As filed with the Securities and Exchange Commission on December 18, 1998
Registration No. 333-64457
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
PRE-EFFECTIVE AMENDMENT NO. 3
FORM S-4
REGISTRATION STATEMENT
UNDER THE SECURITIES ACT OF 1933
FIRST PERRY BANCORP, INC.
(Exact name of Registrant as specified in its charter)
Pennsylvania
(State or other jurisdiction of
incorporation or organization)
6712
(Primary Standard Industrial
Classification Code Number)
25-1817009
(I.R.S. Employer
Identification No.)
FIRST PERRY BANCORP, INC.
101 Lincoln Street
Post Office Box B
Marysville, Pennsylvania 17053-0017
(717) 957-2196
(Address, including ZIP Code, and telephone
number, including area code, of registrant's
principal executive offices)
William L. Hummel
President and Chief Executive Officer
FIRST PERRY BANCORP, INC.
101 Lincoln Street
Post Office Box B
Marysville, Pennsylvania 17053-0017
(717) 957-2196
(Name, address, including ZIP Code, and telephone
number, including area code, of agent for
service)
With a Copy to:
Nicholas Bybel, Jr., Esquire
Cheryl A. Zeman, Esquire
SHUMAKER WILLIAMS, P.C.
P.O. Box 88, Harrisburg, Pennsylvania 17108
(717) 763-1121
Approximate date of commencement of the proposed sale of the securities to the
public: As soon as practicable after the effective date of the Registration
Statement.
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. [ ]
<TABLE>
<CAPTION>
CALCULATION OF REGISTRATION FEE
Title of Each Class Amount Proposed Maximum Proposed Maximum Amount of
of Securities to to be Offering Price Aggregate Registration
be Registered Registered Per Share(1) Offering Price(1) Fee(2)
<S> <C> <C> <C> <C>
Common Stock, par value
$.25 per share 408,000 shares $ 20.935 $ 8,541,480 $ 2,519.74
<FN>
(1) Estimated solely for the purpose of calculating the registration fee and
based, in accordance with Rule 457(f)(2), upon the book value of the
outstanding shares of The First National Bank of Marysville ("Bank"), of
204,000 shares of common stock, par value $.50 per share, as of September
15, 1998, of $ 41.87 per share and a maximum of 204,000 shares of such
stock to be converted in the reorganization into common stock of the
Registrant with a par value of $.25 per share at an exchange ratio of two
shares of Registrant for each share of Bank.
(2) Registration Fee paid by Registrant prior to filing the original
Registration Statement on October 6, 1998.
</FN>
</TABLE>
The Registrant hereby amends this Registration Statement on such date or dates
as may be necessary to delay its effective date until the Registrant shall file
a further amendment which specifically states that this Registration Statement
shall thereafter become effective in accordance with Section 8(a) of the
Securities Act of 1933, as amended, or until the Registration Statement shall
become effective on such date as the Commission, acting pursuant to such Section
8(a), may determine.
<PAGE>
THE FIRST NATIONAL BANK OF MARYSVILLE
101 Lincoln Street
MARYSVILLE, PA 17053-0017
(717) 957-2196
- ------------------------------------------------------------------------------
December 22, 1998
TO OUR SHAREHOLDERS:
The Board of Directors of The First National Bank of Marysville (the
"Bank") cordially invites you to attend a Special Meeting of Shareholders which
will commence at 2:00 p.m., Eastern Standard Time, on Wednesday, January 20,
1999, at Bethany United Methodist Church, 400 Lansvale Street, Marysville,
Pennsylvania 17053.
At this Special Meeting of Shareholders, the Board of Directors recommends
that you vote in favor of the proposal to approve and adopt a Plan of
Reorganization and Plan of Merger that will have the effect of reorganizing the
Bank into a bank holding company. The Board of Directors believes that the
formation of a bank holding company at this time is an important and necessary
part of the Bank's plans for the future.
Under the proposed Plan of Reorganization, each share of Common Stock of
the Bank presently held by you will be converted into two (2) shares of Common
Stock of First Perry Bancorp, Inc. (the "Holding Company"), a bank holding
company whose only substantial asset will be all of the Common Stock of the
Bank. If the Plan of Reorganization is approved and adopted, the Bank's
shareholders (other than dissenting shareholders) will automatically become
shareholders of the Holding Company. The Holding Company will own all of the
outstanding shares of the Bank.
Therefore, your interest in the Bank after the reorganization will remain
essentially the same, except that it will be an indirect interest rather than a
direct interest. The conversion of Common Stock of the Bank into Common Stock of
the Holding Company will be tax free for federal income tax purposes.
The reorganization will be effectuated by the establishment of an interim
bank which is a subsidiary of the Holding Company and which will merge with the
Bank. The proposal does NOT involve a merger between the Bank and another bank
or company already in operation. After consummation of the proposed
reorganization, the Bank will continue its banking business substantially
unchanged under the same management.
THE BOARD OF DIRECTORS BELIEVES THAT THE PLAN OF REORGANIZATION AND PLAN OF
MERGER ARE IN THE BEST INTERESTS OF THE BANK AND ITS SHAREHOLDERS AND URGES YOU
TO VOTE IN FAVOR OF THE PLAN OF REORGANIZATION AND PLAN OF MERGER. THE APPROVAL
AND ADOPTION OF THE
<PAGE>
PLAN OF REORGANIZATION AND PLAN OF MERGER REQUIRES AN AFFIRMATIVE VOTE OF THE
HOLDERS OF AT LEAST TWO-THIRDS (2/3) OF THE OUTSTANDING SHARES OF THE BANK'S
COMMON STOCK. IT IS, THEREFORE, EXTREMELY IMPORTANT FOR YOU TO SIGN, DATE AND
RETURN YOUR ENCLOSED PROXY AS SOON AS POSSIBLE IN THE PRE-ADDRESSED AND STAMPED
ENVELOPE SUPPLIED FOR YOUR CONVENIENCE, WHETHER OR NOT YOU PLAN TO ATTEND THE
SPECIAL MEETING.
We urge you to carefully review the enclosed Proxy Statement/Prospectus
that describes the Plan of Reorganization and the Plan of Merger proposal in
detail. Again, your Board of Directors strongly recommends that you vote FOR the
proposal.
On behalf of the Board of Directors, thank you for your cooperation and
continued support.
Very truly yours,
/s/ William L. Hummel
----------------------------
William L. Hummel, President
and Chief Executive Officer
<PAGE>
-----------------------------------------
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
TO BE HELD ON JANUARY 20, 1999
-----------------------------------------
TO THE SHAREHOLDERS OF THE FIRST NATIONAL BANK OF MARYSVILLE:
Notice is hereby given that a Special Meeting of Shareholders of The First
National Bank of Marysville (the "Bank") will be held at 2:00 p.m., Eastern
Standard Time, on Wednesday, January 20, 1999, at Bethany United Methodist
Church, 400 Lansvale Street, Marysville, Pennsylvania 17053, for the following
purposes:
1. To consider and act upon a proposal to approve and adopt the Plan of
Reorganization and Plan of Merger dated as of September 10, 1998, providing,
among other things, for the merger of the Bank and The First National Interim
Bank of Marysville (the "Interim Bank"), a national banking association
organized under the laws of the United States, a subsidiary of First Perry
Bancorp, Inc. (the "Holding Company") and for the automatic conversion of each
share of the Common Stock of the Bank into two (2) shares of the Common Stock of
the Holding Company;
2. Adjournment of the Special Meeting to a later date, if necessary, to
permit further solicitation of proxies in the event there are not sufficient
votes at the time of the Special Meeting to constitute a quorum or to approve
the Plan of Reorganization and Plan of Merger; and
3. To transact such other business as may properly come before the Special
Meeting and any adjournment or postponement thereof.
You are urged to mark, sign, date and promptly return your Proxy in the
enclosed envelope so that your shares may be voted in accordance with your
wishes and in order that the presence of a quorum may be assured. The prompt
return of your signed Proxy, regardless of the number of shares you hold, will
aid the Bank in reducing the expense of additional proxy solicitation. The
giving of such Proxy does not affect your right to vote in person if you attend
the meeting and give notice to the Secretary of the Bank.
Only those shareholders of record at the close of business on December 11,
1998, will be entitled to notice of and to vote at the Special Meeting and any
adjournment or postponement thereof.
<PAGE>
A copy of the Bank's Annual Report for the fiscal year ended December 31,
1997, December 31, 1996, and December 31, 1995, and of the Bank's Consolidated
Reports of Condition and Income for the quarter ended September 30, 1998, may be
obtained at no cost by contacting William L. Hummel, President, or Larry D.
Reich, Senior Vice President, Secretary and Cashier, and The First National Bank
of Marysville, 101 Lincoln Street, Post Office Box B, Marysville, Pennsylvania
17053-0017; telephone: (717) 957-2196.
AN AFFIRMATIVE VOTE OF THE HOLDERS OF AT LEAST TWO-THIRDS (2/3) OF THE
OUTSTANDING SHARES IS REQUIRED FOR APPROVAL AND ADOPTION OF THE PLAN OF
REORGANIZATION AND PLAN OF MERGER. THEREFORE, WHETHER OR NOT YOU EXPECT TO
ATTEND THE SPECIAL MEETING IN PERSON, YOU ARE URGED TO SIGN, DATE AND PROMPTLY
RETURN THE ENCLOSED PROXY. A SELF-ADDRESSED STAMPED ENVELOPE IS ENCLOSED FOR
YOUR CONVENIENCE.
By Order of the Board of Directors,
/s/ William L. Hummel
-----------------------------------
William L. Hummel, President
and Chief Executive Officer
December 22, 1998
<PAGE>
PROXY STATEMENT/PROSPECTUS
FIRST PERRY BANCORP, INC.
PROSPECTUS
408,000 Shares Common Stock
($.25 par value)
THE FIRST NATIONAL BANK OF MARYSVILLE
PROXY STATEMENT
Date of Proxy Statement: December 22, 1998
First Perry Bancorp, Inc., a newly formed Pennsylvania business corporation
(the "Holding Company"), proposes to issue 408,000 shares of its common stock to
shareholders of The First National Bank of Marysville (the "Bank") in a
reorganization, pursuant to which the Bank will become a wholly-owned subsidiary
of the Holding Company and shareholders of the Bank will become shareholders of
the Holding Company.
This Proxy Statement/Prospectus includes this cover page and a Proxy
Statement of the Bank for use in connection with a Special Meeting of
Shareholders to be held on Wednesday, January 20, 1999, at 2:00 p.m., Eastern
Standard Time. The proposed reorganization and related matters to be acted upon
at the shareholders' meeting are described in this Proxy Statement/Prospectus.
If the proposed reorganization is approved and adopted, and certain other
conditions are met, each shareholder of the Bank will receive two (2) shares of
Holding Company common stock in exchange for one (1) share of common stock of
the Bank held by shareholders as of December 11, 1998. See section entitled
"PROPOSED REORGANIZATION - Conversion of Stock."
The affirmative vote of the holders of at least two-thirds (2/3) of the
outstanding shares of the Bank is required under the National Bank Act to
approve and adopt the Plan of Reorganization and Plan of Merger.
---------------------------------
This Proxy Statement/Prospectus does not cover resales of shares of Holding
Company common stock after consummation of the proposed reorganization, and no
person is authorized to make use of the Proxy Statement/Prospectus in connection
with any such resale.
i
<PAGE>
The principal executive office of the Holding Company is located at 101
Lincoln Street, Marysville, Pennsylvania 17053-0017. The Holding Company's
telephone number is (717) 957-2196.
---------------------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION (THE "SEC"), THE OFFICE OF THE COMPTROLLER OF THE
CURRENCY (THE "OCC"), THE PENNSYLVANIA DEPARTMENT OF BANKING, THE BOARD OF
GOVERNORS OF THE FEDERAL RESERVE SYSTEM (THE "FEDERAL RESERVE BOARD"), THE
PENNSYLVANIA SECURITIES COMMISSION OR ANY OTHER STATE SECURITIES COMMISSION.
NONE OF THE AFOREMENTIONED HAS PASSED UPON THE ACCURACY OR ADEQUACY OF THIS
PROXY STATEMENT/PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL
OFFENSE.
THE SHARES OF COMMON STOCK OFFERED HEREBY ARE NOT SAVINGS ACCOUNTS OR
DEPOSITS AND ARE NOT INSURED BY THE FEDERAL DEPOSIT INSURANCE CORPORATION OR ANY
OTHER GOVERNMENT AGENCY. THE COMMON STOCK IS NOT GUARANTEED BY THE BANK OR
HOLDING COMPANY. THERE CAN BE NO ASSURANCE THAT THE TRADING PRICE OF THE COMMON
STOCK OFFERED HEREBY WILL NOT DECREASE AT ANY TIME.
THE PROPOSED TRANSACTION WILL CREATE CERTAIN NEW RISKS FOR SHAREHOLDERS,
INCLUDING CERTAIN ANTI-TAKEOVER PROVISIONS IN THE HOLDING COMPANY'S ARTICLES AND
BY-LAWS. THE OVERALL EFFECT OF THESE PROVISIONS MAY BE TO DETER A FUTURE
TAKEOVER OFFER OR OTHER MERGER OR ACQUISITION PROPOSAL THAT A MAJORITY OF THE
SHAREHOLDERS MIGHT VIEW TO BE IN THEIR BEST INTERESTS AS THE OFFER MIGHT INCLUDE
A SUBSTANTIAL PREMIUM OVER THE MARKET PRICE OF THE HOLDING COMPANY'S COMMON
STOCK AT THAT TIME. THESE PROVISIONS MAY ALSO HAVE THE EFFECT OF ASSISTING THE
HOLDING COMPANY'S CURRENT BOARD OF DIRECTORS TO RETAIN ITS POSITION AND TO
RESIST CHANGES THAT THE SHAREHOLDERS MAY WANT TO MAKE IF DISSATISFIED WITH THE
CONDUCT OF THE HOLDING COMPANY'S BUSINESS.
IN ADDITION, THE COMMON STOCK OF THE HOLDING COMPANY BEING OFFERED IN
EXCHANGE FOR THE BANK'S COMMON STOCK INVOLVES A DEGREE OF RISK SIMILAR TO THAT
OF COMMON STOCK OF THE BANK, INCLUDING RISKS RELATED TO INTENSE COMPETITION AND
STRICT GOVERNMENTAL REGULATION. See "Risk Factors" below on Page 4 of this
Prospectus.
ii
<PAGE>
---------------------------------
AVAILABLE INFORMATION
The Holding Company has filed with the Securities and Exchange Commission
in Washington, D.C., a Registration Statement under the Securities Act of 1933,
as amended, for the registration of its common stock to be issued and exchanged
in the proposed reorganization.
The Registration Statement of which this Proxy Statement/Prospectus is a
part is on file with the Securities and Exchange Commission in Washington, D.C.
The Registration Statement, including the exhibits thereto, contains information
in addition to that contained herein. The Registration Statement and exhibits
may be examined during normal business hours at the Securities and Exchange
Commission's public reference room located at Judiciary Plaza, 450 Fifth Street,
N.W., Washington, D.C. 20549 (telephone: 202-942-8090) and also at the regional
offices of the Securities and Exchange Commission located at 7 World Trade
Center, Suite 1300, New York, New York 10048 (telephone: 212-748-8000); The
Curtis Center, Independence Square West, 601 Walnut Street, Suite 1005E,
Philadelphia, Pennsylvania 19106 (telephone: 215-597-3100); and Citicorp Center,
500 West Madison Street, Suite 1400, Chicago, Illinois 60661 (telephone:
312-353-7390). Copies of such material may be obtained from the public reference
section of the Securities and Exchange Commission at Judiciary Plaza, 450 Fifth
Street, N.W., Washington, D.C. 20549, at prescribed rates. The Securities and
Exchange Commission maintains a Web site that contains reports, proxy and
information statements and other information regarding registrants that file
electronically with the Securities and Exchange Commission. The address of the
Securities and Exchange Commission site is http://www.sec.gov.
The Bank is not subject to the reporting requirements of the Securities
Exchange Act of 1934, as amended (the "Act"), and, accordingly, does not file
reports, proxy statements and other information with the Office of the
Comptroller of the Currency (the "OCC"). However, the Bank voluntarily makes
annual financial statements available to its shareholders, and the Holding
Company will continue this practice by providing consolidated annual financial
reports to shareholders after the reorganization.
-----------------------------------
The date of this Proxy Statement/Prospectus is December 22, 1998.
iii
<PAGE>
TABLE OF CONTENTS
Page
SUMMARY............................................................. vii
Special Meeting of the First National Bank of Marysville......... vii
Risk Factors..................................................... viii
Proposed Reorganization.......................................... ix
INTRODUCTION........................................................ 1
Date, Place and Time of Special Meeting.......................... 1
Purpose of the Special Meeting................................... 1
Record Date; Quorum; Voting Rights............................... 2
Solicitation of Proxies.......................................... 2
Voting and Revocation of Proxies................................. 3
RISK FACTORS........................................................ 4
Risks Created by the Proposed Transaction........................ 4
Risks Shared by the Bank and Holding Company..................... 8
FORWARD LOOKING STATEMENTS.......................................... 12
PRINCIPAL BENEFICIAL OWNERS OF THE BANK'S COMMON STOCK.............. 13
Principal Owners................................................. 13
Beneficial Ownership by Officers and Directors................... 14
PROPOSED REORGANIZATION............................................. 16
Plan of Reorganization and Plan of Merger........................ 16
Reasons for the Proposed Reorganization.......................... 17
Shareholder Approval............................................. 20
Effective Date................................................... 20
Effect of Reorganization on Bank's Business and Shareholders..... 21
Conversion of Stock.............................................. 21
Exchange of Stock Certificates................................... 21
Failure To Surrender Stock Certificates.......................... 21
Trading and Resale of Holding Company Common Stock............... 22
Description of Property.......................................... 22
Accounting Treatment............................................. 23
Tax Consequences................................................. 23
Rights of Dissenting Shareholders................................ 25
Regulatory Approvals............................................. 26
iv
<PAGE>
DESCRIPTION OF THE HOLDING COMPANY.................................. 28
Organization..................................................... 28
Management....................................................... 28
Remuneration..................................................... 29
Indemnification for Securities Act Liabilities................... 29
Supervision and Regulation of the Holding Company................ 30
Permitted Activities............................................. 31
Issuance of Additional Securities................................ 33
Acquisition of Additional Banks.................................. 34
DESCRIPTION OF THE BANK............................................. 35
History and Business............................................. 35
Competition...................................................... 36
Supervision and Regulation of the Bank........................... 36
The Federal Reserve System....................................... 37
Monetary Policy.................................................. 38
Deposit Insurance................................................ 38
Legislation...................................................... 39
Regulatory Capital............................................... 43
Examinations and Audits.......................................... 44
Real Estate Loans................................................ 45
Legal Proceedings................................................ 46
Directors and Executive Officers................................. 46
Principal Officers of the Bank................................... 47
Executive Compensation........................................... 48
Pension Plan..................................................... 48
Compensation of Directors........................................ 49
CERTAIN TRANSACTIONS................................................ 50
DESCRIPTION OF THE BANK'S COMMON STOCK.............................. 51
The Bank's Common Stock.......................................... 51
Comparative Market Prices........................................ 52
Capitalization................................................... 54
Year 2000 Computer Problem....................................... 56
DESCRIPTION OF THE HOLDING COMPANY'S STOCK.......................... 59
Common Stock..................................................... 59
Legal Opinion.................................................... 59
Anti-Takeover Provisions......................................... 59
Anti-Takeover Provisions Applicable to Registered Corporations... 62
DIVIDENDS........................................................... 67
v
<PAGE>
COMPARISON OF SHAREHOLDER RIGHTS.................................... 68
FINANCIAL STATEMENTS................................................ 73
SHAREHOLDER PROPOSALS............................................... 73
OTHER MATTERS....................................................... 74
EXHIBIT A PLAN OF REORGANIZATION AMONG THE FIRST NATIONAL BANK OF
MARYSVILLE, THE FIRST NATIONAL INTERIM BANK OF MARYSVILLE, AND
FIRST PERRY BANCORP, INC.
EXHIBIT B PLAN OF MERGER BETWEEN THE FIRST NATIONAL BANK
OF MARYSVILLE AND THE FIRST NATIONAL INTERIM BANK
OF MARYSVILLE
EXHIBIT C ARTICLES OF INCORPORATION OF FIRST PERRY BANCORP, INC.
EXHIBIT D BY-LAWS OF FIRST PERRY BANCORP, INC.
EXHIBIT E EXCERPTS FROM SECTION 215a OF THE NATIONAL BANK ACT
CONCERNING DISSENTERS' RIGHTS
vi
<PAGE>
SUMMARY
The following summary of this Proxy Statement/Prospectus is provided for
your convenience and is qualified in its entirety by the detailed information
set forth elsewhere in this Proxy Statement/Prospectus, including the exhibits
hereto. The mailing address of the principal executive offices of the Holding
Company and the Bank is 101 Lincoln Street, Post Office Box B, Marysville,
Pennsylvania 17053-0017. (Telephone Number of Holding Company and Bank:
717-957-2196) The Bank is a national banking association organized under the
laws of the United States of America. The Holding Company is a Pennsylvania
Corporation organized to effectuate the proposed transaction and has no
operating history.
Special Meeting of the First National Bank of Marysville
Date: January 20, 1999
Time and Place: 2:00 p.m., Eastern Standard Time, at Bethany
United Methodist Church, 400 Lansvale Street,
Marysville, Pennsylvania 17053
Record Date: December 11, 1998
Securities Entitled to Vote:
Each share of The First National Bank of Marysville (the "Bank") common
stock, par value Fifty Cents ($.50) per share, issued and outstanding on
the record date entitles its holders to one (1) vote with respect to all
matters presented at the meeting for shareholder action.
Shares Outstanding on the Record Date:
204,000 shares of Common Stock, par value $.50 per share
Effects of Abstaining From Voting:
A Bank shareholder who abstains from voting does not perfect his or her
dissenter's rights. See, "PROPOSED REORGANIZATION - Rights of Dissenting
Shareholders." A shareholder who abstains from voting is not included in
the affirmative vote necessary to approve and adopt the Plan
vii
<PAGE>
of Reorganization and Plan of Merger. A Bank shareholder who abstains from
voting, automatically without any action on his or her part, will receive two
(2) shares of Holding Company common stock, par value Twenty-five Cents ($.25)
per share in exchange for one (1) share of common stock of the Bank par value
Fifty Cents ($.50) per share held on the Effective Date if at least two-thirds
(2/3) of the outstanding shares of Bank common stock vote in favor of the Plan
of Reorganization and Plan of Merger. See section entitled "PROPOSED
REORGANIZATION Conversion of Stock."
Matters to be Considered:
(1) A proposal to approve and adopt the Plan of Reorganization among the
Bank, The First National Interim Bank of Marysville (the "Interim Bank") and
First Perry Bancorp, Inc., a Pennsylvania business corporation (the "Holding
Company"), and to approve and adopt the Plan of Merger between the Bank and
Interim Bank whereby the shareholders of the Bank will become shareholders of
the Holding Company, and the Bank will become a wholly-owned subsidiary of the
Holding Company; (2) Adjournment of the Special Meeting to a later date, if
necessary, to permit further solicitation of proxies; and (3) To act on such
other matters as may properly come before the Special Meeting and any
adjournment or postponement thereof.
Risk Factors
The proposed transaction will create certain new risks for shareholders,
the foremost new risk resulting from certain "anti-takeover" provisions in the
Holding Company's Articles of Incorporation and By-laws. The general effect of
these provisions may be to deter a future takeover offer or other merger or
acquisition proposal that a majority of the shareholders might view to be in
their best interests. For example, shareholders might favor an offer that
included a substantial premium over the market price of the Holding Company's
Common Stock at that time. These provisions may also have the effect of
assisting the Holding Company's current Board of Directors in retaining its
position and in resisting changes that the shareholders may want to make.
Therefore, shareholders who are dissatisfied with the conduct of the Holding
Company's business may not be able to change the direction of the Holding
Company.
Additionally, investment in the Common Stock of the Holding Company
involves a degree of risk, similar to the risk of investment in the Common Stock
of the Bank. Money invested in the Common Stock, unlike money deposited with the
Bank, is not, and will not, be insured by the Federal Deposit Insurance
Corporation ("FDIC"). Funds invested in Common Stock will not earn interest.
Intense competition, government regulation, and economic uncertainties result in
a degree of risk for any investment in the Common Stock of the Holding Company.
viii
<PAGE>
Proposed Reorganization
Brief Description of Transaction
The proposed transaction which is set forth in the Plan of Reorganization
and Plan of Merger will result in a shell one-bank holding company whereby the
Bank will merge with and into The First National Interim Bank of Marysville (the
"Interim Bank"), under the charter of the Interim Bank and charter number of the
Bank, and under the title of the Bank. Interim Bank has been organized as an
interim national banking association and subsidiary of the Holding Company in
order to facilitate the reorganization. It has no operating history. After the
merger, the resulting bank will be a fully owned subsidiary of the Holding
Company. The Holding Company will own 100% of the shares of the resulting bank.
Conditions to the Consummation of the Plan of Reorganization and Plan of
Merger
The affirmative vote of the holders of at least two-thirds (2/3) of the
outstanding shares of the Bank's common stock is required to approve and adopt
the Plan of Reorganization and Plan of Merger. In addition, the Plan of
Reorganization and Plan of Merger require the approval of the Office of the
Comptroller of the Currency ("OCC"). On September 18, 1998, the organizers of
the Interim Bank filed an application with the OCC for approval to charter the
Interim Bank and to merge the Bank with and into the Interim Bank, and the OCC
granted its approval of the Charter for the Interim Bank and for the proposed
transaction on October 21, 1998. Any approval, when granted by the OCC, reflects
only the OCC's view that the transaction does not contravene the competitive
standards of the law and is consistent with regulatory concerns relating to bank
management and to the safety and soundness of the subject banking organizations.
Such approval is not to be interpreted as an opinion by the OCC that the
reorganization is favorable to the stockholders from a financial point of view
or that the OCC has considered the adequacy of the terms of the exchange. THE
OCC'S APPROVAL IS NOT AN ENDORSEMENT OR RECOMMENDATION OF THE REORGANIZATION AND
MERGER. The application of the Holding Company to become a bank holding company
requires the approval of the Board of Governors of the Federal Reserve System
(the "Federal Reserve Board"). The Holding Company filed an application with the
Federal Reserve Board for approval to become a bank holding company on November
4, 1998. The Federal Reserve Board has not yet approved the application and
proposal to form a bank holding company. See sections entitled "PROPOSED
REORGANIZATION - Shareholder Approval" and "PROPOSED REORGANIZATION - Regulatory
Approvals."
Conversion of Stock
Upon the consummation of the Plan of Reorganization and Plan of Merger, all
shareholders of the Bank, except those who exercise dissenting shareholders'
rights, will become shareholders of the Holding Company and will own two (2)
shares of the Holding Company's common stock for each share of common stock of
the Bank as he or she theretofore owned. Each outstanding share of the Bank's
common stock, par value Fifty Cents ($.50) per share, will be converted into and
become
ix
<PAGE>
two (2) shares of common stock, par value Twenty-five Cents ($.25) per share, of
the Holding Company. See section entitled "PROPOSED REORGANIZATION - Conversion
of Stock."
Exchange of Stock Certificates
Shareholders of the Bank will be required to exchange their present stock
certificates (bearing the name "The First National Bank of Marysville") for new
stock certificates (bearing the name "First Perry Bancorp, Inc."). The Board of
Directors has reserved the right to withhold any dividends from those
shareholders who do not exchange their certificates within a reasonable period
of time after notification of the exchange. See section entitled "PROPOSED
REORGANIZATION Exchange of Stock Certificates."
Failure to Surrender Stock Certificates
Shareholders of the Bank must surrender their stock certificates within two
(2) years of the date of notification to do so. In the event that any stock
certificates are not surrendered for exchange within such two (2) year period,
shares represented by appropriate certificates of the Holding Company that would
otherwise have been delivered in such exchange, shall be sold. The net proceeds
of the sale shall be held for those shareholders of the unsurrendered
certificates to be paid to them upon surrender of their outstanding
certificates. FROM AND AFTER SUCH SALE, THE SOLE RIGHT OF THE HOLDERS OF THE
UNSURRENDERED OUTSTANDING CERTIFICATES SHALL BE THE RIGHT TO COLLECT THE NET
SALES PROCEEDS HELD FOR THEIR ACCOUNT. See section entitled "PROPOSED
REORGANIZATION - Failure to Surrender Stock Certificates."
Amendment
The Board of Directors of the Bank, the Holding Company and the Interim
Bank may amend the Plan of Reorganization and Plan of Merger by mutual consent
either before or after approval by the Bank's shareholders. However, no
amendments can be made to the provisions relating to the conversion of shares of
the Bank into shares of the Holding Company without proper shareholder approval.
See section entitled "PROPOSED REORGANIZATION - Plan of Reorganization and Plan
of Merger."
Termination
The Plan of Reorganization and Plan of Merger may be terminated by the
mutual consent of the Boards of Directors of the Bank, the Interim Bank and the
Holding Company, even after the approval of such plans by the Bank's
shareholders. The Bank's Board of Directors may terminate the Plan of
Reorganization at any time before it is consummated if the Board of Directors
believes the reorganization would be inadvisable for any other proper reason.
See section entitled "PROPOSED REORGANIZATION - Plan of Reorganization and Plan
of Merger."
x
<PAGE>
"Anti-Takeover" Provisions
The Articles of Incorporation and By-laws of the Holding Company establish
or contain certain provisions that may be deemed to be "anti-takeover" in
nature. The Articles of Incorporation of the Holding Company were effective as
of August 14, 1998, the date the Articles of Incorporation were filed with the
Pennsylvania Department of State, Corporation Bureau, and the Bylaws of the
Holding Company were effective as of September 10, 1998, the date that the
By-laws were approved by the Holding Company's Board of Directors. These
provisions of the Articles of Incorporation and By-laws will apply to all
shareholders of the Holding Company on the Effective Date of the Holding Company
formation, the date on which the Plan of Reorganization and Plan of Merger are
consummated. The anti-takeover provisions are as follows:
(1) the authorization of two million (2,000,000) shares of common stock,
all of which may be issued without shareholder approval;
(2) the elimination of cumulative voting in the election of directors;
(3) three (3) year staggered terms of office for directors;
(4) the requirement that holders of at least seventy-five percent (75%) of
the outstanding shares of the Holding Company's common stock approve
any merger, consolidation, liquidation or dissolution of the Holding
Company or the sale of all or substantially all of its assets, unless
at least eighty percent (80%) of all of the members of the Board of
Directors has approved the transaction. Then the transaction must be
approved by only fifty-one percent (51%) of the holders of outstanding
shares of the Holding Company's common stock;
(5) the requirement that holders of at least seventy-five percent (75%) of
the outstanding shares of the Holding Company's common stock approve
any change in the By-laws, or that any such change be approved by a
majority vote of the members of the Board of Directors subject to the
power of the shareholders to change such action of the Board of
Directors by the affirmative vote of the holders of seventy-five
percent (75%) of the outstanding shares of common stock;
(6) the authorization for the Board of Directors to oppose a tender or
other offer on the basis of factors other than economic benefit to
shareholders and to use any legal means to resist an unwanted
takeover;
(7) the requirement that a special meeting of shareholders may only be
called by a majority of the Board of Directors, the Chairman, the
President, the Executive Committee of the Holding Company or by one or
more Shareholders entitled to cast at least forty percent (40%) of the
votes that all Shareholders are entitled to cast at a particular
meeting;
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(8) the elimination of preemptive rights of shareholders to subscribe for
additional shares on a pro rata basis; and
(9) the requirement that certain provisions in the Articles of
Incorporation (relating to Items 2, 4, 6, 7 and 8 above) may only be
amended by the affirmative vote of at least seventy-five percent (75%)
of the outstanding shares of the Holding Company's common stock.
