, the Board of
Directors for election as a director at an annual meeting shall furnish to the
Secretary of the Company the same information required to be set forth in a
stockholder's notice of nomination which pertains to the nominee.
The Board of Directors may reject any nomination by a stockholder not
timely made in accordance with the requirements of this Article 7.F. If the
Board of Directors, or a designated committee thereof, determines that the
information provided in a stockholder's notice does not satisfy the
informational requirements of this Article 7.F in any material respect, the
Secretary of the Company shall notify such stockholder of the deficiency in the
notice. The stockholder shall have an opportunity to cure the deficiency by
providing additional information to the Secretary within such period of time,
not to exceed five days from the date such deficiency notice is given to the
stockholder, as the Board of Directors or such committee shall reasonably
determine. If the deficiency is not cured within such period, or if the Board of
Directors or such committee reasonably determines that the additional
information provided by the stockholder, together with information previously
provided, does not satisfy the requirements of this Article 7.F in any material
respect, then the Board of Directors may reject such stockholder's nomination.
The Secretary of the Company shall notify a stockholder in writing whether such
person's nomination has been made in accordance with the time and informational
requirements of this Article 7.F. Notwithstanding the procedures set forth in
this paragraph, if neither the Board of Directors nor such committee makes a
determination as to the validity of any nominations by a stockholder, the
presiding officer of the annual meeting shall determine and declare at the
annual meeting whether the nomination was made in accordance with the terms of
this Article 7.F. If the presiding officer determines that a nomination was made
in accordance with the terms of this Article 7.F, such person shall so declare
at the annual meeting and ballots shall be provided for use at the meeting with
respect to such nominee. If the presiding officer determines that a nomination
was not made in accordance with the terms of this
-5-
<PAGE>
Article 7.F, such person shall so declare at the annual meeting and the
defective nomination shall be disregarded.
Notwithstanding the foregoing, and except as otherwise required by law,
whenever the holders of any one or more series of Preferred Stock shall have the
right, voting separately as a class, to elect one or more directors of the
Company, the provisions of this Article 7.F shall not apply with respect to the
director or directors elected by such holders of Preferred Stock.
Article 8. Preemptive Rights. The shareholders of the Company shall not
be entitled
to preemptive rights with respect to the capital stock issued by the Company.
Article 9. Elimination of Directors' Liability. A director of the
Company shall not be personally liable, as such, for monetary damages for any
action taken unless: (i) the director has breached or failed to perform such
director's fiduciary duties, or other duties under Chapter 17, Subchapter B of
the BCL, of such director's office, and (ii) the breach or failure to perform
constitutes self-dealing, willful misconduct, or recklessness; provided,
however, that the foregoing shall not apply to (i) the responsibility or
liability of a director pursuant to any criminal statute; or (ii) the liability
of a director for the payment of taxes pursuant to federal, state, or local law.
If the laws of the Commonwealth of Pennsylvania are amended after the effective
date of these Articles of Incorporation to eliminate further or limit the
personal liability of directors, then the liability of a director of the Company
shall be eliminated or limited to the fullest extent permitted by law.
Any repeal or modification of the foregoing paragraph by the
stockholders of the Company shall not adversely affect any right or protection
of a director of the Company existing at the time of such repeal or
modification.
Article 10. Indemnification, etc. of Officers, Directors, Employees,
and Agents.
A. Persons. The Company shall indemnify any person who was or is a
party or is threatened to be made a party to any threatened, pending, or
completed action, suit, or proceeding, including actions by or in the right of
the Company, whether civil, criminal, administrative, or investigative, by
reason of the fact that such person is or was a director, officer, employee,
fiduciary, trustee, or agent of the Company, or is or was serving at the request
of the Company as a director, officer, employee, fiduciary, trustee, or agent of
another corporation, partnership, joint venture, trust, or other enterprise.
B. Extent -- Derivative Actions. In the case of a threatened, pending,
or completed action or suit by or in the right of the Company against a person
named in paragraph A by reason of such person holding a position named in
paragraph A, the Company shall indemnify such person if such person satisfies
the standard in paragraph C, for expenses (including attorneys' fees) actually
and reasonably incurred by such person in connection with the defense or
settlement of the action or suit.
-6-
<PAGE>
C. Standard -- Derivative Suits. In the case of a threatened, pending,
or completed action or suit by or in the right of the Company, a person named in
paragraph A shall be indemnified only if:
1. such person is successful on the merits or otherwise;
or
2. such person acted in good faith in the transaction that is
the subject of the suit or action, and in a manner reasonably believed
to be in, or not opposed to, the best interests of the Company,
including, but not limited to, the taking of any and all actions in
connection with the Company's response to any tender offer or any offer
or proposal of another party to engage in a Business Combination (as
defined in Article 13 of these Articles) not approved by the Board of
Directors. However, such person shall not be indemnified in respect of
any claim, issue, or matter as to which such person has been adjudged
liable to the Company unless (and only to the extent that) the court of
common pleas or the court in which the suit was brought shall
determine, upon application, that despite the adjudication of liability
but in view of all the circumstances, such person is fairly and
reasonably entitled to indemnity for such expenses as the court shall
deem proper.
D. Extent -- Nonderivative Suits. In case of a threatened, pending, or
completed suit, action, or proceeding (whether civil, criminal, administrative,
or investigative), other than a suit by or in the right of the Company, together
hereafter referred to as a nonderivative suit, against a person named in
paragraph A by reason of such person holding a position named in paragraph A,
the Company shall indemnify such person if such person satisfies the standard in
paragraph E, for amounts actually and reasonably incurred by such person in
connection with the defense or settlement of the nonderivative suit, including,
but not limited to (i) expenses (including attorneys' fees), (ii) amounts paid
in settlement, (iii) judgments, and (iv) fines.
E. Standard -- Nonderivative Suits. In case of a nonderivative suit, a
person named in paragraph A shall be indemnified only if:
1. such person is successful on the merits or otherwise;
or
2. such person acted in good faith in the transaction that is
the subject of the nonderivative suit and in a manner such person
reasonably believed to be in, or not opposed to, the best interests of
the Company, including, but not limited to, the taking of any and all
actions in connection with the Company's response to any tender offer
or any offer or proposal of another party to engage in a Business
Combination (as defined in Article 13 of these Articles) not approved
by the Board of Directors and, with respect to any criminal action or
proceeding, such person had no reasonable cause to believe such
person's conduct was unlawful. The termination of a nonderivative suit
by judgment, order, settlement, conviction, or upon a plea of nolo
contendere or its equivalent shall not, in itself, create a presumption
that the person failed to satisfy the standard of this paragraph E.2.
-7-
<PAGE>
F. Determination That Standard Has Been Met. A determination that the
standard of paragraph C or E has been satisfied may be made by a court, or,
except as stated in paragraph C.2 (second sentence), the determination may be
made by:
1. the Board of Directors by a majority vote of a quorum
consisting of directors of the Company who were not parties to the
action, suit, or proceeding;
2. if such a quorum is not obtainable or if obtainable and a
majority of a quorum of disinterested directors so directs, by
independent legal counsel in a written opinion; or
3. the stockholders of the Company.
G. Proration. Anyone making a determination under paragraph F may
determine that a person has met the standard as to some matters but not as to
others, and may reasonably prorate amounts to be indemnified.
H. Advancement of Expenses. Reasonable expenses incurred by a director,
officer, employee, or agent of the Company in defending a civil or criminal
action, suit, or proceeding described in Article 10.A may be paid by the Company
in advance of the final disposition of such action, suit, or proceeding upon
receipt of an undertaking by or on behalf of such person to repay such amount if
it shall ultimately be determined that the person is not entitled to be
indemnified by the Company.
I. Other Rights. The indemnification and advancement of expenses
provided by or pursuant to this Article 10 shall not be deemed exclusive of any
other rights to which those seeking indemnification or advancement of expenses
may be entitled under any insurance or other agreement, vote of stockholders or
directors, or otherwise, both as to actions in their official capacity and as to
actions in another capacity while holding an office, and shall continue as to a
person who has ceased to be a director, officer, employee, or agent and shall
inure to the benefit of the heirs, executors, and administrators of such person.
J. Insurance. The Company shall have the power to purchase and maintain
insurance on behalf of any person who is or was a director, officer, employee,
or agent of the Company, or is or was serving at the request of the Company as a
director, officer, employee, or agent of another corporation, partnership, joint
venture, trust, or other enterprise, against any liability asserted against such
person and incurred by such person in any such capacity, or arising out of such
person's status as such, whether or not the Company would have the power to
indemnify such person against such liability under the provisions of this
Article 10.
K. Security Fund; Indemnity Agreements. By action of the Board of
Directors (notwithstanding their interest in the transaction), the Company may
create and fund a trust fund or fund of any nature, and may enter into
agreements with its officers, directors, employees, and
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<PAGE>
agents for the purpose of securing or insuring in any manner its obligation to
indemnify or advance expenses provided for in this Article 10.
L. Modification. The duties of the Company to indemnify and to advance
expenses to any person as provided in this Article 10 shall be in the nature of
a contract between the Company and each such person, and no amendment or repeal
of any provision of this Article 10, and no amendment or termination of any
trust or other fund created pursuant to Article 10.K hereof, shall alter to the
detriment of such person the right of such person to the advancement of expenses
or indemnification related to a claim based on an act or failure to act which
took place prior to such amendment, repeal, or termination.
M. Proceedings Initiated by Indemnified Persons. Notwithstanding any
other provision in this Article 10, the Company shall not indemnify a director,
officer, employee, or agent for any liability incurred in an action, suit, or
proceeding initiated by (which shall not be deemed to include counter-claims or
affirmative defenses) or participated in as an intervenor or amicus curiae by
the person seeking indemnification unless such initiation of or participation in
the action, suit, or proceeding is authorized, either before or after its
commencement, by the affirmative vote of a majority of the directors then in
office.
N. Savings Clause. If this Article 10 or any portion hereof shall be
invalidated on any ground by any court of competent jurisdiction, then the
Company shall nevertheless indemnify each director, officer, employee, and agent
of the Company as to costs, charges, and expenses (including attorneys' fees),
judgments, fines, and amounts paid in settlement with respect to any action,
suit, or proceeding, whether civil, criminal, administrative, or investigative,
including an action by or in the right of the Company to the fullest extent
permitted by any applicable portion of this Article 10 that shall not have been
invalidated and to the fullest extent permitted by applicable law.
If the laws of the Commonwealth of Pennsylvania are amended to permit
further indemnification of the directors, officers, employees, and agents of the
Company, then the Company shall indemnify such persons to the fullest extent
permitted by law. Any repeal or modification of this Article by the stockholders
of the Company shall not adversely affect any right or protection of a director,
officer, employee, or agent existing at the time of such repeal or modification.
Article 11. Meetings of Stockholders and Stockholder Proposals.
A. Special Meetings of Stockholders. Special meetings of the
stockholders of the Company may be called only by the Board of Directors
pursuant to a resolution approved by the affirmative vote of a majority of the
directors then in office.
B. Action Without a Meeting. Notwithstanding any other provision of
these Articles or the Bylaws of the Company, no action required to be taken or
which may be taken at any annual or special meeting of the stockholders of the
Company may be taken without a
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<PAGE>
meeting, and the power of stockholders to consent in writing, without a meeting,
to the taking of any action is specifically denied.
C. Stockholder Proposals. At an annual meeting of stockholders, only
such new business shall be conducted, and only such proposals shall be acted
upon, as shall have been brought before the annual meeting by, or at the
direction of, (1) the Board of Directors or (2) any stockholder of the Company
who complies with all the requirements set forth in this Article 11.C.
Proposals, other than those made by or at the direction of the Board of
Directors, shall be made pursuant to timely notice in writing to the Secretary
of the Company as set forth in this Article 11.C. For stockholder proposals to
be considered at the annual meeting of stockholders, the stockholder's notice
shall be delivered to, or mailed and received at, the principal executive
offices of the Company not less than 60 days prior to the anniversary date of
the immediately preceding annual meeting of stockholders of the Company. Such
stockholder's notice shall set forth as to each matter the stockholder proposes
to bring before the annual meeting (a) a brief description of the proposal
desired to be brought before the annual meeting and the reasons for conducting
such business at the annual meeting, (b) the name and address, as they appear on
the Company's books, of the stockholder proposing such business and, to the
extent known, any other stockholders known by such stockholder to be supporting
such proposal, (c) the class and number of shares of the Company stock that are
Beneficially Owned by the stockholder on the date of such stockholder notice
and, to the extent known, by any other stockholders known by such stockholder to
be supporting such proposal on the date of such stockholder notice, and (d) any
financial interest of the stockholder in such proposal (other than interests
which all stockholders would have).
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<PAGE>
The Board of Directors may reject any stockholder proposal not timely
made in accordance with the terms of this Article 11.C. If the Board of
Directors, or a designated committee thereof, determines that the information
provided in a stockholder's notice does not satisfy the informational
requirements of this Article 11.C in any material respect, the Secretary of the
Company shall promptly notify such stockholder of the deficiency in the notice.
The stockholder shall have an opportunity to cure the deficiency by providing
additional information to the Secretary within such period of time, not to
exceed five days from the date such deficiency notice is given to the
stockholder, as the Board of Directors or such committee shall reasonably
determine. If the deficiency is not cured within such period, or if the Board of
Directors or such committee determines that the additional information provided
by the stockholder, together with information previously provided, does not
satisfy the requirements of this Article 11.C in any material respect, then the
Board of Directors may reject such stockholder's proposal. The Secretary of the
Company shall notify a stockholder in writing whether such stockholder's
proposal has been made in accordance with the time and informational
requirements of this Article 11.C. Notwithstanding the procedures set forth in
this paragraph, if neither the Board of Directors nor such committee makes a
determination as to the validity of any stockholder proposal, the presiding
officer of the annual meeting shall determine and declare at the annual meeting
whether the stockholder proposal was made in accordance with the terms of this
Article 11.C. If the presiding officer determines that a stockholder proposal
was made in accordance with the terms of this Article 11.C, such person shall so
declare at the annual meeting and ballots shall be provided for use at the
meeting with respect to any such proposal. If the presiding officer determines
that a stockholder proposal was not made in accordance with the terms of this
Article 11.C, such person shall so declare at the annual meeting and any such
proposal shall not be acted upon at the annual meeting.
This provision shall not prevent the consideration and approval or
disapproval at the annual meeting of report of officers, directors, and
committees of the Board of Directors, but in connection with such reports, no
new business shall be acted upon at such annual meeting unless stated, filed,
and received as herein provided.
Article 12. Evaluation of Offers. The Board of Directors of the
Company, when evaluating any offer to (A) make a tender or exchange offer for
any equity security of the Company, (B) merge or consolidate the Company with
another corporation or entity or (C) purchase or otherwise acquire all or
substantially all of the properties and assets of the Company, may, in
connection with the exercise of its judgment in determining what is in the best
interest of the Company and its stockholders, give due consideration to all
relevant factors, including, without limitation, the social and economic effect
of acceptance of such offer: on the Company's present and future customers and
employees and those of its subsidiaries; on the communities in which the Company
and its subsidiaries operate or are located; on the ability of the Company to
fulfill its corporate objectives as a financial institution holding company and
on the ability of its subsidiary financial institution to fulfill the objectives
of a federally insured financial institution under applicable statutes and
regulations.
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<PAGE>
Article 13. Stockholder Approval of Business Combinations
A. Stockholder Vote. Any merger, consolidation, liquidation, or
dissolution of the Company or any action that would result in the sale or other
disposition of at least 50% of the tangible assets of the Company ("Business
Combination") shall require the affirmative vote of the holders of at least
eighty percent (80%) of the outstanding shares of each class of capital stock of
the Company eligible to vote at a legal meeting.
B. Board Approval. The provisions of Article 13.A shall not apply to a
particular Business Combination, and such Business Combination shall require
only such stockholder vote, if any, as would be required by Pennsylvania law, if
such Business Combination is approved by two-thirds of the entire Board of
Directors of the Company.
Article 14. Amendment of Articles and Bylaws.
