As Filed with the Securities and Exchange Commission on
September 4, 1998
Registration No. 333-__________
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM S-4
REGISTRATION STATEMENT
Under
The Securities Act of 1933
LIBERTY CENTRE BANCORP, INC.
(Exact name of registrant as specified in its charter)
Pennsylvania 6711 Applied for
(State or other jurisdiction (Primary Standard (I.R.S. Employer
of incorporation or Industrial Class- Identification
organization) ification Code No.)
Number)
21 South Centre Street
Pottsville, Pennsylvania 17901
(717) 622-5620
(Address, including Zip Code, and telephone number, including
area code, of registrant's principal executive offices)
___________________________
Judith I. Hoffman
Chief Executive Officer
Liberty Centre Bancorp, Inc.
21 South Centre Street
Pottsville, Pennsylvania 17901
(717) 622-5620
(Name, address, including Zip Code, and telephone
number, including area code, of agent for service)
Copy to:
Edward C. Hogan, Esquire
Stevens & Lee
1415 Route 70 East, Suite 506
Cherry Hill, New Jersey 08034
Approximate date of commencement of the proposed sale of the
securities to the public: The date of mailing the Proxy
Statement/Prospectus contained herein.
If the securities being registered on this Form are being
offered in connection with the formation of a holding company and
there is compliance with General Instruction G, check the
following box. [X]
If this Form is filed to register additional securities for
an offering pursuant to Rule 462(b) under the Securities Act,
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(b) under the Securities Act, check the following box and
list the Securities Act registration statement number of the
earlier effective registration statement for the same offering.
[ ]
___________________________
CALCULATION OF REGISTRATION FEE
_________________________________________________________________
Title of Proposed Proposed
Each Class Maximum Maximum
of Securities Amount Offering Aggregate Amount of
To Be To Be Price Offering Registra-
Registered Registered(1) Per Unit(2) Price(2) tion Fee
_________________________________________________________________
Common Stock,
no par value.... 144,639 $19.22 $2,779,962 $820.09
_________________________________________________________________
(1) Based on the approximate number of shares to be issued in
respect of the same number of outstanding shares of common
stock of Liberty Savings Bank, F.S.B. (the "Bank"), plus
shares issuable pursuant to outstanding options to acquire
such stock.
(2) Estimated solely for the purpose of calculating the
registration fee, and calculated in accordance with
Rule 457(f)(2), based on the book value of the common stock
of the Bank of $19.22 per share as of July 31, 1998.
<PAGE>
[LIBERTY SAVINGS BANK LETTERHEAD]
September 24, 1998
To All Shareholders of Liberty Savings Bank, F.S.B.:
Enclosed is a formal notice of the 1998 Annual Meeting of
Shareholders (the "Meeting") of Liberty Savings Bank, F.S.B. (the
"Bank"). The Meeting will be held on Thursday, October 22, 1998
at 2:00 p.m. at the offices of the Bank at 21 South Centre
Street, Pottsville, Pennsylvania.
In connection with the Meeting, the Board of Directors of
the Bank is submitting for your approval an Agreement and Plan of
Reorganization (the "Agreement"), pursuant to which the Bank
will, subject to necessary approvals, become a wholly owned
subsidiary of a newly formed corporation known as "Liberty Centre
Bancorp, Inc." ("Bancorp"). The transactions contemplated by the
Agreement are referred to herein as the "Reorganization." The
Reorganization was unanimously approved by the Board of Directors
and, pursuant to the Agreement, requires the approval of the
holders of the majority of the issued and outstanding shares of
the common stock of the Bank. In addition, the Reorganization
cannot be consummated until certain regulatory approvals have
been received and become final. The Board of Directors
anticipates that, if such stockholder and regulatory approvals
are received and all other conditions to the consummation of the
Reorganization are satisfied, the Reorganization will occur in
the first quarter of 1999.
As a result of the Reorganization, each shareholder who has
not exercised his or her right of dissent and appraisal regarding
the Reorganization will exchange each share of his or her Bank
common stock and related stock purchase rights for one share of
the common stock of Bancorp and related stock purchase rights.
Subsequent to the Reorganization, the current non-dissenting
shareholders of the Bank will own all of the issued and
outstanding shares of Bancorp.
It is also necessary at the Meeting to elect two Class I
directors of the Bank to serve for a term of three years and
until their successors shall have been elected and qualified, and
to ratify the appointment by the Board of Directors of Patton &
Lettich as the Bank's independent auditors for the fiscal year
ending June 30, 1999.
In addition to the Notice of Annual Meeting, you will find
enclosed with this letter (i) a detailed Proxy Statement/
Prospectus describing the terms of the Reorganization and related
considerations, (ii) the Bank's Annual Report to Shareholders,
and (iii) a form of Proxy. Please read all of the enclosed
materials carefully.
The Board urges that you give the enclosures your prompt
attention and that you return your signed Proxy directing a vote
"FOR" the proposed Reorganization, the election as Class I
directors of the Board of Directors' nominees and the
ratification of the appointment of the independent auditors.
It is important that your shares be represented at the
Meeting. Therefore, whether or not you plan to attend, please
complete your Proxy and return it to the Bank in the enclosed
envelope, which does not require postage if mailed in the United
States. If you attend the Meeting and wish to vote in person,
your proxy may be revoked at that time. Additional methods of
revoking a proxy once given are described in the attached Proxy
Statement/Prospectus.
If you have any questions regarding the proposal, please do
not hesitate to contact me or any other officer of the Bank.
Sincerely,
Robert W. Pugh, Jr.
President
<PAGE>
LIBERTY SAVINGS BANK, F.S.B.
_____________________________
NOTICE
OF
ANNUAL MEETING OF SHAREHOLDERS
to be held on October 22, 1998
_____________________________
NOTICE IS HEREBY GIVEN that the Annual Meeting of
Shareholders (the "Meeting") of Liberty Savings Bank, F.S.B. (the
"Bank") will be held on October 22, 1998, at 2:00 p.m. (Eastern
Time) at the Bank's offices at 21 South Centre Street,
Pottsville, Pennsylvania, for the following purposes:
(1) To elect two Class I directors of the Bank to
serve for a term of three years, and until their
successors shall have been elected and qualified
("Matter No. 1");
(2) To consider and act upon a proposal to approve the
formation of a savings and loan holding company by
approving an Agreement and Plan of Reorganization
pursuant to which (a) the Bank will, subject to
necessary approvals, become a wholly owned
subsidiary of a newly formed corporation known as
"Liberty Centre Bancorp, Inc." ("Bancorp"), and
(b) each outstanding share of common stock of the
Bank and related stock purchase rights will be
exchanged, by operation of law, for one share of
common stock of Bancorp and related stock purchase
rights ("Matter No. 2");
(3) To ratify the appointment by the Board of
Directors of Patton & Lettich as the Bank's
independent auditors for the fiscal year ending
June 30, 1999 ("Matter No. 3");
(4) To transact such other business as may properly be
presented at the Meeting.
Stockholders of record at the close of business on
September 1, 1998, are entitled to notice of, and to vote at, the
Meeting.
BY ORDER OF THE BOARD OF DIRECTORS
JUDITH I. HOFFMAN,
Secretary
Pottsville, Pennsylvania
September 24, 1998
YOU ARE CORDIALLY INVITED TO ATTEND THE ANNUAL MEETING. IT
IS IMPORTANT THAT YOUR SHARES BE REPRESENTED REGARDLESS OF THE
NUMBER YOU OWN. EVEN IF YOU PLAN TO BE PRESENT, YOU ARE URGED TO
COMPLETE, SIGN, DATE AND RETURN THE ENCLOSED PROXY PROMPTLY IN
THE ENVELOPE PROVIDED. IF YOU ATTEND THE MEETING, YOU MAY VOTE
EITHER IN PERSON OR BY YOUR PROXY. ANY PROXY GIVEN MAY BE
REVOKED BY YOU IN WRITING OR IN PERSON AT ANY TIME PRIOR TO THE
EXERCISE THEREOF.
BECAUSE THE FORMATION OF THE HOLDING COMPANY (MATTER NO. 2)
MUST BE APPROVED BY THE HOLDERS OF A MAJORITY OF THE OUTSTANDING
SHARES OF COMMON STOCK OF THE BANK, AN ABSTENTION OR A FAILURE TO
VOTE, IN PERSON OR BY PROXY, IS, IN EFFECT, A VOTE AGAINST MATTER
NO. 2.
<PAGE>
LIBERTY SAVINGS BANK, F.S.B.
LIBERTY CENTRE BANCORP, INC.
PROXY STATEMENT/PROSPECTUS
_______________________________
This Proxy Statement/Prospectus is being furnished in
connection with the solicitation of proxies by the Board of
Directors of Liberty Savings Bank, F.S.B. (the "Bank") for use at
its Annual Meeting of Stockholders to be held on October 22,
1998. This Proxy Statement/Prospectus is also the Prospectus of
Liberty Centre Bancorp, Inc. ("Bancorp") and part of an effective
registration statement filed under the Securities Act of 1933, as
amended (the "Securities Act") with respect to the issuance of up
to 144,879 shares of Bancorp's common stock, no par value per
share, in connection with the Reorganization described herein.
The approximate date of mailing of this Proxy Statement/
Prospectus is September 24, 1998.
This Proxy Statement/Prospectus does not cover any resales
of Bancorp's common stock received by the Bank's stockholders
upon completion of the Reorganization described herein. No
person is authorized to make any use of this Proxy Statement/
Prospectus in connection with any such resale or in connection
with the offer or sale of any other securities.
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 date of this Proxy Statement/Prospectus is September 24,
1998.
PAGE 1
<PAGE>
LIBERTY SAVINGS BANK, F.S.B.
LIBERTY CENTRE BANCORP, INC.
PROXY STATEMENT/PROSPECTUS
_________________________________
TABLE OF CONTENTS
SUMMARY................................................... 4
INFORMATION CONCERNING THE MEETING........................ 11
Matters to be Considered at the Meeting.............. 11
Date, Time, and Place of Meeting..................... 11
Record Date; Required Vote........................... 11
Voting and Revocation of Proxies..................... 12
Solicitation of Proxies.............................. 12
Dissenters' Rights................................... 12
Principal Shareholders of the Bank................... 13
MATTER NO. 1
ELECTION OF DIRECTORS..................................... 14
Information Regarding Nominees and Continuing
Directors.......................................... 14
Security Ownership of Management..................... 17
Board Meetings and Committees........................ 19
Remuneration of Executive Officers................... 20
Employment Agreement................................. 21
Employee Benefit Plans............................... 22
Key Employee Stock Compensation Program.............. 22
1997 Employee Stock Option Plan...................... 22
Indebtedness of Management........................... 25
Transactions with Related Persons.................... 26
MATTER NO. 2
PROPOSAL TO APPROVE FORMATION OF HOLDING COMPANY.......... 27
Reasons for the Reorganization....................... 27
Description of the Reorganization.................... 30
Business of Bancorp.................................. 31
Management of Bancorp and the Bank after the
Reorganization..................................... 31
Conditions, Amendment and Termination................ 32
Federal Tax Consequences of the Transaction.......... 33
Financial Accounting Treatment....................... 33
Limitation of Liability and Indemnification of
Directors and Officers............................. 33
Regulation of the Bank and Bancorp................... 34
Restrictions on Cash Dividends....................... 46
Continuing Restrictions.............................. 46
Treatment of Stock Certificates...................... 46
Effect on Employee Benefit Plans..................... 47
Effective Date....................................... 47
<PAGE 2>
DISSENTERS' AND APPRAISAL RIGHTS.......................... 47
DESCRIPTION OF BANCORP'S CAPITAL STOCK.................... 50
General.............................................. 50
Common Stock......................................... 50
Preferred Stock...................................... 51
Certain Restrictions on Acquisition of Bancorp....... 52
COMPARISON OF RIGHTS OF STOCKHOLDERS OF THE BANK
WITH RIGHTS OF SHAREHOLDERS OF BANCORP.................... 66
MARKET FOR BANK COMMON STOCK.............................. 71
MATTER NO. 3
RATIFICATION OF APPOINTMENT OF INDEPENDENT AUDITORS....... 72
LEGAL OPINIONS............................................ 72
FINANCIAL INFORMATION..................................... 72
AVAILABLE INFORMATION..................................... 73
STOCKHOLDER PROPOSALS..................................... 73
OTHER MATTERS............................................. 74
Exhibits
Exhibit A - Agreement and Plan of Reorganization....... A-1
Exhibit B - Articles of Incorporation of Liberty
Centre Bancorp, Inc........................ B-1
Exhibit C - By-Laws of Liberty Centre Bancorp, Inc..... C-1
Exhibit D - Section 552.14 of OTS Regulations Concerning
Dissenters' and Appraisal Rights........... D-1
PAGE 3
<PAGE>
SUMMARY
This summary is qualified in its entirety by the more
detailed information appearing elsewhere herein. This Proxy
Statement/Prospectus contains certain forward-looking statements
within the meaning of the "safe harbor" provisions of the Private
Securities Litigation Reform Act of 1995. Reference is made in
particular to the descriptions of Bancorp's and the Bank's plans
and objectives for future operations, assumptions underlying such
plans and objectives and other forward-looking statements
included in this Proxy Statement/Prospectus under "Matter No. 2
Proposal to Approve Formation of the Holding Company." Such
statements are based on management's current expectations and are
subject to a number of factors and uncertainties which could
cause actual results to differ materially from those described in
such forward-looking statements. Factors which could cause such
results to differ materially from those described in the forward-
looking statements include: (1) expected growth internally and
through acquisitions of other financial services businesses
cannot be realized as anticipated; (2) competitive pressure in
the banking and financial services industry increases
significantly; (3) changes in the interest rate environment; and
(4) general economic conditions, either nationally or in the
Commonwealth of Pennsylvania, are less favorable than expected.
Formation of Holding Company
Liberty Centre Bancorp, Inc. ("Bancorp") was recently
incorporated by Liberty Savings Bank, F.S.B. (the "Bank") under
Pennsylvania law for the purpose of becoming a savings and loan
holding company. Upon completion of the reorganization described
herein (the "Reorganization"), Bancorp will be a "unitary"
savings and loan holding company because it will own one thrift
institution, the Bank. For a description of the differences for
regulatory purposes between a "unitary" and a "multiple" savings
and loan holding company, see "Proposal to Approve Formation of
Holding Company--Regulation of the Bank and Bancorp."
After the Reorganization, the Bank will continue its current
business and operations as a federally-chartered savings bank
under its currently existing name. The existing federal Charter
and By-laws of the Bank will not be affected by the
Reorganization. See "Proposal to Approve Formation of Holding
Company--Plan of Reorganization."
The principal executive offices of Bancorp and the Bank are
located at 21 South Centre Street, Pottsville, Pennsylvania,
17901, and their telephone number is (717) 622-5620.
Reasons for Reorganization The Reorganization is intended to
facilitate the formation or
acquisition of providers of other
financial services, such as
insurance agency, money management,
<PAGE 4> commercial and consumer
finance and equipment leasing, with
the result that Bancorp will become
a more diversified savings and loan
holding company, owning a number of
separate businesses providing
banking, insurance and other
financial services. Although no
specific services or acquisitions
are presently planned, the
management of the Bank is seeking
possible candidates for
acquisition, but no assurance can
be given that any such transaction
will occur.
The holding company structure also
provides more flexibility in terms
of corporate organization and
capital formation, because the
structure of the holding company is
subject to the Pennsylvania
Business Corporation Law of 1988
(the "Pennsylvania Business
Corporation Law") and the laws
pertaining to thrift holding
companies, rather than the more
stringent and limiting laws
pertaining to banks.
The creation of Bancorp as a
holding company of the Bank also
facilitates the inclusion of
provisions in Bancorp's Articles of
Incorporation and By-Laws that are
intended to encourage any person or
entity who may desire to acquire
control of the Bank, or of Bancorp
after completion of the
Reorganization, to negotiate any
such transaction in advance with
the Board of Directors, and to
discourage a nonnegotiated attempt
to acquire control. See "Proposal
to Approve Formation of Holding
Company--Reasons for
Reorganization."
Description of Reorganization Bancorp will become a holding
company of the Bank pursuant to the
Agreement and Plan of
Reorganization ("Agreement")
described herein. Under the
Agreement: (i) an interim federal
savings bank will be organized as a
<PAGE 5> wholly owned subsidiary of
Bancorp, (ii) the interim federal
savings bank will be merged into
the Bank with the Bank being the
survivor, and (iii) upon such
merger, the shares of common stock
of the Bank (and related stock
purchase rights) will be exchanged,
by operation of law, for common
stock of Bancorp (and related stock
purchase rights) on a one-for-one
basis. The stockholders of the
Bank will, after approval of the
Reorganization by the Office of
Thrift Supervision (the "OTS"),
upon the effective date of the
Reorganization, become the
stockholders of Bancorp. Bancorp
will be a savings and loan holding
company with respect to the Bank
and registered as such with the
OTS. See "Proposal to Approve
Formation of Holding
Company--Description of
Reorganization."
Tax Consequences of the
Reorganization The Reorganization is conditioned
upon receipt of an opinion of
counsel to the effect, among other
things, that no gain or loss will
be recognized by Bancorp, the Bank,
or the stockholders of the Bank
when their stock is exchanged, by
operation of law, for stock of
Bancorp. See "Proposal to Approve
Formation of Holding
Company--Federal Tax Consequences
of the Reorganization."
Accounting Treatment The Reorganization will be
characterized and treated as a
"pooling of interests" for
financial reporting and related
purposes.
Comparison of Shareholder
Rights Substantial differences exist
between the rights of the
shareholders of Bancorp, a
Pennsylvania business corporation,
and the present rights of the
stockholders of the Bank, a Federal
savings bank. Such differences
include provisions which may tend
<PAGE 6> to deter a nonnegotiated
tender or exchange offer for
Bancorp, such as the following:
(a) a prohibition relating to the
ownership or voting of shares of
Bancorp common stock in excess of
10% of the shares outstanding; and
(b) requiring a person who acquires
25% or more of Bancorp's
outstanding common stock to buy all
of the common stock of other
shareholders that such shareholders
may choose to tender to such party,
at the highest price paid by such
party for Bancorp common stock in
the twelve months preceding. In
general, certain of the provisions
of the Articles of Incorporation
and By-Laws of Bancorp are designed
to encourage any person or entity
who may seek to acquire control of
Bancorp to negotiate any such
transaction in advance with the
Board of Directors. These
provisions, together with certain
provisions of Pennsylvania law, the
position of the OTS on changes in
control of savings and loan
institutions, and agreements with
certain officers and employees of
the Bank and Bancorp, may make
removal of management of Bancorp
more difficult. See "Description
of Bancorp's Capital Stock--Certain
Restrictions on Acquisition of
Bancorp," "Comparison of Rights of
Stockholders of the Bank with
Rights of Shareholders of Bancorp,"
"Election of Directors--Employment
Agreement," and "Proposal to
Approve Formation of Holding
Company--Regulation of the Bank and
Bancorp."
Unlike the charter documents of the
Bank, the By-Laws of Bancorp, with
certain exceptions, provide that
directors of Bancorp are not liable
for monetary damages for any action
taken or any failure to take any
action unless such action or
failure constitutes self-dealing,
recklessness or willful misconduct.
See "Comparison of Rights of
<PAGE 7> Stockholders of the Bank
with Rights of Shareholders of
Bancorp."
Market for Bancorp Common
Stock It is anticipated that, like the
common stock of the Bank, there
will be no active public trading
market for the Bancorp common stock
to be received by stockholders of
the Bank in the Reorganization.
See "Proposal to Approve Formation
of Holding Company--Description of
Reorganization."
Management of Bancorp The directors of Bancorp are, and
will upon completion of the
Reorganization be, Robert W.
Pugh, Jr., Herman J. Fenstermacher,
Frank J. Grabowski, Daniel C.
Guers, Judith I. Hoffman,
Michael R. Muncy, Menelaos P.
Palles, and Ronald R. Pellish, and
the officers will be the persons
indicated herein under "Formation
of Holding Company--Management of
Bancorp." Bancorp's Class II
directors, consisting of Herman J.
Fenstermacher, Menelaos P. Palles
and Daniel C. Guers, will be
scheduled for re-election at the
annual meeting of shareholders of
Bancorp in October 1999.
Restrictions on Cash
Dividends Initially, the only source of funds
for payment of cash dividends by
Bancorp will be dividends paid to
Bancorp by the Bank. The Bank is
subject to restrictions on the cash
dividends it can pay to Bancorp.
See "Description of Bancorp's
Capital Stock--Common Stock."
Regulation of Bank and
Bancorp Under the Home Owners' Loan Act,
Bancorp will be subject to
regulation by the OTS, as a
"unitary savings and loan holding
company." With respect to certain
matters arising under federal and
state securities laws, Bancorp
will be subject to regulation by
the Securities and Exchange
Commission (the "SEC") and various
<PAGE 8> state regulators; prior to
the Reorganization, such laws were
administered, as to the Bank, by
the OTS. The Bank will continue to
be regulated by the OTS. See
"Proposal to Approve Formation of
Holding Company--Regulation of the
Bank and Bancorp."
Regulatory Approval Completion of the Reorganization is
conditioned upon, among other
things, obtaining the prior
approval of the OTS. Applications
will be made for necessary
approvals after approval by the
Bank's shareholders of the proposal
to form the holding company.
Management of the Bank knows of no
reason why such approvals would not
be granted. See "Proposal to
Approve Formation of Holding
Company--Conditions to the
Reorganization."
Stockholder Vote Required
for Approval Approval of the proposed
Reorganization will require the
affirmative vote of a majority of
the outstanding shares of common
stock of the Bank.
Because the formation of the
holding company (Matter No. 2),
must be approved by the holders of
a majority of the outstanding
shares of common stock of the Bank,
an abstention or a failure to vote,
in person or by proxy, is, in
effect, a vote against Matter
No. 2.
Dissenters' Rights Pursuant to federal regulations, holders
of common stock of the Bank are entitled
to dissenters' and appraisal rights in
connection with the Reorganization.
Shareholders who wish to dissent from
the terms of the Reorganization may
receive the cash value of their shares
of Bank common stock if the
Reorganization is consummated, provided
certain procedures are followed. For a
description of these procedures, see
"Proposal to Approve Formation of
Holding Company-- Dissenters' and
Appraisal Rights." <PAGE 9>
PAGE 10
<PAGE>
Other Information Concerning the Meeting
Other Matters to Be
Acted Upon Stockholders also will be asked
(a) to elect two Class I directors
of the Bank, and (b) to ratify the
appointment of Patton & Lettich as
the Bank's independent auditors for
the 1999 fiscal year.
Election of Directors The two directors who are being
elected, together with six
continuing directors, will serve as
the directors of the Bank, whether
or not the Reorganization is
approved at the Meeting or
ultimately completed. See
"Election of Directors." For
information with respect to the
directors of Bancorp, see "Proposal
to Approve Formation of Holding
Company--Management of Bancorp and
the Bank after the Reorganization."
Ratification of
Independent Auditors The Board of Directors of the Bank
has designated Patton & Lettich as
the Bank's independent auditors for
the year ended June 30, 1999,
subject to ratification by
shareholders. See "Proposal to
Ratify Appointment of Independent
Auditors."
Annual Meeting of The Meeting will be held at
Stockholders 2:00 p.m. on October 22, 1998, at
the offices of the Bank at 21 South
Centre Street Pottsville,
Pennsylvania.
Voting Record Date Stockholders of record at the close
of business on September 1, 1998
are entitled to notice of and to
vote at the Meeting.
PAGE 11
<PAGE>
INFORMATION CONCERNING THE MEETING
Matters to be Considered at the Meeting
This Proxy Statement/Prospectus is furnished in connection
with the solicitation of proxies by the Board of Directors of
Liberty Savings Bank, F.S.B. (the "Bank"), for use at the Bank's
Annual Meeting of Shareholders to be held October 22, 1998, or
any adjournment thereof (the "Meeting"). Stockholders at the
Meeting will elect two Class I directors of the Bank to serve for
a term of three years ("Matter No. 1") as well as consider and
vote upon the adoption of the Agreement and Plan of
Reorganization (the "Agreement") set forth as Exhibit A to this
Proxy Statement/Prospectus ("Matter No. 2"), which provides for a
reorganization (the "Reorganization") pursuant to which the Bank
will become a wholly owned subsidiary of Liberty Centre
Bancorp, Inc. ("Bancorp"), a newly formed Pennsylvania business
corporation, and the stockholders of the Bank will become the
stockholders of Bancorp. See "Proposal to Approve Formation of
Holding Company--Description of the Reorganization." Shareholders
will also be asked to ratify the appointment by the Bank's Board
of Directors of Patton & Lettich as the Bank's independent
auditors for the fiscal year ending June 30, 1999 ("Matter
No. 3"). See "Proposal to Ratify Appointment of Independent
Auditors."
Date, Time, and Place of Meeting
The Annual Meeting of the Shareholders of the Bank will be
held at the offices of the Bank, 21 South Centre Street,
Pottsville, Pennsylvania at 2:00 p.m., on Thursday, October 22,
1998.
Record Date; Required Vote
The Board of Directors has fixed the close of business on
September 1, 1998, as the date for determining holders of record
of the Bank's common stock entitled to notice of and to vote at
the Meeting or any adjournment thereof.
The holders of a majority of the outstanding shares of the
common stock of the Bank, present either in person or by proxy,
will constitute a quorum for the transaction of business at the
Meeting. The affirmative vote of the holders of a majority of
the Bank's outstanding common stock is required to approve Matter
No. 2. The affirmative vote of the holders of a majority of the
Bank's common stock voting at the Meeting is required to approve
Matter No. 3 and any other matter that may properly come before
the Meeting. At September 1, 1998, there were 132,080 shares of
the Bank's common stock outstanding.
<PAGE 12>
Voting and Revocation of Proxies
The execution and return of the enclosed proxy will not
affect a shareholder's right to attend the Meeting and vote in
person. Any shareholder giving a proxy may revoke it at any time
before it is exercised by submitting written notice of its
revocation or a subsequently executed proxy to the Secretary of
the Bank, or by attending the Meeting and electing to vote in
person. Shareholders of record at the close of business on
September 1, 1998 are entitled to notice of, and to vote at, the
Meeting. On that date, there were 132,080 shares of the Bank's
common stock outstanding, each of which will be entitled to one
vote at the Meeting on each matter submitted to shareholders.
If the enclosed proxy is appropriately marked, signed and
returned in time to be voted at the Meeting, the shares
represented by the proxy will be voted in accordance with the
instructions marked thereon. Signed proxies not marked to the
contrary will be voted "FOR" the election, as directors, of the
Board of Directors' nominees and "FOR" approval of Matters No. 2
and 3. Signed proxies will be voted "FOR" or "AGAINST" each other
matter which properly comes before the Meeting or any adjournment
or adjournments thereof, in the discretion of the persons named
as proxyholders.
Solicitation of Proxies
This Proxy Statement/Prospectus and the accompanying proxy
are first being mailed to stockholders of the Bank on or about
September 24, 1998. The expense of soliciting proxies will be
borne by the Bank. It is expected that the solicitation of
proxies will be primarily by mail. The Bank's directors,
officers and employees may also solicit proxies personally, by
telephone and by telegraph.
The Bank's Annual Report for the year ended June 30, 1998
accompanies this Proxy Statement/Prospectus. The Annual Report
of the Bank is furnished to shareholders for their information.
No part thereof is incorporated by reference herein.
Dissenters' Rights
Pursuant to federal regulations, holders of the common stock
of the Bank will have dissenters' and appraisal rights in
connection with Matter No. 2. Shareholders who wish to dissent
from the terms of the Reorganization may receive the cash value
of their shares of Bank common stock if the Reorganization is
consummated, provided certain procedures are followed. For a
description of these procedures, see "Proposal to Approve
Formation of Holding Company-- Dissenters' and Appraisal Rights."
<PAGE 13>
Principal Shareholders of the Bank
The following table sets forth information regarding persons
known by the Bank to own more than 5% of the shares of its
outstanding common stock as of June 30, 1998.
Name and Address of Shares of Common Stock
Beneficial Owner (1) Beneficially Owned (2)
Amount Percent (3)
Roger S. Hillas
Suite 425
One Plymouth Meeting
Plymouth Meeting, PA 19462 13,187 (4) 9.98%
Menelaos P. Palles
P.O. Box 860
Pottsville, PA 17901 10,146 (5) 7.68%
Arthur H. Weston
1805 Village Road
Orwigsburg, PA 17961 8,300 (6) 6.28%
John W. Reiley, Sr.
614 West Market Street
Pottsville, PA 17901 7,408 (7) 5.61%
(1) In the aggregate, directors and executive officers of the
Bank own 23.3% of the common stock of the Bank outstanding
and, on a fully-diluted basis (including shares issuable
upon the exercise of options), 26.6% of its common stock.
(2) Amounts are based on information furnished to the Bank by
the respective individuals, and on the books and records of
the Bank. For the purposes of this Proxy Statement/
Prospectus, shares are deemed to be beneficially owned by a
person if he or she directly or indirectly has or shares the
power to vote or dispose of the shares, whether or not he or
she has any economic interest in the shares. Unless
otherwise indicated, to the knowledge of the Bank's
management, the named beneficial owner has sole voting and
dispositive power with respect to the shares. For purposes
of this Proxy Statement/Prospectus, a person is deemed to
beneficially own shares which may be received upon the
exercise of outstanding stock options if the option is
exercisable within 60 days.
(3) Percent is calculated on a fully diluted basis (i.e. as if
his outstanding options had been exercised on or prior to
June 30, 1998).
(4) Includes 1,887 shares owned by Mr. Hillas' spouse, with
respect to which Mr. Hillas disclaims beneficial ownership.
<PAGE 14>
(5) Includes 7,296 shares owned jointly with Mr. Palles' wife
and 2,000 shares owned by Mr. Palles as custodian for his
minor children. Also includes 750 shares which, as of
June 30, 1998, Mr. Palles had the right to acquire upon the
exercise of stock options.
(6) All shares are owned by Arthur H. Weston as Trustee under a
Living Trust Agreement dated June 22, 1992.
(7) All shares are owned jointly with Mr. Reiley's wife.
MATTER NO. 1
ELECTION OF DIRECTORS
Information Regarding Nominees and Continuing Directors
The Bylaws of the Bank provide that the Board of Directors
may from time to time fix the total number of Directors on the
Board at not less than 7 nor more than 15. The Bylaws also
provide that the Board of Directors shall be divided into three
classes as nearly equal in number as possible. The members of
each class are to be elected for a term of three years and until
their successors are elected and qualified.
The Board of Directors consists of eight (8) members. The
terms of the two (2) Class I Directors expire at the Meeting.
Ronald R. Pellish and Judith I. Hoffman have been nominated for
election at the Meeting to serve as Class I Directors whose term
will expire at the annual meeting of the Bank's shareholders to
be held in 2001.
The Bylaws of the Bank permit nominations for election to
the Board of Directors to be made by the Nominating Committee of
the Board of Directors or by any stockholder entitled to vote for
the election of directors. Nominations for director made by
stockholders (other than by the Nominating Committee) must be
made, in writing, and delivered to the Bank not less than five
(5) days prior to the date of the Meeting. The Bank is not
required to include nominations made by its stockholders in this
Proxy Statement. However, if any such nomination is properly
made, ballots bearing the name of such nominee or nominees will
be provided for use by stockholders at the Annual Meeting. Any
nominations that are not made timely or any votes cast at the
Meeting for any candidate not duly nominated will be disregarded
by the chairman of the Meeting. Although the Nominating
Committee will consider nominees recommended by stockholders, it
has not actively solicited recommendations for nominees from
stockholders, nor has it established procedures for this purpose.
No notice of nomination of any person for election as a Class I
Director has been received from any stockholder as of the date of
this Proxy Statement.
The two nominees for Class I Director receiving the highest
number of votes cast at the Meeting will be elected as Class I
Directors. Abstentions and broker nonvotes will not constitute
<PAGE 15> or be counted as "votes" cast for the purpose of the
election of the Class I Directors.
The continuing directors and the persons who are elected as
directors at the Meeting will serve, for their respective terms
of office, as directors of the Bank, whether or not the
Reorganization is approved at the Meeting or completed. If the
Reorganization is approved at the Meeting and completed, the
Board of Directors of Bancorp will be the same as the Board of
Directors of the Bank. See "Proposal to Approve Formation of
Holding Company--Management of Bancorp and the Bank After the
Reorganization."
Shares represented by properly executed proxies in the
accompanying form will be voted for the nominees named below
unless otherwise specified in the proxy by the stockholder. Any
stockholder who wishes to withhold authority from the
proxyholders to vote for the election of directors or to withhold
authority to vote for any individual nominee may do so by marking
his or her proxy to that effect. Stockholders cannot cumulate
their votes for the election of directors. No proxy may be voted
for a greater number of persons than the number of nominees
named. If any nominee should become unable to serve, the persons
named in the proxy may vote for another nominee. The Bank's
management, however, has no present reason to believe that any
nominee listed below will be unable to serve as a director, if
elected.
The following table sets forth certain information
concerning the nominees for election as directors and the
continuing directors, including their ownership of shares of
common stock of the Bank as of June 30, 1998. There are no
arrangements or understandings between the Bank and any person
pursuant to which such person has been elected a director.
<PAGE 16>
<TABLE>
<CAPTION>
NAME AGE DIRECTOR SINCE
NOMINEES FOR CLASS I DIRECTORS TO SERVE UNTIL 2001:
<S> <C> <C>
RONALD R. PELLISH 48 1992
Licensed Attorney in the Commonwealth of
Pennsylvania since 1976; Partner in the law
firm of Pellish and Pellish, Pottsville,
Pennsylvania; Solicitor for the Bank since 1982.
JUDITH I. HOFFMAN 54 1995
Chief Executive Officer of the Bank since
1991; Executive Vice President and Secretary
of the Bank since August 1990.
<CAPTION>
CONTINUING CLASS II DIRECTORS TO SERVE UNTIL 1999:
<S> <C> <C>
HERMAN J. FENSTERMACHER 62 1987
President of Hadesty's Inc., a plumbing
and heating retail store located in
Pottsville, Pennsylvania
MENELAOS P. PALLES 44 1987
President of PBX Enterprises, Inc.,
located in Pottsville, Pennsylvania;
President of Wholesale Restaurant
Equipment and Supply, Inc., a food service
equipment company located in Pottsville,
Pennsylvania; Lieutenant Colonel in
U.S. Marine Corps Reserve.
DANIEL C. GUERS 49 1993
Vice President of Guers Dairy since
1987; 1972 graduate of Delaware Valley
College; completed a four year tour of
duty with the U.S. Navy in 1977; employed
by Guers Dairy since 1978.
<CAPTION>
NAME AGE DIRECTOR SINCE
CONTINUING CLASS III DIRECTORS TO SERVE UNTIL 2000:
<S> <C> <C>
FRANK J. GRABOWSKI 51 1995
Vice President and co-owner of Schuylkill
Memorial Park, a local cemetery, since
1986, with responsibility for internal
operations, sales, park maintenance and
investments; co-owner of Bagel Works, Inc.,
Pottsville, Pennsylvania; registered independent
securities dealer affiliated with Lombard
Securities, Baltimore, Maryland.
<PAGE 17>
MICHAEL R. MUNCY 41 1993
Since January 1, 1994, Mr. Muncy has
served as President, Victor E. Muncy, Inc.,
a door and glass company located in Pottsville,
Pennsylvania. He served as Vice President
of Victor E. Muncy, Inc. from 1986 to 1993.
ROBERT W. PUGH, JR. 50 1976
President of the Bank since October 1990;
Chairman of the Board of Directors since
1991. Owner of Assured Realty Transfers, a
real estate title insurance agency located
in Pottsville, Pennsylvania.
</TABLE>
Security Ownership of Management
The following table sets forth information concerning the
number of shares of the Common Stock held as of June 30, 1998 by
each nominee for Director, each present Director and executive
officer, and all Directors and executive officers as a group.
PAGE 18
<PAGE>
<TABLE>
<CAPTION>
Amount and Nature of Beneficial Ownership(1)
Sole Voting Shared
Total and Voting and
Name of Beneficial Beneficial Investment Investment Percent
Owner Ownership Power Power of Class (2)
<S> <C> <C> <C> <C>
Directors and Nominees
Herman J. Fenstermacher (3) 5,290 5,290 0 4.0%
Frank J. Grabowski (4) 1,900 1,900 0 1.4%
Daniel C. Guers (5) 1,956 0 1,956 1.5%
Judith I. Hoffman (6)(12) 4,632 0 4,632 3.5%
Michael R. Muncy (7) 1,900 1,900 0 1.4%
Menelaos P. Palles (8) (9) 10,146 2,100 8,046 7.7%
Ronald R. Pellish (6) (9) (10) 6,222 2,185 4,037 4.7%
Robert W. Pugh, Jr. (11) 4,711 0 4,711 3.6%
All directors and executive 36,757 13,375 23,382 26.6%
officers as a group
(8 persons) (13)
______________________________
</TABLE>
(1) Based on information furnished by the respective
individuals, as of June 30, 1998, and the books and records
of the Bank as of such date. Under applicable regulations,
shares are deemed to be beneficially owned by a person if he
or she directly or indirectly has or shares the power to
vote or dispose of the shares. Unless otherwise indicated,
the named beneficial owner has sole voting and dispositive
power with respect to the shares. Under applicable
regulations, a person is deemed to have beneficial ownership
of shares which may be received upon the exercise of
outstanding stock options if the option is exercisable
within 60 days.
(2) Percent is calculated on a fully diluted basis (i.e. as if
his or her options had been exercised on or prior to
June 30, 1998).
(3) Shares include 750 shares which Mr. Fenstermacher has the
right to acquire upon the exercise of stock options.
(4) Shares include 400 shares which Mr. Grabowski has the right
to acquire upon the exercise of stock options.
(5) Shares include 1,528 shares owned jointly with Mr. Guers'
wife, and 28 shares owned by Mr. Guers' wife as custodian
<PAGE 19> for their minor child. Also includes 400 shares
which Mr. Guers has the right to acquire upon the exercise
of stock options.
(6) Indicates a nominee for election as a Class I Director at
the Meeting.
(7) Shares include 400 shares which Mr. Muncy has the right to
acquire upon the exercise of stock options.
(8) Shares include 7,296 shares owned jointly with Mr. Palles'
wife, and 2,000 shares owned by Mr. Palles as custodian for
his minor children. Also includes 750 shares which, as of
June 30, 1998, Mr. Palles had the right to acquire upon the
exercise of stock options.
(9) Mr. Palles' spouse and Mr. Pellish are first cousins.
(10) Shares include 2,600 shares owned jointly with Mr. Pellish's
wife, Linda S. Pellish, and 345 shares owned by Mr. Pellish
as custodian for his children. Also includes 437 shares
owned or controlled by Linda S. Pellish as to which
Mr. Pellish disclaims beneficial ownership. Also includes
1,000 shares which Mr. Pellish has the right to acquire upon
the exercise of stock options.
(11) Shares include 3,000 shares owned jointly with Mr. Pugh's
wife, and 486 shares owned by Mr. Pugh's wife as custodian
for his minor children. Also includes 1,225 shares which,
as of June 30, 1998, Mr. Pugh had the right to acquire upon
the exercise of stock options.
(12) Shares include 975 shares which Ms. Hoffman has the right to
acquire upon the exercise of stock options.
(13) Shares include 5,900 shares which may be acquired by
exercise of vested options granted under the Bank's stock
option plans.
Board Meetings and Committees
The Board of Directors held 12 regular meetings and 1
special meeting during the year ended June 30, 1998. The
Chairman of the Board received $250 per regular and special
meeting attended, and the remaining directors received $200 per
regular and special meeting of the full Board of Directors
attended. Each director received $75 per committee meeting
attended. No director attended fewer than 75% of all meetings of
the Board of Directors and the committees thereof of which he or
she was a member held during the year ended June 30, 1998. An
aggregate of $27,610 was paid to directors during the year ended
June 30, 1998 for attendance at Board and Committee meetings.
<PAGE 20>
The Board of Directors has standing audit, nominating and
compensation committees as described below. The Board of
Directors also has a standing Option Committee which performs
some of the functions typically performed by a compensation
committee.
The Audit/Internal Loan Review/Asset Classification
Committee reviews the scope and results of the audit performed by
the Bank's independent auditors and reviews the Bank's system of
internal control and audit with management and such independent
auditors. This Committee also reviews the Bank's loan portfolio
for the purposes of determining whether to classify such loans as
substandard, doubtful, loss or special mention and determining
the necessary allowances to the loan loss reserve, in accordance
with OTS Regulations. The members of this committee currently
consist of Messrs. Guers and Pellish. This committee met two
times during the 1998 fiscal year.
The Bank's Board of Directors acts as the Nominating
Committee for the selection of nominees for election as
Directors. During the year ended June 30, 1998, the Board of
Directors performed the function of the Nominating Committee
during one regular meeting of the Board of Directors.
The Compensation Committee, which met one time during the
Bank's 1998 fiscal year, is responsible for the approval and
administration of the base salary level of employees, the Bank's
Bonus Program, and the terms of employment of executive officers.
This committee consists of Messrs. Fenstermacher, Grabowski,
Guers and Pugh, and Ms. Hoffman.
The Option Committee (the "Option Committee") serves as the
administrator of the Bank's stock option plans, as further
described hereinafter. The members of this Committee are
Messrs. Grabowski, Guers, Muncy, and Palles. This Committee met
three times during the Bank's 1998 fiscal year.
The Bank has other committees composed of directors and/or
officers of the Bank which meet for specific purposes. The Board
of Directors of the Bank has authority under the Bank's Bylaws to
establish such other committees from time to time as may be
deemed necessary.
Remuneration of Executive Officers
No officer of the Bank received cash compensation exceeding
$100,000 for the year ended June 30, 1998. The following table
sets forth the compensation paid by the Bank to its Chief
Executive Officer:
<PAGE 21>
<TABLE>
<CAPTION>
SUMMARY COMPENSATION TABLE
Long-Term
Compensation
Awards
Securities All Other
Name and Salary(1) Bonus Underlying Compensation
Principal Position Year ($) ($) Options (#) (2)($)
<S> <C> <C> <C> <C> <C>
Judith I. Hoffman, 1998 64,465 1,215 975 6,025
Executive Vice President, 1997 61,164 1,138 0 6,447
Chief Executive Officer and 1996 60,307 1,116 0 4,745
Secretary
</TABLE>
(1) Includes amounts paid to Ms. Hoffman for service on the
Board of Directors.
(2) Consists of 50% matching contributions by the Bank under the
401(k) plan, life and health insurance annual premiums, and
long-term disability insurance premiums.
Employment Agreement
On August 1, 1995, Mrs. Hoffman and the Bank entered into an
employment agreement (the "1995 Agreement") pursuant to which Ms.
Hoffman serves as Executive Vice President and Chief Executive
Officer. The 1995 Agreement is currently scheduled to expire on
July 31, 2001; however, the 1995 Agreement provides that it will
be automatically renewed on August 1 of each year to provide for
a continuous three-year term, unless 60 days' notice of
termination is given by either party, in which case the agreement
will expire at the end of its then current term.
Pursuant to the 1995 Agreement, Mrs. Hoffman is to receive
an annual salary of at least $52,500, and she is entitled to
participate in the Bank's group insurance, hospitalization,
401(k) and bonus plans.
Under the 1995 Agreement, Mrs. Hoffman's employment is
terminable by the Bank at any time, but any termination by the
Bank other than termination for "Cause" (as defined in the 1995
Agreement) does not effect Mrs. Hoffman's right to compensation
under the 1995 Agreement for its full term. In addition, the
1995 Agreement provides that, upon certain actions by the Bank
after a "Change in Control" (as defined in the 1995 Agreement),
Mrs. Hoffman is entitled to receive severance payments for a
period of three (3) years. Such payments will become due
following a "Change in Control" upon (i) an involuntary
termination of employment or (ii) a voluntary termination of
employment after (a) the assignment to Mrs. Hoffman of duties
inconsistent with her position or requiring increased travel;
(b) any reduction in, and/or failure by the Bank to provide
Mrs. Hoffman with, her then current title, responsibilities, or
<PAGE 22> level of salary and employee benefits; (c) any material
relocation or disruption of Mrs. Hoffman; or (d) any other breach
of the 1995 Agreement by the Bank.
Employee Benefit Plans
Pension Plan. The Bank maintains a 401(k) Plan that allows
each employee to save a percentage of their gross salary through
payroll deductions. The Bank matches 50% of each employee's
contributions up to 8% of the employee's compensation. The
401(k) plan replaced the Simplified Employee Pension Plan that
the Bank previously had in effect.
Bonus Program. The Bank also pays bonuses to its employees.
Such bonuses, which are determined by the Board of Directors in
its discretion, are based on the net income of the Bank, are not
based on any defined criteria and are payable at the discretion
of the Board of Directors. No bonuses are paid to directors of
the Bank, except for those paid to Mrs. Hoffman and Mr. Pugh in
their capacities as executive officers of the Bank.
Key Employee Stock Compensation Program
As a performance incentive and to encourage ownership of its
Common Stock, from 1987 to 1997 the Bank maintained the Key
Employee Stock Compensation Program (the "1987 Program") under
which options were granted to directors, executive officers and
other selected key employees of the Bank. The 1987 Program
expired by its terms on October 28, 1997. To replace the 1987
Program, the Board of Directors adopted the Liberty Savings
Bank, F.S.B. 1997 Employee Stock Option Plan (the "1997 Employee
Plan") and the Liberty Savings Bank, F.S.B. 1997 Stock Option
Plan for Outside Directors (the "1997 Director Plan").
As of June 30, 1998, options to acquire 1,490 shares of
authorized but unissued Common Stock were outstanding under the
1987 Program. No options were granted under the 1987 Program
from July 1, 1997 to its expiration on October 28, 1997.
1997 Employee Stock Option Plan
The 1997 Employee Plan authorizes the Option Committee to
grant options for the purchase of up to 5,654 shares of
authorized but unissued Common Stock. The Option Committee has
the authority to grant options to key employees under the 1997
Employee Plan, based upon the recommendation of the Bank's Chief
Executive Officer and subject to the approval of a majority of
the disinterested members of the Board.
Under the 1997 Employee Plan, both "Incentive Stock Options"
(as defined in Section 422 of the Internal Revenue Code of 1986,
as amended (the "Code")), which qualify for certain tax benefits,
and options which do not qualify for such tax benefits
("Nonqualified Stock Options") may be granted.
<PAGE 23>
Option Grants in Last Fiscal Year
The following table sets forth information concerning grants
of stock options for the fiscal year ended June 30, 1998 to the
Bank's Chief Executive Officer.
<TABLE>
<CAPTION>
Individual Grants
Number of % of
Securities Total Options
Underlying Granted
Options to Employees Exercise or
Granted (1) in Fiscal Base Price (3) Expiration
(#) Year (2) ($/Sh) Date
<S> <C> <C> <C> <C>
Judith I. Hoffman 850(4) 27.6% $ 12.00 08/07/2007
125(4) 4.1% $ 12.00 10/21/2007
</TABLE>
________________
(1) Amounts represent securities underlying Incentive Stock
Options granted under the 1997 Employee Plan.
(2) Does not include options to purchase 2,825 shares granted in
fiscal 1998 to directors of the Bank who are not employees.
(3) The exercise price per share is equal to the fair market
value on the date the option was granted. The exercise
price may be paid in cash, or upon the approval of the
Option Committee in shares of the common stock of the Bank
valued at their fair market value on the date of exercise,
or in a combination thereof.
(4) Options have a term of ten years from the date of grant.
Options vest on the earlier of the date on which (i) the
optionee has completed one year of continuous employment
with the Bank from the date of grant or (ii) a change in
control of the Bank occurs. In the event of the optionee's
retirement, her Incentive Stock Options lapse at the earlier
of three months from the date of retirement or the
expiration of the term of the option. If the optionee's
employment terminates due to death or disability, the
optionee or her legal representative may exercise the option
until the earlier of the expiration of the term of the
option or one year after such termination of employment. If
the optionee's employment is terminated for any reason
except retirement, death or disability, all options
terminate upon the date employment is terminated, unless the
Option Committee permits the optionee to exercise such
options until the earlier of (i) the expiration of the term
of the option or (ii) three months after such termination of
employment.
<PAGE 24>
Aggregated Option Exercises in Last Fiscal Year and Fiscal
Year-End Option Values
No options were exercised during the year ended June 30,
1998 by the Bank's Chief Executive Officer. The following table
sets forth the aggregate options to purchase shares of the common
stock of the Bank held by the Bank's Chief Executive Officer at
June 30, 1998, separately identifying exercisable and
unexercisable options, and the aggregate dollar value of
in-the-money unexercised options, separately identifying
exercisable and unexercisable options.
<TABLE>
<CAPTION>
Number of Securities Underlying Value of Unexercised In-the-Money
Unexercised Options Held at 06/30/98 (#) Options at 06/30/98 ($)(1)
Name Exercisable Unexercisable Exercisable Unexercisable
<S> <C> <C> <C> <C>
Judith I. Hoffman 0 975 $ 0 $975
</TABLE>
________________
(1) Based upon the closing price of the Bank's common stock of
$13.00 per share on May 13, 1998 (the last date on which a
reported trade occurred), less the $12.00 exercise price of
her options.
1997 Stock Option Plan for Outside Directors
Under the 1997 Director Plan, each person who (i) is a
director of the Bank and (ii) is not, as of such date, an
employee of the Bank, shall on the date of each annual meeting of
stockholders at which directors are elected, automatically be
granted an option to purchase 125 shares of the Bank's common
stock ("Mandatory Grants"). Future non-employee directors
elected by the Board to fill a vacancy will also receive a
Mandatory Grant on the date of such initial election as a
director. The Option Committee may also grant, from time to time
in its discretion, additional options to purchase shares of
Common Stock to directors who are not employees of the Bank
("Discretionary Grants"), subject to the approval of a majority
of the disinterested members of the Board of Directors.
The 1997 Director Plan authorizes the Option Committee to
grant options for the purchase of an aggregate amount of up to
5,655 shares of the Common Stock pursuant to Mandatory Grants and
Discretionary Grants. Any shares as to which an option expires,
lapses unexercised, or is terminated or canceled may be subject
to a new option.
Only Nonqualified Stock Options may be granted under the
1997 Director Plan. The exercise price for options granted under
the 1997 Director Plan will be equal to the fair market value of
the stock underlying the option on the date the option is
granted.
<PAGE 25>
Nonqualified Stock Options granted under the 1997 Director
Plan may be exercised for 10 years and 1 month after the date of
grant. No option may be transferred by the optionee other than
by will or by the laws of descent and distribution, and each
option is exercisable during the optionee's lifetime only by the
optionee, or his guardian or legal representative, unless
otherwise approved by the Committee.
Under the 1997 Director Plan, options may not be exercised
during the 11-month period following the date of grant unless
(i) there occurs a "change in control" of the Bank during such
period or (ii) the Committee waives the 11-month continuous
service requirement for a director whose service as such has
terminated prior to the satisfaction of such requirement. In the
event of a "change in control," the options become immediately
exercisable.
Under the 1997 Director Plan, in the event of an optionee's
retirement, options may continue to be exercised during the term
of the option for up to 24 months, at the discretion of the
Committee, from the date of retirement. With respect to an
optionee whose service as a director terminates due to death or
disability, the optionee or his or her legal representative may
exercise the option until the earlier of the expiration of the
term of the option or one year after such termination of service.
If an optionee's service as a director is terminated for any
reason except retirement, death or disability, all options
granted to such person under the 1997 Director Plan terminate
60 days after the date such service is terminated, unless the
Committee permits the optionee to exercise such options until the
earlier of (i) the expiration of the term of the option or
(ii) up to 24 months from the date of termination.
On August 7, 1997, the Committee granted options to purchase
a total of 1,950 shares of Common Stock, at an exercise price of
$12.00 per share, to certain non-employee directors of the Bank.
Options to acquire 275 shares of Common Stock were granted to
each of Messrs. Guers, Muncy and Grabowski, and options to
acquire 375 shares of Common Stock were granted to each of
Messrs. Fenstermacher, Palles and Pellish. In addition, each of
the Bank's directors, except for Mrs. Hoffman and Mr. Pugh,
received on October 23, 1997, and will receive as of the date of
the Meeting, options to purchase 125 shares of Common Stock, at a
per share exercise price equal to $12.00 and the fair market
value of the Common Stock on the date of the Meeting,
respectively.
Indebtedness of Management
The Bank offers to its directors, officers, and employees
mortgage financing of their primary residences and consumer
loans. Under applicable Federal law, any loan made to a
director, officer, employee or other affiliate is required to be
on substantially the same terms and conditions available to
<PAGE 26> non-related borrowers (in particular as to interest
rate and collateral). In addition, the risk of nonpayment must
not be greater than the risk of nonpayment on loans to
non-related borrowers, and the loan must be approved by a
majority of the full Board of Directors, with the loan applicant
not voting or influencing the vote.
Certain directors and officers of the Bank are customers of
and during the year ended June 30, 1998 had banking transactions
with the Bank in the ordinary course of business. Similar
transactions may be expected to occur in the future. All loans
and commitments to loan were made under substantially the same
terms, including interest rates, collateral, and repayment terms,
as those prevailing at the time for comparable transactions with
other persons and, in the opinion of Bank's management, do not
involve more than the normal risk of collection or present other
unfavorable features.
Transactions with Related Persons
Mr. Pugh, President of the Bank and Chairman of the Board of
Directors, receives fees earned in connection with title
insurance work relating to the Bank's mortgage loans. These fees
are paid by the customers of the Bank.
Ronald R. Pellish, a director of the Bank, receives fees
earned in connection with legal work relating to the Bank's
mortgage loans. These fees are paid by customers of the Bank.
Attorney Pellish also receives fees from the Bank for legal
services performed for the Bank on a per matter basis, but does
not receive a retainer as legal counsel to the Bank.
THE BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE FOR ITS
NOMINEES FOR DIRECTORS.
PAGE 27
<PAGE>
MATTER NO. 2
PROPOSAL TO APPROVE FORMATION OF HOLDING COMPANY
The Board of Directors of the Bank has unanimously approved,
subject to receipt of necessary approvals, the formation of a
savings and loan holding company to be known as "Liberty Centre
Bancorp, Inc." (the "Reorganization"), pursuant to the Agreement
and Plan of Reorganization dated September 4, 1998 (the
"Agreement") by and among the Bank, Liberty Centre Bancorp, Inc.
("Bancorp"), and Liberty Savings Interim Federal Savings Bank
("Interim Bank"). A copy of the Agreement is attached as Exhibit
A hereto and is incorporated herein by reference. The following
discussion is qualified in its entirety by reference to the
Agreement.
The stockholders of the Bank will become the stockholders of
Bancorp by operation of law. Bancorp will initially be a
"unitary" (as opposed to a "multiple") savings and loan holding
company, and the Bank will continue its existing business and
operations after the Reorganization under its existing name but
as a wholly owned subsidiary of Bancorp. For information with
respect to the differences between a "multiple" and a "unitary"
savings and loan holding company, see "Regulation of the Bank and
Bancorp" herein. The existing federal stock charter and the
by-laws of the Bank will not be affected by the Reorganization.
The consolidated capitalization, assets, liabilities and
financial statements of Bancorp immediately following the
Reorganization, will be substantially the same as those of the
Bank immediately prior to the Reorganization. After the
Reorganization, the deposits of the Bank will continue to be
insured by the FDIC to the maximum amount permitted by law.
THE BOARD OF DIRECTORS OF THE BANK UNANIMOUSLY RECOMMENDS
THAT STOCKHOLDERS OF THE BANK APPROVE THE REORGANIZATION. THE
AFFIRMATIVE VOTE OF THE HOLDERS OF A MAJORITY OF THE OUTSTANDING
SHARES OF COMMON STOCK OF THE BANK IS REQUIRED TO APPROVE THE
REORGANIZATION. ALL PROXIES WILL BE VOTED "FOR" APPROVAL OF THE
AGREEMENT, EXCEPT FOR ANY PROXY SPECIFICALLY MARKED TO THE
CONTRARY BY A STOCKHOLDER.
Reasons for the Reorganization
Growth. Management of the Bank is interested in growth
through the formation or acquisition of other providers of
financial services, including insurance agency, money management,
commercial and consumer finance and equipment leasing. The Board
of Directors of the Bank believes that a holding company
structure will provide greater flexibility in structuring such
acquisitions and in conducting operations thereafter because it
permits the ownership of separate subsidiaries with independent
management. Depending on the manner in which an acquisition is
structured, and certain other factors, such an acquisition may or
may not require approval of Bancorp's shareholders.
<PAGE 28>
Holding Company Operations. Upon completion of the
Reorganization, Bancorp, because it will own only one savings and
loan subsidiary--the Bank--will be a "unitary" savings and loan
holding company. Present regulations of the OTS limit the type
of businesses in which the Bank and its subsidiaries may engage.
Establishing Bancorp as a unitary savings and loan holding
company will permit diversification of operations free of these
restrictions. There are, however, no present plans to engage in
any specific business. In the event additional thrift
institutions are acquired as subsidiaries of Bancorp, Bancorp
would become a "multiple" savings and loan holding company and
its business activities would become subject to the present
restrictions applicable to the Bank. See "Regulation of the Bank
and Bancorp."
The Bank's Board of Directors believes that a system of
independent management, within a unified holding company
structure, results in an organization able to enjoy the
advantages that make small to medium size banks and other
providers of financial services located in the Bank's
geographical market area, successful. Small to medium size banks
and other providers of financial services operate with maximum
flexibility, with management close to the local market and,
therefore, can be especially responsive to the needs of customers
of a particular community. The Bank's Board believes that
customers are attracted by the highly personalized services these
smaller companies are able to perform most effectively. Because
of economies of scale, the holding company structure should
permit any subsidiaries formed or acquired by Bancorp to have
access to highly trained personnel and specialized programs, in
areas such as asset and liability management, marketing, human
resources, and data processing, designed to reduce risk, increase
market penetration, and promote a higher level and quality of
earnings. The Bank's Board believes that a system of independent
management of separate subsidiaries, combined with the support
capabilities of a larger institution, will afford Bancorp and any
subsidiaries it may form or acquire in the future the advantages
of both large and small institutions. The Bank's Board
recognizes that there is a risk that the holding company will not
realize the anticipated economies of scale so as to be able to
provide the intended level of support services, and that there is
also a risk in operating separate subsidiaries with independent
management, in that an imprudent decision made by one subsidiary
could adversely affect the combined organization. Nevertheless,
the Bank's Board believes that these risks can be adequately
controlled and that the benefits to be derived from the holding
company structure are substantial and significantly outweigh the
risks.
The holding company structure also provides more flexibility
in terms of corporate organization and capital formation, since
the structure of a holding company is subject to the Pennsylvania
Business Corporation Law and the laws and regulations pertaining
to thrift holding companies, and not to the more stringent and
limiting laws pertaining to banks. <PAGE 29>
Anti-takeover Provisions. Bancorp's Articles of
Incorporation and By-Laws contain numerous provisions which are
intended to encourage potential acquirors of Bancorp to negotiate
directly with the Board of Directors of Bancorp and to deter a
nonnegotiated tender or exchange offer for Bancorp's stock or a
proxy contest for control of Bancorp. Certain provisions of
Pennsylvania law may also make it more difficult for a
shareholder to successfully challenge the actions of Bancorp's
Board of Directors in a potential change of control context.