THEREFORE, A VOTE IN FAVOR OF THE PLAN OF REORGANIZATION AND PLAN OF MERGER IS A
VOTE IN FAVOR OF THESE ANTI-TAKEOVER PROVISIONS. See section entitled
"DESCRIPTION OF THE HOLDING COMPANY'S STOCK - Anti-Takeover Provisions."
Rights of Dissenting Shareholders
Shareholders of the Bank who: (1) vote against the Plan of Reorganization
and Plan of Merger at the Special Meeting or give notice in writing to the Bank
prior to or at the Special Meeting that they dissent from the Plan of
Reorganization and Plan of Merger; and (2) comply with the procedures described
in the section entitled "PROPOSED REORGANIZATION - Rights of Dissenting
Shareholders" will be entitled to receive cash for the fair value of their
shares. Merely voting against the Plan of Reorganization and Plan of Merger at
the Special Meeting will not perfect a shareholder's dissenters' rights.
Shareholders are urged to review carefully the section of this Proxy
Statement/Prospectus entitled "PROPOSED REORGANIZATION - Rights of Dissenting
Shareholders" and the statutory excerpts concerning dissenters' rights attached
to this Proxy Statement/ Prospectus as Exhibit E. FAILURE TO FOLLOW THE
PROCEDURES SET FORTH IN 12 U.S.C. ss.215a, REGARDING DISSENTERS' RIGHTS WILL
CONSTITUTE A WAIVER OF APPRAISAL RIGHTS.
Accounting Treatment
Management of the Holding Company and the Bank intend that the proposed
reorganization will be accounted for as a pooling of interest method of
accounting.
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Tax Consequences
Shumaker Williams, P.C., Special Counsel to the Bank and the Holding
Company, has issued a tax opinion which is summarized in the section entitled
"PROPOSED REORGANIZATION - Tax Consequences". Under the current provisions of
the Internal Revenue Code of 1986, as amended (the "Code"), no gain or loss is
expected to be recognized for federal income tax purposes by the shareholders of
the Bank by reason of the conversion of their common stock of the Bank into
common stock of the Holding Company in connection with the consummation of the
Plan of Reorganization and Plan of Merger, except for that gain or loss which is
recognized due to the receipt of cash which is received by any dissenting
shareholder, and except for that gain or loss which is recognized due to the
receipt of cash received in lieu of fractional shares of the Holding Company
common stock. NOTE: THE DISCUSSION OF TAX CONSEQUENCES SUMMARIZES THE TAX
OPINION OF SHUMAKER WILLIAMS, P.C., SPECIAL COUNSEL TO THE BANK AND THE HOLDING
COMPANY, AND IS NOT BINDING ON THE INTERNAL REVENUE SERVICE.
------------------------------------
END OF SUMMARY
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FIRST PERRY BANCORP, INC.
AND
THE FIRST NATIONAL BANK OF MARYSVILLE
PROXY STATEMENT/PROSPECTUS
----------------------------------------------
INTRODUCTION
This Proxy Statement, which also constitutes a Prospectus (the "Proxy
Statement/ Prospectus") is furnished for the solicitation by the Board of
Directors of The First National Bank of Marysville (the "Bank"), a national
banking association organized under the laws of the United States of America, of
proxies to be voted at the Special Meeting of Shareholders of the Bank to be
held at Bethany United Methodist Church, 400 Lansvale Street, Pennsylvania
17053, on Wednesday, January 20, 1999, at 2:00 p.m., Eastern Standard Time, and
at any adjournment or postponement of the Special Meeting. This Proxy
Statement/Prospectus also constitutes the Prospectus of First Perry Bancorp,
Inc. (the "Holding Company") in offering its shares of common stock to the
Bank's shareholders in accordance with the Plan of Reorganization and Plan of
Merger. The Articles of Incorporation of the Holding Company were filed with the
Pennsylvania Corporation Bureau on August 14, 1998. The Holding Company was
formed in order to effectuate the proposed reorganization. The principal
executive offices of the Bank and the Holding Company are located at 101 Lincoln
Street, Marysville, Pennsylvania 17053-0017. The telephone number for the Bank
and the Holding Company is (717) 957-2196. All inquiries should be directed to
William L. Hummel, President. This Proxy Statement/Prospectus and the enclosed
form of proxy (the "Proxy") are first being sent to shareholders of the Bank on
or about December 22, 1998.
Date, Place and Time of Special Meeting
The Special Meeting of Shareholders of The First National Bank of
Marysville will be held on Wednesday, January 20, 1999, at Bethany United
Methodist Church, 400 Lansvale Street, Marysville, Pennsylvania 17053, at 2:00
p.m., Eastern Standard Time.
Purpose of the Special Meeting
At the Special Meeting, shareholders of the Bank will be requested: (1) to
consider and act upon a proposal to approve and adopt the Plan of Reorganization
and Plan of Merger dated as of September 10, 1998, providing, among other
things, for the merger of the Bank and The First National Interim Bank of
Marysville (the "Interim Bank"), a national banking association organized under
the laws of the United States of America and a subsidiary of First Perry
Bancorp, Inc. (the "Holding Company"), and for the automatic conversion of each
share of common stock of the Bank
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into two (2) shares of common stock of the Holding Company; (2) to consider any
adjournment of the Meeting to a later date, if necessary, to permit further
solicitation of proxies in the event there are not sufficient votes at the time
of the Meeting to constitute a quorum or to approve the Plan of Reorganization
and Plan of Merger; and (3) to transact such other business as may properly come
before the Special Meeting and any adjournment or postponement thereof.
Record Date; Quorum; Voting Rights
The Board of Directors of the Bank has fixed the close of business on
December 11, 1998, as the record date for the determination of shareholders of
the Bank entitled to notice of and to vote at the Special Meeting (the "Record
Date"). On the Record Date, the Bank had outstanding 204,000 shares of common
stock, par value Fifty Cents ($.50) per share, the only authorized class of
stock, (the "Common Stock") which was held by approximately One Hundred Ten
(110) shareholders.
Under Pennsylvania law and the By-laws of the Bank, the presence of a
quorum, in person or by proxy, is required for each matter to be acted upon at
the Special Meeting. The presence of a quorum, in person or by proxy, of
shareholders entitled to cast at least a majority of the votes which all
shareholders are entitled to cast, shall constitute a quorum for the transaction
of business at the Special Meeting. Votes withheld and abstentions will be
counted in determining the presence of a quorum for the particular matter.
Broker non-votes will not be counted in determining the presence of a quorum for
the particular matter as to which the broker withheld authority.
Assuming the presence of a quorum, the affirmative vote of at least
two-thirds (2/3) of the outstanding shares of Common Stock is required to
approve and adopt the Plan of Reorganization and Plan of Merger. Abstentions and
broker non-votes are not votes cast and therefore do not count either for or
against such approval and adoption. Although abstentions and broker non-votes
are not votes cast, and therefore do not count either for or against such
approval and adoption, abstentions and broker non-votes have the practical
effect of reducing the number of affirmative votes received for each such
matter.
On all other matters to come before the Special Meeting, including the
proposal to approve and adopt the Plan of Reorganization and Plan of Merger,
each share of Common Stock is entitled to one (1) vote.
Solicitation of Proxies
This Proxy Statement/Prospectus and the enclosed form of Proxy are first
being sent to shareholders of the Bank on or about December 22, 1998.
The cost of preparing, assembling, printing, mailing and soliciting
proxies, and any additional material that the Bank may furnish shareholders in
connection with the Special Meeting, will be borne by the Bank. In addition to
solicitation by mail, directors, officers and employees of the Bank may solicit
Proxies from the shareholders of the Bank personally or by telephone, telegram
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<PAGE>
or telecopier. Arrangements will be made with brokerage houses and other
custodians, nominees and fiduciaries to forward proxy solicitation materials to
the beneficial owners of the Common Stock held of record by these persons, and,
upon request therefor, the Bank will reimburse them for their reasonable
forwarding expenses.
Voting and Revocation of Proxies
Shares represented by Proxies properly signed, executed and returned,
unless subsequently revoked, will be voted at the Special Meeting in accordance
with the instructions made thereon by the shareholders. If a Proxy is signed,
executed and returned without indicating any voting instructions, the shares
represented by the Proxy will be voted FOR the approval and adoption of the Plan
of Reorganization and Plan of Merger. Execution and return of the enclosed Proxy
will not affect a shareholder's right to attend the Special Meeting and vote in
person, after giving notice to Larry D. Reich, Secretary and Cashier of the
Bank.
A shareholder of the Bank who returns a Proxy may revoke the Proxy prior to
the time it is voted: (1) by giving notice of revocation to Larry D. Reich,
Secretary and Cashier of The First National Bank of Marysville, 101 Lincoln
Street, Post Office Box B, Marysville, Pennsylvania 17053-0017; (2) by executing
a later-dated proxy and giving notice thereof to Larry D. Reich, Secretary and
Cashier of the Bank; or (3) by voting in person after giving notice to Larry D.
Reich, Secretary and Cashier of the Bank. Attendance by a shareholder at the
Special Meeting will not itself be deemed or constitute a revocation of the
Proxy.
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RISK FACTORS
I. Risks Created by the Proposed Transaction
The proposed transaction will create certain new risks that do not
currently exist for shareholders of the Bank, as follows:
Anti-Takeover Provisions and Increased Control of the Board of Directors.
Under the Articles of Incorporation and By-laws of the Holding Company, attached
as Exhibits C and D, respectively, and incorporated as part of this Prospectus
by reference, there are nine (9) provisions that may be deemed to be
"anti-takeover" in nature that will be immediately applicable. These provisions,
which are authorized by the Pennsylvania Business Corporation Law of 1988, as
amended, (the "BCL") will enhance the ability of the Holding Company's Board of
Directors to resist takeover attempts which the Board of Directors does not
favor. These provisions to resist takeover attempts may be considered a risk to
shareholders because shareholders may disagree with the Board of Director's
opposition to a takeover. Shareholders may determine the takeover would be in
their best interests, for example, if the potential acquiror offered a
substantial premium over the market price of the Holding Company's common stock
at that time or if shareholders were dissatisfied with the current Board of
Directors of the Holding Company. Also, these "anti-takeover" provisions will
generally give the Board of Directors of the Holding Company more power and
control than is the case for the Board of Directors of the Bank. They may,
therefore, affect not just potential acquirors of the Holding Company but also
shareholders who do not seek to acquire the Holding Company.
The provisions of the Articles of Incorporation and By-laws will apply to
all shareholders of the Holding Company on the Effective Date of the Holding
Company formation, the date on which the Plan of Reorganization and Plan of
Merger are consummated. The anti-takeover provisions are as follows:
(1) the authorization of two million (2,000,000) shares of common stock,
all of which may be issued without shareholder approval (Article 5 of the
Articles of Incorporation, Exhibit C);
(2) the elimination of cumulative voting in the election of directors
(Article 8 of the Articles of Incorporation, Exhibit C);
(3) three (3) year staggered terms of office for directors (Section 9.2 of
the By-laws, Exhibit D);
(4) the requirement that holders of at least seventy-five percent (75%) of
the outstanding shares of the Holding Company's common stock approve any merger,
consolidation, liquidation or dissolution of the Holding Company or the sale of
all or substantially all of its assets, unless at least eighty percent (80%) of
all of the members of the Board of Directors has approved the transaction.
4
<PAGE>
Then the transaction must be approved by only fifty-one percent (51%) of the
holders of outstanding shares of the Holding Company's common stock (Article 7
of the Articles of Incorporation, Exhibit C);
(5) the requirement that holders of at least seventy-five percent (75%) of
the outstanding shares of the Holding Company's common stock approve any change
in the By-laws, or that any such change be approved by a majority vote of the
members of the Board of Directors subject to the power of the shareholders to
change such action of the Board of Directors by the affirmative vote of the
holders of seventy-five percent (75%) of the outstanding shares of common stock
(Section 34.1 of the By-laws, Exhibit D);
(6) the authorization for the Board of Directors to oppose a tender or
other offer on the basis of factors other than economic benefit to shareholders,
such as social and economic effects, and to use any legal means to resist an
unwanted takeover (Article 10 of the Articles of Incorporation, Exhibit C);
(7) the requirement that a special meeting of shareholders may only be
called by a majority of the Board of Directors, the Chairman, the President, the
Executive Committee of the Holding Company or by one or more shareholders
entitled to cast at least forty percent (40%) of the votes that all shareholders
are entitled to cast at a particular meeting (Article 9 of the Articles of
Incorporation, Exhibit C, and Section 2.3 of the By-laws, Exhibit D);
(8) the elimination of preemptive rights of shareholders to subscribe for
additional shares on a pro rata basis (Article 11 of the Articles of
Incorporation, Exhibit C); and
(9) the requirement that certain provisions in the Articles of
Incorporation (relating to Items 2, 4, 6, 7 and 8 above) may only be amended by
the affirmative vote of at least seventy-five percent (75%) of the outstanding
shares of the Holding Company's common stock (Article 12 of the Articles of
Incorporation, Exhibit D).
The above-listed provisions give the Board of Directors more power to
oppose an unwanted takeover. Several of these provisions, namely, Items (2), (3)
and (4) above, are specifically prohibited for national banks under current
federal law, and therefore could not be included in the Articles and/or By-laws
of the Bank.
Pursuant to Items (1) and (8) above, the Board of Directors may issue
additional shares, without obtaining shareholder approval, to
management-friendly parties in order to dilute the position of a potential
acquiror. The elimination of preemptive rights of shareholders (Item (8)) means
that the Holding Company is not required to offer newly issued shares to
existing shareholders. This provision gives the Board of Directors increased
control.
Cumulative voting entitles a shareholder to as many votes as equal the
number of shares owned by the shareholder multiplied by the number of directors
to be elected. A shareholder may cast all of these votes for one candidate or
distribute them among any two or more candidates. The prohibition against
cumulative voting (Item 2) may prevent a potential acquiror from electing its
own nominee(s) to the Board, and may make it more difficult for other
shareholders to gain representation on the Board of Directors. The establishment
of a Board with staggered terms of
5
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office, also known as a "Classified Board", (Item 3) may likewise make it more
difficult for an acquiror or other shareholders to change the Board of
Directors, the management and the direction of the company. See the section
entitled "DESCRIPTION OF THE HOLDING COMPANY'S STOCK - Anti-Takeover
Provisions."
Under Item 4, above, if eighty percent (80%) of the Board does not approve
a proposed merger or acquisition, then the approval of seventy-five percent
(75%) of shareholders is required rather than a simple majority. This provision
ensures that any extraordinary corporate transaction can be effectuated only
upon a clear mandate from shareholders. However, it could also give the Board of
Directors veto power over certain acquisitions regardless of whether the
acquisition is desired by or beneficial to any of the shareholders. The
directors and officers of the Holding Company will own approximately 22.22% of
the Holding Company's common stock upon consummation of the proposed
reorganization.
Item 6, above, makes it easier for the Board to oppose an offer by a
potential acquiror because the Board is authorized to consider factors in its
decision-making other than the economic benefit to shareholders. This provision
is authorized for Pennsylvania corporations under Section 1715 of the BCL, which
does not apply to banks.
Item 7, above, which requires that only shareholder(s) entitled to cast at
least forty percent (40%) of the votes may call special meetings of
shareholders, may make it more difficult for a potential acquiror to call a
special meeting to consider matters the approval of which might cause or assist
it to acquire the Holding Company. The provision also gives the Board of
Directors more power over the Holding Company and decreases the power of
shareholders who are not in management.
Items 5 and 9, above, require the approval by shareholders of at least
seventy-five percent (75%) of the outstanding shares of the Holding Company's
common stock in order to amend the Bylaws and to amend many of the anti-takeover
provisions in the Articles of Incorporation. These provisions may have the
effect of making it more difficult for a potential acquiror to amend the Holding
Company's Articles and By-laws in order to change the direction of the Holding
Company or to assist the acquiror in gaining control. These provisions may also
make it more difficult for all shareholders to amend the Holding Company's
Articles and By-laws. Absent these provisions, under the BCL a simple majority
of shareholders could amend the Articles and By-laws.
For a full discussion and more detailed analysis of how these provisions
may function as anti-takeover mechanisms, please refer to the section entitled
"DESCRIPTION OF THE HOLDING COMPANY'S STOCK - Anti-Takeover Provisions".
Furthermore, under the BCL, certain strong anti-takeover provisions are
available to corporations that have their securities registered with the
Securities and Exchange Commission under Section 12 of the Securities Exchange
Act of 1934, as amended ("Registered Corporations"). Although the Holding
Company is not expected to attain the status of "Registered Corporation" at the
Effective Date of the Consummation of the Plan of Reorganization and Plan of
Merger or in the near future, upon attaining such status, these anti-takeover
provisions will apply to the Holding Company. See section entitled "DESCRIPTION
OF THE HOLDING COMPANY'S STOCK - Anti-Takeover Provisions Applicable to
Registered Corporations" for a full discussion of these anti-takeover
provisions.
6
<PAGE>
THE OVERALL EFFECT OF THESE PROVISIONS MAY BE TO DETER A FUTURE TAKEOVER
OFFER OR OTHER MERGER OR ACQUISITION PROPOSAL THAT A MAJORITY OF THE
SHAREHOLDERS MIGHT VIEW TO BE IN THEIR BEST INTERESTS AS THE OFFER MIGHT INCLUDE
A SUBSTANTIAL PREMIUM OVER THE MARKET PRICE OF THE HOLDING COMPANY'S COMMON
STOCK AT THAT TIME. THESE PROVISIONS MAY ALSO HAVE THE EFFECT OF ASSISTING THE
HOLDING COMPANY'S CURRENT BOARD OF DIRECTORS IN RETAINING ITS POSITION AND IN
RESISTING CHANGES THAT THE SHAREHOLDERS MAY WANT TO MAKE IF DISSATISFIED WITH
THE CONDUCT OF THE HOLDING COMPANY'S BUSINESS. A VOTE IN FAVOR OF THE PLAN OF
REORGANIZATION AND PLAN OF MERGER IS A VOTE IN FAVOR OF THESE ANTI-TAKEOVER
PROVISIONS.
Indemnification Provisions for Directors. The Holding Company's By-laws
also contain provisions limiting the liability of directors of the Holding
Company in connection with actions they take as directors. Among other things,
such provisions may prevent the Holding Company and the shareholders from having
a cause of action against the directors for monetary damages. Causes of action
for self-dealing, willful misconduct or recklessness and claims for non-monetary
relief, however, may be unaffected by such provisions. The restriction on
monetary liability may discourage derivative litigation seeking such relief and,
in the case of claims having merit, could reduce the recovery of monetary
damages by the Holding Company. One of the significant effects of the
indemnification provisions in the By-laws is to authorize indemnification
against judgments and settlements in a derivative suit. As a result, damages
assessed against a director to be paid to the Holding Company would be, at
least, reduced by the indemnification amounts owed by the Holding Company to
such persons. The Holding Company, accordingly, will not receive any net benefit
from such awards or settlement amounts and could incur a loss after
indemnification payments are made. Management believes, however, that these
provisions are appropriate because any possible economic loss to the Holding
Company could be offset by a reduction in the cost to the Holding Company of
defending baseless litigation, which also may be discouraged by these provisions
of the Bylaws. See Exhibit D, Article 23. The Bank's By-laws could be amended to
include indemnification provisions if the reorganization into a Holding Company
does not occur.
Increased Regulatory Burden. The Bank is already subject to extensive
governmental supervision, regulation and control, and the reorganization of the
Bank into a Holding Company will result in additional regulation. The Federal
Reserve System, the primary regulator for bank holding companies, will impose
certain requirements on the Holding Company, including the filing of an annual
report. The Holding Company will also be subject to examinations by the Federal
Reserve Board. Although these procedures and requirements may be deemed costly
and burdensome, they are designed to protect the safety and soundness of bank
subsidiaries of holding companies. For example, restrictions on bank holding
companies engaging in non-banking activities and restrictions on extensions of
credit by bank subsidiaries to their parent bank holding companies are clearly
designed to protect banks and their deposits.
7
<PAGE>
The Holding Company will also be subject to the jurisdiction of the
Securities and Exchange Commission and of state securities commissions for
matters relating to the offer and sale of the Holding Company's securities.
Presently, the Bank is exempt from federal and most state registration
requirements because of specific exemptions for bank securities. Unless another
exemption applies to the specific circumstances of the offer or sale of
securities, the Holding Company will be required to register any securities it
offers or sells with the Securities and Exchange Commission and appropriate
state securities commissions. Such registration may entail significant costs,
including legal fees and filing fees. See "DESCRIPTION OF THE HOLDING COMPANY -
Supervision and Regulation of the Holding Company" below.
II. Risks Shared by the Bank and the Holding Company
Investment in the Common Stock of the Holding Company also involves risks
similar to those already borne by investors in the Common Stock of the Bank.
Money invested in the Common Stock of the Bank or the Holding Company, unlike
money deposited with the Bank, is not, and will not, be insured by the Federal
Deposit Insurance Corporation ("FDIC"). Funds invested in Common Stock will not
earn interest. The following risk factors may influence the value of the Common
Stock of the Holding Company in the same way they would the Common Stock of the
Bank alone:
Dependence on Key Personnel. The business success of the Bank and Holding
Company depends and will continue to depend, to a great extent, upon the
services of the Board of Directors of the Bank and Holding Company. The loss of
key personnel by the Bank or Holding Company would have a material adverse
effect upon the future prospects of the Bank or Holding Company.
Intense Competition. The success of the Holding Company will depend upon
the success of the Bank. The Bank operates in an extremely competitive banking
environment. In Pennsylvania, generally, and in the Perry County and Harrisburg
areas, specifically, larger banks dominate the commercial banking industry. By
virtue of their larger capital bases, such institutions have substantially
greater lending limits than the Bank and can perform certain functions for their
customers, such as trust services, which the Bank is not authorized to offer. In
addition to commercial banks, the Bank also competes with other financial
institutions, such as savings and loan associations, credit unions, money market
funds, stock brokerage firms, insurance companies and others, in obtaining funds
and in making loans. Future competitors, including new commercial banks, may
enter the Bank's market area. The Bank's strategy is to attract customers by
providing personalized services and to use the directors' business and personal
contacts within the community. There can be no assurance that the Bank can
successfully continue to pursue this strategy. Neither the Bank nor the Holding
Company can predict the effect of competition on their ability to continue to
gain market acceptance and to operate profitably. See "DESCRIPTION OF THE BANK
Competition" below.
Economic Conditions and Related Uncertainties. Commercial banking is
affected, directly and indirectly, by local, domestic and international economic
and political conditions, and by governmental monetary and fiscal policies.
Conditions such as inflation, recession,
8
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unemployment, volatile interest rates, tight money supply, scarce natural
resources, real estate values, international conflicts and other factors beyond
the Bank's or Holding Company's control can adversely affect the potential
profitability of the Bank or Holding Company. Future rising interest rates,
while increasing the income yield on the Bank's earning assets, can adversely
affect loan demand and, consequently, the profitability of the Bank or Holding
Company. Future decreases in interest rates can adversely affect the Bank's or
Holding Company's profitability because any such decreases can reduce the return
which the Bank earns on its assets. Economic downturns could result in the
delinquency of outstanding loans. Management does not expect any one particular
factor to affect the Bank's or the Holding Company's success or failure.
Government Regulations. The Bank and Holding Company are subject to
extensive governmental supervision, regulation and control, and future
legislation and government policy could adversely affect the commercial banking
industry and the operations of the Bank and Holding Company. The Holding Company
is subject to the provisions and restrictions of the Bank Holding Company Act of
1956, as amended, and to supervision by the Federal Reserve Board. It may engage
only in banking activities and activities related to banking and is subject to
various other restrictions. The Bank is subject to federal and state statutes
applicable to banks chartered under the banking laws of the United States, to
members of the Federal Reserve System and to banks whose deposits are insured by
the Federal Deposit Insurance Corporation. The primary regulator of the Bank is
the Office of the Comptroller of the Currency. Federal and state banking laws
and regulations govern, among other things, the scope of a bank's business, a
bank's investments, a bank's reserves against deposits, a bank's loans, interest
rates, the activities of a bank with respect to mergers and consolidations and
the establishment of branches. The regulatory burden on banks and holding
companies is significant. Furthermore, the restrictions on banks and bank
holding companies may have the effect of making it difficult for banks and bank
holding companies to compete with other types of financial institutions which
are not subject to the same regulatory burden but which offer services, such as
investment services, that are in competition with the services of banking
institutions. See "DESCRIPTION OF THE HOLDING COMPANY - Supervision and
Regulation of the Holding Company" and "DESCRIPTION OF THE BANK - Supervision
and Regulation of the Bank" below.
Possible Change of Regulations. The Holding Company's and the Bank's
organization and operations are strictly regulated and supervised by various
state and federal regulatory bodies, in accordance with applicable statutes and
regulations. Investors should be aware that the statutes and regulations
governing financial institutions, in general, and the commercial banking
industry, in particular, are in a state of continuous change and have been
modified substantially during recent years. Such governing laws can be
anticipated to continue to be the subject of modification, and Management cannot
predict what effect any such future modifications will have on the operations of
the Holding Company and the Bank.
9
<PAGE>
Dividend Restrictions. Currently, the Bank's Management employs a policy of
paying quarterly cash dividends, and the Holding Company's Board of Directors
presently intends to retain the dividend policy of providing for a quarterly
dividend; however, no future assurance can be given that the Holding Company's
results of operations will permit the payment of dividends. The ability of the
Holding Company to pay cash dividends will be subject to the restrictions set
forth in the Pennsylvania Business Corporation Law, and because any dividends
will be upstreamed from the Bank (after its reorganization), the ability of the
Holding Company to pay dividends will also be subject to the Federal Deposit
Insurance Corporation Improvement Act and National Bank Act. See "DESCRIPTION OF
THE BANK'S COMMON STOCK" and "DIVIDENDS".
Management Ownership of Stock: Increased Management Control and Decreased
Market Liquidity. The directors, officers and substantial investors may have
sufficient beneficial ownership of the Common Stock to control the Holding
Company. The directors and officers of the Bank currently own 22.22% of the
Bank's Common Stock and will own the same percentage of Common Stock of the
Holding Company upon effectuation of the proposed reorganization, not taking
into account the possible exercise of dissenting shareholders' rights to
surrender their shares for cash, which could have the effect of increasing the
percentage of shares beneficially owned by the directors and officers. In
addition, one investor, who is not an officer or director of the Bank, owns more
than 10% of the Bank's Common Stock. See "PRINCIPAL BENEFICIAL OWNERS OF THE
BANK'S COMMON STOCK".
The ownership of a substantial percentage of the outstanding Common Stock
by a limited number of shareholders with a common interest, particularly those
who share management of the Holding Company, may result in disproportionate
control of the Holding Company. Although a minority of total shareholders, this
group may be able to consistently determine the outcome of votes in matters
submitted to a vote of the Holding Company's shareholders. It would be difficult
for another shareholder group to defeat a proposal favored by the Holding
Company's directors and officers, or to approve a proposal opposed by the
directors and officers.
The ownership of a relatively large percentage of shares by the Holding
Company's Board of Directors and officers may have the effect of assisting the
Board of Directors and its appointed officers in retaining control of the
Holding Company, even if the other shareholders are dissatisfied with the
current Board. This effect may be even more significant for the Holding Company
because of the provision in the Holding Company's Articles of Incorporation
(Article 7, Exhibit C) requiring that holders of at least seventy-five percent
(75%) of the outstanding shares of common stock approve any merger or other
extraordinary transaction, unless at least eighty percent (80%) of the Board of
Directors approves the transaction. Conversely, a merger which the Board
approves is likely to be approved by shareholders. Thus, the negotiating power
of other shareholders may be reduced in an attempted takeover of the Holding
Company.
The ownership of a substantial number of shares by a limited number of
persons can also adversely affect the liquidity of the market for the Common
Stock because only a limited number
10
<PAGE>
of shares are widely dispersed and likely to change hands. Stock prices in an
illiquid market tend to increase and decrease in a more volatile manner than
stock prices in a liquid market, because prices for a relatively small number of
shares can have a significant impact on the price quoted for the Common Stock.
The Holding Company is unable to estimate the number of shares of Common Stock
that may be sold in the future by any of its shareholders. Such sales will
depend upon a number of factors, including the market price for the shares of
Common Stock and the circumstances applicable to each shareholder. The sale of a
substantial block of shares of Common Stock in the public market is likely to
have an adverse impact on the market price of the shares of Common Stock.
Absence of Public Trading Market. The shares of Common Stock of the Bank
are traded on a limited basis in the local over-the-counter market, primarily in
the Marysville area. The Holding Company does not presently intend to make
application with the National Association of Securities Dealers ("NASD") to have
the Common Stock of the Holding Company listed for trading on the National
Association of Securities Dealers Automated Quotation System ("NASDAQ") or to
make application for listing on any national securities exchange. While the
Holding Company does intend to comply with regulatory requirements necessary for
brokerage firms to make an active market in the Common Stock, no assurance can
be given that a more liquid market for the Common Stock will develop or, if
developed, be maintained.
Loss on Dissolution and Termination. In the event of dissolution and
termination of the Holding Company, the proceeds, if any, realized from
liquidation of the Holding Company's assets will be distributed only after the
satisfaction of all claims of creditors (including depositors). Accordingly, the
ability of a shareholder to recover all or any portion of his or her investment
under such circumstances will depend on the amount of funds realized and the
claims of creditors, depositors and others to be satisfied therefrom.
Year 2000 Computer Problem. The "Year 2000 Problem" is the result of
computer programs having been written using two digits rather than four to
define the applicable year. Any of the Bank's computer systems that have
date-sensitive software or date-sensitive hardware may recognize a date using
"00" as the year 1900 rather than the year 2000. This could result in a system
failure or miscalculations causing disruptions of operations, including, among
other things, a temporary inability to process transactions, send statements, or
engage in similar normal business activities. The Year 2000 Problem also extends
to embedded controllers, which are microprocessors located within a piece of
machinery. The extent of the Year 2000 Problem is difficult to determine.
The Bank has addressed the issue of its Year 2000 readiness and will
continue to assess the situation. It has made necessary replacements in its
software and hardware to ensure that its computers will function properly beyond
the year 2000 and has contacted third parties, including its vendors, service
providers and significant customers, to determine these entities' readiness for
the year 2000. The ability of vendors and service providers to provide supplies,
equipment and services to the
11
<PAGE>
Bank is critical to the Bank's operations, and the unresolved Year 2000 problems
of significant customers could result in a loss of business to the Bank. The
Bank has taken steps to ensure its own Year 2000 compliance and to insulate
itself from third parties' lack of readiness. However, it is not possible to
predict every possible effect of the Year 2000 Problem. See "DESCRIPTION OF THE
BANK'S COMMON STOCK - Year 2000 Computer Problem".
