As Filed with the Securities and Exchange Commission on October 9,
1998
Registration No. 333-62901
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
PRE-EFFECTIVE AMENDMENT NO. 1
TO
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. [ ]
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.
_______________________________
The Registrant hereby amends this Registration Statement on such
date or dates that may be necessary to delay its effective date
until the Registrant shall file a further amendment which
specifically states that this Registration Statement shall
thereafter become effective in accordance with Section 8(a) of the
Securities Act of 1933 or until the Registration Statement shall
become effective on such date as the Commission, acting pursuant to
said Section 8(a), may determine.
<PAGE>
October ___, 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 Tuesday, November 24, 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 November 24, 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 November 24, 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 vote upon a proposal to approve the
formation of a savings and loan holding company by
approving an Agreement and Plan of Reorganization
(the "Agreement") 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 consider and vote upon a proposal (the
"Authorization Proposal") to authorize the Board of
Directors of the Bank, in its discretion, to vote
upon such other business as may properly come
before the Meeting and any adjournment or
postponement thereof, including, without
limitation, a motion to adjourn the Meeting to
another time or place for the purpose of soliciting
additional proxies if there are not sufficient
votes at the time of the Meeting to constitute a
quorum or approve the Agreement ("Matter No. 4");
and <PAGE 6>
(5) To transact such other business as may properly be
presented at the Meeting.
Stockholders of record at the close of business on October 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
October ___, 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 7
<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 November 24, 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 144,639 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
October ___, 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 October ___,
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............................ 12
Matters to be Considered at the Meeting.................. 12
Date, Time, and Place of Meeting......................... 12
Record Date; Required Vote............................... 12
Voting and Revocation of Proxies......................... 13
Solicitation of Proxies.................................. 13
Dissenters' Rights....................................... 13
Principal Shareholders of the Bank....................... 14
MATTER NO. 1
ELECTION OF DIRECTORS......................................... 15
Information Regarding Nominees and Continuing Directors.. 15
Security Ownership of Management......................... 18
Board Meetings and Committees............................ 20
Remuneration of Executive Officers....................... 21
Employment Agreement..................................... 22
Employee Benefit Plans................................... 23
Key Employee Stock Compensation Program.................. 23
1997 Employee Stock Option Plan.......................... 23
Indebtedness of Management............................... 26
Transactions with Related Persons........................ 27
MATTER NO. 2
PROPOSAL TO APPROVE FORMATION OF HOLDING COMPANY.............. 28
Reasons for the Reorganization........................... 28
Description of the Reorganization........................ 31
Business of Bancorp...................................... 32
Management of Bancorp and the Bank after the Reorganization 32
Conditions, Amendment and Termination.................... 33
Federal Tax Consequences of the Transaction.............. 34
Financial Accounting Treatment........................... 34
Limitation of Liability and Indemnification of Directors
and Officers............................................. 35
Regulation of the Bank and Bancorp....................... 35
Restrictions on Cash Dividends........................... 47
Continuing Restrictions.................................. 47
Treatment of Stock Certificates.......................... 47
Effect on Employee Benefit Plans......................... 48
Effective Date........................................... 48
DISSENTERS' AND APPRAISAL RIGHTS.............................. 49
<PAGE 2>
DESCRIPTION OF BANCORP'S CAPITAL STOCK........................ 51
General.................................................. 51
Common Stock............................................. 51
Preferred Stock.......................................... 52
Certain Restrictions on Acquisition of Bancorp........... 53
COMPARISON OF RIGHTS OF STOCKHOLDERS OF THE BANK
WITH RIGHTS OF SHAREHOLDERS OF BANCORP........................ 67
MARKET FOR BANK COMMON STOCK.................................. 72
MATTER NO. 3
RATIFICATION OF APPOINTMENT OF INDEPENDENT AUDITORS........... 73
MATTER NO. 4
THE AUTHORIZATION PROPOSAL.................................... 73
LEGAL OPINIONS................................................ 74
FINANCIAL INFORMATION......................................... 74
AVAILABLE INFORMATION......................................... 75
STOCKHOLDER PROPOSALS......................................... 75
OTHER MATTERS................................................. 76
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.