A. Articles. The Company reserves the right to amend, alter, change, or
repeal any provision contained in these Articles of Incorporation, in the manner
now or hereafter prescribed by law, and all rights conferred upon stockholders
herein are granted subject to this reservation. No amendment, addition,
alteration, change, or repeal of these Articles of Incorporation shall be made
unless such amendment addition, alteration, change, or repeal is first proposed
and approved by the Board of Directors pursuant to a resolution proposed and
adopted by the affirmative vote of a majority of the directors then in office,
and thereafter is approved by the holders of a majority (except as provided
below) of the shares of the Company entitled to vote generally in an election of
directors, voting together as a single class, as well as such additional vote of
the Preferred Stock as may be required by the provisions of any series thereof.
Notwithstanding anything contained in these Articles of Incorporation to the
contrary, the affirmative vote of the holders of at least eighty percent (80%)
of the shares of the Company entitled to vote generally in an election of
directors, voting together as a single class, as well as such additional vote of
the Preferred Stock as may be required by the provisions of any series thereof,
shall be required to amend, adopt, alter, change, or repeal any provision
inconsistent with Articles 7, 8, 9, 10, 11, 12, 13 and 14.
B. Bylaws. The Board of Directors or stockholders may adopt, alter,
amend, or repeal the Bylaws of the Company. Such action by the Board of
Directors shall require the affirmative vote of a majority of the directors then
in office at any regular or special meeting of the Board of Directors. Such
action by the stockholders shall require the affirmative vote of the holders of
at least eighty percent (80%) of the shares of the Company entitled to vote
generally in an election of directors, voting together as a single class, as
well as such additional vote of the Preferred Stock as may be required by the
provisions of any series thereof.
Originally filed on December 8, 1997 and amended on May 1, 1998.
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EXHIBIT 3.(ii)
<PAGE>
BYLAWS
OF
NITTANY FINANCIAL CORP.
ARTICLE I. OFFICES
1.1 Registered Office and Registered Agent. The registered office of
Nittany Financial Corp. (the "Company") shall be located in the Commonwealth of
Pennsylvania at such place as may be fixed from time to time by the board of
directors of the Company (the "Board" or "Board of Directors") upon filing of
such notices as may be required by law, and the registered agent shall have a
business office identical with such registered office. The initial location will
be 637 Kennard Road, State College, Pennsylvania 16801.
1.2 Other Offices. The Company may have other offices within or outside
the Commonwealth of Pennsylvania at such place or places as the Board of
Directors may from time to time determine.
ARTICLE II. STOCKHOLDERS' MEETING
2.1 Meeting Place. All meetings of the stockholders shall be held at
the principal place of business of the Company, or at such other place within or
without the Commonwealth of Pennsylvania as shall be determined by the Board of
Directors and stated in the notice of such meeting.
2.2 Annual Meeting Time. The annual meeting of the stockholders for the
election of directors and for the transaction of such other business as may
properly come before the meeting shall be held each year on such date and time
as may be determined by the Board of Directors and stated in the notice of such
meeting.
2.3 Organization and Conduct. Each meeting of the stockholders shall be
presided over by the Chairman of the Board, or in the Chairman's absence by the
President, or if neither the Chairman nor the President is present, by any Vice
President. The Secretary, or in the Secretary's absence, the assistant
Secretary, or in the assistant Secretary's absence a temporary Secretary, shall
act as secretary of each meeting of the stockholders. In the absence of the
Secretary and any temporary Secretary, the chairman of the meeting may appoint
any person present to act as secretary of the meeting. The chairman of any
meeting of the stockholders, unless prescribed by law or regulation or unless
the Board of Directors has otherwise determined, shall determine the order of
the business and the procedure at the meeting, including such regulation of the
manner of voting and the conduct of discussions as shall be deemed appropriate
by such chairman in the chairman's sole discretion.
2.4 Notice.
(a) Notice of the date, time, and place of, and the general
business to be conducted at, an annual or special meeting of stockholders shall
be given by delivering personally, by facsimile transmission, or by mailing a
written or printed notice of the same, at least ten (10) days prior to the
meeting, to each stockholder of record entitled to vote at such meeting. When
any stockholders' meeting, either annual or special, is adjourned and a new
record date is fixed for an adjourned meeting of stockholders, notice of the
adjourned meeting shall be given as in the case of an original meeting. It shall
<PAGE>
not be necessary to give any notice of the time and place of any meeting
adjourned unless new business is to be transacted thereat or a new record date
is fixed therefor, other than an announcement at the meeting at which such
adjournment is taken.
2.5 Voting Lists. The officer or agent having charge of the transfer
books for shares of the Company shall make a complete list of the shareholders
entitled to vote at any meeting of shareholders, arranged in alphabetical order,
with the address of and the number of shares held by each. The list shall be
produced and kept open at the time and place of the meeting and shall be subject
to inspection of any shareholder during the whole time of the meeting for the
purposes thereof.
2.6 Quorum. Except as otherwise required by law:
(a) A quorum at any annual or special meeting of stockholders
shall consist of stockholders representing, either in person or by proxy, a
majority of the outstanding capital stock of the Company entitled to vote at
such meeting without regard to any shares for which a broker indicates on a
proxy that it does not have discretionary authority as to such shares to vote on
such matter ("Broker Non-votes").
(b) The votes of a majority of those present, without regard
to Broker Non-votes or votes of abstention, at any properly called meeting or
adjourned meeting of stockholders, at which a quorum as defined above is
present, shall be sufficient to transact business, unless such greater vote is
required by these Bylaws, the Articles of Incorporation, or the laws of the
Commonwealth of Pennsylvania.
2.7 Voting of Shares.
(a) Except as otherwise provided in these Bylaws or to the
extent that voting rights of the shares of any class or classes are limited or
denied by the Articles of Incorporation, each stockholder, on each matter
submitted to a vote at a meeting of stockholders, shall have one vote for each
share of capital stock registered in such person's name on the books of the
Company.
(b) Directors are to be elected by a plurality of votes cast
by the shares entitled to vote in the election of directors at a meeting at
which a quorum is present. Stockholders shall not be permitted to cumulate their
votes for the election of directors. If, at any meeting of the stockholders, due
to a vacancy or vacancies or otherwise, directors of more than one class of the
Board of Directors are to be elected, each class of directors to be elected at
the meeting shall be elected in a separate election by a plurality vote.
2.8 Fixing Record Date. The Board of Directors may fix a time prior to
the date of any meeting of shareholders as a record date for the determination
of the shareholders entitled to notice of, or to vote at, the meeting, which
time, except in the case of an adjourned meeting, shall be not more than 90 days
prior to the date of the meeting of shareholders. Only shareholders of record on
the date fixed shall be so entitled notwithstanding any transfer of shares on
the books of the Company after any record date fixed as provided in this
subsection. The Board of Directors may similarly fix a record date for the
determination of shareholders of record for any other purpose. When a
determination of shareholders of record has been made as provided in this
section for purposes of a meeting, the determination shall apply to any
adjournment thereof unless the Board fixes a new record date for the adjourned
meeting.
2.9 Proxies. A stockholder may vote either in person or by proxy
executed in writing by the stockholder, or such person's duly authorized
attorney-in-fact. A telegram, telex, cablegram, datagram, or similar
transmission from a shareholder or attorney-in-fact, or a photographic,
facsimile, or similar
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reproduction of a writing executed by a shareholder or attorney-in-fact may be
treated as properly executed for purposes of this section and shall be so
treated if it sets forth a confidential and unique identification number or
other mark furnished by the Company to the shareholder for the purposes of a
particular meeting or transaction. No proxy shall be valid after three years
from the date of its execution, unless otherwise provided in the proxy.
2.10 Voting of Shares in the Name of Two or More Persons. Where shares
are held jointly or as tenants in common by two or more persons as fiduciaries
or otherwise, if only one or more of such persons is present in person or by
proxy, all of the shares standing in the names of such persons shall be deemed
to be represented for the purpose of determining a quorum and the Company shall
accept as the vote of all such shares the votes cast by such person or a
majority of them and if in any case such persons are equally divided upon the
manner of voting the shares held by them, the vote of such shares shall be
divided equally among such persons, without prejudice to the rights of such
joint owners or the beneficial owners thereof among themselves, except that, if
there shall have been filed with the Secretary of the Company a copy, certified
by an attorney-at-law to be correct, of the relevant portions of the agreements
under which such shares are held or the instrument by which the trust or estate
was created or the decree of court appointing them, or of a decree of court
directing the voting of such shares, the persons specified as having such voting
power in the latest such document so filed, and only such persons, shall be
entitled to vote such shares but only in accordance therewith.
2.11 Voting of Shares by Certain Holders. Shares standing in the name
of another corporation may be voted by an officer, agent, or proxy as the bylaws
of such corporation may prescribe, or, in the absence of such provision, as the
board of directors of such corporation may determine. Shares held by an
administrator, executor, guardian, or conservator may be voted by such person,
either in person or by proxy, without a transfer of such shares into such
person's name. Shares standing in the name of a trustee may be voted by the
trustee, either in person or by proxy. Shares standing in the name of a receiver
may be voted by such receiver without the transfer thereof into the receiver's
name if authority to do so is contained in an appropriate order of the court or
other public authority by which such receiver was appointed. A stockholder whose
shares are pledged shall be entitled to vote such shares until the shares have
been transferred into the name of the pledgee or nominee, and thereafter the
pledgee or nominee shall be entitled to vote the shares so transferred.
2.12 Judges of Election. For each meeting of stockholders, the Board of
Directors may appoint the judges of election. If for any meeting the judge(s)
appointed by the Board of Directors shall be unable to act or the Board of
Directors shall fail to appoint any judge, one or more judges may be appointed
at the meeting by the chairman thereof. The number of judges shall be one or
three. Except for such duties as may be designated in the Articles of
Incorporation to another person, such judges determine the number of shares
outstanding and the voting power of each, the shares represented at the meeting,
the existence of a quorum, the authenticity, validity, and effect of proxies,
receive votes or ballots, hear and determine all challenges and questions in any
way arising in connection with the right to vote, count and tabulate all votes,
determine the result and do such acts as may be proper to conduct the election
or vote with fairness to all shareholders. If there are three judges, the
decision, act, or certificate of a majority shall be effective in all respects
as the decision, act, or certificate of all. Judges need not be stockholders.
2.13 Action By Shareholders Without a Meeting. Action required to be
taken or which may be taken at any annual or special meeting of stockholders of
the Company may be taken without a meeting as set forth in the Articles of
Incorporation, which provisions are incorporated herein with the same effect as
if they were set forth herein.
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<PAGE>
ARTICLE III. CAPITAL STOCK
3.1 Certificates. Certificates of stock shall be issued in numerical
order, and each stockholder shall be entitled to a certificate signed by the
President or a Vice President, and the Secretary or the Treasurer, and may be
sealed with the seal of the Company or a facsimile thereof. The signatures of
such officers may be facsimiles if the certificate is manually signed on behalf
of a transfer agent, or registered by a registrar, other than the Company itself
or an employee of the Company. If an officer who has signed or whose facsimile
signature has been placed upon such certificate ceases to be an officer of the
Company before the certificate is issued, it may be issued by the Company with
the same effect as if the person were an officer on the date of issue. Each
certificate of stock shall state:
(a) that the Company is incorporated under the laws of the
Commonwealth of Pennsylvania;
(b) the name of the person to whom issued;
(c) the number and class of shares and the designation of the
series, if any, which such certificate represents;
(d) the par value of each share represented by such
certificate, or a statement that such shares are without par value; and
(e) that the Company will furnish to any shareholder upon
request and without charge, a full statement of the designations, preferences,
limitations, and relative rights of each class authorized to be issued.
3.2 Transfers.
(a) Transfers of stock shall be made only upon the stock
transfer books of the Company, kept at the registered office of the Company or
at its principal place of business, or at the office of its transfer agent or
registrar, and before a new certificate is issued the old certificate shall be
surrendered for cancellation. The Board of Directors may, by resolution, open a
share register in any state of the United States, and may employ an agent or
agents to keep such register, and to record transfers of shares therein.
(b) Shares of stock shall be transferred by delivery of the
certificates therefor, accompanied either by an assignment in writing on the
back of the certificate or an assignment separate from the certificate, or by a
written power of attorney to sell, assign, and transfer the same, signed by the
holder of said certificate. No shares of stock shall be transferred on the books
of the Company until the outstanding certificates therefor have been surrendered
to the Company.
3.3 Registered Owner. Registered stockholders shall be treated by the
Company as the holders in fact of the stock standing in their respective names
and the Company shall not be bound to recognize any equitable or other claim to
or interest in any share on the part of any other person, whether or not it
shall have express or other notice thereof, except as expressly provided below
or by the laws of the Commonwealth of Pennsylvania. The Board of Directors may
adopt by resolution a procedure whereby a stockholder of the Company may certify
in writing to the Company that all or a portion of the shares registered in the
name of such stockholder are held for the account of a specified person or
persons. The resolution shall set forth:
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(a) The classification of stockholders who may certify;
(b) The purpose or purposes for which the certification may be
made;
(c) The form of certification and information to be contained
therein;
(d) If the certification is with respect to a record date or
closing of the stock transfer books, the date within which the certification
must be received by the Company; and
(e) Such other provisions with respect to the procedure as are
deemed necessary or desirable.
Upon receipt by the Company of a certification complying with a
resolution meeting the above requirements, the persons specified in the
certification shall be deemed, for the purpose or purposes set forth in the
certification, to be the holders of record of the number of shares specified in
place of the stockholder making the certification.
3.4 Mutilated, Lost, or Destroyed Certificates. In case of any
mutilation, loss, or destruction of any certificate of stock, another may be
issued in its place upon receipt of proof of such mutilation, loss, or
destruction. The Board of Directors may impose conditions on such issuance and
may require the giving of a satisfactory bond or indemnity to the Company in
such sum as the Board might determine, or the Board may establish such other
procedures as it deems necessary.
3.5 Fractional Shares or Scrip. The Company may (a) issue fractions of
a share which shall entitle the holder a proportional interest to exercise
voting rights, to receive dividends thereon, and to participate in any of the
assets of the Company in the event of liquidation; (b) arrange for the
disposition of fractional interests by those entitled thereto; (c) pay in cash
the fair value of fractions of a share as of the time when those entitled to
receive such shares are determined; or (d) issue scrip in registered or bearer
form which shall entitle to holder to receive a certificate for a full share
upon the surrender of such scrip aggregating a full share.
3.6 Shares of Another Company. Shares owned by the Company in another
corporation, domestic or foreign, may be voted by such officer, agent, or proxy
as the Board of Directors may determine or, in the absence of such
determination, by the President of the Company.
ARTICLE IV. BOARD OF DIRECTORS
4.1 Number and Powers. The management of all the affairs, property, and
interest of the Company shall be vested in a Board of Directors. The Board of
Directors shall be divided into four classes as nearly equal in number as
possible. The initial Board of Directors shall consist of five (5) persons. The
classification and term of the directors shall be as set forth in the Articles
of Incorporation, which provisions are incorporated herein with the same effect
as if they were set forth herein. Directors need not be residents of the
Commonwealth of Pennsylvania and need not be shareholders of the Company. In
addition to the powers, authorities, and duties expressly conferred upon it by
these Bylaws and the Articles of Incorporation, the Board of Directors may
exercise all such powers of the Company and do all such lawful acts and things
as are not by statute or by the Articles of Incorporation or by these Bylaws
directed or required to be exercised or done by the stockholders.
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In discharging the powers and duties of their respective positions, the
Board of Directors, committees of the Board of Directors, and individual
directors may, in considering the best interests of the Company, consider to the
extent they deem appropriate the effects of any action upon any and all groups
affected by such action, including stockholders, employees, suppliers,
customers, and creditors of the Company, and upon the communities in which
offices or other establishments of the Company are located; the short-term and
long-term interests of the Company; the resources, intent, and conduct (past,
stated, and potential) of any person seeking to acquire control of the Company;
and any and all other factors, provided however, the Board of Directors,
committees of the Board of Directors, or any individual director shall not be
required, in considering the best interests of the Company or the effects of any
action, to regard any interest or interests of any particular group affected by
the action as a dominant or controlling interest or factor.
4.2 Change of Number. The number of directors may at any time be
increased or decreased by a vote of two-thirds of the Board of Directors,
provided that no decrease shall have the effect of shortening the term of any
incumbent director except as provided in Sections 4.4 and 4.5 hereunder.
Notwithstanding anything to the contrary contained within these Bylaws, the
number of directors may neither be less than one (1) nor more than twelve (12).