The combined effect of the foregoing provisions is expected
to make it very difficult for persons to acquire control of
Bancorp in any transaction not favored by management. The anti-
takeover provisions are intended to encourage potential acquirors
of Bancorp to negotiate directly with Bancorp. In the Board of
Directors' judgment, the Board is in the best position to
determine the true value of Bancorp and to negotiate most
effectively for what may be in the best interests of Bancorp's
shareholders. Accordingly, the Board of Directors believes that
it is in the best interests of Bancorp and its shareholders to
encourage potential acquirors to negotiate directly with the
Board of Directors, and that these provisions encourage such
negotiations and discourage hostile takeover attempts. It is
also the Board of Directors' view that these provisions do not
discourage persons from proposing a merger or other transaction
at prices reflective of the true value of Bancorp and which is in
the best interests of all shareholders. However, these
provisions may also deter institutional interest in and ownership
of Bancorp's stock and, accordingly, may depress the market price
for, and liquidity of, Bancorp's stock, or effectively forestall
nonnegotiated takeover offers which might have been deemed by
shareholders to be in their best interest and might have involved
offers to purchase shares at a premium over the market price
prevailing at the time.
The foregoing anti-takeover provisions are not the result of
any specific past or anticipated effort to acquire control of the
Bank. At present, the Bank's Charter contains two anti-takeover
provisions: a requirement that shares with at least 80% of total
voting power approve mergers and other similar transactions with
a person or entity holding common stock with more than 5% of the
Bank's total voting power, if the transaction is not approved of,
in advance, by the Board of Directors; and a prohibition of
cumulative voting in the election of directors. The Bank's By-
Laws provide for a "classified" Board of Directors with staggered
terms of office. In addition, the Bank's Charter also authorizes
a class of preferred stock, the terms of which are to be set by
the Board of Directors upon issuance, which may be issued without
stockholder approval and thus, could be used to impede completion
of a nonnegotiated transaction. The Bank also has a shareholder
rights plan. Notwithstanding the foregoing provisions and the
fact that there has been no attempted takeover of the Bank,
Bancorp's Board of Directors believes that the anti-takeover
provisions contained in its Articles of Incorporation and By-Laws
are in the best interests of shareholders, especially considering
<PAGE 30> (a) recent changes in the law affecting the financial
services industry, such as the passage of regional, reciprocal
interstate banking laws, (b) the recent consolidation in the
banking and thrift industry through mergers and acquisitions,
(c) the perceived attractiveness of the Bank's market area,
(d) the fact that the Bank's stock has been trading, like many
thrift stocks, at prices substantially below book value, and has
a small over-all market capitalization when compared to most
other financial institutions, and (e) recent significant
accumulations of positions in the Bank's stock. Further,
Bancorp's Board believes that such provisions will generally help
provide for continuity in the affairs and business strategy of
Bancorp, and provide the Board with sufficient time to review any
acquisition proposal and consider possible alternatives thereto,
so that there is a maximum opportunity to assure that the
interest of Bancorp's shareholders are protected to the maximum
extent possible. See "Descriptions of Bancorp's Capital Stock--
Articles of Incorporation and By-Laws -- Anti-takeover
Provisions."
Description of the Reorganization
The Bank has caused Bancorp, a Pennsylvania business
corporation, to be formed and organized. Bancorp will cause
Interim Bank, a corporation with a charter in the form of a
federal stock charter, to be organized (subject to the approval
of the OTS); Interim Bank's savings accounts will be insured by
the FDIC. Bancorp will be the sole stockholder of Interim Bank.
Contingent upon regulatory approvals, the Reorganization will be
accomplished as follows:
(1) Interim Bank will merge with and into the Bank,
with the Bank as the resulting corporation. The stock of
Interim Bank will be converted to stock of the Bank.
(a) The Bank, as the resulting corporation, will
retain all incidents of the corporate existence of the Bank
prior to the Reorganization, including its federal stock
charter, by-laws, savings accounts and offices.
(b) The directors of the Bank will remain the
directors of the Bank as the resulting corporation.
(2) The stockholders of the Bank will become the
shareholders of Bancorp. Each share of the Bank common
stock and related stock purchase rights will become a share
of Bancorp common stock and related stock purchase rights.
Each certificate evidencing issued shares of the Bank common
stock immediately prior to the Reorganization will evidence
ownership of the same number of shares of Bancorp common
stock at the effective date after Reorganization.
(3) The shares of common stock of the Bank held by
Bancorp at the effective date will remain as the only issued
<PAGE 31> and outstanding shares of common stock of the Bank
after the Reorganization.
(4) Interim Bank will cease to exist as a legal
entity.
(5) As a result of the Reorganization, Bancorp will
become a publicly held corporation; however Bancorp will not
be required to register its shares of common stock under the
Securities Exchange Act of 1934 (the "Exchange Act"), nor
will it be subject to the rules and regulations thereunder
or file periodic reports and proxy statements with the
Securities and Exchange Commission. The Bank's stock is not
registered under the Exchange Act, and the Bank is not
required to file periodic reports and proxy statements
required thereunder. The shareholders of Bancorp will be
those persons who were stockholders of the Bank immediately
prior to the Reorganization. The Bank will become a wholly
owned subsidiary of Bancorp, and the Bank will continue to
carry on its business and activities as conducted
immediately prior to the Reorganization. The name "Liberty
Savings Bank, F.S.B." will continue to be utilized.
(6) As is the case with the common stock of the Bank,
there will be no active public trading market for Bancorp
common stock. See "Market for Bank Common Stock."
Business of Bancorp
Upon completion of the Reorganization, Bancorp will own all
of the stock of the Bank, and the Bank will be Bancorp's
operating savings institution subsidiary. Bancorp will be a
unitary savings and loan holding company and register with the
OTS under the Home Owner's Loan Act. See "Regulation of the Bank
and Bancorp."
Bancorp may, in the future, enter into a management
agreement for the purpose of rendering certain services to the
Bank after the completion of the Reorganization. No proposal and
no terms of any such agreement, however, have been considered as
yet and it has not been decided that such agreement will be made.
Certain restrictions on the total compensation payable by the
Bank under management and similar agreements are imposed by OTS
regulations; under certain circumstances, OTS approval may be
required. See "Regulation of the Bank and Bancorp."
Management of Bancorp and the Bank after the Reorganization
Directors. The following table sets forth the name and the
year the term of office expires for each director of Bancorp.
Term of
Name Office Expires
Herman J. Fenstermacher. . . . . . . . . . . . . . . 1999
<PAGE 32>
Daniel C. Guers. . . . . . . . . . . . . . . . . . . 1999
Menelaos P. Palles. . . . . . . . . . .. . . . . . . 1999
Frank J. Grabowski . . . . . . . . . . . . . . . . . 2000
Michael R. Muncy . . . . . . . . . . . . . . . . . . 2000
Robert W. Pugh, Jr.. . . . . . . . . . . . . . . . . 2000
Judith I. Hoffman. . . . . . . . . . . . . . . . . . 2001
Ronald R. Pellish. . . . . . . . . . . . . . . . . . 2001
For additional information concerning the initial directors
of Bancorp, see "Matter No. 1 -- Election of Directors" herein.
The Articles of Incorporation of Bancorp, like the By-laws
of the Bank, provide that directors shall serve for terms of
three years and that the terms shall be staggered to provide for
the election of approximately one-third of the board members each
year. Approval of the Reorganization by the holders of the
Bank's common stock will, in effect, confirm the election of such
persons as directors of Bancorp, without further action and
without changes in classes or terms.
Officers. The officers of Bancorp are, and upon completion
of the Reorganization will continue to be, the following persons:
Name Positions
Robert W. Pugh, Jr. . . . . . . . . . . President
Judith I. Hoffman . . . . . . . . . . . Executive Vice President,
Chief Executive Officer
and Secretary
It is expected that until Bancorp becomes actively involved
in additional businesses, no compensation will be paid to the
directors and officers of Bancorp in their capacities as such.
Bancorp may determine that such separate compensation is
appropriate in the future, however.
At the present time, Bancorp does not intend to employ any
persons other than its management, who will continue as employees
of the Bank. If Bancorp acquires other businesses, it may at
such time hire additional employees. Upon completion of the
Reorganization, employees of Bancorp, as well as employees of the
Bank, will be eligible for the grant of benefits under the 1997
Employee Plan and the 1997 Director Plan (collectively, the
"Stock Option Plans") described herein.
Conditions, Amendment and Termination
The Agreement sets forth a number of conditions which must
be met before the Reorganization will be consummated, including,
among others, (1) the approval of the Agreement by the requisite
vote of the holders of the common stock of the Bank, (2) the
receipt of an opinion of counsel that the Reorganization will be
treated as a nontaxable transaction under the Internal Revenue
<PAGE 33> Code of 1986 (the "Code"), (3) the approval of the
Reorganization by the OTS, which has not yet been obtained, and
(4) the receipt of all approvals from any other governmental
agencies or other third parties which may be required for the
lawful consummation of the Reorganization. No such other
governmental or third party approvals are currently anticipated
to be required.
The Board of Directors of the Bank may cause the Agreement
to be amended or terminated if the Board determines that such
termination or amendment would be advisable. Only amendments of
a nonmaterial nature may be effected by the Board of Directors
subsequent to the mailing of this Proxy Statement/Prospectus to
stockholders of the Bank. Such amendment or termination may
occur at any time prior to the filing of Articles of Combination
with the OTS, whether before or after stockholder approval of the
Agreement.
Federal Tax Consequences of the Transaction
The Agreement provides that completion of the transaction is
conditioned upon the receipt of an opinion of counsel (or a tax
advisor) to the effect, among other things, that (1) no gain or
loss will be recognized by the stockholders of the Bank on the
constructive receipt of Bancorp common stock in exchange for Bank
common stock surrendered in the Reorganization, (2) the basis of
the shares of Bancorp common stock constructively received by
stockholders of the Bank in the Reorganization will be the same
as the basis of the shares of Bank common stock surrendered in
exchange therefor, (3) the holding period of the shares of
Bancorp common stock constructively received by the stockholders
of the Bank in the Reorganization will include the period during
which they held their Bank common stock, provided the shares of
Bank common stock are held as a capital asset on the effective
date of the Reorganization, and (4) no gain or loss will be
recognized by Bancorp on the constructive receipt of Bank common
stock in exchange for Interim Bank common stock surrendered in
the Reorganization.
Each stockholder of the Bank should consult his or her own
tax counsel as to specific federal and state tax consequences of
the transaction.
Financial Accounting Treatment
The Reorganization will be characterized and treated as a
"pooling of interests" (rather than as a "purchase") for
financial reporting and related purposes.
<PAGE 34>
Limitation of Liability and Indemnification of Directors and
Officers
The By-Laws of Bancorp, as approved by the Bank as its sole
shareholder, provide for (1) indemnification of directors,
officers, employees and agents of Bancorp and its subsidiaries
and (2) the elimination of a director's liability for monetary
damages, in each case to the fullest extent permitted by
Pennsylvania law. Pennsylvania law provides that a Pennsylvania
corporation may indemnify directors, officers, employees and
agents of the corporation against liabilities they may incur in
such capacities for any action taken or failure to act, whether
or not the corporation would have the power to indemnify the
person under any provision of law, unless such action or failure
to act is determined by a court to have constituted recklessness
or willful misconduct. Pennsylvania law also permits the
adoption of a bylaw, approved by shareholders, providing for the
elimination of a director's liability for monetary damages for
any action taken or any failure to take any action unless (1) the
director has breached or failed to perform the duties of his or
her office and (2) the breach or failure to perform constitutes
self-dealing, willful misconduct or recklessness.
Regulation of the Bank and Bancorp
General. The Bank is subject to extensive regulation,
examination and supervision by the OTS as its chartering agency,
and the FDIC, as the insurer of its deposits. The activities of
federal savings institutions are governed by the Home Owners'
Loan Act, as amended ("HOLA") and, in certain respects, the
Federal Deposit Insurance Act ("FDIA") and the regulations issued
by the OTS and the FDIC to implement these statutes. These laws
and regulations delineate the nature and extent of the activities
in which federal savings associations may engage. Lending
activities and other investments must comply with various
statutory and regulatory capital requirements. In addition, the
Bank's relationship with its depositors and borrowers is also
regulated to a great extent, especially in such matters as the
ownership of deposit accounts and the form and content of the
Bank's 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 as mergers with, or
acquisitions of, other financial institutions. There are
periodic examinations by the OTS and the FDIC to review the
Bank's compliance with various regulatory requirements. 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 such policies, whether by the OTS, the
FDIC or Congress, could have a material adverse impact on
Bancorp, the Bank and their operations. Bancorp, as a savings
and loan holding company, will also be required to file certain
<PAGE 35> reports with, and otherwise comply with the rules and
regulations of, the OTS.
Office of Thrift Supervision. The OTS is an office in the
Department of the Treasury subject to the general oversight of
the Secretary of the Treasury. The OTS generally possesses the
supervisory and regulatory duties and responsibilities formerly
vested in the Federal Home Loan Bank Board. Among other
functions, the OTS issues and enforces regulations affecting
federally insured savings associations and regularly examines
these institutions.
Federal Home Loan Bank System. The Federal Home Loan Bank
("FHLB") system, consisting of 12 FHLBs, is under the
jurisdiction of the Federal Housing Finance Board ("FHFB"). The
designated duties of the FHFB are to: supervise the FHLBs; ensure
that the FHLBs carry out their housing finance mission; ensure
that the FHLBs remain adequately capitalized and able to raise
funds in the capital markets; and ensure that the FHLBs operate
in a safe and sound manner. The Bank, as a member of the FHLB-
Pittsburgh, is required to acquire and hold shares of capital
stock in the FHLB-Pittsburgh in an amount equal to the greater of
(i) 1.0% of the aggregate outstanding principal amount of
residential mortgage loans, home purchase contracts and similar
obligations at the beginning of each year, or (ii) 1/20 of its
advances (borrowings) from the FHLB-Pittsburgh. At June 30,
1998, the Bank complied with this requirement with an investment
in FHLB-Pittsburgh stock of $175,400. Among other benefits, the
FHLB-Pittsburgh provides a central credit facility primarily for
member institutions. It is funded primarily from proceeds
derived from the sale of consolidated obligations of the FHLB
System. It makes advances to members in accordance with policies
and procedures established by the FHFB and the Board of Directors
of the FHLB-Pittsburgh.
Federal Deposit Insurance Corporation. The FDIC is an
independent federal agency established originally to insure the
deposits, up to prescribed statutory limits, of federally insured
banks and to preserve the safety and soundness of the banking
industry. The FDIC maintains two separate insurance funds: the
Bank Insurance Fund (the "BIF") and the Savings Association
Insurance Fund (the "SAIF"). As insurer of the Bank's deposits,
the FDIC has examination, supervisory and enforcement authority
over all savings associations.
The Bank's deposit accounts are insured by the FDIC under
the SAIF to the maximum extent permitted by law. The Savings
Bank pays deposit insurance premiums to the FDIC based on a risk-
based assessment system established by the FDIC for all SAIF-
member institutions. Under applicable regulations, institutions
are assigned to one of three capital groups that are based solely
on the level of an institution's capital ("well capitalized,"
"adequately capitalized" or "undercapitalized"), which are
defined in the same manner as the regulations establishing the
prompt corrective action system under the FDIA as discussed
<PAGE 36> below. The matrix so created results in nine
assessment risk classifications. The Bank's assessments expensed
for the year ended June 30, 1998 equaled $17,532.
Pursuant to the Deposit Insurance Funds Act (the "DIF Act"),
which was enacted on September 30, 1996, the FDIC imposed a
special assessment on each depository institution with SAIF-
assessable deposits which resulted in the SAIF achieving its
designated reserve ratio. In connection therewith, the FDIC
reduced the assessment schedule for SAIF members, effective
January 1, 1997, to a range of 0% to 0.27%, with most
institutions, including the Bank, paying 0%. This assessment
schedule is the same as that for the BIF, which reached its
designated reserve ratio in 1995. In addition, since January 1,
1997, SAIF members are charged an assessment of 0.065% of SAIF-
assessable deposits for the purpose of paying interest on the
obligations issued by the Financing Corporation ("FICO") in the
1980s to help fund the thrift industry cleanup. BIF-assessable
deposits will be charged an assessment to help pay interest on
the FICO bonds at a rate of approximately .013% until the earlier
of December 31, 1999 or the date upon which the last savings
association ceases to exist, after which time the assessment will
be the same for all insured deposits.
The DIF Act provides for the merger of the BIF and the SAIF
into the Deposit Insurance Fund on January 1, 1999, but only if
no insured depository institution is a savings association on
that date. The DIF Act contemplates the development of a common
charter for all federally chartered depository institutions and
the abolition of separate charters for national banks and federal
savings associations. It is not known what form the common
charter may take and what effect, if any, the adoption of a new
charter would have on the operation of the Bank.
The FDIC may terminate the deposit insurance of any insured
depository institution if it determines after a hearing that the
institution has engaged or is engaging in unsafe or unsound
practices, is in an unsafe or unsound condition to continue
operations, or has violated any applicable law, regulation, order
or any condition imposed by an agreement with the FDIC. It also
may suspend deposit insurance temporarily during the hearing
process for the permanent termination of insurance, if the
institution has no tangible capital. If insurance of accounts is
terminated, the accounts at the institution at the time of
termination, less subsequent withdrawals, shall continue to be
insured for a period of six months to two years, as determined by
the FDIC. Management is aware of no existing circumstances that
could result in termination of the deposit insurance of the Bank.
Liquidity Requirements. Under OTS regulations, each savings
institution is required to maintain an average daily balance of
liquid assets (cash, certain time deposits and savings accounts,
bankers' acceptances, and specified U.S. Government, state or
federal agency obligations and certain other investments) equal
to a monthly average of not less than a specified percentage
<PAGE 37> (currently 5.0%) of its net withdrawable accounts plus
short-term borrowings. OTS regulations also require each savings
institution to maintain an average daily balance of short-term
liquid assets at a specified percentage (currently 1.0%) of the
total of its net withdrawable savings accounts and borrowings
payable in one year or less. Monetary penalties may be imposed
for failure to meet liquidity requirements. The Bank's actual
short- and long-term liquidity ratios at June 30, 1998 were 9.53%
and 18.32%, respectively.
Prompt Corrective Action. Each federal banking agency is
required to implement a system of prompt corrective action for
institutions that it regulates. The federal banking agencies
have promulgated substantially similar regulations to implement
this system of prompt corrective action. Under the regulations,
an institution shall be deemed to be (i) "well capitalized" if it
has a total risk-based capital ratio of 10.0% or more, has a
Tier 1 risk-based capital ratio of 6.0% or more, has a leverage
ratio of 5.0% or more and is not subject to specified
requirements to meet and maintain a specific capital level for
any capital measure; (ii) "adequately capitalized" if it has a
total risk-based capital ratio of 8.0% or more, a Tier 1 risk-
based capital ratio of 4.0% or more and a leverage ratio of 4.0%
or more (3.0% under certain circumstances) and does not meet the
definition of "well capitalized;" (iii) "undercapitalized" if it
has a total risk-based capital ratio that is less than 8.0%, a
Tier 1 risk-based capital ratio that is less than 4.0% or a
leverage ratio that is less than 4.0% (3.0% under certain
circumstances); (iv) "significantly undercapitalized" if it has a
total risk-based capital ratio that is less than 6.0%, a Tier 1
risk-based capital ratio that is less than 3.0% or a leverage
ratio that is less than 3.0%; and (v) "critically
undercapitalized" if it has a ratio of tangible equity to total
assets that is equal to or less than 2.0%.
A federal banking agency may, after notice and an
opportunity for a hearing, reclassify a well capitalized
institution as adequately capitalized and may require an
adequately capitalized institution or an undercapitalized
institution to comply with supervisory actions as if it were in
the next lower category if the institution is in an unsafe or
unsound condition or has received in its most recent examination,
and has not corrected, a less than satisfactory rating for asset
quality, management, earnings or liquidity. The OTS may not,
however, reclassify a significantly undercapitalized institution
as critically undercapitalized.
An institution generally must file a written capital
restoration plan that meets specified requirements, as well as a
performance guaranty by each company that controls the
institution, with the appropriate federal banking agency within
45 days of the date that the institution receives notice or is
deemed to have notice that it is undercapitalized, significantly
undercapitalized or critically undercapitalized. Immediately
upon becoming undercapitalized, an institution shall become
<PAGE 38> subject to various mandatory and discretionary
restrictions on its operations.
At June 30, 1998, the Bank was categorized as "well
capitalized" under the prompt corrective action regulations of
the OTS.
Standards for Safety and Soundness. The FDIA requires the
federal banking regulatory agencies to prescribe, by regulation,
standards for all insured depository institutions relating to:
(i) internal controls, information systems and internal audit
systems; (ii) loan documentation; (iii) credit underwriting;
(iv) interest rate risk exposure; (v) asset growth; and
(vi) compensation, fees and benefits. The federal banking
agencies recently adopted final regulations and Interagency
Guidelines Prescribing Standards for Safety and Soundness
("Guidelines"). The Guidelines set forth the safety and
soundness standards that the federal banking agencies use to
identify and address problems at insured depository institutions
before capital becomes impaired. If the OTS determines that the
Bank fails to meet any standard prescribed by the Guidelines, the
agency may require the Bank to submit to the agency an acceptable
plan to achieve compliance with the standard. OTS regulations
establish deadlines for the submission and review of such safety
and soundness compliance plans.
Qualified Thrift Lender Test. All federal savings banks are
required to meet a qualified thrift lender ("QTL") test to avoid
certain restrictions on their operations. A savings institution
that fails to become or remain a QTL shall either become a
national bank or be subject to the following restrictions on its
operations: (i) the institution may not make any new investment
or engage in activities that would not be permissible for
national banks; (ii) the institution may not establish any new
branch office where a national bank located in the savings
institution's home state would not be able to establish a branch
office; (iii) the institution shall be ineligible to obtain new
advances from any FHLB; and (iv) the payment of dividends by the
institution shall be subject to the statutory and regulatory
dividend restrictions applicable to national banks. Also,
beginning three years after the date on which the savings
institution ceases to be a QTL, the savings institution would be
prohibited from retaining any investment or engaging in any
activity not permissible for a national bank and would be
required to repay any outstanding advances to any FHLB. In
addition, within one year of the date on which a savings
institution controlled by a company ceases to be a QTL, the
company must register as a bank holding company and become
subject to the rules applicable to such companies. A savings
institution may requalify as a QTL if it thereafter complies with
the QTL test.
Currently, the QTL test requires that either an institution
qualify as a domestic building and loan association under the
Code or that 65% of an institution's "portfolio assets" (as
<PAGE 39> defined) consist of certain housing and consumer
related assets on a monthly average basis in nine out of every 12
months. Assets that qualify without limit for inclusion as part
of the 65% requirement are loans made to purchase, refinance,
construct, improve or repair domestic residential housing and
manufactured housing; home equity loans; mortgage-backed
securities (where the mortgages are secured by domestic
residential housing or manufactured housing); FHLB stock; direct
or indirect obligations of the FDIC; and loans for educational
purposes, loans to small businesses and loans made through credit
cards. In addition, the following assets, among others, may be
included in meeting the test subject to an overall limit of 20%
of the savings institution's portfolio assets: 50% of residential
mortgage loans originated and sold within 90 days of origination;
100% of consumer loans; and stock issued by FHLMC or FNMA.
Portfolio assets consist of total assets minus the sum of
(i) goodwill and other intangible assets, (ii) property used by
the savings institution to conduct its business, and (iii) liquid
assets up to 20% of the institution's total assets. At June 30,
1998, the qualified thrift investments of the Bank were
approximately 89.50% of its portfolio assets.
Capital Requirements. Under OTS regulations, a federal
savings bank must satisfy three minimum capital requirements:
core capital, tangible capital and risk-based capital. Savings
associations must meet all of the standards in order to comply
with the capital requirements. Savings and loan holding
companies, such as Bancorp, are not subject to any minimum
capital requirements.
OTS capital regulations establish a 3% core capital or
leverage ratio (defined as the ratio of core capital to adjusted
total assets). Core capital is defined to include common
stockholders' equity, noncumulative perpetual preferred stock and
any related surplus, and minority interests in equity accounts of
consolidated subsidiaries, less (i) any intangible assets, except
for certain qualifying intangible assets; (ii) certain mortgage
servicing rights; and (iii) equity and debt investments in
subsidiaries that are not "includable subsidiaries," which is
defined as subsidiaries engaged solely in activities not
impermissible for a national bank, engaged in activities
impermissible for a national bank but only as an agent for its
customers, or engaged solely in mortgage-banking activities. In
calculating adjusted total assets, adjustments are made to total
assets to give effect to the exclusion of certain assets from
capital and to account appropriately for the investments in and
assets of both includable and nonincludable subsidiaries. An
institution that fails to meet the core capital requirement would
be required to file with the OTS a capital plan that details the
steps they will take to reach compliance. In addition, the OTS's
prompt corrective action regulation provides that a savings
institution that has a leverage ratio of less than 4% (3% for
institutions receiving the highest CAMEL examination rating) will
be deemed to be "undercapitalized" and may be subject to certain
restrictions. See "-- Prompt Corrective Action." <PAGE 40>
As required by federal law, the OTS has proposed a rule
revising its minimum core capital requirement to be no less
stringent than that imposed on national banks. The OTS has
proposed that only those savings associations rated a composite
one (the highest rating) under the CAMEL rating system for
savings associations will be permitted to operate at or near the
regulatory minimum leverage ratio of 3%. All other savings
associations will be required to maintain a minimum leverage
ratio of 4% to 5%. The OTS will assess each individual savings
association through the supervisory process on a case-by-case
basis to determine the applicable requirement. No assurance can
be given as to the final form of any such regulation, the date of
its effectiveness or the requirement applicable to the Bank.
A savings association also must maintain "tangible capital"
of not less than 1.5% of its adjusted total assets. "Tangible
capital" is defined, generally, as core capital minus any
"intangible assets" other than purchased mortgage servicing
rights.
Each savings institution must maintain total risk-based
capital equal to at least 8% of risk-weighted assets. Total
risk-based capital consists of the sum of core and supplementary
capital, provided that supplementary capital cannot exceed core
capital, as previously defined. Supplementary capital includes
(i) permanent capital instruments such as cumulative perpetual
preferred stock, perpetual subordinated debt and mandatory
convertible subordinated debt, (ii) maturing capital instruments
such as subordinated debt, intermediate-term preferred stock and
mandatory convertible subordinated debt, subject to an
amortization schedule, and (iii) general valuation loan and lease
loss allowances up to 1.25% of risk-weighted assets.
The risk-based capital regulation assigns each balance sheet
asset held by a savings institution to one of four risk
categories based on the amount of credit risk associated with
that particular class of assets. Assets not included for
purposes of calculating capital are not included in calculating
risk-weighted assets. The categories range from 0% for cash and
securities that are backed by the full faith and credit of the
U.S. Government to 100% for repossessed assets or assets more
than 90 days past due. Qualifying residential mortgage loans
(including multifamily mortgage loans) are assigned a 50% risk
weight. Consumer, commercial, home equity and residential
construction loans are assigned a 100% risk weight, as are
nonqualifying residential mortgage loans and that portion of land
loans and nonresidential construction loans that do not exceed an
80% loan-to-value ratio. The book value of assets in each
category is multiplied by the weighing factor (from 0% to 100%)
assigned to that category. These products are then totalled to
arrive at total risk-weighted assets. Off-balance sheet items
are included in risk-weighted assets by converting them to an
approximate balance sheet "credit equivalent amount" based on a
conversion schedule. These credit equivalent amounts are then
<PAGE 41> assigned to risk categories in the same manner as
balance sheet assets and included risk-weighted assets.
The OTS has incorporated an interest rate risk component
into its regulatory capital rule. Under the rule, savings
institutions with "above normal" interest rate risk exposure
would be subject to a deduction from total capital for purposes
of calculating their risk-based capital requirements. A savings
association's interest rate risk is measured by the decline in
the net portfolio value of its assets (the difference between
incoming and outgoing discounted cash flows from assets,
liabilities and off-balance sheet contracts) that would result
from a hypothetical 200 basis point increase or decrease in
market interest rates divided by the estimated economic value of
the association's assets, as calculated in accordance with
guidelines set forth by the OTS. A savings association whose
measured interest rate risk exposure exceeds 2% must deduct an
interest rate risk component in calculating its total capital
under the risk-based capital rule. The interest rate risk
component is an amount equal to one-half of the difference
between the institution's measured interest rate risk and 2%,
multiplied by the estimated economic value of the association's
assets. That dollar amount is deducted from an association's
total capital in calculating compliance with its riskbased
capital requirement. Under the rule, there is a two quarter lag
between the reporting date of an institution's financial data,
and the effective date for the new capital requirement based on
that data. A savings association with assets of less than $300
million and risk-based capital ratios in excess of 12% is not
subject to the interest rate risk component, unless the OTS
determines otherwise. The rule also provides that the Director
of the OTS may waive or defer an association's interest rate risk
component on a case-by-case basis. Under certain circumstances,
a savings association may request an adjustment to its interest
rate risk component if it believes that the OTS-calculated
interest rate risk component overstates its interest rate risk
exposure. In addition, certain "well-capitalized" institutions
may obtain authorization to use their own interest rate risk
model to calculate their interest rate risk component in lieu of
the OTS-calculated amount. The OTS has postponed the date that
the component will first be deducted from an institution's total
capital.
The table below sets forth the Bank's capital position
relative to its OTS capital requirements at the date indicated.
The definitions of the terms used in the table are those provided
in the capital regulations issued by the OTS.
At June 30, 1998
Percent of Adjusted
Amount Total Assets(1)
Tangible capital . . . . . . . . $2,554,000 10.1%
Tangible capital requirement . . 379,335 1.5
Excess . . . . . . . . . . . . . $2,174,665 8.6%
<PAGE 42>
Core capital . . . . . . . . . . $2,554,000 10.1%
Core capital requirement(2). . . 1,012,000 3.0
Excess . . . . . . . . . . . . . $1,542,000 7.1%
Risk-based capital(3). . . . . . $2,607,000 21.4%
Risk-based capital requirement . 973,000 8.0
Excess . . . . . . . . . . . . . $1,634,000 13.4%
_______________________
(1) Based on total tangible assets of $25,289,000 for purposes
of the tangible capital requirement, total adjusted assets
of $25,289,000 for purposes of the core capital
requirements, and risk-weighted assets of $12,169,000 for
purposes of the risk-based capital requirement.
(2) The current OTS core capital requirement for federal savings
banks is 3% of total adjusted assets. The OTS has proposed
a new core capital requirement for federal savings banks
that is 3% of total adjusted assets for thrifts that receive
the highest supervisory rating for safety and soundness and
4% to 5% for all other thrifts.
(3) Percentage represents total core and supplementary capital
divided by total risk-weighted assets.
Limitations on Capital Distributions. OTS regulations
impose uniform limitations on the ability of all federal savings
banks to engage in various distributions of capital such as
dividends, stock repurchases and cash-out mergers. In addition,
OTS regulations require the Bank to give the OTS 30 days' advance
notice of any proposed declaration of dividends, and the OTS has
the authority under its supervisory powers to prohibit the
payment of dividends. The regulation utilizes a three-tiered
approach which permits various levels of distributions based
primarily upon a savings association's capital level.
A Tier 1 savings bank has capital in excess of its fully
phased-in capital requirement (both before and after the proposed
capital distribution). A Tier 1 savings bank may make (without
application but upon prior notice to, and no objection made by,
the OTS) capital distributions during a calendar year up to 100%
of its net income to date during the calendar year plus one-half
its surplus capital ratio (i.e., the amount of capital in excess
of its fully phased-in requirement) at the beginning of the
calendar year or the amount authorized for a Tier 2 association.
Capital distributions in excess of such amount require advance
notice to the OTS. A Tier 2 savings bank has capital equal to or
in excess of its minimum capital requirement but below its fully
phased-in capital requirement (both before and after the proposed
capital distribution). Such a bank may make (without
application) capital distributions up to an amount equal to 75%
<PAGE 43> of its net income during the previous four quarters
depending on how close the association is to meeting its fully
phased-in capital requirement. Capital distributions exceeding
this amount require prior OTS approval. A Tier 3 savings bank
has capital below the minimum capital requirement (either before
or after the proposed capital distribution). A Tier 3 savings
bank may not make any capital distributions without prior
approval from the OTS.
The Bank currently meets the criteria to be designated a
Tier 1 association and, consequently, could at its option (after
prior notice to, and no objection made by, the OTS) distribute up
to 100% of its net income during the calendar year plus 50% of
its surplus capital ratio at the beginning of the calendar year
less any distributions previously paid during the year.
Loans to One Borrower. Under the HOLA, savings institutions
are generally subject to the national bank limit on loans to one
borrower. Generally, this limit is 15% of the Bank's unimpaired
capital and surplus, plus an additional 10% of unimpaired capital
and surplus, if such loan is secured by readily-marketable
collateral, which is defined to include certain financial
instruments and bullion. The OTS by regulation has amended the
loans to one borrower rule to permit federal savings banks that
meet certain requirements, including capital requirements, to
extend loans to one borrower in additional amounts under
circumstances limited essentially to loans to develop or complete
residential housing units. At June 30, 1998, the Bank's largest
aggregate amount of loans to one borrower was $492,109, which
represented 19% of the Bank's unimpaired capital and surplus at
June 30, 1998.
Activities of Savings Banks and Their Subsidiaries. When a
federal savings bank establishes or acquires a subsidiary or
elects to conduct any new activity through a subsidiary that the
bank controls, the savings bank must notify the FDIC and the OTS
30 days in advance and provide the information each agency may,
by regulation, require. Savings banks also must conduct the
activities of subsidiaries in accordance with existing
regulations and orders.
The OTS may determine that the continuation by a savings
bank of its ownership control of, or its relationship to, the
subsidiary constitutes a serious risk to the safety, soundness or
stability of the association or is inconsistent with sound
banking practices or with the purposes of the FDIA. Based upon
that determination, the FDIC or the OTS has the authority to
order the savings association to divest itself of control of the
subsidiary. The FDIC also may determine by regulation or order
that any specific activity poses a serious threat to the SAIF.
If so, it may require that no SAIF member engage in that activity
directly.
Transactions with Affiliates. Federal savings banks must
comply with Sections 23A and 23B of the Federal Reserve Act
<PAGE 44> ("Sections 23A and 23B") relative to transactions with
affiliates in the same manner and to the same extent as if the
savings bank were a Federal Reserve member bank. A savings and
loan holding company, its subsidiaries and any other company
under common control are considered affiliates of the subsidiary
savings bank under the HOLA. Generally, Sections 23A and 23B:
(i) limit the extent to which the insured association or its
subsidiaries may engage in certain covered transactions with an
affiliate to an amount equal to 10% of such institution's capital
and surplus and place an aggregate limit on all such transactions
with affiliates to an amount equal to 20% of such capital and
surplus, and (ii) require that all such transactions be on terms
substantially the same, or at least as favorable to the
institution or subsidiary, as those provided to a non-affiliate.
The term "covered transaction" includes the making of loans, the
purchase of assets, the issuance of a guarantee and similar types
of transactions. Any loan or extension of credit by the Bank to
an affiliate must be secured by collateral in accordance with
Section 23A.
Three additional rules apply to federal savings banks: (i) a
savings bank may not make any loan or other extension of credit
to an affiliate unless that affiliate is engaged only in
activities permissible for bank holding companies; (ii) a savings
bank may not purchase or invest in securities issued by an
affiliate (other than securities of a subsidiary); and (iii) the
OTS may, for reasons of safety and soundness, impose more
stringent restrictions on savings banks but may not exempt
transactions from or otherwise abridge Section 23A or 23B.
Exemptions from Section 23A or 23B may be granted only by the
Federal Reserve Board, as is currently the case with respect to
all FDIC-insured banks. The Bank has not been significantly
affected by the rules regarding transactions with affiliates.
The Bank's authority to extend credit to executive officers,
directors and 10% shareholders, as well as entities controlled by
such persons, is governed by Sections 22(g) and 22(h) of the
Federal Reserve Act, and Regulation O thereunder. Among other
things, these regulations generally require that such loans be
made on terms and conditions substantially the same as those
offered to unaffiliated individuals and not involve more than the
normal risk of repayment. Generally, Regulation O also places
individual and aggregate limits on the amount of loans the Bank
may make to such persons based, in part, on the Bank's capital
position, and requires certain board approval procedures to be
followed. The OTS regulations, with certain minor variances,
apply Regulation O to savings institutions.
Community Reinvestment Act. Under the federal Community
Reinvestment Act ("CRA"), all federally insured financial
institutions have a continuing and affirmative obligation
consistent with safe and sound operations to help meet all the
credit needs of its delineated community. The CRA does not
establish specific lending requirements or programs nor does it
limit an institution's discretion to develop the types of
<PAGE 45> products and services that it believes are best suited
to meet all the credit needs of its delineated community. The
CRA requires the federal banking agencies, in connection with
regulatory examinations, to assess an institution's record of
meeting the credit needs of its delineated community and to take
such record into account in evaluating regulatory applications to
establish a new branch office that will accept deposits, relocate
an existing office, or merge or consolidate with, or acquire the
assets or assume the liabilities of, a federally regulated
financial institution, among others. The CRA requires public
disclosure of an institution's CRA rating. The Bank received an
"outstanding" rating as a result of its latest evaluation.
Regulatory and Criminal Enforcement Provisions. The OTS has
primary enforcement responsibility over savings institutions and
has the authority to bring action against all "institution-
affiliated parties," including stockholders, and any attorneys,
appraisers and accountants who knowingly or recklessly
participate in wrongful action likely to have an adverse effect
on an insured institution. Formal enforcement action may range
from the issuance of a capital directive or cease and desist
order to removal of officers or directors, receivership,
conservatorship or termination of deposit insurance. Civil
penalties cover a wide range of violations and can amount to
$27,500 per day, or $1.1 million per day in especially egregious
cases. Under the FDIA, the FDIC has the authority to recommend
to the Director of the OTS that enforcement action be taken with
respect to a particular savings institution. If action is not
taken by the Director, the FDIC has authority to take such action
under certain circumstances. Federal law also establishes
criminal penalties for certain violations.
Holding Company Acquisitions. The HOLA and OTS regulations
issued thereunder generally prohibit a savings and loan holding
company, without prior OTS approval, from acquiring more than 5%
of the voting stock of any other savings association or savings
and loan holding company or controlling the assets thereof. They
also prohibit, among other things, any director or officer of a
savings and loan holding company, or any individual who owns or
controls more than 25% of the voting shares of such holding
company, from acquiring control of any savings association not a
subsidiary of such savings and loan holding company, unless the
acquisition is approved by the OTS.
Holding Company Activities. As a unitary savings and loan
holding company, Bancorp generally will not be subject to
activity restrictions under the HOLA. If Bancorp acquires
control of another savings association as a separate subsidiary
other than in a supervisory acquisition, it would become a
multiple savings and loan holding company. There generally are
more restrictions on the activities of a multiple savings and
loan holding company than on those of a unitary savings and loan
holding company. The HOLA provides that, among other things, no
multiple savings and loan holding company or subsidiary thereof
which is not an insured association shall commence or continue
<PAGE 46> for more than two years after becoming a multiple
savings and loan association holding company or subsidiary
thereof, any business activity other than: (i) furnishing or
performing management services for a subsidiary insured
institution, (ii) conducting an insurance agency or escrow
business, (iii) holding, managing, or liquidating assets owned by
or acquired from a subsidiary insured institution, (iv) holding
or managing properties used or occupied by a subsidiary insured
institution, (v) acting as trustee under deeds of trust,
(vi) those activities previously directly authorized by
regulation as of March 5, 1987 to be engaged in by multiple
holding companies or (vii) those activities authorized by the
Federal Reserve Board as permissible for bank holding companies,
unless the OTS by regulation, prohibits or limits such activities
for savings and loan holding companies. Those activities
described in (vii) above also must be approved by the OTS prior
to being engaged in by a multiple savings and loan holding
company.
Qualified Thrift Lender Test. The HOLA provides that any
savings and loan holding company that controls a savings
association that fails the QTL test, as explained under
"--Qualified Thrift Lender Test," must, within one year after the
date on which the association ceases to be a QTL, register as and
be deemed a bank holding company subject to all applicable laws
and regulations.
Restrictions on Cash Dividends
Bancorp, as a Pennsylvania business corporation, will be
subject to the restrictions imposed by the Pennsylvania Business
Corporation Law on the payment of cash dividends. Because cash
dividends paid to Bancorp by the Bank will be initially the sole
source of funds for payment of dividends by Bancorp, the
restrictions on the Bank's ability to pay cash dividends is
important. Such restrictions are described herein under
"Description of Bancorp's Capital Stock--Common Stock."
Continuing Restrictions
As a condition to OTS approval of the Reorganization,
Bancorp will likely be required to ensure that the Bank shall
meet its minimum regulatory net worth requirements or, where
necessary, infuse additional capital in a form satisfactory to
the OTS to effect compliance with such requirements. For further
information on the restrictions on the ability of the Bank and
Bancorp to pay cash dividends, see "Description of Bancorp's
Capital Stock--General" herein.
Treatment of Stock Certificates
After the effective date of the Reorganization (the
"Effective Date"), the former holders of Bank common stock will
be entitled to exchange their stock certificates for new
certificates evidencing the same number of shares of Bancorp
<PAGE 47> common stock. The exchange of Bank common stock for
Bancorp common stock will occur automatically at the Effective
Date. As soon as practicable after the Effective Date, Bancorp,
or a bank or trust company designated by Bancorp, in the capacity
of exchange agent (the "Exchange Agent"), will send a transmittal
form to each Bank shareholder. The transmittal form will contain
instructions with respect to the surrender of certificates
representing Bank Common Stock to be exchanged for Bancorp common
stock.
BANK SHAREHOLDERS SHOULD NOT FORWARD BANK STOCK CERTIFICATES
TO THE EXCHANGE AGENT UNTIL THEY HAVE RECEIVED TRANSMITTAL FORMS.
BANK SHAREHOLDERS SHOULD NOT RETURN STOCK CERTIFICATES WITH THE
ENCLOSED PROXY CARD.
Until so exchanged, the Bank's stock certificates will, for
all purposes, represent the same number of shares of Bancorp's
common stock as the number of shares of the Bank's common stock
previously represented, and the holders of such certificates will
have all of the rights of holders of Bancorp's common stock.
Bancorp may withhold cash dividends, if and when declared, on
common stock not so exchanged until such time as it is exchanged.
Instructions with respect to the exchange of stock certificates
will be sent to all holders of record on the Effective Date of
shares of the Bank's common stock as soon as practicable after
the consummation of the Reorganization. The Bank, which serves
as the transfer agent and registrar for the Bank's common stock,
will act in the same capacity for Bancorp's common stock.
Effect on Employee Benefit Plans
Upon completion of the Reorganization, the Stock Option
Plans will, by reason of the Reorganization, be continued as and
become plans of Bancorp and the Bank. Stock options with respect
to shares of the Bank's common stock granted under the Stock
Option Plans and outstanding prior to consummation of the
Reorganization will automatically become options to purchase the
same number of shares of Bancorp's common stock upon consummation
of the Reorganization, upon identical terms and conditions and
for an identical price, and Bancorp will assume all of the Bank's
obligations with respect to such outstanding options.
All other employee benefit plans of the Bank will remain
plans of the Bank and will be unchanged by the Reorganization,
except that any plan which refers to the common stock of the Bank
will, following completion of the Reorganization, be deemed to
refer instead to common stock of Bancorp. In the future, Bancorp
may adopt such employee benefit plans as plans and obligations of
Bancorp to cover employees of Bancorp who are not also employees
of the Bank. If Bancorp acquires other savings and loan
subsidiaries, such employee benefit plans may be extended to
cover the employees of such institutions.
<PAGE 48>
Effective Date
The Effective Date of the Reorganization will be the date
upon which Articles of Combination pertaining to the
Reorganization are filed with and endorsed by the OTS.
Management currently anticipates that the Effective Date will
occur in the first quarter of 1999.
DISSENTERS' AND APPRAISAL RIGHTS
Pursuant to OTS regulations, holders of the Bank's common
stock will have dissenters' and appraisal rights in connection
with the Reorganization. Shareholders may dissent from the terms
of the Reorganization and receive in cash the value of their
shares if they comply with all the applicable provisions of the
OTS regulations. Shareholders contemplating the exercise of
their dissenters' rights should review the procedures set forth
in Section 552.14 of the OTS regulations and should consult their
personal legal and tax counsel as to the legal and tax related
consequences of exercising their dissenters' rights. The
following is a summary of the steps which must be taken for the
effective exercise of dissenters' rights and is qualified in its
entirety by reference to Section 552.14, a copy of which is
attached to this Proxy Statement/Prospectus as Exhibit D.
1. Vote Against the Merger. To be eligible to exercise
his or her right to dissent, a shareholder must not vote for the
Reorganization. A shareholder waives his or her right to dissent
if he or she votes in favor of the Reorganization either in
person or by proxy.
2. Written Demand for Appraisal and Payment. Each
stockholder electing to make a demand under this section shall
deliver to the Bank, before voting on the Reorganization, a
writing identifying himself or herself and stating his or her
intention to demand appraisal of and payment for his or her
shares. Such demand must be in addition to and separate from any
proxy or vote against the combination by the stockholder.
3. Notification of Effective Date and Written Offer.
Within ten days after the effective date of the Reorganization,
the Bank will:
a. Give written notice by mail of the effective date
of the Reorganization to stockholders who have demanded appraisal
of and payment for their shares in accordance with paragraph 2
above and have not voted in favor of the Reorganization;
b. Make a written offer to each such stockholder to
pay for dissenting shares at a specified price deemed by the Bank
to be the fair value thereof; and
c. Inform such stockholders that, within 60 days of
such date, the respective requirements of paragraphs (5) and (6)
below must be satisfied. <PAGE 49>
4. Acceptance of Offer. If within 60 days of the
effective date of the Reorganization the fair value is agreed
upon between the Bank and any stockholder who has complied with
the provisions of paragraph (2) above, payment for his or her
shares will be made within 90 days of the effective date of the
Reorganization.
5. Petition to Be Filed if Offer Not Accepted. If, within
60 days of the effective date of the Reorganization, the Bank and
any stockholder who has complied with the provisions of
paragraph (2) above do not agree as to the fair value, then any
such stockholder may file a petition with the OTS, with a copy by
registered or certified mail to the Bank, demanding a
determination of the fair market value of the stock of all such
stockholders. A stockholder entitled to file such a petition who
fails to file such petition within 60 days of the effective date
of the Reorganization shall be deemed to have accepted the terms
offered under the Reorganization.
6. Stock Certificates to Be Noted. Within 60 days of the
effective date of the Reorganization, each stockholder demanding
appraisal and payment must submit to the Bank his or her stock
certificates for notation thereon that an appraisal and payment
have been demanded with respect to such stock and that appraisal
proceedings are pending. Any stockholder who fails to submit his
or her stock certificates for such notation within such time
period shall no longer be entitled to appraisal rights and shall
be deemed to have accepted the terms offered under the
Reorganization.
4. Withdrawal of Demand. Notwithstanding the foregoing,
at any time within 60 days after the effective date of the
Reorganization, any shareholder shall have the right to withdraw
his or her demand for appraisal and to accept the terms offered
in the Reorganization.
8. Valuation and Payment. The OTS, or one or more
independent persons appointed by the OTS, will appraise the
shares to determine their fair market value, as of the effective
date of the Reorganization, exclusive of any element of value
arising from the accomplishment or expectation of the
Reorganization. The OTS will review and provide an opinion on
any appraisal prepared by independent persons as to the
suitability of the appraisal methodology and the adequacy of the
analysis and supportive data. The OTS, after consideration of
the appraisal report will, if it concurs in the valuation of the
shares, direct payment by the Bank of the appraised fair market
value of the shares, upon surrender of the certificates
representing such stock. Such payment will include interest from
the effective date of the Reorganization, at a rate deemed
equitable by the OTS.
9. Costs and Expenses. The costs and expenses of any
proceeding under this section may be apportioned and assessed by
the OTS as it may deem equitable against all or some of the
<PAGE 50> parties. In making this determination the OTS will
consider whether any party has acted arbitrarily, vexatiously, or
not in good faith in respect to the rights provided by the OTS
regulations.
10. Voting and Distribution. Any stockholder who has
demanded appraisal rights is thereafter neither entitled to vote
such stock for any purpose nor entitled to the payment of
dividends or other distributions on the stock (except dividends
or other distributions payable to, or a vote to be taken by,
stockholders of record as of a date which is on or prior to, the
effective date of the Reorganization); provided, that if any
stockholder becomes unentitled to appraisal and payment of
appraised value with respect to such stock and accepts or is
deemed to have accepted the terms offered upon Reorganization,
such stockholder shall thereupon be entitled to vote and receive
the distributions described above.
DESCRIPTION OF BANCORP'S CAPITAL STOCK
General
The authorized capital of Bancorp consists of 3,000,000
shares of common stock, no par value, and 500,000 shares of
preferred stock, such preferred stock to be issuable, in series
and classes having such par value, rights, preferences,
privileges and restrictions as the Board of Directors of Bancorp
may determine. Except as described below, each share of Bancorp
common stock will have the same relative rights as, and will be
identical in all respects with, each other share of Bancorp
common stock.
Common Stock
Voting Rights. Prior to the issuance of any preferred stock
which possesses voting rights (see "Preferred Stock"), the
holders of the common stock will possess exclusive voting rights
in Bancorp. Except for the limitation on the right of a person
or group acting in concert to vote shares with voting power in
excess of 10% (see "--Certain Restrictions on Acquisition of
Bancorp"), each holder of shares of common stock will be entitled
to one vote for each share held on matters upon which
stockholders have the right to vote. Stockholders will not be
entitled to cumulate their votes for the election of directors.
Dividends. Under the Pennsylvania Business Corporation Law,
Bancorp may only pay dividends if solvent and if payment of such
dividend would not render Bancorp insolvent. Funds for dividend
distribution must initially come from dividends paid to Bancorp
by the Bank, so that the restrictions on the Bank's ability to
pay dividends are indirectly applicable to Bancorp. The Bank's
ability to pay dividends is restricted by certain regulations.
Under such regulations, the Bank is not permitted to pay
dividends on its common stock if such payment, together with any
payment for the repurchase of stock, would reduce its net worth
<PAGE 51> below the amount required for the liquidation account
established in connection with the Bank's conversion in 1987 from
mutual to stock form. Furthermore, the Bank is not permitted to
pay or declare a cash dividend on, or to repurchase any of its
Common Stock, in an amount in excess of 100% of its net income
for the then current fiscal year plus one-half of its surplus
capital ratio, except with the prior approval of the OTS. See
"Regulation of the Bank and Bancorp--Limitations on Capital
Distributions."
In addition, OTS regulations require the Bank to give the
OTS 30 days' advance notice of any proposed declaration of
dividends to Bancorp, as its holding company, and the OTS may
object to dividends that it deems inconsistent with the financial
soundness of the Bank. Bancorp presently intends to continue the
Bank's policy on paying cash dividends on its common stock,
although no assurance can be given as to how long it will
continue such policy. For the year ended June 30, 1998, the Bank
paid cash dividends to stockholders equal to $0.23 per share. On
July 28, 1998, the Bank declared an annual cash dividend of $0.25
per share payable on September 30, 1998 to stockholders of record
on September 1, 1998.
Preemptive Rights; Redemption. Holders of Bancorp's common
stock will not be entitled to preemptive rights with respect to
any shares of Bancorp which may be issued. The common stock will
not be subject to redemption. Upon receipt by Bancorp of the
full specified purchase price therefor, the common stock will be
fully paid and nonassessable.
Liquidation. In the event of any liquidation, dissolution,
or winding up of Bancorp, after payment of all debts and
liabilities of Bancorp and payment of any liquidation preference
plus accrued dividends applicable to any outstanding shares of
preferred stock, the holders of Bancorp's common stock would be
entitled to receive all assets of Bancorp available for
distribution in cash or in kind.
Preferred Stock
None of the 500,000 shares of serial preferred stock
authorized will be issued in the Reorganization. The Board of
Directors of Bancorp is authorized to approve the issuance of
such shares of preferred stock, without any required approval of
shareholders. The rights, qualifications, limitations and
restrictions on each series of preferred stock issued will be
determined by the Board of Directors at the time of issuance and
may include, among other things, rights to participating
dividends, voting and convertibility into common stock. The
Board of Directors intends to authorize, prior to the completion
of the Reorganization, 10,000 shares of Series A Junior
Participating Preferred Stock for issuance under and pursuant to
the terms of Bancorp's proposed Shareholder Rights Plan described
below.
<PAGE 52>
Similarly, the Board of Directors of the Bank presently has
the authority to issue up to 500,000 shares of preferred stock
with such rights, qualifications and limitations as the Board of
Directors may determine, including 10,000 shares of Series A
Junior Participating Preferred Stock (the "Bank Series A
Preferred") for issuance under and pursuant to the terms of
Bank's Shareholder Rights Plan described below.
Shareholder Rights Plan
Prior to the completion of the Reorganization, Bancorp
intends to adopt a Shareholder Rights Plan (the "Bancorp Rights
Plan") substantially identical to the Shareholder Rights Plan
maintained by the Bank (the "Bank Rights Plan"). These
Shareholder Rights Plans are designed to protect the issuer's
shareholders from attempts to acquire control of the issuer at an
inadequate price. Under the Bank Rights Plan, each outstanding
share of Bank common stock has attached to it one right to
purchase a unit of the Bank Series A Preferred. The rights are
not currently exercisable or transferable, and no separate
certificates evidencing such rights have been or will be
distributed, unless certain events occur. The rights currently
attached to the outstanding shares of Bank common stock will
expire on June 16, 2008.
Each right will initially entitle a holder to buy one unit
of the Bank Series A Preferred at an exercise price of $63.00.
The rights become separate from the Bank common stock, and if not
redeemed by the Board of Directors within a 10-day period of
time, become exercisable if a person, group or other entity
acquires or announces a tender offer for 14.9% or more of the
Bank's total voting power. The rights also become separate from
the Bank common stock, and if not redeemed by the Board of
Directors within a 10-day period of time, become exercisable if a
person or group who has become a beneficial owner of at least 10%
of the outstanding Bank common stock or its total voting power is
declared by the Bank's Board of Directors to be an "adverse
person," as defined in the Bank Rights Plan.
After the rights become exercisable, under certain
circumstances, the rights (other than rights held by a 14.9%
beneficial owner, as the case may be, or an "adverse person")
will entitle the holders to purchase either Bank common stock or
the common stock of the potential acquiror at a substantially
reduced price.
The Bank is generally entitled to redeem the rights at $.001
per right at any time until the tenth business day following
public announcement that a 14.9% position has been acquired. At
any time prior to the date the rights have become nonredeemable,
the Bank's Board of Directors can extend the redemption period.
Rights are not redeemable following an "adverse person"
determination.
<PAGE 53>
Certain Restrictions on Acquisition of Bancorp
Bancorp's Articles of Incorporation and By-Laws contain
numerous provisions which are intended to encourage potential
acquirors of Bancorp to negotiate directly with the Board of
Directors of Bancorp but which also may deter a nonnegotiated
tender or exchange offer for Bancorp's stock or a proxy contest
for control of Bancorp. Certain provisions of Pennsylvania law
and the position of the OTS on changes in control of savings and
loan institutions may also discourage nonnegotiated takeover
attempts or proxy contests. In addition, the terms of the Bank's
employment agreement with Judith Hoffman (see "Matter No. 1 --
Election of Directors -- Employment Agreement) may also be viewed
as having the effect of discouraging such efforts. These
provisions may also serve to entrench existing management. These
provisions may also deter institutional interest in and ownership
of Bancorp's stock and, accordingly, may depress the market price
for, and liquidity of, Bancorp's stock. Bancorp's Articles of
Incorporation and By-Laws are attached hereto as Exhibits B and
C, respectively, and are incorporated herein by reference. The
following discussion of such provisions and the purpose and
possible effects thereof is qualified in its entirety by
reference to the text itself of Bancorp's Articles of
Incorporation and By-Laws. The Board of Directors of Bancorp
does not presently intend to propose additional anti-takeover
provisions for the Articles of Incorporation or By-Laws of
Bancorp in the future. Because of the possible adverse effect
such provisions may have on Bancorp's stockholders, such
discussion and the Articles of Incorporation and By-Laws
themselves should be read carefully. Approval of the
Reorganization will, in effect, constitute approval of these
provisions by stockholders.
1. Prohibition of Ownership and Voting of Shares in Excess
of 10%. Bancorp's Articles of Incorporation impose limitations
upon the ability of certain stockholders and groups of
stockholders to acquire or vote shares of stock of Bancorp. The
Articles of Incorporation prohibit any person (whether an
individual, company or "group acting in concert") from acquiring
"voting control" of Bancorp. Voting control is generally defined
as the beneficial ownership at any time of shares with more than
10% of the total voting power of Bancorp's outstanding stock.
These provisions would not apply to the purchase of shares by
underwriters in connection with a public offering. A "group
acting in concert" includes persons seeking to combine or pool
their voting power or other interests in common stock for a
common purpose. Such a group does not include actions by the
Board of Directors acting solely in their capacity as such.
Under such provision, shares of common stock, if any, owned
in excess of 10% will be treated as "excess shares." In general,
all shares of common stock deemed to be excess shares shall not
be entitled to vote on any matter or take other stockholder
action. For purposes of determining the voting rights of other
stockholders, excess shares are essentially treated as no longer
<PAGE 54> outstanding. As a result, where excess shares are
present, other stockholders will realize a proportionate increase
in their voting power, but this 10% voting restriction shall not
be applicable to other stockholders if their voting power
increases above 10% as a result of application of this rule to
another stockholder. However, in determining the voting power of
the person or group acting in concert with respect to whom the
rule was initially applied, there will be subsequent reductions
in their voting rights if, as a result of the initial
proportionate reduction in outstanding shares, such person or
group acting in concert still shall be deemed to beneficially own
excess shares.
The potential effect of the voting rights limitations of the
Articles of Incorporation are significant. Any person or group
acting in concert owning more than 10% of the outstanding common
stock will generally be unable to exercise voting rights
proportionate to their equity interest. When operating in
conjunction with other provisions in the Articles of
Incorporation, particularly the provision requiring the
affirmative vote of the holders of 80% of the voting power of the
corporation on certain matters, the practical effect of the
limitation on voting rights may be to render it virtually
impossible for any one stockholder or group acting in concert to
determine the outcome of any such vote.
In determining the number of shares of common stock, a
person will be deemed the owner of any shares over which he or
she has the power to vote, to direct the voting of, or to dispose
or to direct the disposition of. As a result, more than one
person may be deemed to own the same shares. For example, to the
extent that shareholders deposit their shares in a voting trust
arrangement and obtain the power to vote or direct the voting of
the shares so deposited, the number of shares subject to such
arrangement would be aggregated for purposes of the provision.
Certain exceptions from the restrictions on voting rights
are set forth in the Articles of Incorporation. The restrictions
are not applicable to, among other things, the solicitation,
holding and voting of proxies obtained by the Board of Directors.