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,
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
<PAGE 4> 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 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.
<PAGE 5> 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 the Reorganization will
qualify as a "reorganization" under
Section 368(a)(1)(A) of the Internal
Revenue Code of 1986, as amended,
and 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. If this condition is
waived by the parties to the
Agreement, the Bank will, prior to
the consummation of the
Reorganization, (i) amend this Proxy
Statement/Prospectus to disclose
such waiver, (ii) distribute such
amended Proxy Statement/Prospectus
to its stockholders, and
(iii) resolicit stockholder approval
of the Agreement. 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 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
<PAGE 6> 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
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
<PAGE 7> 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
upon completion of the
Reorganization will 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 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." <PAGE 8>
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 OTS 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."
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, (b) to ratify the
appointment of Patton & Lettich as
<PAGE 9> the Bank's independent
auditors for the 1999 fiscal year,
and (c) to approve the Authorization
Proposal.
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."
Authorization Proposal At the Meeting, holders of Bank
common stock will be asked to
approve the Authorization Proposal.
If approved, the Authorization
Proposal will give the Bank's Board
of Directors discretion to vote upon
any other matters that may properly
be brought before the Meeting and
any adjournment or postponement
thereof, including a motion to
adjourn the Meeting in order to
solicit additional proxies if there
are insufficient votes at the time
of the Meeting to constitute a
quorum or approve the Agreement.
Annual Meeting of The Meeting will be held at
Stockholders 2:00 p.m. on November 24, 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 October 1, 1998 are
<PAGE 10> 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 November 24, 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 "Matter No. 2 -- 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") and to
approve the Authorization Proposal ("Matter No. 4"). See "Matter
No. 3 -- Ratification of Appointment of Independent Auditors" and
"Matter No. 4 -- Authorization Proposal."
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 Tuesday, November 24,
1998.
Record Date; Required Vote
The Board of Directors has fixed the close of business on
October 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 a majority of the votes cast by the
holders of Bank common stock entitled to vote at the Meeting is
required to approve Matter No. 3, Matter No. 4 and any other matter
that may properly come before the Meeting. At October 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 October 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, 3 and 4. If Matter
No. 4 is approved by the Bank's stockholders at the Meeting, 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
October __, 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 Section 552.14 of the regulations of the OTS,
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 "Matter
No. 2 -- Proposal to Approve Formation of Holding Company--
Dissenters' and Appraisal Rights." A copy of Section 552.14 of the
OTS regulations is appended to this Proxy Statement/Prospectus as
Exhibit "D."
<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
<PAGE 15> Directors. Abstentions and broker nonvotes will not
constitute 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, from 1992 to the present.
MENELAOS P. PALLES 44 1987
President of PBX Enterprises, Inc.,
located in Pottsville, Pennsylvania, since 1982;
President of Wholesale Restaurant
Equipment and Supply, Inc., a food service
equipment company located in Pottsville,
Pennsylvania, since 1985; 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 for
<PAGE 19> 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 level of salary and employee
<PAGE 22> 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 non-related borrowers (in
particular as to interest rate and collateral). In addition, the
<PAGE 26> 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
Robert W. Pugh, Jr., President of the Bank and Chairman of the
Board of Directors, receives fees from the Bank for performing
title work relating to the Bank's mortgage loans. For the year
ended June 30, 1998, these fees equalled $950.
Ronald R. Pellish, a director of the Bank, receives fees from
the Bank in connection with legal work relating to the Bank's
mortgage loans. Under the relevant loan documentation, the Bank
typically is entitled to be reimbursed by the borrower for these
fees. 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. Fees paid by the
Bank to Attorney Pellish for services rendered during the year
ended June 30, 1998 were $3,819.