4.3 Resignation. Any director may resign at any time by sending a
written notice of such resignation to the home office of the Company addressed
to the Chairman or the President. Unless otherwise specified therein, such
resignation shall take effect upon receipt thereof by the Chairman or the
President.
4.4 Vacancies. All vacancies in the Board of Directors shall be filled
in the manner provided in the Articles of Incorporation, which provisions are
incorporated herein with the same effect as if they were set forth herein.
4.5 Removal of Directors. Directors may be removed in the manner
provided in the Articles of Incorporation, which provisions are incorporated
herein with the same effect as if they were set forth herein.
4.6 Regular Meetings. Regular meetings of the Board of Directors or any
committee thereof may be held without notice at the principal place of business
of the Company or at such other place or places, either within or without the
Commonwealth of Pennsylvania, as the Board of Directors or such committee, as
the case may be, may from time to time designate. The annual meeting of the
Board of Directors shall be held without notice immediately after the
adjournment of the annual meeting of stockholders.
4.7 Special Meetings.
(a) Special meetings of the Board of Directors may be called
at any time by the Chairman, President, or by a majority of the authorized
number of directors, to be held at the principal place of business of the
Company or at such other place or places as the Board of Directors or the person
or persons calling such meeting may from time to time designate. Notice of all
special meetings of the Board of Directors shall be given to each director at
least five (5) days prior to such meeting by telegram, telex, cablegram,
courier, facsimile, or other similar communication, by letter, or personally.
Such notice need neither specify the business to be transacted at, nor the
purpose of, the meeting.
(b) Special meetings of any committee may be called at any
time by such person or persons and with such notice as shall be specified for
such committee by the Board of Directors, or in
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the absence of such specification, in the manner and with the notice required
for special meetings of the Board of Directors.
4.8 Quorum. A majority of the Board of Directors shall be necessary at
all meetings to constitute a quorum for the transaction of business.
4.9 Waiver of Notice. Attendance of a director at a meeting shall
constitute a waiver of notice of such meeting, except where a director attends
for the express purpose of objecting to the transaction of any business because
the meeting is not lawfully called or convened. A waiver of notice signed by the
director or directors, whether before, during, or after the time stated for the
meeting, shall be equivalent to the giving of notice.
4.10 Registering Dissent. A director who is present at a meeting of the
Board of Directors at which action on a corporate matter is taken shall be
presumed to have assented to such action unless such director's dissent is
entered in the minutes of the meeting, or unless the director files a written
dissent to such action with the person acting as the secretary of the meeting
before the adjournment thereof, or unless the director delivers a dissent in
writing to the Secretary of the Company immediately after the adjournment of the
meeting. Such right to dissent shall not apply to a director who voted in favor
of such action.
4.11 Executive, Audit, and Other Committees. Standing or special
committees may be appointed by the Board of Directors from its own number from
time to time, and the Board of Directors may from time to time invest such
committees with such powers as it may see fit, subject to such conditions as may
be prescribed by the Board. An Executive Committee may be appointed by
resolution passed by a majority of the full Board of Directors. It shall have
and exercise all of the authority of the Board of Directors, except in reference
to the submission of any action requiring the approval of stockholders, the
creation or filling of vacancies on the Board of Directors, the adoption,
amendment, or repeal of these Bylaws, the amendment or repeal of any resolution
of the Board which, by its terms, is only amendable or repealable by the entire
Board, or any action on matters committed by these Bylaws or resolution of the
Board to another committee of the Board. An Audit Committee shall be appointed
by resolution passed by a majority of the full Board of Directors, and at least
a majority of the members of the Audit Committee shall be directors who are not
also officers of the Company. The Audit Committee shall review the records and
affairs of the Company to determine its financial condition, shall review the
Company's systems of internal control with management and the Company's
independent auditors, and shall monitor the Company's adherence in accounting
and financial reporting to generally accepted accounting principles, as well as
such other duties as may be assigned to it by the Board of Directors. All
committees appointed by the Board of Directors shall keep regular minutes of the
transactions of their meetings and shall cause them to be recorded in books kept
for that purpose in the office of the Company. The designation of any such
committee, and the delegation of authority thereto, shall not relieve the Board
of Directors, or any member thereof, of any responsibility imposed by law.
4.12 Remuneration. The Board of Directors, by the affirmative vote of a
majority of the directors then in office, and irrespective of any personal
interest of any of its members, shall have the authority to establish reasonable
fee for all directors for services to the Company as directors, officers, or
otherwise, or to delegate such authority to any appropriate committee; provided,
that nothing herein contained shall be construed to preclude any director from
serving the Company in any other capacity and receiving compensation therefor.
Members of standing or special committees may be allowed like compensation for
attending committee meetings.
7
<PAGE>
4.13 Action by Directors Without a Meeting. Any action which may be
taken at a meeting of the directors, or of a committee thereof, may be taken
without a meeting if a consent in writing, setting forth the action so taken or
to be taken, shall be signed by all of the directors, or all of the members of
the committee, as the case may be. Such consent shall have the same effect as a
unanimous vote.
4.14 Action of Directors by Communications Equipment. Any action which
may be taken at a meeting of directors, or of a committee thereof, may be taken
by means of a conference telephone or similar communications equipment by means
of which persons participating in the meeting can hear each other at the same
time. Participation in a meeting pursuant to this section shall constitute
presence in person at the meeting.
ARTICLE V. OFFICERS
5.1 Designations. The officers of the Company may include the Chairman
of the Board, a President, a Secretary, and a Treasurer, as well as such Vice
Presidents (including Executive and Senior Vice Presidents), Assistant
Secretaries, and Assistant Treasurers as the Board may designate, who shall be
elected for one year by the directors at their first meeting after the annual
meeting of stockholders, and who shall hold office until their successors are
elected and qualify. Any two or more offices may be held by the same person,
except that the offices of President and Secretary and President and Treasurer
may not be held by the same person. The President and Chairman of the Board
shall be members of the Board.
5.2 Powers and Duties. The officers of the Company shall have such
authority and perform such duties as the Board of Directors may from time to
time authorize or determine. In the absence of action by the Board of Directors,
the officers shall have such powers and duties as generally pertain to their
respective offices.
5.3 Delegation. In the case of absence or inability to act of any
officer of the Company and of any person herein authorized to act in such
officer's place, the Board of Directors may from time to time delegate the
powers or duties of such officer to any other officer or any director or other
person whom it may select.
5.4 Vacancies. Vacancies in any office arising from any cause may be
filled by the Board of Directors at any regular or special meeting of the Board.
5.5 Other Officers. The Board may appoint such other officers and
agents as it shall deem necessary or expedient, who shall hold their offices for
such terms and shall exercise such powers and perform such duties as shall be
determined from time to time by the Board of Directors.
5.7 Term - Removal. The officers of the Company shall hold office until
their successors are chosen and qualified. Any officer or agent elected or
appointed by the Board of Directors may be removed at any time, with or without
cause, by the affirmative vote of a majority of the whole Board of Directors,
but such removal shall be without prejudice to the contractual rights, if any,
of the person so removed. The election or appointment of an officer or agent
shall not in itself create contractual rights.
8
<PAGE>
ARTICLE VI. FISCAL YEAR; ANNUAL AUDIT
The fiscal year of the Company shall end on the 31st day of December of
each year. The Company shall be subject to an annual audit as of the end of its
fiscal year by independent public accountants appointed by and responsible to
the Board of Directors. The appointment of such accountants shall be subject to
annual ratification by the stockholders.
ARTICLE VII. DIVIDENDS AND FINANCE
7.1 Dividends. Dividends may be declared by the Board of Directors and
paid by the Company out of retained earnings of the Company subject to the
conditions and limitations imposed by the laws of the Commonwealth of
Pennsylvania.
7.2. Reserves. Before making any distribution of earned surplus, there
may be set aside out of the earned surplus of the Company such sum or sums as
the directors from time to time in their absolute discretion deem expedient as a
reserve fund to meet contingencies, or for equalizing dividends, or for
maintaining any property of the Company, or for any other purpose. Any earned
surplus of any year not distributed as dividends shall be deemed to have thus
been set apart until otherwise disposed of by the Board of Directors.
7.3 Depositories. The monies of the Company shall be deposited in the
name of the Company in such bank or banks or trust company or trust companies as
the Board of Directors shall designate, and shall be drawn out only by check or
other order for payment of money signed by such persons and in such manner as
may be determined by resolution of the Board of Directors.
ARTICLE VIII. NOTICES
Except as may otherwise be required by law, any notice to any
stockholder or director may be delivered personally, by mail, by telegram,
telex, or TWX (with answerback received), or by courier service or facsimile
transmission. If sent by mail, telegraph, or courier service, the notice shall
be deemed to have been given to the person when deposited in the United States
mail or with a telegraph or courier service for delivery to that person or, in
the case of telex or TWX, when dispatched to the address of the addressee at
such persons last known address (or to such persons telex, TWX, or facsimile
number) in the records of the Company, with postage or courier or other charges
thereon prepaid.
ARTICLE IX. SEAL
The corporate seal of the Company shall be in such form and bear such
inscription as may be adopted by resolution of the Board of Directors, or by
usage of the officers on behalf of the Company.
9
<PAGE>
ARTICLE X. BOOKS AND RECORDS
The Company shall keep correct and complete books and records of
account and shall keep minutes and proceedings of meetings of its stockholders
and Board of Directors; and it shall keep at its registered office or principal
place of business, or at the office of its transfer agent or registrar, a record
of its stockholders, giving the names and addresses of all stockholders and the
number and class of the shares held by each. Any books, records, and minutes may
be in written form or any other form capable of being converted into written
form within a reasonable time.
ARTICLE XI. AMENDMENTS
These Bylaws may be altered, amended or repealed only as set forth in
the Articles of Incorporation, which provisions are incorporated herein with the
same effect as if they were set forth herein.
Adopted on March 4, 1998.
10
EXHIBIT 4
<PAGE>
================================================================================
COMMON STOCK NITTANY FINANCIAL CORP.
CERTIFICATE NO. ______
INCORPORATED UNDER THE
LAWS OF THE COMMONWEALTH OF PENNSYLVANIA SEE REVERSE FOR
CERTAIN DEFINITIONS
THIS CERTIFIES THAT: __________________________________
IS THE OWNER OF: __________________________________
FULLY PAID AND NONASSESSABLE SHARES OF COMMON STOCK,
$0.10 PAR VALUE PER SHARE OF
NITTANY FINANCIAL CORP.
The shares represented by this certificate are transferable only on the
stock transfer books of the corporation by the holder of record hereof in
person, or by his duly authorized attorney or legal representative, upon the
surrender of this certificate properly endorsed. This certificate and the shares
represented hereby are issued and shall be held subject to all the provisions
contained in the corporation's official corporate papers filed with the
Department of State of the Commonwealth of Pennsylvania (copies of which are on
file with the Transfer Agent), to all of the provisions the holder by acceptance
hereof, assents.
THIS SECURITY IS NOT A DEPOSIT OR ACCOUNT AND IS NOT
FEDERALLY INSURED OR GUARANTEED.
In Witness Whereof, Nittany Financial Corp. has caused this certificate
to be executed by the signatures of its duly authorized officers and has caused
its corporate seal to be hereunto affixed.
DATED:
- ------------------------------------ ------------------------------------
PRESIDENT SECRETARY
SEAL
Incorporated 1997
================================================================================
<PAGE>
NITTANY FINANCIAL CORP.
The Board of Directors of the corporation is authorized by
resolution(s), from time to time adopted, to provide for the issuance of serial
preferred stock in series and to fix and state the voting powers, designations,
preferences, and relative, participating, optional, or other special rights of
the shares of each such series and the qualifications, limitations, and
restrictions thereof. The corporation will furnish to any shareholder upon
request and without charge a full description of each class of stock and any
series thereof.
The shares represented by this certificate may not be cumulatively
voted in the election of directors of the corporation. The Articles also require
the approval of not less than 80% of the corporation's voting stock prior to the
corporation engaging in certain business combinations (as defined in the
Articles). This restriction does not apply if certain approvals are obtained
from the Board of Directors. The affirmative vote of holders of 80% of the
outstanding shares of capital stock of the corporation entitled to vote
generally in the election of directors (considered for this purpose as a single
class) is required to amend this and certain other provisions of the Articles.
The following abbreviations, when used in the inscription on the face
of this certificate, shall be construed as though they were written out in full
according to applicable laws or regulations:
<TABLE>
<CAPTION>
<S> <C> <C>
TEN COM - as tenants in common UNIF TRANS MIN ACT - Custodian
-------- ---------
(Cus) (Minor)
TEN ENT - as tenants by the entireties under Uniform Transfers to Minors Act
JT TEN - as joint tenants with right of -------------------------------------
survivorship and not as tenants (State)
in common
</TABLE>
Additional abbreviations may also be used though not in the above list.
FOR VALUE RECEIVED hereby sell, assign and transfer unto
----------------------
PLEASE INSERT SOCIAL SECURITY OR
OTHER IDENTIFYING NUMBER OF ASSIGNEE
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
(PLEASE PRINT OR TYPEWRITE NAME AND ADDRESS INCLUDING ZIP CODE OF ASSIGNEE)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
shares of the common stock represented by the within certificate and do hereby
irrevocably constitute and appoint
Attorney
- -----------------------------------------------------------------------
to transfer the said shares on the books of the within named corporation with
full power of substitution in the premises.
Dated X
--------------------- -----------------------------------
X
-----------------------------------
NOTICE: The signatures to this assignment must correspond with the
name(s) as written upon the face of the certificate in every particular, without
alteration or enlargement or any change whatever.
SIGNATURE(S) GUARANTEED:
-------------------------------------
THE SIGNATURE(S) SHOULD BE GUARANTEED BY AN ELIGIBLE
GUARANTOR INSTITUTION (BANKS, STOCKBROKERS, SAVINGS
AND LOAN ASSOCIATIONS, AND CREDIT UNIONS WITH
MEMBERSHIP IN AN APPROVED SIGNATURE GUARANTEE
MEDALLION PROGRAM) PURSUANT TO S.E.C. RULE 17Ad-15.
EXHIBIT 10
<PAGE>
EMPLOYMENT AGREEMENT
THIS AGREEMENT, is entered into this 31st day of December 1997,
("Effective Date") by and between Nittany Financial Corp., including its future
subsidiary, Nittany Bank, a federal stock savings bank in formation (referred to
collectively as the "Bank"), and David Z. Richards (the "Executive").
WITNESSETH
WHEREAS, the Executive has heretofore been employed as President and
Chief Executive Officer of another Pennsylvania bank and is to be employed by
the Bank as the President and Chief Executive Officer and is experienced in all
phases of the business of the Bank; and
WHEREAS, the Bank desires to be ensured of the Executive's continued
active participation in the business of the Bank; and
WHEREAS, in order to induce the Executive to remain in the employ of
the Bank and in consideration of the Executive's agreeing to remain in the
employ of the Bank, the parties desire to specify the continuing employment
relationship between the Bank and the Executive;
NOW THEREFORE, in consideration of the premises and the mutual
agreements herein contained, the parties hereby agree as follows:
1. Employment. The Bank hereby employs the Executive in the capacity of
President. The Executive hereby accepts said employment and agrees to render
such administrative and management services to the Bank as are currently
rendered and as are customarily performed by persons situated in a similar
executive capacity. The Executive shall promote the business of the Bank. The
Executive's other duties shall be such as the Board of Directors for the Bank
(the "Board of Directors" or "Board") may from time to time reasonably direct,
including normal duties as an officer of the Bank.
2. Term of Employment. The term of employment of Executive under this
Agreement shall be for the period commencing on the Effective Date and ending
December 31, 2000 thereafter ("Term"). Additionally, on, or before, each annual
anniversary date from the Effective Date, the Term of employment under this
Agreement shall be extended for up to an additional period beyond the then
effective expiration date upon a determination and resolution of the Board of
Directors that the performance of the Executive has met the requirements and
standards of the Board, and that the Term of such Agreement shall be extended.
References herein to the Term of this Agreement shall refer both to the initial
term and successive terms.
<PAGE>
3. Compensation, Benefits and Expenses.
(a) Base Salary. The Bank shall compensate and pay the Executive
during the formation of the Bank a salary at the rate of $72,000 per annum and
upon the opening of the Bank at a rate of $100,000 ("Base Salary") per annum,
payable in cash not less frequently than monthly; provided, that the rate of
such salary shall be reviewed by the Board of Directors not less often than
annually, and the Executive shall be entitled to receive increases at such
percentages or in such amounts as determined by the Board of Directors.