A "group acting in concert" does not include, among other things,
(i) the members of the Board of Directors solely as a result of
their board membership, and (ii) the members of the Board of
Directors as a result of their solicitation, holding and voting
of proxies.
The 10% voting rights limitation may make it extremely
difficult for any one person or group of affiliated persons to
acquire voting control of Bancorp, with the result that it may be
extremely difficult to bring about a change in the Board of
Directors or management by attempting to acquire controlling
interest in the common stock of Bancorp. Accordingly, under this
provision the only way in which a change in control can generally
be brought about is for the proposal to have such broad based
support among unaffiliated stockholders that the applicable vote
<PAGE 55> (a majority or 80% vote, depending upon the matter
under consideration) would be obtained in spite of the
limitations of any one stockholder or affiliated group of
stockholders to 10% of the total votes cast.
Because this provision does place limitations upon the
acquisition and voting of shares by any party, it may have the
effect of discouraging holders of large amounts of shares from
purchasing additional shares, or would be holders who may desire
to acquire enough shares to exercise control from purchasing any
shares. This may have an adverse effect on the liquidity and
market price of the shares.
The Bank's charter contained a similar provision which
limited the right of any person or group to own beneficially or
vote shares beneficially owned by them in excess of 10% of any
class of outstanding stock of the Bank. The OTS advised the Bank
that, as a matter of policy, the OTS would enforce such a
provision only for ten years after the conversion of an
institution from mutual to stock form. Therefore, this provision
of the Bank's Charter expired in 1997.
2. "Classified" Board of Directors. The Articles of
Incorporation of Bancorp provide for a "classified" Board of
Directors of between seven (7) and twenty-five (25) members,
which number is fixed by the Board of Directors, divided into
three classes, serving for initial terms expiring in 1999, 2000,
and 2001, respectively, and after such initial terms, for
successive terms of three years each. In the event of a Board
vacancy, the Articles of Incorporation provide that the sole
power to fill such vacancy is vested in the Board of Directors,
and any such new director shall serve out the full term of the
former director. This provision is designed to assure
experience, continuity, and stability in the Board's leadership
and policies. Bancorp's Board of Directors believes that this
can best be accomplished by electing each director to a
three-year term and electing only approximately one-third of the
directors each year.
The election of directors for staggered terms significantly
extends the time required to make any change in control of
Bancorp's Board of Directors and may tend to discourage any
surprise or nonnegotiated takeover bid for control of Bancorp.
Under Bancorp's Articles of Incorporation, it will take at least
two annual meetings for holders of a majority of Bancorp's voting
securities to make a change in control of the Board of Directors
because only a minority (approximately one-third) of the
directors will be elected at each meeting. In addition, because
certain actions require more than majority approval of the Board,
as described herein, it may take as many as three annual meetings
for a controlling block of Bancorp's stockholders to obtain
complete control of the Board, and thereby of Bancorp's
management.
<PAGE 56>
This provision may tend to perpetuate present management
because of the additional time required to change control of the
Board. Because the provision will increase the amount of time
required for a takeover bidder to obtain control of Bancorp
without the cooperation of the Board even if the takeover bidder
were to acquire a majority of Bancorp's outstanding stock, it may
tend to discourage certain tender offers, perhaps including some
tender offers that Bancorp's shareholders may believe would be in
their best interests. The classified Board provision will apply
to all elections of directors and, accordingly, it will make it
more difficult for Bancorp's shareholders to change the
composition of the Board if the shareholders believe such a
change would be desirable, even in the absence of any third
party's acquisition of voting control of Bancorp. This is
especially true in light of the denial of cumulative voting
described below.
The Bank's By-Laws provide for a "classified" board of
directors divided into three classes as nearly equal in number as
possible, with three year terms for directors.
3. No Cumulative Voting. Cumulative voting entitles a
shareholder to multiply the number of votes to which the
shareholder is entitled by the number of directors to be elected,
with the shareholder being able to cast all such votes for a
single nominee or distribute them among the nominees to be voted
for as such shareholder sees fit. The Pennsylvania Business
Corporation Law provides that shareholders are entitled to
cumulate their votes for the election of directors, unless a
corporation's articles of incorporation provide otherwise.
The Board of Directors specifically prohibited cumulative
voting in Bancorp's Articles of Incorporation because it believes
that each director should represent and act in the interest of
all shareholders and not any special shareholder or group of
shareholders. In light of current acquisition techniques and
activity, minority representation could be disruptive and could
impair the efficient management of Bancorp for the benefit of
shareholders generally. In addition, the absence of cumulative
voting will also tend to deter "greenmail," in which a
substantial minority shareholder uses his holdings as leverage to
demand that a corporation purchase such shareholder's shares at a
significant premium over the market value of such stock to
prevent such shareholder from obtaining or attempting to obtain a
seat on the Board of Directors. In the absence of cumulative
voting, a majority of the votes cast in any election of directors
can elect all of the directors of the class in any given year.
The absence of cumulative voting, coupled with a classified
Board of Directors, may also deter a proxy contest designed to
win representation on the Board of Directors or remove management
because a group or entity owning less than a majority of the
voting stock of Bancorp may be unable to elect a single director.
Although this may tend to make removal of incumbent management
more difficult, the Board of Directors believes deterring proxy
<PAGE 57> contests will avoid the significant cost, in terms of
money and management's time, in opposing such actions.
The Bank's charter provides that stockholders of the Bank
are not entitled to cumulative voting in the election of
directors.
4. Preferred Stock. The Articles of Incorporation of
Bancorp authorize the issuance of up to 500,000 shares of
preferred stock and empower the Board of Directors to issue such
shares as a class or in one or more series, with such voting,
dividend, redemption, sinking fund, conversion, exchange,
liquidation and other rights as shall be determined by the Board
of Directors, without shareholder approval.
Except as may be contemplated under or in connection with
the Bancorp Rights Plan (see "Description of Bancorp's Capital
Stock -- Shareholder Rights Plan"), Bancorp has no agreements,
commitments or plans for the sale or other use of the shares of
preferred stock. The Board of Directors believes that creation
of a class of preferred stock will provide flexibility in
enabling Bancorp to respond promptly should opportunities arise
involving the raising of capital, acquisitions, stock
distributions, and other proper corporate purposes.
Although Bancorp's Board of Directors presently intends to
use the preferred stock for the purposes set forth above, if
there is a merger, proposal, tender offer or other attempt to
gain control of Bancorp that the Board of Directors does not
approve, it would be possible for the Board of Directors to
authorize the issuance of a series of preferred stock with rights
and preferences that would impede completion of the proposed
transaction, thus tending to perpetuate incumbent management.
Therefore, a possible effect of the provision would be to deter a
future takeover attempt that the Board of Directors considers
contrary to the best interests of all shareholders, but which
some, or even a majority, of the shareholders might deem to be in
their best interests.
The Bank's charter contains a similar provision authorizing
the issuance of up to 500,000 shares of preferred stock with such
rights and terms as may be set by the Board of Directors of the
Bank.
5. Shareholder Rights Plan. Bancorp intends to adopt,
prior to completion of the Reorganization, the Bancorp Rights
Plan, which Bancorp's Board of Directors expects will have
substantially the same terms as the Bank Rights Plan. See
"Description of Bancorp's Capital Stock --Shareholder Rights
Plan."
6. Nominations for Directors. Bancorp's By-Laws require
that nominations for the election of directors made by
shareholders of Bancorp (as opposed to those made by the Board of
Directors) must be made by notice (in writing) delivered or
<PAGE 58> mailed to the Secretary not less than 90 days nor more
than 120 days prior to the meeting of shareholders at which
directors are to be elected; provided, however, that if less than
21 days notice of such meeting is given to the shareholders, such
notice shall be delivered within seven days after such notice has
been mailed. Such notice must set forth, among other things, the
name, age, address, principal occupation or employment of each
such nominee, the number of shares of Bancorp stock that are
owned by such nominee and the length of time such nominee has
been a shareholder of Bancorp. Nominations not made in
accordance with the foregoing procedure will be disregarded.
The Board of Directors of Bancorp believes that this
procedure will assure that shareholders of Bancorp will have an
adequate opportunity to consider the qualifications of all
nominees for directors and permit the shareholders' meetings to
be conducted in an orderly manner. It may have the effect,
however, of deterring nominations other than those made by the
Board of Directors.
The Bank's By-Laws provide that nominations for the election
of directors made by shareholders must be delivered in writing to
the Secretary of the Bank at least five days prior to the date of
the annual meeting.
7. Mergers, Sale of Assets, Liquidation Approval. The
Articles of Incorporation of Bancorp, provide that any merger,
consolidation, sale of assets or similar transaction involving
Bancorp and any other person who is, at that time, a 5%
beneficial shareholder of Bancorp, requires the affirmative vote
of shareholders entitled to cast at least 80% of the votes which
all shareholders are entitled to cast, unless the transaction is
approved in advance by 66-2/3% of the members of the Board of
Directors, in which case approval by the affirmative vote of a
majority of the votes cast by the holders of the outstanding
voting stock of Bancorp at a meeting at which a quorum was
present would be required. The Articles of Incorporation also
provide that liquidation or dissolution of Bancorp requires the
affirmative vote of shareholders entitled to cast at least 80% of
the votes that all shareholders are entitled to cast, unless such
transaction is approved by 66-2/3% of the members of the Board of
Directors.
Under Pennsylvania law, unless a corporation's Articles of
Incorporation provide otherwise, the affirmative vote of the
majority of votes cast at a meeting at which quorum is present is
ordinarily sufficient to approve mergers, consolidations and most
other business combinations. Although Bancorp's Articles of
Incorporation require a person or group that acquires 25% or more
of the combined voting power of Bancorp's outstanding voting
stock to offer to purchase all remaining shares of voting stock,
for cash, at the highest price paid by such person or group (see
"--Mandatory Tender Offer by 25% Shareholder"), this may not
provide sufficient protection to Bancorp's shareholders. The
Board of Directors believes that the price paid by such a person
<PAGE 59> or group in open market purchases for Bancorp's stock
may be less than the intrinsic value of the stock. If a tender
offeror believes Bancorp's stock is undervalued in the market,
such offeror would not be deterred by such provision and, in a
merger or other business combination, the offeror might be
willing to pay the remaining shareholders an amount not less than
the highest amount paid by the offeror for shares. Furthermore,
the effects on the employees, customers and communities served by
Bancorp might not be considered by the tender offeror when
merging Bancorp into an entity controlled by such offeror as the
second part of a two-step acquisition.
By requiring approval of a merger or similar transaction
with a 5% beneficial stockholder of Bancorp by the affirmative
vote of stockholders holding 80% or more of Bancorp's combined
voting power if the transaction is not approved in advance by
66-2/3% of the members of the Board of Directors, it will be
extremely difficult for a group or person owning a substantial
block of Bancorp's stock, after a successful tender or exchange
offer, to accomplish a merger or similar transaction without
negotiating an agreement acceptable to Bancorp's Board of
Directors. Accordingly, the Board of Directors will be able to
protect the interests of the remaining stockholders as well as
Bancorp's employees, customers and the communities that Bancorp
serves. If Board approval is not obtained, the proposed
transaction must be on terms sufficiently attractive to obtain
approval by a vote of shareholders holding 80% or more of the
combined voting power of Bancorp's capital stock.
The 80% approval requirement, applicable when 66-2/3% of the
members of the Board of Directors have not approved the
transaction in advance, could result in Bancorp's Board and
management being able to exercise a stronger influence over any
proposed takeover by refusing to approve the proposed business
combination and obtaining sufficient votes, including votes
controlled directly or indirectly by management, to preclude the
80% approval requirement.
Because this provision would tend to discourage certain
nonnegotiated takeover bids and would encourage other takeover
bidders to negotiate with Bancorp's Board, it would also tend to
assist the Board and, therefore, management in retaining their
present positions. In addition, if the Board does not grant its
prior approval, a takeover bidder may still proceed with a tender
offer or other purchases of Bancorp's stock although any
resulting acquisition of Bancorp may be more difficult and more
expensive. Because of any increased expenses and the tendency of
this provision to discourage competitive bidders, the price
offered to Bancorp stockholders may be lower than if this
provision were not present in Bancorp's Articles of
Incorporation.
The Bank's Charter contains similar super-majority
provisions.
<PAGE 60>
8. Qualifications for Directors. Bancorp's Articles of
Incorporation provide that, unless waived by the Board of
Directors, a person must be a shareholder of Bancorp or the Bank
for at least three years before he or she can be elected to the
Board of Directors. This provision is designed to discourage
non-stockholders who are interested in buying a controlling
interest in Bancorp for the purpose of having themselves elected
to the Board, by requiring them to wait at least three years
before standing for election. Bancorp's By-Laws also provide
that, unless waived by a majority of the Board of Directors of
Bancorp, officers, directors, employees, agents and persons who
own 5% or more of the voting securities of any other corporation
or other entity that owns 66-2/3% or more of Bancorp's
outstanding voting stock cannot constitute a majority of the
members of Bancorp's Board of Directors. The effect of this
provision is to prevent a corporation or other entity that has
acquired 66-2/3% or more of Bancorp's voting stock from electing
a Board of Directors of Bancorp in which its representatives
constitute a majority of the directors.
The only qualifications for directors under the Bank's
charter and By-Laws are that (i) a director must at all times own
at least 1,500 shares of the Bank's common stock, (ii) no
director can be related by blood or marriage to any other
director without the consent of two-thirds of the entire board of
directors, and (iii) no newly elected director can serve in that
capacity nor can he or she attend any Board meeting until his or
her election has been approved by the OTS if required by Federal
regulations.
9. Mandatory Tender Offer by 25% Shareholder. Bancorp's
Articles of Incorporation require any person or entity that
acquires Bancorp's common stock and preferred stock, with
combined voting power of 25% or more, to offer to purchase, for
cash, all shares of Bancorp's voting stock at a price equal to
the highest price paid, within the preceding twelve months, by
such person or entity for shares of the respective class or
series of Bancorp's voting stock. In the event such person or
entity did not purchase any shares of a particular class or
series of Bancorp's voting stock within the preceding twelve
months, the price per share for such class or series of Bancorp's
voting stock would be the fair market value of such class or
series of Bancorp's voting stock as of the date on which such
person acquires 25% or more of the combined voting power of
Bancorp's stock. The provisions would not apply if 80% or more
of the members of the Board of Directors approved in advance an
acquisition of Bancorp's stock with combined voting power of 25%
or more.
The Board of Directors believes that any person or entity
who acquires control of Bancorp in a nonnegotiated manner should
be required to offer to purchase all shares of Bancorp's voting
stock remaining outstanding after the assumption of control, at a
price not less than the amount paid to acquire the control
position. Under Federal law, a person or entity is deemed to
<PAGE 61> have acquired "control" of a bank or bank holding
company when such person or entity owns 25% or more of the voting
stock of such bank or bank holding company.
A number of companies have been the subject of tender offers
for, or other acquisitions of, 25% or more of their outstanding
shares of common stock. In many cases, such purchases have been
followed by mergers in which the tender offeror or other
purchaser has paid a lower price for the remaining outstanding
shares than the price it paid in acquiring its original interest
in the company and has paid in a potentially less desirable form,
often securities of the purchaser that do not have an established
trading market at the time of issuance, in the merger. Federal
securities laws and regulations applicable to mergers govern the
disclosure required to be made to minority shareholders in order
to consummate such a transaction but do not assure shareholders
that the consideration which shareholders will receive for their
shares will be fair from a financial standpoint to them or that
they can effectively prevent consummation of the merger.
Moreover, the statutory right of the remaining shareholders of a
company to dissent in connection with certain mergers and receive
the "fair value" of their shares in cash may involve significant
expense and uncertainty to dissenting shareholders and may not be
meaningful because the appraisal standard to be applied under
Pennsylvania law does not take into account any appreciation in
the stock price due to the merger.
This provision in Bancorp's Articles of Incorporation is
intended to partially meet such gaps in the federal and state
laws, and to prevent certain of what the Board perceives to be
potential inequities of business combinations that involve two or
more steps. It is designed to protect shareholders who have not
tendered or otherwise sold their shares to a purchaser who is
attempting to acquire control by ensuring that at least the same
price and form of consideration is paid to such shareholders in a
merger as was paid to shareholders in the initial step of the
acquisition. In the absence of this provision, a purchaser who
acquired control of Bancorp subsequently could cause, by reason
of such control, a merger of Bancorp in which minority
stockholders would receive a price for their shares which would
not reflect any premium the purchaser may have paid in order to
acquire its controlling interest. This price also might be paid
in a potentially less desirable form (e.g., securities of the
purchaser instead of cash).
In many situations, the provision would require that a
purchaser pay shareholders a higher price for their shares and/or
structure the transaction differently than might be the case
without the provision. Accordingly, the Board of Directors
believes that, to the extent a merger were involved as part of a
plan to acquire control of Bancorp, adoption of the provision
would increase the likelihood that a purchaser would negotiate
directly with Bancorp. Bancorp's Board of Directors believes it
is in a better position than the individual shareholders of
Bancorp to negotiate effectively on behalf of all shareholders
<PAGE 62> and that the Board of Directors is likely to be more
knowledgeable than any individual shareholder in assessing the
business and prospects of Bancorp. Accordingly, the Board of
Directors is of the view that negotiations between it and a
would-be purchaser would increase the likelihood that
shareholders, as a whole, would receive a higher average price
for their shares.
The provision would tend to discourage any purchaser whose
objective is to seek control of Bancorp at a relatively low price
by offering a lesser value for shares in a subsequent merger than
it paid for shares acquired in a tender or exchange offer
undertaken to gain control over a portion of Bancorp's voting
stock. Under the provision, the purchaser would be required to
pay the same price in cash for any remaining shares of voting
stock not tendered or exchanged initially. The provision also
should discourage the accumulation of large blocks of shares of
Bancorp's voting stock, which the Board of Directors believes to
be disruptive to the stability of Bancorp's vitally important
relationships with its employees, customers and communities which
it serves, and which could precipitate a change of control of
Bancorp on terms unfavorable to the other shareholders.
Tender offers or other private acquisitions of stock are
usually made at prices above the prevailing market price of a
company's stock. In addition, acquisitions of stock by persons
attempting to acquire control through market purchases may cause
the market price of the stock to reach levels which are higher
than otherwise would be the case. The provision may discourage
any purchases of less than all of the outstanding shares of
Bancorp's voting stock and may thereby deprive holders of
Bancorp's stock of an opportunity to sell their stock at a higher
market price. Because of having to pay a higher price to other
shareholders in a merger, it may become more costly for a
purchaser to acquire control of Bancorp. Open market
acquisitions of stock may be discouraged by the requirement that
any premium price paid in connection with such acquisitions would
increase the price which would be required to be paid in any
merger not approved by 80% or more of the members of Bancorp's
Board of Directors. The provision, may therefore decrease the
likelihood that a tender offer will be made for less than all of
Bancorp's voting stock and, as a result, may adversely affect
those stockholders who would desire to participate in such a
tender offer.
The Bank's Charter and By-Laws do not contain any similar
provision.
10. Prohibition of Shareholders' Action Without a Meeting
and of Shareholders' Right To Call a Special Meeting. Bancorp's
Articles of Incorporation prohibit shareholder action without a
meeting and prohibit shareholders from calling a special meeting.
The prohibition of the use of a written consent procedure will
require prior notice, a shareholders' meeting and a vote of
shareholders for Bancorp's shareholders to take any action.
<PAGE 63> Special meetings of shareholders can only be called by
the Board of Directors. Therefore, without the cooperation of
the Board, any shareholder will have to wait until the annual
meeting of shareholders to have a proposal submitted to the
shareholders for a vote.
These provisions are intended to provide Bancorp's Board of
Directors and nonconsenting shareholders of Bancorp with the
opportunity to review any proposed action, express their views
and take any necessary action to protect the interests of such
shareholders and Bancorp before the action is taken, and to avoid
the costs to Bancorp of holding multiple shareholder meetings
each year to consider proposals of shareholders. They will
preclude a takeover bidder who acquires a majority of Bancorp's
outstanding stock from completing a merger or other business
combination of Bancorp without granting Bancorp and its remaining
shareholders an opportunity to make their views known and vote at
an annual shareholders' meeting. The delay caused by the
necessity for an annual shareholders' meeting would allow
management to take preventive actions, even if such actions are
not believed by shareholders to be in their best interests.
The Bank's By-Laws provide that (i) stockholder action may
be taken without a meeting if a consent to such action is signed
by all of the stockholders of the Bank entitled to vote and (ii)
special stockholders' meetings may be called by the holders of
10% or more of the outstanding shares of Bank common stock.
11. Amendment of Articles of Incorporation. The
Pennsylvania Business Corporation Law provides that the Articles
of Incorporation of a Pennsylvania business corporation (such as
Bancorp) may be amended by the affirmative vote of a majority of
the votes cast by all shareholders entitled to vote thereon,
except as otherwise provided by such corporation's Articles of
Incorporation. Bancorp's Articles of Incorporation provide that
the various provisions thereof requiring 80% stockholder approval
and the provisions (i) establishing a classified Board of
Directors, (ii) eliminating cumulative voting for directors,
(iii) prohibiting acquisition or voting of more than 10% of the
Company's voting stock, (iv) prohibiting shareholder action
without a meeting, (v) prohibiting shareholders from calling
special meetings, (vi) requiring purchase of remaining
stockholders' stock by a 25% stockholder, and (vii) stating that
no shareholder shall have preemptive rights, can only be amended
by an affirmative vote of shareholders entitled to cast at least
80% of all votes which shareholders are entitled to cast, or by
an affirmative vote of 80% of the Directors and of shareholders
entitled to cast at least a majority of all votes which
shareholders are entitled to cast. On other matters, the
Articles of Incorporation of Bancorp can be amended by an
affirmative vote of a majority of the votes cast by all
shareholders entitled to vote thereon at a meeting at which a
quorum is present.
<PAGE 64>
Amendments to the Bank's Charter require the approval of the
holders of shares representing a majority of all votes entitled
to be cast by the stockholders of the Bank (except for an
amendment to the provisions of the Charter requiring
supermajority approval of (i) certain mergers and other
fundamental transactions and (ii) Charter amendments, which
require supermajority approval), and are subject to approval by
the OTS.
12. Amendment of By-Laws. Generally, Bancorp's Articles of
Incorporation vest authority to make and amend the By-Laws in the
Board of Directors, acting by a vote of a majority of the entire
Board. In addition, except as described below, shareholders may
amend the By-laws by an affirmative vote of 66-2/3% of the
outstanding voting stock of Bancorp. However, the provision of
the By-Laws concerning directors' liabilities and indemnification
of directors, officers and others may not be amended to increase
the exposure of directors to liability or decrease the degree of
indemnification except by the two-thirds vote of the entire Board
of Directors or 80% of all votes of shareholders entitled to be
cast.
This provision is intended to provide for additional
continuity and stability in the policies and governance of
Bancorp so as to enable management to carry out its long range
plans for the company. The provision is also intended to
discourage certain nonnegotiated efforts to acquire Bancorp,
since a greater percentage of Bancorp's outstanding voting stock
will be needed before effective control over its affairs could be
exercised. The Board of Directors will have relatively greater
control over the By-Laws of Bancorp than the shareholders
because, except with respect to the director liability and
indemnification provisions, the Board could adopt, alter, amend
or repeal the By-Laws upon a majority vote by the directors.
The Bank's By-Laws can be amended by a majority of the full
board of directors or by a majority of the votes cast at a
meeting of the Bank's stockholders, subject to approval by the
OTS.
13. Pennsylvania Fiduciary Duty Provisions. The
Pennsylvania Business Corporation Law provides that (a) the Board
of Directors can consider, in determining whether a certain
action is in the best interests of the corporation, (1) the
effects of any action upon any or all groups affected by such
action, including shareholders, employees, suppliers, customers
and creditors of the corporation, and upon communities in which
offices or other establishments of the corporation are located,
(2) the short-term and long-term interests of the corporation,
including benefits that may accrue to the corporation from its
long-term plans and the possibility that these interests may be
best served by the continued independence of the corporation,
(3) the resources, intent and conduct (past, stated and
potential) of any person seeking to acquire control of the
corporation, and (4) all other pertinent factors; (b) the Board
<PAGE 65> of Directors need not consider the interests of any
particular group as dominant or controlling; (c) directors, in
order to satisfy the presumption that they have acted in the best
interests of the corporation, need not satisfy any greater
obligation or higher burden of proof with respect to actions
relating to an acquisition or potential acquisition of control;
(d) actions relating to acquisitions of control that are approved
by a majority of "disinterested directors" are presumed to
satisfy the directors' standard unless it is proven by clear and
convincing evidence that the directors did not assent to such
action in good faith after reasonable investigation; and (e) the
fiduciary duty of directors is solely to the corporation and may
be enforced by the corporation or by a shareholder in a
derivative action, but not by a shareholder directly.
The Pennsylvania Business Corporation Law explicitly
provides that the fiduciary duty of directors shall not be deemed
to require directors (a) to redeem any rights under, or to modify
or render inapplicable, any shareholder rights plan or (b) to act
as the board of directors, a committee of the board or an
individual director solely because of the effect such action
might have on an acquisition or potential or proposed acquisition
of control of the corporation or the consideration that might be
offered or paid to shareholders in such an acquisition. One of
the effects of these fiduciary duty provisions may be to make it
more difficult for a shareholder to successfully challenge the
actions of Bancorp's Board of Directors in a potential change in
control context. Pennsylvania case law appears to provide that
the fiduciary duty standard under the Pennsylvania Business
Corporation Law grants directors the statutory authority to
reject or refuse to consider any potential or proposed
acquisition of the corporation.
14. Regulatory Restraints. Because Bancorp will be a
savings and loan holding company under the HOLA, any other
company attempting to acquire control of Bancorp must obtain
prior approval of such acquisition from the OTS. In deciding
whether to grant approval, the OTS considers information relevant
to the proposed transaction, including the capital adequacy of
the bidder, the anticompetitive effects of the transaction and
management depth. Also, an individual or group of individuals
attempting to acquire control of Bancorp would be required to
make prior disclosure and be subject to possible denial of the
right to acquire such control under OTS regulations.
15employment agreement with Judith Hoffman. Such contract includes
provisions which would generally provide severance payments in
the event of termination of employment or resignation following,
among other things, demotion, reduction in base salary, exclusion
from benefit plans or certain transfers, in each case following
certain changes in control of the Bank. See "Matter No. 1:
Election of Directors--Employment Agreement."
PAGE 66
<PAGE>
COMPARISON OF RIGHTS OF STOCKHOLDERS OF THE BANK
WITH RIGHTS OF SHAREHOLDERS OF BANCORP
Set forth below is a table comparing the rights of holders
of common stock of the Bank with the rights of holders of common
stock of Bancorp. This table is qualified in its entirety by the
more detailed information appearing elsewhere herein, by the text
itself of Bancorp's Articles of Incorporation and By-Laws
attached as Exhibits "B" and "C" hereto, respectively.
<TABLE>
<CAPTION>
The Bank Bancorp
<S> <C> <C>
Preemptive rights None None
Issuance of addition- Issuance of shares Issuance of shares
al shares of common could be approved could be approved
stock by simple majority by simple majority vote
vote of Board of Board
Cumulative voting None None
Number of Directors 7 to 15 in number, 7 to 25 in number,
as determined by as determined by the
the Board of Board of Directors
Directors, except
when a greater
number is approved
by the OTS
Voting: Election of Classified Board Classified Board
Directors (only 1/3 of (only 1/3 of directors
directors elected elected each year)
each year)
Voting: Other One vote for each One vote for each share
Matters share owned of owned of record (shares
record of record held by any
person in excess of 10%
of the outstanding shares
cannot be voted)
Stockholder Action: 80% vote required 80% vote required unless
Liquidation or unless transaction transaction approved in
Dissolution is approved in advance by two-thirds of
advance by two- directors; then it is
thirds of directors; majority of the votes
then it is majority cast
of outstanding
shares
Stockholder Action: If substantially If substantially all the
Sale of Assets (not all assets are sold, assets are sold,
<PAGE 67>
in connection with affirmative vote of outstanding shares,
liquidation) a majority of out- affirmative vote of a
standing shares, majority of the votes
but vote of 80% cast, but vote of 80% of
of outstanding outstanding shares
shares is required required in certain
in certain circum- circumstances*
stances*
Stockholder Action: Affirmative vote Affirmative vote of
Increase or reduction of majority of majority of the votes
in authorized outstanding shares cast
common or preferred
stock
Stockholder Action: Affirmative vote Affirmative vote of
Amendment of of majority of majority of the votes
Articles outstanding shares, cast, except certain
except certain amendments require vote
amendments require of 80% of outstanding
vote of 80% of shares
outstanding shares
Amendment of By-Laws Affirmative vote Affirmative vote of
of majority of majority of directors,
directors, subject or by affirmative vote
to stockholder of shareholders owning
amendment by 66-2/3% of outstanding
majority vote of stock, except requires
outstanding shares two-thirds of directors
or vote of 80% of
outstanding shares if
amendment lessens
indemnification or
increases directors'
exposure to liability
Stockholder Action: Yes; must be None
Action by Written unanimous
Consent
Dissenters' Rights Yes; except that Yes; except that if
dissenters' rights Bancorp's shares are
will not apply if listed on a national
Bank's stock is securities exchange
listed on a national or held of record by
securities exchange more than 2,000
or quoted on NASDAQ shareholders, dissenters'
on the date of the rights will apply only
meeting at which in certain limited
the transaction was circumstances, as
submitted to stock- provided by law.
holders' vote and, <PAGE 68>
upon consummation of
such transaction,
stockholders will
receive only cash
or shares of stock
of a corporation
listed on a national
securities exchange
or quoted on NASDAQ
on the effective date
of such transaction
Dividends: Pro-rata if and Pro-rata if and when
when declared by declared by the Board
the Board from from legally available
legally available funds
funds
Stockholder Action: Affirmative vote Affirmative vote of a
Merger or consoli- of 66-2/3% of out- majority of votes cast,
dation standing shares, except that vote of 80%
except that vote of of outstanding shares is
80% of outstanding required in certain
shares is required circumstances*; no
in certain circum- shareholder approval is
stances* required for a merger in
which (a) a Pennsylvania
corporation with Articles
of Incorporation
identical to Bancorp's is
the survivor, (b) each
share of Bancorp stock is
to continue or be
converted into an
identical share of the
survivor, and (c) Bancorp
shareholders hold a
majority of the
outstanding voting shares
of the survivor
Stockholder Action: Affirmative vote Affirmative vote of
All other action of majority of majority of shares voting
shares voting at at a meeting at which a
a meeting at which quorum (50% of out-
a quorum (50% of standing shares plus one
outstanding shares share) is present
plus one share)
is present
Right of Stock- Meeting may be Shareholders do not
holders to Call called by holders have the right to call
Stockholders' of 10% of the a special shareholders'
Meeting outstanding stock meeting
<PAGE 69>
Stockholder Yes Only derivative action
Derivative or Non- is permitted, and
Derivative Action a director is not
Against Director personally liable for
for Director monetary damages unless
Misconduct the act or omission
constitutes recklessness,
self-dealing or willful
misconduct
Indemnification Yes; if final Yes; except that a
of directors, judgment on the director cannot be
officers, and merits in favor of indemnified if his act
employees an officer, director or omission constitutes
or employee or if recklessness or willful
majority of dis- misconduct
interested directors
determines he was
acting in good faith
within scope of his
employment and for a
purpose he reasonably
believed was in the
best interests of the
Bank or its stockholders
Mandatory Tender None Yes - A shareholder
Offer by 25% owning shares with 25% or
Stockholder more of the voting power
of Bancorp is required to
offer to purchase all
shares of stock owned by
other shareholders
Shareholder Yes -- Under certain Yes - Identical to the
Rights Plan circumstances, plan of the Bank
Rights will entitle
holders to purchase
either Bank common
stock or stock of
potential acquiror
at a substantially
reduced price
Right of Stockholders Nominations must be Nominations must be filed
to nominate Directors filed with Bank's with Bancorp's Secretary
for election at Secretary at least at least 90 but not more
Annual Meeting of five days before than 120 days before
Stockholders meeting meeting; nomination must
include, among other
things, name, age,
address, occupation and
certain share ownership
information regarding
nominee <PAGE 70>
Right of Stockholders Any matter raised at Proposal must be filed by
to bring matters meeting may be Stockholder in writing
before Annual discussed and with Bancorp's Secretary
Meeting of Stock- considered at such at least 90 but not more
holders meeting; actual vote 150 days before meeting;
on matter requires but if less than 21 days'
proposal to have notice of meeting is
been filed by Stock- given, proposal must be
holder in writing so filed within seven
with Bank's Secre- days after notice of
tary at least five meeting is mailed
days before meeting
</TABLE>
_____________________
*For information relating to the conditions under which the
affirmative vote of 80% of the outstanding voting power of
Bancorp is required, see "Description Of Bancorp's Capital
Stock--Certain Restrictions on Acquisition of Bancorp" herein.
PAGE 71
<PAGE>
MARKET FOR BANK COMMON STOCK
There is no active public trading market for the Bank's
common stock. As of the record date for the Meeting, the Bank
has 155 holders of record for its common stock. This relatively
small number of shareholders tends to impair the liquidity of and
market for the Bank's common stock. On May 13, 1998, the last
date on which a reported sale occurred, the closing price for the
Bank's common stock was $13.00.
As of June 30, 1998, there were options outstanding to
purchase 7,265 shares of the Bank common stock. Upon
consummation of the Reorganization, such options will be
converted into options to acquire the identical number of shares
of Bancorp common stock. For a description of the dividends paid
on the Bank common stock and expected to be paid on Bancorp
common stock, as well as the restrictions on such dividends, see
"Description of Bancorp's Capital Stock -- Common Stock --
Dividends."
Legg Mason Wood Walker, Incorporated makes a market in the
Bank's common stock. The Bank serves as transfer agent and
registrar for the Bank's common stock.
PAGE 72
<PAGE>
MATTER NO. 3
RATIFICATION OF APPOINTMENT OF INDEPENDENT AUDITORS
The Board of Directors of the Bank has appointed Patton and
Lettich as independent auditors of the Bank for the year ending
June 30, 1999, and has further directed that the selection of
such auditors be submitted for ratification by the stockholders
at the Meeting.
Patton and Lettich served as independent auditors of the
Bank for the fiscal year ended June 30, 1998. Services provided
to the Bank by Patton and Lettich during fiscal year 1998
included examination of the consolidated financial statements,
review of unaudited quarterly financial information and
consultation in connection with special projects, as well as
audit-related and tax matters.
A representative of Patton and Lettich will attend the
Meeting, will be extended and opportunity to make a statement, if
he so desires, and will be available to respond to appropriate
questions.
The affirmative vote of a majority of the votes cast at the
Meeting, assuming a quorum is present, is required for such
ratification. Abstentions and broker nonvotes, although counted
for the purpose of determining whether a quorum is present at the
Meeting, will not constitute or be counted as "votes" cast, so
they will have no effect on the approval of Matter No. 3.
THE BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE FOR THE
RATIFICATION OF THE APPOINTMENT OF PATTON AND LETTICH AS
INDEPENDENT AUDITORS FOR THE YEAR ENDING JUNE 30, 1999.
LEGAL OPINIONS
The legality of shares of Bancorp's common stock to be
issued in exchange for shares of the Bank's common stock pursuant
to the Reorganization, certain federal income tax matters and
certain other legal matters in connection with the Reorganization
are being passed upon by the law firm of Stevens & Lee, P.C.,
Reading, Pennsylvania, counsel to Bancorp and the Bank.
FINANCIAL INFORMATION
No financial statement disclosure is included herein
because, in accordance with the rules of the Securities and
Exchange Commission, (i) the only parties to the Reorganization
(other than the Bank) are Bancorp and its wholly owned
subsidiary, Interim Bank, neither of which has any significant
assets or liabilities, (ii) Bancorp's only substantial asset if
the Reorganization is effected will be its investment in the
Bank, and (iii) the consolidated financial statements of Bancorp
immediately after the Reorganization will be substantially
identical to the financial statements of the Bank immediately
<PAGE 73> before the Reorganization. A copy of the Bank's Annual
Report for the year 1998 accompanies this Proxy Statement/
Prospectus. The Bank's 1998 Annual Report contains audited
financial statements of the Bank, including a statement of
financial condition, a statement of income, statements of cash
flows, and statements of stockholders' equity. Any present
stockholder who did not receive an Annual Report, or who has
misplaced his or her copy, will be furnished a copy, without
charge, upon written request to the Secretary of the Bank at the
address shown on the cover hereof.
AVAILABLE INFORMATION
This Proxy Statement/Prospectus does not contain all of the
information set forth in the Registration Statement which Bancorp
has filed with the Securities and Exchange Commission ("SEC")
under the Securities Act of 1933, in connection with the
Reorganization described herein. The Registration Statement,
including exhibits, may be inspected or copied at prescribed
rates at the public reference facilities maintained by the SEC at
450 Fifth Street, N.W., Washington, D.C. 20549; and the
Commission's regional offices located at Citicorp Center, 500
West Madison Street, Suite 1400, Chicago, Illinois 60661; and at
Seven World Trade Center, Suite 1300, New York, New York 10048.
In addition, a copy of the Registration Statement, including
exhibits, and other reports, proxy and information statements and
other information filed with the SEC may be obtained through the
SEC's Internet web site located at http://www.sec.gov.
Neither the Bank nor Bancorp is, or upon completion of the
Reorganization will be, subject to the information, reporting and
proxy statement requirements of the Securities Exchange Act of
1934.
Under the Pennsylvania Business Corporation Law, Bancorp is
required to furnish to its shareholders annual financial
statements, including at least a balance sheet as of the end of
each fiscal year and a statement of income and expenses for the
fiscal year. Such financial statements will be audited and are
required to be mailed to each shareholder entitled thereto within
120 days after the close of each fiscal year.
STOCKHOLDER PROPOSALS
Any new business to be taken up at the Meeting shall be
stated in writing and filed with the Secretary of the Bank on or
prior to October 16, 1998, and all business so stated, proposed
and filed shall be considered at the Meeting, but no other
proposals shall be acted upon at the Meeting.
Any stockholder of the Bank or Bancorp who desires to submit
a proposal to be considered for inclusion in the Bank's or
Bancorp's proxy materials relating to its respective 1999 annual
meeting of stockholders must submit such proposal in writing,
addressed to Liberty Savings Bank, F.S.B. at 21 South Centre
<PAGE 74> Street, Pottsville, Pennsylvania 17901 (Attention:
Secretary), on or before May 27, 1999.
OTHER MATTERS
Management knows of no business that may properly come
before the Meeting other than those matters described above.
Should any other matters arise, the persons named on the enclosed
proxy will vote thereon in accordance with their best judgment.
BY ORDER OF THE BOARD OF DIRECTORS
__________________________________
Judith I. Hoffman, Secretary
<PAGE>
Exhibit A
AGREEMENT AND PLAN OF REORGANIZATION
THIS AGREEMENT AND PLAN OF REORGANIZATION ("Plan")
dated as of September 4, 1998, is by and between LIBERTY SAVINGS
BANK, F.S.B (the "Bank"), and LIBERTY CENTRE BANCORP, INC., a
Pennsylvania corporation and wholly owned subsidiary of the Bank
("Holding Company"), and LIBERTY SAVINGS INTERIM FEDERAL SAVINGS
BANK, a to-be-formed federal savings bank which will be chartered
under the laws of the United States of America for the sole
purpose of consummating the reorganization provided for herein
("Interim Bank").
BACKGROUND
1. The Bank is a federal savings bank, the authorized
capital stock of which consists of 3,000,000 shares of common
stock, par value $1.00 per share ("Bank Common Stock"), of which
at the date hereof 132,080 shares are issued and outstanding, and
500,000 shares of preferred stock of which, at the date hereof,
no shares are issued or outstanding. The Holding Company is a
recently formed Pennsylvania business corporation which is a
first tier subsidiary of the Bank.
2. The Board of Directors of the Bank has determined
that it is in the best interests of the Bank and its stockholders
for the Bank to be reorganized into a holding company form of
ownership in accordance with the terms of this Plan.
3. The reorganization provided for herein is to be
accomplished through the following steps: (1) the formation of
Interim Bank as an interim federal savings bank, all of the
outstanding stock of which will be held by the Holding Company;
and (2) the merger of Interim Bank into the Bank, with the Bank
being the resulting institution (the "Surviving Bank"). Pursuant
to such merger, (i) all of the issued and outstanding shares of
Bank Common Stock will be automatically exchanged, by operation
of law, on a one-for-one basis for an equal number of issued and
outstanding shares of the common stock of the Holding Company, no
par value per share (the "Holding Company Stock"); (ii) all of
the issued and outstanding Holding Company Stock held by the Bank
will be cancelled; and (iii) all of the issued and outstanding
shares of common stock of Interim Bank shall automatically, by
operation of law, be exchanged for, and shall become, on a one-
for-one basis, fully paid and non-assessable shares of Common
Stock of the Surviving Bank.
<PAGE A1>
AGREEMENT
In consideration of the premises and of the mutual
covenants and agreements herein contained, and in accordance with
the applicable laws and regulations of the United States of
America, the Bank, the Holding Company and Interim Bank,
intending to be legally bound hereby, agree:
ARTICLE I
MERGER
Subject to the terms and conditions of this Plan and in
accordance with the applicable laws and regulations of the United
States of America, on the Effective Date (as that term is defined
in Article V hereof): Interim Bank shall merge with and into the
Bank; the separate existence of Interim Bank shall cease; and the
Bank shall be the resulting institution (such transaction is
referred to herein as the "Merger"). The name of the Surviving
Bank shall be "Liberty Savings Bank, F.S.B." The Bank will have
its home office at 21 South Centre Street, Pottsville,
Pennsylvania 17901 and no branch offices.
ARTICLE II
CHARTER AND BYLAWS
On and after the Effective Date, the Charter and Bylaws
of the Bank, as in effect immediately prior to the Effective
Date, shall be the Charter and Bylaws of the Surviving Bank, and
may thereafter be amended in accordance with applicable law.
ARTICLE III
BOARD OF DIRECTORS AND OFFICERS
3.1 Board of Directors. On and after the Effective
Date, the directors of the Surviving Bank shall consist of the
eight directors of the Bank duly elected and holding office
immediately prior to the Effective Date, each of whom serves a
term of three years. The names and residence addresses of the
directors are:
Term
Name Residence Address Expires
Herman J. Fenstermacher 1036 Ridgeview Drive 1999
Orwigsburg, PA 17961
Frank J. Grabowski 100 Allen Lane 2000
Port Carbon, PA 17965
Daniel C. Guers 118 Lincoln Avenue 1999
Orwigsburg, PA 17961
Judith I. Hoffman 122 N. 18th Street 1998
Pottsville, PA 17901
<PAGE A2>
Michael R. Muncy 1541 Howard Avenue 2000
Pottsville, PA 17901
Menelaos P. Palles P.O. Box 860 1999
Pottsville, PA 17901
Ronald R. Pellish 140 South 24th Street 1998
Pottsville, PA 17901
Robert W. Pugh, Jr. R.R.#5, Box 361 2000
Pine Grove, PA 17963
3.2 Officers. On and after the Effective Date, the
officers of the Surviving Bank shall consist of the officers of
the Bank duly elected and holding office immediately prior to the
Effective Date. The names and titles of the officers are:
Name Title
Robert W. Pugh, Jr. President
Judith I. Hoffman Executive Vice President,
Chief Executive Officer and
Corporate Secretary
Herman J. Fenstermacher Treasurer
Ronald R. Pellish Assistant Treasurer
ARTICLE IV
EXCHANGE OF SHARES
4.1 Stock of the Bank. Each share of the Bank Common
Stock and related stock purchase rights issued and outstanding
immediately prior to the Effective Date shall, on and after the
Effective Date, be exchanged for and become one newly issued
share of Holding Company Stock and related stock purchase rights.
(i) The Exchange. On the Effective Date, each
stockholder holding an outstanding certificate or certificates
which prior thereto represented shares of Bank Common Stock may
surrender the same to the Bank, as exchange agent for all such
stockholders (the "Exchange Agent"), and such stockholders shall
be entitled upon such surrender to receive, in exchange therefor,
certificates representing the number of shares of Holding Company
Stock for which the shares of Bank Common Stock represented by
the certificate or certificates so surrendered shall have been
exchanged. Until so surrendered, each outstanding certificate
which, prior to the Effective Date, represented Bank Common
Stock, shall be deemed for all corporate purposes (including the
payment of dividends) to evidence ownership of the number of
shares of Holding Company Stock for which the shares of Bank
Common Stock (which were, prior to such Effective Date,
represented thereby) shall have been so exchanged; <PAGE A3>
(ii) Satisfaction of All Rights. All shares of
Holding Company Stock for which shares of Bank Common Stock shall
have been exchanged pursuant to this Article IV shall be deemed
to have been issued in full satisfaction of all rights pertaining
to such exchanged shares; and
(iii) Sole Rights, Etc. At the Effective Date,
the holders of certificates formerly representing Bank Common
Stock outstanding at the Effective Date shall cease to have any
rights with respect to Bank Common Stock and their sole rights on
and following the Effective Date shall be with respect to Holding
Company Stock for which their shares of Bank Common Stock shall
have been exchanged as a result of the Merger, or to perfect such
alternative rights, if any, as they may have as dissenting
stockholders.
4.2 Holding Company Stock Owned by Bank. On the
Effective Date, all previously outstanding shares of Holding
Company Stock, which shares are owned by the Bank, shall be
cancelled and shall not be deemed to be authorized, issued or
outstanding for any purpose.
4.3 Interim Bank Common Stock. On the Effective Date,
the outstanding shares of common stock of Interim Bank owned by
the Holding Company, as the sole stockholder of Interim Bank
immediately prior to the Merger, shall automatically be
exchanged, by operation of law, on a one-for-one basis for shares
of fully paid, non-assessable Bank Common Stock and shall not be
further exchanged for shares of the Holding Company Stock so
that, from and after the Effective Date, all of the issued and
outstanding shares of Bank Common Stock shall be owned and held
by the Holding Company.
4.4 Stock Option Plans. At the Effective Date, the
Liberty Savings Bank, F.S.B. 1997 Employee Stock Option Plan and
the Liberty Savings Bank, F.S.B. 1997 Stock Option Plan for
Outside Directors (collectively referred to as the "Plans") shall
each automatically, by operation of law, be continued and become
the Plans of the Holding Company. At the Effective Date, each
unexercised option under the Plans shall automatically become, by
operation of law, an unexercised option to purchase under the
respective Plan the same number of shares (adjusting thereafter
where appropriate pursuant to the anti-dilution provisions of the
Plan, if any) of Holding Company Stock in lieu of shares of Bank
Common Stock on the same terms and conditions under the Plans
(including but not limited to the same option exercise price),
and the Holding Company shall assume all of the Bank's
obligations with respect to the Plans.
4.5 Shareholder Rights Plan. At the Effective Date,
all rights to purchase, sell or receive the Bank's Series A
Junior Participating Preferred Stock or the Bank Common Stock
under the Rights Agreement between the Bank and ChaseMellon
Shareholder Services, L.L.C. dated June 16, 1998, shall
automatically, by operation of law, be converted into and shall
<PAGE A4> become an identical right to purchase, sell or receive
the Holding Company's Series A Junior Participating Preferred
Stock or the Holding Company Stock, respectively.
4.6 Other Benefit Plans. At the Effective Date and
except as otherwise provided in Section 4.4 hereof, all employee
benefit plans of the Bank shall be and will remain employee
benefit plans of the Bank as the Surviving Bank.
4.7 Reservation or Issuance of Stock. At the
Effective Date, the Board of Directors of the Holding Company
shall be deemed to have reserved, or authorized the issuance of,
as the case may be, an amount of shares of Holding Company Stock,
and such shares shall automatically be so reserved or so
authorized, as the case may be, in respect of the agreements,
plans and programs within the foregoing Sections 4.4, 4.5 and 4.6
equal to the amount of shares of Bank Common Stock that the Bank
had reserved or had authorized the issuance of, as the case may
be, in respect of such agreements, plans and programs immediately
prior to the Effective Date.
ARTICLE V
EFFECTIVE DATE OF THE MERGER
The Merger shall be effective on the date on which
articles of combination executed by the Bank and Interim Bank are
filed with and endorsed by the Office of Thrift Supervision
("OTS") pursuant to 12 C.F.R. Section 552.13(k), unless a later
date as specified in such articles of combination (the "Effective
Date"). The Merger shall not be effective unless and until
(i) the Merger receives any necessary approval from the OTS
pursuant to 12 CFR Section 563.22(a) or (c), (ii) in the case the
Merger requires a notification pursuant to 12 CFR Section
563.22(b), notification has been provided to the OTS, or (iii) in
the case of Merger requires notice pursuant to 12 CFR Section
563.22(c), the notice has been filed, and the appropriate period
of time has passed or the OTS has advised the parties that it
will not disapprove the Merger.
ARTICLE VI
EFFECT OF THE MERGER
6.1 Separate Existence. On the Effective Date, the
separate existence of Interim Bank shall cease. As provided in
12 CFR Section 552.13(l), as of the Effective Date, all of the
assets, properties, obligations and liabilities of every kind and
character, real, personal and mixed, tangible and intangible,
chosen in action, rights, and credits then owned by either the
Bank or Interim Bank, or which would inure or be subject to
either of them, shall immediately by operation of law and without
any conveyance or transfer and without any further act or deed,
be vested in and become the assets, property, obligations and
liabilities of the Surviving Bank which shall have, hold and
enjoy the same in its own right as fully and to the same extent
as the same were possessed, held and enjoyed by the Bank and
<PAGE A5> Interim Bank immediately prior to the Effective Date.
The Surviving Bank shall be deemed to be and shall be a
continuation of the entity and identity both of the Bank and
Interim Bank and the rights and obligations of the Bank and of
Interim Bank shall remain unimpaired; and the Surviving Bank,
upon the consummation of the Merger, shall succeed to all of such
rights and obligations and the duties and liabilities connected
therewith.
6.2 Savings Accounts. All savings accounts of the
Bank prior to consummation of the Merger shall, as of the
Effective Date, continue to be savings accounts in the Surviving
Bank without any change whatsoever in any of the provisions of
such savings accounts, including, without limitation, their
respective terms maturity, minimum required balances or
withdrawal value.
6.3 Liquidation Account. After the Effective Date,
the Bank will continue to maintain the Bank's liquidation account
for the benefit of eligible account holders on the same basis as
immediately prior to the Effective Date.
ARTICLE VII
TRANSACTIONS PRIOR TO EFFECTIVE DATE
7.1 Stockholder Approvals. The execution and delivery
of this Plan has been duly authorized and approved by the Board
of Directors of the Bank, by the Board of Directors of the
Holding Company and by the incorporators of Interim Bank. A
certified copy of the resolutions giving such authorization and
approval has been given by each party hereto to the others and
said authorizations and approvals have not been altered, amended
or revoked. To the extent required by applicable laws or
regulations, an annual or special meeting of the stockholders of
the Bank will be held for, inter alia, the purpose of adopting
and approving this Plan. In addition, the Bank, as the sole
stockholder of the Holding Company, will execute a written
consent adopting and approving this Plan, if required by the laws
of the Commonwealth of Pennsylvania. The Holding Company, as the
sole stockholder of Interim Bank, will execute such written
consents or take such other actions on behalf of Interim Bank as
may be required for the adoption and approval of this Plan.
ARTICLE VIII
CONDITIONS PRECEDENT
8.1 Conditions to Performance by the Holding Company
and Interim Bank. The obligations of the Holding Company and
Interim Bank to effect the Merger hereunder shall be subject to
the following conditions:
(a) Stockholder Approval. To the extent required
by applicable law, rules or regulations, the holders of a
majority of the outstanding shares of Bank Common Stock shall, at
a meeting of the stockholders of the Bank duly called for the
<PAGE A6> purpose of considering and acting upon this Plan, have
voted in favor of the adoption and approval of this Plan;
(b) Registration of Shares of Holding Company
Stock. The shares of the Holding Company Stock to be issued to
Bank stockholders in connection with the Merger shall have been
duly registered for issuance with the Securities and Exchange
Commission ("SEC") in accordance with the provisions of the
Securities Act of 1933, as amended. Further, to the extent
required, the Holding Company shall have complied with all
applicable state securities or "Blue Sky" laws relating to the
issuance of Holding Company Stock;
(c) Government Approval. Any and all approvals
from the OTS, the SEC and any other necessary or appropriate
governmental agency required for the lawful consummation of the
Merger and the issuance and delivery of the Holding Company Stock
as contemplated by this Plan shall have been obtained;
(d) Tax Matters. The tax opinion specified in
paragraph (c) of Section 8.2, in form and substance satisfactory
to the Holding Company, shall have been received; and
(e) Consents of Third Parties. The Bank shall
have obtained all such written consents from third parties as may
be required to permit it to perform this Plan in accordance with
its terms, except for such consents with regard to agreements and
arrangements which are not in the aggregate material to the Bank.
8.2 Conditions to Performance by the Bank. The
obligations of the Bank to effect the Merger hereunder shall be
subject to the following conditions:
(a) Other Conditions. The conditions specified
in paragraphs (a), (b) and (c) of Section 8.1 shall have been
fulfilled;
(b) Approval of the Holding Company. The Holding
Company, as the sole stockholder of Interim Bank, shall have duly
approved of the adoption of this Plan;
(c) Federal Tax Ruling or Opinion. The Bank
shall have received an opinion from its counsel or tax advisors,
in form and substance satisfactory to the Bank, that for federal
income tax purposes:
(1) The Merger will be treated for federal
income tax purposes as a reorganization qualifying under the
provisions of Section 368 of the Internal Revenue Code of 1986
("Code"), and no gain or loss will be recognized by the Bank's
stockholders on the constructive receipt of Holding Company Stock
in exchange for their Bank Common Stock surrendered in the
Merger;
<PAGE A7>
(2) No gain or loss will be recognized by
the Holding Company on the constructive receipt of Bank Common
Stock in exchange for Interim Bank Common Stock surrendered in
the Merger;
(3) The tax basis of Holding Company Stock
constructively received by Bank stockholders in the transaction
will be the same as the basis of the Bank Common Stock
surrendered in exchange therefor;
(4) The holding period of the Holding
Company Stock received by Bank stockholders in the Merger will
include the period during which they held their Bank Common Stock
exchanged therefor, provided that the shares of Bank Common Stock
are held as a capital asset on the Effective Date; and
(5) The basis of the Bank Common Stock to be
received by the Holding Company will be determined pursuant to
Treasury Regulation 1.358-6(c)(2).
(d) Consents of Third Parties. The Holding
Company and Interim Bank shall have obtained all such written
approvals, permits or consents from third parties as may be
required to permit them to perform this Plan in accordance with
its terms, except for such consents with regard to agreements and
arrangements which are not in the aggregate material to the
Holding Company or Interim Bank.
ARTICLE IX
TERMINATION
9.1 Termination. This Plan may be terminated (i) at
the election of the Holding Company and Interim Bank, if any one
or more of the conditions to the obligations of either herein
shall not have been fulfilled and shall have become incapable of
fulfillment, or (ii) at the election of the Bank, if any one or
more of the conditions to its obligations herein shall not have
been fulfilled and shall have become incapable of fulfillment.
This Plan may also be terminated at any time prior to the
Effective Date by mutual consent of the respective parties
hereto.
9.2 No Further Liability. In the event of the
termination of this Plan pursuant to any of the provisions
contained in Section 9.1, each party shall pay all costs and
expenses incurred by it in connection with this Plan and the
transactions contemplated hereby, and no party shall have any
further liability or obligation of any nature to any other party.
<PAGE A8>
ARTICLE X
AMENDMENT
Subject to applicable law, this Plan may be amended, by
action of the respective Boards of Directors of the parties
hereto, at any time prior to consummation of the Merger, but only
by an instrument in writing signed by duly authorized officers on
behalf of the parties hereto.
ARTICLE XI
MISCELLANEOUS
11.1 Extensions; Waivers. Each party, by a written
instrument signed by a duly authorized officer, may extend the
time for the performance of any of the obligations or other acts
of the other party hereto and may waive compliance with any of
the covenants, or performance of any of the obligations, of the
other party contained in this Plan.
11.2 Notices. Any notice or other communication
required or permitted under this Plan shall be given, and shall
be effective, if and when delivered personally or mailed by
certified or registered mail, postage prepaid, addressed as
follows:
If to the Bank:
Chief Executive Officer
Liberty Savings Bank, F.S.B.
21 South Centre Street
Pottsville, PA 17901
If to the Holding Company:
Secretary
Liberty Centre Bancorp, Inc.
21 South Centre Street
Pottsville, PA 17901
If to Interim Bank:
Secretary
Liberty Savings Interim Federal Savings Bank
21 South Centre Street
Pottsville, PA 17901
11.3 Execution by Interim Bank. The Bank and the
Holding Company acknowledge that as of the date hereof, Interim
Bank is in organization and has not received its charter from the
OTS and therefore does not have the legal capacity to execute
this Plan. The Holding Company agrees to cause Interim Bank to
execute this Plan promptly following the issuance of Interim's
charter by the OTS. The Bank and the Holding Company agree to be
bound by this Plan prior to and following such execution by
Interim Bank. <PAGE A9>
11.4 Captions. The headings of the several Articles
and Sections herein are inserted for convenience of reference
only and are not intended to be part of, or to affect the meaning
or interpretation of, this Plan.
11.5 Counterparts. For the convenience of the parties
hereto, this Plan may be executed in several counterparts, each
of which shall be deemed the original, but all of which together
shall constitute one and the same instrument.
11.6 Governing Law. This Plan shall be governed by and
construed in accordance with the laws of the United States of
America and, in the absence of controlling Federal law, in
accordance with the laws of the Commonwealth of Pennsylvania.
IN WITNESS WHEREOF, the Bank, Holding Company and
Interim Bank have caused this Agreement and Plan of
Reorganization to be executed by their duly authorized officers
on the date first written above.
LIBERTY SAVINGS BANK, F.S.B.
By/s/ Robert W. Pugh, Jr.
Robert W. Pugh, Jr.
President
LIBERTY SAVINGS INTERIM FEDERAL
SAVINGS BANK (In Formation)
By/s/ Robert W. Pugh, Jr.
Robert W. Pugh, Jr.
President
LIBERTY CENTRE BANCORP, INC., a
Pennsylvania corporation
By/s/ Robert W. Pugh, Jr.
Robert W. Pugh, Jr.
President
PAGE A10
<PAGE>
Exhibit B
ARTICLES OF INCORPORATION
OF
LIBERTY CENTRE BANCORP, INC.
FIRST. The name of the Corporation is Liberty Centre
Bancorp, Inc.
SECOND. The location and post office address of the
Corporation's registered office in this Commonwealth is 21 South
Centre Street, Pottsville, Pennsylvania 17901.
THIRD. The purpose of the Corporation is and it shall have
unlimited power to engage in and to do any lawful act concerning
any or all lawful business for which corporations may be
incorporated under provisions of the Business Corporation Law of
1988, the Act approved December, 1988, P.L. 1444, as amended (the
"Pennsylvania Business Corporation Law").
FOURTH. The term of the Corporation's existence is
perpetual.
FIFTH. The aggregate number of shares of capital stock
which the Corporation shall have authority to issue is 3,500,000
shares, divided into two classes consisting of 3,000,000 shares
of common stock without par value ("Common Stock") and 500,000
shares of preferred stock, having such par value as the board of
directors shall fix and determine, as provided in Article SIXTH
below ("Preferred Stock").