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 (a) recent
<PAGE 30> 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,
although sporadic and limited, the trades of the Bank's stock that
have occurred over the past few years have been, like many thrift
stocks, at prices substantially below book value, (e) the fact that
the Bank has a small over-all market capitalization when compared
to most other financial institutions, and (f) certain significant
accumulations of positions in the Bank's stock during its 1998
fiscal year. 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.
<PAGE 31>
(3) The shares of common stock of the Bank held by
Bancorp at the effective date will remain as the only issued
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
<PAGE 32>
Herman J. Fenstermacher. . . . . . . . . . . . . . . 1999
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 Code of 1986 (the
<PAGE 33> "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) the
Reorganization will qualify as a "reorganization" under
Section 368(a)(1)(A) of the Internal Revenue Code of 1986, as
amended, and 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. If this condition is waived by the parties to the
Agreement, the Bank will, prior to the consummation of the
Reorganization, (i) amend this Proxy Statement/Prospectus to
disclose such waiver, (ii) distribute such amended Proxy Statement/
Prospectus to its stockholders, and (iii) resolicit stockholder
approval of the Agreement.
Each stockholder of the Bank should consult his or her own tax
counsel as to specific federal and state tax consequences of the
transaction.
<PAGE 34>
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.
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
<PAGE 35> 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 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
<PAGE 36> 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 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.
<PAGE 37>
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
(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,
<PAGE 38> 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 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. <PAGE 39>
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 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
<PAGE 40> be deemed to be "undercapitalized" and may be subject to
certain restrictions. See "-- Prompt Corrective Action."
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
<PAGE 41> amount" based on a conversion schedule. These credit
equivalent amounts are then 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
<PAGE 43> distributions up to an amount equal to 75% 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
<PAGE 45> limit an institution's discretion to develop the types of
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
<PAGE 46> association shall commence or continue 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 common stock. The exchange of
<PAGE 47> 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
<PAGE 49>
c. Inform such stockholders that, within 60 days of
such date, the respective requirements of paragraphs (5) and (6)
below must be satisfied.
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.
7. 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.
<PAGE 50>
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
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
<PAGE 51> common stock if such payment, together with any payment
for the repurchase of stock, would reduce its net worth 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 (a
majority or 80% vote, depending upon the matter under
consideration) would be obtained in spite of the limitations of any
<PAGE 55> 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.
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
<PAGE 56> 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 contests
will avoid the significant cost, in terms of money and management's
time, in opposing such actions.
<PAGE 57>
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 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
<PAGE 58> 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 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
<PAGE 59> 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.
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
<PAGE 60> 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 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
<PAGE 61> 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 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
<PAGE 62> 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.
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
<PAGE 63> 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.
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
<PAGE 64> 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 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. <PAGE 65>
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.
15. Employment Agreements. The Bank is a party to an
employment agreement with Judith Hoffman. Such agreement 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
<PAGE 67>
Stockholder Action: If substantially If substantially all the
Sale of Assets (not all assets are sold, assets are sold,
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. <PAGE 68>
holders' vote and,
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
<PAGE 69>
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
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
<PAGE 70>
include, among other
things, name, age,
address, occupation and
certain share ownership
information regarding
nominee
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.
MATTER NO. 4
THE AUTHORIZATION PROPOSAL
The Board seeks the authorization of the Bank's shareholders
to direct the vote of the proxies if any matters properly come
before the Meeting, including, without limitation, a motion to
adjourn the Meeting to another time or place for the purpose of
soliciting additional proxies if there are not sufficient votes at
the time of the Meeting to constitute a quorum or approve the
Agreement. As to all such matters, the Board intends to direct the
voting of such shares in the manner determined by the Board of
Directors in its discretion, and in the exercise of its duties and
responsibilities, to be in the best interests of the Bank and its
shareholders, taken as a whole. As of the date of this Proxy
Statement/Prospectus, the Bank's Board of Directors is not aware of
any other business that may properly come before the Meeting.