(b) Discretionary Bonus. The Executive shall be entitled to
participate in an equitable manner with all other senior management employees of
the Bank in discretionary bonuses that may be authorized and declared by the
Board of Directors to its senior management executives from time to time. No
other compensation provided for in this Agreement shall be deemed a substitute
for the Executive's right to participate in such discretionary bonuses when and
as declared by the Board.
(c) Participation in Benefit and Retirement Plans. The Executive
shall be entitled to participate in and receive the benefits of plans of the
Bank, if any, which may be or may become applicable to management relating to
pension or other retirement benefit plans, profit-sharing, stock options or
incentive plans, or other plans, benefits and privileges given to employees and
executives of the Bank, to the extent commensurate with his then duties and
responsibilities, as fixed by the Board of Directors of the Bank.
(d) Participation in Medical Plans and Insurance Policies. The
Executive shall be entitled to participate in and receive the benefits of a plan
or policy of the Bank, if any, which may be or may become applicable to
management relating to life insurance, long term disability, medical, dental,
eye-care, prescription drugs or medical reimbursement plans.
(e) Vacations and Sick Leave. The Executive shall be entitled to
paid annual vacation leave in accordance with the policies as established from
time to time by the Board of Directors, which shall in no event be less than two
weeks per annum. The Executive shall also be entitled to an annual sick leave
benefit as established by the Board for management employees of the Bank.
(f) Expenses. The Bank shall reimburse the Executive or otherwise
provide for or pay for reasonable expenses incurred by the Executive in
furtherance of, or in connection with the business of the Bank, including, but
not by way of limitation, automobile and traveling expenses, and all reasonable
entertainment expenses, subject to such reasonable documentation and other
limitations as may be established by the Board of Directors of the Bank. If such
expenses are paid in the first instance by the Executive, the Bank shall
reimburse the Executive therefor.
2
<PAGE>
4. Loyalty; Noncompetition.
(a) The Executive shall devote his full time and attention to the
performance of his employment under this Agreement. During the term of the
Executive's employment under this Agreement, the Executive shall not engage in
any business or activity contrary to the business affairs or interests of the
Bank.
(b) Nothing contained in this Section 4 shall be deemed to
prevent or limit the right of Executive to invest in the capital stock or other
securities of any business dissimilar from that of the Bank, or, solely as a
passive or minority investor, in any business.
5. Standards. During the term of this Agreement, the Executive shall
perform his duties in accordance with such reasonable standards expected of
executives with comparable positions in comparable organizations and as may be
established from time to time by the Board of Directors.
6. Termination and Termination Pay. The Executive's employment under
this Agreement shall be terminated upon any of the following occurrences:
(a) The death of the Executive during the term of this Agreement,
in which event the Executive's estate shall be entitled to receive the
compensation due the Executive through the last day of the sixth calendar month
following the day in which Executive's death shall have occurred.
(b) The Board of Directors may terminate the Executive's
employment at any time, but any termination by the Board of Directors other than
termination for Just Cause, shall not prejudice the Executive's right to
compensation under the Agreement. The Executive shall have no right to receive
compensation or other benefits for any period after termination for Just Cause.
The Board may within its sole discretion, acting in good faith, terminate the
Executive for Just Cause and shall notify such Executive accordingly.
Termination for "Just Cause" shall include termination because of the
Executive's personal dishonesty, incompetence, willful misconduct, breach of
fiduciary duty involving personal profit, intentional failure to perform stated
duties, willful violation of any law, rule or regulation (other than traffic
violations or similar offenses) or final cease-and-desist order, or material
breach of any provision of the Agreement.
(c) Except as provided pursuant to Section 9 hereof, in the event
Executive's employment under this Agreement is terminated by the Board of
Directors without Just Cause, the Bank shall be obligated to continue to pay the
Executive the salary provided pursuant to Section 3(a) herein, up to the date of
termination of the remaining Term of this Agreement, and the cost of Executive
obtaining all health benefits which the Executive would be eligible to
participate in through such date based upon the benefit levels substantially
equal to those being provided Executive at the date of termination of
employment.
3
<PAGE>
(d) The voluntary termination by the Executive during the term of
this Agreement with the delivery of no less than ninety (90) days written notice
to the Board of Directors, other than pursuant to Section 9(b), in which case
the Executive shall be entitled to receive only the compensation, vested rights,
and all employee benefits up to the date of such termination.
7. Regulatory Exclusions.
(a) If the Executive is suspended and/or temporarily prohibited from
participating in the conduct of the Bank's affairs by a notice served under
Section 8(e)(3) or (g)(1) of the FDIA (12 U.S.C. 1818(e)(3) and (g)(1)), the
Bank's obligations under the Agreement shall be suspended as of the date of
service, unless stayed by appropriate proceedings. If the charges in the notice
are dismissed, the Bank may within its discretion (i) pay the Executive all or
part of the compensation withheld while its contract obligations were suspended
and (ii) reinstate any of its obligations which were suspended.
(b) If the Executive is removed and/or permanently prohibited from
participating in the conduct of the Bank's affairs by an order issued under
Sections 8(e)(4) or 8(g)(1) of the Federal Deposit Insurance Act ("FDIA") (12
U.S.C. 1818(e)(4) and (g)(1)), all obligations of the Bank under this Agreement
shall terminate, as of the effective date of the order, but the vested rights of
the parties shall not be affected.
(c) If the Bank is in default (as defined in Section 3(x)(1) of FDIA)
all obligations under this Agreement shall terminate as of the date of default,
but this paragraph shall not affect any vested rights of the contracting
parties.
(d) All obligations under this Agreement shall be terminated, except to
the extent determined that continuation of this Agreement is necessary for the
continued operation of the Bank: (i) by the Director of the Office of Thrift
Supervision ("Director of OTS"), or his or her designee, at the time that the
Federal Deposit Insurance Corporation ("FDIC") enters into an agreement to
provide assistance to or on behalf of the Bank under the authority contained in
Section 13(c) of FDIA; or (ii) by the Director of the OTS, or his or her
designee, at the time that the Director of the OTS, or his or her designee
approves a supervisory merger to resolve problems related to operation of the
Bank or when the Bank is determined by the Director of the OTS to be in an
unsafe or unsound condition. Any rights of the parties that have already vested,
however, shall not be affected by such action.
(e) Notwithstanding anything herein to the contrary, any payments made
to the Executive pursuant to the Agreement, or otherwise, shall be subject to
and conditioned upon compliance with 12 USC ss.1828(k) and any regulations
promulgated thereunder.
8. Disability. If the Executive shall become disabled or incapacitated
to the extent that he is unable to perform his duties hereunder, by reason of
medically determinable physical or mental impairment, as determined by a doctor
engaged by the Board of Directors, Executive shall nevertheless continue to
receive the compensation and benefits provided under the terms
4
<PAGE>
of this Agreement as follows: 80% of such compensation and benefits for a period
of three (3) months, and 50% for a period of twelve (12) months, but not
exceeding the remaining term of the Agreement. Such benefits noted herein shall
be reduced by any benefits otherwise provided to the Executive during such
period under the provisions of disability insurance coverage in effect for Bank
employees. Thereafter, Executive shall be eligible to receive benefits provided
by the Bank under the provisions of disability insurance coverage in effect for
Bank employees. Upon returning to active full-time employment, the Executive's
full compensation as set forth in this Agreement shall be reinstated as of the
date of commencement of such activities. In the event that the Executive returns
to active employment on other than a full-time basis, then his compensation (as
set forth in Section 3(a) of this Agreement) shall be reduced in proportion to
the time spent in said employment, or as shall otherwise be agreed to by the
parties.
9. Change in Control.
(a) Notwithstanding any provision herein to the contrary, in the
event of the involuntary termination of Executive's employment during the term
of this Agreement following any Change in Control of the Bank or Parent, or
within twelve (12) months thereafter of such Change in Control, absent Just
Cause, Executive shall be paid an amount equal to the product of 2.99 times the
Executive's "base amount" as defined in Section 280G(b)(3) of the Internal
Revenue Code of 1986, as amended (the "Code") and regulations promulgated
thereunder. Said sum shall be paid, at the option of Executive, either in one
(1) lump sum within thirty (30) days of such termination of service or in
periodic payments over the next 36 months or the remaining term of this
Agreement whichever is less, as if Executive's employment had not been
terminated, and such payments shall be in lieu of any other future payments
which the Executive would be otherwise entitled to receive under Section 6 of
this Agreement. Notwithstanding the forgoing, all sums payable hereunder shall
be reduced in such manner and to such extent so that no such payments made
hereunder when aggregated with all other payments to be made to the Executive by
the Bank or the Parent shall be deemed an "excess parachute payment" in
accordance with Section 280G of the Code and be subject to the excise tax
provided at Section 4999(a) of the Code. The term "Change in Control" shall
refer to (i) the control of voting proxies whether related to stockholders or
mutual members by any person, other than the Board of Directors of the Savings
Bank, to direct more than 25% of the outstanding votes of the Savings Bank, the
control of the election of a majority of the Savings Bank's directors, or the
exercise of a controlling influence over the management or policies of the
Savings Bank by any person or by persons acting as a group within the meaning of
Section 13(d) of the Exchange Act, (ii) an event whereby the OTS, FDIC or any
other department, agency or quasi-agency of the federal government cause or
bring about, without the consent of the Savings Bank, a change in the corporate
structure or organization of the Savings Bank; (iii) an event whereby the OTS,
FDIC or any other agency or quasi-agency of the federal government cause or
bring about, without the consent of the Savings Bank, a taxation or involuntary
distribution of retained earnings or proceeds from the sale of securities to
depositors, borrowers, any government agency or organization or civic or
charitable organization; or (iv) a merger or other business combination between
the Savings Bank and another corporate entity whereby the Savings Bank is not
the surviving entity. In the event that the Savings Bank shall convert in the
future from mutual-to-stock form, the term "Change in Control" shall also refer
to: (i) the sale of all, or
5
<PAGE>
a material portion, of the assets of the Savings Bank or the Parent; (ii) the
merger or recapitalization of the Savings Bank or the Parent whereby the Savings
Bank or the Parent is not the surviving entity; (iii) a change in control of the
Savings Bank or the Parent, as otherwise defined or determined by the Office of
Thrift Supervision or regulations promulgated by it; or (iv) the acquisition,
directly or indirectly, of the beneficial ownership (within the meaning of that
term as it is used in Section 13(d) of the Securities Exchange Act of 1934 and
the rules and regulations promulgated thereunder) of twenty-five percent (25%)
or more of the outstanding voting securities of the Savings Bank or the Parent
by any person, trust, entity or group. The term "person" means an individual
other than the Executive, or a corporation, partnership, trust, association,
joint venture, pool, syndicate, sole proprietorship, unincorporated organization
or any other form of entity not specifically listed herein.
(b) Notwithstanding any other provision of this Agreement to the
contrary, Executive may voluntarily terminate his employment during the term of
this Agreement following a Change in Control of the Bank or Parent, or within
twelve (12) months following such Change in Control, and Executive shall
thereupon be entitled to receive the payment described in Section 9(a) of this
Agreement, upon the occurrence, or within 120 days thereafter, of any of the
following events, which have not been consented to in advance by the Executive
in writing: (i) if Executive would be required to move his personal residence or
perform his principal executive functions more than thirty-five (35) miles from
the Executive's primary office as of the signing of this Agreement; (ii) if in
the organizational structure of the Bank, Executive would be required to report
to a person or persons other than the Board of Directors of the Bank or the
Chairman of the Board; (iii) if the Bank should fail to maintain Executive's
base compensation in effect as of the date of the Change in Control and the
existing employee benefits plans, including material fringe benefit, stock
option and retirement plans; (iv) if Executive would be assigned duties and
responsibilities other than those normally associated with his position as
referenced at Section 1, herein; (v) if Executive's responsibilities or
authority have in any way been materially diminished or reduced; or (vi) if
Executive would not be reelected to the Board of Directors of the Bank.
10. Withholding. All payments required to be made by the Bank hereunder
to the Executive shall be subject to the withholding of such amounts, if any,
relating to tax and other payroll deductions as the Bank may reasonably
determine should be withheld pursuant to any applicable law or regulation.
11. Successors and Assigns.
(a) This Agreement shall inure to the benefit of and be binding
upon any corporate or other successor of the Bank which shall acquire, directly
or indirectly, by merger, consolidation, purchase or otherwise, all or
substantially all of the assets or stock of the Bank or Parent.
(b) Since the Bank is contracting for the unique and personal
skills of the Executive, the Executive shall be precluded from assigning or
delegating his rights or duties hereunder without first obtaining the written
consent of the Bank.
6
<PAGE>
12. Amendment; Waiver. No provisions of this Agreement may be modified,
waived or discharged unless such waiver, modification or discharge is agreed to
in writing, signed by the Executive and such officer or officers as may be
specifically designated by the Board of Directors of the Bank to sign on its
behalf. No waiver by any party hereto at any time of any breach by any other
party hereto of, or compliance with, any condition or provision of this
Agreement to be performed by such other party shall be deemed a waiver of
similar or dissimilar provisions or conditions at the same or at any prior or
subsequent time.
13. Governing Law. The validity, interpretation, construction and
performance of this Agreement shall be governed by the laws of the United States
where applicable and otherwise by the substantive laws of the Commonwealth of
Pennsylvania.
14. Nature of Obligations. Nothing contained herein shall create or
require the Bank to create a trust of any kind to fund any benefits which may be
payable hereunder, and to the extent that the Executive acquires a right to
receive benefits from the Bank hereunder, such right shall be no greater than
the right of any unsecured general creditor of the Bank.
15. Headings. The section headings contained in this Agreement are for
reference purposes only and shall not affect in any way the meaning or
interpretation of this Agreement.
16. Severability. The provisions of this Agreement shall be deemed
severable and the invalidity or unenforceability of any provision of this
Agreement shall not affect the validity or enforceability of the other
provisions of this Agreement, which shall remain in full force and effect.
17. Arbitration. Any controversy or claim arising out of or relating to
this Agreement, or the breach thereof, shall be settled by arbitration in
accordance with the rules then in effect of the district office of the American
Arbitration Association ("AAA") nearest to the home office of the Bank, and
judgment upon the award rendered may be entered in any court having jurisdiction
thereof, except to the extent that the parties may otherwise reach a mutual
settlement of such issue. Further, the settlement of the dispute to be approved
by the Board of the Bank may include a provision for the reimbursement by the
Bank to the Executive for all reasonable costs and expenses, including
reasonable attorneys' fees, arising from such dispute, proceedings or actions,
or the Board of the Bank may authorize such reimbursement of such reasonable
costs and expenses by separate action upon a written action and determination of
the Board following settlement of the dispute. Such reimbursement shall be paid
within ten (10) days of Executive furnishing to the Bank evidence, which may be
in the form, among other things, of a canceled check or receipt, of any costs or
expenses incurred by Executive.
18. Entire Agreement. This Agreement together with any understanding or
modifications thereof as agreed to in writing by the parties, shall constitute
the entire agreement between the parties hereto.
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EXHIBIT 10.1
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BRANCH PURCHASE AND DEPOSIT ASSUMPTION AGREEMENT
THIS BRANCH PURCHASE AND DEPOSIT ASSUMPTION AGREEMENT (the "Agreement")
is entered into this the 24th day of March 1998, between First Commonwealth
Bank, a state chartered commercial bank having its principal office at
Philadelphia and Sixth Streets, Indiana Pennsylvania 15701 (the "Seller"), and
Nittany Financial Corp., a Pennsylvania holding company organized for the
purpose of forming and owning 100% of the stock of Nittany Bank, a federally
chartered stock savings bank (in formation), having its principal office at 637
Kennard Road, State College, Pennsylvania 16801 (the "Purchaser"). The Seller
and the Purchaser are hereinafter sometimes collectively referred to as the
"Parties".
WHEREAS, the Seller wishes to sell the deposits and certain assets, as
defined herein, of the branch offices operated under the name Central Bank at
(1) 116 East College Avenue, State College, Pennsylvania (the "East College
Branch"), and (2) 1276 North Atherton Street, State College, Pennsylvania (the
"North Atherton Branch").