FORWARD-LOOKING STATEMENTS
This Proxy Statement/Prospectus contains and incorporates by reference
certain statements that constitute "forward-looking statements". These
forward-looking statements include all statements regarding the intent, belief
or current expectations regarding the matters discussed or incorporated by
reference in this Proxy Statement/Prospectus (including statements as to
"beliefs," "expectations," "anticipations," "intentions" or similar words) and
all statements that are not statements of historical fact. Such statements are
subject to risks, uncertainties and assumptions, including, but not limited to,
trends for the continued growth of the business of the Bank and the Holding
Company. Should one or more of these risks or uncertainties materialize or
should underlying assumptions prove incorrect, actual results, performance or
achievements in 1999 and beyond could differ materially from those expressed in,
or implied by, such forward-looking statements.
12
<PAGE>
PRINCIPAL BENEFICIAL OWNERS OF THE BANK'S COMMON STOCK
Principal Owners
The following table sets forth, as of November 1, 1998, the name and
address of each person who owns of record or who is known by the Board of
Directors to be the beneficial owner of more than five percent (5%) of the
Bank's outstanding Common Stock, the number of shares beneficially owned by such
person and the percentage of the Bank's outstanding Common Stock so owned.
<TABLE>
<CAPTION>
Percent of Outstanding
Common Stock
Name and Address Shares Beneficially Owned (1) Beneficially Owned
- ---------------- ------------------------- ------------------
<S> <C> <C>
Arlene G. Deckard 22,300 10.93%
c/o The First National Bank
of Marysville
101 Lincoln Street
Post Office Box B
Marysville, PA 17053
CEDE & Co. 11,380 5.58%
P.O. Box 20
Bowling Green Station, NY 10004
<FN>
(1) The securities "beneficially owned" by an individual are determined in
accordance with the definitions of "beneficial ownership" set forth in the
regulations of the Office of the Comptroller of the Currency and the
Securities and Exchange Commission and may include securities owned by or
for the individual's spouse and minor children and any other relative who
has the same home, as well as securities to which the individual has or
shares voting or investment power or has the right to acquire beneficial
ownership within sixty (60) days after November 1, 1998.
Beneficial ownership may be disclaimed as to certain of the securities.
</FN>
</TABLE>
13
<PAGE>
Beneficial Ownership by Officers and Directors
The following table sets forth as of November 1, 1998, the amount and
percentage of the Common Stock of the Bank beneficially owned by each director
and all officers and directors of the Bank as a group. This information has been
furnished by the reporting persons.
Name of Individual Amount and Nature of Percent
or Identity of Group (1) Beneficial Ownership (2) of Class (3)
H. Robert Asper 3,200 (4) 1.57%
David M. Benfer 5,450 (5) 2.67%
Arthur M. Feld 2,000 (6) .98%
John L. Hocker7 6,464 (8) 3.17%
William L. Hummel (9) 2,100 (10) 1.03%
Larry D. Reich11 600 .29%
Keith A. Rohrer 2,300 1.13%
John M. Schrantz 2,373 (12) 1.16%
Raymond A. Smith (13) 7,140 3.50%
Kenneth C. Toomey (14) 8,300 (15) 4.07%
Robert K. Watts 5,400 (16) 2.65%
All Officers and Directors
as a Group (11 persons) 45,327 22.22%
The Plan of Reorganization and Plan of Merger must be approved and adopted
by the affirmative vote of the holders of at least two-thirds (2/3) of the
outstanding shares of the Bank's Common Stock. In terms of the number of shares,
the affirmative votes of the holders of at least 136,000 shares of Common Stock
of the Bank are needed for the proposed reorganization to be approved. The
Officers and Directors, as a group, own 45,327 shares, or approximately 33.33%
(one-third) of the shares representing affirmative votes needed to approve the
reorganization.
- --------
1) The address of each individual listed below is c/o The First National Bank
of Marysville, 101 Lincoln Street, Post Office Box B, Marysville,
Pennsylvania 17053.
2) The securities "beneficially owned" by an individual are determined in
accordance with the definitions of "beneficial ownership" set forth in the
regulations of the Office of the Comptroller of the Currency and the
Securities and Exchange Commission and may include securities owned by or
for the individual's spouse and minor children and any other relative who
has the same home, as well as securities to which the individual has or
shares voting or investment power or has the right to acquire beneficial
ownership within sixty (60) days after November 1, 1998. Beneficial
ownership may be disclaimed as to certain of the securities.
3) Upon consummation of the Plan of Reorganization and Plan of Merger, the
percentage of present ownership of the named individuals or all officers
and directors as a group shall remain unchanged.
4) Includes 1,200 shares owned jointly with spouse.
5) Includes 2,050 shares owned jointly with spouse.
6) Invested in Individual Retirement Account ("IRA").
7) Mr. Hocker is Vice-Chairman of the Board, in addition to being a director
of the Bank.
8) Includes 4,464 shares owned jointly with spouse.
9) Mr. Hummel is the President, Chief Executive Officer and Chief Financial
Officer of the Bank, in addition to being a director.
10) Includes 100 shares owned jointly with spouse.
11) Mr. Reich is the Senior Vice-President, Secretary and Cashier of the Bank.
He is not a director. All other persons listed in table are directors.
12) Includes 2,243 shares invested in IRA.
13) Mr. Smith is Assistant Secretary, in addition to being Director of the
Bank.
14) Mr. Toomey is Chairman of the Board, in addition to being a directors of
the Bank.
15) Includes 300 shares owned jointly with spouse.
16) Includes 700 shares owned jointly with spouse.
14
<PAGE>
PROPOSED REORGANIZATION
Plan of Reorganization and Plan of Merger
Under the terms of the Plan of Reorganization and Plan of Merger, the Bank
will merge with, into and under the Charter of the Interim Bank, a subsidiary of
the Holding Company, and each outstanding share of the Bank's Common Stock
(other than shares as to which dissenters' rights have been perfected) will be
converted into two (2) shares of the Holding Company's Common Stock (the
"Merger").
The Interim Bank is a national banking association, organized under the
National Bank Act for the sole purpose of merging with the Bank to effect the
proposed reorganization. The Interim Bank will conduct no banking business prior
to the Merger and has no operating history. After the Merger, the surviving bank
will conduct business under the name "The First National Bank of Marysville."
If the Plan of Reorganization is consummated, the Bank will become a
wholly-owned subsidiary of the Holding Company, and the shareholders of the Bank
will become shareholders of the Holding Company. The Bank will continue its
banking business substantially unchanged, under the same management.
On September 10, 1998, the Boards of Directors of the Bank, the Interim
Bank and the Holding Company unanimously approved the Plan of Reorganization and
Plan of Merger. The Plan of Reorganization and Plan of Merger may be amended by
mutual consent either before or after approval and adoption by the Bank's
shareholders except for provisions relating to the conversion of shares of
Common Stock of the Bank into shares of common stock of the Holding Company.
THE PLAN OF REORGANIZATION AND PLAN OF MERGER MUST BE APPROVED AND ADOPTED
BY THE AFFIRMATIVE VOTE OF THE HOLDERS OF AT LEAST TWO-THIRDS (2/3) OF THE
OUTSTANDING SHARES OF THE BANK'S COMMON STOCK.
Consummation of the Plan of Reorganization and Plan of Merger is also
subject to the consent and approval of the appropriate governmental authorities,
including approval by the Federal Reserve Board and by the Office of the
Comptroller of the Currency ("OCC"). An application was filed on September 18,
1998, with the OCC requesting approval of the Merger, and the OCC granted its
approval of the Charter for the Interim Bank and for the proposed transaction on
October 21, 1998. The Holding Company is required to register with the Federal
Reserve Board as a bank holding company under the Bank Holding Company Act of
1956, as amended. An application was filed with the Federal Reserve Board on
November 4, 1998. The Federal Reserve Board has not yet approved the application
to form a bank holding company.
15
<PAGE>
The Plan of Reorganization and Plan of Merger may be terminated by the
mutual consent of the Boards of Directors of the Bank, the Interim Bank and the
Holding Company even after they are approved by the Bank's shareholders. The
Board of Directors, however, may not amend any provisions relating to the
conversion of shares of the Bank into shares of the Holding Company without
shareholder approval. The Board of Directors of the Bank may also terminate the
Plan of Reorganization and Plan of Merger at any time before the consummation of
the Merger, if the Board of Directors believes that the reorganization would be
inadvisable for any reason.
As required by generally accepted accounting principles, the Merger may be
accounted for as a pooling of interests.
For additional information, see the Plan of Reorganization and Plan of
Merger, attached as Exhibits A and B, respectively, and incorporated by
reference herein.
Reasons for the Proposed Reorganization
In the opinion of the Board of Directors of the Bank, the formation of a
bank holding company of which the Bank would operate as a wholly-owned
subsidiary, will provide greater flexibility in financing, in engaging in
non-banking activities, in protecting against an unfriendly takeover, and in
responding to changes in Pennsylvania law that provide for expanded branching
and multi-bank holding companies.
* Flexibility in Financing.
Flexibility in financing by the Holding Company is provided by the
authorized capitalization of the Holding Company, whose Articles of
Incorporation authorize two million (2,000,000) shares of Common Stock. If
the Plan of Reorganization is approved, approximately 408,000 shares of
Common Stock will be issued in connection with the consummation of the Plan
of Reorganization, leaving approximately 1,592,000 authorized but unissued
shares of Common Stock. The authorized but unissued shares of Common Stock
would be available for issuance from time to time by action of the Board of
Directors to raise additional capital, for acquisitions, or for other
corporate purposes without further action by the shareholders of the
Holding Company unless otherwise required by law. Such issuance could
result in a dilution of voting rights and book value per share as to the
Common Stock of the Holding Company. There are no present plans,
arrangements or commitments for the issuance of any such shares.
Flexibility would also be provided by the ability to incur indebtedness at
the Holding Company level and to contribute the proceeds to the Bank as
equity capital.
* Non-Banking Activities.
Under the Bank Holding Company Act of 1956, as amended, with the prior
approval of the Federal Reserve Board, the Holding Company may organize or
acquire other financially oriented businesses without shareholder approval.
The Holding Company has no present plans for any such activity.
Subsidiaries of the Holding Company not engaged in banking, but rather in
activities related to banking, are not subject to
16
<PAGE>
geographic restrictions. See section entitled, "DESCRIPTION OF THE HOLDING
COMPANY - Permitted Activities".
* Protection Against an "Unfriendly" Takeover.
The Board of Directors of the Holding Company will be better able to resist
a takeover which it determines to be undesirable than the Board of
Directors of the Bank because of provisions in the Holding Company's
Articles of Incorporation and By-laws which may be described as
"anti-takeover" provisions. Several of these provisions, including the
provision for a "Classified Board", the prohibition against cumulative
voting, and the imposition of a supermajority clause requiring the
affirmative vote of at least seventy-five percent (75%) of shareholders for
approval of a merger not approved by eighty percent (80%) of the Board, are
not permitted for national banks under national banking laws but are
permitted for Pennsylvania corporations. Also, the Pennsylvania Business
Corporation Law of 1988, as amended, (the "BCL"), which applies to
corporations but not banks, contains various provisions designed to assist
management in resisting unwanted takeovers. Some of these provisions in the
BCL apply only to "registered corporations", however, and would therefore
not immediately apply to the Holding Company. See sections entitled
"DESCRIPTION OF THE HOLDING COMPANY'S STOCK - Anti-Takeover Provisions" and
"DESCRIPTION OF THE HOLDING COMPANY'S - Anti-Takeover Provisions Applicable
to Registered Corporations".
Pursuant to Article 10 of the Holding Company's Articles of Incorporation
(Exhibit C) in determining whether an attempted or proposed offer to
acquire the Holding Company is "unfriendly", the Board of Directors of the
Holding Company may consider the following factors:
(i) Whether the offer price is acceptable based on the historical and
present operating results or financial condition of the corporation;
(ii) Whether a more favorable price could be obtained for this
corporation's securities in the future;
(iii) The social and economic effects of the offer or transaction on
this corporation and any of its subsidiaries, employees, depositors, loan
and other customers, creditors, shareholders and other elements of the
communities in which this corporation and any of its subsidiaries operate
or are located;
17
<PAGE>
(iv) The reputation and business practice of the offeror and its
management and affiliates as they would affect the shareholders, employees,
depositors and customers of the corporation and its subsidiaries and the
future value of the corporation's stock;
(v) The value of the securities (if any) which the offeror is offering
in exchange for the corporation's securities, based on an analysis of the
worth of the corporation or other entity whose securities are being
offered;
(vi) The business and financial conditions and earnings prospects of
the offeror, including, but not limited to, debt service and other existing
or likely financial obligations of the offeror, and the possible effect of
such conditions upon this corporation and any of its subsidiaries and the
other elements of the communities in which this corporation and any of its
subsidiaries operate or are located;
(vii) Any antitrust or other legal and regulatory issues that are
raised by the offer.
Under Section 1715 of the BCL, the consideration of these types of factors
by the Board of Directors of a Pennsylvania corporation is specifically
authorized. Also under the BCL, the presumption of propriety generally
given to the Board of Directors exists in a takeover context in the same
manner as it would in other corporate decision contexts. A breach of duty
by a director in a takeover context must be shown by clear and convincing
evidence if the action was assented to by a majority of the Board of
Directors not having an interest in the acquiror. Pursuant to Article 10 of
the Holding Company's Articles of Incorporation, if the Board of Directors
determines that an offer should be rejected, it may take any lawful action
to resist the proposed acquisition or other offer.
* Interstate Banking and Branching.
Under the Riegle-Neal Interstate Banking and Branching Efficiency Act of
1994 (the "Interstate Banking and Branching Act"), bank holding companies,
pursuant to an amendment to the Bank Holding Company Act, can acquire a
bank located in any state, as long as the acquisition does not result in
the bank holding company controlling more than ten percent (10%) of the
deposits in the United States, or thirty percent (30%) of deposits in the
target bank's state. The legislation permits states to waive the
concentration limitations and require that the target institution be in
18
<PAGE>
existence for up to five (5) years before it can be acquired by an
out-of-state bank or bank holding company. Interstate branching and merging
of existing banks is permitted if the bank is adequately capitalized and
demonstrates good management. Branch merging will be permitted earlier if a
state undertakes to enact a law which allows it and states may also enact a
law to permit banks to branch de novo. The Interstate Banking and Branching
Act also amends the International Banking Act to allow a foreign bank to
establish and operate a federal branch or agency upon approval of the
appropriate federal and state banking regulator.
Section 1602 of the Pennsylvania Banking Code of 1965 has been amended to
allow interstate mergers upon compliance with applicable requirements.
Section 907 of the Pennsylvania Banking Code has been amended to allow
Pennsylvania state banks to maintain branches in any other state, the
District of Columbia, or a territory or possession of the United States
with prior regulatory approval. Section 30 of the National Bank Act allows
national banks to engage in interstate banking to the extent permissible
for state banks within the subject state.
Shareholder Approval
An affirmative vote of two-thirds (2/3) of the issued and outstanding
shares of Common Stock of the Bank is necessary to approve and adopt the Plan of
Reorganization and Plan of Merger.
Effective Date
The reorganization and the merger of the Bank with, into and under the
Charter of the Interim Bank shall be effective at the time and on the date
specified in the letter of certification to be issued by the Office of the
Comptroller of the Currency ("OCC"). Presently, the Bank plans to request that
the OCC issue its certification for consummation of the transaction no later
than February 15, 1999 (the "Effective Date"). The OCC approved the proposed
transaction on October 21, 1998. However, the OCC will not issue its letter of
certification for consummation of the transaction until the Holding Company and
the Bank give notice to the OCC that holders of at least two-thirds of the
issued and outstanding shares of Common Stock of the Bank have approved and
adopted the Plan of Reorganization and Plan of Merger.
The approval of the OCC reflects only the OCC's view that the transaction
does not contravene the competitive standards of the law and is consistent with
regulatory concerns relating to bank management and to the safety and soundness
of the subject banking organizations. Such approval is not to be interpreted as
an opinion by the OCC that the reorganization is favorable to the stockholders
from a financial point of view or that the OCC has considered the adequacy of
the terms of the exchange. THE OCC'S APPROVAL IS NOT AN ENDORSEMENT OR
RECOMMENDATION OF THE REORGANIZATION AND MERGER.
19
<PAGE>
Effect of Reorganization on Bank's Business and Shareholders
The Interim Bank is a national banking association, organized by the
Holding Company under the National Bank Act, for the sole purpose of effecting
the reorganization and holding company formation. The Interim Bank is a
subsidiary of the Holding Company. The Interim Bank will conduct no banking
business prior to the proposed merger. On the Effective Date, the Bank will
merge with, into and under the Charter of the Interim Bank. The Interim Bank
will survive under the name "The First National Bank of Marysville".
On the Effective Date, shareholders of the Bank will cease to have any
rights as shareholders of the Bank and their rights will relate solely to the
shares of the Holding Company Common Stock, or, if demanded in accordance with
Section 215a of the National Bank Act, they will have the right to receive cash
in the amount of the appraised value of their shares of Bank Common Stock. See
"Rights of Dissenting Shareholders" and Exhibit E, excerpts from Section 215a of
the National Bank Act, relating to Dissenters' Rights.
Conversion of Stock
On the Effective Date, shareholders of the Bank who do not perfect
dissenters' rights will become shareholders of the Holding Company by reason of
the merger of the Bank with, into and under the Charter of the Interim Bank.
They will own twice the number of shares of the Holding Company's Common Stock
as they previously owned of the Bank's Common Stock. Each outstanding share of
the Bank's Common Stock, par value Fifty Cents ($.50) per share, will
automatically be converted into and become two (2) shares of Common Stock, par
value Twenty-five Cents ($.25) per share, of the Holding Company.
Exchange of Stock Certificates
The outstanding stock certificates that represent one (1) share of the
Bank's Common Stock will be deemed automatically to represent two (2) shares of
the Holding Company's Common Stock. The shareholders of the Holding Company will
be required to exchange their present stock certificates (bearing the name "The
First National Bank of Marysville") for new stock certificates (bearing the name
"First Perry Bancorp, Inc."). The Board of Directors has reserved the right to
withhold any dividends from those shareholders who do not exchange their present
stock certificates for new stock certificates within a reasonable period of time
after being advised by the Board of Directors of such exchange of share
certificates.
Failure To Surrender Stock Certificates
In addition to the right of the Board of Directors of the Holding Company
to withhold dividends from those shareholders who do not exchange their present
stock certificates within a reasonable period of time, shareholders must
surrender their stock certificates within two (2) years of the date of
notification to do so. In the event that any stock certificates are not
surrendered for
20
<PAGE>
exchange within such two (2) year period, the shares represented by appropriate
certificates of the Holding Company that would otherwise have been delivered in
exchange for the unsurrendered certificates, shall be sold. The net proceeds of
the sale shall be held for the shareholders of the unsurrendered certificates
and will be paid to them upon surrender of their outstanding certificates. FROM
AND AFTER SUCH SALE, THE SOLE RIGHT OF THE HOLDERS OF THE UNSURRENDERED
OUTSTANDING CERTIFICATES SHALL BE THE RIGHT TO COLLECT THE NET SALES PROCEEDS
HELD FOR THEIR ACCOUNT.
Trading and Resale of Holding Company Common Stock
There is no regular trading market for the Bank's Common Stock, although
shares are sold from time to time in private transactions. It is not expected
that Holding Company Common Stock will be traded on a more established basis
following the Merger. Currently there are no plans to list shares of Holding
Company Common Stock on any stock exchange, although such action may be taken in
the future.
The shares of Holding Company Common Stock to be received in connection
with the Merger will not require registration under the Securities Act of 1933,
as amended (the "Securities Act"), for their subsequent transfer, except that
shares of the Holding Company Common Stock to be received by persons who are
deemed to be "affiliates" of the Bank (directors, certain officers and
shareholders owning five percent (5%) or more of the outstanding shares of
Common Stock), within the meaning of Rule 145 under the Securities Act, may be
resold by affiliates without further registration only in transactions permitted
under certain sections of Rule 144 under the Securities Act or pursuant to other
exemptions under the Securities Act. Rule 144, among other things, will operate
generally to limit the number of shares of Holding Company Common Stock that may
be sold in any three-month period by any one affiliate not acting in concert
with others to one percent (1%) of the outstanding shares of the Holding Company
Common Stock. This limitation will cease at the end of two (2) years following
the Effective Date as to former affiliates of the Bank who are not affiliates of
the Holding Company. Most affiliates of the Bank, however, will at least
initially also be affiliates of the Holding Company and thus may only sell
shares of Holding Company Common Stock in transactions permitted under Rule 144
or otherwise in compliance with the Securities Act.
Description of Property
The Holding Company does not currently own property as it has no operating
history. The Bank owns its Main Office at 101 Lincoln Street, Marysville,
Pennsylvania 17053, and its Ridgeview Office at 500 South State Road,
Marysville, Pennsylvania 17053.
21
<PAGE>
Accounting Treatment
Management of the Holding Company and the Bank intend that the proposed
reorganization, pursuant to which the Bank will merge with and into the Interim
Bank and become a fully owned subsidiary of the Holding Company, will be
accounted for as a pooling of interest method of accounting. The pooling
- -of-interest method of accounting for a business combination reflects the union
of ownership between the entities involved. The pooling is accomplished
primarily by the issuance of voting common stock of the acquiring company.
Results of operations are restated for prior periods as if the entities involved
had always been combined. Under the pooling-of-interests method, the cost of an
acquisition is the total par or stated value of the capital stock issued by the
acquiror to effectuate the combination. This amount is debited to an investment
account and the appropriate capital stock account is credited. Fair values are
ignored and goodwill is never recorded in a pooling of interests.
Tax Consequences
* Federal
Shumaker Williams, P.C., Special Counsel to the Bank and Holding Company,
issued a tax opinion dated December 4, 1998, regarding federal tax
consequences of the proposed transaction, the contents of which are
summarized below. The discussion provided is a description of all material
analyses underlying the tax opinion and addresses all material federal
income tax consequences to investors affected by the reorganization. The
opinions expressed in the tax opinion and summarized below are not binding
on the Internal Revenue Service.
Under the current provisions of the Internal Revenue Code of 1986, as
amended (the "Code") it is anticipated that:
(1) no gain or loss will be recognized by the Bank, the Holding
Company or the Interim Bank by reason of the reorganization;
(2) no gain or loss will be recognized by the Bank's shareholders upon
the exchange of the Bank's Common Stock solely for the Holding Company's
Common Stock pursuant to the reorganization, except for that gain or loss
which is recognized due to the receipt of cash which is received by any
dissenting shareholder of the Bank, and except for that gain or loss which
is recognized due to the receipt of cash which is received by any
shareholder in lieu of fractional shares of Holding Company Common Stock;
(3) the tax basis of the Holding Company's Common Stock to be received
by each of the Bank's shareholders will be the same as the tax basis of the
Bank's Common Stock theretofore owned by such shareholder;
22
<PAGE>
(4) the holding period of the Holding Company's Common Stock into
which the Bank's Common Stock has been converted will include the holding
period of the Bank's Common Stock, provided that the Common Stock of the
Bank was held as a capital asset on the date of the conversion; and
(5) the Interim Bank will carry-over and take into account all
accounting items of the Bank such as earnings and profits, method of
accounting, inventories, etc.
In general, cash received by dissenting shareholders of the Bank will be
treated as amounts distributed in redemption of their Bank Common Stock and
will be taxable under Section 302(a) of the Code, that is as a capital gain
or loss, if the shares are held as a capital asset and as ordinary income
otherwise. It is possible, however, that the provisions of Section 302(a)
will not apply to a particular dissenting shareholder due to Code rules
that require that certain shareholders be treated as owning shares actually
owned by other individuals and entities (i.e., certain individuals related
to the shareholder and certain partnerships, estates, trusts and
corporations in which the shareholder has an interest); if so, the amounts
paid to the dissenting shareholder may be taxable as dividends because they
would be treated as distributions to which Code Section 301 applies and not
as a redemption under Code Section 302(a).
THE ABOVE DISCUSSION OF TAX CONSEQUENCES SUMMARIZES THE OPINION OF SHUMAKER
WILLIAMS, P.C., SPECIAL COUNSEL TO THE BANK AND THE HOLDING COMPANY, AND IS NOT
BINDING ON THE INTERNAL REVENUE SERVICE.
* State
Under the current Pennsylvania personal income tax law, no gain or loss
will be recognized by the shareholders on the conversion of the Bank Common
Stock into the Holding Company Common Stock, except for shareholders
exercising Dissenters' Rights for Pennsylvania residents and except for
shareholders receiving cash in lieu of fractional shares. Also, until
recently, the Holding Company's Common Stock was clearly exempt from
personal property tax. However, pursuant to recent developments in
Pennsylvania law, the Holding Company's Common Stock may not be exempt from
personal property tax. On October 7, 1998, in Annenberg, et al. v.
Commonwealth of Pennsylvania, et al., in a hearing directed by and
following a decision of the Supreme Court of Pennsylvania issued April 7,
1998, in the same matter, the Pennsylvania Common Pleas Court of Montgomery
County considered the constitutionality of section 4821 of the Fiscal Code,
72 Pa.C.S. section 4821. That law imposes a personal property tax on shares
of stock in any bank, corporation, association, company or limited
partnership, but not if the entity is incorporated or doing business in
Pennsylvania. The Common Pleas Court found that the law was
unconstitutional with regard to its exemption for the stock of corporations
or other entities incorporated or doing business in Pennsylvania. The
Common Pleas Court proceeded to sever and invalidate the exemption portion
from section 4821. This case leaves open the possibility that a particular
county may now choose to impose a tax on stock which formerly had been
exempted under section 4821. These changes in the law apply equally to the
stock of corporations and banks. Therefore, even if the proposed
reorganization does not occur, it is also
23
<PAGE>
possible that the shares of Common Stock of the Bank will be subject to a
personal property tax in the future.
THE ABOVE DISCUSSION OF TAX CONSEQUENCES IS NOT BINDING ON THE PENNSYLVANIA
DEPARTMENT OF REVENUE OR LOCAL TAX AUTHORITIES.
SHAREHOLDERS ARE ADVISED TO CONSULT THEIR OWN TAX ADVISORS IN ORDER TO MAKE
AN INDIVIDUAL APPRAISAL OF THE FEDERAL, STATE AND LOCAL INCOME TAX AND PERSONAL
PROPERTY AND OTHER TAX CONSEQUENCES OF THE CONSUMMATION OF THE REORGANIZATION
AND MERGER AND THE EXERCISE OF DISSENTERS' RIGHTS.
Rights of Dissenting Shareholders
As required by the national banking laws, any shareholder of the Bank who
has voted against the Plan of Reorganization and Plan of Merger at the Special
Meeting, or has given written notice at or prior to the Special Meeting to the
Cashier of the Bank or presiding officer that he dissents from the Plan of
Reorganization and Plan of Merger, will be entitled to receive the value of the
shares of Common Stock of the Bank held by him at the time the merger is
approved by the Office of the Comptroller of the Currency ("OCC") upon written
request made to the Bank at any time before thirty (30) days after the date of
consummation of the merger, accompanied by the surrender of his share
certificates. Any shareholder of the Bank who votes against the Plan of
Reorganization and Plan of Merger at the Special Meeting, or who gives notice in
writing at or prior to the Special Meeting to the Cashier of the Bank or
presiding officer that he dissents, will be notified in writing of the date of
consummation of the merger.
The value of the shares of any dissenting shareholder will be ascertained,
as of the Effective Date, by an appraisal made by a committee of three persons.
The committee shall be comprised of one person selected by the vote of the
holders of the majority of the shares whose owners are entitled to payment in
cash (by reason of such requests for appraisal), one person selected by the
Board of Directors of the Bank and one person selected by the two so selected.
The valuation agreed upon by any two of the three appraisers will govern. If the
value so fixed is not satisfactory to any dissenting shareholder who has duly
requested payment, that shareholder may, within five (5) days after being
notified of the appraisal value of his shares, appeal to the OCC. The OCC is
required to cause a reappraisal to be made which will be final and binding as to
the value of the shares of the dissenting shareholder. If, for any reason, one
or more of the appraisers is not selected as provided above within ninety (90)
days from the Effective Date or, if the appraisers fail to determine the value
of such shares within the ninety (90) days, the OCC is required, upon written
request of any interested party, to cause an appraisal to be made that will be
final and binding on all parties. The expenses of the OCC in making the
reappraisal or the appraisal, as the case may be, will be paid by the Bank. The
ascertained value of the shares must be paid promptly to the dissenting
shareholders, if any. The shares of Holding Company Common Stock that would have
been allocated to a dissenting shareholder will be sold at public auction and
any excess received therefrom will be paid
24
<PAGE>
to the dissenting shareholder in accordance with the requirements of the
national banking laws. For more information regarding the OCC's stock appraisal
process, shareholders may contact the Office of the Comptroller for the
Currency, Corporate Activity Division, 250 E Street , S.W., Washington, D.C.
20219 (Telephone: 202-874-5000).
The foregoing summary does not purport to be a complete statement of the
appraisal rights of dissenting shareholders, and such summary is qualified in
its entirety by reference to the Plan of Reorganization, attached hereto as
Exhibit A and to the applicable provisions of 12 U.S.C. ss.215a, which are
reproduced and attached hereto as Exhibit E. Moreover, a shareholder will not be
permitted to split his or her vote; if a shareholder intends to vote, he or she
must vote all of his or her shares either for or against the Plan of
Reorganization and Plan of Merger.
FAILURE TO FOLLOW THE PROCEDURES SET FORTH IN 12 U.S.C. ss.215a, REGARDING
DISSENTERS' RIGHTS WILL CONSTITUTE A WAIVER OF APPRAISAL RIGHTS. SHAREHOLDERS
MAY WISH TO CONSULT INDEPENDENT LEGAL COUNSEL BEFORE EXERCISING DISSENTERS'
RIGHTS.
Except as set forth herein, notification of the beginning or end of any
statutory period will not be given by the Bank to any dissenting shareholders.
Regulatory Approvals
Consummation of the Plan of Reorganization and Plan of Merger is subject to
the approval of the Federal Reserve Board and the Office of the Comptroller of
the Currency ("OCC"), hereinafter collectively designated as the "Bank
Regulatory Authorities". An application to charter the Interim Bank and to merge
the Bank with and into the Interim Bank was filed on September 18, 1998, with
the OCC, and the OCC approved the Charter of the Interim Bank and the proposed
merger on October 21, 1998. The Holding Company filed an application with the
Federal Reserve Bank of Philadelphia on November 4, 1998, to form a one-bank
holding company. To date, the Federal Reserve has not approved the formation of
a bank holding company. There can be no assurance that the Federal Reserve Bank
will approve the reorganization, and if approval is granted, there can be no
assurance as to the grant date of such approval.
In general, the bank regulatory authorities may disapprove this transaction
if the reorganization and merger of the Bank with and into the Interim Bank and
the reorganization of the Bank into a one-bank holding company would not be
consistent with adequate sound banking practices and would not be in the public
interest.
In addition, the merger of the Bank with and into the Interim Bank may not
be consummated for fifteen (15) days from the date of the final approval by the
OCC or approval by the Federal Reserve Board, if there has been no challenge
issued by the United States Department of Justice on anti-trust grounds in which
case the period of time before which consummation may occur may be extended. The
merger of the Bank with and into the Interim Bank and the reorganization of the
Bank into a one-bank holding company cannot proceed in the absence of requisite
regulatory approvals. The approval of the OCC reflects only the OCC's view that
the transaction does not contravene the competitive standards of the law and is
consistent with regulatory concerns relating to bank
25
<PAGE>
management and to the safety and soundness of the subject banking organizations.