SIXTH. The Preferred Stock may be issued from time to time
as a class without series or, if so determined by the board of
directors of the Corporation, either in whole or in part, in one
or more series. There is hereby expressly granted to and vested
in the board of directors of the Corporation authority to fix and
determine (except as fixed and determined herein), by resolution,
the par value, voting powers, full or limited, or no voting
powers, and such designations, preferences and relative,
participating, optional or other special rights, if any, and the
qualifications, limitations or restrictions thereof, if any,
including specifically, but not limited to, the dividend rights,
conversion rights, redemption rights and liquidation preferences,
if any, of any wholly unissued series of Preferred Stock (or the
entire class of Preferred Stock if none of such shares have been
issued), the number of shares constituting any such series and
the terms and conditions of the issue thereof. Prior to the
issuance of any shares of Preferred Stock, a statement setting
forth a copy of each such resolution or resolutions and the
number of shares of Preferred Stock of each such class or series
shall be executed and filed in accordance with the Pennsylvania
Business Corporation Law. Unless otherwise provided in any such
resolution or resolutions, the number of shares of capital stock
<PAGE B1> of any such class or series so set forth in such
resolution or resolutions may thereafter be increased or
decreased (but not below the number of shares then outstanding),
by a statement likewise executed and filed setting forth a
statement that a specified increase or decrease therein had been
authorized and directed by a resolution or resolutions likewise
adopted by the board of directors of the Corporation. In case
the number of such shares shall be decreased, the number of
shares so specified in the statement shall resume the status they
had prior to the adoption of the first resolution or resolutions.
SEVENTH. Each holder of record of Common Stock shall have
the right to one vote for each share of Common Stock standing in
such holder's name on the books of the Corporation. No
shareholder shall be entitled to cumulate any votes for the
election of directors.
EIGHTH. The management, control and government of the
Corporation shall be vested in a board of directors consisting of
not less than seven (7) nor more than twenty-five (25) members in
number, as fixed by the board of directors of the Corporation
from time to time. The directors of the Corporation shall be
divided into three classes: Class I, Class II and Class III.
Each Class shall be as nearly equal in number as possible. If
the number of Class I, Class II or Class III directors is fixed
for any term of office, it shall not be increased during that
term, except by a majority vote of the board of directors. The
term of office of the initial Class I directors shall expire at
the annual election of directors by the shareholders of the
Corporation in 1998; the term of office of the initial Class II
directors shall expire at the annual election of directors by the
shareholders of the Corporation in 1999; and the term of office
of the initial Class III directors shall expire at the annual
election of directors by the shareholders of the Corporation in
2000. After the initial term of each Class, the term of office
of each Class shall be three (3) years, so that the term of
office of one class of directors shall expire each year when
their respective successors have been duly elected by the
shareholders and qualified. At each annual election by the
shareholders of the Corporation, the directors chosen to succeed
those whose terms then expire shall be identified as being of the
same class as the directors they succeed. Unless waived by the
board of directors of the Corporation, in order to qualify for
election as a director of the Corporation, a person must have
been a shareholder of record of the Corporation or Liberty
Savings Bank, F.S.B., Pottsville, Pennsylvania, for at least
three (3) years. Shareholders of another corporation that merges
with the Corporation, is acquired by, or acquires the
Corporation, or enters into any similar transaction with the
Corporation shall qualify for election as a director of the
Corporation if such shareholder was a shareholder of record of
the other corporation for at least three (3) years. If, for any
reason, a vacancy occurs on the board of directors of the
Corporation, a majority of the remaining directors shall have the
exclusive power to fill the vacancy by electing a director to
<PAGE B2> hold office for the unexpired term in respect of which
the vacancy occurred. No director of the Corporation shall be
removed from office, as a director, by the vote of shareholders,
unless the votes of shareholders cast in favor of the resolution
for the removal of such director constitute at least a majority
of the votes which all shareholders would be entitled to cast at
an annual election of directors.
NINTH. No holder of any class of capital stock of the
Corporation shall have preemptive rights, and the Corporation
shall have the right to issue and to sell to any person or
persons any shares of its capital stock or any option, warrant or
right to acquire capital stock, or any securities having
conversion or option rights without first offering such shares,
rights or securities to any holder of any class of capital stock
of the Corporation.
TENTH. Except as set forth below, the affirmative vote of
shareholders entitled to cast at least 80 percent (80%) of the
votes which all shareholders of the Corporation are entitled to
cast, and if any class of shares is entitled to vote as a
separate class, the affirmative vote of shareholders entitled to
cast at least a majority of the votes entitled to be cast by the
outstanding shares of such class (or such greater amount as
required by the provisions of these Articles of Incorporation
establishing such class) shall be required to approve any of the
following:
(a) any merger or consolidation of the Corporation
with or into any other corporation;
(b) any share exchange in which a corporation, person
or entity acquires the issued or outstanding shares of
capital stock of the Corporation pursuant to a vote of
shareholders;
(c) any sale, lease, exchange or other transfer of
all, or substantially all, of the assets of the Corporation
to any other corporation, person or entity; or
(d) any transaction similar to, or having similar
effect as, any of the foregoing transactions,
if, in any case, as of the record date for the determination of
shareholders entitled to notice thereof and to vote thereon, such
other corporation, institution, person or entity is the
beneficial owner (within the meaning of the Securities Exchange
Act of 1934, as amended, and the regulations thereunder),
directly or indirectly, of shares of capital stock of the
Corporation issued, outstanding and entitled to cast five percent
(5%) or more of the votes which all shareholders of the
Corporation are then entitled to cast.
<PAGE B3>
If any of the transactions identified above in this section
is with a corporation, institution, person or entity that is not
the beneficial owner, directly or indirectly, of shares of
capital stock of the Corporation, issued, outstanding and
entitled to cast five percent (5%) or more of the votes which all
shareholders of the Corporation are then entitled to cast, a
majority of the votes which all shareholders are entitled to cast
shall be required to approve any such transaction. An
affirmative vote as provided in the foregoing provisions shall
be, to the extent permitted by law, in lieu of the vote of the
shareholders otherwise required by law.
The board of directors of the Corporation shall have the
power and duty to determine, for purposes of this Article TENTH,
on the basis of information known to the board, if such other
corporation, institution, person or entity is the beneficial
owner, directly or indirectly, of shares of capital stock of the
Corporation issued, outstanding and entitled to cast five percent
(5%) or more of the votes which all shareholders of the
Corporation are then entitled to cast, and/or if any transaction
is similar to, or has an effect similar to, any of the
transactions identified above in this Article TENTH. Any such
determination shall be conclusive and binding for all purposes of
this Article TENTH.
The Corporation may voluntarily completely liquidate and/or
dissolve only in accordance with all applicable laws and only if
the proposed liquidation and/or dissolution is approved by the
affirmative vote of shareholders entitled to cast at least 80
percent (80%) of the votes which all shareholders are entitled to
cast.
The provisions of this Article TENTH shall not apply to any
transaction which is approved in advance by 66-2/3 percent
(66-2/3%) or more of the members of the board of directors of the
Corporation, at a meeting duly called and held.
ELEVENTH. Subsection 1. No Person or Group Acting in
Concert shall Acquire Voting Control of the Corporation, at any
time, except in accordance with the provisions of Article TENTH.
The terms "Acquire," "Voting Control," "Group Acting in Concert,"
and "Person" as used in this Article ELEVENTH are defined in
subsection 4 hereof.
Subsection 2. If Voting Control of the Corporation is
acquired, in violation of this Article ELEVENTH, all shares with
respect to which any Person or Group Acting in Concert has
acquired Voting Control in excess of the number of shares the
beneficial ownership of which is deemed under Subsection 4 hereof
to confer Voting Control of the Corporation (as determined
without regard to this Subsection 2) shall be considered from and
after the date of acquisition by such Person or Group Acting in
Concert to be "excess shares" for purposes of this Article
ELEVENTH. All shares deemed to be excess shares shall thereafter
no longer be entitled to vote on any matter or to take other
<PAGE B4> shareholder action. If, after giving effect to the
first two sentences of this Subsection 2, any Person or Group
Acting in Concert still shall be deemed to be in Voting Control
of the Corporation based on the number of votes then entitled to
be cast (rather than the number of issued and outstanding shares
of common stock of the Corporation), then shares held in excess
of the number of shares deemed to confer Voting Control upon such
Person or Group Acting in Concert also shall not be entitled to
vote on any matter or take any other shareholder action.
Subsequent reductions in voting rights in accordance with the
foregoing shall be effected as many times as necessary to carry
out the purposes of this Article. The provisions of this
Subsection 2 deeming shares to be excess shares shall only apply
for so long as such shares shall be beneficially owned by such
Person or Group Acting in Concert who has acquired Voting
Control. Notwithstanding the foregoing, shares held in excess of
the number of shares the beneficial ownership of which would
otherwise be deemed under Subsection 4 to confer Voting Control
of the Corporation shall not be deemed to be excess shares if
such shares are held by a Tax-Qualified Employee Stock Benefit
Plan.
Subsection 3. The provisions of this Article ELEVENTH
shall be of no further force and effect after the consummation of
a transaction in which another Person Acquires shares of capital
stock of the Corporation entitled to cast 80% or more of the
votes which all shareholders are entitled to cast (as determined
without regard to the application of this Article ELEVENTH) and
such transaction was approved in advance by the board of
directors of the Corporation.
Subsection 4. For purposes of this Article ELEVENTH:
A. The term "Acquire" includes every type of
acquisition, whether effected by purchase, exchange,
operation of law or otherwise.
B. "Voting Control" means the sole or shared
power to vote or to direct the voting of, or to dispose or
to direct the disposition of, more than ten percent (10%) of
the issued and outstanding common stock of the Corporation;
provided that (i) the solicitation, holding and voting of
proxies obtained by the board of directors of the
Corporation shall not constitute Voting Control, (ii) a Tax-
Qualified Employee Stock Benefit Plan which holds more than
10 percent of the voting shares of the Corporation shall not
be deemed to have Voting Control of the Corporation, and
(iii) any trustee, member of any administrative committee or
employee beneficiary of a Tax-Qualified Employee Stock
Benefit Plan shall not be deemed to have Voting Control of
the Corporation either (A) as a result of their control of a
Tax-Qualified Employee Stock Benefit Plan, and/or their
beneficial interest in voting shares held by a Tax-Qualified
Employee Stock Benefit Plan, or (B) as a result of the
aggregation of both their beneficial interest in voting
<PAGE B5> shares held by a Tax-Qualified Employee Stock
Benefit Plan and voting shares held by such trustee,
administrative committee member or employee beneficiary
independent of a Tax-Qualified Employee Stock Benefit Plan.
C. "Group Acting in Concert" includes Persons
seeking to combine or pool their voting or other interests
in the voting shares for a common purpose, pursuant to any
contract, understanding, relationship, agreement or other
arrangement, whether written or otherwise, provided, that a
"Group Acting in Concert" shall not include (i) the members
of the board of directors of the Corporation solely as a
result of their board membership, (ii) the members of the
board of directors of the Corporation as a result of their
solicitation, holding and voting of proxies obtained by them
pursuant to a proxy solicitation or (iii) any member or all
the members of the board of directors of the Corporation,
and (iv) any Tax-Qualified Employee Stock Benefit Plan and
the trustees, administrative committee members and employee
beneficiaries thereof.
C. The term "Person" includes an individual, a
Group Acting in Concert, a corporation, a partnership, an
association, a joint stock company, a trust, an
unincorporated organization or similar company, a syndicate
or any other group formed for the purpose of acquiring,
holding or disposing of the equity securities of the
Corporation.
D. The term "Tax-Qualified Employee Stock
Benefit Plan" means any defined benefit plan or defined
contribution plan of the Corporation or any subsidiary, such
as an employee stock ownership plan, stock bonus plan,
profit sharing plan or other plan, that, with its related
trust, meets the requirements to be "qualified" under
Section 401 of the Internal Revenue Code of 1986, as
amended.
Subsection 5. This Article ELEVENTH shall not apply to
the purchase of securities of the Corporation by underwriters in
connection with a public offering of such securities by the
Corporation or by a holder of shares of capital stock of the
Corporation with written consent of the board of directors of the
Corporation; provided, however, that purchasers of securities of
the Corporation from any underwriter shall be subject to the
provisions of this Article ELEVENTH.
The board of directors of the Corporation shall have the
power and duty to determine, for purposes of this Article
ELEVENTH, on the basis of information known to the Board, if and
when such other Person has acquired Voting Control of the
Corporation, and/or if any transaction is similar to, or has a
similar effect as, any of the transactions identified in this
Article ELEVENTH. Any such determination shall be conclusive and
binding for all purposes of this Article ELEVENTH. <PAGE B6>
TWELFTH. No action required to be taken or which may be
taken at any annual or special meeting of shareholders of the
Corporation may be taken without a meeting, and the power of the
shareholders of the Corporation to consent in writing to action
without a meeting is specifically denied. The presence, in
person or by proxy, of shareholders entitled to cast at least a
majority of the votes which all shareholders are entitled to cast
shall constitute a quorum of shareholders at any annual or
special meeting of shareholders of the Corporation.
THIRTEENTH. A special meeting of the shareholders of the
Corporation may be called only by the Board of Directors pursuant
to a resolution adopted by a majority of the total number of
directors which the Corporation would have if there were no
vacancies on the Board of Directors.
FOURTEENTH. The authority to make, amend, alter, change or
repeal the By-Laws of the Corporation is hereby expressly and
solely granted to and vested in the board of directors of the
Corporation, subject always to the power of the shareholders to
change such action by the affirmative vote of shareholders of the
Corporation entitled to cast at least 66-2/3 percent (66-2/3%) of
the votes which all shareholders are entitled to cast, except
that provisions of the By-Laws of the Corporation relating to
limitations on directors' liabilities and indemnification of
directors, officers and others may not be amended to increase the
exposure to liability for directors or to decrease the
indemnification of directors, officers and others except by the
affirmative vote of 66-2/3 percent (66-2/3%) of the entire board
of directors or by the affirmative vote of shareholders of the
Corporation entitled to cast at least 80 percent (80%) of the
votes which all shareholders are entitled to cast.
FIFTEENTH. If any corporation, person, entity, or group
becomes the beneficial owner, directly or indirectly, of shares
of capital stock of the Corporation having the right to cast in
the aggregate 25 percent (25%) or more of all votes entitled to
be cast by all issued and outstanding shares of capital stock of
the Corporation entitled to vote, such corporation, person,
entity or group shall within thirty (30) days thereafter offer to
purchase all shares of capital stock of the Corporation issued,
outstanding and entitled to vote. Such offer to purchase shall
be at a price per share equal to the highest price paid for
shares of the respective class or series of capital stock of the
Corporation purchased by such corporation, person, entity or
group within the preceding twelve months. If such corporation,
person, entity or group did not purchase any shares of a
particular class or series of capital stock of the Corporation
within the preceding twelve months, such offer to purchase shall
be at a price per share equal to the fair market value of such
class or series of capital stock on the date on which such
corporation, person, entity or group becomes the beneficial
owner, directly or indirectly, of shares of capital stock of the
Corporation having the right to cast in the aggregate 25 percent
(25%) or more of all votes entitled to be cast by all issued and
<PAGE B7> outstanding capital stock of the Corporation. Such
offer shall provide that the purchase price for such shares shall
be payable in cash. The provisions of this Article FIFTEENTH
shall not apply if 80 percent (80%) or more of the members of the
board of directors of the Corporation approve in advance the
acquisition of beneficial ownership by such corporation, person,
entity or group, of shares of capital stock of the Corporation
having the right to cast in the aggregate 25 percent (25%) or
more of all votes entitled to be cast by all issued and
outstanding shares of capital stock of the Corporation. The
provisions of this Article FIFTEENTH shall be in addition to and
not in lieu of any rights granted under Subchapter E of
Chapter 25 of the Pennsylvania Business Corporation Law and any
amendment or restatement of such section ("Subchapter E");
provided, however, that if the provisions of this Article
FIFTEENTH and Subchapter E are both applicable in any given
instance, the price per share to be paid for shares of capital
stock of the Corporation issued, outstanding and entitled to vote
shall be the higher of the price per share determined in
accordance with this Article FIFTEENTH or the price per share
determined in accordance with the provisions of Subchapter E.
SIXTEENTH: The Corporation reserves the right to amend,
alter, change or repeal any provision contained in its Articles
of Incorporation in the manner now or hereafter prescribed by
statute and all rights conferred upon shareholders and directors
herein are hereby granted subject to this reservation; provided,
however, that the provisions set forth in Articles SEVENTH,
EIGHTH and NINTH through SIXTEENTH, inclusive, of these Articles
of Incorporation may not be repealed, altered or amended, in any
respect whatsoever, unless such repeal, alteration or amendment
is approved by either (a) the affirmative vote of shareholders of
the Corporation entitled to cast at least 80 percent (80%) of the
votes which all shareholders of the Corporation are then entitled
to cast or (b) the affirmative vote of 80 percent (80%) of the
members of the board of directors of the Corporation and the
affirmative vote of shareholders of the Corporation entitled to
cast at least a majority of the votes which all shareholders of
the Corporation are then entitled to cast.
SEVENTEENTH: The name and post office address of the
incorporator is:
<PAGE B8>
Name Address
Amy B. Andrzjewski STEVENS & LEE
111 North Sixth Street
P.O. Box 679
Reading, PA 19603-0679
IN TESTIMONY WHEREOF, the Incorporator has signed these
Articles of Incorporation this 1st day of September, 1998.
/s/ Amy B. Andrzjewski
Amy B. Andrzjewski,
Incorporator
PAGE B9
<PAGE>
Exhibit C
BYLAWS
OF
LIBERTY CENTRE BANCORP, INC.
ARTICLE I
SHAREHOLDERS
Section 1.01 - Annual Meeting -
(a) General. The annual meeting of shareholders shall be
held on such day each year as may be fixed from time to
time by the board of directors, or, if no day be so
fixed, on the fourth Thursday of October of each year;
provided, however, that if such day falls upon a legal
holiday, then on the next business day thereafter. If
the annual meeting shall not have been called and held
within six (6) months after the designated time, any
shareholder may call the meeting at any time
thereafter. At each annual meeting of shareholders,
directors shall be elected, reports of the affairs of
the corporation shall be considered, and such other
business as may properly come before the meeting may be
transacted.
(b) Conduct of Meetings. At every meeting of the
shareholders, the Chairman of the Board or, in his
absence, the officer designated by the Chairman of the
Board, or, in the absence of such designation, a
chairman (who shall be one of the officers, if any is
present) chosen by a majority of the members of the
board of directors shall act as chairman of the
meeting. The chairman of the meeting shall have any
and all powers and authority necessary in the
chairman's sole discretion to conduct an orderly
meeting and preserve order and to determine any and all
procedural matters, including imposing reasonable
limits on the amount of time at the meeting taken up in
remarks by any one shareholder or group of
shareholders. In addition, until the business to be
completed at a meeting of the shareholders is
completed, the chairman of a meeting of the
shareholders is expressly authorized to temporarily
adjourn and postpone the meeting from time to time.
The Secretary of the corporation or in his or her
absence, an assistant secretary, shall act as Secretary
of all meetings of the shareholders. In the absence at
such meeting of the Secretary or assistant secretary,
<PAGE C1> the chairman of the meeting may appoint
another person to act as Secretary of the meeting.
Section 1.02 - Special Meetings - Special meetings of the
shareholders may be called only in accordance with the articles
of incorporation of the corporation. Upon written request to the
Chief Executive Officer or the Secretary, sent by registered mail
or delivered to such officer in person, of any person or persons
entitled to call a special meeting of the shareholders, it shall
be the duty of the Secretary to fix the time of the meeting,
which shall be held not more than sixty (60) days after the
receipt of the request. If the Secretary neglects or refuses to
fix the time of the meeting, the person or persons duly calling
the meeting may do so.
Section 1.03 - Place of Meeting - All meetings of the
shareholders shall be held at such place, within or outside the
Commonwealth of Pennsylvania, as may be designated by the board
of directors in the notice of meeting. In the absence of such
designation, shareholders' meetings shall be held at the
registered office of the corporation.
Section 1.04 - Notice of Meetings of Shareholders - Except as
provided otherwise in these bylaws or required by law, written
notice of every meeting of the shareholders shall be given by, or
at the direction of, the Secretary or other authorized person, to
each shareholder of record entitled to vote at the meeting at
least ten (10) days prior to the day named for the meeting.
Section 1.05 - Contents - The notice of the meeting shall specify
the place, day and hour of the meeting and, in the case of a
special meeting, the general nature of the business to be
transacted. If the purpose, or one of the purposes, of the
meeting is to consider the adoption, amendment or repeal of the
bylaws, there shall be included in, enclosed with, or accompanied
by, the notice a copy of the proposed amendment or a summary of
the changes to be made by the amendment.
Section 1.06 - Quorum -
(a) Annual Meetings. An annual meeting of the shareholders
duly called shall not be organized for the transaction
of business unless a quorum is present. The presence
in person or by proxy of shareholders entitled to cast
at least a majority of the votes that all shareholders
are entitled to cast on a particular matter to be acted
upon at the meeting shall constitute a quorum for the
purposes of consideration and action on such matter.
The shareholders present at a duly organized annual
meeting can continue to do business until adjournment
notwithstanding the withdrawal of enough shareholders
to leave less than a quorum.
(b) Special Meetings. A special meeting of the
shareholders duly called shall not be organized for the
<PAGE C2> transaction of business unless a quorum is
present. The presence in person or by proxy of
shareholders entitled to cast at least a majority of
the votes that all shareholders are entitled to cast on
a particular matter to be acted upon at the meeting
shall constitute a quorum for the purposes of
consideration and action on such matter. The
shareholders present at a duly organized special
meeting can continue to do business until adjournment
notwithstanding the withdrawal of enough shareholders
to leave less than a quorum.
Section 1.07 - Adjournments - If a meeting of the shareholders
duly called cannot be organized because a quorum has not
attended, the chairman of the meeting or a majority of
shareholders present in person or by proxy and entitled to vote
may adjourn the meeting to such time and place as they may
determine.
At any meeting at which directors are to be elected and which has
previously been adjourned for lack of a quorum, the shareholders
present and entitled to vote, although less than a quorum as
fixed herein, shall nevertheless constitute a quorum for the
purpose of electing directors. In other cases, those
shareholders entitled to vote who attend a meeting of the
shareholders that has been previously adjourned for one or more
periods aggregating at least fifteen (15) days because of an
absence of quorum, although less than a quorum as fixed herein,
shall nonetheless constitute a quorum for the purpose of acting
upon any matter stated in the notice of the meeting, provided the
notice of meeting states that shareholders who attend such
adjourned meeting shall nonetheless constitute a quorum for the
purpose of acting upon the matter.
When a meeting of the shareholders is adjourned, it shall not be
necessary to give any notice of the adjourned meeting or of the
business to be transacted at the adjourned meeting other than by
announcement at the meeting at which the adjournment is taken,
unless the board of directors fixes a new record date for the
adjourned meeting or unless notice of the business to be
transacted was required by the Pennsylvania Business Corporation
Law of 1988, as it may be amended, to be stated in the original
notice of the meeting and such notice had not been previously
provided.
Section 1.08 - Action by Shareholders - Whenever any corporate
action is to be taken by vote of the shareholders, it shall be
authorized upon receiving the affirmative vote of a majority of
the votes cast by all shareholders entitled to vote thereon and,
if any shareholders are entitled to vote thereon as a class, upon
receiving the affirmative vote of the majority of the votes cast
by the shareholders entitled to vote as a class on the matter,
except when a different vote is required by law, or the articles
of incorporation, or these bylaws.
<PAGE C3>
Section 1.09 - Voting Rights of Shareholders - Unless otherwise
provided in the articles of incorporation, every shareholder of
the corporation shall be entitled to one vote for every share
outstanding in the name of the shareholder on the books of the
corporation.
Section 1.10 - Voting and Other Action by Proxy -
(a) General. Every shareholder entitled to vote at a
meeting of shareholders or to express consent or
dissent to corporate action in writing without a
meeting may authorize another person or persons to act
for that shareholder by proxy. The presence of, or
vote or other action at a meeting of shareholders, or
the expression of consent or dissent to corporate
action in writing, by a proxy of a shareholder shall
constitute the presence of, or vote or action by, or
written consent or dissent of the shareholder.
Where two or more proxies of a shareholder are present,
the corporation shall, unless otherwise expressly
provided in the proxy, accept as the vote of all shares
represented thereby the vote cast by a majority of them
and, if a majority of the proxies cannot agree whether
the shares represented shall be voted, or upon the
manner of voting the shares, the voting of the shares
shall be divided equally among those persons.
(b) Minimum Requirements. Every proxy shall be executed in
writing by the shareholder or by the duly authorized
attorney-in-fact of the shareholder and filed with the
Secretary of the corporation. A telegram, telex,
cablegram, datagram or similar transmission from a
shareholder or attorney-in-fact, or a photographic,
facsimile or similar reproduction of a writing executed
by a shareholder or attorney-in-fact:
(1) may be treated as properly executed; and
(2) shall be so treated if it sets forth a
confidential and unique identification number or
other mark furnished by the corporation to the
shareholder for the purposes of a particular
meeting or transaction.
(c) Revocation. A proxy, unless coupled with an interest,
shall be revocable at will, notwithstanding any other
agreement or any provision in the proxy to the
contrary, but the revocation of a proxy shall not be
effective until written notice thereof has been given
to the Secretary of the corporation. An unrevoked
proxy shall not be valid after three years from the
date of its execution unless a longer time is expressly
provided therein. A proxy shall not be revoked by the
death or incapacity of the maker unless, before the
<PAGE C4> vote is counted or the authority is
exercised, written notice of the death or incapacity is
given to the Secretary of the corporation.
Section 1.11 - Voting by Fiduciaries and Pledgees - Shares of the
corporation standing in the name of a trustee or other fiduciary
and shares held by an assignee for the benefit of creditors or by
a receiver may be voted by the trustee, fiduciary, assignee or
receiver. A shareholder whose shares are pledged shall be
entitled to vote the shares until the shares have been
transferred into the name of the pledgee, or a nominee of the
pledgee, but nothing in this section shall affect the validity of
a proxy given to a pledgee or nominee.
Section 1.12 - Voting of Joint Holders of Shares -
(a) General. Where shares of the corporation are held
jointly or as tenants in common by two or more persons,
as fiduciaries or otherwise:
(1) if only one or more of such persons is present in
person or by proxy, all of the shares standing in
the name of such persons shall be deemed to be
represented for the purpose of determining a
quorum and the corporation shall accept as the
vote of all the shares the vote cast by a joint
owner or a majority of them; and
(2) if the persons are equally divided upon whether
the shares held by them shall be voted or upon the
manner of voting the shares, the voting of the
shares shall be divided equally among the persons
without prejudice to the rights of the joint
owners or the beneficial owners thereof among
themselves.
(b) Exception. If there has been filed with the Secretary
of the corporation a copy, certified by an attorney at
law to be correct, of the relevant portions of the
agreement under which the shares are held or the
instrument by which the trust or estate was created or
the order of court appointing them or of an order of
court directing the voting of the shares, the persons
specified as having such voting power in the document
latest in date of operative effect so filed, and only
those persons, shall be entitled to vote the shares but
only in accordance therewith.
Section 1.13 - Voting by Corporations - Any corporation that is a
shareholder of this corporation may vote by any of its officers
or agents, or by proxy appointed by any officer or agent, unless
some other person, by resolution of the board of directors of the
other corporation or a provision of its articles or bylaws, a
copy of which resolution or provision certified to be correct by
one of its officers has been filed with the Secretary of this
<PAGE C5> corporation, is appointed its general or special proxy
in which case that person shall be entitled to vote the shares.
Section 1.14 - Determination of 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 corporation after any record date fixed as
provided in this section. 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.
Section 1.15 - Voting List - The officer or agent having charge
of the transfer books for shares of the corporation 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 the inspection of any shareholder during the
whole time of the meeting for the purposes thereof.
Failure to comply with the requirements of this section shall not
affect the validity of any action taken at a meeting prior to a
demand at the meeting by any shareholder entitled to vote thereat
to examine the list. The original share register or transfer
book, or a duplicate thereof kept in Pennsylvania, shall be prima
facie evidence as to who are the shareholders entitled to examine
the list or share register or transfer book or to vote at any
meeting of shareholders.
Section 1.16 - Judges of Election - In advance of any meeting of
shareholders of the corporation, the board of directors may
appoint judges of election, who need not be shareholders, to act
at the meeting or any adjournment thereof. If judges of election
are not so appointed, the presiding officer of the meeting may,
and on the request of any shareholder shall, appoint judges of
election at the meeting. The number of judges shall be one or
three. No person who is a candidate for office to be filled at
the meeting shall act as a judge of election.
In the event any person appointed as a judge fails to appear or
fails or refuses to act, the vacancy may be filled by appointment
made by the board of directors in advance of the convening of the
meeting or at the meeting by the presiding officer thereof.
The judges of election shall determine the number of shares
outstanding and the voting power of each, the shares represented
<PAGE C6> 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. The judge or judges of election shall perform
their duties impartially, in good faith, to the best of their
ability and as expeditiously as is practical. If there are three
judges of election, the decision, act or certificate of a
majority shall be effective in all respects as the decision, act
or certificate of all.
On request of the presiding officer of the meeting, or of any
shareholder, the judge or judges shall make a report in writing
of any challenge or question or matter determined by them, and
execute a certificate of any fact found by them. Any report or
certificate made by them shall be prima facie evidence of the
facts stated therein.
Section 1.17 - No Consent of Shareholders in Lieu of Meeting - No
action required to be taken or which may be taken at any annual
or special meeting of shareholders of the corporation may be
taken without a meeting, and the power of the shareholders to
consent in writing to action without a meeting is specifically
denied.
Section 1.18 - Agenda for Annual Meeting - Matters to be placed
on the agenda for consideration at annual meetings of
shareholders may be proposed by the board of directors or by any
shareholder entitled to vote for the election of directors.
Matters proposed for the agenda by shareholders entitled to vote
for the election of directors shall be made by notice in writing,
delivered or mailed by first class United States mail, postage
prepaid, to the Secretary of the corporation not less than ninety
(90) days nor more than one hundred and fifty (150) days prior to
any annual meeting of shareholders; provided, however, that if
less than twenty-one (21) days' notice of the meeting is given to
shareholders, such written notice shall be delivered or mailed,
as prescribed, to the secretary of the corporation not later than
the close of the seventh day following the day on which notice of
the meeting was mailed to shareholders. Notice of matters which
are proposed by the board of directors shall be given by the
Chairman of the Board or any other appropriate officer. Each
notice given by a shareholder shall set forth a brief description
of the business desired to be brought before the annual meeting.
The Chairman of the meeting of shareholders may determine and
declare to the meeting that a matter proposed for the agenda was
not made in accordance with the foregoing procedure, and if he
should so determine, he shall so declare to the meeting and the
matter shall be disregarded.
<PAGE C7>
ARTICLE II
BOARD OF DIRECTORS
Section 2.01 - General - Unless otherwise provided by statute,
all powers vested by law in the corporation shall be exercised by
or under the authority of, and the business and affairs of the
corporation shall be managed under the direction of, the board of
directors of the corporation.
Section 2.02 - Number, Qualifications, Selection and Term of
Office - The board of directors of the corporation shall consist
of at least seven (7) and not more than twenty-five (25)
directors, the exact number to be set from time to time by
resolution of the board of directors. Each director shall be a
natural person of full age. Unless waived by a majority of the
directors, each director shall at all times be the beneficial
owner of not less than 1,500 shares of capital stock of the
corporation. No director assuming office for the first time
after September 1, 1998 shall be related by blood or marriage to
any other director without the consent of two-thirds of the
entire board of directors. For the purposes of this section,
"related by blood or marriage" shall be defined to include all
members of the immediate family, all in-laws, all nieces,
nephews, and first or second cousins of a director and or his or
her spouse. Unless waived by a majority of the directors, a
majority of the directors shall be persons who are not directors,
officers, employees, agents or holders of record or beneficially
of more than 5% of the voting securities, of any corporation or
any other entity which holds of record or beneficially 66-2/3% or
more of the issued and outstanding shares of any class of capital
stock of the corporation. Each director shall hold office until
the expiration of the term for which he or she was selected and
until a successor has been selected and qualified or until his or
her earlier death, resignation or removal. A decrease in the
number of directors shall not have the effect of shortening the
term of any incumbent director.
Section 2.03 - Nominations for Directors - Nominations for the
election of directors may be made by the board of directors or by
any shareholder entitled to vote for the election of directors.
Nominations made by a shareholder entitled to vote for the
election of directors shall be made by notice in writing,
delivered or mailed by first class United States mail, postage
prepaid, to the Secretary of the corporation not less than ninety
(90) days prior to any meeting of the shareholders called for the
election of directors; provided, however, that if less than
twenty-one (21) days' notice of the meeting is given to
shareholders, such written notice shall be delivered or mailed,
as prescribed, to the Secretary of the corporation not later than
the close of the seventh day following the day on which notice of
the meeting was mailed to shareholders. Notice of nominations
which are proposed by the board of directors shall be given by
the Chairman of the Board or any other appropriate officer. Each
notice of nominations made by a shareholder shall set forth
<PAGE C8> (i) the name, age, business address and, if known,
residence address of each nominee proposed in such notice,
(ii) the principal occupation or employment of each such nominee,
and (iii) the number of shares of capital stock of the
corporation which are beneficially owned by each such nominee.
Upon receiving a notice of nomination made by a shareholder, the
board of directors shall be entitled to request any other
information relating to such nominee deemed relevant by the
board. The Chairman of the meeting may, if the facts warrant,
determine and declare to the meeting that a nomination was not
made in accordance with the foregoing procedure, and if he should
so determine, he shall so declare to the meeting and the
defective nomination shall be disregarded.
Section 2.04 - Election - Except as otherwise provided in these
bylaws, directors of the corporation shall be elected by the
shareholders. In elections for directors, voting need not be by
ballot unless required by vote of the shareholders before the
voting for election of directors begins. The candidates
receiving the highest number of votes, up to the number of
directors to be elected, shall be elected.
Section 2.05 - Vacancies -
(a) Vacancies. Vacancies in the board of directors shall
exist in the case of the happening of any of the
following events: (i) the death or resignation of any
director; (ii) if at any annual or special meeting the
shareholders at which directors are to be elected, the
shareholders fail to elect the full authorized number
of directors to be voted for at that meeting; (iii) an
increase in the number of directors by resolution of
the board of directors; (iv) the removal of a director
by the affirmative vote of shareholders of the
corporation in accordance with the articles of
incorporation of the corporation; or (v) the removal of
a director by the board of directors or a court of
competent jurisdiction in accordance with these bylaws
or otherwise in accordance with law.
(b) Filling Vacancies. Vacancies in the board of
directors, including vacancies resulting from an
increase in the number of directors, may be filled by a
majority vote of the remaining members of the board
though less than a quorum, or by a sole remaining
director, and each person so selected shall be a
director to serve for the balance of the unexpired term
and until his or her successor has been selected and
qualified or until his or her earlier death,
resignation or removal.
<PAGE C9>
Section 2.06 - Removal and Resignation -
(a) Removal by Shareholders. A director may be removed by
shareholders only in accordance with the articles of
incorporation of the corporation.
(b) Removal by Action of the Directors. The board of
directors may declare vacant the office of a director
if that director: (i) has been judicially declared of
unsound mind; (ii) has been convicted of an offense
punishable by imprisonment for a term of more than one
year; (iii) if within sixty (60) days after notice of
his or her election, the director does not accept such
office either in writing or by attending a meeting of
the board of directors and fulfilling such other
requirements of qualification as these bylaws or the
articles of incorporation may provide; or (iv) is
ineligible for any reason to serve as a director of the
corporation's principal banking subsidiary.
(c) Resignation. Any director may resign at any time from
his or her position as a director upon written notice
to the corporation. The resignation shall be effective
upon its receipt by the corporation or at such later
time as may be specified in the notice of resignation.
Section 2.07 - Regular Meetings - The board of directors of the
corporation shall hold an annual meeting for the election of
officers and the consideration of other proper business either as
soon as practical after, and at the same place as, the annual
meeting of shareholders of the corporation, or at such other day,
hour and place as may be fixed by the board. The board of
directors may designate by resolution the day, hour and place,
within or outside the Commonwealth of Pennsylvania, of other
regular meetings.
Section 2.08 - Special Meetings - Special meetings of the board
of directors may be called by the Chairman of the Board, the
Chief Executive Officer or the President of the corporation or a
majority of the directors then in office. In calling the special
meeting, such person or persons may fix the day, hour and place,
within or outside the Commonwealth of Pennsylvania, of the
meeting.
Section 2.09 - Notice of Meetings -
(a) General. No notice of any annual or regular meeting of
the board of directors of the corporation need be
given. Written notice of each special meeting of the
board of directors, specifying the place, day and hour
of the meeting, shall be given to each director at
least 24 hours before the time set for the meeting.
Neither the business to be transacted at, nor the
purpose of, any annual, regular or special meeting of
<PAGE C10> the board need be specified in the notice of
the meeting.
(b) Validation of Meeting Defectively Called or Noticed.
The transactions of any meeting of the board of
directors, however called and noticed or wherever held,
are as valid as though taken at a meeting duly held
after regular call and notice, if a quorum is present
and if, either before or after the meeting, each of the
directors not present signs a waiver of notice. All
such waivers shall be filed with the corporate records
or made a part of the minutes of the meeting.
Attendance of a director at any meeting shall
constitute a waiver of notice of such meeting except
where a director attends a meeting for the express
purpose of objecting to the transaction of any business
because the meeting is not lawfully called or convened.
Section 2.10 - Quorum and Action by Directors - A majority of the
directors in office shall be necessary to constitute a quorum for
the transaction of business. The acts of a majority of directors
present and voting at a meeting at which a quorum is present
shall be the acts of the board of directors, except where a
different vote is required by law, the articles of incorporation
or these bylaws. Every director shall be entitled to one vote.
Any action required or permitted to be taken at a meeting of the
board of directors may be taken without a meeting if, prior or
subsequent to the action, a consent or consents thereto by all of
the directors in office is filed with the Secretary of the
corporation.
Section 2.11 - Presumption of Assent - A director of the
corporation who is present at a meeting of the board of
directors, or of a committee of the board, at which action on any
corporate matter is taken on which the director is generally
competent to act, shall be presumed to have assented to the
action taken unless his or her dissent is entered in the minutes
of the meeting or unless that director files his or her written
dissent to the action with the Secretary of the meeting before
its adjournment or submits the dissent in writing to the
Secretary of the corporation immediately after the adjournment of
the meeting. Such right to dissent shall not apply to a director
who voted in favor of the action. Nothing in this section shall
bar a director from asserting that the minutes of a meeting
incorrectly omitted that director's dissent if, promptly upon
receipt of a copy of those minutes, the director notified the
Secretary, in writing, of the asserted omission or inaccuracy.
Section 2.12 - Presiding Officer - All meetings of the board of
directors of the corporation shall be called to order and
presided over by the Chairman of the Board of Directors, or in
the Chairman's absence, by the Chief Executive Officer of the
corporation or, in the absence of the Chairman and the Chief
Executive Officer, by a chairman of the meeting elected at such
<PAGE C11> meeting by the board of directors. The Secretary of
the corporation shall act as Secretary of the board of directors
unless otherwise specified by the board of directors. In case
the Secretary shall be absent from any meeting, the chairman of
the meeting may appoint any person to act as secretary of the
meeting.
Section 2.13 - Committees - The board of directors may, by
resolution adopted by a majority of the directors in office,
establish one or more committees. Each committee is to consist
of at least two (2) directors of the corporation. The board may
designate one or more directors as alternate members of any
committee who may replace any absent or disqualified member at
any meeting of the committee or for purposes of any written
action of the committee.
A committee, to the extent provided in the resolution of the
board of directors creating it, shall have and may exercise all
of the powers and authority of the board of directors except that
a committee shall not have any power or authority regarding:
(i) the submission to shareholders of any action requiring the
approval of shareholders under the Pennsylvania Business
Corporation Law of 1988, as it may be amended, (ii) the creation
or filling of vacancies in the board of directors, (iii) the
adoption, amendment or repeal of these bylaws, (iv) the
amendment, adoption or repeal of any resolution of the board of
directors that by its terms is amendable or repealable only by
the board of directors, or (v) any action on matters committed by
the bylaws or resolution of the board of directors to another
committee of the board. Each committee of the board shall serve
at the pleasure of the board.
Section 2.14 - Audit Committee - There shall be a standing
committee of the board of directors to be known as the Audit
Committee. The members of the Audit Committee shall consist
exclusively of directors who are not officers or employees of the
corporation or of any entity controlling, controlled by or under
common control with the corporation and who are not beneficial
owners of a controlling interest in the voting stock of the
corporation or of any such entity. The Audit Committee shall:
(i) make recommendations to the board of directors as to the
independent accountants to be appointed by the board, (ii) review
with the independent accountants the scope of their examination,
(iii) receive the reports of the independent accountants and meet
with the representatives of such accountants for the purpose of
reviewing and considering questions relating to their examination
and such reports, (iv) review the internal accounting and
auditing procedures of the corporation, and (v) perform such
other duties as may be assigned to it from time to time by the
board of directors.
Section 2.15 - Personal Liability of Directors - To the fullest
extent permitted by Pennsylvania law, a director of the
corporation shall not be personally liable for monetary damages
for any action taken, or any failure to take any action, unless
<PAGE C12> the director has breached or failed to perform the
duties of his or her office under Subchapter B of Chapter 17 of
the Pennsylvania Business Corporation Law of 1988, as it may be
amended, and such breach or failure to perform constitutes self-
dealing, willful misconduct or recklessness; provided, however,
that the foregoing provision shall not eliminate or limit (i) the
responsibility or liability of that director under any criminal
statute, or (ii) the liability of a director for the payment of
taxes according to local, state or federal law. Any repeal,
modification or adoption of any provision inconsistent with this
section shall be prospective only, and neither the repeal or
modification of this bylaw nor the adoption of any provision
inconsistent with this bylaw shall adversely affect any
limitation on the personal liability of a director of the
corporation existing at the time of such repeal or modification
or the adoption of such inconsistent provision.
Section 2.16 - Age Limitations - No person 70 years of age or
older shall be eligible for election, reelection, appointment or
reappointment to the board of directors of this corporation. No
director shall serve as such beyond the annual meeting of the
corporation immediately following the director becoming 70 years
of age. This age limitation does not apply to an advisory
director or director emeritus.
Section 2.17 - Director Emeritus - Any director of the
corporation 70 years of age or older who has served continuously
as a director of the corporation for 15 years or a director who
has become incapacitated prior to attaining the age of 70, may be
elected by the board to serve as a director emeritus if such
director so consents. Any director so elected shall serve as
director emeritus for life unless removed by the board.
Directors emeritus shall not be considered directors or members
of the board and shall have no authority to vote on any matter
placed before the board for a vote. Election as a director
emeritus shall not prevent such person's options, if any, to
acquire the corporation's capital stock from expiring and
terminating in accordance with their terms due to his or her
resignation or retirement from the board of directors.
ARTICLE III
OFFICERS
Section 3.01 - Officers and Qualifications - The corporation
shall have a Chairman of the Board, a Chief Executive Officer, a
President, a Secretary, and a Treasurer, each of whom shall be
elected or appointed by the board of directors. The board may
also elect one or more vice presidents, and such other officers
and assistant officers as the board deems necessary or advisable.
All officers shall be natural persons of full age. Any two or
more offices may be held by the same person. It shall not be
necessary for officers to be directors of the corporation.
Officers of the corporation shall have such authority and perform
such duties in the management of the corporation as is provided
<PAGE C13> by or under these bylaws or in the absence of
controlling provisions in these bylaws as is determined by or
under resolutions or orders of the board of directors.
Section 3.02 - Election- Term and Vacancies - The officers and
assistant officers of the corporation shall be elected by the
board of directors at the annual meeting of the board or from
time to time as the board shall determine, and each officer shall
hold office for one (1) year and until his or her successor has
been duly elected and qualified or until that officer's earlier
death, resignation or removal. A vacancy in any office occurring
in any manner may be filled by the board of directors and, if the
office is one for which these bylaws prescribe a term, shall be
filled for the unexpired portion of the term.
Section 3.03 - Subordinate Officers, Committees and Agents - The
board of directors may from time to time elect such other
officers and appoint such committees, employees or other agents
as the business of the corporation may require, including one or
more assistant secretaries, and one or more assistant treasurers,
each of whom shall hold office for such period, have such
authority, and perform such duties as are provided in these
bylaws or as the board of directors may from time to time
determine. The board of directors may delegate to any officer or
committee the power to elect subordinate officers and to retain
or appoint employees or other agents, or committees thereof and
to prescribe the authority and duties of such subordinate
officers, committees, employees or other agents.
Section 3.04 - Removal; Resignation and Bonding -
(a) Removal. Any officer or agent of the corporation may
be removed by the board of directors with or without
cause, but such removal shall be without prejudice to
the contract rights, if any, of the person so removed.
Election or appointment of an officer or agent shall
not of itself create contract rights.
(b) Resignation. Any officer may resign at any time upon
written notice to the corporation. The resignation
shall be effective upon its receipt by the corporation
or at such later time as may be specified in the notice
of resignation.
(c) Bonding. The corporation may secure the fidelity of
any or all of its officers by bond or otherwise.
Section 3.05 - Chairman of the Board - The Chairman of the Board
of Directors of the corporation, if one is elected, shall preside
at all meetings of the shareholders and of the directors at which
he or she is present, and shall have such authority and perform
such other duties as the board of directors may from time to time
designate.
<PAGE C14>
Section 3.06 - President - The President shall perform the duties
of Chief Executive Officer either when he has been chosen as
Chief Executive Officer or when the Chief Executive Officer is
absent or unable to perform the duties of his office. The
President shall have such other powers and perform such other
duties as from time to time as may be prescribed by him by the
board of directors or prescribed by the bylaws.
Section 3.07 - Chief Executive Officer - The Chief Executive
Officer shall, in the absence of the Chairman of the Board,
preside at all meetings of the shareholders and of the board of
directors at which he or she is present. Subject to the control
of the board of directors of the corporation and, within the
scope of their authority, any committees thereof, the Chief
Executive Officer shall (a) have general and active management of
all the business, property and affairs of the corporation,
(b) see that all orders and resolutions of the board of directors
and its committees are carried into effect, (c) appoint and
remove subordinate officers and agents, other than those
appointed or elected by the board of directors, as the business
of the corporation may require, (d) have custody of the corporate
seal, or entrust the same to the Secretary, (e) act as the duly
authorized representative of the board in all matters, except
where the board has formally designated some other person or
group to act, (f) sign, execute and acknowledge, in the name of
the corporation, deeds, mortgages, bonds, contracts or other
instruments authorized by the board of directors, except in cases
where signing and execution thereof shall be expressly delegated
by the board of directors, or by these bylaws, to some other
officer or agent of the corporation, and (g) in general perform
all the usual duties incident to the office of Chief Executive
Officer and such other duties as may be assigned to such person
by the board of directors.
Section 3.08 - Executive Vice Presidents and Vice Presidents -
Each executive vice present and vice president, if any, shall
perform such duties as may be assigned to him or her by the board
of directors or the Chief Executive Officer. One executive vice
president may be designated by the board of directors to perform
the duties of the Chief Executive Officer.
Section 3.09 - Secretary - The Secretary shall (a) keep or cause
to be kept the minutes of all meetings of the shareholders, the
board of directors, and any committees of the board of directors
in one or more books kept for that purpose, (b) have custody of
the corporate records, stock books and stock ledgers of the
corporation, (c) keep or cause to be kept a register of the
address of each shareholder, which address has been furnished to
the Secretary by the shareholder, (d) see that all notices are
duly given in accordance with law, the articles of incorporation,
and these bylaws, and (e) in general perform all the usual duties
as may be assigned to him or her by the board of directors or the
Chief Executive Officer.
<PAGE C15>
Section 3.10 - Assistant Secretary - The Assistant Secretary, if
any, or Assistant Secretaries if more than one, shall perform the
duties of the Secretary in his or her absence and shall perform
other duties as the board of directors, the Chief Executive
Officer or the Secretary may from time to time designate.
Section 3.11 - Treasurer - The Treasurer shall have general
supervision of the fiscal affairs of the corporation and shall be
the Chief Financial Officer of the corporation. The Treasurer
shall, with the assistance of the Chief Executive Officer and
managerial staff of the corporation: (a) see that a full and
accurate accounting of all financial transactions is made;
(b) invest and reinvest the capital funds of the corporation in
such manner as may be directed by the board of directors, unless
that function shall have been delegated to a nominee or agent;
(c) deposit or cause to be deposited in the name and to the
credit of the corporation, in such depositories as the board of
directors shall designate, all monies and other valuable effects
of the corporation not otherwise employed; (d) prepare any
financial reports that may be requested from time to time by the
board of directors; (e) cooperate in the conduct of any annual
audit of the corporation's financial records by certified public
accountants duly appointed by the board of directors; and (f) in
general perform all the usual duties incident to the office of
treasurer and such other duties as may be assigned to him or her
by the board of directors or the Chief Executive Officer.
Section 3.12 - Officer Salaries - Unless otherwise provided by
the board of directors of the corporation, the salaries of each
of the officers of the corporation shall be fixed from time to
time by the board of directors. No officer shall be prevented
from receiving such salary or other compensation by reason of the
fact that the officer is also a director of the corporation.
ARTICLE IV
SHARE CERTIFICATES AND TRANSFERS
Section 4.01 - Share Certificates - Share certificates shall be
in such form as shall be approved by the board of directors and
shall state: (i) that the corporation is incorporated under the
laws of the Commonwealth of Pennsylvania, (ii) the name of the
person to whom issued, and (iii) the number and class of shares
and the designation of the series, if any, that the share
certificate represents.
The share register or transfer books and blank share certificates
shall be kept by the Secretary or by any transfer agent or
registrar designated by the board of directors for that purpose.
Section 4.02 - Issuance - The share certificates of the
corporation shall be numbered and registered in the share
register or transfer books of the corporation as they are issued.
They shall be signed on behalf of the corporation by the
President or an executive vice president or vice president and by
<PAGE C16> the Secretary or an Assistant Secretary or the
Treasurer or an Assistant Treasurer; but where a certificate is
signed by a transfer agent or a registrar, the signature of any
corporate officer upon the certificate may be a facsimile,
engraved or printed. In case any officer who has signed, or
whose facsimile signature has been placed upon, any share
certificate shall have ceased to be such officer because of
death, resignation or otherwise, before the certificate is
issued, it may be issued with the same effect as if the officer
had not ceased to be such at the date of its issue. The
provisions of this section shall be subject to any inconsistent
or contrary agreement at the time between the corporation and any
transfer agent or registrar.
Section 4.03 - Transfer of Shares - Transfer of shares shall be
made on the books of the corporation upon surrender of the
certificates therefor, endorsed by the person named in the
certificate or by his attorney, lawfully constituted in writing.
No transfer shall be made which is inconsistent with law.
Section 4.04 - Lost, Destroyed, Mutilated or Stolen
Certificates - If the registered owner of a share certificate
claims that the security has been lost, destroyed, mutilated or
wrongfully taken, another may be issued in lieu thereof in a
manner and upon such terms as the board of directors may
authorize and shall be issued in place of the original security,
in accordance with law, if the owner: (a) so requests before the
corporation has notice that the security has been acquired by a
bona fide purchaser; (b) files with the corporation, if requested
by the corporation, a sufficient indemnity bond; and
(c) satisfies any other reasonable requirements imposed by the
corporation.
ARTICLE V
NOTICE, WAIVERS, AND MEETINGS
Section 5.01 - Manner of Giving Notice - Whenever written notice
is required to be given to any person under the provisions of the
Pennsylvania Business Corporation Law of 1988, as it may
hereafter be amended, or by the articles of incorporation or
these bylaws, it may be given to the person either personally or
by sending a copy of it by first class or express mail, postage
prepaid; or by telegram (with messenger service specified), telex
or TWX (with answerback received) or courier service, charges
prepaid; or by facsimile transmission, to the shareholder's
address (or to shareholder's telex, TWX, or facsimile number)
appearing on the books of the corporation; or, in the case of
directors, supplied by the director to the corporation for the
purpose of notice. Notice sent by mail, by telegraph or by
courier service shall be deemed to have been given to the person
entitled thereto when deposited in the United States mail or with
a telegraph office or courier service for delivery to that
person, or in the case of telex or TWX, when dispatched or in the
case of fax, when received except that, in the case of directors,
<PAGE C17> notice sent by regular mail shall be deemed to have
been given 48 hours after being deposited in the United States
mail or, in the case of telex, TWX, or facsimile, when
dispatched.
A notice of meeting shall specify the place, day and hour of the
meeting and any other information required by any other provision
of the Business Corporation Law of 1988, the articles of
incorporation or these bylaws.
Section 5.02 - Waiver of Notice - Whenever any written notice is
required to be given by statute or the articles of incorporation
or these bylaws, a waiver of the notice in writing, signed by the
person or persons entitled to the notice, whether before or after
the time stated in it, shall be deemed equivalent to the giving
of the notice. Neither the business to be transacted at, nor the
purpose of, a meeting need be specified in the waiver of notice
of such meeting. Attendance of a person, either in person or by
proxy, at any meeting shall constitute a waiver of notice of the
meeting, except where the person attends the meeting for the
express purpose of objecting, at the beginning of the meeting, to
the transaction of any business because the meeting was not
lawfully called or convened.
Section 5.03 - Modification of Proposal - Whenever the language
of a proposed resolution is included in a written notice of a
meeting required to be given under the provisions of the Business
Corporation Law of 1988, as it may be amended, or the articles
of incorporation or these bylaws, the meeting considering the
resolution may without further notice adopt it with such
clarifying or other amendments as do not enlarge its original
purpose.
Section 5.04 - Use of Conference Telephone and Similar
Equipment - One of more persons may participate in a meeting of
the directors, or of any committee of directors, by means of
conference telephone or similar communications equipment by means
of which all persons participating in the meeting can hear each
other. Such participation shall constitute presence in person at
the meeting.
ARTICLE VI
INDEMNIFICATION AND INSURANCE
Section 6.01 - Indemnification -
(a) Indemnification of Directors and Officers. The
corporation shall indemnify any person who was or is a
party or is threatened to be made a party to any
threatened, pending, or completed action, suit, or
proceeding, whether civil, criminal, administrative, or
investigative (including, without limitation, actions
by or in the right of the corporation), by reason of
the fact that such person is or was a director or
<PAGE C18> officer of the corporation, or is or was
serving at the request of the corporation as a
director, officer, employee, or agent of another
corporation, partnership, joint venture, trust or other
enterprise, against expenses (including attorneys'
fees), amounts paid in settlement, judgments, and fines
actually and reasonably incurred by such person in
connection with such action, suit, or proceeding;
provided, however, that no indemnification shall be
made in any case where the act or failure to act giving
rise to the claim for indemnification is determined by
a court to have constituted willful misconduct or
recklessness.
(b) Indemnification of Others. The corporation may, at its
discretion, indemnify any person who was or is a party
or is threatened to be made a party to any threatened,
pending, or completed action, suit, or proceeding,
whether civil, criminal, administrative, or
investigative (including, without limitation, actions
by or in the right of the corporation), by reason of
the fact that such person is or was an employee or
agent of the corporation who is not entitled to rights
under Section 6.01(a) hereof, or such person is or was
serving at the request of the corporation as an
employee or agent of another corporation, partnership,
joint venture, trust or other enterprise, against
expenses (including attorneys' fees), amounts paid in
settlement, judgments, and fines actually and
reasonably incurred by such person in connection with
such action, suit, or proceeding; provided, however,
that no indemnification shall be made in any case where
the act or failure to act giving rise to the claim for
indemnification is determined by a court to have
constituted willful misconduct or recklessness.
(c) Advancing Expenses. Expenses (including attorneys'
fees) incurred in defending a civil or criminal action,
suit, or proceeding shall be paid by the corporation in
advance of the final disposition of such action, suit,
or proceeding upon receipt of an undertaking by or on
behalf of the director, officer, employee, or agent to
repay such amount if it shall be ultimately determined
that he is not entitled to be indemnified by the
corporation as authorized in this Article Six.
(d) Rights Not Exclusive. The indemnification and
advancement of expenses provided by this Article Six
shall not be deemed exclusive of any other right to
which persons seeking indemnification and advancement
of expenses may be entitled under any agreement, vote
of shareholders or disinterested directors, or
otherwise, both as to actions in such persons' official
capacity and as to their actions in another capacity
while holding office, and shall continue as to a person
<PAGE C19> 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.
(e) Insurance; Other Security. The corporation may
purchase and maintain insurance on behalf of any
person, may enter into contracts of indemnification
with any person, may create a fund of any nature (which
may, but need not be, under the control of a trustee)
for the benefit of any person, and may otherwise secure
in any manner its obligations with respect to
indemnification and advancement of expenses, whether
arising under this Article Six or otherwise, to or for
the benefit of any person, whether or not the
corporation would have the power to indemnify such
person against such liability under the provisions of
this Article Six.
Section 6.02 - Contract Rights; Amendment or Repeal - All rights
under this Article Six shall be deemed a contract between the
corporation and the indemnified representative pursuant to which
the corporation and each indemnified representative intend to be
legally bound. Any repeal, amendment or modification hereof
shall be prospective only and shall not affect any rights or
obligations then existing.
Section 6.03 - Reliance on Provisions - Each person who shall act
as an indemnified representative of the corporation shall be
deemed to be doing so in reliance upon the rights provided by
this Article Six.
Section 6.04 - Interpretation - The provisions of this Article
are intended to constitute bylaws authorized by 15 Pa. C.S.
Section 1746.
ARTICLE VII
MISCELLANEOUS
Section 7.01 - Registered Office - The registered office of the
corporation, required by law to be maintained in the Commonwealth
of Pennsylvania, may be, but need not be, the principal place of
business of the corporation. The address of the registered
office may be changed from time to time by the board of directors
of the corporation.
Section 7.02 - Other Offices - The corporation may have
additional offices and business in such places, within or outside
the Commonwealth of Pennsylvania, as the board of directors of
the corporation may designate or as the business of the
corporation may require.
Section 7.03 - Corporate Seal - The corporation may have a
corporate seal, which shall have inscribed on it the name of the
<PAGE C20> corporation, the year of organization, and the words
"Corporate Seal--Pennsylvania" or such inscription as the board
of directors of the corporation may determine. The seal may be
used by causing it or a facsimile of it to be impressed or
affixed, or in any manner reproduced.
Section 7.04 - Fiscal Year - The fiscal year of the corporation
shall end on June 30.
Section 7.05 - Checks - All checks, notes, bills of exchange or
other orders in writing shall be signed by such person or persons
as the board of directors or, any person authorized by resolution
of the board of directors may from time to time designate.
Section 7.06 - Contracts - Except as otherwise provided in the
Business Corporation Law of 1988, as it may be amended, in the
case of transactions that require action by the shareholders, the
board of directors may authorize any officer or agent to enter
into any contract or to execute or deliver any instrument on
behalf of the corporation, and such authority may be general or
confined to specific instances.