WHEREAS, the Purchaser wishes to assume the deposits and
purchase certain assets of the Branches, and
NOW, THEREFORE, in consideration of the foregoing, of the mutual
agreements, covenants, representations, warranties and conditions contained
herein, and of other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the Parties have agreed and do
agree as follows (the "Transaction"):
DEFINITIONS
Some of the capitalized terms appearing in this Agreement are defined
below. The definition of a term expressed in the singular also applies to that
term as used in the plural and vice versa.
"ATM" means automatic teller machine.
"Assets" has the meaning set forth in Section 1.02 of this
Agreement.
"Branches" means the branch offices of Seller at 116 East
College Avenue and 1276 North Atherton Street, State College,
Pennsylvania.
"Break-Opens" means, with respect to safe deposit boxes, property in
the possession of Seller as a result of non-payment of rental fees or pursuant
to a court order, as set forth in Section 1.06 of this Agreement.
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"Closing" means the purchase of the Assets by Purchaser and the
assumption of the Liabilities by Purchaser on the Effective Date.
"Effective Date" has the meaning set forth in Section 1.01 of
this Agreement.
"Deposit Liabilities" means all deposits (as defined in 12 U.S.C.
Section 1813(l)) which are booked at the Branches on the Closing Date, including
in each case accrued but unpaid interest and both collected and uncollected
funds, but excluding (i) deposits held in accounts for which Seller acts as
fiduciary (other than deposits held by retirement plans), and (ii) deposits
constituting official checks, travelers checks, money orders or certified
checks.
"Fixed Assets" means all fixtures (including signage poles), leasehold
improvements, furnishings, vaults, safe deposit boxes, equipment (including, for
example, all ATM machines, but excluding any computer or telecommunications
equipment), supplies (other than forms and other supplies which bear Seller's
name or logo), and other personal property, which are owned or (to the extent of
Seller's interest as lessee) leased by Seller, which are located at the Branches
on the Closing Date. .
"Premium" has the meaning set forth in Section 3.1 of this
Agreement.
ARTICLE I
TRANSFER OF ASSETS AND ASSUMPTION OF LIABILITIES
1.01 Effective Date. The closing of the Transaction contemplated hereby (the
"Closing") shall occur as soon as possible following receipt of all approvals of
regulatory authorities necessary for the Purchaser and Seller to consummate such
Transaction at such time and date as may be mutually agreed to by the Parties
(the "Effective Date" or the "Closing Date"). The Closing shall be held at such
place as may be agreed upon by the Parties. Notwithstanding the foregoing, in no
event shall the Closing Date be before seven (7) calendar days after the last
date of approval issued by the Office of Thrift Supervision ("OTS"),
Pennsylvania Department of Banking ("PDB") and the Federal Deposit Insurance
Corporation ("FDIC") or later than 30 days after receipt of such approvals.
Determination of the Closing Date shall give consideration to timetables
associated with all conditions and duties of the Parties, including obtaining
all necessary governmental approvals and certifications and coordination of the
transfer of the electronic data processing files and systems. It is agreed that
time is of the essence with respect to this Transaction.
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1.02 Transfer of Assets and Consideration Therefor.
(a) Obligations of the Seller. Except as otherwise expressly provided
herein, the sale of the assets is without warranty or guarantee, express or
implied, on an "as-is, where-is" basis, and without recourse. Except as
otherwise expressly provided herein, the assets are sold without any
representation or warranty whatsoever by Sellers. The Seller agrees that,
subject to the terms and conditions of this Agreement, it will validly sell,
assign, transfer, convey and deliver to the Purchaser, on the Effective Date:
(i) All of its rights, title and interest, as lessee under any
and all real estate leases pertaining to the Branches, (set
forth at Schedule 1.02(a)(i)) together with all leasehold
improvements thereon, including any security deposits on
such real estate leases net of deductions as specified
at Section 8.02;
(ii) All of its rights, title and interest, if any, in all real
property pertaining to the Branches (set forth at Schedule
1.02(a)(ii);
(iii)All of its rights, title and interest in and to all of the
furniture, fixtures and equipment used in the operation of
the Branches, as set forth at Schedule 1.02(a)(iii);
(iv) All of its rights, title and interest to the safe deposit
box business conducted at the North Atherton Branch,
exclusive of "Break-Opens" as hereinafter defined at Section
1.06;
(v) All petty cash, vault cash, automated teller machine cash
and drawer cash ("Branch Cash") maintained at the Branches
as of the Closing Date, subject to audit verification
conducted by a representative of each party as of the close
of business on the Closing Date, and savings and checking
deposit records and customer records relating thereto;
(vi) All of its rights, title and interest in the Loans as
referred to at Section 1.04; Further, Seller agrees to
maintain the Branches and related property and assets in a
manner conducive to normal operations from the date of the
Agreement through the Closing Date.
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(b) Obligations of the Purchaser. The Purchaser agrees that on the
Effective Date, subject to the terms and conditions of this Agreement, and in
consideration for the aforesaid sale, assignment, transfer, conveyance and
delivery:
(i) Purchaser will pay to the Seller the sum of the aggregate of
the following: the aggregate purchase price for the
Leasehold Improvements, Furniture, Fixtures and Equipment,
and the Branch and ATM Cash, as adjusted by the pro rata
rents paid in advance on the rented safe deposit boxes and
pro rata adjustments as provided at Section 1.10; and (ii)
(ii) the Purchaser will assume and agree to pay, perform
and discharge all Deposit Liabilities of the Seller to
transfer to Purchaser as of the Closing Date, including
accrued interest, attributed on the records of the Seller to
the Branches now existing or hereafter arising and existing
on the Effective Date as set forth at Schedule 1.02(b)
(i)(1) "Schedule of Deposit Liabilities" attached hereto,
with only such changes therein as shall have occurred in the
ordinary course of business of the Seller between the date
of such schedule and the Effective Date. The risk of loss
for deposited items in transit as of the Closing Date shall
rest with the Seller. The purchase price for the Prepaid
Rent, Real Property, Leasehold Improvements, Furniture,
Fixtures and Equipment shall be equal to the book value
of the Seller under generally accepted accounting principles
as set forth at Schedule 1.02(b)(i)(2).
(ii) Purchaser will assume and thereafter fully and timely
perform and discharge, in accordance with their terms, all
of the liabilities and obligations of the Seller arising on
and after the Closing Date related to the leased property,
personal property, furniture, fixtures and equipment, rented
safe deposit boxes, exclusive of Break-Opens, and any
related contracts and service agreements listed in Schedule
1.02(b)(ii), except to the extent that assumption of such
obligations is objected to by the applicable third party
despite the assistance of Seller's best efforts, or
Purchaser and Seller agree to modify or cancel as
appropriate, such obligations as of the Closing Date.
1.03 Payment of Premium.
(a) The Purchaser further agrees that on the Effective Date, subject to
the terms and conditions of this Agreement, it shall pay
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to the Seller a premium in the form of cash equal to nine percent (9%) and in
the form of stock equal to one percent (1%) times (X) the Deposit Liabilities
less Excluded Deposits as defined herein at the Branches (the "Premium"). For
purposes of calculating the Premium, there shall be subtracted from the
aggregate balance of Deposit Liabilities (i) retail certificates of deposit of
$100,000 or more with negotiated rates ("Retail Jumbo Certificates of Deposit"),
(ii) bid money jumbo Certificates of Deposits, (iii) deposit accounts held by
officers, directors or employees of the Seller other than those whose primary
work location is at one of the Branches and who will be employed by the
Purchaser on the first day following the Closing Date, and (iv) deposits made
with respect to Individual Retirement Accounts and KEOGH Accounts ("IRA
Deposits") (collectively, constituting the "Excluded Deposits").
(b) The amount to be paid by the Seller to the Purchaser in
consideration of the assumption by the Purchaser of the Deposit Liabilities
referred to at Section 1.02(b)(i) and the Premium referred to at Section 1.03(a)
is for the sole purpose of determining the amounts to be paid by the Seller and
the Purchaser hereunder and shall not constitute an allocation of the purchase
price for any particular asset being transferred or liability being assumed.
(c) Because certain components of the closing payments will not be
finally determinable until after the Closing Date, the Seller shall pay the
Purchaser by wire transfer of immediately available funds by 2:00 p.m. on the
Closing Date an amount equal to the outstanding balances and accrued interest on
the Deposit Liabilities, as of the close of business on the second business day
preceding the Closing Date reduced by the Purchase Price, net of adjustments
(the "Preliminary Closing Payment"). The Seller shall deliver to the Purchaser
on the business day immediately preceding the Closing Date a preliminary
settlement statement setting forth a calculation of the Closing Payment, similar
to that as set forth at Schedule 1.03(c).
(d) The Seller shall deliver to the Purchaser no later than 30 business
days after the Closing Date a final settlement statement, similar to that as set
forth at Schedule 1.03(d), setting forth a calculation of the Final Closing
Payment and the difference between the Final Closing Payment and the Preliminary
Closing Payment. The difference between the Final Closing Payment and the
Preliminary Closing Payment shall be paid by wire transfer of funds by the
Seller to the Purchaser or by the Purchaser to the Seller, as applicable, no
later than 45 business days after the Closing Date. Any such amount shall accrue
interest at the Federal Funds Rate in effect on the Closing Date from the
Closing Date to the date of payment. Further, any errors on Deposit Liabilities
or accrued interest thereon, or other amounts ("Mistakes-in-Fact") which are
determined as of the date of the final settlement statement shall be reconciled
as of such date and appropriate
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<PAGE>
adjustments of payments shall be made to the Seller or the Purchaser, as
appropriate, at such time. Notwithstanding the foregoing, or anything else
herein to the contrary, any Mistakes- in-Fact which shall be determined by the
Seller or the Purchaser thereafter related to the Transaction consummated under
this Agreement shall nevertheless be reconciled by adjustment or payment to the
Seller or the Purchaser, as appropriate, within 30 days of such determination.
The provisions of this Section shall survive beyond the Effective Date.
(e) If Seller accepts an item before the Closing Date, which item is
returned as uncollectible, and no offset of funds is available to the Purchaser,
then Seller shall be liable for such item in an amount equal to the portion not
covered by offset. Adjustment to the Closing Payment will be made as necessary
to reflect Seller's liability.
1.04 Purchase of Loans.
(a) In addition to the purchase of assets and assumption of liabilities
described above, the Purchaser shall purchase on the Effective Date certain
deposit related loans of the Branches (the "Loans") at the par value of such
loans on the Closing Date. These Loans shall consist of: (i) loans secured by
deposit instruments, including but not limited to, savings accounts and
certificates, on the books of the Branches and (ii) unsecured loans created by
writing a check or similar instrument and creating an overdraft and loan on an
account with an established line of credit. The Purchaser will receive all
pertinent details on these loans as part of the closing transaction at least
thirty days prior to the Effective Date. Purchase of these Loans shall be
subject to each loan being acceptable to the Purchaser in accordance with the
Purchaser's underwriting standards. (A list of such Loans as of December 31,
1997, is attached hereto as Schedule 1.04(a)). Loans related to the Deposit
Liabilities include loans secured by deposits, overdraft loans related to
checking accounts, and similar loans. Except as mutually agreed upon, Loans to
be purchased will not include loans for which no active deposit relationship
exists as a Deposit Liability which shall transfer. Purchaser reserves the right
within its sole discretion to reject any such Loans, provided notice of such
rejection is given not less than fourteen (14) days prior to the Closing Date;
in which case the related Deposit Liabilities, if any, shall not transfer.
1.05 Additional Obligations of the Parties.
(a) Actions by Seller at Closing. On the Effective Date, the
Seller will:
(i) deliver to the Purchaser such of the assets purchased as
shall be capable of physical delivery, including, without
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<PAGE>
limitation, all assets comprising the safe deposit box business at
the Branches;
(ii) execute, acknowledge (if appropriate) and deliver to the Purchaser
a Bill of Sale as set forth in Schedule 1.05(a)(ii) hereto and all such deeds,
endorsements, assignments or other instruments of conveyance, assignment and
transfer as shall be reasonably necessary or advisable to consummate the sale
and transfer to the Purchaser the purchased assets;
(iii) make available to the Purchaser cash equal to the sum of the
Deposits Liabilities plus accrued interest assumed by the Purchaser plus the
Deposit and the accrued interest thereon LESS the sum of: (i) the purchase price
for the Loans to be assumed pursuant to Section 1.04(c); (ii) the payment for
assets set forth at Section 1.02(b)(i); and (iii) the Premium set forth at
Section 1.03(a);
(iv) assign and deliver to the Purchaser all collateral security of any
nature whatsoever held by the Seller as collateral security for any loan being
acquired by the Purchaser;
(v) assign, transfer and deliver to the Purchaser such of the following
records pertaining to the Deposit Liabilities to be assumed by the Purchaser and
loans to be purchased by the Purchaser and any other records reasonably
requested by the Purchaser as exist and are in the Seller's possession, and as
are necessary to enable the Purchaser to service said deposit accounts and loans
on a continuing basis:
(i) Signature cards, retirement accounts files, orders and
contracts between the Seller and customers of accounts to be
transferred hereunder, taxpayer identification number
certifications and records relating thereto;
(ii) The form of rules and regulations applicable to the accounts
to be transferred hereunder; and
(iii) Loan files and records.
(b) Preservation of Records. The Purchaser agrees that it will preserve
and safely keep, for as long as may be required by applicable law, all of the
signature cards, orders, contracts, forms, taxpayer identification number
certifications, and records herein above referred to for the joint benefit of
itself and the Seller, and that it will permit the Seller and its
representatives to inspect, and make extracts from or copies of, any such
signature cards, orders, files, contracts, forms, taxpayer identification number
certifications or records, at any reasonable time, and at the expense of the
Seller, as shall be reasonably necessary to the Seller for purposes of its
records. The Seller agrees that it will
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<PAGE>
preserve and safely keep, in accordance with its business practices for its
other bank offices, all of the files, books of accounts and records as exist and
are in Seller's possession pertaining to the past history of the accounts
transferred hereunder, including deposit slips, canceled checks or withdrawal
orders, for the joint benefit of itself and the Purchaser, and that it will
permit the Purchaser and its representatives to inspect, and make extracts from
or copies of, any such files, books of accounts or records, at any reasonable
time and at the expense of the Purchaser, as shall be reasonably necessary to
the Purchaser for purposes of its records.
(c) Deposit List. At least 30 days prior to the Closing Date, Seller
agrees to provide to Purchaser a list of all Deposit Liabilities, identifying
the types of each such deposit, the amounts thereof, the interest rate(s) paid
thereon, the name(s) and address(es) of each depositor as well as all other
pertinent information regarding each depositor and his or her Deposit
Liabilities. Purchaser shall have the right, prior to the Closing Date to review
the books and records of Seller relating to such Deposit Liabilities in
accordance with Section 5.01 for the purpose of verifying the accuracy of the
foregoing list.
(d) Employment Compensation. Unless otherwise agreed to by the Parties,
Seller shall, in accordance with its policies and procedures, pay to employees
of the Branches as of the Closing Date wages earned and payable through the
Closing Date, including sums payable, if any, for accrued sick leave or vacation
pay in compliance with Seller's personnel practices for terminating employees.
Purchaser shall not assume any financial or legal liabilities or responsibility
for payment of wages or benefits earned and accrued by employees of Seller prior
to the Closing Date.
(e) Final Account Statement and Tax Report. Seller shall render a final
statement of account and related tax reporting to each depositor and borrower
whose accounts are assumed by the Purchaser hereunder as of the Closing Date,
including the filing of such tax reporting with the appropriate taxing
authorities.
(f) Notice to Automated Clearing House. The Purchaser agrees, at its
expense, to notify all Automated Clearing House originators of the transfers and
assumptions made pursuant to this Agreement. Seller agrees to assist Purchaser
in such activities to the extent reasonably requested.
(g) Notice on Service Contracts. Seller shall give all notices and take
all other actions necessary and required, including actions required by
applicable laws, in connection with Seller's assignment of and Purchaser's
assumption of the liabilities and responsibilities of Seller under any operating
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<PAGE>
agreements, leases and service contracts, with prior notice and consultation by
the Purchaser.