Such approval is not to be interpreted as an opinion by the OCC that the
reorganization is favorable to the stockholders from a financial point of view
or that the OCC has considered the adequacy of the terms of the exchange. THE
OCC'S OR THE FEDERAL RESERVE'S APPROVAL IS NOT AN ENDORSEMENT OR RECOMMENDATION
OF THE REORGANIZATION AND MERGER.
26
<PAGE>
DESCRIPTION OF THE HOLDING COMPANY
Organization
The Holding Company was organized as a Pennsylvania business corporation
and incorporated under Pennsylvania law on August 14, 1998, at the direction of
the Board of Directors of the Bank for the purpose of becoming a bank holding
company by acquiring all of the Bank's outstanding Common Stock. The Holding
Company has authorized two million (2,000,000) shares of Common Stock, par value
Twenty-five Cents ($.25) per share. Currently, there are four (4) shares of the
Common Stock outstanding and held by the incorporators.
The Holding Company expects to function primarily as the holder of all of
the Bank's Common Stock. It may, in the future, acquire or form additional
subsidiaries, including other banks to the extent permitted by law.
At present, the Holding Company does not own or lease any property and has
no paid employees. It will not actively engage in business until after the
consummation of the Plan of Reorganization and Plan of Merger. Until then, the
Holding Company will use the Bank's space and employees without payment.
Thereafter, it may reimburse the Bank on a fair and reasonable basis for all
services furnished to it and for all expenses incurred on its behalf.
Copies of the Articles of Incorporation and By-laws of the Holding Company
are attached to this Proxy Statement/Prospectus as Exhibits C and D,
respectively, and incorporated herein by reference.
Management
On the Effective Date, the Board of Directors of the Holding Company will
consist of those persons who are members of the Board of Directors of the Bank.
See "DESCRIPTION OF THE BANK - Directors and Executive Officers", below. The
directors of the Bank will be elected annually by the Holding Company.
The officers of the Holding Company are elected by the Board of Directors
for one-year terms. The current officers are as follows:
27
<PAGE>
<TABLE>
<CAPTION>
Age
Name as of November 1, 1998 Position
----- ---------------------- ----------
<S> <C> <C>
William L. Hummel 51 President and Chief Executive Officer
Larry D. Reich 56 Senior Vice President, Secretary & Treasurer
Kenneth C. Toomey 78 Chairman of the Board
</TABLE>
Remuneration
Because the Holding Company was not in existence in 1997, it paid no
remuneration to its directors and officers for that year. Further, the Holding
Company has paid no remuneration to its directors or officers to date during
1998. It is anticipated that the Holding Company and the Bank, on a consolidated
basis, will pay directors and officers the same compensatory amounts which they
currently receive, with such increases in the future as they would reasonably
have expected to receive had the proposed reorganization not occurred. See
"DESCRIPTION OF THE BANK Executive Compensation" and "DESCRIPTION OF THE BANK -
Compensation of Directors" below. However, although it is expected that the
Holding Company will hold several board meetings each year, the total amount
spent on directors for their attendance at board meetings is not expected to
increase because the Holding Company's directors will not receive separate
compensation for their attendance at Holding Company meetings and will only be
compensated for their attendance at Bank meetings.
Indemnification for Securities Act Liabilities
The Bank expects to extend its present directors' and officers' liability
insurance policy to cover the Holding Company's directors and officers without
significant additional cost. This liability policy would cover the typical
errors and omissions liability associated with the activities of the Holding
Company. The provisions of the insurance policy would probably not indemnify any
of the Holding Company's officers and directors against liability arising under
the 1933 Act.
Pennsylvania Law and the By-laws of the Holding Company and of the Interim
Bank provide for broad indemnification of officers and directors against
liabilities and expenses incurred in legal proceedings. In addition, the By-laws
of the Holding Company and the Interim Bank limit the liability of directors for
monetary damages under certain conditions.
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<PAGE>
In the opinion of the Commission, indemnification of officers, directors or
persons controlling the Holding Company for liabilities arising under the 1933
Act is against public policy as expressed in the Act and is therefore
unenforceable.
Supervision and Regulation of the Holding Company
The Holding Company will be subject to the jurisdiction of the Securities
and Exchange Commission and of state securities commissions for matters relating
to the offering and sale of its securities. Presently, the Bank is exempt from
such registration requirements. Accordingly, additional issuances of Holding
Company stock to raise capital and for dividend reinvestment, stock option and
other plans will be subject to such registration (absent any exemption from
registration). Registration will require the incursion of additional costs by
the Holding Company that the Bank does not presently have to incur.
On the Effective Date, the Holding Company will become subject to the
provisions of the Bank Holding Company Act of 1956, as amended, and to
supervision by the Federal Reserve Board. The Bank Holding Company Act requires
the Holding Company to secure prior approval of the Federal Reserve Board before
acquiring control, directly or indirectly, of more than five percent (5%) of the
voting shares or substantially all of the assets of any institution, including
another bank.
A bank holding company is prohibited from engaging in or acquiring, direct
or indirect, control of more than five percent (5%) of the voting shares of any
company engaged in non-banking activities unless the Federal Reserve Board, by
order or regulation, has found such activities to be so closely related to
banking, managing, or controlling banks as to be a proper incident thereto. In
making this determination, the Federal Reserve Board considers whether these
activities offer benefits to the public that outweigh any possible adverse
effects.
As a bank holding company, the Holding Company will be required to file an
annual report with the Federal Reserve Board as well as any additional
information that the Federal Reserve Board may require pursuant to the Bank
Holding Company Act. The Federal Reserve Board may also make examinations of the
Holding Company and any or all of its subsidiaries. Further, under Section 106
of the 1970 amendments to the Bank Holding Company Act and the Federal Reserve
Board's regulations, a bank holding company and its subsidiaries are prohibited
from engaging in certain tie-in arrangements in connection with any extension of
credit or provision of credit or provision of any property or services. The
so-called "anti-tie-in" provisions state generally that a bank may not extend
credit, lease, sell property or furnish any service to a customer on the
condition that the customer provide additional credit or service to the bank, to
its bank holding company or to any other subsidiary of its bank holding company
or on the condition that the customer not obtain other credit or service from a
competitor of the bank, its bank holding company or any subsidiary of its bank
holding company.
29
<PAGE>
Subsidiary banks of a bank holding company are subject to certain
restrictions imposed by the Federal Reserve Act on any extensions of credit to
the bank holding company or any of its subsidiaries, on investments in the stock
or other securities of the bank holding company and on taking of such stock or
securities as collateral for loans to any borrower.
Permitted Activities
The Federal Reserve Board permits bank holding companies to engage in
activities so closely related to banking or managing or controlling banks as to
be a proper incident thereto. While the types of permissible activities are
subject to change by the Federal Reserve Board, the following list comprises the
principal activities that presently may be conducted by a bank holding company:
1. Making, acquiring or servicing loans and other extensions of credit
for its own account or for the account of others, such as would be made by
the following types of companies: consumer finance, credit card, mortgage,
commercial finance and factoring.
2. Operating as an industrial bank, Morris Plan or industrial loan
company in the manner authorized by state law so long as the institution
does not both accept demand deposits and make commercial loans.
3. Operating as a trust company in the manner authorized by federal or
state law so long as the institution does not make certain types of loans
or investments or accept deposits, except as may be permitted by the
Federal Reserve Board.
4. Subject to certain limitations, acting as an investment or
financial advisor to investment companies and other persons.
5. Leasing personal and real property or acting as agent, broker, or
advisor in leasing property, provided that it is reasonably anticipated
that the transaction will compensate the lessor for not less than the
lessor's full investment in the property.
6. Making equity and debt investments in corporations or projects
designed primarily to promote community welfare.
7. Providing to others financially oriented data processing or
bookkeeping services.
8. Subject to certain limitations, acting as an insurance agent or
broker in relation to insurance for itself and its subsidiaries or for
insurance directly related to extensions of credit by the bank holding
company system.
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<PAGE>
9. Subject to certain limitations, acting as underwriter for credit
life insurance and credit accident and health insurance that is directly
related to extensions of credit by the bank holding company system.
10. Providing courier services of a limited character.
11. Subject to certain limitations, providing management consulting
advice to nonaffiliated banks and nonbank depository institutions.
12. Selling money orders having a face value of One Thousand Dollars
($1,000) or less, travelers' checks and United States savings bonds.
13. Performing appraisals of real estate.
14. Subject to certain conditions, acting as intermediary for the
financing of commercial or industrial income-producing real estate by
arranging for the transfer of the title, control and risk of such a real
estate project to one or more investors.
15. Providing securities brokerage services, related securities credit
activities pursuant to Federal Reserve Board Regulation T and incidental
activities such as offering custodial services, individual retirement
accounts and cash management services, if the securities brokerage services
are restricted to buying and selling securities solely as agent for the
account of customers and do not include securities underwriting or dealing
or investment advice or research services.
16. Underwriting and dealing in obligations of the United States,
general obligations of states and their political subdivisions and other
obligations such as bankers' acceptances and certificates of deposit.
17. Subject to certain limitations, providing by any means, general
information and statistical forecasting with respect to foreign exchange
markets; advisory services designed to assist customers in monitoring,
evaluating and managing their foreign exchange exposures; and certain
transactional services with respect to foreign exchange.
18. Subject to certain limitations, acting as a futures commission
merchant in the execution and clearance on major commodity exchanges of
futures contracts and options on futures contracts for bullion, foreign
exchange, government securities, certificates of deposit and other money
market instruments.
31
<PAGE>
19. Subject to certain limitations, providing commodity trading and
futures commission merchant advice.
20. Providing consumer financial counseling that involves counseling,
educational courses and distribution of instructional materials to
individuals on consumer-oriented financial management matters, including
debt consolidation, mortgage applications, bankruptcy, budget management,
real estate tax shelters, tax planning, retirement and estate planning,
insurance and general investment management, so long as this activity does
not include the sale of specific products or investments.
21. Providing tax planning and preparation advice such as strategies
designed to minimize tax liabilities and includes, for individuals,
analysis of the tax implications of retirement plans, estate planning and
family trusts. For corporations, tax planning includes the analysis of the
tax implications of mergers and acquisitions, portfolio mix, specific
investments, previous tax payments and year-end tax planning. Tax
preparation involves the preparation of tax forms and advice concerning
liability based on records and receipts supplied by the client.
22. Providing check guaranty services to subscribing merchants.
23. Subject to certain limitations, operating a collection agency and
credit bureau.
24. Acquiring and operating thrift institutions, including savings and
loan associations, building and loan associations and FDIC-insured savings
banks.
25. Operating a credit bureau, subject to certain limitations.
Issuance of Additional Securities
Because the Holding Company has authorized Common Stock substantially in
excess of the number of shares that will be issued in connection with the Plan
of Reorganization, the Board of Directors of the Holding Company will have the
flexibility to raise additional capital and to make acquisitions through the
issuance of Holding Company Common Stock without further approval by the Holding
Company's shareholders. The Holding Company shareholders will not have
preemptive rights to subscribe for additional shares. Therefore, such issuance
could result in a dilution of voting rights and book value per share as to the
Common Stock of the Holding Company. The Board of Directors of the Holding
Company has no present plans for issuing additional shares of Holding Company
Common Stock.
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<PAGE>
Acquisition of Additional Banks
The Riegle-Neal Interstate Banking and Branching Efficiency Act of 1994
permits adequately capitalized and managed bank holding companies to acquire
banks in any state. Concentration limits apply and "Community Reinvestment Act"
("CRA") evaluations by the Federal Reserve are required before acquisitions are
approved. The Act also permits interstate mergers between adequately capitalized
and managed banks, subject to concentration limits, state laws and CRA
evaluations. The Board of Directors of the Holding Company has no present plans
to acquire an additional bank but may consider such acquisitions in the future.
33
<PAGE>
DESCRIPTION OF THE BANK
History and Business
The Bank was organized in 1903 as a national banking association,
commencing operations in 1904, and is under the supervision of the Office of the
Comptroller of the Currency ("OCC"). Its principal office is located at 101
Lincoln Street, Marysville, Pennsylvania 17053-0017, and its Ridgeview Office is
located at 500 South State Road, Marysville, Pennsylvania 17053-0017.
As of September 30, 1998, the Bank had total assets of approximately
Seventy-Seven Million Seven Hundred Sixty Thousand Dollars ($77,760,000), total
equity capital of approximately Eight Million Eight Hundred Seventy-Two Thousand
Dollars ($8,872,000), total liabilities of approximately Sixty-Eight Million
Eight Hundred Eighty-Eight Thousand Dollars ($68,888,000), of which total
deposits amounted to approximately Sixty-Eight Million One Hundred Seventy-Eight
Thousand Dollars ($68,178,000).
Major classifications of loans are summarized as follows:
<TABLE>
In Thousands of Dollars
------------------------------------------------------
<CAPTION>
June 30, December 31, December 31, December 31,
1998 1997 1996 1995
<S> <C> <C> <C> <C>
Loan Classifications:
Commercial and Industrial $ 104 $ 2,600 $ 2,530 $ 1,833
Agricultural 0 0 0 0
Real Estate Mortgages (1) 43,356 39,950 39,031 36,197
Loans to Individuals 6,468 5,215 4,513 4,662
Loans to Municipal Governments 854 795 537 315
All Other Loans 78 10 5 3
Less Unearned Income (1,059) (1,024) (1,026) (999)
Less Allowance for Loan Losses (423) (428) (432) (439)
----------- ------------ ---------- ----------
Net Loans $ 49,378 $ 47,118 $ 45,158 $ 41,572
========= ========== ========== =========
</TABLE>
The Bank engages in a full-service commercial banking business, including
accepting time and demand deposits, and making secured and unsecured commercial
and consumer loans. The Bank's business is not seasonal in nature. The Bank's
deposits are insured by the Federal Deposit Insurance Corporation (the "FDIC")
to the extent provided by law.
34
<PAGE>
On November 1, 1998, the Bank had approximately Thirty (30) employees:
Twenty-four (24) full-time employees and six (6) part-time employees. The Bank
owns its Main Office.
Competition
The Bank competes actively with other area commercial banks and savings and
loan associations, many of which are larger than the Bank, as well as with major
regional banking and financial institutions headquartered in other areas of
Pennsylvania. The Bank's major competitors are located in Perry, Cumberland and
Juniata Counties, Pennsylvania. Dauphin Deposit Bank and Trust Company has a
branch in Enola, Cumberland County; PNC Bank, N.A., has branches in Duncannon
and Loysville, Perry County, and Enola, Cumberland County; The First National
Bank of Newport has its main office in Newport and a branch in Duncannon, both
in Perry County; The Bank of Landisburg has its main office in Landisburg and
branches in Blain and Shermans Dale, all in Perry County; Financial Trust
Company has a branch in New Bloomfield, Perry County; The First National Bank of
Mifflintown has its main branch in Mifflintown, Juniata County and a branch in
Ickesburg, Perry County; First National Bank of Liverpool has its main branch in
Liverpool, Perry County; and The Juniata Valley Bank has its main branch in
Mifflintown, Juniata County and a branch in Millerstown, Perry County. Deposit
deregulation has intensified the competition for deposits among banks in recent
years. The Bank, however, is generally competitive with all financial
institutions in its service area with respect to interest rates paid on time and
savings deposits, service charges on deposit accounts and interest rates charged
on loans. In terms of assets and liabilities, the Bank is smaller than many of
its major competitors.
Supervision and Regulation of the Bank
(See also "Supervision and Regulation of the Holding Company", above.)
The operations of the Bank are subject to federal and state statutes
applicable to banks chartered under the banking laws of the United States, to
members of the Federal Reserve System and to banks whose deposits are insured by
the Federal Deposit Insurance Corporation ("FDIC"). Bank operations are also
subject to regulation of the Office of the Comptroller of the Currency ("OCC"),
the Federal Reserve Board and the FDIC. The proposed reorganization will not
affect the authority of these agencies over the Bank.
The OCC has primary supervisory authority over the Bank and regularly
examines the Bank. The OCC has the authority to prevent a national bank, such as
the Bank, from engaging in an unsafe or unsound practice in conducting its
business. The Bank's Common Stock is not registered under Section 12(g) of the
Securities Exchange Act of 1934, as amended, and therefore, the Bank does not
file periodic reports with the OCC. However, if the Plan of Reorganization
receives all of the required approvals, the Holding Company may be required to
file such periodic reports under Section 15(d) of the Securities Exchange Act of
1934, as amended, with the Securities and Exchange
35
<PAGE>
Commission. See, "DESCRIPTION OF THE HOLDING COMPANY -- Supervision and
Regulation of the Holding Company".
Federal and state banking laws and regulations govern, among other things,
the scope of a bank's business, a bank's investments, a bank's reserves against
deposits, a bank's loans, interest rates, the activities of a bank with respect
to mergers and consolidations and the establishment of branches. Under
Pennsylvania law, all banks in Pennsylvania are permitted to establish or
acquire branch offices in any county of the state. National bank branches may be
established within the permitted area only after approval by the OCC. The OCC is
required to grant approval only if it finds that there is a need for banking
services or facilities such as those contemplated by the proposed branch and may
disapprove the application if the bank does not have the capital and surplus
deemed necessary by the OCC. The OCC may also disapprove the application if it
relates to the establishment of a branch in a county contiguous to the county in
which the applicant's principal place of business is located and another banking
institution that has its principal place of business in the county of the
proposed location has in good faith notified the OCC of its intention to
establish a branch in the same municipal location of the proposed branch site.
Multi-bank holding companies are permitted in Pennsylvania within certain
limitations. See section entitled "Reasons for the Proposed Reorganization -
Multi-Bank Holding Companies and Statewide Branching".
* The Federal Reserve System
The Federal Reserve System is managed through a tripartite hierarchy
headed by the Federal Reserve Board, which oversees the entire system. The
second-level of the hierarchy is the twelve Federal Reserve banks and their
branches spread throughout the nation's twelve Federal Reserve districts.
The third level in the Federal Reserve System's structure is the member
banks of each district. These banks act in concert with the Federal Reserve
banks to perform the actual operations of the Federal Reserve System,
including such functions as furnishing an elastic currency and affording
means of rediscounting commercial paper. The Federal Reserve System is at
the center of the nation's stable financial and economic system. The
Federal Reserve banks are the means through which the Federal Reserve
System effectuates its goals of maintaining financial and economic
stability.
A subsidiary bank of a bank holding company (which the Bank would
become on the Effective Date,) is subject to certain restrictions imposed
by the Federal Reserve Act on any extensions of credit to the bank holding
company or its subsidiaries, on investments in the stock or other
securities of the bank holding company or its subsidiaries and on taking
such stock or securities as collateral for loans. The Federal Reserve Act
and Federal Reserve Board regulations also place certain limitations and
reporting requirements on extensions of credit by a bank to principal
shareholders of its parent holding company, among others, and
36
<PAGE>
to related interests of such principal shareholders. In addition,
legislation and regulations may affect the terms upon which any person
becoming a principal shareholder of a holding company may obtain credit
from banks with which the subsidiary bank maintains a correspondent
relationship.
* Monetary Policy
The earnings of the Bank are affected by the policies of regulatory
authorities, including the OCC and the Federal Reserve Board. An important
function of the Federal Reserve System is to regulate the money supply and
interest rates. Among the instruments used to implement these objectives
are open market operations in United States government securities, changes
in reserve requirements against member bank deposits and limitations on
interest rates that member banks may pay on time and savings deposits.
These instruments are used in varying combinations to influence overall
growth and distribution of bank loans, investments and deposits, and their
use may also affect rates charged on loans or paid for deposits.
The Bank is a member of the Federal Reserve System and, therefore, the
policies and regulations of the Federal Reserve Board have had and will
continue to have a significant effect on deposits, loans and investment
growth, as well as the rate of interest earned and paid, and are expected
to affect the Bank's operations in the future. Neither the Holding Company
nor the Bank can predict the effect of such policies and regulations upon
the future business and earnings of the Bank.
From time to time, various types of federal and state legislation are
proposed that could result in additional regulation of, and restrictions
on, the business of the Bank. The Bank cannot predict whether any such
legislation will be adopted or how such legislation would affect the
business of the Bank. As a consequence of the extensive regulation of
commercial banking activities in the United States, the Bank's business is
particularly susceptible to being affected by federal legislation and
regulations that may increase the cost of doing business.
* Deposit Insurance
The Bank's deposits are insured by the FDIC pursuant to the system of
federal deposit insurance initially established by the Banking Act of 1933.
The Federal Deposit Insurance Act of 1950 embodies the basic authority for
the operation of the FDIC. The Depository Institutions Deregulation and
Monetary Control Act of 1980 began the phase-out of interest rate ceilings
on deposits and increased the coverage of FDIC insurance from Forty
Thousand Dollars ($40,000) to One Hundred Thousand Dollars ($100,000) per
deposit account. The
37
<PAGE>
Bank pays insurance premiums into the Bank Insurance Fund ("BIF") according
to rates established by the FDIC. The FDIC Improvement Act of 1991
("FDICIA"), enacted in part to prevent the insolvency of the deposit
insurance funds, authorized the FDIC to raise insurance premium assessments
in order to achieve and maintain an adequate level of funds. The depletion
of the deposit insurance funds was due, in part, to the failure of a large
number of financial institutions in the 1980s, and the requisite increased
deposit account coverage.
Due to the health of the banking industry, the FDIC established a new
rate schedule in 1996. The new rate schedule substantially reduces the cost
of deposit insurance for BIF insured institutions.
Although the FDIC reduced the assessment rate, the FDIC has discretion
to increase the assessment in the future in response to changes in the
economic climate of the banking industry. As a result, the future cost of
deposit insurance for the Bank is, in large part, dependent upon the extent
of future bank failures and the amount of insurance coverage provided by
the FDIC for each deposit account, neither of which are within the Bank's
control. Moreover, because the current insurance premium assessment system
differentiates between higher and lower risk institutions, with lower
premiums assessed against institutions in a lower risk category, the Bank's
future cost of deposit insurance will depend upon its riskrating. The Bank
is currently in the FDIC's lowest risk category.
* Legislation
Federal law, including the Change in Bank Control Act of 1978
("CBCA"), prohibits acquisitions of control of a bank without prior notice
to certain federal bank regulators. "Control" is defined for this purpose
as the power, directly or indirectly, to direct the management or policies
of the bank or to vote twenty-five percent (25%) or more of any class of
voting securities of a bank. Under 12 C.F.R. 303.4(a), a person who owns at
least ten percent (10%) of a class of voting securities is presumed to meet
the definition of "control" if (1) the bank has issued any class of
securities subject to the registration requirements of section 12 of the
Securities and Exchange Act of 1934; or (2) immediately after the
transaction, no other person will own a greater proportion of that class of
voting securities.
Under the Federal Deposit Insurance Act ("FDIA"), the OCC possesses
the power to prohibit institutions, such as the Bank, from engaging in any
activity that would be an unsafe and unsound banking practice and in
violation of the law. Moreover, the Financial Institutions Regulatory and
Interest Rate Control Act of 1978 ("FIRIRCA") established limits and
reporting requirements for bank insider transactions and created major
statutory provisions regarding electronic fund transfers. It generally
expanded the circumstances under which officers or directors of a bank may
be removed by the bank's federal supervisory
38
<PAGE>
agency, restricts lending by a bank to its executive officers, directors,
principal shareholders or related interests thereof, restricts management
personnel of a bank from serving as directors or in other management
positions with certain depository institutions whose assets exceed a
specified amount or which have an office within a specified geographic
area, and restricts management personnel from borrowing from another
institution that has a correspondent relationship with their bank.
Additionally, FIRIRCA requires that no person may acquire control of a
bank unless the appropriate federal supervisory agency has been given sixty
(60) days prior written notice and within that time has not disapproved the
acquisition or extended the period for disapproval. Control for purposes of
FIRIRCA, means the power, directly or indirectly, to direct the management
or policies or to vote twenty-five percent (25%) or more of any class of
outstanding stock of a financial institution or its respective holding
company. A person or group holding revocable proxies to vote twenty-five
percent (25%) or more of the outstanding stock of a financial institution
or bank holding company, such as the Holding Company, would presumably be
deemed to control the institution for purposes of FIRIRCA.
The Garn-St. Germain Depository Institutions Act of 1982 ("Garn-St.
Germain"), expanded FDIC powers to assist troubled banks, removed certain
restrictions on a bank's lending powers and liberalized its depository
capabilities. Garn-St. Germain also amended FIRIRCA (see above) by
eliminating the statutory limits on lending by a bank to its executive
officers, directors, principal shareholders or related interests thereof
and by relaxing certain reporting requirements. Garn-St. Germain, however,
also tightened FIRIRCA provisions respecting management interlocks and
correspondent bank relationships by management personnel.
Under the Community Reinvestment Act of 1977, as amended, ("CRA"), the
OCC is required to assess the record of all financial institutions
regulated by it to determine if these institutions are meeting the credit
needs of the community (including low and moderate-income neighborhoods)
which they serve and to take this record into account in its evaluation of
any application made by any such institutions for, among other things,
approval of a branch or other deposit facility, office relocation, a merger
or an acquisition of bank shares. The Financial Institutions Reform,
Recovery and Enforcement Act of 1989 ("FIRREA", see below) amended the CRA
to require, among other things, that the OCC make publicly available the
evaluation of a bank's record of meeting the credit needs of its entire
community, including low- and moderate-income neighborhoods. This
evaluation will include a descriptive rating ("outstanding,"
"satisfactory," "needs to improve," or "substantial noncompliance") and a
statement describing the basis for the rating. These ratings are publicly
disclosed.
39
<PAGE>
In April, 1995, regulators revised CRA with an emphasis on performance
over process and documentation. Under the revised rules, the five-point
rating scale is still utilized; however, the twelve (12) assessment factors
have been replaced with a three-prong test. A bank's compliance is
determined by a three-prong test whereby examiners assign a numerical score
for a bank's performance in each of three areas: lending, service and
investment. The area of lending is weighted to increase its importance in
the application of the test. The rule became effective July 1, 1995.
When rating a bank in the area of lending, regulators examine the
number and amount of loan originations, the location of where the loans
were made, and the income levels of the borrowers. Although banks, under
the revised rules, are not required to make loans in every area, if there
are apparent tracts in which there is little lending, examiners will focus
their investigations in that area.
The service prong evaluates how a bank delivers its products to the
community through branching. As with lending, banks are not required to
branch in every area, although conspicuous gaps will be investigated.
The third prong, investment in community, examines how the bank meets
the investment needs in the community within which it operates. Assessment
of investment is accomplished using a "performance context" pursuant to
which regulators meet with civic, community and bank officials in order to
determine the credit needs of the community.
Expanded Home Mortgage Disclosure Act reporting requirements were also
approved for large banks and thrifts which require reporting of census
tract data on mortgages made outside of the delineated communities. In
addition, effective March 1, 1997, institutions with assets above Two
Hundred Fifty Million Dollars ($250,000,000) are required to report their
aggregate small business loans made by geographic region.
Independent banks with total assets of less than Two Hundred Fifty
Million Dollars ($250,000,000) and bank subsidiaries with total assets of
less than Two Hundred Fifty Million Dollars ($250,000,000) that have
holding companies with total assets of less than One Billion Dollars
($1,000,000,000) will be subjected to less stringent CRA examinations.
Under the new regulation, banks will enjoy a reduction in compliance
burden. Specifically, banks are not required to keep extensive
documentation to prove that directors have participated in drafting and
review of CRA policies. A formal CRA statement does not have to be
prepared. The efforts banks make to market in low- and moderate-income
communities do not have to be documented, nor will banks have to justify
the basis for their
40
<PAGE>
community delineation or the methods utilized to determine the credit needs
of the community.
Under the Bank Secrecy Act ("BSA"), banks and other financial
institutions are required to report to the Internal Revenue Service
currency transactions of more than Ten Thousand Dollars ($10,000) or
multiple transactions of which the Bank is aware in any one day that
aggregate in excess of Ten Thousand Dollars ($10,000). Civil and criminal
penalties are provided under the BSA for failure to file a required report,
for failure to supply information required by the BSA or for filing a false
or fraudulent report.
An omnibus federal banking bill, known as the Competitive Equality
Banking Act ("CEBA"), was signed into law on August 10, 1987. Included in
the legislation were measures: (1) imposing certain restrictions on
transactions between banks and their affiliates; (2) expanding the powers
available to federal bank regulators in assisting failed and failing banks;
(3) limiting the amount of time banks may hold certain deposits prior to
making such funds available for withdrawal and any interest thereon; and
(4) requiring that any adjustable rate mortgage loan and secured by a lien
on a one- to four-family dwelling include a limitation on the maximum rate
at which interest may accrue on the principal balance during the term of
such loan. This legislation has not had a material adverse effect on the
Bank's anticipated operations or its competitive position.
The Financial Institutions Reform, Recovery and Enforcement Act of
1989 ("FIRREA") was primarily enacted to improve the supervision of savings
associations by strengthening capital, accounting and other supervisory
standards. In addition, FIRREA reorganized the FDIC by creating two deposit
insurance funds to be administered by the FDIC: the Savings Association
Insurance Fund and the Bank Insurance Fund.
FIRREA reformed real estate appraisal proceedings and the existing
supervisory/ enforcement powers and penalty provisions in connection with
the regulation of the Bank under FIRREA, civil monetary penalties are
classified into three levels, with amounts increasing with the severity of
the violation. The first tier provides for civil penalties of up to Five
Thousand Dollars ($5,000) per day for any violation of law or regulation. A
civil penalty of up to Twenty-five Thousand Dollars ($25,000) per day may
be assessed if more than a minimal loss or a pattern of misconduct is
involved. Finally, a civil penalty of up to One Million Dollars
($1,000,000) per day may be assessed for knowingly or recklessly causing a
substantial loss to an institution or taking action that results in a
substantial pecuniary gain or other benefit. Criminal penalties are
increased to One Million Dollars ($1,000,000) per violation, and up to Five
Million Dollars ($5,000,000) for continuing violations or for the actual
amount of gain or loss. These monetary penalties may be combined with
prison sentences for up to five (5) years. Management is of the opinion
that these additional reforms have not materially impacted the results of
operations of the Bank.
41
<PAGE>
The Crime Control Act of 1990 expanded the authority of federal
regulators to combat financial fraud. This act prohibited undercapitalized
banks from making golden parachute and other indemnification payments to
institution-affiliated parties. It also increased the severity of
punishment for those convicted of bank crimes, provided regulators new
procedural powers to recover assets improperly diverted from financial
institutions, and expanded the FDIC's enforcement powers.
* Regulatory Capital
The FDIC and other federal bank regulatory agencies have issued
risk-based capital guidelines which supplement leverage capital
requirements. As of December 31, 1992, the guidelines require all United
States banks and bank holding companies to maintain a minimum risk-based
capital ratio of eight percent (8%), of which at least four percent (4%)
must be in the form of common stockholders' equity. Assets are assigned to
categories with higher levels of capital required for the categories
perceived as representing greater risk. The required capital ratios
represent equity, and to the extent permitted, non-equity capital as a
percentage of total risk-weighted assets. The risk-based capital rules are
designed to make regulatory capital requirements more sensitive to
differences in risk profiles among banks and bank holding companies and to
minimize disincentives for holding liquid assets. The risk-based capital
rules have not had a material effect on the Bank's business and capital
plans.