Any note, mortgage, evidence of indebtedness, contract or other
document, or any assignment or endorsement thereof, executed or
entered into between the corporation and any other person, when
signed by one or more officers or agents having actual or
apparent authority to sign it, or by the Chief Executive Officer,
the President or a vice president and the Secretary or Assistant
Secretary or Treasurer or Assistant Treasurer of the corporation,
shall be held to have been properly executed for and on behalf of
the corporation, without prejudice to the rights of the
corporation against any person who shall have executed the
instrument in excess of his or her actual authority.
Section 7.07 - Amendment of Bylaws - These bylaws may be amended,
altered, changed or repealed as provided in the articles of
incorporation. Any change in the bylaws shall take effect when
adopted unless otherwise provided in the resolution effecting the
change.
Section 7.08 - Severability - If any provision of these bylaws or
the application thereof to any person or circumstance shall be
invalid or unenforceable to any extent, the remainder of these
bylaws and the application of such provisions to other persons or
circumstances shall not be affected thereby and shall be deemed
to be applicable to the greatest extent permitted by law.
PAGE C21
<PAGE>
Exhibit "D"
SECTION 552.14 OF OTS REGULATIONS
CONCERNING DISSENTER AND APPRAISAL RIGHTS
Section 552.14 Dissenter and appraisal rights.
(a) Right to demand payment of fair or appraised
value. Except as provided in paragraph (b) of this section, any
stockholder of a Federal stock association combining in
accordance with Section 552.13 of this part shall have the right
to demand payment of the fair or appraised value of his stock:
Provided, That such stockholder has not voted in favor of the
combination and complies with the provisions of paragraph (c) of
this section.
(b) Exceptions. No stockholder required to accept
only qualified consideration for his or her stock shall have the
right under this section to demand payment of the stock's fair or
appraised value, if such stock was listed on a national
securities exchange or quoted on the National Association of
Securities Dealers' Automated Quotation System ("NASDAQ") on the
date of the meeting at which the combination was acted upon or
stockholder action is not required for a combination made
pursuant to Section 552.13(h)(2) of this part. "Qualified
consideration" means cash, shares of stock of any association or
corporation which at the effective date of the combination will
be listed on a national securities exchange or quoted on NASDAQ,
or any combination of such shares of stock and cash.
(c) Procedure--
(1) Notice. Each constituent Federal stock
association shall notify all stockholders entitled to rights
under this section, not less than twenty days prior to the
meeting at which the combination agreement is to be submitted for
stockholder approval, of the right to demand payment of appraised
value of shares, and shall include in such notice a copy of this
section. Such written notice shall be mailed to stockholders of
record and may be part of management's proxy solicitation for
such meeting.
(2) Demand for appraisal and payment. Each
stockholder electing to make a demand under this section shall
deliver to the Federal stock association, before voting on the
combination, a writing identifying himself or herself and stating
his or her intention thereby to demand appraisal of and payment
for his or her shares. Such demand must be in addition to and
separate from any proxy or vote against the combination by the
stockholder.
(3) Notification of effective date and written
offer. Within ten days after the effective date of the
combination, the resulting association shall: <PAGE D1>
(i) Give written notice by mail to
stockholders of constituent Federal stock associations who
have complied with the provisions of paragraph (c)(2) of
this section and have not voted in favor of the combination,
of the effective date of the combination;
(ii) Make a written offer to each
stockholder to pay for dissenting shares at a specified
price deemed by the resulting association to be the fair
value thereof, and
(iii) Inform them that, within sixty days of
such date, the respective requirements of paragraphs (c)(5)
and (c)(6) of this section (set out in the notice) must be
satisfied.
The notice and offer shall be accompanied by a balance
sheet and statement of income of the association the shares of
which the dissenting stockholder holds, for a fiscal year ending
not more than sixteen months before the date of notice and offer,
together with the latest available interim financial statements.
(4) Acceptance of offer. If within sixty days of
the effective date of the combination the fair value is agreed
upon between the resulting association and any stockholder who
has complied with the provisions of paragraph (c)(2) of this
section, payment therefor shall be made within ninety days of the
effective date of the combination.
(5) Petition to be filed if offer not accepted.
If within sixty days of the effective date of the combination the
resulting association and any stockholder who has complied with
the provisions of paragraph (c)(2) of this section do not agree
as to the fair value, then any such stockholder may file a
petition with the Office, with a copy by registered or certified
mail to the resulting association, demanding a determination of
the fair market value of the stock of all such stockholders. A
stockholder entitled to file a petition under this section who
fails to file such petition within sixty days of the effective
date of the combination shall be deemed to have accepted the
terms offered under the combination.
(6) Stock certificates to be noted. Within sixty
days of the effective date of the combination, each stockholder
demanding appraisal and payment under this section shall submit
to the transfer agent his certificates of stock for notation
thereon that an appraisal and payment have been demanded with
respect to such stock and that appraisal proceedings are pending.
Any stockholder who fails to submit his or her stock certificates
for such notation shall no longer be entitled to appraisal rights
under this section and shall be deemed to have accepted the terms
offered under the combination.
(7) Withdrawal of demand. Notwithstanding the
foregoing, at any time within sixty days after the effective date
<PAGE D2> of the combination, any stockholder shall have the
right to withdraw his or her demand for appraisal and to accept
the terms offered upon the combination.
(8) Valuation and payment. The Director shall,
as he or she may elect, either appoint one or more independent
persons or direct appropriate staff of the Office to appraise the
shares to determine their fair market value, as of the effective
date of the combination, exclusive of any element of value
arising from the accomplishment or expectation of the
combination. Appropriate staff of the Office shall review and
provide an opinion on appraisals prepared by independent persons
as to the suitability of the appraisal methodology and the
adequacy of the analysis and supportive data. The Director after
consideration of the appraisal report and the advice of the
appropriate staff shall, if he or she concurs in the valuation of
the shares, direct payment by the resulting association of the
appraised fair market value of the shares, upon surrender of the
certificates representing such stock. Payment shall be made,
together with interest from the effective date of the
combination, at a rate deemed equitable by the Director.
LSB Costs and expenses. The costs and expenses
of any proceeding under this section may be apportioned and
assessed by the Director as he or she may deem equitable against
all or some of the parties. In making this determination the
Director shall consider whether any party has acted arbitrarily,
vexatiously, or not in good faith in respect to the rights
provided by this section.
(10) Voting and distribution. Any stockholder who
has demanded appraisal rights as provided in paragraph (c)(2) of
this section shall thereafter neither be entitled to vote such
stock for any purpose nor be entitled to the payment of dividends
or other distributions on the stock (except dividends or other
distribution payable to, or a vote to be taken by stockholders of
record at a date which is on or prior to, the effective date of
the combination): Provided, That if any stockholder becomes
unentitled to appraisal and payment of appraised value with
respect to such stock and accepts or is deemed to have accepted
the terms offered upon the combination, such stockholder shall
thereupon be entitled to vote and receive the distributions
described above.
(11) Status. Shares of the resulting association
into which shares of the stockholders demanding appraisal rights
would have been converted or exchanged, had they assented to the
combination, shall have the status of authorized and unissued
shares of the resulting association.
PAGE D3
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 20. Indemnification of Directors and Officers
The By-Laws of Bancorp, as approved by the Bank as its sole
shareholder, provide for (1) indemnification of directors,
officers, employees and agents of Bancorp and its subsidiaries
and (2) the elimination of a director's liability for monetary
damages, in each case to the fullest extent permitted by
Pennsylvania law.
Pennsylvania law provides that a Pennsylvania corporation
may indemnify directors, officers, employees and agents of the
corporation against liabilities they may incur in such capacities
for any action taken or failure to act, whether or not the
corporation would have the power to indemnify the person under
any provision of law, unless such action or failure to act is
determined by a court to have constituted recklessness or willful
misconduct. Pennsylvania law also permits the adoption of a
bylaw, approved by shareholders, providing for the elimination of
a director's liability for monetary damages for any action taken
or any failure to take any action unless (1) the director has
breached or failed to perform the duties of his or her office and
(2) the breach or failure to perform constitutes self-dealing,
willful misconduct or recklessness.
Bancorp's directors and officers on and after the effective
date of the Reorganization will be insured against certain
liabilities for their actions, as such, by an insurance policy
obtained by Bancorp.
Item 21. Exhibits and Financial Statement Schedules
(a) Exhibits.
2.1 Agreement and Plan of Reorganization dated
September 4, 1998, between Liberty Centre
Bancorp, Inc. and Liberty Savings Bank, F.S.B.
and Liberty Savings Interim Federal Savings Bank
(included as Exhibit A to the Proxy Statement/
Prospectus).
3.1 Articles of Incorporation, as amended, of Liberty
Centre Bancorp, Inc. (Attached as Exhibit B to
the Proxy Statement/Prospectus).
3.2 By-Laws of Liberty Centre Bancorp, Inc. (Attached
as Exhibit C to the Proxy Statement/Prospectus).
5.1 Opinion of Stevens & Lee re: Legality of Shares
Being Registered.
<PAGE II1>
8.1 Form of Opinion of Stevens & Lee re: Tax
Matters.
10.1 Liberty Savings Bank, F.S.B. 1997 Employee Stock
Option Plan.
10.2 Liberty Savings Bank, F.S.B. Stock Option Plan
for Outside Directors.
10.3 Employment Agreement dated as of August 1, 1995,
between Liberty Savings Bank, F.S.B., and Judith
Hoffman.
10.4 Rights Agreement dated June 16, 1998, between
Liberty Savings Bank, F.S.B. and ChaseMellon
Shareholder Services, L.L.C.
23.1 Consent of Stevens & Lee (contained in
Exhibit 5.1).
24.1 Powers of Attorney of Directors and Officers
(included on signature page hereof).
99.1 Form of Proxy for the Annual Meeting of
Shareholders of Liberty Savings Bank, F.S.B.
(b) Financial Statement Schedules.
None required.
Item 22. Undertakings
(a) The undersigned registrant hereby undertakes to:
(1) 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;
(ii) Reflect in the prospectus any facts or
events which, individually or together, represent a
fundamental change in the information in the registration
statement; and notwithstanding the forgoing, 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 the
volume and price represent no more than a 20% change in the
maximum aggregate offering price set forth in the
"Calculation of Registration Fee" table in the effective
registration statement. <PAGE II2>
(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.
(b) Insofar as indemnification for liabilities arising
under the Securities Act of 1933 may be permitted to directors,
officers and controlling persons of the registrant pursuant to
the bylaws of the registrant, or otherwise, the registrant has
been advised that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as
expressed in the Act and is, therefore, unenforceable. In the
event that a claim for indemnification against such liabilities
(other than the payment by the registrant of expenses incurred or
paid by a director, offer or controlling person of the registrant
in the successful defense of any action, suit or proceeding) is
asserted by such director, officer or controlling person in
connection with the securities being registered, the registrant
will, unless in the opinion of its counsel the matter has been
settled by controlling precedent, submit to a court of
appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in
the Act and will be governed by the final adjudication of such
issue.
(c) The undersigned registrant hereby undertakes to supply
by means of a post-effective amendment all information concerning
a transaction, and the company being acquired involved therein,
that was not the subject of and included in the registration
statement when it became effective.
PAGE II3
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933,
the registrant has duly caused this registration statement to be
signed on its behalf by the undersigned, thereunto duly
authorized, in the City of Pottsville, Commonwealth of
Pennsylvania, on September 1, 1998.
LIBERTY CENTRE BANCORP, INC.
(Registrant)
By:/s/ Judith I. Hoffman
Judith I. Hoffman,
Executive Vice President and
Chief Executive Officer
KNOW ALL MEN BY THESE PRESENTS, that each person whose
signature appears below constitutes and appoints Robert W.
Pugh, Jr., Judith I. Hoffman, Ronald R. Pellish, Esquire, or
Edward C. Hogan, Esquire, and each of them, his true and lawful
attorney-in-fact, as agent with full power of substitution and
resubstitution for him and in his name, place and stead, in any
and all capacity, to sign any or all amendments to this
Registration Statement and to file the same, with all exhibits
thereto, and other documents in connection therewith, with the
Securities and Exchange Commission, granting unto such attorney-
in-fact and agent full power and authority to do and perform each
and every act and thing requisite and necessary to be done in and
about the premises, as fully and to all intents and purposes as
they might or could do in person, hereby ratifying and confirming
all that said attorneys-in-fact and agents, or their substitute
or substitutes, may lawfully do or cause to be done by virtue
hereof.
Pursuant to the requirements of the Securities Act of 1933,
this registration statement has been signed by the following
persons in the capacities and on the dates indicated.
Signature Title Date
/s/ Robert W. Pugh, Jr. Chairman of the September 1, 1998
Robert W. Pugh, Jr. Board and President
/s/ Judith I. Hoffman Director, September 1, 1998
Judith I. Hoffman Executive Vice
President and
Chief Executive
Officer (Principal
Executive, Financial
and Accounting
Officer)
<PAGE II4>
/s/ Herman J. Fenstermacher Director September 1, 1998
Herman J. Fenstermacher
/s/ Frank J. Grabowski Director September 1, 1998
Frank J. Grabowski
/s/ Daniel C. Guers Director September 1, 1998
Daniel C. Guers
/s/ Michael R. Muncy Director September 1, 1998
Michael R. Muncy
/s/ Menelaos P. Palles Director September 2, 1998
Menelaos P. Palles
/s/ Ronald R. Pellish Director September 2, 1998
Ronald R. Pellish, Esquire
PAGE II5
<PAGE>
EXHIBIT INDEX
Sequentially
Numbered
Number Description Page
2.1 Agreement and Plan of Reorganization
dated September 4, 1998, between Liberty
Centre Bancorp, Inc. and Liberty Savings
Bank, F.S.B. and Liberty Savings Interim
Federal Savings Bank (included as
Exhibit A to the Proxy Statement/
Prospectus).
3.1 Articles of Incorporation, as amended, of
Liberty Centre Bancorp, Inc. (Attached as
Exhibit B to the Proxy Statement/
Prospectus).
3.2 By-Laws of Liberty Centre Bancorp, Inc.
(Attached as Exhibit C to the Proxy
Statement/Prospectus).
5.1 Opinion of Stevens & Lee re: Legality
of Shares Being Registered.
8.1 Form of Opinion of Stevens & Lee re: Tax Matters.
10.1 Liberty Savings Bank, F.S.B. 1997 Employee
Stock Option Plan.
10.2 Liberty Savings Bank, F.S.B. Stock Option
Plan for Outside Directors.
10.3 Employment Agreement dated as of August 1,
1995, between Liberty Savings Bank, F.S.B.,
and Judith Hoffman.
10.4 Rights Agreement dated June 16, 1998,
between Liberty Savings Bank, F.S.B. and
ChaseMellon Shareholder Services, L.L.C.
23.1 Consent of Stevens & Lee (contained in
Exhibit 5.1).
24.1 Powers of Attorney of Directors and Officers
(included on signature page hereof).
99.1 Form of Proxy for the Annual Meeting of
Shareholders of Liberty Savings Bank, F.S.B.
<PAGE II6>
September 4, 1998
Board of Directors
Liberty Centre Bancorp, Inc.
21 South Centre Street
Pottsville, Pennsylvania 17901
Re: Registration Statement on Form S-4
Gentlemen:
We have served as counsel to Liberty Centre Bancorp, Inc.
(the "Company") in connection with the following described
transaction. The Company proposes to offer up to 144,879 shares
common stock, no par value (the "Common Stock"), in connection
with a proposed reorganization by which the Company will become
the parent company of Liberty Savings Bank, F.S.B. The Common
Stock is to be registered under the Securities Act of 1933, as
amended, on a Registration Statement on Form S-4 to be filed with
the Securities and Exchange Commission on September 4, 1998 (the
"Registration Statement").
In connection with this transaction, we have reviewed the
following documents :
1. the Articles of Incorporation of the Company;
2. the Bylaws of the Company;
3. the minute books of the Company;
4. the Registration Statement, including the Proxy
Statement/Prospectus (the "Prospectus") contained
therein; and
5. the form of the certificates representing shares of the
Common Stock.
Based upon our review of such documents, it is our opinion
that the 144,879 shares of Common Stock covered by the
Registration Statement have been duly authorized and, when issued
pursuant to the terms described in the Registration Statement,
will be legally issued by the Company and fully paid and
nonassessable.
We consent to the filing of this opinion and our tax opinion
as exhibits to the Registration Statement, and to the reference
to us under the heading "Legal Opinions" in the Proxy Statement/
Prospectus. In giving this consent, we do not thereby admit that
we come within the category of persons whose consent is required
under Section 7 of the Securities Act of 1933, as amended, or the
<PAGE 1> rules and regulations of the Securities and Exchange
Commission thereunder.
Very truly yours,
STEVENS & LEE <PAGE 2>
[STEVENS & LEE LETTERHEAD]
___________, 199_
Board of Directors
Liberty Savings Bank, F.S.B.
21 South Centre Street
Pottsville, PA 17901
Re: Holding company formation and acquisition by holding company
of all of the outstanding common stock of Liberty Savings
Bank, F.S.B.
Lady and Gentlemen:
You have requested our opinion in connection with the
following transactions (collectively, the "Reorganization")
contemplated by the Agreement and Plan of Reorganization (the
"Reorganization Agreement"), dated as of _________, 1998, between
and among Liberty Centre Bancorp, Inc. ("Bancorp"), Liberty
Savings Bank, F.S.B. (the "Bank"), and Liberty Savings Interim
Federal Savings Bank ("Interim Bank"), pursuant to which:
(i) the Bank will form and initially acquire all of
the outstanding Bancorp Common Stock;
(ii) Bancorp will form and initially acquire all of the
outstanding Interim Bank Common Stock;
(iii) Interim Bank will merge into the Bank (the "Bank
Merger"), with the Bank surviving such merger and
acquiring all of the assets of Interim Bank (if
any);
(iv) each outstanding share of Interim Bank Common
Stock will, automatically and by operation of law,
be exchanged for one share of Bank Common Stock;
(v) each outstanding share of Bank Common Stock (other
than the stock issued under Clause (iv) and any
stock surrendered in accordance with the exercise
of dissenters' rights) will, automatically and by
operation of law, be exchanged for one share of
Bancorp Common Stock; and
(vi) each outstanding share of Bancorp Common Stock
(other than the stock issued under Clause (v))
will, automatically and by operation of law, be
canceled.
No fractional shares of Bank Common Stock are outstanding.
Accordingly, no fraction shares of Bancorp Common Stock will be
issued pursuant the Reorganization. Bank shareholders will be
<PAGE 1> entitled to exercise dissenters' rights in connection
with the Reorganization by complying with the requirements of
federal regulations.
Attached to and trading with each share of Bank Common Stock
are certain "poison pill" rights issued pursuant to an agreement
between the Bank and Chase Mellon Shareholder Services, L.L.P.
On the Effective Date of the Bank Merger, such rights will,
automatically and by operation of law, become substantially
similar rights with respect to the Bancorp Common Stock issued in
the Reorganization (the "Bancorp Stock Rights").
As a result of the foregoing, the Bank will become a wholly-
owned subsidiary of Bancorp, and all of the outstanding shares of
Bancorp Common Stock will initially be owned by the shareholders
of the Bank immediately prior to the Bank Merger.
This opinion is being furnished pursuant to Sections 8.1(d)
and 8.2(c) of the Reorganization Agreement. All capitalized
terms herein, unless otherwise specified, have the meanings
assigned thereto in the Reorganization Agreement and its
exhibits.
In connection with our opinion, we have examined and are
familiar with originals or copies, certified or otherwise
identified to our satisfaction, of the Reorganization Agreement,
the exhibits thereto, and such other documents as we have deemed
necessary or appropriate for the opinions set forth below. In
our examination, we have assumed the genuineness of all
signatures, the authenticity of all documents submitted to us as
originals, the conformity to original documents of all documents
submitted to us as certified or photostatic copies, and the
authenticity of such latter documents. As to any facts material
to this opinion which we did not independently establish or
verify, we have relied upon the foregoing documents and upon
statements and representations of officers and other
representatives of the Bank, including certain written
representations of the management of the Bank annexed hereto.
The opinions expressed herein are conditioned on the initial and
continuing accuracy of the facts, information, and
representations contained in the aforesaid documents or otherwise
referred to above.
In preparing our opinion, we have considered applicable
provisions of the IRC, Treasury regulations, pertinent judicial
authorities, interpretive rulings of the Internal Revenue
Service, and such other authorities as we have deemed relevant.
Based solely upon the foregoing and upon the assumptions set
forth herein, and subject to the qualifications and caveats set
forth herein, we are of the opinion that, under present law, for
federal income tax purposes: <PAGE 2>
1. The Reorganization (a) will constitute a
"reorganization" within the meaning of IRC Section 368(a)(1)(A),
and (b) will not be disqualified by reason of the fact that stock
of Bancorp is issued in the transaction, as permitted by IRC
Section 368(a)(2)(E).
2. Bancorp, the Bank and Interim Bank will each be "a party
to a reorganization" within the meaning of IRC Section 368(b).
3. No gain or loss will be recognized by Bancorp on the
constructive receipt of Bank Common Stock in exchange for Interim
Bank Common Stock surrendered in the Reorganization.
4. The basis of the Bank Stock to be received by Bancorp in
the Reorganization will be determined pursuant to Treasury
Regulation 1.358-6(c)(2).
5. No gain or loss will be recognized by the Bank or
Interim Bank solely by reason of the transfer of Interim Bank's
assets (if any) to the Bank in the Bank Merger.
6. The basis of Interim Bank's assets (if any) in the hands
of the Bank will be the same as the basis of such assets in the
hands of Interim Bank immediately prior to the Bank Merger.
7. The holding period of Interim Bank's assets (if any) in
the hands of the Bank will include the period during which such
assets were held by Interim Bank.
8. No gain or loss will be recognized by the shareholders
of the Bank on the constructive receipt of Bancorp Common Stock
in exchange for Bank Common Stock surrendered in the
Reorganization.
9. The Bancorp Stock Rights will not constitute "other
property" within the meaning of IRC Section 356(a)(1)(B).
10. The basis of the Bancorp Common Stock constructively
received by the Bank shareholders in the Reorganization will be
the same as the basis of the Bank Common Stock surrendered in
exchange therefor.
11. The holding period of the Bancorp Common Stock
constructively received by the Bank shareholders in the
Reorganization will include the period during which they held
their Bank Common Stock, provided the shares of Bank Common Stock
are held as a capital asset on the Effective Date of the
Reorganization.
We call your attention to the fact that certain portions of
this opinion relating to the federal income tax treatment of Bank
<PAGE 3> shareholders may not be applicable to persons who
received their Bank Common Stock pursuant to the exercise of
employee stock
options or otherwise as compensation, or to foreign persons or
persons who, because of their circumstances or status, are
subject to special federal income tax treatment.
Except as set forth above, we express no other opinion as to
the tax consequences of the Reorganization and related
transactions to any party under federal, state, local or foreign
laws.
Very truly yours, <PAGE 4>
LIBERTY SAVINGS BANK, F.S.B.
1997 EMPLOYEE STOCK OPTION PLAN
PAGE 1
<PAGE>
TABLE OF CONTENTS
Page
Article
Article 1. PURPOSE OF THE PLAN ......................... 3
Article 2. DEFINITIONS ................................. 3
Article 3. ADMINISTRATION OF THE PLAN .................. 4
Article 4. COMMON STOCK SUBJECT TO THE PLAN ............ 6
Article 5. STOCK OPTIONS ............................... 6
Article 6. ELIGIBILITY ................................. 8
Article 7. TERM AND EXERCISE OF OPTIONS ................ 9
Article 8. TERMINATION OF EMPLOYMENT ...................13
Article 9. ADJUSTMENT PROVISIONS .......................15
Article 10. GENERAL PROVISIONS ..........................16
PAGE 2
<PAGE>
Article 1. PURPOSE OF THE PLAN
1.1 Purpose - The Liberty Savings Bank, F.S.B. 1997
Employee Stock Option Plan (the "Plan") is
intended to provide key employees of Liberty
Savings Bank, F.S.B. (the "Bank") and any of its
Subsidiaries an opportunity to acquire Common
Stock of the Bank. The Plan is designed to help
the Bank attract, retain and motivate key
employees to make substantial contributions to the
success of the business. Stock Options are
granted under the Plan based on the Participant's
level of responsibility and performance within the
Bank.
1.2 Stock Options to be Granted - Incentive Stock
Options within the meaning of Code Section 422(b)
and Nonqualified Stock Options may be granted
within the limitations of the Plan herein
described.
Article 2. DEFINITIONS
2.1 "Agreement" - The written instrument evidencing
the grant of an Option. A Participant may be
issued one or more Agreements from time to time,
reflecting one or more Options.
2.2 "Bank" - Liberty Savings Bank, F.S.B., a federal
savings bank.
2.3 "Board" - The Board of Directors of the Bank.
2.4 "Code" - The Internal Revenue Code of 1986, as
amended.
2.5 "Committee" - The Committee which the Board
appoints to administer the Plan.
2.6 "Common Stock" - The common stock of the Bank
($1.00 par value) as described in the Bank's
Charter, or such other stock as shall be
substituted therefor.
2.7 "Employee" - Any key employee (including officers)
of the Bank or a Subsidiary.
2.8 "Exchange Act" - The Securities Exchange Act of
1934, as amended.
2.9 "Incentive Stock Option" - A stock option intended
to satisfy the Requirements of Code
Section 422(b).
<PAGE 3>
2.10 "Nonqualified Stock Option" - A stock option other
than an incentive stock option.
2.11 "Optionee" - A Participant who is awarded a Stock
Option pursuant to the provisions of the Plan.
2.12 "Participant" - An Employee selected by the
Committee to receive a grant of an Option under
the Plan.
2.13 "Plan" - The Liberty Savings Bank, F.S.B. 1997
Employee Stock Option Plan.
2.14 "Retirement" - The voluntary termination of
employment upon or following the attainment of age
sixty-five.
2.15 "Stock Option" or "Option" - An award of a right
to purchase Common Stock pursuant to the
provisions of the Plan.
2.16 "Subsidiary" - A subsidiary corporation as defined
in Code Section 424(f) that is a subsidiary of the
Bank.
Article 3. ADMINISTRATION OF THE PLAN
3.1 The Committee - The Plan shall be administered by
a committee of the Board (the "Committee")
composed of two or more members of the Board, all
of whom are "outside directors" within the meaning
of Code Section 162(m). The Board may from time
to time remove members from, or add members to,
the Committee. Vacancies on the Committee,
howsoever caused, shall be filled by the Board.
3.2 Powers of the Committee -
(a) The Committee shall be vested with full
authority to make such rules and regulations
as it deems necessary or desirable to
administer the Plan and to interpret the
provisions of the Plan, unless otherwise
determined by a majority of the disinterested
members of the Board. Any determination,
decision or action of the Committee in
connection with the construction,
interpretation, administration or application
of the Plan shall be final, conclusive and
binding upon all Optionees and any person
claiming under or through an Optionee, unless
otherwise determined by a majority of the
disinterested members of the Board.
<PAGE 4>
(b) Subject to the terms, provisions and
conditions of the Plan and subject to review
and approval by a majority of the
disinterested members of the Board, the
Committee shall have exclusive jurisdiction
to:
(i) determine and select, based upon
the recommendation of the Bank's
Chief Executive Officer (except as
to herself or himself), the
Employees to be granted Options (it
being understood that more than one
Option may be granted to the same
person);
(ii) determine the number of shares
subject to each Option;
(iii) determine the date or dates when
the Options will be granted;
(iv) determine the purchase price of the
shares subject to each Option in
accordance with Article 5 of the
Plan;
(v) determine the date or dates when
each Option may be exercised within
the term of the Option specified
pursuant to Article 7 of the Plan;
(vi) determine whether or not an Option
constitutes an Incentive Stock
Option; and
(vii) prescribe the form, which shall be
consistent with the Plan, of the
Agreement evidencing any Options
granted under the Plan.
3.3 Terms - The grant of an Option under the Plan
shall be evidenced by an Agreement and may include
any terms and conditions consistent with this
Plan, as the Committee may determine.
3.4 Liability - No member of the Board or the
Committee shall be liable for any action or
determination made in good faith by the Board or
the Committee with respect to this Plan or any
Options granted under this Plan.
<PAGE 5>
Article 4. COMMON STOCK SUBJECT TO THE PLAN
4.1 Common Stock Authorized - The aggregate number of
shares of Common Stock for which Options may be
granted under the Plan shall not exceed
5,654 shares. The limitation established by the
preceding sentence shall be subject to adjustment
as provided in Article 9 of the Plan.
4.2 Shares Available - The Common Stock to be issued
upon exercise of Options granted under the Plan
shall be the Common Stock made available at the
discretion of the Board, either from authorized
but unissued Common Stock or from Common Stock
acquired by the Bank, including shares purchased
in the open market. In the event that any
outstanding Option under the Plan for any reason
expires or is terminated, the shares of Common
Stock allocable to the unexercised portion of such
Option may thereafter be regranted subject to
option under the Plan.
Article 5. STOCK OPTIONS
5.1 Exercise Price - The exercise price of Common
Stock shall be, in the case of an Incentive Stock
Option, 100 percent of the fair market value of
one share of Common Stock on the date the Option
is granted, except that the purchase price per
share shall be 110 percent of such fair market
value in the case of an Incentive Stock Option
granted to any individual described in Section 6.2
of the Plan. The exercise price of Common Stock
shall be, in the case of a Nonqualified Stock
Option, such dollar amount as may be specified by
the Committee. The exercise price shall be
subject to adjustment as provided in Article 9 of
the Plan.
5.2 Limitation on Incentive Stock Options - The
aggregate fair market value (determined as of the
date an Option is granted) of the stock with
respect to which Incentive Stock Options are
exercisable for the first time by any individual
in any calendar year (under the Plan and all other
plans maintained by the Bank and Subsidiaries)
shall not exceed $100,000.
5.3 Determination of Fair Market Value -
(a) During such time as Common Stock is not
listed on an established stock exchange or
exchanges but is listed in the NASDAQ
National Market System, the fair market value
per share shall be the closing sale price for
<PAGE 6> the Common Stock on the day the
Option is granted. If no sale of Common
Stock has occurred on that day, the fair
market value shall be determined by reference
to such price for the next preceding day on
which a sale occurred.
(b) During such time as the Common Stock is not
listed on an established stock exchange or in
the NASDAQ National Market System, fair
market value per share shall be the mean
between the closing dealer "bid" and "asked"
prices for the Common Stock for the day of
the grant, and if no "bid" and "asked" prices
are quoted for the day of the grant, the fair
market value shall be determined by reference
to such prices on the next preceding day on
which such prices were quoted.
(c) If the Common Stock is listed on an
established stock exchange, the fair market
value shall be deemed to be the closing price
of Common Stock on such stock exchange on the
day the Option is granted or, if no sale of
Common Stock has been made on such stock
exchange on that day, the fair market value
shall be determined by reference to such
price for the next preceding day on which a
sale occurred.
(d) In the event that the Common Stock is not
traded on an established stock exchange or in
the NASDAQ National Market System, and no
closing dealer "bid" and "asked" prices are
available on the date of a grant, then fair
market value will be the price established by
the Committee in good faith.
5.4 Limitation on Grants - Grants to any Employee
under this Plan, during any period of 12
consecutive months, shall not exceed in the
aggregate Options to acquire more than 2,500
shares of Common Stock. Such limitation shall be
subject to adjustment in the manner described in
Article 9 and by giving effect to any adjustment
in other Options granted during the relevant 12
month period.
5.5 Transferability of Options - Unless otherwise
designated by the Committee to the contrary, each
Option granted under the Plan shall by its terms
be non-transferable by the Optionee (except by
will or the laws of descent and distribution), and
each Option shall be exercisable during the
Optionee's lifetime only by the Optionee, his
<PAGE 7> guardian or legal representative or by
such other means as the Committee may approve from
time to time, provided that, if the Bank is at the
time of such approval subject to the provisions of
either Section 16(b) of the Exchange Act or
Rule 16b-3 thereunder, as either may be amended
from time to time (or any law, rule, regulation or
other provision that may hereafter replace such
Section or Rule), such means is not inconsistent
with or contrary to such Section or Rule or
replacement thereof. An Optionee may also
designate a beneficiary to exercise his or her
Options after the Optionee's death. The Committee
may amend outstanding Options to provide for
transfer, without payment of consideration, to
immediate family members of the Optionee or to
trusts or partnerships for such family members.
Article 6. ELIGIBILITY
6.1 Participation - Options shall be granted only to
persons who are considered key employees of the
Bank, as determined by the Committee, based upon
the recommendation of the Chief Executive Officer
(except as to herself or himself) and ratified by
a majority of the disinterested members of the
Board.
6.2 Incentive Stock Option Eligibility -
Notwithstanding any other provision of the Plan,
an individual who owns more than 10 percent of the
total combined voting power of all classes of
outstanding stock of the Bank or of a Subsidiary
shall not be eligible for the grant of an
Incentive Stock Option, unless the special
requirements set forth in Sections 5.1 and 7.1 of
the Plan are satisfied. For purposes of this
Section 6.2, in determining stock ownership, an
individual shall be considered as owning the stock
owned, directly or indirectly, by or for his
brothers and sisters (whether by the whole or half
blood), spouse, ancestors and lineal descendants.
Stock owned, directly or indirectly, by or for a
corporation, partnership, estate or trust shall be
considered as being owned proportionately by or
for its shareholders, partners or beneficiaries.
"Outstanding stock" shall include all stock
actually issued and outstanding immediately before
the grant of the Option. "Outstanding stock"
shall not include shares authorized for issue
under outstanding Options held by the Optionee or
by any other person.
<PAGE 8>
Article 7. TERM AND EXERCISE OF OPTIONS
7.1 Termination -
(a) Each Option granted under the Plan shall
terminate on the date determined by the
Committee and approved by a majority of the
disinterested members of the Board, and
specified in the Agreement; provided,
however, that (i) each intended Incentive
Stock Option granted to an individual
described in Section 6.2 of the Plan shall
terminate not later than five years after the
date of the grant, (ii) each other intended
Incentive Stock Option shall terminate not
later than ten years after the date of grant,
and (iii) each Option granted under the Plan
which is intended to be a Nonqualified Stock
Option shall terminate not later than ten
years and one month after the date of grant.
Except as otherwise provided in Section 8.4,
each Option granted under the Plan shall
become exercisable only after the earlier of
the date on which (i) the Optionee has
completed one year of continuous employment
with the Bank or a Subsidiary immediately
following the date of the grant of the Option
or (ii) a Change in Control occurs. The
Committee at its discretion may provide
further limitations on the exercisability of
Options granted under the Plan. An Option
may be exercised only during the continuance
of the Optionee's employment, except as
provided in Article 8.
(b) For purposes of Section 7.1(a), a "Change in
Control" shall be deemed to have occurred
upon the happening of any of the following:
(i) any "Person" (as such term is used
in Sections 13(d) and 14(d) of the
Exchange Act (except for (1) the
Bank or any Subsidiary, or (2) any
of the Bank's employee benefit
plans (or any trust forming a part
thereof) (the "Benefit Plan(s)"))
is or becomes the beneficial owner,
directly or indirectly, of the
Bank's securities representing
19.9% or more of the combined
voting power of the Bank's then
outstanding securities, other than
pursuant to an excepted transaction
described in Clause (iii) below;
<PAGE 9>
(ii) a binding written agreement is
executed (and, if legally required,
approved by the Bank's
stockholders) providing for a sale,
exchange, transfer or other
disposition of substantially all of
the assets of the Bank to another
entity, except to an entity
controlled directly or indirectly
by the Bank;
(iii) the stockholders of the Bank
approve a merger, consolidation,
share exchange, division or other
reorganization of or relating to
the Bank, unless:
(A) the stockholders of the Bank
immediately before such
merger, consolidation, share
exchange, division or
reorganization, own, directly
or indirectly immediately
following such merger,
consolidation, share exchange,
division or reorganization at
least 66-2/3% of the combined
voting power of the
outstanding voting securities
of the Bank resulting from
such merger, consolidation,
share exchange, division or
reorganization (the "Surviving
Bank") in substantially the
same proportion as their
ownership of the voting
securities immediately before
such merger, consolidation,
share exchange, division or
reorganization; and
(B) the individuals who,
immediately before such
merger, consolidation, share
exchange, division or
reorganization, are members of
the Board (the "Incumbent
Board"), continue to
constitute at least 66-2/3% of
the Board of Directors of the
Surviving Bank; provided,
however, that if the election,
or nomination for election by
the Bank's stockholders of any
new director was approved by a
<PAGE 10> vote of at least
66-2/3% of the Incumbent
Board, such new director
shall, for the purposes
hereof, be considered a member
of the Incumbent Board;
provided further, however,
that no individual shall be
considered a member of the
Incumbent Board if such
individual initially assumed
office as a result of either
an actual or threatened
"Election Contest" (as
described in Rule 14a-11
promulgated under the Exchange
Act) or other actual or
threatened solicitation of
proxies or consents by or on
behalf of a Person other than
the Board (a "Proxy Contest")
including by reason of any
agreement intended to avoid or
settle any Election Contest or
Proxy Contest; and
(C) no Person (except (1) the Bank
or any Subsidiary, (2) any
Benefit Plan, (3) the
Surviving Bank or any
subsidiary of the Surviving
Bank, or (4) any Person who,
immediately prior to such
merger, consolidation, share
exchange, division or
reorganization had beneficial
ownership of 19.9% or more of
the then outstanding voting
securities of the Bank) has
beneficial ownership of 19.9%
or more of the combined voting
power of the Surviving Bank's
then outstanding voting
securities immediately
following such merger,
consolidation, share exchange,
division or reorganization;
(iv) a plan of liquidation or
dissolution of the Bank, other than
pursuant to bankruptcy or
insolvency laws, is adopted; or
(v) during any period of two
consecutive years, individuals, who
<PAGE 11> at the beginning of such
period, constituted the Board cease
for any reason to constitute at
least a majority of the Board,
unless the election, or the
nomination for election by the
Bank's stockholders, of each new
director was approved by a vote of
at least 66-2/3% of the directors
then still in office who were
directors at the beginning of the
period; provided, however, that no
individual shall be considered a
member of the Board at the
beginning of such period if such
individual initially assumed office
as a result of either an actual or
threatened Election Contest or
Proxy Contest, including by reason
of any agreement intended to avoid
or settle any Election Contest or
Proxy Contest.
Notwithstanding the foregoing, a Change in
Control shall not be deemed to have occurred
if a Person becomes the beneficial owner,
directly or indirectly, of securities
representing 19.9% or more of the combined
voting power of the Bank's then outstanding
securities solely as a result of an
acquisition by the Bank of its voting
securities which, by reducing the number of
shares outstanding, increases the
proportionate number of shares beneficially
owned by such Person; provided, however, that
if a Person becomes a beneficial owner of
19.9% or more of the combined voting power of
the Bank's then outstanding securities by
reason of share repurchases by the Bank and
thereafter becomes the beneficial owner,
directly or indirectly, of any additional
voting securities of the Bank (other than
pursuant to a stock split, stock dividend or
similar transaction), then a Change in
Control shall be deemed to have occurred with
respect to such Person under Clause (i).
7.2 Exercise -
(a) A person electing to exercise an Option shall
give written notice to the Bank of such
election and of the number of shares he has
elected to purchase, in such form as the
Committee shall have prescribed or approved,
and shall at the time of exercise tender the
<PAGE 12> full purchase price of the shares
he has elected to purchase. The purchase
price shall be paid in full, in cash, upon
the exercise of the Option; provided,
however, that in lieu of cash, with the
approval of the Committee at or prior to
exercise, an Optionee may exercise his Option
by tendering to the Bank shares of Common
Stock owned by him and having a fair market
value equal to the cash exercise price
applicable to his Option (with the fair
market value of such stock to be determined
in the manner provided in Section 5.3 hereof)
or by delivering such combination of cash and
such shares as the Committee in its sole
discretion may approve. Notwithstanding the
foregoing, Common Stock acquired pursuant to
the exercise of an Incentive Stock Option may
not be tendered as payment unless the holding
period requirements of Code Section 422(a)(1)
have been satisfied.
(b) A person holding more than one Option at any
relevant time may, in accordance with the
provisions of the Plan, elect to exercise
such Options in any order.
(c) In addition, at the request of the
Participant and to the extent permitted by
applicable law, the Bank may, in its sole
discretion, selectively approve arrangements
with a brokerage firm under which such
brokerage firm, on behalf of the Participant,
shall pay to the Bank the exercise price of
the Options being exercised, and the Bank,
pursuant to an irrevocable notice from the
Participant, shall promptly deliver the
shares being purchased to such firm.
Article 8. TERMINATION OF EMPLOYMENT
8.1 Retirement - In the event of Retirement, an Option
shall lapse at the earlier of the expiration of
the term of the Option or:
(a) In the case of an Incentive Stock Option,
three months from the date of Retirement; and
(b) in the case of Options other than Incentive
Stock Options, up to 24 months, at the
discretion of the Committee, from the date of
Retirement.
8.2 Death or Disability - In the event of termination
of employment due to death or disability (as
<PAGE 13> defined in Code Section 72(m)), the
Option shall lapse at the earlier of the
expiration of the term of the Option or one year
after termination due to any such cause.
8.3 Other Termination - Except as otherwise provided
in Sections 8.4(a) and (c), in the event of
termination of employment for any reason other
than is described in Section 8.1 or 8.2, all
Options shall lapse as of the date of termination.
8.4 Special Termination Provisions -
(a) Notwithstanding anything herein to the
contrary, the Committee may, in its
discretion and subject to the approval of a
majority of the disinterested members of the
Board, waive the one-year continuous
employment requirement set forth in
Section 7.1(a) and permit the exercise of an
Option held by an Employee whose employment
has terminated prior to the satisfaction of
such requirement. Any such waiver may be
made with retroactive effect provided it is
made within 60 days following the Optionee's
termination of employment.
(b) In the event the Committee waives the
continuous service requirement with respect
to an Option and the circumstance of the
Employee's termination is described in
Section 8.1 or 8.2, the Option will lapse as
otherwise provided in the relevant section.
(c) Notwithstanding anything herein to the
contrary, the Committee may, in its
discretion, waive the lapse provisions of
Section 8.3 and permit the exercise of an
Option until a date which is the earlier of
the expiration of the term of such Option or:
(i) in the case of an Incentive Stock
Option, three months from the date
of termination of employment; and
(ii) in the case of Options other than
Incentive Stock Options, up to
24 months from the date of
termination.
<PAGE 14>
Article 9. ADJUSTMENT PROVISIONS
9.1 Share Adjustments -
(a) In the event that the shares of Common Stock,
as presently constituted, shall be changed
into or exchanged for a different number or
kind of shares of stock or other securities
of the Bank or of another corporation
(whether by reason of merger, consolidation,
recapitalization, reclassification, split-up,
combination of shares or otherwise) or if the
number of such shares of stock shall be
increased through the payment of a stock
dividend, then, subject to the provisions of
Subsection (c) below, there shall be
substituted for or added to each share of
Common Stock which was theretofore
appropriated, or which thereafter may become
subject to an Option under the Plan, the
number and kind of shares of stock or other
securities into which each outstanding share
of the Common Stock shall be so changed or
for which each such share shall be exchanged
or to which each such share shall be
entitled, as the case may be. Outstanding
Options shall also be appropriately amended
as to price and other terms, as may be
necessary to reflect the foregoing events.
(b) If there shall be any other change in the
number or kind of the outstanding shares of
the Common Stock, or of any stock or other
securities in which such Common Stock shall
have been changed, or for which it shall have
been exchanged, and if a majority of the
disinterested members of the Board shall, in
its sole discretion, determine that such
change equitably requires an adjustment in
any Option which was theretofore granted or
which may thereafter be granted under the
Plan, then such adjustment shall be made in
accordance with such determination.
(c) The grant of an Option pursuant to the Plan
shall not affect in any way the right or
power of the Bank to make adjustments,
reclassifications, reorganizations or changes
of its capital or business structure, to
merge, to consolidate, to dissolve, to
liquidate or to sell or transfer all or any
part of its business or assets.
9.2 Corporate Changes - A dissolution or liquidation
of the Bank, or a merger or consolidation in which
<PAGE 15> the Bank is not the surviving entity,
shall cause each outstanding Option to terminate,
except to the extent that another corporation may
and does in the transaction assume and continue
the Option or substitute its own options.
9.3 Fractional Shares - Fractional shares resulting
from any adjustment in Options pursuant to this
Article 9 may be settled as a majority of the
disinterested members of the Board or the
Committee (as the case may be) shall determine.
9.4 Binding Determination - To the extent that the
foregoing adjustments relate to stock or
securities of the Bank, such adjustments shall be
made by a majority of the disinterested members of
the Board, whose determination in that respect
shall be final, binding and conclusive. Notice of
any adjustment shall be given by the Bank to each
holder of an Option which shall have been
adjusted.
Article 10. GENERAL PROVISIONS
10.1 Effective Date - The Plan shall become effective
upon its adoption by the Board, provided that any
grant of an Option is subject to the approval of
the Plan by the stockholders of the Bank within
12 months of the Plan's adoption by the Board.
10.2 Termination of the Plan - Unless previously
terminated by the Board of Directors, the Plan
shall terminate on, and no Options shall be
granted after, the tenth anniversary of its
adoption by the Board.
10.3 Limitation on Termination, Amendment or
Modification
(a) The Board may at any time terminate, amend,
modify or suspend the Plan, provided that
without the approval of the stockholders of
the Bank no amendment or modification shall
be made by the Board which:
(i) increases the maximum number of
shares of Common Stock as to which
Options may be granted under the
Plan;
(ii) changes the class of persons
eligible to be granted Options
under the Plan; or
<PAGE 16>
(iii) otherwise requires the approval of
stockholders under applicable tax,
securities or other law.
(b) No amendment, modification, suspension or
termination of the Plan shall in any manner
affect any Option theretofore granted under
the Plan without the consent of the Optionee
or any person validly claiming under or
through the Optionee.
10.4 No Right to Employment - Neither anything
contained in the Plan or in any instrument under
the Plan nor the grant of any Option hereunder
shall confer upon any Optionee any right to
continue in the employ of the Bank or of any
Subsidiary or limit in any respect the right of
the Bank or of any Subsidiary to terminate the
Optionee's employment at any time and for any
reason.
10.5 Withholding Taxes - The Bank will require that an
Optionee, as a condition of the exercise of an
Option, or any other person or entity receiving
Common Stock upon exercise of an Option, pay or
reimburse any taxes which the Bank is required to
withhold in connection with the exercise of the
Option.
10.6 Listing and Registration of Shares -
(a) No Option granted pursuant to the Plan shall
be exercisable in whole or in part if at any
time a majority of the disinterested members
of the Board shall determine in its
discretion that the listing, registration or
qualification of the shares of Common Stock
subject to such Option on any securities
exchange or under any applicable law, or the
consent or approval of any governmental
regulatory body, is necessary or desirable as
a condition of, or in connection with, the
granting of such Option or the issue of
shares thereunder, unless such listing,
registration, qualification, consent or
approval shall have been effected or obtained
free of any conditions not acceptable to a
majority of the disinterested members of the
Board. <PAGE 17>
LIBERTY SAVINGS BANK, F.S.B.
1997 STOCK OPTION PLAN
FOR OUTSIDE DIRECTORS
PAGE 1
<PAGE>
TABLE OF CONTENTS
Page
Article
Article 1. PURPOSE OF THE PLAN ......................... 3
Article 2. DEFINITIONS ................................. 3
Article 3. ADMINISTRATION OF THE PLAN .................. 4
Article 4. COMMON STOCK SUBJECT TO THE PLAN ............ 6
Article 5. STOCK OPTIONS ............................... 6
Article 6. ELIGIBILITY ................................. 8
Article 7. TERM AND EXERCISE OF OPTIONS ................ 9
Article 8. TERMINATION OF EMPLOYMENT ...................13
Article 9. ADJUSTMENT PROVISIONS .......................15
Article 10. GENERAL PROVISIONS ..........................16
PAGE 2
<PAGE>
Article 1. PURPOSE OF THE PLAN
1.1 Purpose - The Liberty Savings Bank, F.S.B. 1997
Stock Option Plan For Outside Directors (the
"Plan") is intended and designed to provide
certain directors of Liberty Savings Bank, F.S.B.
(the "Bank") with an opportunity to acquire Common
Stock of the Bank, thereby giving them a stake in
the continued growth and success of the Bank's
business.
1.2 Stock Options to be Granted - Only Nonqualified
Stock Options may be granted within the
limitations of the Plan herein described.
Article 2. DEFINITIONS
2.1 "Agreement" - The written instrument evidencing
the grant of an Option. A Participant may be
issued one or more Agreements from time to time,
reflecting one or more Options.
2.2 "Bank" - Liberty Savings Bank, F.S.B., a federal
savings bank.
2.3 "Board" - The Board of Directors of the Bank.
2.4 "Code" - The Internal Revenue Code of 1986, as
amended.
2.5 "Committee" - The Committee which the Board
appoints to administer the Plan.
2.6 "Common Stock" - The common stock of the Bank
($1.00 par value) as described in the Bank's
Charter, or such other stock as shall be
substituted therefor.
2.7 "Director" - Any director of the Bank who is not
also, at the time of a grant, a common law
employee of the Bank.
2.8 "Discretionary Option" - A Stock Option granted
pursuant to Section 5.1(b) hereof.
2.9 "Exchange Act" - The Securities Exchange Act of
1934, as amended.
2.10 "Incentive Stock Option" - A Stock Option intended
to satisfy the Requirements of Code
Section 422(b).
2.11 "Mandatory Option" - A Stock Option granted
pursuant to Section 5.1(a) hereof. <PAGE 3>
2.12 "Nonqualified Stock Option" - A stock option other
than an Incentive Stock Option.
2.13 "Optionee" - A Participant who is awarded a Stock
Option pursuant to the provisions of the Plan.
2.14 "Participant" - A Director selected by the
Committee to receive a grant of an Option under
the Plan.
2.15 "Plan" - The Liberty Savings Bank, F.S.B. 1997
Stock Option Plan for Outside Directors.
2.16 "Retirement" - The voluntary termination of an
individual as a Director upon or following the
attainment of age sixty-five.
2.17 "Stock Option" or "Option" - An award of a right
to purchase Common Stock pursuant to the
provisions of the Plan.
Article 3. ADMINISTRATION OF THE PLAN
3.1 The Committee - The Plan shall be administered by
a committee of the Board (the "Committee")
composed of two or more members of the Board, all
of whom are "outside directors" within the meaning
of Code Section 162(m). The Board may from time
to time remove members from, or add members to,
the Committee. Vacancies on the Committee,
howsoever caused, shall be filled by the Board.
3.2 Powers of the Committee -
(a) The Committee shall be vested with full
authority to make such rules and regulations
as it deems necessary or desirable to
administer the Plan and to interpret the
provisions of the Plan, unless otherwise
determined by a majority of the members of
the Board. Any determination, decision or
action of the Committee in connection with
the construction, interpretation,
administration or application of the Plan
shall be final, conclusive and binding upon
all Optionees and any person claiming under
or through an Optionee, unless otherwise
determined by a majority of the members of
the Board.
(b) Subject to the terms, provisions and
conditions of the Plan and subject to review
and approval by a majority of the members of
the Board, the Committee shall have exclusive
jurisdiction to: <PAGE 4>
(i) determine and select (except, with
respect to each member of the
Committee, as to herself or
himself), the Directors to be
granted Discretionary Options (it
being understood that more than one
Option may be granted to the same
person);
(ii) determine the number of shares
subject to each Discretionary
Option;
(iii) determine the date or dates when
Discretionary Options will be
granted;
(iv) determine the date or dates when
each Option may be exercised within
the term of the Option specified
pursuant to Article 7 of the Plan;
and
(v) prescribe the form, which shall be
consistent with the Plan, of the
Agreement evidencing any Options
granted under the Plan.
3.3 Terms - The grant of an Option under the Plan
shall be evidenced by an Agreement and may include
any terms and conditions consistent with this
Plan, as the Committee may determine.
3.4 Liability - No member of the Board or the
Committee shall be liable for any action or
determination made in good faith by the Board or
the Committee with respect to this Plan or any
Options granted under this Plan.
Article 4. COMMON STOCK SUBJECT TO THE PLAN
4.1 Common Stock Authorized - The aggregate number of
shares of Common Stock for which Options may be
granted under the Plan shall not exceed
5,655 shares. The limitation established by the
preceding sentence shall be subject to adjustment
as provided in Article 9 of the Plan.
4.2 Shares Available - The Common Stock to be issued
upon exercise of Options granted under the Plan
shall be made available at the discretion of the
Board, either from authorized but unissued Common
Stock or from Common Stock acquired by the Bank,
including shares purchased in the open market. In
the event that any outstanding Option under the
<PAGE 5> Plan for any reason expires or is
terminated, the shares of Common Stock allocable
to the unexercised portion of such Option may
thereafter be regranted subject to option under
the Plan.
Article 5. STOCK OPTIONS
5.1 Grant of Options; Exercise Price -
(a) Each Director shall be granted, on the date
of his or her election and on each date of
his or her reelection (whether at an annual
meeting or an adjournment thereof), a
Mandatory Option to acquire 125 shares of
Common Stock. In the event the Bank's Board
shall at any time be classified, for purposes
of this Plan, any continuing Director not on
the slate for reelection at an annual meeting
of the Bank's stockholders shall,
notwithstanding such fact, be treated as
being reelected at such meeting (or any
adjournment thereof).
(b) Discretionary Options may also be granted to
any Director from time to time, in the
discretion of a disinterested majority of the
members of the Committee, subject to
ratification by a majority of the
disinterested members of the Board. Such
ratification by the Board shall include a
determination, which may be based on an
opinion of legal counsel, that such grants do
not violate the laws governing corporate
self-dealing applicable to the Bank.
(c) The exercise price of a Nonqualified Stock
Option to purchase a share of Common Stock
shall be the fair market value of a share on
the grant date, as determined in Section 5.2.
The exercise price shall be subject to
adjustment as provided in Article 9 of the
Plan.
5.2 Determination of Fair Market Value -
(a) During such time as Common Stock is not
listed on an established stock exchange or
exchanges but is listed in the NASDAQ
National Market System, the fair market value
per share shall be the closing sale price for
the Common Stock on the day the Option is
granted. If no sale of Common Stock has
occurred on that day, the fair market value
shall be determined by reference to such
<PAGE 6> price for the next preceding day on
which a sale occurred.
(b) During such time as the Common Stock is not
listed on an established stock exchange or in
the NASDAQ National Market System, fair
market value per share shall be the mean
between the closing dealer "bid" and "asked"
prices for the Common Stock for the day of
the grant, and if no "bid" and "asked" prices
are quoted for the day of the grant, the fair
market value shall be determined by reference
to such prices on the next preceding day on
which such prices were quoted.
(c) If the Common Stock is listed on an
established stock exchange, the fair market
value shall be deemed to be the closing price
of Common Stock on such stock exchange on the
day the Option is granted or, if no sale of
Common Stock has been made on such stock
exchange on that day, the fair market value
shall be determined by reference to such
price for the next preceding day on which a
sale occurred.
(d) In the event that the Common Stock is not
traded on an established stock exchange or in
the NASDAQ National Market System, and no
closing dealer "bid" and "asked" prices are
available on the date of a grant, then fair
market value will be the price established by
the Committee in good faith.
5.3 Transferability of Options - Unless otherwise
designated by the Committee to the contrary, each
Option granted under the Plan shall by its terms
be non-transferable by the Optionee (except by
will or the laws of descent and distribution), and
each Option shall be exercisable during the
Optionee's lifetime only by the Optionee, his
guardian or legal representative or by such other
means as the Committee may approve from time to
time, provided that, if the Bank is at the time of
such approval subject to the provisions of either
Section 16(b) of the Exchange Act or Rule 16b-3
thereunder, as either may be amended from time to
time (or any law, rule, regulation or other
provision that may hereafter replace such Section
or Rule), such means is not inconsistent with or
contrary to such Section or Rule or replacement
thereof. An Optionee may also designate a
beneficiary to exercise his or her Options after
the Optionee's death. The Committee may amend
outstanding Options to provide for transfer,
<PAGE 7> without payment of consideration, to
immediate family members of the Optionee or to
trusts or partnerships for such family members.
5.4 Limitation on Grants - Grants to any Director
under this Plan, during any period of 12
consecutive months, shall not exceed in the
aggregate Options to acquire more than 2,500
shares of Common Stock. Such limitation shall be
subject to adjustment in the manner described in
Article 9 and by giving effect to any adjustment
in other Options granted during the relevant 12
month period.
Article 6. ELIGIBILITY
6.1 Participation - Options shall be granted only to
persons who are Directors.
Article 7. TERM AND EXERCISE OF OPTIONS
7.1 Termination -
(a) Each Option granted under the Plan shall
terminate on the date determined by the
Committee and approved by a majority of the
members of the Board, and specified in the
Agreement; provided, however, that no Option
shall terminate later than ten years and one
month after the date of grant. Except as
otherwise provided in Section 8.4, each
Option granted under the Plan shall become
exercisable only after the earlier of the
date on which (i) the Optionee has completed
11 months of continuous service as a Director
with the Bank immediately following the date
of the grant of the Option or (ii) a Change
in Control occurs. The Committee at its
discretion may provide further limitations on
the exercisability of Options granted under
the Plan. An Option may be exercised only
during the continuance of the Optionee's
service as a Director, except as provided in
Article 8.
(b) For purposes of Section 7.1(a), a "Change in
Control" shall be deemed to have occurred
upon the happening of any of the following:
(i) any "Person" (as such term is used
in Sections 13(d) and 14(d) of the
Exchange Act (except for (1) the
Bank or any Subsidiary, or (2) any
of the Bank's employee benefit
plans (or any trust forming a part
<PAGE 8> thereof) (the "Benefit
Plan(s)")) is or becomes the
beneficial owner, directly or
indirectly, of the Bank's
securities representing 19.9% or
more of the combined voting power
of the Bank's then outstanding
securities, other than pursuant to
an excepted transaction described
in Clause (iii) below;
(ii) a binding written agreement is
executed (and, if legally required,
approved by the Bank's
stockholders) providing for a sale,
exchange, transfer or other
disposition of substantially all of
the assets of the Bank to another
entity, except to an entity
controlled directly or indirectly
by the Bank;
(iii) the stockholders of the Bank
approve a merger, consolidation,
share exchange, division or other
reorganization of or relating to
the Bank, unless:
(A) the stockholders of the Bank
immediately before such
merger, consolidation, share
exchange, division or
reorganization, own, directly
or indirectly immediately
following such merger,
consolidation, share exchange,
division or reorganization at
least 66-2/3% of the combined
voting power of the
outstanding voting securities
of the Bank resulting from
such merger, consolidation,
share exchange, division or
reorganization (the "Surviving
Bank") in substantially the
same proportion as their
ownership of the voting
securities immediately before
such merger, consolidation,
share exchange, division or
reorganization; and
(B) the individuals who,
immediately before such
merger, consolidation, share
<PAGE 9> exchange, division or
reorganization, are members of
the Board (the "Incumbent
Board"), continue to
constitute at least 66-2/3% of
the Board of Directors of the
Surviving Bank; provided,
however, that if the election,
or nomination for election by
the Bank's stockholders of any
new director was approved by a
vote of at least 66-2/3% of
the Incumbent Board, such new
director shall, for the
purposes hereof, be considered
a member of the Incumbent
Board; provided further,
however, that no individual
shall be considered a member
of the Incumbent Board if such
individual initially assumed
office as a result of either
an actual or threatened
"Election Contest" (as
described in Rule 14a-11
promulgated under the Exchange
Act) or other actual or
threatened solicitation of
proxies or consents by or on
behalf of a Person other than
the Board (a "Proxy Contest")
including by reason of any
agreement intended to avoid or
settle any Election Contest or
Proxy Contest; and
(C) no Person (except (1) the Bank
or any Subsidiary, (2) any
Benefit Plan, (3) the
Surviving Bank or any
subsidiary of the Surviving
Bank, or (4) any Person who,
immediately prior to such
merger, consolidation, share
exchange, division or
reorganization had beneficial
ownership of 19.9% or more of
the then outstanding voting
securities of the Bank) has
beneficial ownership of 19.9%
or more of the combined voting
power of the Surviving Bank's
then outstanding voting
securities immediately
following such merger,
<PAGE 10> consolidation, share
exchange, division or
reorganization;
(iv) a plan of liquidation or
dissolution of the Bank, other than
pursuant to bankruptcy or
insolvency laws, is adopted; or
(v) during any period of two
consecutive years, individuals, who
at the beginning of such period,
constituted the Board cease for any
reason to constitute at least a
majority of the Board, unless the
election, or the nomination for
election by the Bank's
stockholders, of each new director
was approved by a vote of at least
66-2/3% of the directors then still
in office who were directors at the
beginning of the period; provided,
however, that no individual shall
be considered a member of the Board
at the beginning of such period if
such individual initially assumed
office as a result of either an
actual or threatened Election
Contest or Proxy Contest, including
by reason of any agreement intended
to avoid or settle any Election
Contest or Proxy Contest.