(h) Environmental Audit. Purchaser shall have thirty (30) days from the
date of execution of this Agreement to cause an independent environmental
consultant of its choice to inspect and audit the assets and real property
related to the Transaction for the existence of any and all environmental
conditions and any and all violations of environmental laws, as is commonly
referred to as a Phase I environmental study (the "Environmental Audit"). It is
the current intention of the Purchaser not to cause an Environmental Audit,
unless it discovers a need in the completion of its due diligence. The cost of
such Environmental Audit shall be paid by the Seller, with a credit for such
payments to be given to the Seller at the Closing by the Purchaser. If such
Environmental Audit discovers any environmental condition that the Purchaser
reasonably finds unacceptable within its sole discretion ("Environmental
Condition"), the Purchaser may terminate this Agreement by delivery of written
notice of termination on or before the day which is thirty (30) days from the
date of the Agreement, which notice shall identify such Environmental Condition.
Seller shall have 45 days from the receipt of such notice of termination to
undertake such actions as are necessary to the satisfaction of the Purchaser to
cure such defects or conditions in which case such notice of termination shall
be deemed withdrawn. Upon termination of the Agreement for failure of Seller to
cure such defects or conditions, there shall be no further liability for either
party. The Purchaser shall furnish the Seller with a copy of the results of such
Environmental Audit within three (3) business days of receipt of such report.
The result of such Environmental Audit shall not be disclosed to any third party
without the prior written consent of the Parties.
(i) Mailing Labels. Seller shall at its expense furnish Purchaser with
two (2) sets of mailing labels addressed to each account holder and borrower and
similar information in electronic data format as of 45 days prior to the
anticipated Closing Date and an additional set of mailing labels as of the
Closing Date in order to facilitate the timely and efficient transition.
(j) Inspection of Premises. Purchaser may contract with an independent
firm at its own expense to conduct structural, engineering and mechanical
inspections of the premises and Leasehold improvements within 30 days from the
signing of the Agreement. Seller shall provide access to the property and
Leasehold improvements during these time periods. The inspection shall include,
but not be limited to, areas of heating, air conditioning, plumbing, roof,
electric, basement, well, septic, insulation, radon, termite, structure of the
premises, banking equipment and related matters. Should the inspection report be
unacceptable to the Purchaser within its sole discretion, Purchaser may void the
Agreement and in the event that Seller shall not agree
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<PAGE>
to make the necessary repairs at Seller's expense prior to the Closing Date this
Agreement can be terminated with no further liability by either party. Time
periods of the inspection may be expanded for a reasonable period of time
pending delivery of laboratory results.
(k) Fire Safety Certificate. Seller shall provide Purchaser with a
Certificate of Occupancy and/or a fire safety certificate, as and if applicable,
issued by the appropriate municipal or county authority as of the Closing Date.
Should repairs be required in order to qualify for the Certificate of Occupancy
or fire safety certificate, Seller shall be responsible for the costs of such
repairs.
(l) Easements. Seller represents to its best knowledge that there are
no easements covering the leased property or real property associated with the
Transaction except easements which exclusively benefit the property which is the
subject of this Agreement.
(m) Storage Tanks. Seller represents that to the best of Seller's
knowledge, there exist no underground storage tanks located on the premises or
sidewalk areas of the leased property with the Transaction.
(n) Hiring Employees of Seller. Upon closing, the Purchaser may
immediately hire, or not hire any, all or none of Seller's employees in the
Branches, subject to receipt of certain information from Seller regarding such
employees, which information Seller hereby agrees to provide. Such information
to be provided by the Seller shall include, but not limited to, a listing of all
persons currently employed in the Branches, salary levels of such persons,
copies of employment agreements, if any, and detailed information regarding
employee health, welfare and retirement benefits currently provided to such
employees. Purchaser agrees not to contact employees of Seller unless Seller has
given approval for the employee contact. (A list of all Employees at the
Branches, as of the date of the Agreement, including the rate of pay, hiring
date and responsibilities is attached hereto as Schedule 1.05(n)).
1.06 Safe Deposit Boxes. The Purchaser agrees to assume and to discharge, in the
usual course of banking business, the duties and obligations of the Seller; from
and after the Effective Date, with respect to the safe deposit box business at
the North Atherton Branch, excluding property in possession of Seller as a
result of non-payment of rental fees or pursuant to a court order ("Break-
Opens"), and to maintain all necessary facilities for the use of such boxes by
the renters thereof during the period for which such persons have paid rent
therefor in advance to the Seller, subject to the provisions of the rental
agreements between it and the respective renters of such boxes.
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On the Effective Date, the Seller shall assign, transfer and deliver to the
Purchaser all records pertaining to safe deposit operations at the Branches as
they exist and are available, including relevant safe deposit contracts, except
where the Purchaser waives compliance with any document delivery contemplated
thereby.
1.07 Safekeeping Items.
(a) The Seller agrees to transfer and deliver to the Purchaser all
securities and papers, if any, held by the Seller in safekeeping for its
customers at the Branches, together with all of the records relating thereto.
(b) The Purchaser agrees to assume, honor, and discharge, from and
after the Effective Date, the duties and obligations of the Seller with respect
to such safekeeping items and shall be entitled to any right or benefit arising
henceforth from such safekeeping business from and after the Effective Date.
1.08 Certain Transitional Matters. Following the Effective Date:
(a) Honor Checks. The Purchaser agrees to honor in accordance with law,
up to the collected amount on deposit (and any other funds available by reason
of any agreement between the depositor and the Purchaser), all properly drawn
and presented checks, drafts, electronic debits and credits and withdrawal
orders presented to the Purchaser by mail, over its counters, through the check
clearing system, and Automated Clearing House of the banking industry, by
depositors of the accounts assumed, whether drawn on the checks, withdrawal or
draft forms provided by the Seller, or by the Purchaser, and in all other
respects to discharge, in the usual course of the banking business, the duties
and obligations of the Seller with respect to the balances due and owing to the
depositors whose accounts are assumed by the Purchaser. The Purchaser's
obligation under this Section to honor checks, withdrawal, draft forms and
electronic debits and credits provided by the Seller and carrying its imprint
shall expire at the close of business on the 90th business day after the
Effective Date or a date mutually agreeable to both Parties.
(b) Payment Demanded from Seller. If any of such depositors, instead of
accepting the obligation of the Purchaser to pay the Deposit Liabilities
assumed, shall demand payment from the Seller for all or any part of any such
assumed Deposit Liabilities, the Seller shall not be liable or responsible for
making such payment. Instead, the Seller may, at its discretion, assume custody
of the check or other item presented for payment, including electronic items, on
an account which has been transferred with the Branches, batch such items and
make them available to the Purchaser for pick-up at 10:30 a.m. of the next
banking day after receipt thereof by the Seller, subject to unforeseen delays
which are outside of the control of either party. The Seller shall not, at any
time, be
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liable or responsible for making payment on such items by reason of its
obtaining custody of them for transmittal to the Purchaser.
In order to reduce the continuing charges to the Seller through the check
clearing system of the banking industry which will result from check forms of
the Seller being used after the Effective Date by the depositors whose accounts
are assumed, the Purchaser agrees, at its cost and expense, on or immediately
after (and in no event without the express written consent of the Seller, if
prior to) the Effective Date, to notify depositors of the Purchaser's assumption
of the Deposit Liabilities and, at its sole cost and expense and without cost to
depositors, to furnish each depositor of an assumed account with not less than
fifty (50) checks on the forms of the Purchaser, with instructions to utilize
the Purchaser's checks and to destroy unused checks of the Seller as of the
Effective Date. The Seller hereby agrees that after the 90th business day or a
date mutually agreeable to both Parties, it shall, with respect to any check or
other item presented to it for payment on an account which has been transferred
with the Branches, at its sole option,either: (i) return such check or other
item with reference to the maker thereof; or (ii) assume custody thereof, batch
the same and make it available to the Purchaser for pick-up and telephone the
Purchaser of the availability of the same for pick-up prior to 10:30 a.m. of the
next banking day after receipt thereof by the Seller.
(c) Uncollected Items. The Purchaser agrees, no later than the start of
the second business day after demand by the Seller, to pay the Seller an amount
equivalent to the amount of any uncollected item included in a depositor's
balance on the Effective Date which is returned after the Effective Date as not
collected. The Purchaser shall be required to make such payment for an item only
up to the amount on deposit with the Purchaser at the time the Seller makes the
demand aforesaid.
(d) Overdrafts and Transitional Action. Overdrafts paid on the Deposit
Accounts with respect to ledger dates after the Closing Date will be the
responsibility and risk of Purchaser. Overdrafts approved with respect to ledger
dates prior to Closing Date will be the responsibility and risk of Seller.
(e) ATMs and Debit Cards. (i) Seller shall provide Purchaser no later
than sixty (60) days prior to the Closing Date, a test tape, along with a file
format or file layout and a production tape thirty (30) days before the Closing
Date, containing customer name, card number, withdrawal limits, the Deposit
Accounts activated by, accessible to or committed to such cards issue dates
and/or open dates, last transaction dates, and expiration dates as to all ATM
and debit cards issued to customers of the Seller's processor to deactivate the
operation of the Seller ATM and debit cards completely or to deactivate or
disconnect the Deposit Accounts from such Seller ATM and debit cards no later
than the business day cutoff on the date prior to the Closing Date so that all
activity generated by the Seller ATM and debit cards shall
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have settled prior to the Closing Date. All transactions and activity related to
the Seller ATM and debit cards following the Closing Date which are received or
forwarded to Seller will be accepted and forwarded by Seller to Purchaser along
with all corresponding funds. Seller thereafter agrees to immediately notify its
processor to deactivate such ATM and debit cards and to forward all transactions
related thereto directly to Purchaser.
(ii) Seller agrees to deactivate the ATMs located at the
Offices on or before the business day cutoff on the day prior to the Closing
Date. Thereafter, Purchaser shall reconfigure the ATMs to its standards for
activation after the business day cutoff on the Closing Date.
(iii) Purchaser and Seller agree to cooperate with each other
to assure that all transactions originated through the ATM or originated with
the ATM Cards prior to or on the Closing Date shall be for the account of Seller
and all transactions originated after the Closing Date shall be for the account
of Purchaser. A post closing adjustment shall be made to reflect all such
transactions which cannot be reasonably calculated as of the Closing.
1.09 Indemnification
(a) The Seller shall indemnify, hold harmless and defend the Purchaser
from and against all losses and liabilities, including reasonable legal fees and
expenses, arising out of any actions, suits or proceedings commenced prior to
the Effective Date (other than proceedings to prevent or limit the consummation
of this Agreement) relating to operations at the Branches; and the Seller shall
indemnify, hold harmless and defend the Purchaser from and against all losses
and liabilities (including reasonable legal fees) arising out of any actions,
suits or proceeding commenced on or after the Effective Date which relate to
operations at the Branches prior to the Effective Date. The Seller agrees
further to defend, indemnify and hold harmless the Purchaser against all claims,
losses, liabilities (including reasonable legal fees) and obligations resulting
from any material breach of any agreement, representation or warranty made by
the Seller in the Agreement or in any certificate delivered to the Purchaser
hereunder. The Purchaser will give the Seller written notice of a threatened or
pending claim within thirty (30) calendar days (except in the case where the
Purchaser's first notice is its receipt of the Complaint, in which case such
time for giving Notice shall be fifteen (15) calendar days of its learning about
such threatened or pending claim), together with a statement of facts known to
it regarding such threatened or pending claim. The Seller will then have
forty-five (45) calendar days from the date it received such notice to
investigate the threatened or pending claim and determine whether it will elect
to assume the defense of the matter involving such threatened or pending claim.
If it does so elect, the Seller will be given the Purchaser's full cooperation
and assistance in maintaining said defense. The Seller shall not be liable for
any
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amounts in settlement of a claim or action as described above if such settlement
is effected without the Seller's written consent, which consent shall not be
unreasonably withheld. It is understood that the obligations of the Seller under
this paragraph shall survive the Effective Date.
(b) The Purchaser shall indemnify, hold harmless and defend the Seller
from and against all claims, losses, liabilities, demands and obligations,
including reasonable legal fees and expenses, real estate, sales and use, social
security and unemployment taxes, all accounts payable and operating expenses
including salaries, rents and utility charges, which the Seller may receive,
suffer or incur in connection with operations and transactions occurring on or
after the Effective Date, and which involve the Branches or the assets
transferred or liabilities assumed pursuant to this Agreement, except as
otherwise specifically provided for in the Agreement. To the extent that any
such item has been prepaid by the Seller for a period extending beyond the
Effective Date, there shall be a proportionate monetary adjustment with respect
thereto in favor of the Seller. The Purchaser agrees further to defend,
indemnify, and hold harmless the Seller against all claims, losses, liabilities
(including reasonable legal fees) and obligations resulting from any material
breach of any agreement, representation or warranty made by the Purchaser in the
Agreement or in any certificate delivered to the Seller hereunder. The Seller
will give the Purchaser written notice of a threatened or pending claim within
thirty (30) calendar days (except in the case where the Seller's first notice is
its receipt of a Complaint, in which such time for giving notice shall be
fifteen (15) calendar days) of its learning about such threatened or pending
claim, together with a statement of facts known to it regarding such threatened
or pending claim. The Purchaser will then have forty-five (45) calendar days
from the date it receives such notice to investigate the threatened or pending
claim to determine whether it will elect to assume the defense of the matter
involving such threatened or pending claim. If it does so elect, the Purchaser
will be given the Seller's full cooperation and assistance in maintaining such
defense. It is understood that the obligations of the Purchaser under this
paragraph shall survive the Effective Date.
1.10 Prorata Adjustment of Physical Plant Expenses. All real estate taxes,
utility payments, service contracts, insurance, and similar expenses relating to
the premises on which the Branches are located shall be prorated between the
Parties as of the Effective Date.
1.11 FDIC Quarterly Assessment. There shall be no proration of the FDIC
quarterly assessment actually paid by the Seller for the assessment period in
which the Closing Date is included with respect to the Deposit Liabilities
actually transferred as of the Closing Date.
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1.12 Notice to Customers/Public Disclosures.
As mutually agreed upon by the Parties, Purchaser and/or Seller shall
notify holders of all accounts at the Branches prior to the Closing Date of the
Transaction and its impact on such account holders.
(a) No Public Disclosure. Except as herein below provided to the
contrary or otherwise herein agreed, the Parties shall make no public disclosure
of this Agreement or any transaction contemplated herein prior to the Closing
Date. Any press release, public notice or notice to local officials regarding
this Agreement or the transactions contemplated herein to be made prior to the
Closing Date shall be approved in writing by all Parties prior to its release,
unless such release or notice is required in the opinion of the Purchaser or the
Seller by law, regulations or regulatory authority, in which case no approval of
the other party shall be required. Where required, the approval of any party
shall not be unreasonably withheld. Where approval is not required, the Parties,
nevertheless agree to confer prior to any such release or notice.
(b) Notice by Purchaser to Customers. After all applicable regulatory
approvals have been received, the Purchaser and Seller shall mail a notice to
all depositors and safe deposit customers of the Branches whose accounts are to
be assumed notifying them of the impending transaction and transfer of the
banking business for those Branches to the Purchaser. The Purchaser and Seller
will each pay one-half (1/2) the cost of printing and mailing such notice.
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF THE SELLER
The Seller hereby represents and warrants to the Purchaser as follows:
2.01 Corporate Organization and Powers. The Seller is a state chartered
commercial bank duly organized, validly existing and in good standing under the
laws of the Commonwealth of Pennsylvania and the rules and regulations of the
Pennsylvania Department of Banking ("PDB"). The Seller has the corporate power
and authority to own its properties, to effect this transaction and carry on its
business as presently conducted. The Seller' deposits are, subject only to
monetary limits established by law and regulation, insured by the Banking
Insurance Fund ("BIF") of the FDIC.
2.02 Leases: Title to Property; Encumbrances.
(a) The Seller has, and at the Effective Date will have, good insurable
and marketable title, or lease to the real property, furnishings, equipment and
other assets to be transferred to the
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Purchaser pursuant to this Agreement, and in each case subject to no mortgage,
pledge, lien, security interest, conditional sale agreements, encumbrance or
charge of any nature whatsoever, except as otherwise indicated on Schedule 2.02,
which would interfere with or otherwise prevent the Purchaser from having quiet
enjoyment of the real estate, ownership, possession and quiet enjoyment of the
other assets or ownership of the Deposit Liabilities, Loans or the safe deposit
business to be transferred in accordance with this Agreement.