On December 19, 1991, the Federal Deposit Insurance Corporation
Improvement Act of 1991 ("FDICIA") became law. Under FDICIA, which greatly
increased the powers of the FDIC, institutions must be classified, based on
their risk-based capital ratios, into one of five defined categories, as
illustrated below (well capitalized, adequately capitalized,
undercapitalized, significantly undercapitalized and critically
undercapitalized). As of September 30, 1998, the Bank was "well
capitalized", and the proposed reorganization will not change the Bank's
capitalization.
42
<PAGE>
Total Tier 1 Tier 1 Under a
Risk-Based Risk-Based Leverage Capital Order
Ratio Ratio Ratio or Directive
-------- ---------- -------- ------------
CAPITAL CATEGORY
Well capitalized >10.0 >6.0 >5.0 No
- - -
Adequately capitalized >8.0 >4.0 >4.0*
- - -
Undercapitalized <8.0 <4.0 <4.0*
Significantly
undercapitalized <6.0 <3.0 <3.0
Critically undercapitalized <2.0
-
* 3.0 for those banks having the highest available regulatory rating.
In the event an institution's capital deteriorates to the
undercapitalized category or below, FDICIA prescribes an increasing amount
of regulatory intervention, including: (1) the institution of a capital
restoration plan and a guarantee of the plan by a parent institution; and
(2) the placement of a hold on increases in assets, number of branches or
lines of business. If capital has reached the significantly or critically
undercapitalized levels, further material restrictions can be imposed,
including restrictions on interest payable on accounts, dismissal of
management and (in critically undercapitalized situations) appointment of a
receiver. For well capitalized institutions, FDICIA provides authority for
regulatory intervention where the institution is deemed to be engaging in
unsafe or unsound practices or receives a less than satisfactory
examination report rating for asset quality, management, earnings or
liquidity. All but well capitalized institutions are prohibited from
accepting brokered deposits without prior regulatory approval.
Under FDICIA, financial institutions are subject to increased
regulatory scrutiny and must comply with certain operational, managerial
and compensation standards to be developed by Federal Reserve Board
regulations. FDICIA also requires the regulators to issue new rules
establishing certain minimum standards to which an institution must adhere
including standards requiring a minimum ratio of classified assets to
capital, minimum earnings necessary to absorb losses and minimum ratio of
market value to book value for publicly held institutions. Additional
regulations are required to be developed relating to internal controls,
loan documentation, credit underwriting, interest rate exposure, asset
growth and excessive compensation, fees and benefits.
* Examinations and Audits
Full-scope, on site examinations are required for all FDIC-insured
institutions except institutions with assets under Two Hundred Fifty
Million Dollars ($250,000,000) which are well capitalized, well-managed and
not subject to a recent change in control every eighteen (18) months. Banks
with total assets of Five Hundred Million Dollars ($500,000,000) or more as
of the beginning of a fiscal year, are required to submit to their
supervising federal and state banking agencies a publicly available annual
audit report. The independent
43
<PAGE>
accountants of such bank shall attest to the accuracy of management's
report. The accountants shall also monitor management's compliance with
governing laws and regulations. In addition, banks with assets of Five
Hundred Million Dollars ($500,000,000) or more as of the beginning of a
fiscal year are also required to select an independent audit committee
composed of outside directors who are independent of management, to review
with management and the independent accountants the reports that must be
submitted to the bank regulatory agencies. If the independent accountants
resign or are dismissed, written notification thereof must be given to the
bank's supervising government banking agencies.
The OCC has issued new guidelines for identifying risks in
concentrated credit. In particular, the OCC now requires that all
full-scope safety and soundness examinations of national banks will include
a separate page (until now this page has been optional) which details the
types and levels of loan concentrations issued by such banks. The OCC
examiners will examine excessive amounts of credit obligations endorsed or
co-signed by related parties. Banks found to have in excessive of
twenty-five percent (25%) of their capital subject to risky loans or
non-traditional banking activities and that fail to adequately manage these
risks, could be ordered to set aside more than eight percent (8%) of their
total capital as a cushion against loss.
* Real Estate Loans
FDICIA also requires that banking agencies reintroduce loan-to-value
("LTV") ratio regulations which were previously repealed by the 1982 Act.
LTV's will limit the amount of money a financial institution may lend to a
borrower, when the loan is secured by real estate, to no more than a
percentage to be set by regulation of the value of the real estate.
A separate subtitle within FDICIA, called the "Bank Enterprise Act of
1991", requires "Truth-In-Savings" on consumer deposit accounts so that
consumers can make meaningful comparisons between the competing claims of
banks with regard to deposit accounts and products. Under this provision,
the Bank will be required to provide information to depositors concerning
the terms of their deposit accounts, and in particular, to disclose the
annual percentage yield. There are operational costs involved in complying
with the Truth-In-Savings law.
For a discussion of the Interstate Banking and Branching Act, see
section entitled "PROPOSED REORGANIZATION - Reasons for the Proposed
Organization - Interstate Banking and Branching".
The Riegle Community Development and Regulatory Improvement Act of
1994 contains provisions to encourage the private sector secondary market
for small business loans and to reduce bank regulatory burden. It also
established a Community Development Financial Institutions Fund to provide
financial and technical assistance to Community Development Financial
Institutions.
44
<PAGE>
Legal Proceedings
The nature of the Bank's business generates a certain amount of litigation
involving matters arising in the ordinary course of business. In the opinion of
management of the Bank, however, there are no proceedings pending to which the
Bank is a party or to which its property is subject, which, if determined
adversely to the Bank, would be material in relation to the Bank's undivided
profits or financial condition, nor are there any proceedings pending other than
ordinary routine litigation incident to the business of the Bank. In addition,
no material proceedings are pending or are known to be threatened or
contemplated against the Bank by government authorities or others.
Directors and Executive Officers
The following table sets forth selected information about the directors and
executive officers of the Bank. The directors are elected annually by
shareholders.
<TABLE>
<CAPTION>
Age
as of
Name and Position November 1, Director of Bank
with Bank 1998 Principal Occupation for last Five Years Since
--------- ---- ---------------------------------------- -----
<S> <C> <C>
H. Robert Asper, 63 President of Bank for 14 years before retiring
Director in 1997 1973
David M. Benfer, 71 Retired owner of Benfer's Meat Market 1983
Director
Arthur M. Feld, 56 Lawyer (Sole Proprietor) 1997
Director
John L. Hocker, 79 Retired, former garage owner (Heisley and
Director and Vice- Hocker, Inc.) 1973
Chairman
William L. Hummel, 51 President of Bank since 1997; Senior Vice-
Director, President and President prior to 1997 1983
Chief Executive Officer
Larry D. Reich, 56 Employee of Bank since 1982; currently (not director --
Senior Vice President, Senior Vice President, Cashier and Treasurer Executive Officer
Secretary and Treasurer since 1995)
Keith A. Rohrer, 48 Owner of Ford dealership; Current President
Director and Director, Maguire's Ford, Inc. and
Maguire's Ford of Hershey, Inc. 1997
John M. Schrantz, 48 Current President and Director, H. E. Rohrer,
Director Inc. and Rohrer Enterprises, Inc. (Rohrer Bus
Service) 1994
45
<PAGE>
Raymond A. Smith, 76 Retired, former insurance agent/broker 1976
Director and Assistant
Secretary
Kenneth C. Toomey, 78 Retired, former President of the Bank 1963
Director and Chairman
of the Board
Robert K. Watts, 78 Retired, former owner of local retail store 1983
Director
</TABLE>
Principal Officers of the Bank
The following table sets forth selected information about the principal
officers of the Bank, each of whom is elected by the Board of Directors for
one-year terms and each of whom holds office at the discretion of the Board of
Directors.
<TABLE>
<CAPTION>
Age as
Office and Bank Number of Shares of
Position with Held Employee Beneficially November
Name the Bank Since Since Owned (1) 1, 1998
---- -------- ----- ----- ----- -------
<S> <C> <C> <C> <C> <C>
William L. Hummel President, 1997 1967 2,100 51
Chief
Executive
Officer, Chief
Financial
Officer
Larry D. Reich Senior Vice 1995 1982 600 56
President,
Secretary and
Cashier
Kenneth C. Toomey Chairman of 1983 1953 8,300 78
the Board
- --------------------------
<FN>
(1) All shares are owned individually or jointly with a spouse unless otherwise
indicated.
</FN>
</TABLE>
46
<PAGE>
Executive Compensation
Shown below is information concerning the annual compensation for services
in all capacities to the Bank for the fiscal years ended December 31, 1997, of
those persons who were, at December 31, 1997, (i) the Chief Executive Officer,
and (ii) the four other most highly compensated executive officers of the Bank
to the extent such persons' total annual salary and bonus exceeded One Hundred
Thousand Dollars ($100,000):
<TABLE>
Summary Compensation Table
--------------------------
<CAPTION>
Long-Term Compensation
Annual Compensation Awards Payouts
(a) (b) (c) (d) (e) (f) (g) (h) (i)
Name Other
and Annual Restricted All Other
Principal Compen- Stock Option/ LTIP Compen-
Position Salary Bonus sation Award(s) SARs Payouts sation
-------- Year ($) ($) ($) ($) (#) ($) ($)
---- --- --- --- --- --- --- ---
<S> <C> <C> <C> <C> <C> <C> <C> <C>
William L. Hummel, 1997 69,000(2) 2,000 -- -- -- -- 9,752.03(3)
----
President and
Chief Executive
Officer(1)
<FN>
(1) William L. Hummel was elected President on May 27, 1997.
(2) Includes $6,000 in board fees.
(3) Includes $4,248.21 in premiums paid by the Bank for Blue Cross/Blue Shield
Health Insurance coverage and $5,503.82 in premiums paid by the Bank for
the Pension Plan, which includes life insurance.
</FN>
</TABLE>
The total cash compensation received in 1997 by the Bank's executive
officers was approximately $124,200.00.
Pension Plan
The Bank has provided a non-contributory, defined-benefit funded Pension
Plan to its full-time employees since 1954. Eligibility requirements are as
follows:
1) Minimum months of service: 12
2) Minimum age: 21
3) Maximum age: none
4) Participant enters plan on eligibility date nearest completion of
eligibility requirements.
5) Entry date: October 15
47
<PAGE>
The Pension Plan provides monthly benefits to eligible retired employees.
The monthly pension is calculated as 35% of monthly compensation and 20% of the
excess above $750. Monthly compensation is based on the average compensation of
the highest five (5) consecutive year period. Employees will be 100% vested in
their pension benefit after seven (7) years of service. The total benefit is
reduced for each year of service less than 35 years. Normal retirement age is
65. Eligibility for early retirement occurs at age 55 if employee has ten years
of participation. The Plan also provides for life insurance in the amount 100
times the monthly pension. The asset balance of the Plan as of October 15, 1997,
was $71,625.12. Total disbursements for the year ending October 15, 1997, were
$360,559.45 and total receipts were $189,480.09, including $89,744.00 in
employer contributions. The asset balance as of October 15, 1996, was
$242,704.48.
The two executive officers of the Bank, William L. Hummel and Larry D.
Reich, are participants in the Plan. As of the last valuation date, October 15,
1997, Mr. Hummel's estimated projected monthly benefit upon retirement at age 65
was $2,848.00. His retirement benefit accrued to date was $1,727.17 which was
100% vested. His insured death benefit was $284,800.
Compensation of Directors
The Board of Directors held twenty-four (24) meetings in 1997. The
Directors each receive Two Hundred and Fifty Dollars ($250.00), per meeting for
serving on the Board of Directors, plus health insurance (Blue Cross/Blue
Shield). However, two members receive Three Hundred and Fifty Dollars ($350.00)
each, per meeting, without health insurance. They do not receive additional
compensation for committee participation. The Secretary of the Board of
Directors, Mr. Larry D. Reich, receives One Thousand Two Hundred Dollars
($1,200) per year for performance of his duties as Secretary. In 1997, the Board
of Directors received an aggregate of approximately Sixty-One Thousand Six
Hundred Fifty Dollars ($61,650) for their service on the Board of Directors and
attendance at committee meetings.
48
<PAGE>
CERTAIN TRANSACTIONS
There have been no material transactions between the Bank, nor any material
transactions proposed, with any director or executive officer of the Bank, or
any associate of the foregoing persons. The Bank has engaged in and intends to
continue to engage in banking and financial transactions in the ordinary course
of business with directors and officers of the Bank and their associates on
comparable terms and with similar interest rates as those prevailing from time
to time for other customers of the Bank. Total loans outstanding from the Bank
at December 31, 1997, to the Bank's officers and directors as a group and
members of their immediate families and companies in which they had an ownership
interest of ten percent (10%) or more were $511,978.54 or approximately 6.19% of
the Bank's total equity capital. Loans to such persons were made in the ordinary
course of business, were made on substantially the same terms, including
interest rates and collateral, as those prevailing at the time for comparable
transactions with other persons, and did not involve more than the normal risk
of collectability or present other unfavorable features. Total loans to the
above described group as of the most recent practicable date, July 20, 1998,
were $552,070.60 or approximately 6.41% of the Bank's total equity capital.
49
<PAGE>
DESCRIPTION OF THE BANK'S COMMON STOCK
The Bank's Common Stock
As of September 30, 1998, the Bank's authorized Common Stock consisted of
two hundred twenty-five thousand (225,000) shares, par value Fifty Cents ($.50)
per share, of which 204,000 shares were issued and outstanding. Each share of
Common Stock is entitled to one (1) vote on all matters that may be brought
before shareholders' meetings, except that the holders of Common Stock have
cumulative voting rights in the election of directors. Cumulative voting for the
election of directors entitles each shareholder to multiply the number of votes
to which the shareholder is entitled by the total number of directors to be
elected, and the shareholder may cast the whole number of these votes for one
candidate or may distribute them among two or more candidates. As of September
30, 1998, the Bank had approximately 110 shareholders. The Bank's Common Stock
has limited preemptive subscription rights. The Bank's shares are non-assessable
(except as provided under 12 U.S.C. ss.55, relating to assessments upon
shareholders for a deficiency in paid-up capital stock; 12 U.S.C. ss.55 has not
been used for many years) and requires no sinking fund. Each shareholder is
entitled to receive dividends that may be declared by the Board of Directors,
and, in the event of liquidation, dissolution or merger, the holders will be
entitled to share pro rata according to their interests. See section entitled
"Comparison of Shareholder Rights" for a summary of the differences between the
rights of holders of the Bank's Common Stock and the rights of holders of the
Holding Company's Common Stock.
Payment of dividends is subject to the restrictions set forth in the
National Bank Act, which provides that dividends may be declared by the Board of
Directors and paid from the net profits of the Bank as the Board of Directors
shall judge expedient. Dividends may be paid only if: (1) the payment would not
impair the Bank's capital structure; (2) if the Bank's surplus is at least equal
to its common capital; (3) the dividends declared in any year do not exceed the
net profits in that year and the net profits retained in the two (2) preceding
years; (4) no losses have been sustained equal to or exceeding its undivided
profits; and (5) the Bank continues its operations at an amount greater than its
net profits deducting therefrom its losses and bad debts. In addition, under the
Federal Deposit Insurance Corporation Improvement Act (12 U.S.C. ss.1818),
dividends cannot be declared and paid if the OCC obtains a cease and desist
order because such payment would constitute an unsafe and unsound banking
practice.
The following table sets forth the dividends paid by the Bank to its
shareholders since January 1996.
50
<PAGE>
AMOUNTS OF
DIVIDENDS PAID
Regular Cash Special Cash In the
Dividend Per Share Dividend Per Share Aggregate
------------------ ------------------ ---------
Month/Year
March 1996 $ .30 $ $ 60,000
June 1996 .31 62,000
September 1996 .32 64,000
December 1996 .33 66,000
January 1997 .10 20,000
March 1997 .33 66,660
June 1997 .33 67,320
September 1997 .33 67,320
December 1997 .33 .09 85,680
March 1998 .34 69,360
June 1998 .35 71,400
September 1998 .36 73,440
Holders of Common Stock who are Pennsylvania residents are not subject to
the Pennsylvania county personal property tax on their shareholdings.
Comparative Market Prices
There has never been an organized public trading market for the Bank's
outstanding Common Stock. The Bank's Common Stock is traded over-the-counter
from time to time; as of July 31, 1998, the highest trade price known to
management for transactions of the Bank's Common Stock was $39.00 per share on
January 5, 1998. 300 shares were sold in that transaction. This sale was the
most recent sale as of July 31, 1998, in which the sale price was known. Due to
the infrequency of such trading and the fact that such trades are generally
private transactions, the Board of Directors of the Bank is unable to determine
actual trading prices on any given date. Therefore, as of June 8, 1998, the date
on which the public announcement of the proposed transaction was made, it was
unable to determine the actual trading price of the Bank's stock.
The following table compares the market value of the Bank's and Holding
Company's Common Stock prior to the public announcement of the proposed
transaction. The Bank does not have information on bid quotes. Because the
Holding Company has no operating history and was only recently formed, its stock
had no market value prior to the public announcement:
51
<PAGE>
Market Value on Date
Prior to Public Announcement
of Proposed Transaction (June 7, 1998)
Common Stock of Bank
(last known trade price: $39.00 per share)
Common Stock of Holding Company
(Holding Company not yet in existence -
no market value)
No amounts of the Bank's Common Stock are subject to outstanding options or
warrants to purchase, or securities convertible into, common equity of the Bank
or the Holding Company.
Bid price information is not available. However, the Bank does have
information regarding the trade price at which shares are sold. The following
table shows the high and low trade prices, for the Bank's Common Stock:
Trade Prices: Bank's Common Stock
(Price per share)
High Low
For Quarter Ended:
March 1996 $ 32 32
June 1996 35 35
Sept. 1996 35 35
Dec. 1996 35 35
March 1997 37 37
June 1997 37 37
Sept. 1997 37 37
Dec. 1997 37 37
March 1998 39 39
June 1998 none none
Sept. 1998 not available not available (1)
- --------
(1) The only stock transfer recorded for this period was between family members
with no amount of sale stated.
52
<PAGE>
Capitalization
Set forth below is the capitalization of the Bank at September 30, 1998,
and of the Interim Bank and the Holding Company at initial formation, and as
adjusted to reflect the consummation of the Merger.
<TABLE>
<CAPTION>
The First The First National
National Bank Interim Bank First Perry
of Marysville of Marysville Bancorp, Inc.
Prior to Merger
<S> <C> <C> <C>
Number of Shares Authorized
or to be Authorized,
Common Stock, par value
$.50 for Bank, $.25 for Interim
Bank and for Holding Company............. 225,000 2,000,000 2,000,000
Number of Shares outstanding:
Common Stock........................... 204,000 408,000 4 (2)
Capital Accounts:
Common Stock........................... 102,000 102,000 (1) 1.00 (2)
Capital Surplus........................ 640,000 20,400 (1)
Undivided Profits...................... 7,835,000
Net Unrealized Holding Gains
(Losses) on Available-for-
Sale Securities..................... 295,000 0 0
---------- --------------- --------------
Total Equity Common......................... 8,872,000 122,400 1.00
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After Merger
Number of Shares Outstanding:
Common Stock par value
$.50 for Bank, $.25 for Interim
Bank and for Holding Company.......... -- 408,000 (3) 408,000 (4)
Capital Accounts:
Common Stock par value
$.25 for Interim Bank and for
Holding Company........................ -- 102,000 102,000
Capital Surplus.......................... -- 640,000 640,000
Undivided Profits...................... -- 7,835,000 7,835,000
Net Unrealized Holding Gains
(Losses) on Available-for-
Sale Securities..................... -- 295,000 295,000
------- --------- -----------
Total Equity Common......................... 0 8,872,000 (5) 8,872,000 (6)
======= ========= =========
<FN>
(1) Represents shares issued upon the initial capitalization of the Interim
Bank for Thirty Cents ($.30) per share. Forty thousand (40,000) shares were
subscribed by the organizers of the Interim Bank and three hundred
sixtyeight thousand (368,000) shares were subscribed by First Perry
Bancorp, Inc. At the Effective Date of the Merger, the forty thousand
(40,000) shares of the organizers will be assigned to First Perry Bancorp,
Inc. at the same purchase price, Thirty Cents ($.30) per share.
(2) Represents four (4) shares issued to the incorporators of the Holding
Company for Twenty-five Cents ($.25) per share. At the Effective Date of
the Merger, these shares will be repurchased and retired by First Perry
Bancorp, Inc. at the same purchase price, Twenty-five Cents ($.25) per
share.
(3) Represents the initial forty thousand (40,000) shares issued on formation
of the Interim Bank to the organizers for Thirty Cents ($.30) per share,
and 368,000 shares which will be purchased by the Holding Company on the
Effective Date of the Merger.
(4) Represents the maximum number of shares to be issued to the holders of
Common Stock of the Bank as the result of the Merger.
(5) Total equity capital reflects the capital accounts after payment of the One
Hundred Twenty-Two Thousand Four Hundred Dollars ($122,400) dividend to the
Holding Company to repay its loan to purchase the shares that provided the
funds for the initial capitalization of the Interim Bank. This borrowing
will be through Atlantic Central Bankers Bank, Camp Hill, Pennsylvania. If
the proposed reorganization had occurred on January 1, 1997, the payment of
the dividend to repay the Holding Company' s loan would have reduced
interest income for the Bank's 1997 fiscal year by approximately $208.25.
(6) Amounts after the Merger are on a consolidated basis.
</FN>
</TABLE>
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Year 2000 Computer Problem
The following section contains forward-looking statements which involve
risks and uncertainties. The actual impact of the Year 2000 issue on the Bank
could materially differ from that which is anticipated in these forward-looking
statements as a result of certain factors identified below.
Description of the Problem
The "Year 2000 Problem" is the result of computer programs having been
written using two digits rather than four to define the applicable year. Any of
the Bank's computer systems that have date-sensitive software or date-sensitive
hardware may recognize a date using "00" as the year 1900 rather than the year
2000. This could result in a system failure or miscalculations causing
disruptions of operations, including, among other things, a temporary inability
to process transactions, generate statements, compute payments, interest or
delinquencies, or engage in similar normal business activities. In addition to
affecting information technology systems, the Year 2000 Problem affects embedded
controllers, which are microprocessors located within a piece of machinery, such
as a fax machine, power switch, elevator, or railroad switch. A microprocessor
controls some aspect of a device's operations, such as the interpretation of
instructions. Some microprocessors are programmable, while others are not.
Because of the interdependence of businesses, public utilities and other
entities, and the possible widespread nature of the Year 2000 Problem, its
extent is difficult to determine. The Year 2000 Problem could cause a
significant economic disruption. Because of their dependence on technology and
date-sensitive data, financial institutions may be particularly vulnerable. As a
result, various regulators have issued guidelines concerning the Year 2000
Problem. Also, the Bank is subject to the regulation and oversight of various
banking regulators, whose oversight includes the provision of specific
timetables, programs and guidance regarding Year 2000 issues. Regulatory
examination of the Bank's Year 2000 readiness are conducted on a quarterly
basis.
The Bank's State of Readiness
The Bank has implemented a Year 2000 Plan which began early in 1998 with
the formation of a committee consisting of management and board members to
monitor the problem and to establish a plan of action, following the guidelines
contained in the series of Federal Financial Institutions Examinations Council's
Interagency Guidelines. Such plan called for evaluation and remediation of both
the Bank's own computer systems and controllers and for evaluation and action
regarding the Year 2000 readiness of certain third parties, namely, those third
parties from whom the Bank obtains services and supplies.
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1. The Bank's Systems and Electronic Equipment: By June 30, 1998, the Bank
had already completed both the evaluation and remediation phases for its own
computer systems and electronic equipment which may house microprocessors. The
Bank modified or replaced portions of its software and hardware so that its
computer systems will properly use dates beyond December 31, 1999. The Bank
presently believes that as a result of modifications to existing software and
hardware and conversions to new software and hardware, the Year 2000 Problem can
be mitigated. The Bank is now in a validation phase in which it will continue to
assess and further test its computer software and hardware to ensure Year 2000
compliance. The Independent Consultants Associates, located in Shrewsbury,
Pennsylvania, have made an independent audit of the Bank's hardware and
determined that it is Year 2000 ready. Even though all test information
indicates that the Bank's system is fully Year 2000 compliant, if the system
were not compliant, Year 2000 issues could have a material adverse impact on the
operations of the Bank. The Bank has also taken inventory of its devices which
use microprocessors, and at present no devices have been found which could
significantly adversely impact the Bank if not Year 2000 compliant.
2. Third Parties: Other businesses which are not Year 2000 compliant may
adversely impact the Bank, even if the Bank's own systems are Year 2000
compliant. For example, the Bank could lose business from a large commercial
customer which suffers business losses related to the Year 2000. Therefore, the
Bank has formally contacted its vendors and service providers and large
commercial customers to determine the extent to which the Bank is vulnerable to
those third parties' failure to resolve their own Year 2000 issues.
Approximately ninety-five percent (95%) of the Bank's vendors and service
providers responded to the Bank's inquiries. These entities indicated that they
are Year 2000 compliant or taking steps to become Year 2000 compliant.
Additional inquiries have been sent to those vendors who did not respond. If a
particular vendor or service provider continues to refrain from responding, and
if such vendor or service provider is deemed to be significant, the Bank will
treat such failure to respond as a response that the vendor is not Year 2000
compliant and will make appropriate contingency plans by June 30, 1999.
Similarly, the Bank has contacted customers which it considers significant,
both in terms of size of deposits and loans. The customers contacted are aware
of the Year 2000 Problem and have either taken steps to become compliant or are
in the process of taking the necessary steps. The Bank will continue to monitor
the situation with regard to its vendors, service providers and customers and
will take appropriate actions as further information is obtained. The Bank has
not received any warranties from its vendors and service providers and is not
aware that it possesses any right of redress with respect to any such third
parties.
Costs to Address the Year 2000 Problem
The costs for modifications and conversion projects thus far are
approximately $30,000, the major component of which was the purchase of new
computer equipment and software, including test equipment. These costs have been
paid by the Bank as a normal expense and have not had, nor are they expected to
have, a material effect on the results of operations of the Bank. Additional
costs are expected to be minimal.
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The Risks of the Bank's Year 2000 Issues
The worst case scenario for the Bank is that the Year 2000 Problem could
result in an inability to operate the Bank using any computer-related systems,
services, or products for an indefinite period, as well as a loss of business
from customers affected by the Year 2000 Problem. Many calculations which rely
on date-sensitive information, such as interest and payment calculations, could
become unreliable or inoperable, and the Bank could lose the ability to process
transactions and perform other basic banking functions. Also, the Bank could
lose access to its normal supply of products and services, and its borrowers
could suffer losses affecting their creditworthiness. A basic break-down in
communications or transportation is also possible and would, of course, affect
the Bank as well as other businesses.
Contingency Plans
The Bank has developed a specific contingency plan to revert to a
handwritten manual system for operating if necessary so that it will be able to
process transactions and perform other basic banking functions. As part of the
necessary preparation for this plan, the Bank has ensured that it has all
necessary information and data in document form. In the case of failure of
correspondent banks' check-clearing system, the Bank plans to clear checks
directly through the Federal Reserve. The Bank does not have any other
contingency plans at present, nor does it have specific plans to develop other
contingency plans. However, it will continue to monitor the Year 2000 situation
and to develop additional contingency plans if it is deemed necessary and
appropriate to do so.
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<PAGE>
DESCRIPTION OF THE HOLDING COMPANY'S STOCK
Common Stock
The Holding Company is authorized to issue Two Million (2,000,000) shares
of Common Stock, par value Twenty-five Cents ($.25) per share, of which
approximately 408,000 thousand shares would be outstanding if the reorganization
had been consummated as of September 30, 1998. The remaining 1,592,000 thousand
authorized but unissued shares of Common Stock may be issued by the Board of
Directors without further shareholder approval. Issuance of these shares could
cause a dilution of the book value of the stock and the voting power of present
shareholders. The holders are entitled to one (1) vote per share on all matters
presented to them and have no cumulative voting rights in the election of
directors.
The Common Stock has no preemptive, subscription, or conversion rights,
redemption or repurchase provisions. These shares are non-assessable and require
no sinking fund. Each shareholder is entitled to receive dividends that may be
declared by the Board of Directors and to share pro rata in the event of
dissolution or liquidation. For information concerning dividend restrictions,
see sections entitled "Description of the Bank's Stock - The Bank's Common
Stock" and "Comparison of Shareholder Rights".
In some jurisdictions, shares of common stock of a general business
corporation, such as the Holding Company, may be treated differently from shares
of stock of a bank, and therefore, may be the subject of personal property
taxation.
Legal Opinion
Shumaker Williams, P.C., 3425 Simpson Ferry Road, Camp Hill, Pennsylvania
17011, Special Counsel to the Bank and the Holding Company, has delivered an
opinion to the effect that the shares of Common Stock of the Holding Company to
be issued in connection with the reorganization will be, when issued and
delivered pursuant to the Plan of Reorganization and Plan of Merger, fully paid
and non-assessable by the Holding Company.
Anti-Takeover Provisions
Under the Pennsylvania Business Corporation Law of 1988, as amended
("BCL"), the Articles of Incorporation and By-laws of the Holding Company, there
are nine (9) provisions that may be deemed to be "anti-takeover" in nature that
will be immediately applicable. Two of these provisions are: the authorization
of two million (2,000,000) shares of Common Stock and the lack of preemptive
rights for shareholders to subscribe to purchase additional shares of stock on a
pro rata basis. The additional shares of Common Stock and the elimination of
preemptive rights to such stock were authorized for the purpose of providing the
Board of Directors of the Holding Company with as much
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<PAGE>
flexibility as possible to issue additional shares, without further shareholder
approval for proper corporate purposes, including financing, acquisitions, stock
dividends, stock splits, employee incentive plans and other similar purposes.
However, these additional shares may also be used by the Board of Directors (if
consistent with its fiduciary responsibilities) to deter future attempts to gain
control over the Holding Company.
The Bank is not permitted by the national banking laws to elect directors
for staggered terms (a "Classified Board"). Provisions for a Classified Board,
however, are included in the By-Laws of the Holding Company. The Board of
Directors believes that a Classified Board will help to assure continuity and
stability of corporate leadership and policy. In addition, a Classified Board
will help to moderate the pace of any change in control of the Board of
Directors by extending the time required to elect a majority of the directors to
at least two successive Annual Meetings. However, since this extension of time
also tends to discourage a tender offer or takeover bid, this provision may also
be deemed to be "anti-takeover" in nature. In addition, a Classified Board makes
it more difficult for a majority of the shareholders to change the composition
of the Board of Directors even though this may be considered desirable for them.
Section 9.3 of the By-laws of the Holding Company provides that at the 1999
Annual Meeting of Shareholders of the Holding Company, the shareholders shall
elect ten (10) directors as follows: Four (4) Class A directors to serve until
the 2000 Annual Meeting of Shareholders, three (3) Class B directors to serve
until the 2001 Annual Meeting of Shareholders, and three (3) Class C directors
to serve until the 2002 Annual Meeting of Shareholders. Each class shall be
elected in a separate election. At each Annual Meeting of Shareholders
thereafter, successors to the class of directors whose term shall then expire
shall be elected to hold office for a term of three (3) years, so that the term
of office of one class of directors shall expire in each year. Vacancies which
occur during the year shall be filled by the Board of Directors to serve for the
remainder of the full term.