If it is necessary to adjourn the Meeting for 30 days or more,
notice of the time and place of the adjourned Meeting will be given
in the same manner as the original meeting. No notice of the time
<PAGE 73> and place of the adjourned Meeting is required to be
given to shareholders, however, if the Meeting is adjourned for
less than 30 days, other than an announcement of such time and
place at the Meeting. Only proxies marked "FOR" this proposal will
be voted for adjournment, if such vote is necessary.
The affirmative vote of the holders of a majority of the votes
cast at the Meeting affirmatively or negatively by holders of
outstanding shares of Bank common stock present and entitled to
vote at the Meeting is required in order to approve and adopt the
Authorization Proposal.
THE BANK'S BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT ITS
SHAREHOLDERS VOTE "FOR" THE AUTHORIZATION PROPOSAL, AUTHORIZING ITS
BOARD OF DIRECTORS TO DIRECT THE VOTE OF THE PROXIES UPON SUCH
OTHER MATTERS AS MAY PROPERLY COME BEFORE SUCH MEETING, INCLUDING
WITHOUT LIMITATION, A MOTION TO ADJOURN SUCH MEETING.
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 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.
<PAGE 74>
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
November 19, 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
Street, Pottsville, Pennsylvania 17901 (Attention: Secretary), on
or before June __, 1999.
<PAGE 75> 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:
Name<PAGE>
Residence Address Term
Expires<PAGE>
Herman J. Fenstermacher 1036 Ridgeview Drive
Orwigsburg, PA 17961<PAGE>
1999 Frank J. Grabowski 100 Allen Lane
Port Carbon, PA 17965<PAGE>
2000 Daniel C. Guers 118 Lincoln Avenue
Orwigsburg, PA 17961<PAGE>
1999 Judith I. Hoffman
PAGE A2
<PAGE>
122 N. 18th Street
Pottsville, PA 17901<PAGE>
1998 Michael R. Muncy 1541 Howard Avenue
Pottsville, PA 17901<PAGE>
2000 Menelaos P. Palles P.O. Box 860
Pottsville, PA 17901<PAGE>
1999 Ronald R. Pellish 140 South 24th Street
Pottsville, PA 17901<PAGE>
1998 Robert W. Pugh, Jr. R.R.#5, Box 361
Pine Grove, PA 17963<PAGE>
2000
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<PAGE>
Title Robert W. Pugh, Jr. President Judith I. Hoffman
<PAGE>
Executive Vice President, Chief
Executive Officer and Corporate
Secretary<PAGE>
Herman J. Fenstermacher Treasurer Ronald R. Pellish<PAGE>
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
<PAGE A4> operation of law, be converted into and shall 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 Interim Bank
<PAGE A5> 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 purpose of
<PAGE A6> 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;
006 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.
\DM 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 of any such class or series
so set forth in such resolution or resolutions may thereafter be
<PAGE B1> 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 hold office for the unexpired term in respect of which
the vacancy occurred. No director of the Corporation shall be
<PAGE B2> 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.
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
<PAGE B3> 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 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
<PAGE B4> 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 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.
<PAGE B5>
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.
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
<PAGE B6> 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 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
<PAGE B7> 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:
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 B8>
<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, the chairman of the
meeting may appoint another person to act as Secretary of
the meeting.
<PAGE C1>
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 transaction of
business unless a quorum is present. The presence in
person or by proxy of shareholders entitled to cast at
<PAGE C2> 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.
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. <PAGE C3>
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 vote is
counted or the authority is exercised, written notice of
the death or incapacity is given to the Secretary of the
corporation.
<PAGE C4>
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 corporation, is
appointed its general or special proxy in which case that person
shall be entitled to vote the shares.
<PAGE C5>
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 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
<PAGE C6> 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 (i) the name, age, business
<PAGE C8> 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.