Notwithstanding the foregoing, a Change in
Control shall not be deemed to have occurred
if a Person becomes the beneficial owner,
directly or indirectly, of securities
representing 19.9% or more of the combined
voting power of the Bank's then outstanding
securities solely as a result of an
acquisition by the Bank of its voting
securities which, by reducing the number of
shares outstanding, increases the
proportionate number of shares beneficially
owned by such Person; provided, however, that
if a Person becomes a beneficial owner of
19.9% or more of the combined voting power of
the Bank's then outstanding securities by
reason of share repurchases by the Bank and
thereafter becomes the beneficial owner,
directly or indirectly, of any additional
voting securities of the Bank (other than
pursuant to a stock split, stock dividend or
similar transaction), then a Change in
<PAGE 11> Control shall be deemed to have
occurred with respect to such Person under
Clause (i).
7.2 Exercise -
(a) A person electing to exercise an Option shall
give written notice to the Bank of such
election and of the number of shares he has
elected to purchase, in such form as the
Committee shall have prescribed or approved,
and shall at the time of exercise tender the
full purchase price of the shares he has
elected to purchase. The purchase price
shall be paid in full, in cash, upon the
exercise of the Option; provided, however,
that in lieu of cash, with the approval of
the Committee at or prior to exercise, an
Optionee may exercise his Option by tendering
to the Bank shares of Common Stock owned by
him and having a fair market value equal to
the cash exercise price applicable to his
Option (with the fair market value of such
stock to be determined in the manner provided
in Section 5.2 hereof) or by delivering such
combination of cash and such shares as the
Committee in its sole discretion may approve.
(b) A person holding more than one Option at any
relevant time may, in accordance with the
provisions of the Plan, elect to exercise
such Options in any order.
(c) In addition, at the request of the
Participant and to the extent permitted by
applicable law, the Bank may, in its sole
discretion, selectively approve arrangements
with a brokerage firm under which such
brokerage firm, on behalf of the Participant,
shall pay to the Bank the exercise price of
the Options being exercised, and the Bank,
pursuant to an irrevocable notice from the
Participant, shall promptly deliver the
shares being purchased to such firm.
Article 8. TERMINATION OF STATUS AS DIRECTOR
8.1 Retirement - In the event of Retirement, an Option
shall lapse at the earlier of the expiration of
the term of the Option or up to 24 months, at the
discretion of the Committee, from the date of
Retirement.
8.2 Death or Disability - In the event of termination
of an individual's status as a Director due to
<PAGE 12> death or disability (as defined in Code
Section 72(m)), the Option shall lapse at the
earlier of the expiration of the term of the
Option or one year after termination due to any
such cause.
8.3 Other Termination - Except as otherwise provided
in Sections 8.4(a) and (c), in the event of
termination of an individual's status as a
Director for any reason other than is described in
Section 8.1 or 8.2, all Options shall lapse as of
the date of termination.
8.4 Special Termination Provisions -
(a) Notwithstanding anything herein to the
contrary, the Committee may, in its
discretion and subject to the approval of a
majority of the members of the Board, waive
the eleven-month continuous service
requirement set forth in Section 7.1(a) and
permit the exercise of an Option held by a
Director whose service as such has terminated
prior to the satisfaction of such
requirement. Any such waiver may be made
with retroactive effect provided it is made
within 60 days following the Optionee's
termination.
(b) In the event the Committee waives the
continuous service requirement with respect
to an Option and the circumstance of the
Director's termination is described in
Section 8.1 or 8.2, the Option will lapse as
otherwise provided in the relevant section.
(c) Notwithstanding anything herein to the
contrary, the Committee may, in its
discretion, waive the lapse provisions of
Section 8.3 and permit the exercise of an
Option until a date which is the earlier of
the expiration of the term of such Option or
up to 24 months from the date of termination.
Article 9. ADJUSTMENT PROVISIONS
9.1 Share Adjustments -
(a) In the event that the shares of Common Stock,
as presently constituted, shall be changed
into or exchanged for a different number or
kind of shares of stock or other securities
of the Bank or of another corporation
(whether by reason of merger, consolidation,
recapitalization, reclassification, split-up,
<PAGE 13> combination of shares or otherwise)
or if the number of such shares of stock
shall be increased through the payment of a
stock dividend, then, subject to the
provisions of Subsection (c) below, there
shall be substituted for or added to each
share of Common Stock which was theretofore
appropriated, or which thereafter may become
subject to an Option under the Plan, the
number and kind of shares of stock or other
securities into which each outstanding share
of the Common Stock shall be so changed or
for which each such share shall be exchanged
or to which each such share shall be
entitled, as the case may be. Outstanding
Options shall also be appropriately amended
as to price and other terms, as may be
necessary to reflect the foregoing events.
(b) If there shall be any other change in the
number or kind of the outstanding shares of
the Common Stock, or of any stock or other
securities in which such Common Stock shall
have been changed, or for which it shall have
been exchanged, and if a majority of the
members of the Board shall, in its sole
discretion, determine that such change
equitably requires an adjustment in any
Option which was theretofore granted or which
may thereafter be granted under the Plan,
then such adjustment shall be made in
accordance with such determination.
(c) The grant of an Option pursuant to the Plan
shall not affect in any way the right or
power of the Bank to make adjustments,
reclassifications, reorganizations or changes
of its capital or business structure, to
merge, to consolidate, to dissolve, to
liquidate or to sell or transfer all or any
part of its business or assets.
9.2 Corporate Changes - A dissolution or liquidation
of the Bank, or a merger or consolidation in which
the Bank is not the surviving entity, shall cause
each outstanding Option to terminate, except to
the extent that another corporation may and does
in the transaction assume and continue the Option
or substitute its own options.
R\E Fractional Shares - Fractional shares resulting
from any adjustment in Options pursuant to this
Article 9 may be settled as a majority of the
members of the Board or the Committee (as the case
may be) shall determine. <PAGE 14>
9.4 Binding Determination - To the extent that the
foregoing adjustments relate to stock or
securities of the Bank, such adjustments shall be
made by a majority of the members of the Board,
whose determination in that respect shall be
final, binding and conclusive. Notice of any
adjustment shall be given by the Bank to each
holder of an Option which shall have been
adjusted.
Article 10. GENERAL PROVISIONS
10.1 Effective Date - The Plan shall become effective
upon its adoption by the Board, provided that any
grant of an Option is subject to the approval of
the Plan by the stockholders of the Bank within
12 months of the Plan's adoption by the Board.
10.2 Termination of the Plan - Unless previously
terminated by the Board of Directors, the Plan
shall terminate on, and no Options shall be
granted after, the tenth anniversary of its
adoption by the Board.
10.3 Limitation on Termination, Amendment or
Modification
(a) The Board may at any time terminate, amend,
modify or suspend the Plan, provided that
without the approval of the stockholders of
the Bank no amendment or modification shall
be made by the Board which otherwise requires
the approval of such stockholders under
applicable tax, securities or other law.
(b) No amendment, modification, suspension or
termination of the Plan shall in any manner
affect any Option theretofore granted under
the Plan without the consent of the Optionee
or any person validly claiming under or
through the Optionee.
10.4 No Right to Continued Status as Director - Neither
anything contained in the Plan or in any
instrument under the Plan nor the grant of any
Option hereunder shall confer upon any Optionee
any right to continue as a Director (or to be
nominated for such position) of the Bank.
10.5 Withholding Taxes - The Bank will require that an
Optionee, as a condition of the exercise of an
Option, or any other person or entity receiving
Common Stock upon exercise of an Option, pay or
reimburse any taxes which the Bank may be required
<PAGE 15> to withhold in connection with the
exercise of the Option.
10.6 Listing and Registration of Shares -
(a) No Option granted pursuant to the Plan shall
be exercisable in whole or in part if at any
time a majority of the members of the Board
shall determine in its discretion that the
listing, registration or qualification of the
shares of Common Stock subject to such Option
on any securities exchange or under any
applicable law, or the consent or approval of
any governmental regulatory body, is
necessary or desirable as a condition of, or
in connection with, the granting of such
Option or the issue of shares thereunder,
unless such listing, registration,
qualification, consent or approval shall have
been effected or obtained free of any
conditions not acceptable to a majority of
the members of the Board. <PAGE 16>
Exhibit 10.3
EMPLOYMENT CONTRACT
THIS AGREEMENT, entered into as of the 1st day of August,
1995, by and between GREATER POTTSVILLE FEDERAL SAVINGS AND LOAN
ASSOCIATION (the "Association"), a federally-chartered savings
and loan association, and JUDITH I. HOFFMAN (the "Executive").
BACKGROUND:
A. The Association desires to retain the services of
Executive on the terms and conditions set forth herein and, for
purpose of effecting the same, the Board of Directors of the
Association has approved this Employment Agreement and authorized
its execution and delivery on the Association's behalf to the
Executive.
B. The services of the Executive, her experience in and
knowledge of the thrift industry, and her reputation and contacts
in the industry are extremely valuable to the Association.
C. The Association wishes to attract and retain such well-
qualified executives and it is in the best interests of the
Association and of the Executive to secure the services of the
Executive notwithstanding any change in control of the
Association.
D. The Association considers the establishment and
maintenance of a sound and vital management to be part of its
overall corporate strategy and to be essential to protecting and
enhancing the best interests of the Association and its
stockholders.
NOW, THEREFORE, to assure the Association of the Executive's
dedication, the availability of her advice and counsel to the
Board of Directors of the Association and the availability of her
management skills to the Association, and to induce the Executive
to accept employment with the Association and for other good and
valuable consideration, the receipt and adequacy whereof each
party hereby acknowledges, the Association and the Executive
hereby agree as follows:
ARTICLE I
1. EMPLOYMENT: The Association agrees to, and does
hereby, employ Executive as Executive Vice President and Chief
Executive Officer of the Association, and Executive agrees to,
and does hereby, accept such employment, for the period set forth
in Section 2.
2. TERM: This Agreement shall be for a three (3) year
period commencing on August 1, 1995 and ending on July 31, 1998;
provided, however, that this Agreement shall be automatically
renewed on August 1, 1996 for the three (3) year period <PAGE 1>
commencing August 1, 1996 and ending July 31, 1999 unless either
party shall give written notice of nonrenewal to the other party
on or before May 31, 1996 in which case this Agreement shall
continue in effect through July 31, 1998; and further provided
that if this Agreement is renewed on August 1, 1996 it shall be
automatically renewed on August 1 of each subsequent year (the
"Annual Renewal Date") for a period ending three (3) years from
each Annual Renewal Date unless either party shall give written
notice of nonrenewal to the other party at least sixty (60) days
prior to an Annual Renewal Date, in which case this Agreement
shall continue in effect for a term ending two (2) years from the
Annual Renewal Date immediately following such notice.
3. EXECUTIVE DUTIES AND OBLIGATIONS: (a) Executive
agrees that, during the term of her employment under this
Agreement and in her capacity as Executive Vice President and
Chief Executive Officer, she will devote her full business time
and energy to the business, affairs and interests of the
Association and serve it diligently and to the best of her
ability. The services and duties to be performed by the
Executive during her active service employment shall be those
appropriate to the Executive Vice President and Chief Executive
Officer of the Association as currently in effect as of the date
of this Agreement.
(b) Executive agrees that during the term of her employment
hereunder, except with the express consent of the Board of
Directors of the Association, she will not, directly or
indirectly, engage or participate in, become a director of or
render advisory or other services for any firm, corporation,
business entity or business enterprise directly competitive with
or to any business of the Association; provided, however, that
Executive shall not thereby be precluded or prohibited from
owning passive investments so long as such ownership does not
require her to devote substantial time to the management or
control of the business or activities in which she has invested.
Notwithstanding anything to the contrary contained in the
Agreement, during the term of this Agreement Executive shall have
no employment contract or other written or oral agreement with
any entity or person other than Association concerning employment
as an officer. Nothing contained in this Agreement shall in any
way restrict the right of Executive to serve as a director,
officer, trustee or in any similar capacity with respect to any
charitable or non-profit organization, any fraternal organization
or any church or religious organization, or as a trustee or
fiduciary with respect to any trust, will or estate.
(c) Executive agrees and acknowledges that by virtue of her
employment hereunder she will maintain an intimate knowledge of
the activities and affairs of the Association including trade
secrets, customer lists, stockholders lists, and other
confidential matters. As a result, and also because of the
special, unique, and extraordinary services that Executive is
capable of performing for the Association or one of its
competitors, Executive recognizes that the services to be
<PAGE 2> rendered by her hereunder are of a character giving them
a peculiar value, the loss of which cannot be adequately or
reasonably compensated for by damages. Executive therefore
agrees that if she fails to render to the Association the
services required hereunder, or if during the term of employment
Executive renders services to a competitor of the Association
other than as authorized herein, the Association shall be
entitled to immediate injunctive or other equitable relief to
restrain Executive from failing to render her services hereunder,
or from rendering her services to others, in addition to any
other remedies to which the Association may be entitled under
law.
(d) Executive shall not directly or indirectly disclose or
use at any time, either during or subsequent to her employment
hereunder, any secret or confidential information, knowledge, or
data of Association whether or not obtained, acquired or
developed by Executive unless she shall first secure the written
consent of the Association. Upon termination of her employment,
Executive shall turn over to the Association all notes,
memoranda, notebooks, drawings or other documents made by,
compiled by, or delivered to her concerning any customers,
accounts, loans, systems, or any other matter, used, developed or
investigated by the Association during the period of her
employment; it being agreed that the same and all information
contained therein are at all times property of the Association.
Executive, at any time during or after the termination of the
Executive's employment, never shall have or claim any right,
title, or interest in any trademark, trade name or character
names belonging to or used by the Association, and never shall
have or claim any right, title, or interest in any material or
matter of any sort prepared for or used in connection with
advertising, broadcasting, or promotion of the business of the
Association, whether produced, prepared, published or broadcasted
in whole or in part by the Association, it being the intention of
this Agreement that the Executive shall, and hereby does,
recognize that the Association now has and shall hereafter have
and retain the exclusive rights in any and all such trademarks,
trade names, character names, material and matter referred to
herein.
4. COMPENSATION: The Association agrees to pay Executive,
and Executive agrees to accept, as compensation for all services
rendered by her to the Association, compensation at the annual
rate of Fifty-Two Thousand Five Hundred Dollars ($52,500) which
shall be payable in conformity with Association's policy relating
to salaried employees. Such salary shall be increased in the
sole and absolute discretion of the Association's Board of
Directors or Committees thereof duly authorized by the Board to
so act.
5. PARTICIPATION IN BENEFIT PLANS, REIMBURSEMENT OF
BUSINESS EXPENSES AND MOVING EXPENSES: (a) During the term of
employment under this Agreement, Executive shall be entitled to
participate in any pension, group insurance, hospitalization,
<PAGE 3> deferred compensation or other benefit or incentive
plans of the Association presently in effect or hereafter adopted
by the Association and generally available to all employees of
senior executive status, and, additionally, Executive shall be
entitled to have the use of the Association's facilities and
executive benefits as are customarily made available by the
Association to its executive officers.
(b) During the term of this Agreement, to the extent that
such expenditures meet the requirements of the Internal Revenue
Code of 1986, as amended, for deductibility by the Association
for federal income tax purposes and are substantiated by the
Executive as required by the Internal Revenue Service and
policies of the Association, the Association shall reimburse the
Executive promptly for all expenditures, transportation expenses,
travel, entertainment, parking, business meetings, and the
monthly costs, including dues, of maintaining memberships at
appropriate clubs, made in accordance with rules and policies
established from time to time by the Board of Directors of the
Association in pursuance and furtherance of the Association's
business and goodwill.
(c) During the term of this Agreement, Executive shall be
entitled to annual vacation leave no less favorable than that
received by any other employee of the Association.
6. ILLNESS: In the event Executive is unable to perform
her duties under this Agreement on a full-time basis for a period
of three (3) consecutive months by reason of illness or other
physical or mental disability, and at or before the end of such
period she does not return to work on a full-time basis, the
Association may terminate this Agreement without further or
additional compensation payment being due the Executive from the
Association pursuant to this Agreement, except (i) in the case of
the termination of this Agreement by the Association under this
Section 6 after a Notice of Termination (as defined in Section
9(a)) is delivered by the Executive, the Executive shall
nevertheless be absolutely entitled to receive, in addition to
benefits payable in accordance with the Association's insurance
programs then in effect, all of the compensation and benefits
provided for in, and for the term set forth in, Section 10; and
(ii) benefits accrued through the date of such termination under
employee benefit plans of the Association. The benefits
described in clause (ii) shall be for and shall include the
greater of (a) the long-term disability, other insurance and
other benefits in effect for the employees of the Association as
of the date of this Agreement or (b) the long-term disability,
other insurance and other benefits then regularly provided by the
Association to disabled employees, as well as any other insurance
benefits so provided.
7. DEATH: In the event of the Executive's death during
the term of this Agreement, her estate, legal representatives or
named beneficiaries (as directed by Executive in writing) shall
receive compensation in accordance with the Association's
<PAGE 4> established Life Insurance Program, which currently is
equal to an amount of three (3) times the annual salary with a
maximum benefit of Six Hundred Thousand Dollars ($600,000);
provided, however, that if the Executive dies after a Notice of
Termination (as defined in Section 9(a)) has been delivered by
the Executive, and any amounts would be payable to the Executive
under this Agreement if she had continued to live, all amounts
shall be paid in accordance with the terms of this Agreement to
the Executive's devisee, legatee, or other designee, or if there
is no such designee, to the Executive's estate.
8. TERMINATION BY ASSOCIATION FOR CAUSE: Notwithstanding
the provisions of Section 2 of this Agreement, the Board of
Directors of the Association may, in its sole discretion,
terminate the Executive's employment for Cause. For the purposes
of this Agreement, (a) prior to a Change in Control (as defined
in Section 9(b) of this Agreement), the Association shall have
"Cause" to terminate the Executive's employment hereunder because
of the Executive's personal dishonesty, incompetency, willful
misconduct, breach of fiduciary duty involving personal profit,
willful failure to perform stated duties, willful violation of
any law, rule, regulation (other than traffic violations or
similar offenses) or a final cease and desist order issued by the
Office of Thrift Supervision ("OTS") or material breach of any
provision of this Agreement, and (b) following a Change in
Control, as defined in Section 9(b) of this Agreement, and
subject to any applicable regulations of the Office of Thrift
Supervision or any other regulatory body having jurisdiction, the
Association shall have "Cause" to terminate the Executive's
employment hereunder only because of (i) the Executive's
conviction for commission of, or plea of guilty or nolo
contendere to, a felony or the actual incarceration of the
Executive for a period of forty-five (45) consecutive days, or
(ii) the issuance by any federal banking authority of an order
directing that the Executive's employment with the Association be
terminated or that the Executive be relieved of the duties being
performed by the Executive for the Association. For the purposes
of the paragraph, no act, or failure to act, on the Executive's
part shall be considered "willful" unless done, or omitted to be
done, by her not in good faith and without reasonable belief that
her action or omission was in the best interest of the
Association; provided that any act or omission on the Executive's
behalf in reliance upon an opinion of counsel to the Association
or counsel to the Executive shall not be deemed to be willful.
In addition, no action or omission by the Executive which was
believed to be in the best interest of the Association, and no
error in judgment, shall be considered "cause" or "incompetency"
for purposes of this paragraph. Notwithstanding the foregoing,
the Executive shall not be deemed to have been terminated for
Cause unless and until there shall have been delivered to her a
copy of a certification by a two-thirds majority of the members
of the Board of Directors of the Association finding that, in the
good faith opinion of such two-thirds majority, the Executive was
guilty of conduct which is deemed to be of Cause within the
meaning of the first sentence of this paragraph and specifying
<PAGE 5> the particulars thereof in detail, after reasonable
notice to the Executive and an opportunity for her, together with
her counsel, to be heard before such two-thirds majority.
9. TERMINATION FOLLOWING CHANGE IN CONTROL.
(a) If a Change in Control (as defined in Section 9(b)
of this Agreement) shall occur and if thereafter, at any time
during the term of this Agreement, there shall be:
(i) any involuntary termination of the Executive
(other than as set forth in Sections 6, 7 or 8 of this
Agreement);
(ii) any reduction in the Executive's title,
responsibilities (including reporting responsibilities), or
authority, including such title, responsibilities or authority as
may be increased from time to time during the term of this
Agreement;
(iii) the assignment to the Executive of duties
inconsistent with the Executive's office on the date of a Change
in Control or as the same may be increased from time to time
after a Change in Control;
(iv) any reassignment of the Executive to a
location greater than fifteen (15) miles from 21 South Centre
Street, Pottsville, Pennsylvania;
(v) any reduction in the Executive's annual base
salary in effect on the date of a Change in Control or as the
same may be increased from time to time after a Change in
Control;
(vi) any failure to continue the Executive's
participation, on substantially similar terms, in any incentive
compensation or bonus plans of the Association in which the
Executive participated at the time of the Change in Control or
any change or amendment to any of the substantive provisions of
any of such plans which would materially decrease the potential
benefits to the Executive under any of such plans;
(vii) any failure to provide the Executive with
benefits at least as favorable as those enjoyed by the Executive
under any of the Association's pension, life insurance, medical,
health and accident, disability or other employee plans in which
the Executive participated at the time of the Change in Control,
or the taking of any action that would materially reduce any of
such benefits in effect at the time of the Change in Control,
unless such reduction relates to a reduction in benefits
applicable to all employees generally;
(viii) any requirement that the Executive travel
in performance of her duties on behalf of the Association for a
significantly greater period of time during any year than was
<PAGE 6> required of the Executive during the year preceding the
year in which the Change in Control occurred;
(ix) any sustained pattern of interruption or
disruption of the Executive for matters substantially unrelated
to the Executive's discharge of her duties on behalf of the
Association; or
(x) any breach of this Agreement of any nature
whatsoever on the part of the Association;
Then, at the option of the Executive, exercisable by the
Executive within ninety (90) days of the occurrence of each and
every of the foregoing events, the Executive may resign from
employment with the Association (or, if involuntarily terminated,
give notice of intention to collect benefits under this
Agreement) by delivering a notice in writing (the "Notice of
Termination") to the Association and the provisions of Section 10
of this Agreement shall apply.
(b) As used in this Agreement, "Change in Control"
shall mean the occurrence of any of the following:
(i) any "person" or "group" (as those terms are
defined or used in Section 13(d) of the Securities Exchange Act
of 1934 (the "Exchange Act"), as enacted and in force on the date
hereof) is or becomes the "beneficial owner" (as that term is
defined in Rule 13d-3 under the Exchange Act, as enacted and in
force on the date hereof) of securities of the Association
representing 24.99% or more of the combined voting power of the
Association's securities then outstanding;
(ii) there occurs a merger, consolidation, or
other reorganization involving the Association and another entity
or a sale, exchange, transfer, or other disposition of
substantially all of the stock or assets of the Association to
another entity or other person, or a purchase by the Association
of substantially all of the stock or assets of another entity,
unless (A) such merger, consolidation, reorganization, sale,
exchange, transfer, disposition or purchase is approved in
advance by eighty percent (80%) or more of the members of the
Association's Board of Directors who are not interested in the
transaction, and (B) stockholders who held at least a majority of
the voting power of the Association's securities outstanding
immediately prior to consummation of any such transaction hold at
least a majority of the voting power of the outstanding
securities of the legal entity resulting from or existing after
any such transaction, and (C) a majority of the members of the
Board of Directors of the legal entity resulting from or existing
after any such transaction are former members of the Board of
Directors of the Association;
(iii) there occurs a contested proxy
solicitation of the Association's stockholders which results in
the contesting party obtaining the ability to elect twenty-five
<PAGE 7> percent (25%) or more of the members of the Board of
Directors standing for election at any meeting of the
Association's stockholders;
(iv) at any meeting of the Association's
stockholders at which directors are elected, less than fifty-one
percent (51%) of the directors elected at such meeting were
nominated by the members of the Board of Directors in office at
the time of such meeting; or
(v) there occurs a change in control of the
Association of a nature that would be required to be reported in
response to Item 5(e) of Schedule 14A of Regulation 14A under
the Exchange Act, as enacted and in force on the date hereof,
whether or not the Association is then subject to such reporting
requirement.
10. RIGHTS IN EVENT OF TERMINATION FOLLOWING CHANGE IN
CONTROL. (a) In the event that the Executive delivers a Notice
of Termination to the Association, the Executive shall be
absolutely entitled to receive the compensation and benefits set
forth below for a period of three (3) years from the date of the
Notice of Termination, as follows:
(i) the Executive shall continue to receive
payments of annual base salary at the highest amount in effect
during the three (3) calendar years preceding the year in which
the Notice of Termination is delivered, payable in the same
manner as salaries paid to other executive employees of the
Association.
(ii) the Executive shall receive, no later than
the fifth (5th) calendar day of each month, an amount equal to
one-twelfth (1/12) of the highest annual incentive bonus received
by the Executive from the Association since the beginning of her
employment, or if the Association has in effect an annual
executive incentive plan, an amount equal to one-twelfth (1/12)
of the annual dollar amount the Executive would have received
under the incentive plan, based on the Executive's highest annual
base salary in effect during, and based on the highest percentage
award of annual base salary received by the Executive under such
Plan during, the three (3) calendar years preceding the year in
which the Notice of Termination is delivered;
(iii) the Executive shall receive, no later than
the fifth (5th) calendar day of each month, an amount equal to
one-twelfth (1/12) of the amount of the highest contribution made
by the Association on behalf of the Executive to each employee
benefit plan in effect (other than the plans referred to in
paragraph 10(a)(iv) below) during the three (3) calendar years
preceding the year in which the Notice of Termination is
delivered;
(iv) the Executive shall be entitled to continue
to participate in the employee retirement plan of the <PAGE 8>
Association, or any supplemental executive retirement plan or
other plan in effect during the term of this Agreement designed
to supplement payments made under such employee retirement plan,
as if the Executive's employment had not terminated; and
(v) the Association shall provide the Executive
with life, disability, and medical insurance benefits at levels
equivalent to the highest levels in effect for the Executive
during the three (3) calendar years preceding the year in which
the Notice of Termination is delivered.
(b) In the event that the Executive is ineligible to
continue participation in the employee retirement plan of the
Association, or any supplemental executive retirement plan or
other plan in effect during the term of this Agreement designed
to supplement payments made under the employee retirement plan,
or in any of the life, disability, or medical insurance plans or
programs providing the benefits described in Section 10 (a)(v) of
this Agreement, the Association shall, in lieu of such
participation, pay the Executive a dollar amount equal to the
dollar amount of the benefits forfeited by the Executive as a
result of such ineligibility in the case of the retirement plan
or other plan, or a dollar amount equal to the cost to the
Executive to obtain such benefits in the case of any life,
disability, or medical insurance plans or programs.
(c) The Association shall pay to the Executive all
legal fees and expenses incurred by the Executive as a result of
the Executive's delivery of a Notice of Termination (including
all such fees and expenses, if any, incurred in contesting or
disputing any termination of employment or in seeking to obtain
or enforce any right or benefit provided by this Agreement).
(d) The Executive shall not be required to mitigate
the amount of any payment provided for in this Section 10 by
seeking other employment or otherwise, nor shall the amount of
any payment or benefit provided for in this Section 10 be reduced
by any compensation earned by the Executive as a result of
employment by another employer or by reason of the Executive's
receipt of or right to receive any retirement or other benefits
after the date of termination of employment or otherwise;
provided, however, that the payments provided for in this Section
10 shall be reduced by the amount actually received by the
Executive under any severance policy of the Association then in
effect.
(e) Upon written request of the Executive, the
Association's obligation to make payments under this Section 10
shall be secured in total (i) by a stand-by letter of credit
obtained by the Association from a recognized financial
institution the long-term obligations of which are rated, on the
date of such request, investment grade or better by Standard &
Poor's Corporation or Moody's Investors Service, Inc. or (ii) by
such other reasonable security as the Executive shall approve.
<PAGE 9>
(f) The Executive's right to receive payments under
this Agreement shall not decrease the amount of , or otherwise
adversely affect, any benefits payable to the Executive under any
plan, agreement, or arrangement relating to employee benefits
provided by the Association.
(g) It is the intention of the parties that the
severance payments under Section 10(a) of this Agreement shall
not constitute "excess parachute payments" within the meaning of
Section 280G of the Internal Revenue Code of 1986, as amended,
and any regulations thereunder. If the independent accountants
acting as auditors for the Association immediately prior to a
Change in Control determine that the severance payments under
this Agreement constitute "excess parachute payments," the
payments may be reduced to the maximum amount which may be paid
without the payments being "excess parachute payments." The
determination shall take into account (i) whether the payments
are "parachute payments" under Section 280G and, if so, (ii)
the amount of payments under this Agreement that constitutes
reasonable compensation under Section 280G. Nothing contained
in this Agreement shall prevent the Association after a Change in
Control from agreeing to pay the Executive compensation or
benefits in excess of those provided in this Agreement.
11. RESIGNATION: In the event that Executive resigns from
or otherwise voluntarily terminates her employment with the
Association at any time, except in the case of a termination of
employment in which a Notice of Termination is delivered by the
Executive, or if the Association terminates the Executive's
employment for Cause in accordance with Section 8 of this
Agreement, this Agreement shall terminate upon the date of such
resignation or other termination of employment and thereupon the
Association shall have no obligation to make any further payments
under this Agreement, provided that the Executive shall be
entitled to receive any vested benefits, insured or otherwise,
that she would otherwise be eligible to receive under any benefit
plans of the Association.
ARTICLE II
12. NOTICES: For the purposes of this Agreement, notices
and all other communications provided for in the Agreement shall
be in writing and shall be deemed to have been duly given when
delivered or mailed by United States registered or certified
mail, return receipt requested, postage prepaid, addressed as
follows:
If to the Executive:
Judith I. Hoffman
122 North 18th Street
Pottsville, Pennsylvania 17901
If to the Association:
<PAGE 10>
Board of Directors
Greater Pottsville Federal Savings
and Loan Association
21 South Centre Street
Pottsville, Pennsylvania 17901
or at such other address as any party may have furnished to the
other in writing in accordance herewith, except that notices of
change of address shall be effective only upon receipt.
13. MODIFICATION-WAIVERS-APPLICABLE LAW: 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 on behalf of the Association by such officer
as may be specifically designated by the Board of Directors of
the Association. No waiver by either party hereto at any time of
any breach by the other party hereto of, or in 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. No agreements or representations, oral or
otherwise, express or implied, with respect to the subject matter
hereof have been made by either party which are not set forth
expressly in this Agreement. The validity, interpretation,
construction and performance of this Agreement shall be governed
by the laws of the Commonwealth of Pennsylvania.
14. INVALIDITY-ENFORCEABILITY: The invalidity or
unenforceability of any provisions of this Agreement shall not
affect the validity or enforceability of any other provision of
this Agreement, which shall remain in full force and effect. Any
provision in this Agreement which is prohibited or unenforceable
in any jurisdiction shall, as to such jurisdiction, be
ineffective only to the extent of such prohibition or
unenforceability without invalidating or affecting the remaining
provisions hereof, and any such prohibition or unenforceability
in any jurisdiction shall not invalidate or render unenforceable
such provision in any other jurisdiction.
15. SUCCESSOR RIGHTS: This Agreement shall insure to the
benefit of and be enforceable by the Executive's personal or
legal representatives, devisees and legatees. If Executive
should die while any amounts would still be payable to her under
this Agreement, all such amounts, unless otherwise provided
herein shall be paid in accordance with the terms of this
Agreement to her devisee, legatee or other designee or, if there
is no such designee, to her estate.
16. HEADINGS: Descriptive headings contained in this
Agreement are for convenience only and shall not control or
affect the meaning or construction of any provision hereof.
17. ARBITRATION: Any dispute, controversy or claim arising
under or in connection with this Agreement shall be settled
exclusively by arbitration, conducted before a panel of three
<PAGE 11> arbitrators, in Pottsville, Pennsylvania in accordance
with the rules of the American Arbitration Association then in
effect. Judgment may be entered on the arbitrator's award in any
court having jurisdiction.
ARTICLE III
18. REGULATORY AND OTHER PROCEEDINGS: The provisions of
this paragraph 18 shall control as to continuing rights and
obligations under this Agreement, notwithstanding any other
provision of this Agreement, for as long as they are required to
be included in employment contracts between an institution
insured by the FDIC and its officers and as long as the
Association is such an insured institution.
(a) If the Executive is suspended and/or temporarily
prohibited from participating in the conduct of the Association's
affairs by a notice served under Section 8(e) (3) or (g) (1) of
the Federal Deposit Insurance Act (12 U.S.C. 1818(e) (3) and (g)
(1)), the Association's obligations under this Agreement shall be
suspended as of the date of service, unless stayed by appropriate
proceedings. If the charges in the notice are dismissed, the
Association may in its discretion pay the Executive all of the
compensation withheld while its obligations hereunder were
suspended and reinstate its obligations which were suspended.
(b) If the Executive is removed and/or permanently
prohibited from participating in the conduct of the Association's
affairs by an order issued under Section 8(e) (4) or (g) (1) of
the Federal Deposit Insurance Act (12 U.S.C. 1818 (e) (4) or (g)
(1)), all obligations of the Association under this Agreement
shall terminate as of the effective date of the order, provided
that vested rights of the contracting parties shall not be
affected.
(c) If the Association becomes in default (as defined
in Section 3(x) (1) of the Federal Deposit Insurance Act), all
obligations under this Agreement shall terminate as of the date
of default, provided that this paragraph 16 (iii) 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
thereof is necessary for the continued operation of the
Association, by the Director of the Office of Thrift Supervision
("OTS") or his or her designee, at the time the Director of the
OTS or the Resolution Trust Corporation enters into an agreement
to provide assistance to or on behalf of the Association under
the authority contained in Section 13 (c) of the Federal Deposit
Insurance Act, or by the Director of the OTS or his or her
designee at the time the Director of the OTS or his or her
designee, approves a supervisory merger to resolve problems
related to operation of the Association or when the Association
is determined by the Director of the OTS to be in an unsafe or
<PAGE 12> unsound condition, provided that any rights of the
parties that have already vested shall not be affected by such
action.
(e) The Association's Board of Directors may terminate
the Executive's employment at any time, provided that any
termination by the Association's Board of Directors, other than
termination for Cause, shall not prejudice the Executive's right
to compensation under this Agreement.
IN WITNESS WHEREOF, the parties have executed this Agreement
effective as of the date first above written.
WITNESS:
/s/ Carolyn A. Domlesky /s/ Judith I. Hoffman
Judith I. Hoffman
ATTEST: GREATER POTTSVILLE FEDERAL
SAVINGS AND LOAN ASSOCIATION
/s/ Anne Lipsky BY /s/ Robert W. Pugh, Jr.
Robert W. Pugh, Jr.
President <PAGE 13>
________________________________________________________________
LIBERTY SAVINGS BANK, F.S.B.
and
CHASEMELLON SHAREHOLDER SERVICES, L.L.C.
as rights agent
_______________
RIGHTS AGREEMENT
Dated as of June 16, 1998
________________________________________________________________
<PAGE>
TABLE OF CONTENTS
Section Page
1. Certain Definitions................................ 1
2. Appointment of Rights Agent........................ 5
3. Issue of Rights Certificates....................... 6
4. Form of Rights Certificates........................ 7
5. Countersignature and Registration.................. 8
6. Transfer, Split Up, Combination, or Exchange of
Rights Certificates; Mutilated, Destroyed, Lost,
or Stolen Rights Certificates...................... 9
7. Exercise of Rights; Purchase Price; Expiration
Date of Rights..................................... 10
8. Cancellation and Destruction of Rights
Certificates....................................... 12
9. Reservation and Availability of Capital Stock...... 13
10. Preferred Stock Record Date........................ 14
11. Adjustment of Purchase Price, Number and Kind of
Shares or Number of Rights......................... 15
12. Certificate of Adjusted Purchase Price or Number
of Shares.......................................... 26
13. Consolidation, Merger, or Sale or Transfer of
Assets or Earning Power............................ 26
14. Fractional Rights and Fractional Shares............ 29
15. Rights of Action................................... 30
16. Agreement of Rights Holders........................ 30
17. Rights Certificate Holder Not Deemed a Shareholder. 31
18. Concerning the Rights Agent........................ 31
19. Merger or Consolidation or Change of Name of
Rights Agent....................................... 32
20. Duties of Rights Agent............................. 32
21. Change of Rights Agent............................. 35
<PAGE 1>
22. Issuance of New Rights Certificates................ 36
23. Redemption and Termination......................... 36
24. Exchange........................................... 37
25. Notice of Certain Events........................... 38
26. Notices............................................ 39
27. Supplements and Amendments......................... 40
28. Successors......................................... 40
29. Determinations and Actions by the Board of
Directors.......................................... 41
30. Benefits of this Agreement......................... 41
31. Severability....................................... 41
32. Governing Law...................................... 42
33. Counterparts....................................... 42
34. Descriptive Headings............................... 42
Exhibit A - Supplementary Charter Section - Terms of
Series A Junior Participating Preferred Stock
Exhibit B - Form of Rights Certificate
Exhibit C - Summary of Rights to Purchase Preferred Shares
PAGE 2
<PAGE>
RIGHTS AGREEMENT
RIGHTS AGREEMENT, dated as of June 16, 1998 (the
"Agreement"), between LIBERTY SAVINGS BANK, F.S.B., a Federal
savings bank (the "Bank"), and CHASEMELLON SHAREHOLDER SERVICES,
L.C.C., a New York limited liability company, as rights agent
(the "Rights Agent").
BACKGROUND
On June 16, 1998 (the "Rights Dividend Declaration
Date"), the Board of Directors of the Bank authorized and
declared a dividend distribution of one Right (as hereinafter
defined) for each share of common stock, par value $1.00 per
share, of the Bank (the "Common Stock") outstanding at the close
of business on the Rights Dividend Declaration Date, payable to
shareholders of record as of the close of business on June 30,
1998 (the "Record Date"), and has authorized the issuance of one
Right (as such number may hereinafter be adjusted pursuant to the
provisions of Section 11(p) hereof) for each share of Common
Stock issued between the Record Date (whether originally issued
or delivered from the Bank's treasury) and the Distribution Date,
each Right initially representing the right to purchase one one-
hundredth of a share of Series A Junior Participating Preferred
Stock of the Bank having the rights, powers, and preferences
herein set forth, upon the terms and subject to the conditions
hereinafter set forth (the "Rights").
AGREEMENT:
NOW, THEREFORE, in consideration of the premises and
the mutual agreements herein set forth, the parties hereto,
intending to be legally bound, hereby agree as follows:
Section 1. Certain Definitions. For purposes of this
Agreement, the following terms have the meanings indicated:
(a) "Acquiring Person" shall mean any Person who
or which, together with all Affiliates and Associates of such
Person, shall be the Beneficial Owner of (i) 14.9% or more of the
shares of Common Stock or (ii) Voting Securities that in the
aggregate represent 14.9% or more of the Total Voting Power, but
shall not include the Bank, any Subsidiary of the Bank, any
employee stock option plan or other employee benefit plan of the
Bank or of any Subsidiary of the Bank, or any Person or entity
organized, appointed, or established by the Bank for or pursuant
to the terms of any such plan.
(b) "Adverse Person" shall mean any Person
declared to be an Adverse Person by the Board of Directors upon a
determination that the criteria set forth in Section 11(a)(ii)(B)
apply to such Person.
<PAGE 1>
(c) "Affiliate" and "Associate" shall have the
respective meanings ascribed to such terms in Rule 12b-2 of the
General Rules and Regulations under the Exchange Act, as in
effect on the date hereof.
(d) A Person shall be deemed the "Beneficial
Owner", of, and shall be deemed to "beneficially own," any
securities:
(i) which such Person or any of such
Person's Affiliates or Associates, directly or indirectly,
has the right to acquire (whether such right is exercisable
immediately or only after the passage of time) pursuant to
any agreement, arrangement, or understanding (whether or not
in writing) or upon the exercise of conversion rights,
exchange rights, rights, warrants or options, or otherwise;
provided, however, that a Person shall not be deemed the
"Beneficial Owner" of, or to "beneficially own,"
(A) securities tendered pursuant to a tender offer or
exchange offer made by such Person or any of such Person's
Affiliates or Associates until such tendered securities are
accepted for purchase or exchange, or (B) securities
issuable upon exercise of Rights at any time prior to the
occurrence of a Triggering Event, or (C) securities issuable
upon exercise of Rights from and after the occurrence of a
Triggering Event which Rights were acquired by such Person
or any of such Person's Affiliates or Associates prior to
the Distribution Date or pursuant to Section 3(a) or
Section 22 hereof (the "Original Rights") or pursuant to
Section 11(i) hereof in connection with an adjustment made
with respect to any Original Rights;
(ii) which such Person or any of such
Person's Affiliates or Associates, directly or indirectly,
has the right to vote or dispose of or has "beneficial
ownership" of (as determined pursuant to Rule 13d-3 of the
General Rules and Regulations under the Exchange Act),
including pursuant to any agreement, arrangement, or
understanding, whether or not in writing; provided, however,
that a Person shall not be deemed the "Beneficial Owner" of,
or to "beneficially own," any security under this
subparagraph (ii) as a result of an agreement, arrangement,
or understanding to vote such security if such agreement,
arrangement, or understanding (A) arises solely from a
revocable proxy given in response to a public proxy or
consent solicitation made pursuant to, and in accordance
with, the applicable provisions of the General Rules and
Regulations under the Exchange Act and (B) is not also then
reportable by such Person on Schedule 13D under the Exchange
Act (or any comparable or successor report); or
(iii) which are beneficially owned, directly
or indirectly, by any other Person (or any Affiliate or
Associate thereof) with which such Person (or any of such
Person's Affiliates or Associates) has any agreement,
<PAGE 2> arrangement, or understanding (whether or not in
writing), for the purpose of acquiring, holding, voting
(except pursuant to a revocable proxy as described in the
proviso to subparagraph (ii) of this paragraph (d)), or
disposing of any Voting Securities; provided, however, that
nothing in this paragraph (d) shall cause a person engaged
in business as an underwriter of securities to be the
"Beneficial Owner" of, or to "beneficially own," any
securities acquired through such person's participation in
good faith in a firm commitment underwriting until the
expiration of forty days after the date of such acquisition.
(e) "Business Day" shall mean any day other than
a Saturday, Sunday, or a day on which banking institutions in the
Commonwealth of Pennsylvania are authorized or obligated by law
or executive order to close.
(f) "Close of business" on any given date shall
mean 5:00 P.M., New York time, on such date; provided, however,
that if such date is not a Business Day it shall mean 5:00 P.M.,
New York time, on the next succeeding Business Day.
(g) "Common Stock" shall mean the common stock,
par value $1.00 per share, of the Bank, except that "Common
Stock" when used with reference to any Person other than the Bank
shall mean the capital stock of such Person with the greatest
voting power, or the equity securities or other equity interest
having power to control, or direct the management of, such
Person.
(h) "Common stock equivalents" shall have the
meaning set forth in Section 11(a)(iii) hereof.
(i) "Continuing Director" shall mean (i) any
member of the Board of Directors of the Bank, while such Person
is a member of the Board, who is not an Acquiring Person, an
Adverse Person (or a Person with respect to whom the Continuing
Directors are considering making an Adverse Person determination
pursuant to Section 11(a)(ii)(B) hereof), or an Affiliate or
Associate of any such Person, or a representative of any such
Person, Affiliate, or Associate, and who was a member of the
Board prior to the date of this Agreement, or (ii) any Person who
subsequently becomes a member of the Board, while such Person is
a member of the Board, who is not an Acquiring Person, an Adverse
Person (or a Person with respect to whom the Continuing Directors
are considering making an Adverse Person determination), or an
Affiliate or Associate of any such Person, or a representative of
any such Person, Affiliate or Associate, if such Person's
nomination for election or election to the Board is recommended
or approved by a majority of the Continuing Directors.
(j) "Current market price" shall have the meaning
set forth in Section 11(d)(i) hereof.
<PAGE 3>
(k) "Current Value" shall have the meaning set
forth in Section 11(a)(iii) hereof.
(l) "Distribution Date" shall have the meaning
set forth in Section 3(a) hereof.
(m) "Exchange Act" shall mean the Securities
Exchange Act of 1934, as amended.
(n) "Expiration Date" shall have the meaning set
forth in Section 7(a) hereof.
(o) "Final Expiration Date" shall have the
meaning set forth in Section 7(a) hereof.
(p) "OTS Regulations" shall mean the rules and
regulations of the Office of Thrift Supervision and any federal
or state agency which is a successor thereto as the primary
regulatory agency having jurisdiction over the Bank.
(q) "Person" shall mean any individual, firm,
corporation, partnership, or other entity.
(r) "Preferred Stock" shall mean shares of
Series A Junior Participating Preferred Stock, without par value,
of the Bank, and, to the extent that there are not a sufficient
number of shares of Series A Junior Participating Preferred Stock
authorized to permit the full exercise of the Rights, any other
series of preferred stock, without par value, of the Bank
designated for such purpose containing terms substantially
similar to the terms of the Series A Junior Participating
Preferred Stock.
(s) "Principal Party" shall have the meaning set
forth in Section 13(b) hereof.
(t) "Purchase Price" shall have the meaning set
forth in Section 4(a) hereof.
(u) "Record Date" shall have the meaning set
forth in the BACKGROUND clause in the recital to this Agreement.
(v) "Redemption Price" shall have the meaning set
forth in Section 23(a) hereof.
(w) "Rights" shall have the meaning set forth in
the BACKGROUND clause in the recital to this Agreement.
(x) "Rights Certificates" shall have the meaning
set forth in Section 3(a) hereof.
(y) "Rights Dividend Declaration Date" shall have
the meaning set forth in the BACKGROUND clause in the recital to
this Agreement.
<PAGE 4>
(z) "Section 11(a)(ii) Event" shall mean any
event described in clauses (A) or (B) of Section 11(a)(ii)
hereof.
(aa) "Section 11(a)(ii) Trigger Date" shall have
the meaning set forth in Section 11(a)(iii) hereof.
(aa) "Section 13 Event" shall mean any event
described in clauses (x), (y), or (z) of Section 13(a) hereof.
(bb) "Securities Act" shall mean the Securities
Act of 1933, as amended.
(cc) "Spread" shall have the meaning set forth in
Section 11(a)(iii) hereof.
(dd) "Stock Acquisition Date" shall mean the
first date of public announcement (which, for purposes of this
definition, shall include, without limitation, a report filed
pursuant to Section 13(d) under the Exchange Act) by the Bank or
an Acquiring Person that an Acquiring Person has become such.
(ee) "Subsidiary" shall mean, with reference to
any Person, any corporation of which an amount of voting
securities sufficient to elect at least a majority of the
directors of such corporation is beneficially owned, directly or
indirectly, by such Person, or otherwise controlled by such
Person.
(ff) "Substitution Period" shall have the meaning
set forth in Section 11(a)(iii) hereof.
(gg) "Total Voting Power" on any given date shall
mean the total number of votes eligible to be cast in a general
election of directors of the Bank.
(hh) "Trading Day" shall have the meaning set
forth in Section 11(d)(i) hereof.
(ii) "Triggering Event" shall mean any Section
11(a)(ii) Event or Section 13 Event.
(jj) "Voting Securities" shall mean any class or
classes of capital stock of the Bank entitled to vote generally
in the election of directors.
Section 2. Appointment of Rights Agent. The Bank
hereby appoints the Rights Agent to act as agent for the Bank in
accordance with the terms and conditions hereof, and the Rights
Agent hereby accepts such appointment. The Bank may from time to
time appoint such Co-Rights Agents as it may deem necessary or
desirable.
<PAGE 5>
Section 3. Issue of Rights Certificates.
(a) Until the earliest of (i) the close of
business on the twentieth Business Day after the Stock
Acquisition Date, (ii) the close of business on the twentieth
Business Day (or such later date as may be determined by the
Board of Directors) after the date that a tender offer or
exchange offer by any Person (other than the Bank, any Subsidiary
of the Bank, any employee stock option plan or other employee
benefit plan of the Bank or of any Subsidiary of the Bank, or any
Person or entity organized, appointed, or established by the Bank
for or pursuant to the terms of any such plan) is first published
or sent or given within the meaning of Rule 14d-2(a) of the
General Rules and Regulations under the Exchange Act, if, upon
consummation thereof, such Person would be the Beneficial Owner
of (x) 14.9% or more of the shares of Common Stock then
outstanding or (y) Voting Securities representing 14.9% or more
of the Total Voting Power, or (iii) the close of business on the
twentieth Business Day after the Board of Directors determines,
pursuant to the criteria set forth in Section 11(a)(ii)(B)
hereof, that a Person is an Adverse Person (the earliest of (i),
(ii), and (iii) being herein referred to as the "Distribution
Date"), (x) the Rights will be evidenced (subject to the
provisions of paragraph (b) of this Section 3) by the
certificates for the Common Stock registered in the names of the
holders of such Common Stock (which certificates for Common Stock
shall be deemed also to be certificates for Rights) and not by
separate certificates, and (y) the Rights will be transferable
only in connection with the transfer of the underlying shares of
Common Stock (including a transfer to the Bank). As soon as
practicable after the Distribution Date, the Rights Agent will
send by first-class, insured, postage prepaid mail, to each
record holder of the Common Stock as of the close of business on
the Distribution Date, at the address of such holder shown on the
records of the Bank, one or more rights certificates, in
substantially the form of Exhibit B hereto (the "Rights
Certificates"), evidencing one Right for each share of Common
Stock so held, subject to adjustment as provided herein. In the
event that an adjustment in the number of Rights per share of
Common Stock has been made pursuant to Section 11(p) hereof, at
the time of distribution of the Rights Certificates, the Bank
shall make the necessary and appropriate rounding adjustments (in
accordance with Section 14(a) hereof) so that Rights Certificates
representing only whole numbers of Rights are distributed and
cash is paid in lieu of any fractional Rights. As of and after
the Distribution Date, the Rights will be evidenced solely by
such Rights Certificates.
(b) As promptly as practicable following the
Record Date, the Bank will send a copy of a Summary of Rights, in
substantially the form attached hereto as Exhibit C (the "Summary
of Rights"), by postage prepaid mail, to each record holder of
the Common Stock as of the close of business on the Record Date,
at the address of such-holder shown on the records of the Bank.
<PAGE 6>
(c) Rights shall be issued in respect of all
shares of Common Stock which are issued (whether originally
issued or from the Bank's treasury) after the Record Date but
prior to the earlier of the Distribution Date or the Expiration
Date. Certificates representing such shares of Common Stock
shall also be deemed to be certificates for Rights, and shall
bear the following legend:
This certificate also evidences and entitles the holder
hereof to certain Rights as set forth in the Rights
Agreement between LIBERTY SAVINGS BANK, F.S.B. (the "Bank")
and ChaseMellon Shareholder Services, L.L.C., as rights
agent (the "Rights Agent"), dated as of June 16, 1998 (the
"Rights Agreement"), the terms of which are hereby
incorporated herein by reference and a copy of which is on
file at the principal offices of the Bank. Under certain
circumstances, as set forth in the Rights Agreement, such
Rights will be evidenced by separate certificates and will
no longer be evidenced by this certificate. The Bank or the
Rights Agent will mail to the holder of this certificate a
copy of the Rights Agreement, as in effect on the date of
mailing, without charge promptly after receipt of a written
request therefor. Under certain circumstances set forth in
the Rights Agreement, Rights issued to, or held by, any
Person who is, was or becomes an Acquiring Person, an
Adverse Person, or any Affiliate or Associate thereof (as
such terms are defined in the Rights Agreement), whether
currently held by or on behalf of such Person or by any
subsequent holder, may become null and void.
With respect to such certificates containing the foregoing
legend, until the earlier of (i) the Distribution Date or
(ii) the Expiration Date, the Rights associated with the Common
Stock represented by such certificates shall be evidenced by such
certificates alone and registered holders of Common Stock shall
also be the registered holders of the associated Rights, and the
transfer of any of such certificates shall also constitute the
transfer of the Rights associated with the Common Stock
represented by such certificates.
Section 4. Form of Rights Certificates.
(a) The Rights Certificates (and the forms of
election to purchase and of assignment to be printed on the
reverse thereof) may have such marks of identification or
designation and such legends, summaries, or endorsements printed
thereon as the Bank may deem appropriate and as are not
inconsistent with the provisions of this Agreement, or as may be
required to comply with any applicable law or with any rule or
regulation made pursuant thereto or with any rule or regulation
of any stock exchange on which the Rights may from time to time
be listed, or to conform to usage. Subject to the provisions of
Section 11 and Section 22 hereof, the Rights Certificates,
whenever distributed, shall be dated as of the Record Date and on
their face shall entitle the holders thereof to purchase such
<PAGE 7> number of one one-hundredths of a share of Preferred
Stock as shall be set forth therein at the price set forth
therein (such exercise price per one one-hundredth of a share,
the "Purchase Price"), but the amount and type of securities
purchasable upon the exercise of each Right and the Purchase
Price thereof shall be subject to adjustment as provided herein.
(b) Any Rights Certificate issued pursuant to
Section 3(a) or Section 22 hereof that represents Rights
beneficially owned by: (i) an Acquiring Person or an Adverse
Person or any Associate or Affiliate of an Acquiring Person or an
Adverse Person, (ii) a transferee of an Acquiring Person or an
Adverse Person (or of any such Associate or Affiliate) who
becomes a transferee after such Acquiring Person or Adverse
Person becomes such, or (iii) a transferee of an Acquiring Person
or an Adverse Person (or of any such Associate or Affiliate) who
becomes a transferee prior to or concurrently with the Acquiring
Person or Adverse Person becoming such and receives such Rights
pursuant to either (A) a transfer (whether or not for
consideration) from the Acquiring Person or Adverse Person to
holders of equity interests in such Acquiring Person or Adverse
Person or to any Person with whom such Acquiring Person or
Adverse Person has any continuing agreement, arrangement, or
understanding regarding the transferred Rights or (B) a transfer
that the Board of Directors of the Bank has determined is part of
a plan, arrangement, or understanding which has as a primary
purpose or effect avoidance of Section 7(e) hereof, and any
Rights Certificate issued pursuant to Section 6 or Section 11
hereof upon transfer, exchange, replacement, or adjustment of any
other Rights Certificate referred to in this sentence, shall
contain (to the extent feasible) the following legend:
The Rights represented by this Rights Certificate are
or were beneficially owned by a Person who was or became an
[Acquiring Person] [Adverse Person] or an Affiliate or
Associate thereof (as such terms are defined in the Rights
Agreement). Accordingly, this Rights Certificate and the
Rights represented hereby may become null and void under the
circumstances and with the effect specified in Section 7(e)
of such Agreement.
Section 5. Countersignature and Registration.
(a) The Rights Certificates shall be executed on
behalf of the Bank by its Chairman of the Board, Chief Executive
Officer, President, or any Executive Vice President either
manually or by facsimile signature, and shall have affixed
thereto the Bank's seal or a facsimile thereof which shall be
attested by the Secretary or an Assistant Secretary of the Bank,
either manually or by facsimile signature. The Rights
Certificates shall be countersigned manually by the Rights Agent
and shall not be valid for any purpose unless so countersigned.
In case any officer of the Bank who shall have signed any of the
Rights Certificates shall cease to be such officer of the Bank
before countersignature by the Rights Agent and issuance and
<PAGE 8> delivery by the Bank, such Rights Certificates,
nevertheless, may be countersigned by the Rights Agent and issued
and delivered by the Bank with the same force and effect as
though the person who signed such Rights Certificates had not
ceased to be such officer of the Bank; and any Rights
Certificates may be signed on behalf of the Bank by any person
who, at the actual date of the execution of such Rights
Certificate, shall be a proper officer of the Bank to sign such
Rights Certificate, although at the date of the execution of this
Rights Agreement any such person was not such an officer.
(b) Following the Distribution Date, the Rights
Agent will keep or cause to be kept, at its principal office or
offices designated as the appropriate place for surrender of
Rights Certificates upon exercise or transfer, books for
registration and transfer of the Rights Certificates issued
hereunder. Such books shall show the names and addresses of the
respective holders of the Rights Certificates, the number of
Rights evidenced on its face by each of the Rights Certificates
and the date of each of the Rights Certificates.
Section 6. Transfer, Split Up, Combination, or
Exchange of Rights Certificates; Mutilated, Destroyed, Lost, or
Stolen Rights Certificates.
(a) Subject to the provisions of Section 4(b),
Section 7(e), Section 14, and Section 24 hereof, at any time
after the close of business on the Distribution Date, and at or
prior to the close of business on the Expiration Date, any Rights
Certificate may be transferred, split up, combined, or exchanged
for another Rights Certificate entitling the registered holder to
purchase a like number of one one-hundredths of a share of
Preferred Stock (or, following a Triggering Event, Common Stock,
other securities, cash, or other assets, as the case may be) as
the Rights Certificate surrendered then entitled such holder (or
former holder in the case of a transfer) to purchase. Any
registered holder desiring to transfer, split up, combine, or
exchange any Rights Certificate shall make such request in
writing delivered to the Rights Agent, and shall surrender the
Rights Certificate to be transferred, split up, combined, or
exchanged at the principal office or offices of the Rights Agent
designated for such purpose. Neither the Rights Agent nor the
Bank shall be obligated to take any action whatsoever with
respect to the transfer of any such surrendered Rights
Certificate until the registered holder shall have completed and
signed the certificate contained in the form of assignment on the
reverse side of such Rights Certificate and shall have provided
such additional evidence of the identity of the Beneficial Owner
(or former Beneficial Owner) or Affiliates or Associates thereof
as the Bank shall reasonably request. Thereupon the Rights Agent
shall, subject to Section 4(b), Section 7(e), and Section 14
hereof, countersign and deliver to the Person entitled thereto a
Rights Certificate as so requested. The Bank may require payment
of a sum sufficient to cover any tax or governmental charge that
<PAGE 9> may be imposed in connection with any transfer, split
up, combination, or exchange of Rights Certificates.