Another provision that could be considered "anti-takeover" in nature is the
elimination of cumulative voting. Cumulative voting entitles each shareholder to
as many votes as equal the number of shares owned by him multiplied by the
number of directors to be elected. A shareholder may cast all of these votes for
one candidate or distribute them among any two or more candidates. Cumulative
voting is required under the national banking laws, but is optional under the
Pennsylvania Business Corporation Law. The Board of Directors did not provide
for cumulative voting in the Articles of Incorporation of the Holding Company
because it believes that each director should represent and act in the interest
of all shareholders and not any special group of shareholders. The absence of
cumulative voting means that a majority of the outstanding shares can elect all
the members of the Board of Directors. Although the Bank has (and the Holding
Company after the reorganization will have) approximately 110 shareholders, the
Board of Directors recognizes that the absence of cumulative voting makes it
more difficult to gain representation on the Board of Directors.
The Holding Company's By-laws may be amended by the affirmative vote of at
least seventy-five percent (75%) of the outstanding shares of Common Stock at
any regular or special meeting or by a majority vote of the members of the Board
of Directors, subject to the affirmative vote of at least seventy-five percent
(75%) of the shares to change any amendment to the By-laws previously approved
by the Board of Directors. These provisions were included in the By-laws of the
Holding
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<PAGE>
Company in order to ensure that any extraordinary corporate transaction could be
effected only if it received a clear mandate from the shareholders and/or the
directors.
Other provisions that could be considered "anti-takeover" are the
requirements in the Holding Company's Articles of Incorporation that the
affirmative vote of the holders of at least seventy-five percent (75%) of the
outstanding shares of Common Stock of the Holding Company is required to approve
any merger, consolidation, dissolution or liquidation of the Holding Company or
the sale of all or substantially all of its assets; or the holders of at least
fifty-one percent (51%) of the outstanding shares of Common Stock of the Holding
Company when at least eighty percent (80%) of the Board of Directors have
approved such transaction. These provisions were included in the Articles of
Incorporation of the Holding Company in order to ensure that any extraordinary
corporate transaction could be effected only if it receives a clear mandate from
the shareholders. However, these provisions could give the Holding Company's
management a veto power over certain acquisitions regardless of whether any such
acquisition is desired by or beneficial to a majority of the shareholders and
thereby assist management in retaining their present positions. Also, these
provisions could give the holders of a minority of the Holding Company's
outstanding shares a veto power over any merger, consolidation, dissolution or
liquidation of the Holding Company, the sale of all or substantially all of its
assets even if management and/or a majority of the shareholders believes such
transaction to be desirable and beneficial. Absent such provisions in the
Holding Company's Articles of Incorporation, the affirmative vote of at least a
majority of the Holding Company's shares outstanding and entitled to vote
thereon would be required to approve any merger, consolidation, dissolution,
liquidation, and the sale of all of its assets. Upon the consummation of the
reorganization, it is expected that the executive officers and directors of the
Holding Company will own an aggregate of 90,654 shares, or 22.22% of the Holding
Company's outstanding stock.
Another anti-takeover provision in the Articles of Incorporation enables
the Board of Directors to oppose a tender offer on the basis of factors other
than economic benefit to shareholders, such as the impact the acquisition of the
Holding Company would have on the community; the effect of the acquisition upon
shareholders, employees, depositors, suppliers and customers; and the reputation
and business practices of the tender offeror. This provision was included in the
Articles of Incorporation of the Holding Company to permit the Board of
Directors to recognize the responsibilities to these constituent groups and to
the Holding Company and its subsidiaries and the communities that they serve.
An additional anti-takeover provision is the requirement that only those
shareholders entitled to cast at least forty percent (40%) of the votes that all
shareholders are entitled to cast at a particular meeting shall be entitled to
call special meetings of the shareholders. This provision appears in both the
Articles of Incorporation and the By-laws of the Holding Company. Currently, the
Bank provides that three or more shareholders entitled to cast at least
twenty-five percent (25%) of the votes that all shareholders are entitled to
cast may call a special meeting. Increasing the threshold percentage makes it
more difficult for a hostile acquiror with a minority of shares to influence the
direction and management of the Holding Company and to disrupt the business of
the Holding Company between annual meetings and provides a greater time for
consideration of any shareholder proposal. The Board
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<PAGE>
of Directors, the Chairman, the President or the Executive Committee may,
however, call a special meeting pursuant to the Holding Company's By-laws.
A final anti-takeover provision in the Articles of Incorporation of the
Holding Company requires that certain anti-takeover provisions in the Articles,
i.e., the voting requirements for approval of mergers, the prohibition of
cumulative voting rights, the requirements for calling a special meeting, the
ability of the Board of Directors to consider non-economic factors in opposing a
tender offer, and the prohibition of shareholders' preemptive rights, may only
be amended by the affirmative vote of the holders of at least seventy-five
percent (75%) of the outstanding shares of Common Stock of the Holding Company.
Anti-takeover Provisions Applicable to Registered Corporations
In addition to the provisions already described, under the Pennsylvania
Business Corporation Law of 1988 ("BCL"), as amended, there are seven additional
provisions that may be deemed to be "anti-takeover" in nature. These provisions
are related to corporations that have their securities registered with the
Securities and Exchange Commission ("SEC") under Section 12 of the Securities
Exchange Act of 1934, as amended ("Registered Corporations"). The Holding
Company is required to register its stock with the SEC, if at any calendar
year-end the Holding Company has five hundred (500) or more shareholders of
record and assets of at least Five Million Dollars ($5,000,000). It is not
anticipated that the Holding Company will have, at the Effective Date of the
Consummation of the Plan of Reorganization and Plan of Merger, five hundred
(500) or more shareholders of record. However, upon obtaining the five hundred
shareholder threshold, a Registration Statement will be filed with the SEC to
register the Holding Company's Common Stock under the Securities and Exchange
Act of 1934. On the Effective Date of that Registration Statement, the
Corporation will obtain Registered Corporation Status under the BCL and the
following statutory provisions will be applicable to the Holding Company.
Two of these statutory provisions eliminate the rights of the shareholders
of Registered Corporations to call a Meeting of shareholders and to propose an
amendment to the Articles of Incorporation of the Holding Company. One effect of
these provisions will be to prevent the calling of a special meeting of
shareholders for the purpose of considering a merger, consolidation or other
corporate combination which does not have the approval of a majority of the
members of the Board of Directors. Therefore, such a provision may have the
effect of making the Holding Company less attractive as a potential takeover
candidate by depriving shareholders of the opportunity to initiate special
meetings at which a possible business combination might be proposed. (There is
an important exception, however, in that an interested shareholder who owns at
least twenty percent (20%) of the votes that all shareholders would be entitled
to cast in an election of directors of the corporation may generally call a
special meeting for the purpose of approving a business combination within five
years after the interested shareholder's acquisition date.)
In the opinion of the Board of Directors, the elimination of these two
rights under the BCL for Registered Corporations will discourage attempts by
shareholders to disrupt the business of the
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<PAGE>
Holding Company between Annual Meetings of the shareholders by calling a special
meeting. Furthermore, these provisions will provide a greater time for
consideration of any shareholder proposal to the extent that his, her or its
proposal must be deferred until the next Annual Meeting of shareholders and must
comply with certain notice requirements and proxy solicitation rules in advance
thereof. These BCL provisions would not affect the calling of a special meeting
by the Chairman of the Board or by a majority of the members of the Board of
Directors or of its Executive Committee if, in their judgment, there are matters
to be acted upon which are in the best interests of the Holding Company and its
shareholders.
Another BCL provision to which the Holding Company will be subject, upon
obtaining Registered Corporation status, assures that all shareholders will
receive the "fair value" for their shares as the result of a "control
transaction." "Fair Value" means not less than the highest price paid per share
by a controlling person or group at any time during the 90-day period ending on
and including the date of the control transaction plus an increment representing
any value, including, without limitation, any proportion of any value payable
for acquisition of control of the Holding Company, that may not be reflected in
such price. "Control Transaction" means the acquisition by a person who has, or
a group of persons acting in concert that has, voting power over voting shares
of the Holding Company that would entitle the holders thereof to cast at least
twenty percent (20%) of the votes that all shareholders would be entitled to
cast in an election of directors of the Holding Company. After the occurrence of
a Control Transaction, any shareholder may, within a specified time period, make
written demand on the person or group controlling at least twenty percent (20%)
of the voting power of the shares of the Holding Company for payment in an
amount equal to the Fair Value of each voting share as of the date on which the
Control Transaction occurs.
It has become a relatively common practice in corporate takeovers to pay
cash to acquire controlling equity in an company and then to acquire the
remaining equity interest in the company by paying the balance of the
shareholders a price for their shares which is lower than the price paid to
acquire control or is in a less desirable form of consideration, frequently, in
securities of the purchaser that do not have an established trading market at
the time of issue. The Board of Directors considers such "two-tier pricing"
tactics to be unfair to the Holding Company's shareholders. By their very
nature, such tactics tend (and are designed) to cause concern on the part of
shareholders that if they do not act promptly, they risk either being relegated
to the status of minority shareholders in a controlled company or being forced
to accept a lower price for all of their shares. Thus, two-tier pricing unduly
pressures shareholders into selling as many of their shares as quickly as
possible, either to the purchaser or in the open market, without having genuine
opportunity to make a considered investment choice between remaining a
shareholder of the company or disposing of their shares. Moreover, such sales in
turn facilitate the purchaser's acquisition of a sufficient interest in the
company and thereby enables the purchaser to force the exchange of remaining
shares for a lower price in a Business Combination. (See discussion below).
While the Fair Price provision in the BCL is designed to help assure fair
treatment of all shareholders vis-a-vis other shareholders in the event of a
takeover, it is not the purpose of the Fair Price provision to assure that
shareholders will receive a premium price for their shares in a takeover.
Accordingly, the Fair Price provision would not preclude the Board of Directors'
opposition to any
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<PAGE>
future takeover proposal which it believes not to be in the best interests of
the Holding Company and its shareholders, whether or not such a proposal
satisfies the minimum price, form of consideration and procedural requirements
of the Fair Price provision under the BCL.
Another provision under the BCL relates to a "Business Combination"
involving a Registered Corporation. Business Combination means any one of the
following transactions involving an "Interested Shareholder": (1) a merger of
consolidation of the Holding Company with an Interested Shareholder or any other
corporation which is, or after the merger or consolidation would be, an
affiliate or associate of the Interested Shareholder; (2) a sale, lease,
exchange, mortgage, pledge, transfer or other disposition to or with the
Interested Shareholder or any affiliate or associate of such Interested
Shareholder of the assets of the Holding company or any subsidiary of the
Holding Company having an aggregate market value equal to ten percent (10%) or
more of the consolidated assets, of all outstanding shares or of the
consolidated earning power and net income, of the Holding Company; (3) the
issuance or transfer by the Holding company or any subsidiary of any shares of
the Holding Company or any subsidiary which has an aggregate market value at
least equal to five percent (5%) of the aggregate market value of all such
outstanding shares to an Interested Shareholder or any affiliate or associate;
(4) the adoption of any plan for the liquidation or dissolution of the Holding
company proposed by, or pursuant to any agreement with, the Interested
Shareholder or any affiliate or associate; (5) a reclassification of securities
or recapitalization of the Holding Company or any merger of consolidation of the
Holding company with any subsidiary of the Holding Company or any other
transaction proposed by, or pursuant to any agreement with, the Interested
Shareholder or any affiliate or associate, which has the effect, directly or
indirectly, of increasing the proportionate share of the outstanding shares of
the Holding Company owned by the Interested Shareholder; or (6) the receipt by
the Interested Shareholder or any affiliate or associate of the benefit,
directly or indirectly, of any loans, advances, guarantees, pledges or other
financial assistance or any tax credits or other tax advantages provided by or
through the Holding Company. An "Interested Shareholder" is any person that is
the beneficial owner, directly or indirectly of shares entitling that person to
cast at least twenty percent (20%) of the votes that all shareholders would be
entitled to cast in an election of directors of the Holding company.
The Holding Company shall not engage in a Business Combination with an
Interested Shareholder other than: (1) a Business Combination approved by the
Board of Directors prior to the date on which the Interested Shareholder
acquires at least twenty percent (20%) of the shares ("Share Acquisition Date")
or where the purchase of shares by the Interested Shareholder has been approved
by the Board of Directors of the Holding Company; (2) a Business Combination
approved by a majority of the votes that all shareholders would be entitled to
cast not including those shares held by the Interested Shareholder, at a meeting
called for such purpose no earlier than three months after the Interested
Shareholder became, and if at the time of the meeting the Interested Shareholder
is, the beneficial owner, directly or indirectly, of shares entitling the
Interested Shareholder to cast at least eighty percent (80%) of the votes that
all shareholders would be entitled to cast in an election of Directors of the
Holding Company if the Business Combination satisfies certain minimum conditions
(see discussion below); (3) a Business Combination approved by the affirmative
vote of all of the shareholders of the outstanding shares; (4) a Business
Combination approved by a majority of the votes that all shareholders would be
entitled to cast not including those shares beneficially owned by
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the Interested Shareholder at a meeting called for such purpose no earlier than
five years after the Interested Shareholder's Share Acquisition date; and (5) a
Business Combination approved at a shareholders' meeting called for such purpose
no earlier than five years after the Interested Shareholder's Share Acquisition
Date and that meets certain minimum conditions (see discussion below).
The certain minimum conditions discussed in Business Combinations above
generally require that the aggregate amount of the cash and the market value of
consideration other than cash (such as stock, bonds or debentures) to be
received per share by the shareholders of the Holding Company be at least equal
to the highest per share price paid by the Interested shareholder at a time when
the Interested Shareholder was the beneficial owner of shares entitling him to
cast at least five percent (5%) of the votes that all shareholders would be
entitled to cast in an election of directors: (A) Business Combination or (B) in
the transaction in which the Interested Shareholder became an Interested
Shareholder, whichever is higher; plus, in either situation, interest compounded
annually from the earlier date on which the highest per-share acquisition price
was paid through the consummation date at the rate of 1-year United States
Treasury obligations from time to time in effect less the aggregate amount of
any cash dividends paid and the market value of any dividends paid other than
cash.
The above BCL provision relating to Business Combinations is designed to
help assure that if, despite the Holding Company's best efforts to remain
independent, the Holding Company is nevertheless taken over, each shareholder
will be treated fairly vis-a-vis every other shareholder and that arbitrageurs
and professional investors will not profit at the expense of the Holding
Company's long-term public shareholders. It should be noted that while the
Business Combination provision is designed to help assure fair treatment of all
shareholders vis-a-vis other shareholders in the event of a takeover, it is not
the purpose of the Business Combination provision to assure that shareholders
will receive premium price for their shares in a takeover. Accordingly, the
Board of Directors is of the view, that the Business Combination provision would
not preclude the Board of Director's opposition to any future takeover proposal
which it believes not to be in the best interests of the Holding Company and its
shareholders, whether or not such a proposal satisfies the requirements of the
Business Combination provision or Fair Price provision or both.
Subchapter G of Chapter 25 of the BCL also applies to Registered
Corporations. Under Subchapter G, the acquisition of shares that increase the
acquiror's control of the corporation above 20%, 33 1/3% or 50% of the voting
power able to elect the Board of Directors cannot be voted until a majority of
disinterested shareholders approve the restoration of the voting rights of those
shares in two separate votes: (1) all disinterested shares of the corporation
and (2) all voting shares of the corporation. Voting rights which are restored
by shareholder approval will lapse if any proposed control-share-acquisition
which is approved is not consummated within 90 days after shareholder approval
is obtained. Furthermore, control-shares that are not accorded voting rights or
whose rights lapse will regain such voting rights on transfer to another person
who is not an affiliate of the acquiror's. If they constitute control-shares for
the transferee, this subchapter must be applied to that person as well. If the
acquiror's does not request a shareholder meeting to approve restoration of
voting rights within 30 days of the acquisition or if voting rights are denied
by the shareholders or if
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<PAGE>
they lapse, the corporation may redeem the control shares at the average of the
high and low price on the date of the notice of redemption.
Subchapter H of Chapter 25 of the BCL likewise applies to Registered
Corporations. Under Subchapter H, a control person (a person who owns shares
with 20% or more voting power) must disgorge to the corporation any profits from
the disposition of any equity securities if the disposition occurs within 18
months of becoming a control person, and the security was acquired 24 months
before to 18 months after becoming a control person. This provision seeks to
prevent speculative takeover attempts.
Finally, under the BCL, a Registered Corporation has the express authority
to treat shareholders on a disparate basis and therefore may take advantage of
"poison pills". "Poison pills" generally consist of a shareholder rights plan
whereby a corporation gives its shareholders the right to buy common stock upon
the occurrence of certain specified events, such as a merger, thereby decreasing
the value of the acquiror's holdings and the acquiror's percentage of ownership.
THE OVERALL EFFECT OF THESE PROVISIONS MAY BE TO DETER A FUTURE OFFER OR
OTHER MERGER OR ACQUISITION PROPOSAL THAT A MAJORITY OF THE SHAREHOLDERS MIGHT
VIEW TO BE IN THEIR BEST INTERESTS AS THE OFFER MIGHT INCLUDE A SUBSTANTIAL
PREMIUM OVER THE MARKET PRICE OF THE HOLDING COMPANY'S COMMON STOCK AT THAT
TIME. IN ADDITION, THESE PROVISIONS MAY HAVE THE EFFECT OF ASSISTING THE HOLDING
COMPANY'S CURRENT BOARD OF DIRECTORS IN RETAINING ITS POSITION AND PLACING IT IN
A BETTER POSITION TO RESIST CHANGES THAT THE SHAREHOLDERS MAY WANT TO MAKE IF
DISSATISFIED WITH THE CONDUCT OF THE HOLDING COMPANY'S BUSINESS.
A vote in favor of the Plan of Reorganization and Plan of Merger is a vote
in favor of the anti-takeover provisions contained in the Holding Company's
Articles and By-laws and under the BCL.
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DIVIDENDS
The Bank has paid continuous quarterly cash dividends since 1996, and
continuous semi-annual cash dividends for over fifteen years. It is the present
intention of the Holding Company's Board of Directors to retain the dividend
policy of providing for a quarterly dividend; however, further dividends must
necessarily depend upon earnings, financial condition, appropriate legal
restrictions and other factors relevant at the time the Board of Directors of
the Holding Company considers dividend policy. Cash available for dividend
distribution to shareholders of the Holding Company must initially come from
dividends paid by the Bank to the Holding Company. Therefore, the restrictions
on the Bank's dividend payments are directly applicable to the Holding Company.
See sections entitled "DESCRIPTION OF THE BANK'S COMMON STOCK - The Bank's
Common Stock" and "COMPARISON OF SHAREHOLDER RIGHTS".
Under the BCL, the Holding Company may not pay a dividend if, after giving
effect thereto: (1) the Holding Company would be unable to pay its debts as they
become due or (2) the Holding Company's total assets would be less than its
total liabilities plus an amount needed to satisfy any preferential rights of
shareholders. Total assets and liabilities shall be determined by the Board of
Directors, which may base its determination on one or more of the following: (i)
the book value of the assets and liabilities of the Holding Company, as
reflected on its books and records; (ii) unrealized appreciation and
depreciation of the assets of the Holding Company; (iii) the current value of
the assets and liabilities of the corporation, either valued separately or
valued in segments or as an entirety as a going concern; or (iv) any other
method that is reasonable in the circumstances.
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COMPARISON OF SHAREHOLDER RIGHTS
One result of the consummation of the proposed reorganization is that
shareholders of the Bank, whose rights are presently governed by the National
Bank Act, will become shareholders of the Holding Company, and their rights in
the future will be governed by the Pennsylvania Business Corporation Law of
1988, as amended ("BCL"). Another result is that the Articles of Incorporation
and By-laws of the Holding Company differ in several aspects from those of the
Bank.
The following table compares the rights of shareholders of the Bank with
the rights of shareholders of the Holding Company. This table is qualified by
the more detailed information appearing elsewhere in this Proxy
Statement/Prospectus and in the exhibits hereto and is not intended to be an
exhaustive comparison.
<TABLE>
<CAPTION>
The Holding Company's
The Bank's Common Stock Common Stock
<S> <C> <C>
Authorized and Outstanding Two Hundred Twenty-Five Two million (2,000,000)
Thousand (225,000) shares, shares, par value Twenty-
par value Fifty Cents ($.50) five Cents ($.25) per share,
per share, authorized; of authorized; of which
which 204,000 were 408,000 shares would be
outstanding on September outstanding if the
30, 1998 reorganization were
effected on September 30,
1998
Voting One (1) vote per share with One (1) vote per share with
cumulative voting for no cumulative voting for
directors directors
Preemptive Rights Limited Preemptive rights to No preemptive rights to
subscribe for additional subscribe for additional
shares on a pro rata basis shares on a pro rata basis
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<PAGE>
Dividends As declared by the Board of As declared by the Board
Directors; may be paid only of Directors; the Bank's
if it would not impair the dividend restrictions apply
Bank's capital structure, if indirectly to the Holding
the Bank's surplus is at least Company as cash available
equal to its common capital for dividend distributions
and if the dividends declared will initially come from
in any year do not exceed the dividends paid to the
total of net profits in that Holding Company by the
year combined with Bank. In addition, the
undivided profits of the Holding Company may not
preceding two years less any pay a dividend if, after
required transfers to surplus, giving effect thereto: (1)
if no losses have been the Holding Company
sustained equal to or would be unable to pay its
exceeding its undivided debts as they become due
profits, and if the Bank or (2) the Holding
continues its operations at an Company's total assets
amount greater than its net would be less than its total
profits deducting therefrom liabilities plus the amount
its losses and bad debts needed to satisfy any
preferential rights of
shareholders
Amendment of By-laws Approval by a majority vote Approval by the
of the Board of Directors, affirmative vote of the
subject to the power of holders of at least seventy-
shareholders to change such five percent (75%) of the
action by the affirmative outstanding shares, or by a
vote of the holders of a majority vote of the Board
majority of the outstanding of Directors subject to the
shares; or the affirmative power of shareholders to
vote of the holders of at least change such action of the
fifty percent (50%) of the Board of Directors by the
outstanding shares affirmative vote of the
holders of seventy-five
percent (75%) of the
outstanding shares
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<PAGE>
Shareholder Action
(a) Mergers, Consolidations Approval by a vote of at Approval by vote of at
least sixty-six and two-thirds least seventy-five percent
percent (66 2/3%) of (75%) of outstanding
outstanding shares shares; or approval of at
least fifty-one
percent (51%) of
outstanding shares
if such transaction
has received the
prior approval of at least
eighty percent (80%)
of the Board of Directors.
(b) Liquidation, Sales of Approval by a vote of at Approval by vote of at
Substantially All Assets least sixty-six and two-thirds least seventy-five percent
percent (66 2/3%) of (75%) of outstanding
outstanding shares. shares; or approval of at
least fifty-one percent (51%)
of outstanding shares
if such transaction has
received the prior approval
of at least eighty percent (80%)
of Directors.
(c) Special Shareholder Upon request by the Board Upon request by the
Meetings of Directors or three or more Chairman of the Board, the
shareholders owning in the President, a majority of the
aggregate not less than Board of Directors, or of
twenty-five percent (25%) of its Executive Committee,
the outstanding shares or by one or more
shareholders owning in the
aggregate not less than
forty percent (40%) of the
outstanding shares
Increase in Capital Stock Approval by vote of at least Approval by vote of a
sixty-six and two-thirds majority of the directors
percent (66 2/3%) of
outstanding shares
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<PAGE>
Amendment of Articles of Approval by vote of at least Approval by vote of
Incorporation sixty-six and two-thirds majority of the votes cast
percent (66 2/3%) of except for certain Anti-
outstanding shares takeover provisions, then
75%.
Repurchase of Shares Cannot reduce or retire any Stock can be repurchased
part of its stock without prior if, after giving effect
regulatory approvals thereto: (1) the Holding
Company would still be
able to pay its debts as
they become due or (2) the
Holding Company's total assets
would still be more than its
total liabilities plus an amount
needed to satisfy any preferential
rights of shareholders; no more than
ten percent (10%) of the outstanding
shares can be repurchased in any
twelve (12) month period without
prior regulatory approval.
Terms of Directors Directors serve one-year Directors serve staggered
terms. Elections for entire terms; board is
Board of Directors occur "classified". Eventually,
annually. all Directors shall serve
three-year terms, with
approximately one-third of
the Directors coming up for
election each year.
</TABLE>
The Articles of Incorporation of the Holding Company authorize the Board of
Directors to oppose a tender offer for shares of the Holding Company on the
basis of factors other than economic benefit to shareholders such as: the impact
of the acquisition upon the community; the effect of the acquisition upon
employees, depositors, shareholders and customers; and the reputation and
business practices of the tender offeror. Consideration of these types of
factors is authorized for corporations by Section 1715 of the Pennsylvania
Business Corporation Law of 1988, which does not apply to banks. Also, the
Articles of Incorporation of the Holding Company prohibit cumulative voting for
directors, and its By-laws provide for three (3) year staggered terms of
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office for directors (a "Classified Board"). Under national banking laws, the
Bank is not permitted to prohibit cumulative voting or to have a Classified
Board. See section entitled "DESCRIPTION OF THE HOLDING COMPANY'S STOCK -
Anti-Takeover Provisions".
In some jurisdictions, shares of common stock of a business corporation
such as the Holding Company may be treated differently from shares of stock of a
banking institution for legal investments for institutions and fiduciaries, and
as the subject of personal property taxation. Thus, shareholders of the Bank may
desire to determine whether the status of their shares under local or state laws
applicable to them would be changed upon the effective date of the Merger. Under
Pennsylvania law, a fiduciary will be subject to the same standards for
investments in stock of the Holding Company as for investments in the stock of
the Bank. Until recently, holdings in the stock of corporations and banks doing
business in Pennsylvania were clearly exempt from personal property taxes.
However, because of recent developments in Pennsylvania law, the holders of the
common stock of the Holding Company who are Pennsylvania residents may be
subject to a Pennsylvania county personal property tax on their shareholdings in
the future. If the proposed reorganization does not occur, the holders of the
common stock of the Bank may be subject to a Pennsylvania county personal
property tax on their shareholdings in the future. See section entitled
"PROPOSED REORGANIZATION - Tax Consequences".
71
<PAGE>
FINANCIAL STATEMENTS
The Bank is not subject to the reporting requirements of the 1934 Act, and
accordingly, does not file reports, proxy statements and other information with
the OCC.
The Board of Directors has not included any financial statements of the
Bank in this Proxy Statement/Prospectus. It is the Board's position that
financial statements would not be material or relevant, in order for the
shareholders to make an informed prudent judgment to approve the Plan of
Reorganization and Plan of Merger. For example, if the reorganization into the
Holding Company would have occurred on January 1, 1997, the financial statements
contained in the 1997 Annual Report would not be different in any material
respect.
The Bank has previously furnished financial statements for the 1997 fiscal
year prepared in conformity with generally accepted accounting principles to
shareholders. However, the Bank's 1997, 1996 and 1995 Annual Reports, and the
Bank's Consolidated Reports of Condition and Income for the most recent fiscal
quarter ended September 30, 1998, prepared in conformity with generally accepted
accounting principles, may be obtained promptly and at no cost by contacting
William L. Hummel, President, or Larry D. Reich, Senior Vice President, The
First National Bank of Marysville, 101 Lincoln Street, Post Office Box B,
Marysville, Pennsylvania 17053-0017; telephone number: (717) 957-2196.
SHAREHOLDER PROPOSALS
In the event of consummation of the Plan of Reorganization, any shareholder
who, in accordance with and subject to the provisions of the proxy rules of the
Securities and Exchange Commission, wishes to submit a proposal for inclusion in
the Holding Company's proxy statement for its 1999 Annual Meeting of
Shareholders must deliver such proposal in writing to Larry D. Reich, Senior
Vice President, at the Holding Company's principal executive offices, 101
Lincoln Street, Marysville, Pennsylvania 17053-0017, no later than January 31,
1999.
If the Plan of Reorganization is not consummated, then any shareholder of
the Bank who wishes to submit a proposal for inclusion in the Bank's proxy
statement for its 1999 Annual Meeting of Shareholders, must submit the proposal
in writing to Larry D. Reich, Senior Vice President of the Bank, at the Bank's
principal office at 101 Lincoln Street, Post Office Box B, Marysville,
Pennsylvania 17053-0017, no later than January 31, 1999.
72
<PAGE>
OTHER MATTERS
The Board of Directors does not know of any matters to be presented for
consideration other than the matters described in the Proxy
Statement/Prospectus, but if any matters are properly presented, it is the
intention of the persons named in the accompanying Proxy to vote on such matters
in accordance with their best judgment.
73
<PAGE>
EXHIBIT A
PLAN OF REORGANIZATION
A-1
<PAGE>
PLAN OF REORGANIZATION
THIS AGREEMENT made as of this 10th day of September, 1998, among FIRST
PERRY BANCORP, INC., a Pennsylvania business corporation (the "Holding
Company"), THE FIRST NATIONAL BANK OF MARYSVILLE, Marysville, Pennsylvania, a
national banking association (the "Bank"), and THE FIRST NATIONAL INTERIM BANK
OF MARYSVILLE (In Organization), a national banking association and a subsidiary
of the Holding Company (the "Interim Bank"),
WITNESSETH:
WHEREAS, the Holding Company, the Bank and the Interim Bank desire to
effect the formation of a bank holding company whereby Bank and the Interim Bank
will be merged, the surviving bank will become a wholly-owned subsidiary of the
Holding Company, and the present shareholders of the Bank (except for those who
perfect dissenters' rights) will become shareholders of the Holding Company, on
the terms and conditions hereinafter set forth;
NOW, THEREFORE, in consideration of the mutual covenants and agreements
contained herein, and intending to be legally bound hereby, the parties agree as
follows:
SECTION 1. MERGER.
1.1. Agreement to Merge. Subject to the terms and conditions hereinafter
set forth, the parties hereto agree to effect a merger of the Bank and the
Interim Bank (the "Merger") pursuant to the provisions of the Bank Merger Act of
1966, 12 U.S.C. Section 215a, (the "Bank Merger Act") in accordance with the
Plan of Merger attached hereto as Exhibit A and made a part hereof (the "Plan of
Merger").
1.2. Holding Company Common Stock. The Holding Company shall make available
to the Bank and the Interim Bank a sufficient number of shares of the Holding
Company's Common Stock to effect the Merger pursuant to the Plan of Merger.
SECTION 2. SHARES OF THE HOLDING COMPANY AND OF THE SURVIVING BANK.
2.1. Conversion of Shares. The manner of converting the shares of Capital
Stock of the Bank into shares of Common Stock of the Holding Company and the
shares of Capital Stock
A-2
<PAGE>
of the Interim Bank into shares of Capital Stock of the surviving bank in the
Merger shall be as set forth in Section 7 of the Plan of Merger.
SECTION 3. REPRESENTATIONS AND WARRANTIES OF THE HOLDING COMPANY.
The Holding Company represents, warrants and agrees as follows:
3.1. Organization and Standing. The Holding Company is a corporation duly
organized and validly existing under the Pennsylvania Business Corporation Law
of 1988, as amended.