(b) To the knowledge of the Seller (not having made any specific
investigation for this purpose), there is no condemnation proceeding pending or
threatened which would preclude or impair the use of the Branches as presently
being used in the conduct of the business of the Seller.
(c) The equipment, fixtures, and furniture being sold are all of the
physical assets owned by the Seller and used by it to conduct the business of
the Branches as of the date hereof; the equipment comprising part of the assets
being sold is in good operating condition and repair, giving consideration to
its age and use and subject to ordinary wear and tear. The Purchaser, however,
acknowledges and agrees that all such property is being sold "as is" and without
any warranties, express or implied, other than those specified in this
paragraph.
(d) No notice of any violation of zoning laws, building, fire, and
other regulating laws, statutes, ordinances and regulations relating to the
Branches has been received by the Seller and is currently outstanding and
uncured. With respect to the Branches, to its knowledge, the Seller is in
compliance with all federal, state and local laws, rules and regulations
relating to environmental protection and the Seller has not been notified or is
otherwise aware that it is potentially liable, or is considered potentially
liable, under the Comprehensive Environmental Response, Compensation and
Liability Act of 1980, as amended, or any similar state law. To its knowledge,
no disposal, release or discharge of hazardous or toxic substances, pollutants
or contaminants, including petroleum and gas products, as any of such terms may
be defined under federal, state or local law, has occurred on, in, at or about
any of the facilities of the Branches. There are no actions, suits or regulatory
investigations pending or threatened against the Seller relating to
environmental protection matters.
2.03 No Violation. Neither the execution and delivery of this Agreement, nor the
consummation of this sale, will violate or conflict with: (i) the Articles of
Incorporation or Bylaws of the Seller; (ii) any provision of any agreement or
any other restriction of any kind to which the Seller is a party or by which the
Seller is bound under any material lease; or (iii) any statute, law, decree,
regulation or order of any governmental authority known to the Seller, once the
governmental approvals and consents referred to in this Agreement are obtained;
or will result in a
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default under or cause the acceleration of the maturity of, any obligation or
loan to which the Seller is a party.
2.04 Corporate Authority. The execution and delivery of this Agreement, and the
consummation of this sale, have been duly authorized by the Board of Directors
of the Seller. No further corporate authorization on the part of the Seller is
necessary to consummate the transaction.
2.05 Disclosure. No representation or warranty of the Seller contained in this
Agreement, nor any schedule, exhibit or other document furnished or to be
furnished by the Seller, contains or will contain any untrue statement of a
material fact or omits or will omit a material fact necessary in order to make
the statements contained therein not misleading.
2.06 Non-Competition and Non-Solicitation
(a) Except as provided in this Section 2.06, for a period of three
years from the Closing Date, Seller agrees not to open, acquire, establish or
operate any new office for the conduct of retail branch banking or other banking
services within the Borough of State College and College, Ferguson, Patton,
Harris and Halfmoon Townships.
(b) The provisions of this Section of this Agreement do not prohibit
the Seller from acquiring another financial institution (in whole) with offices
in the areas designated in Paragraph (a) or from conducting non-banking
activities such as insurance, trust services, financial planning, brokerage
services, loan production offices, ATMs or cash dispensing, or investment
banking, from an office located in those areas. If the Seller conducts
non-banking activities, the Seller would agree to consider space at the
Purchaser's location if acceptable to Seller.
(c) Except to the extent required to service the loans or other
non-deposit products of existing customers, Seller will not directly solicit
customers whose Deposit Liabilities or Loans are located at the Branches and are
being transferred hereunder on the Closing Date for a period beginning on the
date of this Agreement and ending three (3) years after the Closing Date, except
with respect to the notices required to this Agreement. This Section of this
Agreement is not intended to prohibit general advertising and soliciting to the
general public by Unitas Bank, a Division of First Commonwealth Bank (or any
successor entity). From the date of this Agreement and for three years following
the Closing Date, Seller will not directly solicit(s) deposit accounts from
customers whose Deposit Liabilities and/or loans are assumed or acquired by
Purchaser pursuant to this Agreement, or (b) refinancing of loans from borrowers
whose loans are being acquired by Purchaser hereunder, except as may occur in
connection with (i) advertising or solicitations directed to the public
generally, (ii) solicitations outside the designated market area of the Offices
and
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(iii) customers or borrowers with a banking or other relationship with Seller or
its affiliates at offices other than the Offices, or who have or maintain more
than one place of business. The covenants and obligations of Seller hereunder
shall survive the Closing.
2.07 Limitation of Warranties. Except as may be expressly represented or
warranted in this Agreement by the Seller, the Seller makes no representations
or warranties with regard to any assets being transferred to the Purchaser, or
liability or obligation being assumed by the Purchaser.
2.08 Disclosure of Employment Agreements.
Except as disclosed in Schedule 2.08 attached hereto, there exist no
written employment agreements or contracts between Seller and Seller's Employees
at the Branches, whether written or otherwise related to wages, hours, terms of
employment, benefits or working conditions or accommodations, except for the
normal policies and procedures of First Commonwealth Bank regarding personnel.
2.9 Non-Solicitation. Officers, directors, employees, representatives and agents
of Seller shall refrain from considering, soliciting, proposing to enter into or
entering into any discussion or negotiations with other potential buyers of the
Branches or substantially all of the assets or Deposit Liabilities of the
Branches from the date hereof through the Closing Date. Seller shall promptly
inform Purchaser of the receipt from the date hereof of any proposals, and terms
thereof, from third parties relating to any such potential acquisition.
2.10 No Litigation. There is no action, suit, proceeding, inquiry or
investigation, at law or in equity, or before any court, public board or body
pending, or to the knowledge of the Seller threatened, against the Seller;
wherein an unfavorable decision, ruling or finding would materially and
adversely affect the Transaction contemplated by this Agreement or adversely
affect the validity or enforceability of this Agreement or any document
necessary to consummate the Transactions contemplated herein or any approval,
consent or permission required to be obtained by the Seller hereunder.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF PURCHASER
The Purchaser hereby represents and warrants to the Seller the following:
3.01 Corporate Organization. The Purchaser is a corporation duly organized,
validly existing and in good standing under the laws of the Commonwealth of
Pennsylvania. Upon the receipt of a charter
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from the OTS and FDIC insurance of account by Nittany Bank (in formation), the
Purchaser will have the corporate power and authority to own or lease its
properties, to effect the transactions contemplated hereby and to carry on its
business.
3.02 No Violation. Neither the execution and delivery of this Agreement nor the
consummation of the Transaction as contemplated by this Agreement will violate
or conflict with: (i) the Articles of Incorporation or the Bylaws of the
Purchaser; (ii) any provision of any agreement or any other restriction of any
kind to which the Purchaser is a party to or by which the Purchaser is bound; or
(iii) any statute, law, decree, regulation or order of any governmental
authority known to the Purchaser, once the governmental consents referred to in
this Agreement are obtained, or will result in a default under, or cause the
acceleration of the maturity of, any obligation or loan to which the Purchaser
is a party.
3.03 Corporate Authority. The execution and delivery of this Agreement, and the
consummation of the Transaction have been duly authorized by the Board of
Directors of the Purchaser. Upon receipt of its charter from the OTS, the
Transaction will be approved and authorized by the Board of Directors of Nittany
Bank.
3.04 No Litigation. There is no action, suit, proceeding, inquiry or
investigation, at law or in equity, or before any court, public board or body
pending, or to the knowledge of the Purchaser threatened, against the Purchaser;
wherein an unfavorable decision, ruling or finding would materially and
adversely affect the Transaction contemplated by this Agreement or adversely
affect the validity or enforceability of this Agreement or any document
necessary to consummate the Transactions contemplated herein or any approval,
consent or permission required to be obtained by the Purchaser hereunder.
3.05 Disclosure. Neither this Agreement nor any schedule, exhibit, certificate
or other document furnished or to be furnished by the Purchaser on the Effective
Date contains or will contain any untrue statement of a material fact or omits
or will omit a material fact necessary in order to make the statements contained
therein not misleading.
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ARTICLE IV
CONDUCT OF BUSINESS PENDING THE EFFECTIVE DATE
4.01 Conduct of Business. Pending the Effective Date, and except as otherwise
consented to by the Purchaser:
(a) Ordinary Course of Business. The Seller will use every reasonable
effort to carry on the business of the Branches diligently and substantially in
the same manner as on the date hereof, and the Seller will not, with regard to
the Branches, engage in any one or more activities or transactions which shall
be outside of the ordinary course of the business of the Branches as conducted
as of the date hereof, except for activities or transactions contemplated by
this Agreement;
(b) Maintenance of Staff. The Seller will use its every reasonable
effort to preserve the business operations as are presently conducted at the
Branches. Seller shall maintain in effect the current staffing levels at the
Branches from the date of the Agreement to the Closing Date. The Seller further
agrees to use every reasonable effort to preserve for the Purchaser the goodwill
of its customers and others having relations with the business normally
conducted at the Branches, and to cooperate with and assist the Purchaser in
assuring the orderly transition of such business from the Seller to the
Purchaser. Nothing in this paragraph shall be construed as requiring the Seller
to engage in any activities or efforts outside of the ordinary course of
business as presently conducted.
(c) Wages. Seller shall not increase the wages of any employee of the
Branches other than in accordance with the policies and salary budget guidelines
presently in effect.
(d) Maintain Services. Seller shall not materially alter the products
or services presently offered at the Branches or materially alter the pricing
policy applicable to such products without prior notice to the Purchaser.
(e) Maintenance of Insurance. Seller shall use every reasonable effort
to maintain in effect through the Closing Date all property, liability, fire and
casualty insurance in effect as of the date of the Agreement with regard to the
Branches, including the structures, leasehold improvements and personal
property.
ARTICLE V
OBLIGATIONS OF THE PARTIES PRIOR TO AND AFTER EFFECTIVE DATE
5.01 Full Access. The Seller shall afford to the officers and authorized
representatives of the Purchaser access to properties, books and records
pertaining to the Branches in order that the Purchaser may have full opportunity
to make such reasonable investigations at such reasonable times as it shall
desire of the affairs of the Seller relating to the Branches, and the officers
of the Seller will furnish the Purchaser with such additional
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financial and operating data and other information as to its business and
properties at the Branches as the Purchaser shall from time to time reasonably
request and as shall be available, including, without limitations, information
required for inclusion in all governmental applications necessary to effect the
Transaction. Nothing in this Section shall be deemed to require the Seller to
breach any obligation of confidentiality.
5.02 Requirements of Regulatory Authorities. The Seller shall, as soon as is
practicable, notify the proper regulatory authorities of its intent to terminate
operation of the Branches and to consummate this Transaction and thereafter
shall: (i) comply with the normal and usual requirements imposed by such
authority applicable to effectuate this Transaction; and (ii) use its good faith
efforts to obtain any required approval of such regulatory authority to transfer
the operations of the Branches.
5.03 Regulatory Application to Effect the Purchase of Assets and Assumption of
Liabilities. The Purchaser shall prepare and file, with the assistance of the
Seller, as soon as practicable, but in no event later than 30 days following the
date of this Agreement, an application, as required by law, to the appropriate
Federal and/or State regulatory authorities for approval to effect this
Transaction, and the Parties hereto shall, if required by applicable statute or
regulation, publish appropriate notice of the Transaction or related regulatory
application. The Parties agree to use their good faith efforts to obtain such
approval in a diligent manner and on a priority basis, and the Purchaser further
agrees to prepare the application in a diligent manner and on a priority basis.
The Parties shall each pay one-half (1/2) of any fees associated with the
applications.
5.04 Further Assurance. Both Parties hereby agree to execute and to deliver such
instruments and take such other actions as the other party may reasonably
require in order to carry out the intent of this Agreement, and the Seller
agrees to give such bills of sale, acknowledgments and other instruments or
conveyance and transfer as, in the reasonable judgment of the Purchaser, shall
be necessary and appropriate to vest in the Purchaser legal and equitable title
to the assets of the Seller being sold hereunder, free and clear of all liens
and encumbrances; and that Seller shall assist Purchaser as requested and
required for Purchaser to perfect any liens or security interest associated with
any assets or collateral being transferred.
5.05 Right to Intervene. In the event that any litigation is instituted against
the Purchaser under or in connection with this Agreement, the Seller shall have
the right in its sole discretion to intervene in such litigation and the
Purchaser does hereby consent to such intervention.
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5.06 Customer Data.
Seller shall provide Purchaser with such data processing computer disks
or tapes encoded with information pertaining to deposit accounts and loans of
the Branches' customers as Purchaser shall request, or authorizations of Seller
for Purchaser to access same from the service bureau maintaining such
information as of the Closing Date. Each Party shall pay its own expenses
associated with the data processing conversion of the customer records to be
transferred. Seller shall provide Purchaser with reasonably available
statistical data related to the Branches prior to the Closing Date upon request.
5.07 Press Releases. Purchaser and Seller will cooperate and coordinate in the
issuance of any press releases regarding the Transaction.
5.08 Allocation of Purchase Price.
The purchase price paid and liabilities assumed by the Purchaser
pursuant to this Agreement shall be allocated in accordance with Section 1060 of
the Internal Revenue Code of 1986, as amended ("Code"). The Seller and the
Purchaser shall cooperate to comply with all substantive and procedural
requirements of Section 1060 of the Code and any regulations thereunder.
5.09 Operation of the Offices.
Except as otherwise expressly provided in this Agreement after the
Closing Date neither Seller, its subsidiaries, affiliates or parent corporation
shall be obligated to provide for any managerial, financial, business, or other
services to the Offices, including without limitation any personnel, employee
benefit, data processing, accounting, risk management, or other services or
assistance that may have been provided to the Offices prior to the close of
business on the Closing Date, and Purchaser shall take such action as may in its
judgment appear to be necessary or advisable to provide for the ongoing
operation and management of, and the provision of services and assistance to,
the Offices after the Closing Date. Upon the Closing, Purchaser shall change the
legal name of the Offices and, except for any documents or materials in
possession of the customers of the Offices (including but not limited to deposit
tickets and checks), shall not use and shall cause the Offices to cease using
any signs, stationery, advertising, documents, or printed or written materials
that refer to the Offices by any name that includes the words "Central" or "FCB"
or the name of any affiliate of First Commonwealth Financial.
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ARTICLE VI
CONDITIONS TO PURCHASER'S OBLIGATIONS
Each and every obligation of the Purchaser under the Agreement to be performed
on or before the Effective Date shall be subject to the satisfaction, on or
before the Effective Date, of the following conditions:
6.01 Representations and Warranties True: Obligations Performed.
(a) The representations and warranties made by the Seller in this
Agreement shall be true at and as of the Effective Date as though such
representations and warranties were made at and as of such time, except for any
changes permitted by the terms hereof or consented to by the Purchaser.
(b) The Seller shall have performed and complied with in all material
respects all obligations and agreements required by this Agreement to be
performed or complied with by it prior to or at the Effective Date.
(c) From the date of this Agreement until the Effective Date, there
shall have been no material adverse change, not cured, in the business or
material conditions (financial or otherwise) of the Branches, except for any
changes permitted by the terms, hereof, or consented to by the Purchaser.
(d) On the Effective Date, no action, suit or proceeding shall be
pending or threatened: (i) against the Seller which might materially and
adversely affect the business, properties and assets of the Branches; or (ii)
against either party which seeks to prohibit consummation of this transaction.
(e) The Seller shall have delivered to the Purchaser a certificate of
its President, dated the Effective Date, certifying to the fulfillment of all
the conditions contained at this Section 6.01.
(f) The Purchaser and the Seller shall have received from the
appropriate regulatory authorities approval: (i) to effect this transaction; and
(ii) for the Purchaser to operate the Branches.
(g) The Purchaser shall have received an opinion of counsel or a
certification from the President for the Seller, dated the Effective Date, to
the effect that (i) the Seller has been duly organized and is validly existing,
(ii) the Seller has duly authorized the execution and delivery of this Agreement
and the performance by the Seller of each of its obligations hereunder, (iii)
this Agreement and the instruments delivered by the Seller pursuant hereto are
valid, binding and enforceable against the Seller in accordance with their
respective terms (subject only to applicable bankruptcy laws and principles of
equity), (iv) any
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consents, approvals, permissions or authorizations required to be obtained under
any law, rule or regulation from any governmental body, agency or authority for
the consummation by the Seller of its obligations hereunder and the transactions
contemplated by the Seller herein have been obtained, and (v) such party is
unaware of any action, suit, proceeding, inquiry, or investigation, at law or in
equity, or before any court, public board or body, pending or threatened,
against the Seller wherein an unfavorable decision, ruling or finding would
materially and adversely affect the consummation, validity or enforceability of
the transactions contemplated hereby.