(b) Upon receipt by the Bank and the Rights Agent
of evidence reasonably satisfactory to them of the loss, theft,
destruction, or mutilation of a Rights Certificate, and, in case
of loss, theft, or destruction, of indemnity or security
reasonably satisfactory to them, and reimbursement to the Bank
and the Rights Agent of all reasonable expenses incidental
thereto, and upon surrender to the Rights Agent and cancellation
of the Rights Certificate if mutilated, the Bank will execute and
deliver a new Rights Certificate of like tenor to the Rights
Agent for countersignature and delivery to the registered owner
in lieu of the Rights Certificate so lost, stolen, destroyed, or
mutilated.
Section 7. Exercise of Rights; Purchase Price;
Expiration Date of Rights.
(a) Subject to Section 7(e) hereof, the
registered holder of any Rights Certificate may exercise the
Rights evidenced thereby (except as otherwise provided herein
including, without limitation, the restrictions on exercisability
set forth in Section 9(c), Section 11(a)(iii), and Section 23(a)
hereof) in whole or in part at any time after the Distribution
Date upon surrender of the Rights Certificate, with the form of
election to purchase and the certificate on the reverse side
thereof duly executed, to the Rights Agent at the principal
office or offices of the Rights Agent designated for such
purpose, together with payment of the aggregate Purchase Price
with respect to the total number of one one-hundredths of a share
(or other securities, cash, or other assets, as the case may be)
as to which such surrendered Rights are then exercisable, at or
prior to the earliest of (i) the close of business on June 16,
2008 (the "Final Expiration Date"), (ii) the time at which the
Rights are redeemed as provided in Section 23 hereof (the earlier
of (i) and (ii) being herein referred to as the "Expiration
Date"), or (iii) the time at which such Rights are exchanged as
provided in Section 24 hereof.
(b) The Purchase Price for each one one-hundredth
of a share of Preferred Stock pursuant to the exercise of a Right
shall initially be Sixty-Three Dollars ($63.00), and shall be
subject to adjustment from time to time as provided in
Sections 11 and 13(a) hereof and shall be payable in accordance
with paragraph (c) below.
(c) Upon receipt of a Rights Certificate
representing exercisable Rights, with the form of election to
purchase and the certificate on the reverse side thereof duly
executed, accompanied by payment, with respect to each Right so
exercised, of the Purchase Price per one one-hundredth of a share
of Preferred Stock (or other shares, securities, cash, or other
assets, as the case may be) to be purchased as set forth below
and an amount equal to any applicable transfer tax, the Rights
<PAGE 10> Agent shall, subject to Section 20(k) hereof, thereupon
promptly (i) (A) requisition from any transfer agent of the
shares of Preferred Stock (or make available, if the Rights Agent
is the transfer agent for such shares) certificates for the total
number of one one-hundredths of a share of Preferred Stock to be
purchased and the Bank hereby irrevocably authorizes its transfer
agent to comply with all such requests, or (B) if the Bank shall
have elected to deposit the total number of shares of Preferred
Stock issuable upon exercise of the Rights hereunder with a
depositary agent, requisition from the depositary agent
depositary receipts representing such number of one-hundredths of
a share of Preferred Stock as are to be purchased (in which case
certificates for the shares of Preferred Stock represented by
such receipts shall be deposited by the transfer agent with the
depositary agent) and the Bank will direct the depositary agent
to comply with such request, (ii) requisition from the Bank the
amount of cash, if any, to be paid in lieu of fractional shares
in accordance with Section 14 hereof, (iii) after receipt of such
certificates or depositary receipts, cause the same to be
delivered to or upon the order of the registered holder of such
Rights Certificate, registered in such name or names as may be
designated by such holder, and (iv) after receipt thereof,
deliver such cash, if any, to or upon the order of the registered
holder of such Rights Certificate. The payment of the Purchase
Price (as such amount may be reduced pursuant to
Section 11(a)(iii) hereof) shall be made in cash or by certified
bank check or bank draft payable to the order of the Bank. In
the event that the Bank is obligated to issue other securities
(including Common Stock) of the Bank, pay cash, and/or distribute
other property pursuant to Section 11(a) hereof, the Bank will
make all arrangements necessary so that such other securities,
cash, and/or other property are available for distribution by the
Rights Agent, if and when appropriate. The Bank reserves the
right to require prior to the occurrence of a Triggering Event
that, upon any exercise of Rights, a number of Rights be
exercised so that only whole shares of Preferred Stock would be
issued.
(d) In case the registered holder of any Rights
Certificate shall exercise less than all the Rights evidenced
thereby, a new Rights Certificate evidencing Rights equivalent to
the Rights remaining unexercised shall be issued by the Rights
Agent and delivered to, or upon the order of, the registered
holder of such Rights Certificate, registered in such name or
names as may be designated by such holder, subject to the
provisions of Section 14 hereof.
(e) Notwithstanding anything in this Agreement to
the contrary, from and after the first occurrence of a Section
11(a)(ii) Event, any Rights beneficially owned by (i) an
Acquiring Person, an Adverse Person, or an Associate or Affiliate
of an Acquiring Person or an Adverse Person, (ii) a direct or
indirect transferee of an Acquiring Person or an Adverse Person
(or of any such Associate or Affiliate) who becomes a transferee
after the Acquiring Person or Adverse Person becomes such, or
<PAGE 11> (iii) a direct or indirect transferee of an Acquiring
Person or an Adverse Person (or of any such Associate or
Affiliate) who becomes a transferee prior to or concurrently with
the Acquiring Person or Adverse Person becoming such and receives
such Rights pursuant to either (A) a transfer (whether or not for
consideration) from the Acquiring Person or Adverse Person to
holders of equity interests in such Acquiring Person or Adverse
Person or to any Person with whom the Acquiring Person or Adverse
Person has any continuing agreement, arrangement, or
understanding regarding the transferred Rights or (B) a transfer
which the Board of Directors of the Bank has determined is part
of a plan, arrangement or understanding which has as a primary
purpose or effect the avoidance of this Section 7(e), shall
become null and void without any further action and no holder of
such Rights shall have any rights whatsoever with respect to such
Rights, whether under any provision of this Agreement or
otherwise. The Bank shall use all reasonable efforts to insure
that the provisions of this Section 7(e) and Section 4(b) hereof
are complied with, but shall have no liability to any holder of
Rights Certificates or other Person as a result of its failure to
make any determinations with respect to an Acquiring Person or an
Adverse Person or any of their respective Affiliates, Associates,
or transferees hereunder.
(f) Notwithstanding anything in this Agreement to
the contrary, neither the Rights Agent nor the Bank shall be
obligated to undertake any action with respect to a registered
holder upon the occurrence of any purported exercise as set forth
in this Section 7 unless such registered holder shall have
(i) completed and signed the certificate contained in the form of
election to purchase set forth on the reverse side of the Rights
Certificate surrendered for such exercise and (ii) provided such
additional evidence of the identity of the Beneficial Owner (or
former Beneficial Owner) or Affiliates or Associates thereof as
the Bank shall reasonably request.
Section 8. Cancellation and Destruction of Rights
Certificates. All Rights Certificates surrendered for the
purpose of exercise, transfer, split up, combination, or exchange
shall, if surrendered to the Bank or any of its agents, be
delivered to the Rights Agent for cancellation or in cancelled
form, or, if surrendered to the Rights Agent, shall be cancelled
by it, and no Rights Certificates shall be issued in lieu thereof
except as expressly permitted by any of the provisions of this
Agreement. The Bank shall deliver to the Rights Agent for
cancellation and retirement, and the Rights Agent shall so cancel
and retire, any other Rights Certificate purchased or acquired by
the Bank otherwise than upon the exercise thereof. The Rights
Agent shall deliver all cancelled Rights Certificates to the
Bank, or shall, at the written request of the Bank, destroy such
cancelled Rights Certificates, and in such case shall deliver a
certificate of destruction thereof to the Bank.
<PAGE 12>
Section 9. Reservation and Availability of Capital
Stock.
(a) The Bank covenants and agrees that it will
cause to be reserved and kept available out of its authorized and
unissued shares of Preferred Stock (and, following the occurrence
of a Triggering Event, out of its authorized and unissued shares
of Common Stock and/or other securities or out of its authorized
and issued shares held in its treasury), the number of shares of
Preferred Stock (and, following the occurrence of a Triggering
Event, Common Stock and/or other securities) that, as provided in
this Agreement, including Section 11(a)(iii) hereof, will be
sufficient to permit the exercise in full of all outstanding
Rights.
(b) So long as the shares of Preferred Stock
(and, following the occurrence of a Triggering Event, Common
Stock and/or other securities) issuable and deliverable upon the
exercise of the Rights may be quoted on any automated quotation
system of the National Association of Securities Dealers, Inc. or
listed on any national securities exchange, the Bank shall use
its best efforts to cause, from and after such time as the Rights
become exercisable, all shares reserved for such issuance to be
so quoted or listed on such exchange upon official notice of
issuance upon such exercise.
(c) The Bank shall use its best efforts to
(i) file, as soon as practicable following the first occurrence
of a Section 11(a)(ii) Event, or, if applicable, as soon as
practicable following the earliest date after the first
occurrence of a Section 11(a)(ii) Event on which the
consideration to be delivered by the Bank upon exercise of the
Rights has been determined in accordance with Section 11(a)(iii)
hereof, an offering circular on an appropriate form under the OTS
Regulations, with respect to the securities purchasable upon
exercise of the Rights, (ii) cause such offering circular to
become effective as soon as practicable after such filing, and
(iii) cause such offering circular to remain effective until the
earlier of (A) the date as of which the Rights are no longer
exercisable for such securities, and (B) the date of the
expiration of the Rights. The Bank may temporarily suspend, for
a period of time not to exceed ninety (90) days after the date
set forth in clause (i) of the first sentence of this
Section 9(c), the exercisability of the Rights in order to
prepare and file such offering circular and permit it to become
effective. Upon any such suspension, the Bank shall issue a
public announcement stating that the exercisability of the Rights
has been temporarily suspended, as well as a public announcement
at such time as the suspension is no longer in effect. In
addition, if the Bank shall determine that an offering circular
is required following the Distribution Date, the Bank may
temporarily suspend the exercisability of the Rights until such
time as an offering circular has been declared effective. The
Bank shall also use its best efforts to take such action as may
be appropriate under, or to ensure compliance with, the
<PAGE 13> securities or "blue sky" laws of the various states in
connection with the exercisability of the Rights.
Notwithstanding any provision of this Agreement to the contrary,
the Rights shall not be exercisable in any jurisdiction if the
requisite qualification in such jurisdiction shall not have been
obtained, or the exercise thereof shall not be permitted under
applicable law.
(d) The Bank covenants and agrees that it will
take all such action as may be necessary to ensure that all one
one-hundredths of a share of Preferred Stock (and, following the
occurrence of a Triggering Event, Common Stock and/or other
securities) delivered upon exercise of Rights shall, at the time
of delivery of the certificates for such shares (subject to
payment of the Purchase Price), be duly and validly authorized
and issued and fully paid and nonassessable.
(e) The Bank further covenants and agrees that it
will pay when due and payable any and all federal and state
transfer taxes and charges which may be payable in respect of the
issuance or delivery of the Rights Certificates and of any
certificates for a number of one one-hundredths of a share of
Preferred Stock (or Common Stock and/or other securities, as the
case may be) upon the exercise of Rights. The Bank shall not,
however, be required to pay any transfer tax which may be payable
in respect of any transfer or delivery of Rights Certificates to
a Person other than, or the issuance or delivery of a number of
one one-hundredths of a share of Preferred Stock (or Common Stock
and/or other securities, as the case may be) in respect of a name
other than that of, the registered holder of the Rights
Certificates evidencing Rights surrendered for exercise or to
issue or deliver any certificates for a number of one one-
hundredths of a share of Preferred Stock (or Common Stock and/or
other securities, as the case may be) in a name other than that
of the registered holder upon the exercise of any Rights until
such tax shall have been paid (any such tax being payable by the
holder of such Rights Certificate at the time of surrender) or
until it has been established to the Bank's satisfaction that no
such tax is due.
Section 10. Preferred Stock Record Date. Each person
in whose name any certificate for a number of one one-hundredths
of a share of Preferred Stock (or Common Stock and/or other
securities, as the case may be) is issued upon the exercise of
Rights shall for all purposes be deemed to have become the holder
of record of such fractional shares of Preferred Stock (or Common
Stock and/or other securities, as the case may be) represented
thereby on, and such certificate shall be dated, the date upon
which the Rights Certificate evidencing such Rights was duly
surrendered and payment of the Purchase Price (and all applicable
transfer taxes) was made; provided, however, that if the date of
such surrender and payment is a date upon which the Preferred
Stock (or Common Stock and/or other securities, as the case may
be) transfer books of the Bank are closed, such Person shall be
deemed to have become the record holder of such shares <PAGE 14>
(fractional or otherwise) on, and such certificate shall be
dated, the next succeeding Business Day on which the Preferred
Stock (or Common Stock and/or other securities, as the case may
be) transfer books of the Bank are open. Prior to the exercise
of the Rights evidenced thereby, the holder of a Rights
Certificate shall not be entitled to any rights of a shareholder
of the Bank with respect to shares for which the Rights shall be
exercisable, including, without limitation, the right to vote, to
receive dividends, or other distributions or to exercise any
preemptive rights, and shall not be entitled to receive any
notice of any proceedings of the Bank, except as provided herein.
Section 11. Adjustment of Purchase Price, Number and
Kind of Shares or Number of Rights. The Purchase Price, the
number and kind of shares covered by each Right and the number of
Rights outstanding are subject to adjustment from time to time as
provided in this Section 11.
(a) (i) In the event the Bank shall at any time
after the date of this Agreement (A) declare a dividend on
the Preferred Stock payable in shares of Preferred Stock,
(B) subdivide the outstanding Preferred Stock, (C) combine
the outstanding Preferred Stock into a smaller number of
shares, or (D) issue any shares of its capital stock in a
reclassification of the Preferred Stock (including any such
reclassification in connection with a consolidation or
merger in which the Bank is the continuing or surviving
bank), except as otherwise provided in this Section 11(a)
and Section 7(e) hereof, the Purchase Price in effect at the
time of the record date for such dividend or of the
effective date of such subdivision, combination, or
reclassification, and the number and kind of shares of
Preferred Stock or capital stock, as the case may be,
issuable on such date, shall be proportionately adjusted so
that the holder of any Right exercised after such time shall
be entitled to receive, upon payment of the Purchase Price
then in effect, the aggregate number and kind of shares of
Preferred Stock or capital stock, as the case may be, which,
if such Right had been exercised immediately prior to such
date and at a time when the Preferred Stock transfer books
of the Bank were open, such holder would have owned upon
such exercise and been entitled to receive by virtue of such
dividend, subdivision, combination, or reclassification. If
an event occurs that would require an adjustment under both
this Section 11(a)(i) and Section 11(a)(ii) hereof, the
adjustment provided for in this Section 11(a)(i) shall be in
addition to, and shall be made prior to, any adjustment
required pursuant to Section 11(a)(ii) hereof.
(ii) Subject to Section 24 of this
Agreement, in the event:
(A) any Person shall at any time after
the Rights Dividend Declaration Date become an
Acquiring Person, unless the event causing such Person
<PAGE 15> to become an Acquiring Person (I) is a
transaction set forth in Section 13(a) hereof, or
(II) is an acquisition of shares of Common Stock and/or
Voting Securities pursuant to a tender offer or an
exchange offer for all outstanding shares of Common
Stock and other Voting Securities, if any, at a price
and on terms determined by at least a majority of the
Continuing Directors who are not representatives,
nominees, Affiliates or Associates of an Acquiring
Person, after receiving advice from one or more
investment banking firms, to be (x) at a price which is
fair to shareholders (taking into account all factors
which the Board of Directors deems relevant including,
without limitation, prices which could reasonably be
achieved if the Bank or its assets were sold on an
orderly basis designed to realize maximum value) and
(y) otherwise in the best interests of the Bank and its
shareholders; or
(B) the Board of Directors of the Bank
shall declare any Person to be an Adverse Person, upon
a determination that such Person, alone or together
with its Affiliates and Associates, has, at any time
after the Rights Dividend Declaration Date, become the
beneficial owner of Voting Securities representing at
least 10% of the Total Voting Power and a
determination, after reasonable inquiry and
investigation, including consultation with such persons
as the Board of Directors shall deem appropriate, that
such beneficial ownership by such Person is
(1) intended to cause the Bank to repurchase the Voting
Securities beneficially owned by such Person or to
cause pressure on the Bank to take action or enter into
a transaction or series of transactions intended to
provide such Person (and not shareholders generally)
with short-term financial gain under circumstances
where the Board of Directors determines that the best
long-term interests of the Bank and its shareholders
would not be served by taking such action or entering
into such transaction or series of transactions at that
time or (2) causing or reasonably likely to cause a
material adverse impact (including, but not limited to,
impairment of relationships with customers, impairment
of the Bank's business reputation or impairment of the
Bank's ability to maintain its competitive position) on
the business or prospects of the Bank; or
(C) any Acquiring person or any
Associate or Affiliate of any Acquiring Person, at any
time after the date of this Agreement, directly or
indirectly, (1) shall merge into the Bank or otherwise
combine with the Bank and the Bank shall be the
continuing or surviving corporation of such merger or
combination and the Voting Securities of the Bank shall
remain outstanding and unchanged, (2) shall, in one
<PAGE 16> transaction or a series of transactions,
other than in connection with the exercise of the
Rights or the exercise or conversion of securities
exercisable or convertible into capital stock of the
Bank or any of its Subsidiaries, transfer any assets to
the Bank or to any of its Subsidiaries in exchange (in
whole or in part) for shares of Voting Securities, for
shares of other equity securities of the Bank, or for
securities exercisable for or convertible into shares
of equity securities of the Bank (Common Stock or
otherwise) or otherwise obtain from the Bank, with or
without consideration, any additional shares of such
equity securities or securities exercisable for or
convertible into shares of such equity securities
(other than pursuant to a pro rata distribution to all
holders of Common Stock), (3) shall sell, purchase,
lease, exchange, mortgage, pledge, transfer, or
otherwise acquire or dispose of, in one transaction or
a series of transactions, to, from, with, or of (as the
case may be) the Bank or any of its Subsidiaries,
assets on terms and conditions less favorable to the
Bank than the Bank would be able to obtain in arm's-
length negotiation with an unaffiliated third party,
other than pursuant to a transaction set forth in
Section 13(a) hereof, (4) shall receive any
compensation from the Bank or any of the Bank's
Subsidiaries other than compensation for services as a
director or for full-time employment as a regular
employee at rates in accordance with the Bank's (or its
Subsidiaries') past practices, or (5) shall receive the
benefit, directly or indirectly (except proportionately
as a shareholder and except if resulting from a
requirement of law or governmental regulation), of any
loans, advances, guarantees, pledges, or other
financial assistance or any tax credits or other tax
advantage provided by the Bank or any of its
Subsidiaries; or
(D) during such time as there is an
Acquiring Person, there shall be any reclassification
of securities (including any reverse stock split), or
recapitalization of the Bank, or any merger or
consolidation of the Bank with any of its Subsidiaries
or any other transaction or series of transactions
involving the Bank or any of its Subsidiaries, other
than a transaction or transactions to which the
provisions of Section 13(a) apply (whether or not with
or into or otherwise involving an Acquiring Person)
which has the effect, directly or indirectly, of
increasing by more than 1% the proportionate share of
the outstanding shares of any class of equity
securities of the Bank or any of its Subsidiaries which
is directly or indirectly beneficially owned by any
Acquiring Person or any Associate or Affiliate of any
Acquiring Person; <PAGE 17>
then, promptly following the first occurrence of a
Section 11(a)(ii) Event, proper provision shall be made so
that each holder of a Right (except as provided below and in
Section 7(e) hereof) shall thereafter have the right to
receive, upon exercise thereof at the then current Purchase
Price in accordance with the terms of this Agreement, in
lieu of a number of one one-hundredths of a share of
Preferred Stock, such number of shares of Common Stock of
the Bank as shall equal the result obtained by
(x) multiplying the then current Purchase Price by the then
number of one one-hundredths of a share of Preferred Stock
for which a Right was exercisable immediately prior to the
first occurrence of a Section 11(a)(ii) Event, and
(y) dividing that product (which, following such first
occurrence, shall thereafter be referred to as the "Purchase
Price" for each Right and for all purposes of this
Agreement) by 50% of the lowest closing price (as determined
pursuant to the second sentence of Section 11(d)(i) hereof)
per share of Common Stock on any Trading Day (as defined in
Section 11(d)(i) hereof) occurring within the twelve-month
period immediately preceding the date of such first
occurrence (such number of shares, the "Adjustment Shares").
(iii) In the event that (a) the number of
shares of Common Stock which are authorized by the Bank's
Charter but not outstanding or reserved for issuance for
purposes other than upon exercise of the Rights are not
sufficient to permit the exercise in full of the Rights in
accordance with the foregoing subparagraph (ii) of this
Section 11(a), or (b) the quotient (the "Quotient") obtained
by dividing the Purchase Price by the number of Adjustment
Shares issuable upon exercise of a Right is less than the
then par value per share of the Common Stock, the Bank
shall, to the extent permitted by applicable law and
regulation and subject to such limitations as are necessary
to prevent a default under any agreement to which the Bank
is a party: (A) determine the excess of (1) the value of the
Adjustment Shares issuable upon the exercise of a Right (the
"Current Value") over (2) the Purchase Price (such excess,
the "Spread"), and (B) with respect to each Right, make
adequate provision to substitute for the Adjustment Shares,
upon payment of the applicable Purchase Price, (1) cash,
(2) a reduction in the Purchase Price, (3) Common Stock or
other equity securities of the Bank (including, without
limitation, shares, or units of shares, of preferred stock
which the Board of Directors of the Bank has deemed to have
the same value as shares of Common Stock (such shares of
preferred stock, "common stock equivalents")), (4) debt
securities of the Bank, (5) other assets, or (6) any
combination of the foregoing, having an aggregate value
equal to the Current Value, where such aggregate value has
been determined by the Board of Directors of the Bank based
upon the advice of a regionally recognized investment
banking firm selected by the Board of Directors of the Bank;
provided, however, if the Bank shall not have made adequate
<PAGE 18> provision to deliver value pursuant to clause (B)
above within 30 days following the later of (x) the first
occurrence of a Section 11(a)(ii) Event and (y) the date on
which the Bank's right of redemption pursuant to
Section 23(a) expires (the later of (x) and (y) being
referred to herein as the "Section 11(a)(ii) Trigger Date"),
then the Bank shall be obligated to deliver, upon the
surrender for exercise of a Right and without requiring
payment of the Purchase Price, shares of Common Stock (to
the extent available) and then, if necessary, cash, which
shares and/or cash have an aggregate value equal to the
Spread. If the Board of Directors of the Bank shall
determine in good faith that it is likely that
(a) sufficient additional shares of Common Stock could be
authorized for issuance upon exercise in full of the Rights
or (b) a reduction in the par value per share of Common
Stock to an amount that is equal to or less than the
Quotient could be authorized, the 30 day period set forth
above may be extended to the extent necessary, but not more
than 90 days after the Section 11(a)(ii) Trigger Date, in
order that the Bank may seek shareholder approval for the
authorization of such additional shares or for the reduction
of such par value, as the case may be (such period, as it
may be extended, the "Substitution Period"). To the extent
that the Bank determines that some action need be taken
pursuant to the first and/or second sentences of this
Section 11(a)(iii), the Bank (x) shall provide, subject to
Section 7(e) hereof, that such action shall apply uniformly
to all outstanding Rights, and (y) may suspend the
exercisability of the Rights until the expiration of the
Substitution Period in order to seek any authorization of
additional shares or reduction in par value and/or to decide
the appropriate form of distribution to be made pursuant to
such first sentence and to determine the value thereof. In
the event of any such suspension, the Bank shall issue a
public announcement stating that the exercisability of the
Rights has been temporarily suspended, as well as a public
announcement at such time as the suspension is no longer in
effect. For purposes of this Section 11(a)(iii), the value
of the Common Stock shall be the current market price (as
determined pursuant to Section 11(d) hereof) per share of
the Common Stock on the Section 11(a)(ii) Trigger Date and
the value of any "common stock equivalent" shall be deemed
to have the same value as the Common Stock on such date.
(b) In case the Bank shall fix a record date for
the issuance of rights, options, or warrants to all holders of
Preferred Stock entitling them to subscribe for or purchase (for
a period expiring within 45 calendar days after such record date)
Preferred Stock (or shares having the same rights, privileges and
preferences as the shares of Preferred Stock ("equivalent
preferred stock")) or securities convertible into Preferred Stock
or equivalent preferred stock at a price per share of Preferred
Stock or per share of equivalent preferred stock (or having a
conversion price per share, if a security convertible into
<PAGE 19> Preferred Stock or equivalent preferred stock) less
than the current market price (as determined pursuant to
Section 11(d) hereof) per share of Preferred Stock on such record
date, the Purchase Price to be in effect after such record date
shall be determined by multiplying the Purchase Price in effect
immediately prior to such record date by a fraction, the
numerator of which shall be the number of shares of Preferred
Stock outstanding on such record date, plus the number of shares
of Preferred Stock which the aggregate offering price of the
total number of shares of Preferred Stock and/or equivalent
preferred stock so to be offered (and/or the aggregate initial
conversion price of the convertible securities so to be offered)
would purchase at such current market price, and the denominator
of which shall be the number of shares of Preferred Stock
outstanding on such record date, plus the number of additional
shares of Preferred Stock and/or equivalent preferred stock to be
offered for subscription or purchase (or into which the
convertible securities so to be offered are initially
convertible). In case such subscription price may be paid by
delivery of consideration part or all of which may be in a form
other than cash, the value of such consideration shall be as
determined in good faith by the Board of Directors of the Bank,
whose determination shall be described in a statement filed with
the Rights Agent and shall be binding on the Rights Agent and the
holders of the Rights. Shares of Preferred Stock owned by or
held for the account of the Bank shall not be deemed outstanding
for the purpose of any such computation. Such adjustment shall
be made successively whenever such a record date is fixed, and in
the event that such rights or warrants are not so issued, the
Purchase Price shall be adjusted to be the Purchase Price which
would then be in effect if such record date had not been fixed.
(c) In case the Bank shall fix a record date for
a distribution to all holders of Preferred Stock (including any
such distribution made in connection with a consolidation or
merger in which the Bank is the continuing bank) of evidences of
indebtedness, cash (other than a regular quarterly cash dividend
out of the earnings or retained earnings of the Bank), assets
(other than a dividend payable in Preferred Stock, but including
any dividend payable in stock other than Preferred Stock) or
subscription rights or warrants (excluding those referred to in
Section 11(b) hereof), the Purchase Price to be in effect after
such record date shall be determined by multiplying the Purchase
Price in effect immediately prior to such record date by a
fraction, the numerator of which shall be the current market
price (as determined pursuant to Section 11(d) hereof) per share
of Preferred Stock on such record date, less the fair market
value (as determined in good faith by the Board of Directors of
the Bank, whose determination shall be described in a statement
filed with the Rights Agent) of the portion of the cash, assets,
or evidences of indebtedness so to be distributed or of such
subscription rights or warrants applicable to a share of
Preferred Stock and the denominator of which shall be such
current market price (as determined pursuant to Section 11(d)
hereof) per share of Preferred Stock. Such adjustments shall be
<PAGE 20> made successively whenever such a record date is fixed,
and in the event that such distribution is not so made, the
Purchase Price shall be adjusted to be the Purchase Price which
would have been in effect if such record date had not been fixed.
(d) (i) For the purpose of any computation
hereunder, other than computations made pursuant to
Section 11(a)(iii) hereof, the "current market price" per
share of Common Stock on any date shall be deemed to be the
average of the daily closing price per share of such Common
Stock for each of the 30 consecutive Trading Days (as such
term is hereinafter defined) immediately prior to such date,
and for purposes of computations made pursuant to
Section 11(a)(iii) hereof, the "current market price" per
share of Common Stock on any date shall be deemed to be the
average of the daily closing price per share of such Common
Stock for each of the 10 consecutive Trading Days
immediately following such date; provided, however, that in
the event that the current market price per share of the
Common Stock is determined during a period following the
announcement by the issuer of such Common Stock of (A) a
dividend or distribution on such Common Stock payable in
shares of such Common Stock or securities convertible into
shares of such Common Stock (other than the Rights), or
(B) any subdivision, combination, or reclassification of
such Common Stock, and the ex-dividend date for such
dividend or distribution, or the record date for such
subdivision, combination or reclassification shall not have
occurred prior to the commencement of the requisite
30 Trading Day or 10 Trading Day period, as set forth above,
then, and in each such case, the "current market price"
shall be properly adjusted to take into account ex-dividend
trading. The closing price for each day shall be the
average of the high bid and low asked prices in the over-
the-counter market, as reported by the National Association
of Securities Dealers, Inc. Automated Quotation System
("NASDAQ") or such other system then in use, or, if on any
such date the shares of Common Stock are not quoted by any
such organization, the average of the closing bid and asked
prices as furnished by a professional market maker making a
market in the Common Stock selected by the Board of
Directors of the Bank. If on any such date no market maker
is making a market in the Common Stock, the fair value of
such shares on such date as determined in good faith by the
Board of Directors of the Bank shall be used. The term
"Trading Day" shall mean a Business Day. If the Common
Stock is not publicly held or not so listed or traded,
"current market price" per share shall mean the fair value
per share as determined in good faith by the Board of
Directors of the Bank, whose determination shall be
described in a statement filed with the Rights Agent and
shall be conclusive for all purposes.
(ii) For the purpose of any computation
hereunder, the "current market price" per share of Preferred
<PAGE 21> Stock shall be determined in the same manner as
set forth above for the Common Stock in clause (i) of this
Section 11(d) (other than the last sentence thereof). If
the current market price per share of Preferred Stock cannot
be determined in the manner provided above or if the
Preferred Stock is not publicly held or listed or traded in
a manner described in clause (i) of this Section 11(d), the
"current market price" per share of Preferred Stock shall be
conclusively deemed to be an amount equal to 100 (as such
number may be appropriately adjusted for such events as
stock splits, stock dividends, and recapitalizations with
respect to the Common Stock occurring after the date of this
Agreement) multiplied by the current market price per share
of the Common Stock. If neither the Common Stock nor the
Preferred Stock is publicly held or so listed or traded,
current market price" per share of the Preferred Stock shall
mean the fair value per share as determined in good faith by
the Board of Directors of the Bank, whose determination
shall be described in a statement filed with the Rights
Agent and shall be conclusive for all purposes. For all
purposes of this Agreement, the "current market price" of
one one-hundredth of a share of Preferred Stock shall be
equal to the "current market price" of one share of
Preferred Stock divided by 100.
(e) Anything herein to the contrary
notwithstanding, no adjustment in the Purchase Price shall be
required unless such adjustment would require an increase or
decrease of at least 1% in the Purchase Price; provided, however,
that any adjustments which by reason of this Section 11(e) are
not required to be made shall be carried forward and taken into
account in any subsequent adjustment. All calculations under
this Section 11 shall be made to the nearest cent or to the
nearest ten-thousandth of a share of Common Stock or other share
or one-millionth of a share of Preferred Stock, as the case may
be. Notwithstanding the first sentence of this Section 11(e),
any adjustment required by this Section 11 shall be made no later
than the earlier of (i) three (3) years from the date of the
transaction which mandates such adjustment, or (ii) the
Expiration Date.
(f) If as a result of an adjustment made pursuant
to Section 11(a)(ii) or Section 13(a) hereof, the holder of any
Right thereafter exercised shall become entitled to receive any
shares of capital stock other than Preferred Stock, thereafter
the number of such other shares so receivable upon exercise of
any Right and the Purchase Price thereof shall be subject to
adjustment from time to time in a manner and on terms as nearly
equivalent as practicable to the provisions with respect to the
Preferred Stock contained in Sections 11(a), (b), (c), (e), (g),
(h), (i), (j), (k), and (m), and the provisions of Sections 7, 9,
10, 13, and 14 hereof with respect to the Preferred Stock shall
apply on like terms to any such other shares.
<PAGE 22>
(g) All Rights originally issued by the Bank
subsequent to any adjustment made to the Purchase Price hereunder
shall evidence the right to purchase, at the adjusted Purchase
Price, the number of one one-hundredths of a share of Preferred
Stock purchasable from time to time hereunder upon exercise of
the Rights, all subject to further adjustment as provided herein.
(h) Unless the Bank shall have exercised its
election as provided in Section 11(i), upon each adjustment of
the Purchase Price as a result of the calculations made in
Sections 11(b) and (c), each Right outstanding immediately prior
to the making of such adjustment shall thereafter evidence the
right to purchase, at the adjusted Purchase Price, that number of
one one-hundredths of a share of Preferred Stock (calculated to
the nearest one-millionth) obtained by (i) multiplying (x) the
number of one one-hundredths of a share covered by a Right
immediately prior to this adjustment, by (y) the Purchase Price
in effect immediately prior to such adjustment of the Purchase
Price, and (ii) dividing the product so obtained by the Purchase
Price in effect immediately after such adjustment of the Purchase
Price.
(i) The Bank may elect on or after the date of
any adjustment of the Purchase Price to adjust the number of
Rights, in lieu of any adjustment in the number of one one-
hundredths of a share of Preferred Stock purchasable upon the
exercise of a Right. Each of the Rights outstanding after the
adjustment in the number of Rights shall be exercisable for the
number of one one-hundredths of a share of Preferred Stock for
which a Right was exercisable immediately prior to such
adjustment. Each Right held of record prior to such adjustment
of the number of Rights shall become that number of Rights
(calculated to the nearest one-ten-thousandth) obtained by
dividing the Purchase Price in effect immediately prior to
adjustment of the Purchase Price by the Purchase Price in effect
immediately after adjustment of the Purchase Price. The Bank
shall make a public announcement of its election to adjust the
number of Rights, indicating the record date for the adjustment,
and, if known at the time, the amount of the adjustment to be
made. This record date may be the date on which the Purchase
price is adjusted or any day thereafter, but, if the Rights
Certificates have been issued, shall be at least ten (10) days
later than the date of the public announcement. If Rights
Certificates have been issued, upon each adjustment of the number
of Rights pursuant to this Section 11(i), the Bank shall, as
promptly as practicable, cause to be distributed to holders of
record of Rights Certificates on such record date Rights
Certificates evidencing, subject to Section 14 hereof, the
additional Rights to which such holders shall be entitled as a
result of such adjustment, or, at the option of the Bank, shall
cause to be distributed to such holders of record in substitution
and replacement for the Rights Certificates held by such holders
prior to the date of adjustment, and upon surrender thereof, if
required by the Bank, new Rights Certificates evidencing all the
Rights to which such holders shall be entitled after such
<PAGE 23> adjustment. Rights Certificates so to be distributed
shall be issued, executed, and countersigned in the manner
provided for herein (and may bear, at the option of the Bank, the
adjusted Purchase Price) and shall be registered in the names of
the holders of record of Rights Certificates on the record date
specified in the public announcement.
(j) Irrespective of any adjustment or change in
the Purchase Price or the number of one one-hundredths of a share
of Preferred Stock issuable upon the exercise of the Rights, the
Rights Certificates theretofore and thereafter issued may
continue to express the Purchase Price per one one-hundredth of a
share and the number of one one-hundredths of a share which were
expressed in the initial Rights Certificates issued hereunder.
(k) Before taking any action that would cause an
adjustment reducing the Purchase Price below the then stated
value, if any, of the number of one one-hundredths of a share of
Preferred Stock issuable upon exercise of the Rights, the Bank
shall take any corporate action which may, in the opinion of its
counsel, be necessary in order that the Bank may validly and
legally issue fully paid and nonassessable such number of one
one-hundredths of a share of Preferred Stock at such adjusted
Purchase Price.
(l) In any case in which this Section 11 shall
require that an adjustment in the Purchase Price be made
effective as of a record date for a specified event, the Bank may
elect to defer until the occurrence of such event the issuance to
the holder of any Right exercised after such record date the
number of one one-hundredths of a share of Preferred Stock and
other capital stock or securities of the Bank, if any, issuable
upon such exercise over and above the number of one one-
hundredths of a share of Preferred Stock and other capital stock
or securities of the Bank, if any, issuable upon such exercise on
the basis of the Purchase Price in effect prior to such
adjustment; provided, however, that the Bank shall deliver to
such holder a due bill or other appropriate instrument evidencing
such holder's right to receive such additional shares (fractional
or otherwise) or securities upon the occurrence of the event
requiring such adjustment.
(m) Anything in this Section 11 to the contrary
notwithstanding, the Bank shall be entitled to make such
reductions in the Purchase Price, in addition to those
adjustments expressly required by this Section 11, as and to the
extent that in their good faith judgment the Board of Directors
of the Bank shall determine to be advisable in order that any
(i) consolidation or subdivision of the Preferred Stock,
(ii) issuance wholly for cash of any shares of Preferred Stock at
less than the current market price, (iii) issuance wholly for
cash of shares of Preferred Stock or securities which by their
terms are convertible into or exchangeable for shares of
Preferred Stock, (iv) stock dividends, or (v) issuance of rights,
options, or warrants referred to in this Section 11, hereafter
<PAGE 24> made by the Bank to holders of its Preferred Stock
shall not be taxable to such stockholders.
(n) The Bank covenants and agrees that it shall
not, at any time after the Distribution Date, (i) consolidate
with any other Person (other than a Subsidiary of the Bank in a
transaction which complies with Section 11(o) hereof), (ii) merge
with or into any other Person (other than a Subsidiary of the
Bank in a transaction which complies with Section 11(o) hereof),
or (iii) sell or transfer (or permit any Subsidiary to sell or
transfer), in one transaction, or a series of related
transactions, assets or earning power aggregating more than 50%
of the assets or earning power of the Bank and its Subsidiaries
(taken as a whole) to any other Person or Persons (other than the
Bank and/or any of its Subsidiaries in one or more transactions
each of which complies with Section 11(o) hereof), if (x) at the
time of or immediately after such consolidation, merger, or sale
there are any rights, warrants, or, other instruments or
securities outstanding or agreements in effect which would
substantially diminish or otherwise eliminate the benefits
intended to be afforded by the Rights or (y) prior to,
simultaneously with, or immediately after such consolidation,
merger, or sale, the shareholders of the Person who constitutes,
or would constitute, the "Principal Party" for purposes of
Section 13(a) hereof shall have received a distribution of Rights
previously owned by such Person or any of its Affiliates and
Associates.
(o) The Bank covenants and agrees that, after the
Distribution Date, it will not, except as permitted by Section 27
hereof, take (or permit any Subsidiary to take) any action if at
the time such action is taken it is reasonably foreseeable that
such action will diminish substantially or otherwise eliminate
the benefits intended to be afforded by the Rights.
(p) Anything in this Agreement to the contrary
notwithstanding, in the event that the Bank shall at any time
after the Rights Dividend Declaration Date and prior to the
Distribution Date (i) declare a dividend on the outstanding
shares of Common Stock payable in shares of Common Stock,
(ii) subdivide the outstanding shares of Common Stock, or
(iii) combine the outstanding shares of Common Stock into a
smaller number of shares, the number of Rights associated with
each share of Common Stock then outstanding, or issued or
delivered thereafter but prior to the Distribution Date, shall be
proportionately adjusted so that the number of Rights thereafter
associated with each share of Common Stock following any such
event shall equal the result obtained by multiplying the number
of Rights associated with each share of Common Stock immediately
prior to such event by a fraction the numerator of which shall be
the total number of shares of Common Stock outstanding
immediately prior to the occurrence of the event and the
denominator of which shall be the total number of shares of
Common Stock outstanding immediately following the occurrence of
such event. <PAGE 25>
(q) The failure by the Board of Directors to
declare a Person to be an Adverse Person following such Person
becoming the Beneficial Owner of Voting Securities representing
10% or more of the Total Voting Power shall not imply that such
Person is not an Adverse Person or limit the Board of Directors'
right at any time in the future to declare such Person to be an
Adverse Person.
Section 12. Certificate of Adjusted Purchase Price or
Number of Shares. Whenever an adjustment is made as provided in
Section 11 and Section 13 hereof, the Bank shall (a) promptly
prepare a certificate setting forth such adjustment and a brief
statement of the facts accounting for such adjustment,
(b) promptly file with the Rights Agent, and with each transfer
agent for the Preferred Stock and the Common Stock, a copy of
such certificate, and (c) mail a brief summary thereof to each
holder of a Rights Certificate (or, if prior to the Distribution
Date, to each holder of a certificate representing shares of
Common Stock) in accordance with Section 26 hereof. The Rights
Agent shall be fully protected in relying on any such certificate
and on any adjustment therein contained.
Section 13. Consolidation, Merger, or Sale or Transfer
of Assets or Earning Power.
(a) In the event that, following the Stock
Acquisition Date, directly or indirectly, (x) the Bank shall
consolidate with, or merge with and into, any other Person (other
than a Subsidiary of the Bank in a transaction which complies
with Section 11(o) hereof), and the Bank shall not be the
continuing or surviving bank of such consolidation or merger,
(y) any Person (other than a Subsidiary of the Bank in a
transaction which complies with Section 11(o) hereof) shall
consolidate with, or merge with or into, the Bank, and the Bank
shall be the continuing or surviving bank of such consolidation
or merger and, in connection with such consolidation or merger,
all or part of the outstanding shares of Voting Securities shall
be changed into or exchanged for stock or other securities of any
other Person or cash or any other property, or (z) the Bank shall
sell or otherwise transfer (or one or more of its Subsidiaries
shall sell or otherwise transfer), in one transaction or a series
of related transactions, assets or earning power aggregating more
than 50% of the assets or earning power of the Bank and its
Subsidiaries (taken as a whole) to any Person or Persons (other
than the Bank or any Subsidiary of the Bank in one or more
transactions each of which complies with Section 11(o) hereof);
then, and in each such case (except as may be contemplated by
Section 13(d) hereof), proper provision shall be made so that:
(i) each holder of a Right, except as provided in Section 7(e)
hereof, shall thereafter have the right to receive, upon the
exercise thereof at the then current Purchase Price in accordance
with the terms of this Agreement, such number of validly
authorized and issued, fully paid, nonassessable, and freely
tradeable shares of Common Stock of the Principal Party (as such
term is hereinafter defined), not subject to any liens,
<PAGE 26> encumbrances, rights of first refusal, or other adverse
claims, as shall be equal to the result obtained by
(1) multiplying the then current Purchase Price by the number of
one one-hundredths of a share of Preferred Stock for which a
Right is exercisable immediately prior to the first occurrence of
a Section 13 Event (or, if a Section 11(a)(ii) Event has occurred
prior to the first occurrence of a Section 13 Event, multiplying
the number of such one one-hundredths of a share for which a
Right was exercisable immediately prior to the first occurrence
of a Section 11(a)(ii) Event by the Purchase Price in effect
immediately prior to such first occurrence), and dividing that
product (which, following the first occurrence of a Section 13
Event, shall be referred to as the "Purchase Price" for each
Right and for all purposes of this Agreement) by (2) 50% of the
current market price (determined pursuant to Section 11(d)(i)
hereof) per share of the Common Stock of such Principal Party on
the date of consummation of such Section 13 Event; (ii) such
Principal Party shall thereafter be liable for, and shall assume,
by virtue of such Section 13 Event, all the obligations and
duties of the Bank pursuant to this Agreement; (iii) the term
"Bank" shall thereafter be deemed to refer to such Principal
Party, it being specifically intended that the provisions of
Section 11 hereof shall apply only to such Principal Party
following the first occurrence of a Section 13 Event; (iv) such
Principal Party shall take such steps (including, but not limited
to, the reservation of a sufficient number of shares of its
Common Stock) in connection with the consummation of any such
transaction as may be necessary to assure that the provisions
hereof shall thereafter be applicable, as nearly as reasonably
may be, in relation to its shares of Common Stock thereafter
deliverable upon the exercise of the Rights; and (v) the
provisions of Section 11(a)(ii) hereof shall be of no effect
following the first occurrence of any Section 13 Event.
(b) "Principal Party" shall mean (i) in the case
of any transaction described in clause (x) or (y) of the first
sentence of Section 13(a), the Person that is the issuer of any
securities into which shares of Common Stock are converted in
such merger or consolidation and if no securities are so issued,
the Person that is the other party to such merger or
consolidation and (ii) in the case of any transaction described
in clause (z) of the first sentence of Section 13(a), the Person
that is the party receiving the greatest portion of the assets or
earning power transferred pursuant to such transaction or
transactions; provided, however, that in any such case, (1) if
the Common Stock of such Person is not at such time and has not
been continuously over the preceding 12 month period registered
under Section 12 of the Exchange Act, and such Person is a direct
or indirect Subsidiary of another Person the Common Stock of
which is and has been so registered, "Principal Party" shall
refer to such other Person; and (2) in case such Person is a
Subsidiary, directly or indirectly, of more than one Person, the
Common Stock of two or more of which are and have been so
registered, "Principal Party" shall refer to whichever of such
<PAGE 27> Persons is the issuer of the Common Stock having the
greatest aggregate market value.
(c) The Bank shall not consummate any such
consolidation, merger, sale, or transfer unless the Principal
Party shall have a sufficient number of authorized shares of its
Common Stock which have not been issued or reserved for issuance
to permit the exercise in full of the Rights in accordance with
this Section 13 and unless prior thereto the Bank and such
Principal Party shall have executed and delivered to the Rights
Agent a supplemental agreement providing for the terms set forth
in paragraphs (a) and (b) of this Section 13 and further
providing that, as soon as practicable after the date of any
consolidation, merger or sale of assets mentioned in
paragraph (a) of this Section 13, the Principal Party will
(i) prepare and file a registration
statement under the Securities Act, with respect to the
Rights and the securities purchasable upon exercise of the
Rights on an appropriate form, and will use its best efforts
to cause such registration statement to (A) become effective
as soon as practicable after such filing and (B) remain
effective (with a prospectus at all times meeting the
requirements of the Securities Act) until the Expiration
Date; and
(ii) will deliver to holders of the Rights
historical financial statements for the Principal Party and
each of its Affiliates which comply in all respects with the
requirements for registration on Form 10 under the Exchange
Act.
The provisions of this Section 13 shall similarly apply to
successive mergers or consolidations or sales or other transfers.
In the event that a Section 13 Event shall occur at any time
after the occurrence of a Section 11(a)(ii) Event, the Rights
which have not theretofore been exercised shall thereafter become
exercisable in the manner described in Section 13(a).
(d) Notwithstanding anything in this Agreement to
the contrary, Section 13 shall not be applicable to a transaction
described in subparagraphs (x) and (y) of Section 13(a) if
(i) such transaction is consummated with a Person or Persons (or
a wholly-owned subsidiary of any such Person or Persons) who
acquired shares of Common Stock pursuant to a tender offer or
exchange offer for all outstanding shares of Common Stock at a
price and on terms determined to be in accordance with Section
11(a)(ii)(A) hereof, (ii) the price per share of Common Stock
offered in such transaction is not less than the price per share
of Common Stock paid to all holders of shares of Common Stock
whose shares were purchased pursuant to such tender offer or
exchange offer, and (iii) the form of consideration being offered
to the remaining holders of shares of Common Stock pursuant to
such transaction is the same as the form of consideration paid
pursuant to such tender offer or exchange offer. Upon <PAGE 28>
consummation of any such transaction contemplated by this
Section 13(d), all Rights hereunder shall expire.
Section 14. Fractional Rights and Fractional Shares.
(a) The Bank shall not be required to issue
fractional Rights, except prior to the Distribution Date as
provided in Section 11(p) hereof, or to distribute Rights
Certificates that evidence fractional Rights. In lieu of such
fractional Rights, there shall be paid to the registered holders
of the Rights Certificates with regard to which such fractional
Rights would otherwise be issuable, an amount in cash equal to
the same fraction of the current market value of a whole Right.
For purposes of this Section 14(a), the current market value of a
whole Right shall be the closing price of the Rights for the
Trading Day immediately prior to the date on which such
fractional Rights would have been otherwise issuable. The
closing price of the Rights for any day shall be the last quoted
price or, if not so quoted, the average of the high bid and low
asked prices in the over-the-counter market, as reported by
NASDAQ or such other system then in use or, if on any such date
the Rights are not quoted by any such organization, the average
of the closing bid and asked prices as furnished by a
professional market maker making a market in the Rights selected
by the Board of Directors of the Bank. If on any such date no
such market maker is making a market in the Rights the fair value
of the Rights on such date as determined in good faith by the
Board of Directors of the Bank shall be used.
(b) The Bank shall not be required to issue
fractional shares of Preferred Stock (other than fractions which
are integral multiples of one one-hundredth of a share of
Preferred Stock) upon exercise of the Rights or to distribute
certificates which evidence fractional shares of Preferred Stock
(other than fractions which are integral multiples of one one-
hundredth of a share of Preferred Stock). In lieu of fractional
shares of Preferred Stock that are not integral multiples of one
one-hundredth of a share of Preferred Stock, the Bank may pay to
the registered holders of Rights Certificates at the time such
Rights are exercised as herein provided an amount in cash equal
to the same fraction of the current market value of one one-
hundredth of a share of Preferred Stock. For purposes of this
Section 14(b), the current market value of one one-hundredth of a
share of Preferred Stock shall be one one-hundredth of the
closing price of a share of Preferred Stock (as determined
pursuant to Section 11(d)(ii) hereof) for the Trading Day
immediately prior to the date of such exercise.
(c) Following the occurrence of a Triggering
Event, the Bank shall not be required to issue fractional shares
of Common Stock upon exercise of the Rights or to distribute
certificates that evidence fractional shares of Common Stock. In
lieu of fractional shares of Common Stock, the Bank may pay to
the registered holders of Rights Certificates at the time such
Rights are exercised as herein provided an amount in cash equal
<PAGE 29> to the same fraction of the current market value of one
share of Common Stock. For purposes of this Section 14(c), the
current market value of one share of Common Stock shall be the
closing price of one share of Common Stock (as determined
pursuant to Section 11(d)(i) hereof) for the Trading Day
immediately prior to the date of such exercise.
(d) The holder of a Right by the acceptance of
the Rights expressly waives his right to receive any fractional
Rights or any fractional shares upon exercise of a Right, except
as permitted by this Section 14.
Section 15. Rights of Action. All rights of action in
respect of this Agreement are vested in the respective registered
holders of the Rights Certificates (and, prior to the
Distribution Date, the registered holders of the Common Stock);
and any registered holder of any Rights Certificate (or, prior to
the Distribution Date, of the Common Stock), without the consent
of the Rights Agent or of the holder of any other Rights
Certificate (or, prior to the Distribution Date, of the Common
Stock), may, in his own behalf and for his own benefit, enforce,
and may institute and maintain any suit, action, or proceeding
against the Bank to enforce, or otherwise act in respect of, his
right to exercise the Rights evidenced by such Rights Certificate
in the manner provided in such Rights Certificate and in this
Agreement. Without limiting the foregoing or any remedies
available to the holders of Rights, it is specifically
acknowledged that the holders of Rights would not have an
adequate remedy at law for any breach of this Agreement and shall
be entitled to specific performance of the obligations hereunder
and injunctive relief against actual or threatened violations of
the obligations hereunder of any Person subject to this
Agreement.
Section 16. Agreement of Rights Holders. Every
holder of a Right by accepting the same consents and agrees with
the Bank and the Rights Agent and with every other holder of a
Right that:
(a) prior to the Distribution Date, the Rights
will be transferable only in connection with the transfer of
Common Stock;
(b) after the Distribution Date, the Rights
Certificates are transferable only on the registry books of the
Rights Agent if surrendered at the principal office or offices of
the Rights Agent designated for such purposes, duly endorsed or
accompanied by a proper instrument of transfer and with the
appropriate forms and certificates fully executed;
(c) subject to Section 6(a) and Section 7(f)
hereof, the Bank and the Rights Agent may deem and treat the
person in whose name a Rights Certificate (or, prior to the
Distribution Date, the associated Common Stock certificate) is
registered as the absolute owner thereof and of the Rights
<PAGE 30> evidenced thereby (notwithstanding any notations of
ownership or writing on the Rights Certificates or the associated
Common Stock certificate made by anyone other than the Bank or
the Rights Agent) for all purposes whatsoever, and neither the
Bank nor the Rights Agent, subject to the last sentence of
Section 7(e) hereof, shall be required to be affected by any
notice to the contrary; and
(d) notwithstanding anything in this Agreement to
the contrary, neither the Bank nor the Rights Agent shall have
any liability to any holder of a Right or other Person as a
result of its inability to perform any of its obligations under
this Agreement by reason of any preliminary or permanent
injunction or other order, decree, or ruling issued by a court of
competent jurisdiction or by a governmental, regulatory, or
administrative agency or commission, or any statute, rule,
regulation, or executive order promulgated or enacted by any
governmental authority, prohibiting or otherwise restraining
performance of such obligation; provided, however, the Bank must
use its best efforts to have any such order, decree, or ruling
lifted or otherwise overturned as soon as possible.
Section 17. Rights Certificate Holder Not Deemed a
Shareholder. No holder, as such, of any Rights Certificate shall
be entitled to vote, receive dividends, or be deemed for any
purpose the holder of the number of one one-hundredths of a share
of Preferred Stock or any other securities of the Bank which may
at any time be issuable upon the exercise of the Rights
represented thereby, nor shall anything contained herein or in
any Rights Certificate be construed to confer upon the holder of
any Rights Certificate, as such, any of the rights of a
shareholder of the Bank or any right to vote for the election of
directors or upon any matter submitted to shareholders at any
meeting thereof, or to give or withhold consent to any corporate
action, or to receive notice of meetings or other actions
affecting shareholders (except as provided in Section 25 hereof),
or to receive dividends or subscription rights, or otherwise,
until the Right or Rights evidenced by such Rights Certificate
shall have been exercised in accordance with the provisions
hereof.
Section 18. Concerning the Rights Agent.
(a) The Bank agrees to pay to the Rights Agent
reasonable compensation for all services rendered by it hereunder
and, from time to time, on demand of the Rights Agent, its
reasonable expenses and counsel fees and disbursements and other
disbursements incurred in the administration and execution of
this Agreement and the exercise and performance of its duties
hereunder. The Bank shall indemnify the Rights Agent for, and
hold it harmless against, any loss, liability, claim or expense
(the "Loss"), arising out of or in connection with its duties
under this Agreement, including the costs and expenses of
defending itself against any Loss, unless such Loss shall have
been determined by a court of competent jurisdiction to be a
<PAGE 31> result of the Rights Agent's gross negligence or
intentional misconduct. The obligations of the Bank under this
section shall survive the termination of this Agreement.
(b) The Rights Agent shall be protected and shall
incur no liability for or in respect of any action taken,
suffered, or omitted by it in connection with its administration
of this Agreement in reliance upon any Rights Certificate or
certificate for Common Stock or for other securities of the Bank,
instrument of assignment or transfer, power of attorney,
endorsement, affidavit, letter, notice,, direction, consent,
certificate, statement, or other paper or document believed by it
to be genuine and to be signed, executed and, where necessary,
verified or acknowledged, by the proper Person or Persons.
Section 19. Merger or Consolidation or Change of Name
of Rights Agent.
(a) Any corporation into which the Rights Agent
or any successor Rights Agent may be merged or with which it may
be consolidated, or any corporation resulting from any merger or
consolidation to which the Rights Agent or any successor Rights
Agent shall be a party, or any corporation succeeding to the
corporate trust business of the Rights Agent or any successor
Rights Agent, shall be the successor to the Rights Agent under
this Agreement without the execution or filing of any paper or
any further act on the part of any of the parties hereto;
provided, however, that such corporation would be eligible for
appointment as a successor Rights Agent under the provisions of
Section 21 hereof. In case at the time such successor Rights
Agent shall succeed to the agency created by this Agreement, any
of the Rights Certificates shall have been countersigned but not
delivered, any such successor Rights Agent may adopt the
countersignature of a predecessor Rights Agent and deliver such
Rights Certificates so countersigned; and in case at that time
any of the Rights Certificates shall not have been countersigned,
any successor Rights Agent may countersign such Rights
Certificates either in the name of the predecessor or in the name
of the successor Rights Agent; and in all such cases such Rights
Certificates shall have the full force provided in the Rights
Certificates and in this Agreement.
(b) In case at any time the name of the Rights
Agent shall be changed and at such time any of the Rights
Certificates shall have been countersigned but not delivered, the
Rights Agent may adopt the countersignature under its prior name
and deliver Rights Certificates so countersigned; and in case at
that time any of the Rights Certificates shall not have been
countersigned, the Rights Agent may countersign such Rights
Certificates either in its prior name or in its changed name; and
in all such cases such Rights Certificates shall have the full
force provided in the Rights Certificates and in this Agreement.
Section 20. Duties of Rights Agent. The Rights Agent
undertakes the duties and obligations imposed by this Agreement
<PAGE 32> upon the following terms and conditions, by all of
which the Bank and the holders of Rights Certificates, by their
acceptance thereof, shall be bound:
(a) The Rights Agent may consult with legal
counsel (who may be legal counsel for the Bank), and the opinion
of such counsel shall be full and complete authorization and
protection to the Rights Agent as to any action taken or omitted
by it in good faith and in accordance with such opinion.
(b) Whenever in the performance of its duties
under this Agreement the Rights Agent shall deem it necessary or
desirable that any fact or matter (including, without limitation,
the identity of any Acquiring Person or Adverse Person and the
determination of "current market price") be proved or established
by the Bank prior to taking or suffering any action hereunder,
such fact or matter (unless other evidence in respect thereof be
herein specifically prescribed) may be deemed to be conclusively
proved and established by a certificate signed by the Chairman of
the Board, the President, any Executive Vice President, or the
Secretary of the Bank and delivered to the Rights Agent; and such
certificate shall be full authorization to the Rights Agent for
any action taken or suffered in good faith by it under the
provisions of this Agreement in reliance upon such certificate.
(c) The Rights Agent shall be liable hereunder
only for its own gross negligence, bad faith, or willful
misconduct; provided, however, that in no case will the Rights
Agent be liable for special, indirect, incidental or
consequential loss or damages of any kind whatsoever (including
but not limited to lost profits), even if the Rights Agent has
been advised of the possibility of such damages. Any liability
of the Rights Agent will be limited to the amount of fees paid by
the Bank hereunder.
(d) The Rights Agent shall not be liable for or
by reason of any of the statements of fact or recitals contained
in this Agreement or in the Rights Certificates or be required to
verify the same (except as to its countersignature on such Rights
Certificates), but all such statements and recitals are and shall
be deemed to have been made by the Bank only.