3.2. Capitalization. The Holding Company is authorized to issue Two Million
(2,000,000) shares of Common Stock, par value Twenty-five Cents ($.25) per
share, of which four (4) shares are issued and outstanding. There are no
outstanding options, warrants, calls, convertible securities, subscriptions or
other commitments or rights of any nature with respect to the Common Stock of
the Holding Company.
3.3. Authority Relative to this Agreement. The execution, delivery and
performance of this Agreement have been duly authorized by the Board of
Directors of the Holding Company. Subject to appropriate shareholder and
regulatory approvals, neither the execution and delivery of this Agreement nor
the consummation of the transactions provided for herein will violate any
agreement to which the Holding Company is a party or by which it is bound or any
law, order or decree or any provision of its Articles of Incorporation or
By-laws.
3.4. Absence of Liabilities. Prior to the effective time of the Merger, the
Holding Company will have engaged only in the transactions contemplated by this
Agreement and the Plan of Merger, will have no material liabilities and will
have incurred no material obligations except in connection with its performance
of the transactions provided for in this Agreement and in the Plan of Merger.
SECTION 4. REPRESENTATIONS AND WARRANTIES OF THE BANK.
The Bank represents, warrants and agrees as follows:
4.1. Organization and Standing. The Bank is a national banking association
duly organized and validly existing under the National Bank Act.
A-3
<PAGE>
4.2. Capitalization. The Bank is authorized to issue Two Hundred
Twenty-Five Thousand (225,000) shares of Capital Stock, par value Fifty Cents
($.50) per share, of which 204,000 shares are issued and outstanding. There are
no outstanding options, warrants, calls, convertible securities, subscriptions
or other commitments or rights of any nature with respect to the Capital Stock
of Bank.
4.3. Authority Relative to this Agreement. The execution, delivery and
performance of this Agreement and the Plan of Merger have been duly authorized
by the Board of Directors of the Bank. Subject to appropriate shareholder and
regulatory approvals, neither the execution and delivery of this Agreement or
the Plan of Merger nor the consummation of the transactions provided for herein
or therein will violate any agreement to which the Bank is a party or by which
it is bound or any law, order, or decree or any provision of its Articles of
Association or By-laws.
SECTION 5. REPRESENTATIONS AND WARRANTIES OF THE INTERIM BANK.
The Interim Bank represents, warrants and agrees as follows:
5.1. Organization and Standing. The Interim Bank is a national banking
association in the process of formation under the National Bank Act.
5.2. Capitalization. Upon formation, the Interim Bank will be authorized to
issue 2,000,000 shares of Capital Stock, par value Twenty-five Cents ($.25) per
share, of which 408,000 shares will be issued and outstanding and owned by the
Holding Company and ten organizers immediately prior to the Merger.
5.3. Authority Relative to this Agreement. The execution, delivery and
performance of this Agreement and the Plan of Merger have been duly authorized
by the Board of Directors of the Interim Bank. Subject to appropriate
shareholder and regulatory approvals, neither the execution and delivery of this
Agreement or the Plan of Merger nor the consummation of the transactions
provided for herein or therein will violate any agreement to which the Interim
Bank is a party or by which it is bound or any law, order, decree or any
provision of its Articles of Association or By-laws.
5.4. Absence of Liabilities. Prior to the effective time of the Merger, the
Interim Bank will have engaged only in the transactions contemplated by this
Agreement and the Plan of Merger, will have no material liabilities and will
have incurred no material obligations except in connection with its performance
of the transactions provided for in this Agreement and in the Plan of Merger.
A-4
<PAGE>
SECTION 6. COVENANTS OF THE HOLDING COMPANY.
The Holding Company agrees that between the date hereof and the effective
time of the Merger:
6.1. Capitalization of the Interim Bank. The Holding Company shall purchase
a total of 368,000 shares of Capital Stock, par value Twenty-five Cents ($.25)
per share, of Interim Bank for Thirty Cents ($.30) per share, and shall cause
the Interim Bank to do all things necessary to obtain a charter as a national
banking association pursuant to the National Bank Act so as to permit the
consummation of the Merger provided for in the Plan of Merger. The Holding
Company may also purchase the subscription rights of the Organizers of the
Interim Bank for their 40,000 shares of Capital Stock prior to the Merger. Such
shares of the Organizers shall be purchased at Thirty Cents ($.30) per share.
6.2. Approval of Merger. The Holding Company, as a shareholder of the
Interim Bank, shall approve this Agreement and the Plan of Merger in accordance
with applicable law.
6.3. Best Efforts. The Holding Company will use its best efforts to take,
or cause to be taken, all actions or do, or cause to be done, all things
necessary, proper or advisable under applicable laws and regulations to
consummate and make effective the transactions contemplated by this Agreement
and the Plan of Merger, subject, however, to the requisite vote of the
shareholders of the Bank in accordance with the requirements of the Bank Merger
Act and applicable law.
SECTION 7. COVENANTS OF THE BANK.
The Bank agrees that between the date hereof and the effective time of the
Merger:
7.1. Shareholders' Meeting. The Bank shall submit this Agreement and the
Plan of Merger to the vote of its shareholders as provided by the Bank Merger
Act and other applicable laws at a meeting of shareholders to be held as soon as
practicable, and any adjournment or postponement thereof.
7.2. Best Efforts. The Bank will use its best efforts to take, or cause to
be taken, all actions or do, or cause to be done, all things necessary, proper
or advisable under applicable laws and regulations to consummate and make
effective the transactions contemplated by this Agreement and the Plan of
Merger, subject, however, to the requisite vote of the shareholders of the Bank
in accordance with the requirements of the Bank Merger Act and applicable law.
SECTION 8. COVENANTS OF THE INTERIM BANK.
The Interim Bank agrees that between the date hereof and the effective time
of the Merger:
A-5
<PAGE>
8.1. Shareholder Approval. The Interim Bank shall submit this Agreement and
the Plan of Merger to its shareholders (who shall be the Holding Company and the
Directors of the Interim Bank) for approval and adoption as provided by the Bank
Merger Act and other applicable laws.
8.2. Best Efforts. The Interim Bank will use its best efforts to take, or
cause to be taken, all actions or do, or cause to be done, all things necessary,
proper or advisable under applicable laws and regulations to consummate and make
effective the transactions contemplated by this Agreement and the Plan of
Merger, subject, however, to the requisite vote of the shareholders of the Bank
in accordance with the requirements of the Bank Merger Act and applicable law.
SECTION 9. CONDITIONS TO OBLIGATIONS OF THE PARTIES.
The obligations of the parties to consummate this Agreement and the Plan of
Merger shall be subject to the following conditions:
9.1. Representations and Warranties: Performance of Covenants. The
representations and warranties and covenants contained in Sections 3, 4, 5, 6, 7
and 8 hereof shall be true as of and at the effective time of the Merger, and
each party shall have performed all obligations required hereby to be performed
by it prior to the effective time of the Merger.
9.2. Bank Shareholder Approval. The shareholders of Bank shall have duly
approved this Agreement and the Plan of Merger in accordance with applicable
laws.
9.3. Regulatory Approvals. Any federal or state regulatory agency having
jurisdiction (banking or otherwise), to the extent that any consent or approval
is required by applicable laws or regulations for the consummation of this
Agreement and the Plan of Merger, shall have granted any necessary consent or
approval.
9.4. Registration Statement. The registration statement (the "Registration
Statement") filed by the Holding Company, if required pursuant to the Securities
Act of 1933, as amended, covering the shares of the Holding Company's Common
Stock to be issued pursuant to the Plan of Merger shall have been declared
effective by the Securities and Exchange Commission; and no stop order
suspending the effectiveness of the Registration Statement shall have been
issued and no proceeding for that purpose shall have been initiated or, to the
knowledge of the Holding Company, shall be contemplated or threatened by the
Securities and Exchange Commission.
9.5. Litigation. There shall be no litigation or proceeding pending or
threatened for the purpose of enjoining, restraining or preventing the
consummation of the Merger, this Agreement or the Plan of Merger or otherwise
claiming that such consummation is improper.
A-6
<PAGE>
9.6. Tax Opinion. A tax opinion shall have been obtained from Shumaker
Williams, P.C. of Camp Hill, Pennsylvania, Special Counsel to the Bank that the
conversion of Bank's Capital Stock into the Holding Company's Common Stock will
be tax free for federal income tax purposes; provided, however, that the
requirements of this Section 9.6 may be waived by the affirmative vote of a
majority of the Board of Directors of each of the parties hereto.
SECTION 10. TERMINATION, WAIVER AND AMENDMENT.
10.1. Circumstances of Termination. Anything herein or elsewhere to the
contrary notwithstanding, this Agreement and the Plan of Merger may be
terminated at any time before the effective time of the Merger (whether before
or after action with respect thereto by the Bank's shareholders) only:
(a) by the mutual consent of the Board of Directors of the Bank, the
Interim Bank and the Holding Company evidenced by an instrument in writing
signed on behalf of each by any two of their respective officers; or
(b) by the Board of Directors of the Bank if in its sole judgment the
Merger would be inadvisable because of the number of shareholders of the
Bank who perfect their dissenter's rights in accordance with applicable law
and the Plan of Merger, or if, in the sole judgment of such Board, the
Merger would not be in the best interests of the Bank or its employees,
depositors or shareholders for any reason whatsoever.
10.2. Effect of Termination. In the event of the termination and
abandonment hereof, this Agreement and the Plan of Merger shall become void and
have no effect, without any liability on the part of any of the parties, their
directors, officers or shareholders, except as set forth in Section 10 hereof.
10.3. Waiver. Any of the terms or conditions of this Agreement and the Plan
of Merger may be waived in writing at any time by the Bank by action taken by
its Board of Directors, whether before or after action by the Bank's
shareholders; provided, however, that such action shall be taken only if, in the
judgment of the Board of Directors, such waiver will not have a materially
adverse effect on the benefits intended to be granted hereunder to the
shareholders of the Bank.
10.4. Amendment. Anything herein or elsewhere to the contrary
notwithstanding, to the extent permitted by law, this Agreement and the Plan of
Merger may be amended at any time by the affirmative vote of a majority of the
Board of Directors of each of the Bank, the Holding Company and the Interim
Bank, whether before or after action with respect thereto by the Bank's
shareholders and without further approval of such amendment by the shareholders
of the parties hereto; provided, however, that Section 2.1 of this Agreement and
Section 7 of the Plan of Merger may not be
A-7
<PAGE>
amended after the meeting of the Bank's shareholders referred to in Section 7.1
hereof except by the vote of Bank shareholders required for the approval of the
Merger by such shareholders.
SECTION 11. EXPENSES.
11.1. General. Each party hereto will pay its own expenses incurred in
connection with this Agreement and the Plan of Merger, whether or not the
transactions contemplated herein are effected.
11.2. Special Dividend. Upon the effective time of the Merger, the
surviving bank shall pay a special dividend to the Holding Company in an amount
equal to the sum of:
(a) the expenses of the Holding Company in connection with the
transactions contemplated herein, if any;
(b) the principal amount of any loan that the Holding Company shall
have obtained to purchase shares of Capital Stock of the Interim Bank as
provided in 6.1 hereof; and
(c) the amount of any interest incurred by the Holding Company on
account of any loans obtained by it for the purchase shares of Capital
Stock of the Interim Bank as provided in Section 6.1 hereof.
SECTION 12. MISCELLANEOUS.
12.1. Restrictions on Affiliates. The Holding Company may cause stock
certificates representing any shares issued to any shareholder who may be deemed
to be an affiliate of the Bank, within the meaning of Rule 145 under the
Securities Act of 1933, as amended, to bear a legend setting forth any
applicable restrictions on transfer thereof under Rule 145 and may cause
stop-transfer orders to be entered with its transfer agent with respect to any
such certificates.
12.2. No Brokers. Each of the parties represents to the other that it has
not incurred and will not incur any liability for brokerage fees or agents'
commissions in connection with this Agreement, the Plan of Merger and the
transactions contemplated hereby.
12.3. Right to Withhold Dividends. The Board of Directors of the Holding
Company reserves the right to withhold dividends from any former shareholder of
the Bank who fails to exchange certificates representing the shares of the Bank
for certificates representing the shares of the Holding Company in accordance
with Section 7 of the Plan of Merger.
A-8
<PAGE>
12.4. Failure to Surrender Certificates. Shareholders of the Holding
Company shall surrender certificates representing the shares of the Bank for
certificates representing the shares of the Holding Company within two (2) years
of the date of the letter of transmittal as provided in Section 7 of the Plan of
Merger. In the event that any certificates are not surrendered for exchange
within such two (2) year period, the shares, represented by appropriate
certificates of the Holding Company that would otherwise have been delivered in
exchange for the unsurrendered certificates, may be sold and the net proceeds of
the sale shall be held for the shareholders of the unsurrendered certificates to
be paid to them upon surrender of their outstanding certificates. From and after
such sale, the sole right of the holders of the unsurrendered outstanding
certificates shall be the right to collect the net sales proceeds held for their
account.
12.5. Entire Agreement. This Agreement (including the Plan of Merger
attached as an exhibit hereto) contains the entire agreement among the parties
with respect to the subject matter hereof and supersedes all prior agreements,
written or oral, with respect thereto.
12.6. Captions. Descriptive headings are for convenience only and shall not
control or affect the meaning or construction of any provisions of this
Agreement or the Plan of Merger.
12.7. Applicable Law. This Agreement and the Plan of Merger shall be
governed by the laws of the Commonwealth of Pennsylvania applicable to contracts
executed in and to be performed exclusively within the Commonwealth of
Pennsylvania, regardless of where they are executed.
12.8. Counterparts. This Agreement may be executed in any number of
counterparts, and each such counterpart shall be deemed to be an original
instrument, but all such counterparts together shall constitute but one
agreement.
A-9
<PAGE>
IN WITNESS WHEREOF, this Agreement has been executed as of the day and year
first above mentioned.
(SEAL)
ATTEST: FIRST PERRY BANCORP, INC.
/s/ Larry D. Reich By: /s/ William L. Hummel
- ------------------------- ----------------------------
Larry D. Reich, Secretary William L. Hummel, President
(SEAL)
ATTEST: THE FIRST NATIONAL BANK
OF MARYSVILLE
/s/ Larry D. Reich By: /s/ William L. Hummel
- ------------------------- ---------------------------
Larry D. Reich, Cashier William L. Hummel, President
(SEAL)
ATTEST: THE FIRST NATIONAL INTERIM BANK
OF MARYSVILLE (In Organization)
/s/ Larry D. Reich By: /s/ William L. Hummel
- ------------------------- -----------------------------
Larry D. Reich, Cashier William L. Hummel, President
A-10
<PAGE>
EXHIBIT B
PLAN OF MERGER
B-1
<PAGE>
PLAN OF MERGER
THE FIRST NATIONAL BANK OF MARYSVILLE
with and into
THE FIRST NATIONAL INTERIM BANK OF MARYSVILLE
under the charter of
THE FIRST NATIONAL INTERIM BANK OF MARYSVILLE
under the title of
THE FIRST NATIONAL BANK OF MARYSVILLE
THIS AGREEMENT made between THE FIRST NATIONAL BANK OF MARYSVILLE
(hereinafter referred to as "Bank"), a banking association organized under the
laws of the United States, being located at 101 Lincoln Street, Marysville,
Pennsylvania 17053-0017, County of Perry, in the Commonwealth of Pennsylvania,
with a capital of One Hundred Two Thousand Dollars ($102,000) divided into Two
Hundred Four Thousand (204,000) shares of common stock each of Fifty Cents
($.50) par value, surplus of approximately $640,000, and undivided profits,
including capital reserves, of approximately $7,695,000, and unrealized holding
gains on available-for-sale securities of $169,000, as of June 30, 1998, and THE
FIRST NATIONAL INTERIM BANK OF MARYSVILLE (In Organization) (hereinafter
referred to as "Interim Bank"), a banking association organized under the laws
of the United States, being located at 101 Lincoln Street, Marysville, County of
Perry, in the Commonwealth of Pennsylvania, with aggregate capital
B-2
<PAGE>
stock of $102,000 divided into 408,000 shares of common stock, each of
Twenty-five Cents ($.25) par value, surplus of Twenty Thousand Four Hundred
Dollars ($20,400), and no undivided profits and capital reserves, as of the
effective time of the merger (the "Effective Time"); each acting pursuant to a
resolution of its board of directors, adopted by the vote of a majority of its
directors, pursuant to the authority given by and in accordance with the
provisions of the Act of November 7, 1918, as amended (12 U.S.C. Section 215a)
(the "Bank Merger Act"), witnesseth as follows:
Section 1.
The Bank shall be merged into the Interim Bank under the charter of the
Interim Bank and with the charter number of the Bank. Section 2. The Receiving
Association (hereinafter referred to as the "Association") shall be the Interim
Bank, which upon completion of this transaction, shall change its name to and be
known as "The First National Bank of Marysville". Section 3. The business of the
Association shall be that of a national banking association. This business shall
be conducted by the Association at its main office which shall be located at 101
Lincoln Street, Marysville, County of Perry, Pennsylvania 17053-0017, and at its
legally established branches.
B-3
<PAGE>
Section 4.
The aggregate amount of capital stock of the Association upon completion of
the transaction shall be $102,000, divided into 408,000 shares of common stock,
each of Twenty-five Cents ($.25) par value, and at the Effective Time, the
Association shall have a surplus of $640,000, and undivided profits, including
capital reserves, which when combined with the capital and surplus, will be
equal to the combined capital structures of the merging banks as stated in the
preamble of this Agreement, adjusted, however, for normal earnings and expenses
between June 30, 1998, and the Effective Time. Section 5. All assets of the
Bank, as they exist at the Effective Time, shall pass to and vest in the
Association without any conveyance or other transfer. The Association shall be
responsible for all of the liabilities of every kind and description of each of
the merging banks existing as of the Effective Time. A committee of six, three
to be appointed by the Board of Directors of each bank at the Effective Time,
shall have satisfied themselves that the statement of condition of each bank as
of June 30, 1998, fairly presents its financial condition and since such date
there has been no material adverse change in the financial condition or business
of either bank. Section 6. The Bank shall contribute to the Association
acceptable assets having a book value, over and above its liability to its
creditors, of at least $8,606,000, and having an estimated fair value over and
above its liability to its creditors, of at least $8,606,000, or one hundred
percent (100%) of
B-4
<PAGE>
the estimated fair value of excess acceptable assets over and above liabilities
to creditors, to the Association, adjusted, however, for normal earnings and
expenses between June 30, 1998, and the Effective Time, and for allowance of
cash payments, if any, permitted under this Agreement.
Section 7.
The manner and basis of converting shares of common stock of the Bank and
Interim Bank shall be as follows: 7.1. Stock of the Interim Bank. The shares of
common stock, par value Twentyfive Cents ($.25) per share, of the Interim Bank
issued and outstanding immediately prior to the Effective Time shall continue to
be issued and outstanding shares of the Association and shall be held by the
Holding Company, First Perry Bancorp, Inc. From and after the Effective Time,
each certificate that, prior to the Effective Time represented shares of the
Interim Bank, shall evidence ownership of shares of the Association on the basis
hereinbefore set forth. 7.2. Stock of the Bank. Each share of Common Stock, par
value of Fifty Cents ($.50) per share, of the Bank issued and outstanding
immediately prior to the Effective Time (except for shares owned by shareholders
who shall have duly perfected dissenters' rights in accordance with this Plan of
Merger and applicable law) shall, on the Effective Time, by virtue of the merger
and without any action on the part of the holder thereof, be converted into and
become two (2) shares of fully paid and nonassessable common stock, par value
Twenty-five Cents ($.25) per share, of First Perry Bancorp, Inc., a Pennsylvania
business corporation and a bank holding company under the provisions of the Bank
Holding Company Act of 1956, as amended, (the "Holding Company"). From and after
the Effective Time, each certificate which, prior to the Effective Time,
represented
B-5
<PAGE>
shares of common stock of the Bank shall evidence ownership of shares of common
stock of the Holding Company on the basis set forth herein.
7.3. Treasury Stock. Each share of common stock, par value Fifty Cents
($.50) per share, of the Bank held as a treasury share immediately prior to the
Effective Time, if any, shall thereupon and without notice be canceled. 7.4.
Exchange Agent. If and when the Holding Company determines, the Bank shall
designate the Secretary or another officer of the Holding Company or the Bank to
act as exchange agent to receive from the holders thereof certificates that
immediately prior to the Effective Time represented the Bank's common stock and
to exchange such certificates for common stock of the Holding Company as
provided herein. 7.5. Exchange Procedure. If appointed pursuant to Section 7.4
hereof, the exchange agent shall promptly mail to each record holder as of the
date of exchange of an outstanding certificate or certificates that prior to the
Effective Time represented shares of the Bank's common stock, a letter of
transmittal (which shall specify how delivery shall be effected, and that risk
of loss and title to such certificate or certificates shall pass only upon
proper delivery of such certificate or certificates, together with a properly
executed letter of transmittal to the exchange agent at its address stated
therein) and instructions for use in effecting the surrender of such certificate
or certificates for exchange therefor. Upon surrender to the exchange agent of
such certificate or certificates, together with such letter of transmittal,
properly executed, the exchange agent shall exchange such certificate or
certificates for shares of common stock of the Holding Company as provided
herein.
B-6
<PAGE>
7.6. Dissenters' Rights. Shareholders of the Bank shall be entitled to
exercise the rights provided in the Bank Merger Act with respect to this Plan of
Merger. Section 8. Neither of the banks shall declare nor pay any dividend to
its shareholders between the date of this Agreement and the time at which the
merger shall become effective except for the declaration and payment of any
normal dividend, nor dispose of any of its assets in any other manner except in
the normal course of business and for adequate value. Section 9. The present
Board of Directors of the Bank shall continue to serve as the Board of Directors
of the Association until the next annual meeting or until such time as their
successors have been elected and have qualified. Section 10. Effective as of the
time this merger shall become effective as specified in the "Certificate
Approving Merger" to be issued by the Comptroller of the Currency, the articles
of association of the Association shall read in their entirety as follows:
FIRST. The title of this Association shall be The First National Bank
of Marysville.
SECOND. The Main Office of the Association shall be in Marysville,
County of Perry, Commonwealth of Pennsylvania. The general business of the
Association shall be conducted at its main office and its branches.
THIRD. The Board of Directors of this Association shall consist of not
less than five nor more than twenty-five, the exact number to be fixed and
determined from time to time by resolution of a majority of the full Board
of Directors or by resolution of a majority of the
B-7
<PAGE>
shareholders at any annual or special meeting thereof. Each director, during the
full term of his or her directorship, shall own common or preferred stock of the
Association, or of a holding company owning the Association, with an aggregate
par, fair market, or equity value of not less than One Thousand Dollars
($1,000), as of either (i) the date of purchase, (ii) the date the person became
a director, or (iii) the date of that person's most recent election to the Board
of Directors, whichever is most recent. Any combination of common or preferred
stock of the Association or the holding company may be used. Any amount of the
specified interest shall conform to the requirements of 12 U.S.C. 72, as
amended. Any vacancy in the Board of Directors may be filled by action of a
majority of the remaining directors between meetings of shareholders; provided
however, that the Board of Directors may not increase the number of directors
between meetings of shareholders to a number which: (1) exceeds by more than two
the number of directors last elected by shareholders when the number was 15 or
less; and (2) exceeds by more than four the number of directors last elected by
shareholders when the number was 16 or more, but in no event shall the number of
directors exceed 25.
Terms of directors, including directors selected to fill vacancies, shall
expire at the next regular meeting of shareholders at which directors are
elected, unless the directors resign or are removed from office. Despite the
expiration of a director's term, the director shall continue to serve until his
or her successor is elected and qualifies or until there is a decrease in the
number of directors and his or her position is eliminated.
Honorary or advisory members of the Board of Directors, without voting
power or power of final decision in matters concerning the business of the
Association, may be appointed by resolution of a majority of the full Board of
Directors, or by resolution of shareholders at any annual meeting or special
meeting. Honorary or advisory directors shall not be counted to determine the
number of directors of the Association or the presence of a quorum in connection
with any board action, and shall not be required to own qualifying shares.
FOURTH. There shall be an annual meeting of the shareholders, the
purpose of which shall be the election of Directors and the transaction of
whatever other business may be brought before said meeting. It shall be
held at the main office or other convenient place as the Board of Directors
may designate, on the day of each year specified therefor in the Bylaws, or
if that day falls on a legal holiday in the state in which the Association
is located, on the next following banking day. If no election is held on
the day fixed, or in the event of a legal holiday on the following banking
day, an election may be held on any subsequent day within sixty (60) days
of the day fixed, to be designated by the board of directors, or, if the
directors fail to fix the day, by the shareholders representing two-thirds
of the shares issued and outstanding. In all cases at least ten (10) days
advance notice of the meeting shall be given to the shareholders by first
class mail.
In all elections of directors, the number of votes each common shareholder
may cast will be determined by multiplying the number of shares he or she owns
by the number of directors
B-8
<PAGE>
to be elected. Those votes may be cumulated and cast for a single candidate or
may be distributed among two or more candidates in the manner selected by the
shareholder. On all other questions, each common shareholder shall be entitled
to one vote for each share of stock held by him or her. If the issuance of
preferred stock with voting rights has been authorized by a vote of shareholders
owning a majority of the common stock of the Association, preferred shareholders
will not have cumulative voting rights and will not be included within the same
class as common shareholders, for purposes of elections of directors.
Nominations for election to the Board of Directors may be made by the Board
of Directors or by any stockholder of any outstanding class of capital stock of
the Association entitled to vote for election of directors. Nominations other
than those made by or on behalf of the existing management shall be made in
writing and be delivered or mailed to the President of the Association not less
than fourteen (14) days nor more than fifty (50) days prior to any meeting of
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 nominations shall be mailed or delivered to the President of the
Association not later than the close of business on the seventh (7th) day
following the day on which the notice of meeting was mailed. Such notification
shall contain the following information to the extent known to the notifying
shareholder:
(1) The name and address of each proposed nominee;
(2) The principal occupation of each proposed nominee;
(3) The total number of shares of capital stock of the Association
that will be voted for each proposed nominee;
(4) The name and residential address of the notifying shareholder;
and
(5) The number of shares of capital stock of the Association owned by
the notifying shareholder.
Nominations not made in accordance herewith may, in his/her discretion, be
disregarded by the Chairman of the meeting, and the vote tellers may disregard
all votes cast for each such nominee. No bylaw may unreasonably restrict the
nomination of directors by shareholders.
A director may resign at any time by delivering written notice to the Board
of Directors, its Chairman, or to the Association, which resignation shall be
effective when the notice is delivered unless the notice specifies a later
effective date.
B-9
<PAGE>
A director may be removed by shareholders at a meeting called to remove him
or her, when notice of the meeting stating that the purpose or one of the
purposes is to remove him or her is provided, if there is a failure to fulfill
one of the affirmative requirements for qualification, or for cause, provided,
however, that a director may not be removed if the number of votes sufficient to
elect him or her under cumulative voting is voted against his or her removal.
FIFTH. The authorized amount of capital stock of this Association
shall be Two Million (2,000,000) shares of common stock of the par value of
Twenty-five Cents ($.25) each; but said capital stock may be increased or
decreased from time to time, in accordance with the provisions of the laws
of the United States.
No holder of shares of capital stock of any class of the Association shall
have any preemptive or preferential right of subscription to any shares of any
class of stock of the Association, whether now or hereafter authorized, or to
any obligations convertible into stock of the Association, issued, or sold, nor
any right of subscription to any thereof other than such, if any, as the Board
of Directors, in its discretion may from time to time determine and at such
price as the Board of Directors may from time to time fix.
Unless otherwise specified in the articles of association or required by
law, (i) all matters requiring shareholder action, including amendments to the
articles of association, must be approved by shareholders owning a majority
voting interest in the outstanding voting stock, and (ii) each shareholder shall
be entitled to one vote per share. Unless otherwise specified in the Articles of
Association or required by law, all shares of voting stock shall be voted
together as a class, on any matters requiring shareholder approval. Shares of
the same class may be issued as a dividend on a pro rata basis and without
consideration.
SIXTH. The Board of Directors shall appoint one of its members
President of this Association and one of its members Chairman of the Board
of Directors of this Association. The Board of Directors shall have the
power to appoint one or more Vice Presidents; a Secretary who shall keep
the minutes of the directors' and shareholders' meetings and be responsible
for authentication of the records of the Association; and a Cashier and
such other officers and employees as may be required to transact the
business of this Association. A duly appointed officer may appoint one or
more officers or assistant officers if authorized by the Board of Directors
in accordance with the Bylaws.
The Board of Directors shall have the power to:
(1) Define the duties of the officers, employees and agents of the
Association;
(2) Delegate the performance of its duties, but not the responsibility for
its duties, to the officers, employees, and agents of the Association;
B-10
<PAGE>
(3) Fix the compensation and enter into employment contracts with its
officers and employees upon reasonable terms and conditions consistent
with applicable law;
(4) Dismiss officers and employees;
(5) Require bonds from officers and employees and to fix the penalty
thereof;
(6) Ratify written policies authorized by the Association's management or
committees of the board;
(7) Regulate the manner in which any increase or decrease of the capital
of the Association shall be made, provided that nothing herein shall
restrict the power of shareholders to increase or decrease the capital
of the Association in accordance with law, and nothing shall raise or
lower from two-thirds the percentage required for shareholders'
approval to increase or reduce the capital;
(8) Manage and administer the business and affairs of the Association;
(9) Adopt initial Bylaws, not inconsistent with law or the Articles of
Association, for managing the business and regulating the affairs of
the Association;
(10) Amend or repeal Bylaws, except to the extent that the Articles of
Association reserve this power in whole or in part to the
shareholders;
(11) Make contracts; and
(12) Generally do and perform all acts that may be legal for a Board of
Directors to do and perform.
SEVENTH. The Board of Directors shall have the power to change the
location of the main office to any other place within the limits of
Marysville, Pennsylvania, without the approval of the shareholders but
subject to the approval of the Comptroller of the Currency; and shall have
the power to establish or change the location of any branch or branches of
the Association to any other location, without the approval of the
shareholders but subject to the approval of the Comptroller of the
Currency.
EIGHTH. The corporate existence of this Association shall continue
until terminated in accordance with the laws of the United States.
NINTH. The Board of Directors of this Association, or the Chairman of
the Board or the President, or any one or more shareholders owning, in the
aggregate, not less than twenty-five percent (25%) of the stock of this
Association, may call a special meeting of shareholders at any time. Unless
otherwise provided by the Bylaws or the laws of the United States or waived
by shareholders, a notice of the time, place, and purpose of every annual
and special meeting of the shareholders shall be given by first-class mail,
postage prepaid, mailed at least ten (10) days, and no more than sixty (60)
days, prior to the date of such meeting to each shareholder of record at
his/her address as shown upon the books of this Association. Unless
otherwise provided by the Bylaws, any action requiring approval of
shareholders must be effected at a duly called annual or special meeting.
B-11
<PAGE>
TENTH. This Association may, upon the affirmative vote of a majority
of its Board of Directors, purchase insurance for the purpose of
indemnifying its directors, officers, other employees and agents, to the
extent that such indemnification is allowed in the following paragraph.
Such insurance may, but need not be, for the benefit of all directors,
officers, employees or agents.