(h) From the date of this Agreement until the Closing Date, there shall
have occurred no material damage to or destruction of the Branches or the
leasehold improvements thereto.
ARTICLE VII
CONDITIONS TO THE SELLER'S OBLIGATIONS
Each and every obligation of the Seller under this Agreement to be performed on
or before the Effective Date shall be subject to the satisfaction, on or before
the Effective Date, of the following conditions:
7.01 Representations and Warranties True: Obligations Performed.
(a) The representations and warranties made by the Purchaser in this
Agreement shall be true at and as of the Effective Date as though such
representations and warranties were made at and as of such time, except for any
changes permitted by the terms hereof or consented to by the Seller.
(b) The Purchaser shall have performed and complied with in all
material respects all obligations and agreements required by this Agreement to
be performed or complied with by it prior to or at the Effective Date.
(c) The Purchaser shall have delivered to the Seller a certificate of
its President, dated the Effective Date, certifying to the fulfillment of both
of the foregoing conditions.
(d) The Seller shall have received an opinion of counsel or a
certification from the President for the Purchaser, dated the Effective Date, to
the effect that (i) the Purchaser has been duly organized and is validly
existing, (ii) the Purchaser has duly authorized the execution and delivery of
this Agreement and the performance by the Purchaser of each of its respective
obligations hereunder, (iii) this Agreement and the instruments delivered by the
Purchaser pursuant hereto are valid, binding and enforceable against the
Purchaser in accordance with their respective terms (subject to applicable
bankruptcy laws and principles of equity), (iv) other than the formation of
Nittany Bank and approval of agencies regulating the Purchaser to buy the assets
and assume the liabilities pursuant to this Agreement and to establish the
Branches contemplated hereby, no other consents, approvals,
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permissions or authorizations are required to be obtained under any law, rule or
regulation from any governmental body, agency or authority for the consummation
by the Purchaser of its obligations hereunder and the transactions contemplated
by the Purchaser herein, and the aforesaid approvals have been obtained and are
in full force and effect, and (v) such party is unaware of any action, suit,
proceeding, inquiry, or investigation at law or in equity, or before any court,
public board or body, pending or threatened, against the Purchaser wherein an
unfavorable decision, ruling or finding would materially and adversely affect
any such approval, consent or permission or the consummation, validity or
enforceability or the transactions contemplated hereby.
ARTICLE VIII
CONDITIONS TO THE SELLER'S AND THE PURCHASER'S OBLIGATIONS
Each and every obligation of the Parties under this Agreement to be performed on
or before the Effective Date shall be subject to the satisfaction, on or before
the Effective Date, of the following conditions:
8.01 Approval of Governmental Authorities. The approval by the appropriate
regulatory authorities shall have been obtained (including the approval of the
Charter and FDIC insurance of accounts by Nittany Bank); the consent of the
appropriate regulatory authorities to the establishment and operation by the
Purchaser of a branch bank at the present location of each Branch shall have
been obtained; and termination of branch operations conducted by the Seller at
each Branch location and the Seller's consummation of this sale shall not have
been objected to by the appropriate regulatory authority.
8.02 Consents to Assignment of Leases. The landlord under any real estate lease
to be assigned hereunder shall have consented to the Seller's assignment of such
lease to the Purchaser on terms substantially similar to the existing terms
between the Seller and the landlord. Further, landlord shall furnish the
Purchaser with a statement of the balance of any security deposits held under
such lease as of the Closing Date, giving effect to all deductions that are
deemed necessary by the landlord following an inspection of the property as of
the Closing Date.
ARTICLE IX
TERMINATION
9.01 Methods of Termination. This Agreement may be terminated at any time, but
not later than the Effective Date:
(a) By mutual agreement of the Boards of Directors of the
Purchaser and the Seller; or
25
<PAGE>
(b) By the Board of Directors of the Purchaser if any of the conditions
provided for in Article VI of this Agreement shall not have been met or waived
in writing by the Purchaser; or
(c) By the Board of Directors of the Seller if any of the conditions
provided for in Article VII of this Agreement shall not have been met or waived
in writing by the Seller; or
(d) By the Board of Directors of either party if any of the conditions
provided for in Article VIII shall not have been met; or
(e) By the Board of Directors of the Seller or the Purchaser if the
Effective Date has not occurred within the earlier of July 31, 1998 or 30 days
of the receipt of all required final regulatory approvals.
9.02 Procedure Upon Termination. In the event of termination pursuant to Section
9.01 hereof, written notice thereof shall be given to the other party, and this
Agreement shall terminate immediately upon receipt of such notice, unless an
extension is consented to by the party or Parties having the right to terminate.
If this Agreement is terminated as provided herein:
(a) Each party will redeliver all documents, work papers and other
materials of the party relating to this transaction, whether so obtained before
or after the execution hereof, to the party furnishing the same; and
(b) All information received by either party hereto with respect to the
business of the other party (other than information which is a matter of public
knowledge or which has heretofore been or is hereafter published in any
publication for public distribution or filed as public information with any
governmental authority) shall not at any time be used for business advantage by
such party or disclosed by such party to third persons to the detriment of the
party furnishing such information or if otherwise prohibited by state or federal
law; and
(c) Nothing contained in this Article IX shall be deemed to excuse
either Party for a breach of any of its obligations or agreements undertaken or
made in this Agreement.
9.03 Retention of Deposit. If this Agreement is terminated by the Purchaser for
any reason other than the compliance with any of the conditions provided for in
Articles VI or VIII of this Agreement not having been met or waived in writing
by the Purchaser or failure to satisfy the conditions of Sections 1.05 (j) and
(l), then the Seller shall retain the Deposit plus all accrued interest thereon.
26
<PAGE>
ARTICLE X
MISCELLANEOUS PROVISIONS
10.01 Allocation of Purchase Price. Prior to Closing, the Purchaser and Seller
shall prepare a schedule allocating the total consideration paid pursuant to
this Agreement for the purchase of assets under Section 1.02 and premium related
to the assumption of the Deposit Liabilities under Section 1.03 of this
Agreement.
10.02 First Option to Purchase Branches if Sale Contemplated. For a period of
three years from the Closing Date, if the Seller decides to sell the two branch
offices of Unitas Bank, a Division of First Commonwealth Bank located at Hills
Plaza, South Atherton, State College and in Pine Grove Mills, Pennsylvania, it
will offer and negotiate the branch sales with the Purchaser, prior to offering
the sale to any other institution. The purchaser must respond within 30 days of
receiving information on the offices, with a firm offer, which can be accepted
or declined by the Seller. The Seller agrees to negotiate in good faith with the
Purchaser if an offer is made on these branches. If no offer is forthcoming from
the purchaser within 30 days, the Seller may offer the branches to third
parties. Seller also agrees to consider subsequent amended offers from the
Purchaser at any time prior to the sale in an effort to reach an agreement. This
Section is not binding on successors to First Commonwealth Financial Corporation
or First Commonwealth Bank, and is not to be construed to effect the merger or
sale of FCB as a whole.
10.03 Entire Agreement; Amendment and Modification. This Agreement and the
exhibits and schedules hereto shall constitute the entire agreement of the
Parties. The Parties hereto, by mutual consent of their respective duly
authorized officers, may amend, modify and supplement this Agreement in such
manner as may be agreed upon by them in writing.
10.04 Assignment. Upon the receipt of a charter by Nittany Bank, this Agreement
will be assigned to Nittany Bank, which will become a party to the Agreement.
This Agreement and all of the provisions hereof shall be binding upon, and inure
to the benefit of, the Parties hereto and their respective successors and
permitted assigns, but neither this Agreement nor any of the rights, interests
or obligations hereunder shall, except as provided herein, be assigned, prior to
the Effective Date, by either of the Parties hereto without the prior written
consent of the other.
10.05 Counterparts. This Agreement may be executed simultaneously in two or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
27
<PAGE>
10.06 Headings. The headings of the Sections and Articles of this Agreement are
inserted for convenience only and shall not constitute a part hereof.
10.07 Survival of Representations and Warranties. The respective representations
and warranties of the Parties hereto contained herein shall not survive after
the Effective Date, unless stated otherwise herein.
10.08 Payment of Expenses. Each party hereto shall pay for its own expenses and
costs in connection with the carrying out of this Agreement except as stated
otherwise herein. Each Party shall pay one-half (1/2) any applicable fee payable
to the regulators in connection with applications related to the Transaction.
10.09 Consent to Arbitration. Any controversy or claim arising out of or
relating to this Agreement, or the breach thereof, shall be settled by
arbitration in accordance with the rules for commercial arbitration then in
effect at the district office of the American Arbitration Association ("AAA")
nearest to the home office of the party initiating said arbitration proceeding,
and judgment upon the award rendered may be entered in any court having
jurisdiction thereof, except to the extent that the Parties may otherwise reach
a mutual settlement of such issue.
10.10 Governing Law. This Agreement shall be governed by the laws of the
Commonwealth of Pennsylvania except to the extent Federal Law controls.
10.11 Public Disclosure: Advertising. Except as herein provided to the contrary
or as required by law or otherwise herein agreed, any press release, public
notice or notice to local officials regarding this Agreement or the transactions
contemplated herein to be made prior to the Effective Date shall be approved in
writing by all Parties prior to its release; the approval of any party shall not
be unreasonably withheld. Any press release or notice related only to the
formation of Nittany Bank is not required to be approved by the Seller.
10.12 Deposit Account Servicing. Purchaser shall, as of the Effective Date, have
converted, by the close of the business day, all of the computerized deposit
account information, onto the Purchaser's data processing system.
10.13 Data Processing Services. Seller's sole and exclusive responsibilities
concerning the provision of data processing services to or for the Deposit
Accounts of the Offices after the Closing Date, if any, shall be as set forth in
this Section. As soon as practicable following the date of this Agreement,
Seller shall provide Purchaser with applicable product functions and
specifications relating to the data processing support required for the Deposit
Accounts, loans, and sale deposit business (if such
28
<PAGE>
data processing support currently is provided with respect to such business)
maintained at the Offices (such Deposit Accounts, loans and safe deposit
business, if applicable, hereinafter called the "Accounts"). As soon as
practicable following the date of this Agreement, Seller shall provide to
Purchaser file formats relating to the Accounts and up to three (3) sets of test
tapes related to the Accounts in generic form which are machine readable on IBM
(or IBM compatible) equipment. By not later than 2:00 p.m. local time on the day
immediately following the Closing Date, Seller shall make the foregoing
documents and materials available to the Purchaser, Seller shall review and
analyze such materials and shall advise Seller in writing of any defects or
concerns relating thereto not later than 10 business days following receipt
thereof.
10.14 Addresses for Notice, etc. All notices, requests, demands and other
communications provided for hereunder and under the related documents shall be
in writing (including telegraphic communications) and mailed (by registered or
certified mail) or telegraphed or delivered to the applicable party at the
addresses indicated below.
If to the Seller: George E. Dash
Senior Executive Vice President
and Chief Operating Officer
First Commonwealth Bank
Central Offices
Philadelphia and Sixth Streets
P.O. Box 400
Indiana, Pennsylvania 15701
With a copy to: David R. Tomb, Jr.
General Counsel
First Commonwealth Bank
Central Offices
Philadelphia and Sixth Streets
P.O. Box 400
Indiana, Pennsylvania 15701
29
<PAGE>
If to the Purchaser: David Richards, President
Nittany Financial Corp.
637 Kennard Road
State College, Pennsylvania 16801
With a copy to: Gregory A. Gehlmann
Malizia, Spidi, Sloane & Fisch, P.C.
1301 K Street, N.W.
Suite 700 East
Washington, D.C. 20005
or, as to each party, at such other address as shall be designated by such party
in a written notice to each other party complying as to delivery with the terms
of this Section.
30
<PAGE>
BRANCH PURCHASE AND DEPOSIT ASSUMPTION AGREEMENT
AMENDMENT NO. 1
This shall constitute an Amendment dated May 13, 1998 to the Branch
Purchase and Deposit Assumption Agreement (the "Agreement") entered into the
24th day of March 1998, between First Commonwealth Bank, a state chartered
commercial bank having its principal office at Philadelphia and Sixth Streets,
Indiana Pennsylvania 15701 (the "Seller"), and Nittany Financial Corp., a
Pennsylvania holding company organized for the purpose of forming and owning
100% of the stock of Nittany Bank, a federally chartered stock savings bank (in
formation), having its principal office at 637 Kennard Road, State College,
Pennsylvania 16801 (the "Purchaser"). The Seller and the Purchaser are
hereinafter sometimes collectively referred to as the "Parties".
WHEREAS, pursuant to Section 10.03 of the Agreement, the Parties, by
mutual consent of their respective duly authorized officers, wish to amend,
modify and supplement the Agreement,
NOW, THEREFORE, in consideration of and in accordance with the
provisions of the Agreement, and for other good and valuable consideration, the
receipt of which is hereby acknowledged, the Parties hereby amend Section
9.01(e) of the Agreement as follows:
ARTICLE IX
TERMINATION
9.01 Methods of Termination. This Agreement may be terminated at any time, but
not later than the Effective Date:
. . . . . . . . . . . . . .
(e) By the Board of Directors of the Seller or the Purchaser if the
Effective Date has not occurred within the earlier of September 30, 1998 or 30
days of the receipt of all required final regulatory approvals, unless extended
by the mutual consent of the Parties.
<TABLE> <S> <C>
<ARTICLE> 9
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION DERIVED FROM THE
FINANCIAL STATEMENTS IN THE PROSPECTUS WHICH FORMS PART OF FORM SB-2 AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL INFORMATION.
</LEGEND>
<MULTIPLIER> 1
<S> <C> <C>
<PERIOD-TYPE> OTHER 3-MOS
<FISCAL-YEAR-END> DEC-31-1997 DEC-31-1998
<PERIOD-END> DEC-31-1997 MAR-31-1998
<CASH> 29,449 146,448
<INT-BEARING-DEPOSITS> 0 0
<FED-FUNDS-SOLD> 0 0
<TRADING-ASSETS> 0 0
<INVESTMENTS-HELD-FOR-SALE> 0 0
<INVESTMENTS-CARRYING> 0 0
<INVESTMENTS-MARKET> 0 0
<LOANS> 0 0
<ALLOWANCE> 0 0
<TOTAL-ASSETS> 99,449 219,097
<DEPOSITS> 0 0
<SHORT-TERM> 0 0
<LIABILITIES-OTHER> 125,226 70,180
<LONG-TERM> 0 0
0 0
0 0
<COMMON> 0 2,650
<OTHER-SE> (25,777) 146,267
<TOTAL-LIABILITIES-AND-EQUITY> 99,449 219,097
<INTEREST-LOAN> 0 0
<INTEREST-INVEST> 0 0
<INTEREST-OTHER> 295 464
<INTEREST-TOTAL> 295 464
<INTEREST-DEPOSIT> 0 0
<INTEREST-EXPENSE> 0 0
<INTEREST-INCOME-NET> 0 0
<LOAN-LOSSES> 0 0
<SECURITIES-GAINS> 0 0
<EXPENSE-OTHER> 26,072 24,517
<INCOME-PRETAX> (25,777) (24,053)
<INCOME-PRE-EXTRAORDINARY> (25,777) (24,053)
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> (25,777) (24,053)
<EPS-PRIMARY> 0 (1.75)
<EPS-DILUTED> 0 0
<YIELD-ACTUAL> 0 0
<LOANS-NON> 0 0
<LOANS-PAST> 0 0
<LOANS-TROUBLED> 0 0
<LOANS-PROBLEM> 0 0
<ALLOWANCE-OPEN> 0 0
<CHARGE-OFFS> 0 0
<RECOVERIES> 0 0
<ALLOWANCE-CLOSE> 0 0
<ALLOWANCE-DOMESTIC> 0 0
<ALLOWANCE-FOREIGN> 0 0
<ALLOWANCE-UNALLOCATED> 0 0
</TABLE>