Section 2.06 - Removal and Resignation -
\DM Removal by Shareholders. A director may be removed by
shareholders only in accordance with the articles of
incorporation of the corporation. <PAGE C9>
(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 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
<PAGE C10> 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
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.
<PAGE C11>
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 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
<PAGE C12> 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 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
<PAGE C13> 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.
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.
<PAGE C14>
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.
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
<PAGE C15> 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 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
<PAGE C16> 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, 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.
<PAGE C17>
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 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.
<PAGE C18>
(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 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
<PAGE C19> 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
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
<PAGE C20> 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.
(9) 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.*
8.1 Opinion of Stevens & Lee re: Tax Matters.
<PAGE II1>
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.*
99.1 Form of Proxy for the Annual Meeting of
Shareholders of Liberty Savings Bank, F.S.B.
___________________
*Previously filed.
(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
<PAGE II2> offering price set forth in the "Calculation of
Registration Fee" table in the effective registration
statement.
(iii) Include any additional or changed material
information on the plan of distribution.
(2) For determining liability under the Securities Act,
treat each post-effective amendment as a new registration statement
of the securities offered, and the offering of the securities at
that time to be the initial bona fide offering.
(3) File a post-effective amendment to remove from
registration any of the securities that remain unsold at the end of
the offering.
(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 Pre-Effective Amendment No. 1
to Registration Statement No. 62901 on Form S-4 to be signed on its
behalf by the undersigned, thereunto duly authorized, in the City
of Pottsville, Commonwealth of Pennsylvania, on October 9, 1998.
LIBERTY CENTRE BANCORP, INC.
(Registrant)
By: /s/ Judith I. Hoffman
Judith I. Hoffman,
Executive Vice President and
Chief Executive Officer
PAGE II4
<PAGE>
Pursuant to the requirements of the Securities Act of 1933,
this Pre-Effective Amendment No. 1 to Registration Statement
No. 62901 on Form S-4 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 October 9, 1998
Robert W. Pugh, Jr. Board and President
/s/ Judith I. Hoffman Director, October 9, 1998
Judith I. Hoffman Executive Vice
President and
Chief Executive
Officer (Principal
Executive, Financial
and Accounting
Officer)
/s/ Herman J. Fenstermacher* Director October 9, 1998
Herman J. Fenstermacher
/s/ Frank J. Grabowski* Director October 9, 1998
Frank J. Grabowski
/s/ Daniel C. Guers* Director October 9, 1998
Daniel C. Guers
/s/ Michael R. Muncy* Director October 9, 1998
Michael R. Muncy
/s/ Menelaos P. Palles* Director October 9, 1998
Menelaos P. Palles
/s/ Ronald R. Pellish* Director October 9, 1998
Ronald R. Pellish, Esquire
*By /s/ Judith I. Hoffman
Judith I. Hoffman,
Attorney-in-Fact
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 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*
99.1 Form of Proxy for the Annual Meeting of
Shareholders of Liberty Savings Bank, F.S.B.
<PAGE II6>
________________________
<PAGE II7>
* Previously filed.
EXHIBIT 8.1
October 9, 1998
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 September 4, 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 fractional shares of Bancorp Common Stock will be
issued pursuant the Reorganization. Bank shareholders will be
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:
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
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.
We further call your attention to the fact the opinions
expressed herein are specifically conditioned on our assumption
that neither the facts relating to the Reorganization, nor
applicable federal law, will change materially between the date
hereof and the closing of the Reorganization.
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,
STEVENS & LEE
/s/ Stevens & Lee
EXHIBIT 99.1
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 NOVEMBER 24, 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 October 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
November 24, 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
MATTER NO. 4: Approval of proposal to give the Bank's Board
of Directors discretion to vote upon any other matters that may
properly be brought before the Annual Meeting, including a motion
to adjourn the Annual Meeting in order to solicit additional
proxies.
_____ FOR _____ AGAINST _____ ABSTAIN
_________________________________________________________________
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), (3) AND (4). 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
November 24, 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.