(e) The Rights Agent shall not be under any
responsibility in respect of the validity of this Agreement or
the execution and delivery hereof (except the due execution and
delivery hereof by the Rights Agent) or in respect of the
validity or execution of any Rights Certificate (except its
countersignature thereof); nor shall it be responsible for any
breach by the Bank of any covenant or condition contained in this
Agreement or in any Rights Certificate; nor shall it be
responsible for any adjustment required under the provisions of
Section 11 or Section 13 hereof or responsible for the manner,
method or amount of any such adjustment or the ascertaining of
the existence of facts that would require any such adjustment
(except with respect to the exercise of Rights evidenced by
<PAGE 33> Rights Certificates after actual notice of any such
adjustment); nor shall it by any act hereunder be deemed to make
any representation or warranty as to the authorization or
reservation of any shares of Common Stock or Preferred Stock to
be issued pursuant to this Agreement or any Rights Certificate or
as to whether any shares of Common Stock or Preferred Stock will,
when so issued, be validly authorized and issued, fully paid and
nonassessable.
(f) The Bank agrees that it will perform,
execute, acknowledge, and deliver or cause to be performed,
executed, acknowledged, and delivered all such further and other
acts, instruments and assurances as may reasonably be required by
the Rights Agent for the carrying out or performing by the Rights
Agent of the provisions of this Agreement.
(g) The Rights Agent is hereby authorized and
directed to accept instructions with respect to the performance
of its duties hereunder from the Chairman of the Board, the
President, any Executive Vice President, or the Secretary of the
Bank, and to apply to such officers for advice or instructions in
connection with its duties, and it shall not be liable for any
action taken or suffered to be taken by it in good faith in
accordance with instructions of any such officer.
(h) The Rights Agent and any shareholder,
director, officer, or employee of the Rights Agent may buy, sell,
or deal in any of the Rights or other securities of the Bank or
become pecuniarily interested in any transaction in which the
Bank may be interested, or contract with or lend money to the
Bank or otherwise act as fully and freely as though it were not
Rights Agent under this Agreement. Nothing herein shall preclude
the Rights Agent from acting in any other capacity for the Bank
or for any other legal entity.
(i) The Rights Agent may execute and exercise any
of the rights or powers hereby vested in it or perform any duty
hereunder either itself or by or through its attorneys or agents,
and the Rights Agent shall not be answerable or accountable for
any act, default, neglect, or misconduct of any such attorneys or
agents or for any loss to the Bank resulting from any such act,
default, neglect, or misconduct; provided, however, reasonable
care was exercised in the selection and continued employment
thereof.
(j) No provision of this Agreement shall require
the Rights Agent to expend or risk its own funds or otherwise
incur any financial liability in the performance of any of its
duties hereunder or in the exercise of its rights if there shall
be reasonable grounds for believing that repayment of such funds
or adequate indemnification against such risk or liability is not
reasonably assured to it.
(k) If, with respect to any Rights Certificate
surrendered to the Rights Agent for exercise or transfer, the
<PAGE 34> certificate attached to the form of assignment or form
of election to purchase, as the case may be, has either not been
completed or indicates an affirmative response to clause 1
and/or 2 thereof, the Rights Agent shall not take any further
action with respect to such requested exercise or transfer
without first consulting with the Bank.
Section 21. Change of Rights Agent. The Rights Agent
or any successor Rights Agent may resign and be discharged from
its duties under this Agreement upon 30 days' notice in writing
mailed to the Bank, and to each transfer agent of the Common
Stock and Preferred Stock, by registered or certified mail, and
to the holders, if any, of the Rights Certificates by first-class
mail. The Bank may remove the Rights Agent or any successor
Rights Agent upon 10 days' notice in writing, mailed to the
Rights Agent or successor Rights Agent, as the case may be, and
to each transfer agent of the Common Stock and Preferred Stock,
by registered or certified mail, and to the holders of the Rights
Certificates by first-class mail. If the Rights Agent shall
resign or be removed or shall otherwise become incapable of
acting, the Bank shall appoint a successor to the Rights Agent.
If the Bank shall fail to make such appointment within a period
of 10 days after giving notice of such removal, or within a
period of 30 days after it has been notified in writing of such
resignation or incapacity by the resigning or incapacitated
Rights Agent or by the holder of a Rights Certificate (who shall,
with such notice, submit his Rights Certificate for inspection by
the Bank), as the case may be, then any registered holder of any
Rights Certificate may apply to any court of competent
jurisdiction for the appointment of a new Rights Agent. Any
successor Rights Agent, whether appointed by the Bank or by such
a court, shall be either (a) a corporation organized and doing
business under the laws of the United States or of any state of
the United States so long as such corporation is authorized under
such laws to exercise corporate trust powers and is subject to
supervision or examination by federal or state authority and
which has at the time of its appointment as Rights Agent a
combined capital and surplus of at least $50,000,000 or (b) an
affiliate of such corporation. After appointment, the successor
Rights Agent shall be vested with the same powers, rights,
duties, and responsibilities as if it had been originally named
as Rights Agent without further act or deed; but the predecessor
Rights Agent shall deliver and transfer to the successor Rights
Agent any property at the time held by it hereunder, and execute
and deliver any further assurance, conveyance, act or deed
necessary for the purpose. Not later than the effective date of
any such appointment, the Bank shall file notice thereof in
writing with the predecessor Rights Agent and each transfer agent
of the Common Stock and the Preferred Stock, and mail a notice
thereof in writing to the registered holders of the Rights
Certificates. Failure to give any notice provided for in this
Section 21, however, or any defect therein, shall not affect the
legality or validity of the resignation or removal of, the Rights
Agent or the appointment of the successor Rights Agent, as the
case may be. <PAGE 35>
Section 22. Issuance of New Rights Certificates.
Notwithstanding any of the provisions of this Agreement or of the
Rights to the contrary, the Bank may, at its option, issue new
Rights Certificates evidencing Rights in such form as may be
approved by its Board of Directors to reflect any adjustment or
change in the Purchase Price and the number, kind, or class of
shares or other securities or property purchasable under the
Rights Certificates made in accordance with the provisions of
this Agreement. In addition, in connection with the issuance or
sale of shares of Common Stock following the Distribution Date
and prior to the redemption or expiration of the Rights, the Bank
(a) shall, with respect to shares of Common Stock so issued or
sold pursuant to the exercise of stock options or under any
employee plan or arrangement, granted or awarded on or prior to
the Distribution Date, or upon the exercise, conversion, or
exchange of securities hereinafter issued by the Bank, and
(b) may, in any other case, if deemed necessary or appropriate by
the Board of Directors of the Bank, issue Rights Certificates
representing the appropriate number of Rights in connection with
such issuance or sale; provided, however, that (i) no such Rights
Certificate shall be issued if, and to the extent that, the Bank
shall be advised by counsel that such issuance would create a
significant risk of material adverse tax consequences to the Bank
or the Person to whom such Rights Certificate would be issued,
and (ii) no such Rights Certificate shall be issued if, and to
the extent that, appropriate adjustment shall otherwise have been
made in lieu of the issuance thereof.
Section 23. Redemption and Termination.
(a) The Board of Directors of the Bank may, at
its option, at any time prior to the earlier of (i) the close of
business on the twentieth Business Day following the Stock
Acquisition Date (or such later date as may be determined by a
majority of the Continuing Directors; provided, however, that
such date shall not be extended at such time if the Rights are
not then redeemable), or (ii) the Final Expiration Date, redeem
all but not less than all the then outstanding Rights at a
redemption price of $.001 per Right, as such amount may be
appropriately adjusted to reflect any stock split, stock
dividend, or similar transaction occurring after the date hereof
(such redemption price being hereinafter referred to as the
"Redemption Price"); provided, however, that if, following the
occurrence of the Stock Acquisition Date and following the
expiration of the right of redemption hereunder but prior to any
Triggering Event, (i) a Person who is an Acquiring Person shall
have transferred or otherwise disposed of a number of shares of
Common Stock in one transaction or series of transactions, not
directly or indirectly involving the Bank or any of its
Subsidiaries, such that such Person is thereafter a Beneficial
Owner of less than 10% of the outstanding shares of Common Stock
or Voting Securities representing less than 10% of Total Voting
Power, and (ii) there are no other Persons, immediately following
the occurrence of the event described in clause (i), who are
Acquiring Persons, then the right of redemption shall be
<PAGE 36> reinstated and thereafter be subject to the provisions
of this Section 23. Notwithstanding the foregoing, the Board of
Directors may not redeem any Rights following a determination
pursuant to Section 11(a)(ii)(B) that any Person is an Adverse
Person. Notwithstanding anything contained in this Agreement to
the contrary, the Rights shall not be exercisable after the first
occurrence of a Section 11(a)(ii) Event until such time as the
Bank's right of redemption hereunder has expired. The Bank may,
at its option, pay the Redemption Price in cash, shares of Common
Stock (based on the "current market price", as defined in
Section 11(d)(i) hereof, of the Common Stock at the time of
redemption), or any other form of consideration deemed
appropriate by the Board of Directors.
(b) Immediately upon the action of the Board of
Directors of the Bank ordering the redemption of the Rights, and
without any further action and without any notice, the right to
exercise the Rights will terminate and the only right thereafter
of the holders of Rights shall be to receive the Redemption Price
for each Right so held. The Bank shall promptly give public
notice of such redemption and notice to the Rights Agent;
provided, however, the failure to give, or any defect in, any
such notice shall not affect the validity of such redemption.
Within 10 days after such action of the Board of Directors
ordering the redemption of the Rights, the Bank shall mail a
notice to all holders of the then outstanding Rights at each
holder's last address as it appears upon the registry books of
the Rights Agent or, prior to the Distribution Date, on the
registry books of the transfer agent for the Common Stock. Any
notice which is mailed in the manner herein provided shall be
deemed given, whether or not the holder receives the notice.
Each such notice of redemption will state the method by which the
payment of the Redemption Price will be made.
Section 24. Exchange.
(a) The Board of Directors of the Bank may, at
its option, at any time and from time to time after the first
occurrence of a Section 11(a)(ii) Event, exchange all or part of
the then outstanding and exercisable Rights (which shall not
include Rights that have become void pursuant to the provisions
of Section 7(e) hereof) for shares of Common Stock or common
stock equivalents (as defined in Section 11(a)(iii) hereof), or
any combination thereof, at an exchange ratio of one share of
Common Stock, or such number of common stock equivalents or units
representing fractions thereof as would be deemed to have the
same value as one share of Common Stock, per Right, appropriately
adjusted to reflect any stock split, stock dividend, or similar
transaction occurring after the date hereof (such exchange ratio
being hereinafter referred to as the "Exchange Ratio").
(b) Immediately upon the action of the Board of
Directors of the Bank ordering the exchange of any Rights
pursuant to subsection (a) of this Section 24 and without any
further action and without any notice, the right to exercise such
<PAGE 37> Rights shall terminate and the only right thereafter of
a holder of such Rights shall be to receive that number of shares
of Common Stock and/or common stock equivalents equal to the
number of such Rights held by such holder multiplied by the
Exchange Ratio. The Bank shall promptly give public notice of
any such exchange; provided, however, that the failure to give,
or any defect in, such notice shall not affect the validity of
such exchange. The Bank promptly shall mail a notice of any such
exchange to all of the holders of such Rights at their last
addresses as they appear upon the registry books of the Rights
Agent. Any notice which is mailed in the manner herein provided
shall be deemed given, whether or not the holder receives the
notice. Each such notice of exchange will state the method by
which the exchange of the shares of Common Stock and/or common
stock equivalents for Rights will be effected and, in the event
of any partial exchange, the number of Rights which will be
exchanged. Any partial exchange shall be effected pro rata based
on the number of Rights (other than Rights which have become void
pursuant to the provisions of Section 7(e) hereof) held by each
holder of Rights.
(c) In the event that the number of shares of
Common Stock which are authorized by the Bank's Charter but not
outstanding or reserved for issuance for purposes other than upon
exercise of the Rights are not sufficient to permit an exchange
of Rights as contemplated in accordance with this Section 24, the
Bank may, at its option, take all such action as may be necessary
to authorize additional shares of Common Stock for issuance upon
exchange of the Rights.
(d) The Bank shall not be required to issue
fractional shares of Common Stock or to distribute certificates
which evidence fractional shares of Common Stock. In lieu of
such fractional shares of Common Stock, the Bank shall pay to the
registered holders of Rights with regard to which such fractional
shares of Common Stock would otherwise be issuable an amount in
cash equal to the same fraction of the value of a whole share of
Common Stock. For purposes of this Section 24, the value of a
whole share of Common Stock shall be the closing price (as
determined pursuant to the second sentence of Section 11(d)(i)
hereof) for the Trading Day immediately prior to the date of
exchange pursuant to this Section 24, and the value of any common
stock equivalent shall be deemed to have the same value as the
Common Stock on such date.
Section 25. Notice of Certain Events.
(a) In case the Bank shall propose, at any time
after the Distribution Date, (i) to pay any dividend payable in
stock of any class to the holders of Preferred Stock or to make
any other distribution to the holders of Preferred Stock (other
than a regular quarterly cash dividend out of earnings or
retained earnings of the Bank), or (ii) to offer to the holders
of Preferred Stock rights or warrants to subscribe for or to
purchase any additional shares of Preferred Stock or shares of
<PAGE 38> stock of any class or any other securities, rights or
options, or (iii) to effect any reclassification of its Preferred
Stock (other than a reclassification involving only the
subdivision of outstanding shares of Preferred Stock), or (iv) to
effect any consolidation or merger into or with any other Person
(other than a Subsidiary of the Bank in a transaction which
complies with Section 11(o) hereof), or to effect any sale or
other transfer (or to permit one or more of its Subsidiaries to
effect any sale or other transfer), in one transaction or a
series of related transactions of more than 50% of the assets or
earning power of the Bank and its Subsidiaries (taken as a whole)
to any other Person or Persons (other than the Bank and/or any of
its Subsidiaries in one or more transactions each of which
complies with Section 11(o) hereof), or (v) to effect the
liquidation, dissolution, or winding up of the Bank, then, in
each such case, the Bank shall give to each holder of a Rights
Certificate, to the extent feasible and in accordance with
Section 26 hereof, a notice of such proposed action, which shall
specify the record date for the purposes of such stock dividend,
distribution of rights or warrants, or the date on which such
reclassification, consolidation, merger, sale, transfer,
liquidation, dissolution, or winding up is to take place and the
date of participation therein by the holders of the shares of
Preferred Stock, if any such date is to be fixed, and such notice
shall be so given in the case of any action covered by clause (i)
or (ii) above at least 20 days prior to the record date for
determining holders of the shares of Preferred Stock for purposes
of such action, and in the case of any such other action, at
least 20 days prior to the date of the taking of such proposed
action or the date of participation therein by the holders of the
shares of Preferred Stock whichever shall be the earlier.
(b) In case any Section 11(a)(ii) Event shall
occur, then, (i) the Bank shall as soon as practicable thereafter
give to each holder of a Rights Certificate, to the extent
feasible and in accordance with Section 26 hereof, a notice of
the occurrence of such event, which shall specify the event and
the consequences of the event to holders of Rights under
Section 11(a)(ii) hereof, and (ii) all references in the
preceding paragraph to Preferred Stock shall be deemed thereafter
to refer to Common Stock and/or, if appropriate, other
securities.
Section 26. Notices. Notices or demands authorized by
this Agreement to be given or made by the Rights Agent or by the
holder of any Rights Certificate to or on the Bank shall be
sufficiently given or made if sent by United States mail, postage
prepaid, addressed (until another address is filed in writing
with the Rights Agent) as follows:
<PAGE 39>
Liberty Savings Bank, F.S.B.
21 South Centre Street
Pottsville, PA 17901
Attention: Judith Hoffman,
Chief Executive Officer
Subject to the provisions of Section 21, any notice or demand
authorized by this Agreement to be given or made by the Bank or
by the holder of any Rights Certificate to or on the Rights Agent
shall be sufficiently given or made if sent by United States
mail, postage prepaid, addressed (until another address is filed
in writing with the Bank) as follows:
ChaseMellon Shareholder Services
Overpeck Centre
85 Challenger Road
Ridgefield Park, New Jersey 07660-2108
Attention: William T. Beauchamp
Assistant Vice President
Notices or demands authorized by this Agreement to be
given or made by the Bank or the Rights Agent to the holder of
any Rights Certificate (or, if prior to the Distribution Date, to
the holder of certificates representing shares of Common Stock)
shall be sufficiently given or made if sent by United States
mail, postage prepaid, addressed to such holder at the address of
such holder as shown on the registry books of the Bank.
Section 27. Supplements and Amendments. Prior to the
Distribution Date and subject to the penultimate sentence of this
Section 27, the Bank and the Rights Agent shall, if the Bank so
directs, supplement or amend any provision of this Agreement
without the approval of any holders of certificates representing
shares of Common Stock. From and after the Distribution Date and
subject to the penultimate sentence of this Section 27, the Bank
and the Rights Agent shall, if the Bank so directs, supplement or
amend this Agreement without the approval of any holders of
Rights Certificates in order (i) to cure any ambiguity, (ii) to
correct or supplement any provision contained herein which may be
defective or inconsistent with any other provisions herein, or
(iii) to change or supplement the provisions hereunder in any
manner which the Bank may deem necessary or desirable and which
shall not adversely affect the interests of the holders of Rights
Certificates. Upon the delivery of a certificate from an
appropriate officer of the Bank which states that the proposed
supplement or amendment is in compliance with the terms of this
Section 27, the Rights Agent shall execute such supplement or
amendment.
Section 28. Successors. All the covenants and
provisions of this Agreement by or for the benefit of the Bank or
the Rights Agent shall bind and inure to the benefit of their
respective successors and assigns hereunder. <PAGE 40>
Section 29. Determinations and Actions by the Board of
Directors. For all purposes of this Agreement, any calculation
of the number of shares of Voting Securities outstanding at any
particular time, including for purposes of determining the
particular percentage of such outstanding shares of Voting
Securities of which any Person is the Beneficial Owner, shall be
made in accordance with the last sentence of Rule 13d-3(d)(1)(i)
of the General Rules and Regulations under the Exchange Act as in
effect on the date hereof. The Board of Directors of the Bank
(with, where specifically provided for herein, the concurrence of
the Continuing Directors) shall have the exclusive power and
authority to administer this Agreement and to exercise all rights
and powers specifically granted to the Board (with, where
specifically provided for herein, the concurrence of the
Continuing Directors) or to the Bank, or as may be necessary or
advisable in the administration of this Agreement, including,
without limitation, the right and power to (i) interpret the
provisions of this Agreement, and (ii) make all determinations
deemed necessary or advisable for the administration of this
Agreement (including (i) a determination as to the identity of
the Affiliates and Associates of any person, (ii) a determination
as to the extent of the Beneficial Ownership of any Person, and
(iii) a determination to redeem or not redeem the Rights or to
amend the Agreement). All such actions, calculations,
interpretations, and determinations (including, for purposes of
clause (y) below, all omissions with respect to the foregoing)
which are done or made by the Board (with, where specifically
provided for herein, the concurrence of the Continuing Directors)
in good faith, shall (x) be final, conclusive and binding on the
Bank, the Rights Agent, the holders of the Rights and all other
parties, and (y) not subject the Board (or the Continuing
Directors) to any liability to the holders of the Rights.
Section 30. Benefits of this Agreement. Nothing in
this Agreement shall be construed to give to any Person other
than the Bank, the Rights Agent, and the registered holders of
the Rights Certificates (and, prior to the Distribution Date,
registered holders of the Common Stock) any legal or equitable
right, remedy, or claim under this Agreement; but this Agreement
shall be for the sole and exclusive benefit of the Bank, the
Rights Agent, and the registered holders of the Rights
Certificates (and, prior to the Distribution Date, registered
holders of the Common Stock).
Section 31. Severability. If any term, provision,
covenant, or restriction of this Agreement is held by a court of
competent jurisdiction or other authority to be invalid, void, or
unenforceable, the remainder of the terms, provisions, covenants,
and restrictions of this Agreement shall remain in full force and
effect and shall in no way be affected, impaired, or invalidated;
provided, however, that notwithstanding anything in this
Agreement to the contrary, if any such term, provision, covenant,
or restriction is held by such court or authority to be invalid,
void, or unenforceable and the Board of Directors of the Bank
determines in its good faith judgment that severing the invalid
<PAGE 41> language from this Agreement would adversely affect the
purpose or effect of this Agreement, the right of redemption set
forth in Section 23 hereof shall be reinstated and shall not
expire until the close of business on the tenth day following the
date of such determination by the Board of Directors. Without
limiting the foregoing, if any provision requiring that a
determination be made by less than the entire Board of Directors
is held by a court of competent jurisdiction or other authority
to be invalid, void, or unenforceable, such determination shall
then be made by the entire Board of Directors.
Section 32. Governing Law. This Agreement, each Right
and each Rights Certificate issued hereunder shall be deemed to
be a contract made under the laws of the Commonwealth of
Pennsylvania and Federal law and for all purposes shall be
governed by and construed in accordance with the laws of the
Commonwealth and Federal law applicable to contracts made and to
be performed entirely within the Commonwealth by federally
chartered savings banks, but not the respective laws of the
Commonwealth and the United States governing conflicts of law;
provided, however, that all provisions regarding the rights,
duties and obligations of the Rights Agent shall be governed by
and construed in accordance with the laws of the State of New
York applicable to contracts made and to be performed entirely
within such State.
Section 33. Counterparts. This Agreement may be
executed in any number of counterparts and each of such
counterparts shall for all purposes be deemed to be an original,
and all such counterparts shall together constitute but one and
the same instrument.
Section 34. Descriptive Headings. Descriptive
headings of the several Sections of this Agreement are inserted
for convenience only and shall not control or affect the meaning
or construction of any of the provisions hereof.
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be duly executed as of the day and year first above
written.
LIBERTY SAVINGS BANK, F.S.B.
By/s/ Judith I. Hoffman
Judith I. Hoffman
Chief Executive Officer
CHASEMELLON SHAREHOLDER SERVICES,
L.L.C.
By/s/ Laura R. Picone
Name: Laura R. Picone
Title: Vice President
PAGE 42
<PAGE>
Exhibit A
Supplementary Charter Section
TERMS OF
SERIES A JUNIOR PARTICIPATING PREFERRED STOCK
OF
LIBERTY SAVINGS BANK, F.S.B.
RESOLVED that, pursuant to the authority vested in the
Board of Directors of Liberty Savings Bank, F.S.B. (the "Bank")
by its Charter, the Board of Directors does hereby provide for
the issue of a series of Preferred Stock, without par value, of
the Bank, to be designated "Series A Junior Participating
Preferred Stock" (hereinafter referred to as the "Series A
Preferred Stock" or "this Series"), initially consisting of
10,000 shares, and to the extent that the designations, powers,
preferences and relative and other special rights and the
qualifications, limitations and restrictions of the Series A
Preferred Stock are not stated and expressed in the Charter, does
hereby fix and herein state and express such designations,
powers, preferences and relative and other special rights and the
qualifications, limitations and restrictions thereof, as follows:
1. Designation and Amount. The designation of the
series of Preferred Stock created by this resolution shall be
Series A Junior Participating Preferred Stock and the number of
shares constituting such Series is Ten Thousand (10,000). Such
number of shares may be increased or decreased by resolution of
the Board of Directors; provided, that no decrease shall reduce
the number of shares of Series A Preferred Stock to a number less
than the number of shares then outstanding plus the number of
shares reserved for issuance upon the exercise of outstanding
options, rights or warrants or upon the conversion of any
outstanding securities of the Bank convertible into shares of
this Series.
2. Dividends.
(A) Subject to the prior and superior rights of
the holders of any shares of any series of Preferred Stock
ranking prior and superior to the shares of this Series with
respect to dividends, the holders of shares of this Series shall
be entitled to receive, when and as declared by the Board of
Directors out of funds legally available for the purpose,
quarterly dividends payable in cash on April 1, July 1,
October 1, and January 1 of each year (each such date being
referred to herein as a "Quarterly Dividend Payment Date"),
commencing on the first Quarterly Dividend Payment Date after the
first issuance of a share or fraction of a share of this Series,
in an amount per share (rounded to the nearest cent) equal to the
<PAGE A1> greater of (a) $10.00 or (b) subject to the provision
for adjustment hereinafter set forth, 100 times the aggregate per
share amount of all cash dividends, and 100 times the aggregate
per share amount (payable in kind) of all non-cash dividends or
other distributions, other than a dividend payable in shares of
Common Stock or a subdivision of the outstanding shares of Common
Stock (by reclassification or otherwise), declared on the Common
Stock since the immediately preceding Quarterly Dividend Payment
Date, or, with respect to the first Quarterly Dividend Payment
Date, since the first issuance of any share or fraction of a
share of this Series. In the event the Bank shall at any time
after May 26, 1998 (the "Rights Declaration Date") declare any
dividend on the Common Stock payable in shares of Common Stock,
subdivide the outstanding shares of Common Stock, or combine the
outstanding shares of Common Stock into a smaller number of
shares, then in each such case the amount to which holders of
shares of this Series were entitled immediately prior to such
event under clause (b) of the preceding sentence shall be
adjusted by multiplying such amount by a fraction the numerator
of which is the number of shares of Common Stock outstanding
immediately after such event and the denominator of which is the
number of shares of Common Stock that were outstanding
immediately prior to such event.
(B) The Bank shall declare a dividend or
distribution on the Series A Preferred Stock as provided in
paragraph (A) of this Section immediately after it declares a
dividend or distribution on the Common Stock (other than a
dividend payable in shares of Common Stock); provided that, in
the event no dividend or distribution shall have been declared on
the Common Stock during the period between any Quarterly Dividend
Payment Date and the next subsequent Quarterly Dividend Payment
Date, a dividend of $10.00 per share on Series A Preferred Stock
shall nevertheless be payable on such subsequent Quarterly
Dividend Payment Date.
(C) Dividends shall begin to accrue and be
cumulative on outstanding shares of Series A Preferred Stock from
the Quarterly Dividend Payment Date next preceding the date of
issue of such shares of this Series, unless the date of issue of
such shares is prior to the record date for the first Quarterly
Dividend Payment Date in which case dividends on such shares
shall begin to accrue from the date of issue of such shares, or
unless the date of issue is a Quarterly Dividend Payment Date or
is a date after the record date for the determination of holders
of shares of this Series entitled to receive a quarterly dividend
and before such Quarterly Dividend Payment Date, in either of
which events such dividends shall begin to accrue and be
cumulative from such Quarterly Dividend Payment Date. Accrued
but unpaid dividends shall not bear interest. Dividends paid on
the shares of this Series in an amount less than the total amount
of such dividends at the time accrued and payable on such shares
shall be allocated pro rata on a share-by-share basis among all
such shares at the time outstanding. The Board of Directors may
fix a record date for the determination of holders of shares of
<PAGE A2> this Series entitled to receive payment of a dividend
or distribution declared thereon, which record date shall be no
more than sixty (60) days prior to the date fixed for the payment
thereof.
3. Voting Rights. The holders of shares of Series A
Preferred Stock shall have the following voting rights:
(A) Subject to the provision for adjustment
hereinafter set forth, each share of Series A Preferred Stock
shall entitle the holder thereof to 100 votes on all matters
submitted to a vote of the shareholders of the Bank. In the
event the Bank shall at any time declare or pay any dividend on
the Common Stock payable in shares of Common Stock, or effect a
subdivision or combination or consolidation of the outstanding
shares of Common Stock (by reclassification or otherwise than by
payment of a dividend in shares of Common Stock) into a greater
or lesser number of shares of Common Stock, then in each such
case the number of votes per share to which holders of shares of
Series A Preferred Stock were entitled immediately prior to such
event shall be adjusted by multiplying such number by a fraction,
the numerator of which is the number of shares of Common Stock
outstanding immediately after such event and the denominator of
which is the number of shares of Common Stock that were
outstanding immediately prior to such event.
(B) Except as otherwise provided herein, in any
other resolutions creating a series of Preferred Stock or any
similar stock, or by law, the holders of shares of Series A
Preferred Stock and the holders of Common Stock and any other
capital stock of the Bank having general voting rights shall vote
together as one class on all matters submitted to a vote of
stockholders of the Bank.
(C) Except as set forth herein, or as otherwise
provided by law, holders of Series A Preferred Stock shall have
no special voting rights and their consent shall not be required
(except to the extent they are entitled to vote with holders of
Common Stock as set forth herein) for taking any corporate
action.
4. Certain Restrictions.
(A) Whenever quarterly dividends or other
dividends or distributions payable on the Series A Preferred
Stock as provided in Section 2 are in arrears, thereafter and
until all accrued and unpaid dividends and distributions, whether
or not declared, on shares of Series A Preferred Stock
outstanding shall have been paid in full, the Bank shall not:
(i) declare or pay dividends, or make any
other distributions, on any shares of stock ranking junior
(either as to dividends or upon liquidation, dissolution or
winding up) to the Series A Preferred Stock;
<PAGE A3>
(ii) declare or pay dividends, or make any
other distributions, on any shares of stock ranking on a
parity (either as to dividends or upon liquidation,
dissolution or winding up) with the Series A Preferred
Stock, except dividends paid ratably on the Series A
Preferred Stock and all such parity stock on which dividends
are payable or in arrears in proportion to the total amounts
to which the holders of all such shares are then entitled;
(iii) redeem or purchase or otherwise
acquire for consideration shares of any stock ranking junior
(either as to dividends or upon liquidation, dissolution or
winding up) to the Series A Preferred Stock, provided that
the Bank may at any time redeem, purchase or otherwise
acquire shares of any such junior stock in exchange for
shares of any stock of the Bank ranking junior (either as to
dividends or upon dissolution, liquidation or winding up) to
the Series A Preferred Stock; or
(iv) redeem or purchase or otherwise acquire
for consideration any shares of Series A Preferred Stock, or
any shares of stock ranking on a parity with the Series A
Preferred Stock, except in accordance with a purchase offer
made in writing or by publication (as determined by the
Board of Directors) to all holders of such shares upon such
terms as the Board of Directors, after consideration of the
respective annual dividend rates and other relative rights
and preferences of the respective series and classes, shall
determine in good faith will result in fair and equitable
treatment among the respective series or classes.
(B) The Bank shall not permit any subsidiary of the
Bank to purchase or otherwise acquire for consideration any
shares of stock of the Bank unless the Bank could, under
paragraph (A) of this Section 4, purchase or otherwise acquire
such shares at such time and in such manner.
5. Reacquired Shares. Any shares of Series A
Preferred Stock purchased or otherwise acquired by the Bank in
any manner whatsoever shall be retired and cancelled promptly
after the acquisition thereof. All such shares shall upon their
cancellation become authorized but unissued shares of Preferred
Stock and may be reissued as part of a new series of Preferred
Stock subject to the conditions and restrictions on issuance set
forth herein, in the Charter, or in any other resolutions
creating a series of Preferred Stock or any similar stock or as
otherwise required by law.
6. Liquidation, Dissolution or Winding Up. Upon
any liquidation, dissolution or winding up of the Bank, no
distribution shall be made (A) to the holders of shares of stock
ranking junior (either as to dividends or upon liquidation,
dissolution or winding up) to the Series A Preferred Stock
unless, prior thereto, the holders of shares of Series A
Preferred Stock shall have received $100.00 per share, plus an
<PAGE A4> amount equal to accrued and unpaid dividends and
distributions thereon, whether or not declared, to the date of
such payment, provided that the holders of shares of Series A
Preferred Stock shall be entitled to receive an aggregate amount
per share, subject to the provision for adjustment hereinafter
set forth, equal to 100 times the aggregate amount to be
distributed per share to holders of Common Stock, or (B) to the
holders of shares of stock ranking on a parity (either as to
dividends or upon liquidation, dissolution or winding up) with
the Series A Preferred Stock, except distributions made ratably
on the Series A Preferred Stock and all such parity stock in
proportion to the total amounts to which the holders of all such
shares are entitled upon such liquidation, dissolution or winding
up. In the event the Bank shall at any time declare or pay any
dividend on the outstanding shares of Common Stock payable in
shares of Common Stock, or effect a subdivision or combination or
consolidation of the outstanding shares of Common Stock (by
reclassification or otherwise than by payment of a dividend in
shares of Common Stock) into a greater or lesser number of shares
of Common Stock, then in each such case the aggregate amount to
which holders of shares of Series A Preferred Stock were entitled
immediately prior to such event under the proviso in clause (A)
of the preceding sentence shall be adjusted by multiplying such
amount by a fraction the numerator of which is the number of
shares of Common Stock outstanding immediately after such event
and the denominator of which is the number of shares of Common
Stock that were outstanding immediately prior to such event.
7. Consolidation, Merger, Etc. In case the Bank
shall enter into any consolidation, merger, combination or other
transaction in which the outstanding shares of Common Stock are
exchanged for or changed into other stock or securities, cash
and/or any other property, then in any such case each share of
Series A Preferred Stock shall at the same time be similarly
exchanged or changed into an amount per share, subject to the
provision for adjustment hereinafter set forth, equal to
100 times the aggregate amount of stock, securities, cash and/or
any other property (payable in kind), as the case may be, into
which or for which each share of Common Stock is changed or
exchanged. In the event the Bank shall at any time declare or
pay any dividend on the Common Stock payable in shares of Common
Stock, or effect a subdivision or combination or consolidation of
the outstanding shares of Common Stock (by reclassification or
otherwise than by payment of a dividend in shares of Common
Stock) into a greater or lesser number of shares of Common Stock,
then in each such case the amount set forth in the preceding
sentence with respect to the exchange or change of shares of
Series A Preferred Stock shall be adjusted by multiplying such
amount by a fraction, the numerator of which is the number of
shares of Common Stock outstanding immediately after such event
and the denominator of which is the number of shares of Common
Stock that were outstanding immediately prior to such event.
8. No Redemption. The shares of Series A Preferred
Stock shall not be redeemable. <PAGE A5>
9. Rank. The Series A Preferred Stock shall rank,
with respect to the payment of dividends and the distribution of
assets, junior to all series of any other class of the Bank's
Preferred Stock.
10. Amendment. The Charter of the Bank shall not be
amended in any manner which would materially alter or change the
powers, preferences or special rights of the Series A Preferred
Stock so as to affect them adversely without the affirmative vote
of the holders of at least two-thirds of the outstanding shares
of Series A Preferred Stock, voting together as a single class.
PAGE A6
<PAGE>
Exhibit B
[Form of Rights Certificate]
Certificate No. R- _______ Rights
NOT EXERCISABLE AFTER JUNE 16, 2008, OR EARLIER IF REDEEMED OR
EXCHANGED BY LIBERTY SAVINGS BANK, F.S.B. THE RIGHTS ARE SUBJECT
TO REDEMPTION, AT THE OPTION OF LIBERTY SAVINGS BANK, F.S.B., AT
$.001 PER RIGHT ON THE TERMS SET FORTH IN THE RIGHTS AGREEMENT.
UNDER CERTAIN CIRCUMSTANCES, RIGHTS BENEFICIALLY OWNED BY AN
ACQUIRING PERSON OR ADVERSE PERSON (AS SUCH TERMS ARE DEFINED IN
THE RIGHTS AGREEMENT) AND ANY SUBSEQUENT HOLDER OF SUCH RIGHTS
MAY BECOME NULL AND VOID. [THE RIGHTS REPRESENTED BY THIS RIGHTS
CERTIFICATE ARE OR WERE BENEFICIALLY OWNED BY A PERSON WHO WAS OR
BECAME AN (ACQUIRING) (ADVERSE) PERSON OR AN AFFILIATE OR
ASSOCIATE OF AN (ACQUIRING) (ADVERSE) PERSON (AS SUCH TERMS ARE
DEFINED IN THE RIGHTS AGREEMENT). ACCORDINGLY, THIS RIGHTS
CERTIFICATE AND THE RIGHTS REPRESENTED HEREBY MAY BECOME NULL AND
VOID UNDER THE CIRCUMSTANCES AND WITH THE EFFECT SPECIFIED IN
SECTION 7(e) OF SUCH AGREEMENT.](1)
Rights Certificate
LIBERTY SAVINGS BANK, F.S.B.
This certifies that _____________________, or
registered assigns, is the registered owner of the number of
Rights set forth above, each of which entitles the owner thereof,
subject to the terms, provisions and conditions of the Rights
Agreement, dated as of June 16, 1998 (the "Rights Agreement"),
between LIBERTY SAVINGS BANK, F.S.B., a Federal savings bank (the
"Bank"), and CHASEMELLON SHAREHOLDER SERVICES, L.L.C., a New York
limited liability company, as rights agent (the "Rights Agent),
to purchase from the Bank at any time prior to 5:00 p.m. (New
York City time) on June 16, 2008, at the office or offices of the
Rights Agent designated for such purpose, or its successors as
Rights Agent, one one-hundredth of a fully paid, nonassessable
share of Series A Junior Participating Preferred Stock (the
"Preferred Stock") of the Bank, at a purchase price of
Sixty-Three Dollars ($63.00) per one one-hundredth of a share
(the "Purchase Price"), upon presentation and surrender of this
Rights Certificate with the Form of Election to Purchase and
related Certificate duly executed. The number of Rights
evidenced by this Rights Certificate (and the number of shares
which may be purchased upon exercise thereof) set forth above,
and the Purchase Price per share set forth above, are the number
and Purchase Price as of June 30, 1998, based on the Preferred
_______________
(1) The portion of the legend in brackets shall be inserted only
if applicable and shall replace the preceding sentence.
PAGE B1
<PAGE>
Stock as constituted at such date. The Bank reserves the right
to require prior to the occurrence of a Triggering Event (as
defined in the Rights Agreement) that a number of Rights be
exercised so that only whole shares of Preferred Stock will be
issued.
Upon the occurrence of a Section 11(a)(ii) Event (as
defined in the Rights Agreement), if the Rights evidenced by this
Rights Certificate are beneficially owned by (i) an Acquiring
Person, an Adverse Person, or an Affiliate or Associate of any
such Person (as such terms are defined in the Rights Agreement),
(ii) a transferee of any such Acquiring Person, Adverse Person,
Associate, or Affiliate, or (iii) under certain circumstances
specified in the Rights Agreement, a transferee of a person who,
after such transfer, became an Acquiring Person, an Adverse
Person, or an Affiliate or Associate of any such Person, such
Rights shall become null and void and no holder hereof shall have
any right with respect to such Rights from and after the
occurrence of such Section 11(a)(ii) Event.
As provided in the Rights Agreement, the Purchase Price
and the number and kind of shares of Preferred Stock or other
securities which may be purchased upon the exercise of the Rights
evidenced by this Rights Certificate are subject to modification
and adjustment upon the happening of certain events, including a
Triggering Event.
This Rights Certificate is subject to all of the terms,
provisions, and conditions of the Rights Agreement, which terms,
provisions, and conditions are hereby incorporated herein by
reference and made a part hereof and to which Rights Agreement
reference is hereby made for a full description of the rights,
limitations of rights, obligations, duties, and immunities
hereunder of the Rights Agent, the Bank, and the holders of the
Rights Certificates, which limitations of rights include the
temporary suspension of the exercisability of such Rights under
the specific circumstances set forth in the Rights Agreement.
Copies of the Rights Agreement are on file at the above-mentioned
office of the Rights Agent and are also available upon written
request to the Rights Agent.
This Rights Certificate, with or without other Rights
Certificates, upon surrender at the principal office or offices
of the Rights Agent designated for such purpose, may be exchanged
for another Rights Certificate or Rights Certificates of like
tenor and date evidencing Rights entitling the holder to purchase
a like aggregate number of one one-hundredths of a share of
Preferred Stock as the Rights evidenced by the Rights Certificate
or Rights Certificates surrendered shall have entitled such
holder to purchase. If this Rights Certificate shall be
exercised in part, the holder shall be entitled to receive upon
surrender hereof another Rights Certificate or Rights
Certificates for the number of whole Rights not exercised.
<PAGE B2>
Subject to the provisions of the Rights Agreement, the
Rights evidenced by this Certificate (i) may (unless the Board of
Directors shall have made a determination pursuant to
Section 11(a)(ii)(B) of the Rights Agreement that a Person is an
Adverse Person) be redeemed by the Bank at its option at a
redemption price of $.001 per Right at any time prior to the
earlier of the close of business on (a) the twentieth business
day following the Stock Acquisition Date (as such time period may
be extended pursuant to the Rights Agreement), and (b) the Final
Expiration Date.
No fractional shares of Preferred Stock will be issued
upon the exercise of any Right or Rights evidenced hereby (other
than fractions which are integral multiples of one one-hundredth
of a share of Preferred Stock, which may, at the election of the
Bank, be evidenced by depositary receipts), but in lieu thereof a
cash payment will be made, as provided in the Rights Agreement.
No holder of this Rights Certificate shall be entitled
to vote or receive dividends or be deemed for any purpose the
holder of shares of Preferred Stock or of any other securities of
the Bank which may at any time be issuable on the exercise
hereof, nor shall anything contained in the Rights Agreement or
herein be construed to confer upon the holder hereof, as such,
any of the rights of a shareholder of the Bank or any right to
vote for the election of directors or upon any matter submitted
to shareholders at any meeting thereof, or to give or withhold
consent to any corporate action, or, to receive notice of
meetings or other actions affecting shareholders (except as
provided in the Rights Agreement), or to receive dividends or
subscription rights, or otherwise, until the Right or Rights
evidenced by this Rights Certificate shall have been exercised as
provided in the Rights Agreement.
<PAGE B3>
This Rights Certificate shall not be valid or
obligatory for any purpose until it shall have been countersigned
by the Rights Agent.
WITNESS the facsimile signature of the proper officers
of the Bank and its corporate seal.
Dated as of _________________, ____
LIBERTY SAVINGS BANK, F.S.B.
By________________________________
Title:
Attest:___________________________
Secretary
Countersigned:
____________________,
as rights agent
By________________________
Authorized Signature
PAGE B4
<PAGE>
[Form of Reverse Side of Rights Certificate]
FORM OF ASSIGNMENT
(To be executed by the registered holder if such
holder desires to transfer the Rights Certificate.)
FOR VALUE RECEIVED _____________________________________________
hereby sells, assigns and transfers unto _______________________
________________________________________________________________
(Please print name and address of transferee)
________________________________________________________________
this Rights Certificate, together with all right, title and
interest therein, and does hereby irrevocably constitute and
appoint ________________________ Attorney, to transfer the within
Rights
Certificate on the books of the within-named Bank, with full
power of substitution.
Dated: _______________, _____
__________________________________
Signature
Signature Guaranteed: ______________________________
Signatures must be guaranteed by a member firm of a
registered national securities exchange, a member of the National
Association of Securities Dealers, Inc., or a commercial bank or
trust company having an office or correspondent in the United
States.
PAGE B5
<PAGE>
Certificate
The undersigned hereby certifies by checking the
appropriate boxes that
(1) this Rights Certificate [ ] is [ ] is not being
sold, assigned and transferred by or on behalf of a Person who is
or was an Acquiring Person, an Adverse Person, or an Affiliate or
Associate of any such Person (as such terms are defined pursuant
to the Rights Agreement);
(2) after due inquiry and to the best knowledge of the
undersigned, it [ ] did [ ] did not acquire the Rights evidenced
by this Rights Certificate from any Person who is, was or
subsequently became an Acquiring Person, an Adverse Person, or an
Affiliate or Associate of any such Person.
Dated: _______________, _____ __________________________________
Signature
Signature Guaranteed:
NOTICE
The signature to the foregoing Assignment and
Certificate must correspond to the name as written upon the face
of this Rights Certificate in every particular, without
alteration or enlargement or any change whatsoever.
PAGE B6
<PAGE>
FORM OF ELECTION TO PURCHASE
(To be executed if holder desires to
exercise Rights represented by the
Rights Certificate.)
To: LIBERTY SAVINGS BANK, F.S.B.
The undersigned hereby irrevocably elects to exercise
______________ Rights represented by this Rights Certificate to
purchase the shares of Preferred Stock issuable upon the exercise
of the Rights (or such other securities of the Bank or of any
other person which may be issuable upon the exercise of the
Rights) and requests that certificates for such shares be issued
in the name of and delivered to:
Please insert social security
or other identifying number
________________________________________________________________
(Please print name and address)
________________________________________________________________
If such number of Rights shall not be all the Rights
evidenced by this Rights Certificate, a new Rights Certificate
for the balance of such Rights shall be registered in the name of
and delivered to:
Please insert social security
or other identifying number
________________________________________________________________
(Please print name and address)
________________________________________________________________
________________________________________________________________
Dated: ___________________, _____
__________________________________
Signature
Signature Guaranteed: ____________________________
Signatures must be guaranteed by a member firm of a
registered national securities exchange, a member of the National
Association of Securities Dealers, Inc., or a commercial bank or
trust company having an office or correspondent in the United
States.
PAGE B7
<PAGE>
Certificate
The undersigned hereby certifies by checking the
appropriate boxes that:
(1) the Rights evidenced by this Rights Certificate
[ ] are [ ] are not being exercised by or on behalf of a Person
who is or was an Acquiring Person, an Adverse Person or an
Affiliate or Associate of any such Person (as such terms are
defined pursuant to the Rights Agreement);
(2) after due inquiry and to the best knowledge of the
undersigned, it [ ] did [ ] did not acquire the Rights evidenced
by this Rights Certificate from any Person who is, was or became
an Acquiring Person, an Adverse Person or an Affiliate or
Associate of any such Person.
Dated: ______________, ____ __________________________________
Signature
Signature Guaranteed:
NOTICE
The signature to the foregoing Election to Purchase and
Certificate must correspond to the name as written upon the face
of this Rights Certificate in every particular, without
alteration or enlargement or any change whatsoever.
PAGE B8
<PAGE>
Exhibit C
SUMMARY OF RIGHTS TO PURCHASE
PREFERRED STOCK
On June 16, 1998, the Board of Directors of LIBERTY
SAVINGS BANK, F.S.B. (the "Bank") declared a dividend
distribution of one Right for each outstanding share of the
Common Stock, par value $1.00 per share (the "Common Stock"), of
the Bank, to shareholders of record at the close of business on
June 30, 1998. Each Right entitles the registered holder to
purchase from the Bank one one-hundredth of a share of Series A
Junior Participating Preferred Stock, without par value (the
"Preferred Stock"), at a Purchase Price of $63.00, subject to
adjustment.
The description and terms of the Rights are set forth
in a Rights Agreement dated June 16, 1998 (the "Rights
Agreement") between the Bank and ChaseMellon Shareholder
Services, L.L.C., as rights agent, which is incorporated herein
by reference.
Initially, the Rights will not be exercisable and no
separate certificates evidencing the Rights ("Rights
Certificates") will be distributed. The Rights will be evidenced
by Common Stock certificates representing shares then outstanding
and will automatically trade with the Common Stock. The Rights
will separate from the Common Stock on a "Distribution Date." A
"Distribution Date" will occur upon the earlier of
(i) 20 business days following a public announcement that a
person or group of affiliated or associated persons (an
"Acquiring Person") has acquired, or obtained the right to
acquire, 14.9% or more of the outstanding shares of Common Stock
or voting securities representing 14.9% or more of the total
voting power of the Bank (the "Stock Acquisition Date"),
(ii) 20 business days (or such later date as the Board of
Directors shall determine) following the commencement of a tender
offer or exchange offer that would result in a person or group
acquiring 14.9% or more of such outstanding shares of Common
Stock or total voting power, or (iii) 20 business days following
the determination by the Board of Directors, after reasonable
inquiry and investigation, including consultation with such
persons as such directors shall deem appropriate, that, with
respect to any person who has, along or together with his
affiliates or associates, acquired 10% or more of such
outstanding shares of Common Stock or total voting power of the
Bank (a) such beneficial ownership by such person is intended to
cause the Bank to repurchase the voting securities beneficially
owned by such person or to cause pressure on the Bank to take
action or enter into a transaction or series of transactions
intended to provide such person with short-term financial gain
under circumstances where the Board determines that the best
long-term interests of the Bank and its shareholders would not be
served by taking such action or entering into such transaction or
<PAGE C1> transactions at that time or (b) such ownership is
causing or is likely to cause a material adverse impact on the
business or prospects of the Bank (any such person being referred
to herein and in the Rights Agreement as an "Adverse Person").
Until the Distribution Date, (i) the Rights will be
evidenced by the Common Stock certificates and will be
transferred with and only with such Common Stock certificates,
(ii) new Common Stock certificates issued after June 30, 1998
will contain a notation incorporating the Rights Agreement by
reference, and (iii) the surrender for transfer of any
certificate for Common Stock outstanding will also constitute the
transfer of the Rights associated with the Common Stock
represented by such certificate.
The Rights are not exercisable until the Distribution
Date and will expire at the close of business on June 16, 2008,
unless earlier redeemed as described below. Pursuant to the
Rights Agreement, the Bank reserves the right to require prior to
the occurrence of a Triggering Event (as defined below) that,
upon any exercise of Rights, a number of Rights be exercised so
that only whole share of Preferred Stock will be issued.
As soon as practicable after the Distribution Date,
Rights Certificates will be mailed to holders of record of the
Common Stock as of the close of business on the Distribution Date
and, thereafter, the separate Rights Certificate alone will
represent the Rights. Except as otherwise provided in the Rights
Agreement or determined by the Board of Directors, only shares of
Common Stock issued prior to the Distribution Date will be issued
with Rights.
In the event that (i) a person becomes an Acquiring
Person (except pursuant to an offer for all outstanding shares of
the Bank's voting securities which at least a majority of the
Continuing Directors (as defined below) determines to be fair to
and otherwise in the best interests of the Bank and its
shareholders), (ii) an Acquiring Person engages in one or more
"self-dealing" transactions as defined in the Rights Agreement,
(iii) the Bank is the surviving corporation in a merger with an
Acquiring Person, (iv) during such time that there exists an
Acquiring Person, a recapitalization or reverse stock split
occurs which results in such Acquiring Person's proportionate
ownership interest being increased by more than 1%, or (v) any
person is determined to be an Adverse Person (any of the
foregoing, a "Flip-in Event"), each holder of a Right will
thereafter have the right to receive, upon exercise, Common Stock
(or, in certain circumstances, cash, property, or other
securities of the Bank) having a value (based on the lowest
closing price of the Common Stock during the twelve-month period
preceding the Flip-in Event) equal to two times the exercise
price of the Right. Notwithstanding the foregoing, following the
occurrence of a Flip-in Event, all Rights that are, or (under
certain circumstances specified in the Rights Agreement) were,
beneficially owned by any Acquiring Person or an Adverse Person
<PAGE C2> (or by certain related parties) will be null and void.
Rights are not exercisable following the occurrence of a Flip-in
Event, however, until such time as the Rights are no longer
redeemable by the Bank as set forth below.
For example, at an exercise price of $50.00 per Right,
each Right not owned by an Acquiring Person or an Adverse Person
(or by certain related parties) following a Flip-in Event would
entitle its holder to purchase $100.00 worth of Common Stock
based on the lowest closing price of the Common Stock during the
twelve-month period preceding the Flip-in Event (or other
consideration, as noted above) for $50.00. Assuming that the
lowest closing price of the Common Stock during such period was
$12.50, the holder of each valid Right would be entitled to
purchase eight shares of Common Stock for $50.00.
The term "Continuing Directors" means any member of the
Board of Directors of the Bank who was a member of the Board
prior to the date of the Rights Agreement, and any person who is
subsequently elected to the Board if such person is recommended
or approved by a majority of the Continuing Directors, but shall
not include an Acquiring Person, an Adverse Person, or an
affiliate or associate of an Acquiring Person or Adverse Person,
or any representative of the foregoing entities.
In the event that, at any time following the Stock
Acquisition Date, (i) the Bank is acquired in a merger or other
business combination transaction in which the Bank is not the
surviving corporation (other than a merger which follows an offer
for all outstanding voting securities of the Bank, which at least
a majority of the Continuing Directors determines to be fair to
and otherwise in the best interests of the Bank and its
shareholders, and the merger price is not less than, and the form
of consideration is the same as, that paid in the tender or
exchange offer) or (ii) 50% or more of the Bank's assets or
earning power is sold or transferred, each holder of a Right
(except Rights which previously have been voided as set forth
above) shall thereafter have the right to receive, upon exercise,
common stock of the acquiring company having a value equal to two
times the exercise price of the Right. The events set forth in
this paragraph and in the second preceding paragraph are referred
to as "Triggering Events."
The Purchase Price payable and the amount of Preferred
Stock or other securities or property issuable upon exercise of
the Rights are subject to adjustment from time to time to prevent
dilution (i) in the event of a stock dividend on, or a
subdivision, combination, or reclassification of, the Preferred
Stock, (ii) if holders of the Preferred Stock are granted certain
rights or warrants to subscribe for Preferred Stock or
convertible securities at less than the current market price of
the Preferred Stock, or (iii) upon the distribution to holders of
the Preferred Stock of evidences of indebtedness or assets
(excluding regular quarterly cash dividends) or of subscription
rights or warrants (other than those referred to above).
<PAGE C3>
With certain exceptions, no adjustment in the Purchase
Price will be required until cumulative adjustments amount to at
least 1% of the Purchase Price. No fractional shares of
Preferred Stock will be issued and, in lieu thereof, an
adjustment in cash will be made based on the market price of the
Preferred Stock on the last trading date prior to the date of
exercise.
At any time during the twenty business days following
the Stock Acquisition Date, the Bank may redeem the Rights in
whole, but not in part, at a price of $.001 per Right (payable in
cash, Common Stock, or other consideration deemed appropriate as
determined by the Board of Directors). At any time prior to the
date the Rights would otherwise become nonredeemable, a majority
of the Continuing Directors may extend the period for redemption.
The Bank's right of redemption may be reinstated if an Acquiring
Person reduces such Person's beneficial or total voting power
ownership to less than 10% of the outstanding shares of Common
Stock or total voting power in a transaction or series of
transactions not involving the Bank and there is then no other
Acquiring Person. Immediately upon the action of the Board of
Directors ordering redemption of the Rights, the Rights will
terminate and the only right of the holders of Rights will be to
receive the $.001 redemption price. Notwithstanding the
foregoing, the Board of Directors may not redeem the Rights
following a determination that any person is an Adverse Person.
At any time after the occurrence of a Flip-in Event,
the Board of Directors may exchange the Rights (other than Rights
owned by an Acquiring Person or an Adverse Person or an affiliate
or an associate of any such person, which have become void), in
whole or in part, at an exchange ratio of one share of Common
Stock, and/or other equity securities deemed to have the
equivalent value, per Right, subject to adjustment.
Until a Right is exercised, the holder thereof, as
such, will have no rights as a shareholder of the Bank,
including, without limitation, the right to vote or to receive
dividends. While the distribution of the Rights will not be
taxable to shareholders or to the Bank, shareholders may,
depending upon the circumstances, recognize taxable income in the
event that the Rights become exercisable for Common Stock (or
other consideration) of the Bank or for common stock of the
acquiring company as set forth above, or are exchanged as
provided in the preceding paragraph.
Other than those provisions relating to the principal
economic terms of the Rights, any of the provisions of the Rights
Agreement may be amended by the Board of Directors of the Bank
prior to the Distribution Date. After the Distribution Date, the
provisions of the Rights Agreement may be amended by the Board in
order to cure any ambiguity, to make changes which do not
<PAGE C4> adversely affect the interests of holders of Rights
(excluding the interests of any Acquiring Person or Adverse
Person or an affiliate or associate of any such person), or to
shorten or lengthen any time period under the Rights Agreement;
however, no amendment to adjust the time period governing
redemption shall be made at such time as the Rights are not
redeemable.
A copy of the Rights Agreement is available free of
charge from the Rights Agent. This summary description of the
Rights does not purport to be complete and is qualified in its
entirety by reference to the Rights Agreement. <PAGE C5>
REVOCABLE PROXY
LIBERTY SAVINGS BANK, F.S.B.
21 South Centre Street
Pottsville, Pennsylvania 17901
THE PROXY IS BEING SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
OF LIBERTY SAVINGS BANK, F.S.B. (THE "BANK") FOR USE ONLY AT ITS
ANNUAL MEETING OF STOCKHOLDERS TO BE HELD ON OCTOBER 22, 1998 AND
AT ANY ADJOURNMENT THEREOF.
The undersigned, being a stockholder of the Bank, hereby
appoints Menelaos P. Palles, Michael R. Muncy and Daniel C.
Guers, or any of them acting in the absence of the others, as
proxyholders, each with full powers of substitution, and hereby
authorizes them to represent and vote, as designated below, all
the shares of Common Stock of the Bank held of record by the
undersigned on September 1, 1998 at the Annual Meeting of the
Stockholders of the Bank to be held at the Bank's office located
at 21 South Centre Street, Pottsville, Pennsylvania, on
October 22, 1998 at 2:00 p.m. and at any adjournment of such
meeting.
MATTER NO. 1: Election of Judith I. Hoffman and Ronald R.
Pellish, Esquire, as Class I Directors to serve until the annual
meeting of stockholders of the Bank to be held in the year 2001.
_____ FOR all nominees listed _____ WITHHOLD AUTHORITY
above (except for any to vote for all
nominees written below). nominees listed above.
INSTRUCTIONS: To withhold authority to vote for any of the
nominees, write the nominee's name in the following space:
_______________________________________________________
MATTER NO. 2: Proposal to approve the Agreement and Plan of
Reorganization dated September 4, 1998 pursuant to which, among
other things, the Bank will become a wholly-owned subsidiary of
Liberty Centre Bancorp, Inc., a Pennsylvania corporation formed
by the Bank for such purpose.
_____ FOR _____ AGAINST _____ ABSTAIN
MATTER NO. 3: Proposal to ratify the appointment of Patton
and Lettich as the independent auditors of the Bank for the
fiscal year ending June 30, 1999.
_____ FOR _____ AGAINST _____ ABSTAIN
<PAGE 1>
_________________________________________________________________
THIS PROXY IS SOLICITED BY THE BANK'S BOARD OF DIRECTORS.
IF NOT OTHERWISE SPECIFIED, THIS PROXY WILL BE VOTED FOR THE
ELECTION OF THE BOARD OF DIRECTORS' NOMINEES TO THE BOARD AND FOR
MATTERS (2) AND (3). THIS PROXY WILL BE VOTED, IN THE DISCRETION
OF THE PROXYHOLDERS, UPON SUCH OTHER BUSINESS AS MAY PROPERLY
COME BEFORE THE ANNUAL MEETING OF STOCKHOLDERS OR ANY ADJOURNMENT
THEREOF. THIS PROXY MAY BE REVOKED AT ANY TIME BEFORE IT IS
VOTED AT THE ANNUAL MEETING.
BECAUSE THE FORMATION OF THE HOLDING COMPANY (MATTER NO. 2)
MUST BE APPROVED BY THE HOLDERS OF A MAJORITY OF THE OUTSTANDING
SHARES OF COMMON STOCK OF THE BANK, AN ABSTENTION OR FAILURE TO
VOTE, IN PERSON OR BY PROXY, IS, IN EFFECT, A VOTE AGAINST MATTER
NO. 2.
The undersigned hereby acknowledges the receipt, prior to
the signing of this Proxy, of a Notice of Annual Meeting of
Stockholders of Liberty Savings Bank, F.S.B. called for
October 22, 1998, the Annual Report of the Bank for the year
ended June 30, 1998 and a Proxy Statement for the Annual Meeting.
DATE:______________, 1998
____________________________ ______________________________
Signature Print Name
____________________________ ______________________________
Signature Print Name
Please sign and print your name(s) and print the date on which
you sign the proxy in the spaces provided above. Only one
signature is required in the case of a joint account. When
signing in a representative capacity, please give your title.
<PAGE 2>