This Association shall indemnify its officers and directors and the
officers and directors of its subsidiaries, if any, and may indemnify the
Association's employees and agents and the employees and agents of its
subsidiaries, if any, to the full extent permitted by and under the terms and
conditions of the Pennsylvania Business Corporation Law of 1988, as amended,
from time to time, or such successor statute providing indemnification for a
Pennsylvania general business corporation or the relevant provisions of the
Model Business Corporation Act, and the Association may, by action of its Board
of Directors, indemnify all other persons whom it may lawfully indemnify under
the Act; provided however, such indemnification provisions shall not allow the
indemnification of directors, officers, employees or agents of the Association
against expenses, penalties, or other payments incurred in an administrative
proceeding or action instituted by an appropriate bank regulatory agency which
proceeding or action results in a final order assessing civil money penalties or
requiring affirmative action by an individual or individuals in the form of
payments to this Association.
The foregoing right of indemnification or reimbursement shall not be
exclusive of other rights to which such persons, their heirs, executors, or
administrators, may be entitled as a matter of law.
ELEVENTH. These Articles of Association may be amended at any regular
or special meeting of the shareholders by the affirmative vote of the
holders of a majority of the stock of this Association, unless the vote of
the holders of a greater amount of stock is required by law, and in that
case, by the vote of the holders of such greater amount. The Association's
Board of Directors may propose one or more amendments to the Articles of
Association for submission to the shareholders.
Section 11.
This Agreement may be terminated by the unilateral action of the Board of
Directors of any participant prior to the approval of the stockholders of said
participant or by the mutual consent of the Board of all participants after any
shareholder group has taken affirmative action. Since time is of the essence to
this Agreement, if for any reason the transaction shall not have been
consummated by June 30, 1999, this Agreement shall terminate automatically as of
that date unless extended, in writing, prior to said date by mutual action of
the Boards of Directors of the participants.
B-12
<PAGE>
Section 12.
This Agreement shall be approved, adopted, ratified and confirmed by the
affirmative vote of the shareholders of each of the banks owning at least
two-thirds (2/3) of its capital stock outstanding, at a meeting to be held on
the call of the Directors; and the merger shall become effective at the time
specified in a certificate to be issued by the Comptroller of the Currency of
the United States, under the seal of office, approving the merger. Section 13.
The obligations of the Bank and the Interim Bank to effect the merger shall
be subject to all of the terms and conditions contained in the Plan of
Reorganization. Section 14.
The persons who are executive or other officers of the Bank immediately
prior to the consummation of the merger shall serve as the officers of the
Association from and after the Effective Time and until such time as the Board
of Directors of the Association shall otherwise determine. At the Effective
Time, all persons who are employees of the Bank and the Interim Bank shall
become employees of the Association.
B-13
<PAGE>
WITNESS the signatures and seals of said merging banks this 10th day of
September, 1998, each hereunto set by its President or a Vice President and
attested by its Cashier or Secretary, pursuant to a resolution of its Board of
Directors, acting by a majority thereof, and witness the signatures hereto of a
majority of each of said Boards of Directors.
THE FIRST NATIONAL BANK
OF MARYSVILLE
ATTEST:
/s/ Larry D. Reich By: /s/ William L. Hummel
- -------------------------- ---------------------------
Larry D. Reich, Cashier William L. Hummel, President
and Director
/s/ H. Robert Asper
- -------------------------
H. Robert Asper
/s/ David M. Benfer
- ------------------------
David M. Benfer
/s/ Arthur M. Feld
- -----------------------
Arthur M. Feld
/s/ John L. Hocker
- ----------------------
John L. Hocker
/s/ Keith A. Rohrer
- ----------------------
Keith A. Rohrer
/s/ John M. Schrantz
- ---------------------
John M. Schrantz
/s/ Raymond A. Smith
- ---------------------
Raymond A. Smith
B-14
<PAGE>
/s/ Kenneth C. Toomey
- ---------------------
Kenneth C. Toomey
/s/ Robert K. Watts
- --------------------
Robert K. Watts
Directors of The First National Bank of Marysville
Perry County, Pennsylvania
B-15
<PAGE>
THE FIRST NATIONAL INTERIM
BANK OF MARYSVILLE
(In Organization)
ATTEST:
/s/ Larry D. Reich By: /s/ William L. Hummel
- ----------------------- ---------------------------
Larry D. Reich, Cashier William L. Hummel, President
and Director
/s/ H. Robert Asper
- ----------------------
H. Robert Asper
/s/ David M. Benfer
- ---------------------
David M. Benfer
/s/ Arthur M. Feld
- ---------------------
Arthur M. Feld
/s/ John L. Hocker
- --------------------
John L. Hocker
/s/ Keith A. Rohrer
- --------------------
Keith A. Rohrer
/s/ John M. Schrantz
- --------------------
John M. Schrantz
/s/ Raymond A. Smith
- --------------------
Raymond A. Smith
/s/ Kenneth C. Toomey
- ---------------------
Kenneth C. Toomey
/s/ Robert K. Watts
- --------------------
Robert K. Watts
Directors of The First National Interim Bank of Marysville,
Perry County, Pennsylvania
B-16
<PAGE>
COMMONWEALTH OF PENNSYLVANIA :
: SS.
COUNTY OF PERRY :
On this 10th day of September, 1998, before me, a Notary Public for the
State and County aforesaid, personally came William L. Hummel, as President, and
Larry D. Reich, as Cashier, of The First National Bank of Marysville, and each
in his/her said capacity acknowledged the foregoing instrument to be the act and
deed of said national banking association and the seal affixed thereto to be its
seal; and came also H. Robert Asper, David M. Benfer, Arthur M. Feld, John L.
Hocker, William L. Hummel, Keith A. Rohrer, John M. Schrantz, Raymond A. Smith,
Kenneth C. Toomey and Robert K. Watts, being at least a majority of the Board of
Directors of said national banking association, and each of them acknowledged
said instrument to be the act and deed of said national banking association and
of himself as director thereof.
WITNESS my official seal and signature this day and year aforesaid.
/s/ Dorothy A. Taylor
-------------------------------------
(Seal of Notary) Notary Public, Perry County
My commission expires: May 27, 2000
COMMONWEALTH OF PENNSYLVANIA :
: SS.
COUNTY OF PERRY :
On this 6th day of October, 1998, before me, a Notary Public for the
Commonwealth and County aforesaid, personally came William L. Hummel, as
President, and Larry D. Reich, as Cashier, of The First National Interim Bank of
Marysville, and each in his/her capacity acknowledged the foregoing instrument
to be the act and deed of said national banking association and the seal affixed
thereto to be its seal; and came also H. Robert Asper, David M. Benfer, Arthur
M. Feld, John L. Hocker, William L. Hummel, Keith A. Rohrer, John M. Schrantz,
Raymond A. Smith, Kenneth C. Toomey and Robert K. Watts, being at least a
majority of the Board of Directors of said national banking association and each
of them acknowledged said instrument to be the act and deed of said national
banking association and of himself as a director thereof.
WITNESS my official seal and signature this day and year aforesaid.
/s/ Dorothy A. Taylor
------------------------------------
(Seal of Notary) Notary Public, Perry County
My commission expires: May 27, 2000
B-17
<PAGE>
EXHIBIT C
ARTICLES OF INCORPORATION
OF
FIRST PERRY BANCORP, INC.
C-1
<PAGE>
ARTICLES OF INCORPORATION
OF
FIRST PERRY BANCORP, INC.
In compliance with the requirements of 15 Pa.C.S. Section 1306 (relating to
Articles of Incorporation), the undersigned, desiring to be incorporated as a
business corporation, hereby state that:
1. The name of the Corporation is First Perry Bancorp, Inc.
2. The address, including street and number, if any, of this
Corporation's initial registered office in this Commonwealth is 101
Lincoln Street, P.O. Box B, Marysville, Pennsylvania 17053-0017, and
the county of venue is Perry.
3. The Corporation is incorporated under the provisions of the
Pennsylvania Business Corporation Law of 1988 (15 Pa.C.S. ss.1101 et
seq.), as the same may be amended.
4. The purpose or purposes of the Corporation are to have unlimited power
to engage in and to do any lawful act concerning any or all business
for which corporations may be incorporated under the provisions of the
Pennsylvania Business Corporation Law of 1988, as the same may be
amended.
5. The aggregate number of shares that the Corporation shall have
authority to issue is Two Million (2,000,000) shares of Common Stock
having a par value of Twenty-Five Cents ($.25) per share. The holders
of Common Stock shall have one vote per share.
6. The name and address, including street and number, if any, of each of
the Incorporators, and the number and class of shares subscribed to by
each Incorporator is:
Number and
Name Address Class of Shares
---- ------- ---------------
William L. Hummel 506 Maple Avenue 1 share of
Marysville, PA 17053 common stock
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Kenneth C. Toomey 209 Ridgeview Drive 1 share of
Marysville, PA 17053 common stock
Larry D. Reich 168 Wyoming Avenue 1 share of
Enola, PA 17025 common stock
H. Robert Asper 1020 Mountaindale Drive 1 share of
Marysville, PA 17053 common stock
7. No merger, consolidation, liquidation or dissolution of the
Corporation, nor any action that would result in the sale or other
disposition of all or substantially all of the assets of the
Corporation shall be valid unless first approved by the affirmative
vote of:
(a) the holders of at least seventy-five percent (75%) of the
outstanding shares of Common Stock of the Corporation; or
(b) the holders of at least fifty-one percent (51%) of the outstanding
shares of Common Stock of the Corporation, provided that such transaction
has received the prior approval of at least eighty percent (80%) of all of
the members of the Board of Directors.
8. Cumulative voting rights shall not exist with respect to the election
of directors.
9. Except as otherwise provided by law and unless Section 2521 of the
Pennsylvania Business Corporation Law of 1988, as it may be amended,
applies to the Corporation, only those shareholders entitled to cast
at least forty percent (40%) of the votes that all shareholders are
entitled to cast at a particular meeting shall be entitled to call
special meetings of the shareholders.
10. (a) The Corporation shall be governed by the provisions of Section
1715 of the Pennsylvania Business Corporation Law of 1988, as it may
be amended. The Board of Directors may, if it deems advisable, oppose
a tender or other offer for the corporation's securities, whether the
offer is in cash or in the securities of a corporation or otherwise.
When considering whether to oppose an offer, the Board of Directors
may, but is not legally obligated to, in considering the best
interests of the corporation, consider any relevant, germane or
pertinent issue to the extent they deem appropriate; by way of
illustration, but not to be considered any limitation on the power of
the Board of Directors to oppose a tender or other offer for this
corporation's securities, the Board of Directors may, but shall not be
legally obligated to, consider any or all of the following:
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(i) Whether the offer price is acceptable based on the historical
and present operating results or financial condition of the
corporation;
(ii) Whether a more favorable price could be obtained for this
corporation's securities in the future;
(iii) The social and economic effects of the offer or transaction
on this corporation and any of its subsidiaries, employees,
depositors, loan and other customers, creditors, shareholders and
other elements of the communities in which this corporation and any of
its subsidiaries operate or are located;
(iv) The reputation and business practice of the offeror and its
management and affiliates as they would affect the shareholders,
employees, depositors and customers of the corporation and its
subsidiaries and the future value of the corporation's stock;
(v) The value of the securities (if any) which the offeror is
offering in exchange for the corporation's securities, based on an
analysis of the worth of the corporation or other entity whose
securities are being offered;
(vi) The business and financial conditions and earnings prospects
of the offeror, including, but not limited to, debt service and other
existing or likely financial obligations of the offeror, and the
possible effect of such conditions upon this corporation and any of
its subsidiaries and the other elements of the communities in which
this corporation and any of its subsidiaries operate or are located;
(vii) Any antitrust or other legal and regulatory issues that are
raised by the offer.
(b) If the Board of Directors determines that an offer should be
rejected, it may take any lawful action to accomplish its purpose
including, but not limited to, any or all of the following: advising
shareholders not to accept that offer; litigation against the offeror;
filing complaints with all governmental and regulatory authorities;
acquiring the offeror corporation's securities; selling or otherwise
issuing authorized but unissued securities or treasury stock or granting
options with respect thereto; acquiring a company to create an antitrust or
other regulatory problem for the offeror; and obtaining a more favorable
offer from another individual or entity.
11. The Corporation may issue shares, option rights or securities having
conversion or option rights, or obligations without first offering
them to shareholders of any class or classes.
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12. Articles 7, 8, 9, 10, 11 and 12 shall not be amended unless first
approved by the affirmative vote of the holders of at least
seventy-five percent (75%) of the outstanding shares of Common Stock
of the Corporation.
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IN TESTIMONY WHEREOF, the incorporators have signed these Articles of
Incorporation this 31st day of July, 1998.
/s/ William L. Hummel /s/ Larry D. Reich
- -------------------------- -----------------------------
William L. Hummel, Larry D. Reich,
Incorporator Incorporator
/s/ Kenneth C. Toomey /s/ H. Robert Asper
- ------------------------- ------------------------------
Kenneth C. Toomey, H. Robert Asper, Incorporator
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EXHIBIT D
BY-LAWS OF FIRST PERRY BANCORP, INC.
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BY-LAWS
of
FIRST PERRY BANCORP, INC.
Article 1
CORPORATION OFFICE
Section 1.1 The Corporation shall have and continuously maintain in
Pennsylvania a registered office. The registered office shall be 101 Lincoln
Street, Marysville, Pennsylvania 17053. The principal place of business of the
Corporation may be, but need not be, the same as the registered office. The
address of the registered office may be changed from time to time by the Board
of Directors.
Section 1.2 The Corporation may also have offices at such other places as
the Board of Directors may from time to time designate or the business of the
Corporation may require.
Article 2
SHAREHOLDERS MEETINGS
Section 2.1 All meetings of the shareholders shall be held at the
registered office of the Corporation or at such other place as may be fixed from
time to time by the Board of Directors, and such meetings shall be held at such
time as may be fixed from time to time by the Board of Directors.
Section 2.2 The annual meeting of the shareholders shall be held no later
than the thirty-first day of May in each year, when the shareholders shall elect
members to the Board of Directors and transact such other business as may
properly be brought before the meeting.
Section 2.3 Special meetings of the shareholders may be called at any time
by the Chairman of the Board, the President, a majority of the Board of
Directors or of its Executive Committee or by one or more Shareholders entitled
to cast at least forty percent (40%) of the votes which all Shareholders are
entitled to cast at a particular meeting. At any time, upon written request of
any person who has called a special meeting, it shall be the duty of the
Secretary to fix the time of the meeting which, if the meeting is called
pursuant to a statutory right, shall be held not more than sixty (60) days after
the receipt of the request. If the Secretary refuses to fix the time of the
meeting or
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neglects to fix the time of the meeting within thirty (30) days after the
receipt of such a request, the person or persons making the request may issue
the call.
Section 2.4 Written notice of all shareholder meetings (other than
adjourned meetings of shareholders), shall state the place, date, hour, the
purpose thereof and shall be served upon, or mailed, postage prepaid, or
telegraphed, charges prepaid, at least ten (10) days before such meeting, unless
a greater period of notice is required by statute or by these By-laws, to each
shareholder entitled to vote thereat at such address as appears on the transfer
books for shares of the Corporation.
Section 2.5 When a meeting of shareholders is adjourned, it shall not be
necessary to give any notice of the adjourned meeting or of the business to be
transacted at an adjourned meeting, other than by announcement at the meeting at
which the adjournment is taken, unless the Board of Directors fixes a new record
date for the adjourned meeting.
Article 3
QUORUM OF SHAREHOLDERS
Section 3.1 The presence, in person or by proxy, of shareholders entitled
to cast at least a majority of the votes which all shareholders are entitled to
cast on the particular matter shall constitute a quorum for purposes of
considering such matter, and unless otherwise provided by statute the acts of
such shareholders at a duly organized meeting shall be the acts of the
shareholders.
Section 3.2 If, however, any meeting of shareholders cannot be organized
because of lack of a quorum, those present, in person or by proxy, shall have
the power, except as otherwise provided by statute, to adjourn the meeting to
such time and place as they may determine, without notice other than an
announcement at the meeting, until the requisite number of shareholders for a
quorum shall be present, in person or by proxy, except that those shareholders
entitled to vote who attend a meeting of shareholders:
(1) At which directors are to be elected that has been previously
adjourned for lack of a quorum, although less than a quorum, shall
nevertheless constitute a quorum for the purpose of electing directors;
(2) That has been previously adjourned for one or more periods
aggregating at least fifteen (15) days because of an absence of a quorum,
although less than a quorum, shall nevertheless constitute a quorum for the
purpose of acting upon any matter set forth in the notice of the meeting if
the notice states that those shareholders who attend the adjourned meeting
shall nevertheless constitute a quorum for the purpose of acting upon the
matter.
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Section 3.3 At any adjourned meeting at which a quorum shall be present or
so represented, any business may be transacted which might have been transacted
at the original meeting if a quorum had been present. The shareholders present,
in person or by proxy, at a duly organized meeting can continue to do business
until adjournment, notwithstanding the withdrawal of enough shareholders to
leave less than a quorum.
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Article 4
VOTING RIGHTS
Section 4.1 Except as may be otherwise provided by statute or by the
Articles of Incorporation, at every shareholders meeting, every shareholder
entitled to vote thereat shall have the right to one vote for every share having
voting power standing in his name on the transfer books for shares of the
Corporation on the record date fixed for the meeting.
Section 4.2 When a quorum is present at any meeting the voice vote of the
holders of a majority of the stock having voting power, present, in person or by
proxy, shall decide any question brought before such meeting except as provided
differently by statute or by the Articles of Incorporation.
Section 4.3 Upon demand made by a shareholder entitled to vote at any
election for directors before the voting begins, the election shall be by
ballot.
Article 5
PROXIES
Section 5.1 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 him by proxy. Every
proxy shall be executed in writing by the shareholder or his duly authorized
attorney in fact and filed with the Secretary of the Corporation.
Section 5.2 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 notice
thereof has been given to the Secretary of the Corporation. No unrevoked proxy
shall be valid after eleven (11) months from the date of its execution, unless a
longer time is expressly provided therein, but in no event shall a proxy, unless
coupled with an interest, be voted after three (3) years from the date of its
execution. 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 such death or incapacity is given to the Secretary of the Corporation.
Article 6
RECORD DATE
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Section 6.1 The Board of Directors may fix a time, not more than ninety
(90) days prior to the date of any meeting of shareholders, or the date fixed
for the payment of any dividend or distribution, or the date for the allotment
of rights, or the date when any change or conversion or exchange of shares will
be made or go into effect, as a record date for the determination of the
shareholders entitled to notice of, and to vote at, any such meeting, or
entitled to receive payment of any such dividend or distribution, or to receive
any such allotment of rights, or to exercise the rights in respect to any such
change, conversion or exchange of shares. In such case, only such shareholders
as shall be shareholders of record on the date so fixed shall be entitled to
notice of, or to vote at, such meeting or to receive payment of such dividend or
distribution or to receive such allotment of rights or to exercise such rights,
as the case may be, notwithstanding any transfer of any shares on the transfer
books for shares of the Corporation after any record date fixed as aforesaid.
Section 6.2 The Board of Directors may close the transfer books for shares
of the Corporation against transfers of shares during the whole or any part of
such period, and in such case written or printed notice thereof shall be mailed
at least ten (10) days before closing thereof to each shareholder of record at
the address appearing on the records of the Corporation or supplied by him to
the Corporation for the purpose of notice. While the transfer books for shares
of the Corporation are closed, no transfer of shares shall be made thereon. If
no record date is fixed by the Board of Directors for the determination of
shareholders entitled to receive notice of, and vote at, a shareholders meeting,
transferees of shares which are transferred on the books of the Corporation
within ten (10) days next preceding the date of such meeting shall not be
entitled to notice of or to vote at such meeting.
Article 7
VOTING LISTS
Section 7.1 The Secretary shall have charge of the transfer books for
shares of the Corporation and 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.
Section 7.2 Failure to comply with the requirements of Section 7.1 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 the
Commonwealth of 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 an any meeting of shareholders.
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Article 8
JUDGES OF ELECTION
Section 8.1 In advance of any meeting of shareholders, 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. A person who is a candidate for office to be
filled at the meeting shall not act as a judge.
Section 8.2 In case 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.
Section 8.3 The judges of election shall determine the number of shares
outstanding and the voting power of each, the shares represented at the meeting,
the existence of a quorum, the authenticity, validity and effect of proxies,
receive votes or ballots, hear and determine all challenges and questions in any
way arising in connection with the right to vote, count and tabulate all votes,
determine the result and do such acts as may be proper to conduct the election
or vote with fairness to all shareholders. The judges of election shall perform
their duties impartially, in good faith, to the best of their ability and as
expeditiously as is practical. If there are three judges of election, the
decision, act or certificate of a majority shall be effective in all respects as
the decision, act or certificate of all.
Section 8.4 On request of the presiding officer of the meeting, or of any
shareholder, the judges of election 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.
Article 9
DIRECTORS
Section 9.1 Nominations for election to the Board of Directors may be made
by the Board of Directors or by any shareholder of any outstanding class of
capital stock of the Corporation entitled to vote for the election of directors.
Any shareholder who intends to nominate or to cause to have nominated any
candidate for election to the Board of Directors (other than any candidate
proposed by the Corporation's then existing Board of Directors) shall so notify
the Secretary of the Corporation in writing not less than sixty (60) days prior
to the date of any meeting of shareholders called for the
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election of directors. Such notification shall contain the following information
to the extent known by the notifying shareholder.
(a) the name and address of each proposed nominee;
(b) the age of each proposed nominee;
(c) the principal occupation of each proposed nominee;
(d) the number of shares of the Corporation owned by each proposed
nominee;
(e) the total number of shares that to the knowledge of the notifying
shareholder will be voted for each proposed nominee;
(f) the name and residence address of the notifying shareholder; and
(g) the number of shares of the Corporation owned by the notifying
shareholder.
Any nomination for director not made in accordance with this Section shall
be disregarded by the presiding officer of the meeting, and votes cast for each
such nominee shall be disregarded by the judges of election. In the event that
the same person is nominated by more than one shareholder, if at least one
nomination for such person complies with this Section, the nomination shall be
honored and all votes cast for such nominee shall be counted.
Section 9.2 The number of directors that shall constitute the whole Board
of Directors shall be not less than three (3). The Board of Directors shall be
classified into three (3) classes, each class to be elected for a term of three
(3) years. The terms of the respective classes shall expire in successive years
as provided in Section 9.3 hereof. Within the foregoing limits, the Board of
Directors may from time to time fix the number of directors and their respective
classifications.
Section 9.3 At the 1999 annual meeting of shareholders of the Corporation,
the shareholders shall elect ten (10) directors as follows: four (4) Class A
directors to serve until the 2000 annual meeting of shareholders, three (3)
Class B directors to serve until the 2001 annual meeting of
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shareholders, and three (3) Class C directors to serve until the 2002 annual
meeting of shareholders. Each class shall be elected in a separate election. At
each annual meeting of shareholders thereafter, successors to the class of
directors whose term shall then expire shall be elected to hold office for a
term of three (3) years, so that the term of office of one class of directors
shall expire in each year. The Board of Directors shall have the sole discretion
to increase the number of Directors that shall constitute the whole Board of
Directors; provided however, that the total number of Directors in each class
remains relatively proportionate to the others.
Section 9.4 The Board of Directors may declare vacant the office of a
director who has been judicially declared of unsound mind or who has been
convicted of an offense punishable by imprisonment for a term of more than one
year or for any other proper cause which these By-laws may specify or if, within
sixty (60) days or such other time as these By-laws may specify after notice of
his selection, he does not accept the office either in writing or by attending a
meeting of the Board of Directors and fulfill such other requirements of
qualification as these By-laws may specify.
Section 9.5 Upon application of any shareholder or director, the court may
remove from office any director in case of fraudulent or dishonest acts, or
gross abuse of authority or discretion with reference to the Corporation, or for
any other proper cause, and may bar from office any director so removed for a
period prescribed by the court. The Corporation shall be made a party to the
action and, as a prerequisite to the maintenance of an action under this Section
9.5, a shareholder shall comply with Section 1782 of the Business Corporation
Law of 1988, and any amendments or supplements thereto.
Section 9.6 An act of the Board of Directors done during the period when a
director has been suspended or removed for cause shall not be impugned or
invalidated if the suspension or removal is thereafter rescinded by the
shareholders or by the Board of Directors or by the final judgment of a court.
Section 9.7 The Board of Directors may appoint a person who previously held
the position of Director to be a Director Emeritus. A Director Emeritus may
attend meetings of the Board of Directors and shall have such other rights and
privileges as may be determined from time to time by resolution of the Board of
Directors.
Article 10
VACANCIES ON BOARD OF DIRECTORS
Article 10.1 Vacancies on the Board of Directors, including vacancies
resulting from an increase in the number of directors, shall be filled by a
majority of the remaining members of the Board of Directors, or by a sole
remaining director, though less than a quorum, and each person so
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appointed shall be a director until the expiration of the term of office of the
class of directors to which he was appointed.
Article 11
POWERS OF BOARD OF DIRECTORS
Section 11.1 The business and affairs of the Corporation shall be managed
by its Board of Directors, which may exercise all such powers of the Corporation
and do all such lawful acts and things as are not by statute or by the Articles
of Incorporation or by these By-laws directed or required to be exercised and
done by the shareholders.
Section 11.2 A director shall stand in a fiduciary relation to the
Corporation and shall perform his duties as a director, including his duties as
a member of any committee of the Board of Directors upon which he may serve, in
good faith, in a manner he reasonably believes to be in the best interests of
the Corporation and with such care, including reasonable inquiry, skill and
diligence, as a person of ordinary prudence would use under similar
circumstances. In performing his duties, a director shall be entitled to rely in
good faith on information, opinions, reports or statements, including financial
statements and other financial data, in each case prepared or presented by any
of the following:
(a) One or more officers or employees of the Corporation whom the director
reasonably believes to be reliable and competent in the matters presented.
(b) Counsel, public accountants or other persons as to matters which the
director reasonably believes to be within the professional or expert competence
of such persons.
(c) A committee of the Board of Directors upon which he does not serve,
duly designated in accordance with law, as to matters within its designated
authority, which committee the director reasonably believes to merit confidence.
A director shall not be considered to be acting in good faith if he has
knowledge concerning the matter in question that would cause his reliance to be
unwarranted.
In assessing whether the standard set forth herein has been satisfied,
there shall not be any greater obligation to justify, or higher burden of proof
with respect to, any act as the board of directors, any committee of the board
or any individual director relating to or affecting an acquisition or potential
or proposed acquisition of control of the corporation than is applied to any
other act as a board of directors, any committee of the board or any individual
director.
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Section 11.3 In discharging the duties of their respective positions, the
Board of Directors, committees of the Board of Directors and individual
directors may, in considering the best interests of the Corporation, consider
the effects of any action upon employees, upon suppliers, upon creditors and
customers of the Corporation and upon communities in which offices or other
establishments of the Corporation are located, and all other pertinent factors.
The consideration of those factors shall not constitute a violation of Section
11.2.
Section 11.4 Absent breach of fiduciary duty, lack of good faith or
self-dealing, actions taken as a director or any failure to take any action
shall be presumed to be in the best interests of the Corporation.
Section 11.5 A director shall not be personally liable, as such, for
monetary damages for any action taken, or any failure to take any action,
unless:
(a) the director has breached or failed to perform the duties of his office
under this Article 11; and
(b) the breach or failure to perform constitutes self-dealing, willful
misconduct or recklessness.
Section 11.6 The provisions of Section 11.5 shall not apply to:
(a) the responsibility or liability of a director pursuant to any criminal
statute; or
(b) the liability of a director for the payment of taxes pursuant to local,
State or Federal law.
Section 11.7 A director of the Corporation who is present at a meeting of
the Board of Directors, or of a committee of the Board of Directors, at which
action on any corporate matter is taken shall be presumed to have assented to
the action taken unless his dissent is entered in the minutes of the meeting or
unless he files his written dissent to the action with the Secretary of the
Corporation before the adjournment thereof or transmits the dissent in writing
to the Secretary of the Corporation immediately after the adjournment of the
meeting. The right to dissent shall not apply to a director who voted in favor
of the action. Nothing in this Section 11.7 shall bar a director from asserting
that minutes of any meeting incorrectly omitted his dissent if, promptly upon
receipt of a copy of such minutes, he notifies the Secretary of the Corporation,
in writing, of the asserted omission or inaccuracy.
Article 12
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COMMITTEES OF THE BOARD OF DIRECTORS
Section 12.1 The Board of Directors may, by resolution adopted by a
majority of the directors in office, establish one or more committees to consist
of one or more directors of the Corporation. Any committee, to the extent
provided in the resolution of the Board of Directors or in these By-laws, 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 as to the
following:
(a) The submission to shareholders of any action requiring approval of
shareholders under applicable law, the Articles of Incorporation or
these By-laws.
(b) The creation or filling of vacancies in the Board of Directors.
(c) The adoption, amendment or repeal of these By-laws.
(d) The amendment or repeal of any resolution of the Board of Directors
that by its terms is amendable or repealable only by the Board of
Directors.
(e) Action on matters committed by these By-laws or resolution of the
Board of Directors to another committee of the Board of Directors.
Section 12.2 The Board of Directors 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 the purposes of any written action
by the committee. In the absence or disqualification of a member and alternate
member or members of a committee, the member or members thereof present at any
meeting and not disqualified from voting, whether or not he or they constitute a
quorum, may unanimously appoint another director to act at the meeting in the
place of the absent or disqualified member.
Section 12.3 Each committee of the Board of Directors shall serve at the
pleasure of the Board of Directors. The term "Board of Directors," when used in
any provision of this Article 12 relating to the organization or procedures of
or the manner of taking action by the Board of Directors, shall be construed to
include and refer to any executive or other committee of the Board of Directors.
Any provision of this Article 12 relating or referring to action to be taken by
the Board of Directors or the procedure required therefor shall be satisfied by
the taking of corresponding action by a committee of the Board of Directors to
the extent authority to take the action has been delegated to the committee
pursuant to this Article 12.
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Article 13
MEETINGS OF THE BOARD OF DIRECTORS
Section 13.1 An organization meeting may be held immediately following the
annual shareholders meeting without the necessity of notice to the directors to
constitute a legally convened meeting, or the directors may meet at such time
and place as may be fixed by either a notice or waiver of notice or consent
signed by all of such directors.
Section 13.2 Regular meetings of the Board of Directors shall be held not
less often than semi-annually at a time and place determined by the Board of
Directors at the preceding meeting. One or more directors may participate in any
meeting of the Board of Directors, or of any committee thereof, by means of a
conference telephone or similar communications equipment by means of which all
persons participating in the meeting can hear one another.
Section 13.3 Special meetings of the Board of Directors may be called by
the President on one (1) day's notice to each director, either personally or in
the manner set forth under Article 32 hereof; special meetings shall be called
by the President in like manner and on like notice upon the written request of
three (3) directors.
Section 13.4 At all meetings of the Board of Directors, a majority of the
directors shall constitute a quorum for the transaction of business, and the
acts of a majority of the directors present at a meeting in person or by
conference telephone or similar communications equipment at which a quorum is
present in person or by such communications equipment shall be the acts of the
Board of Directors, except as may be otherwise specifically provided by statute
or by the Articles of Incorporation or by these By-laws. If a quorum shall not
be present in person or by communications equipment at any meeting of the
directors, the directors present may adjourn the meeting from time to time,
without notice other than announcement at the meeting, until a quorum shall be
present or as permitted herein.
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Article 14
INFORMAL ACTION BY THE BOARD OF DIRECTORS
Section 14.1 Any action required or permitted to be taken at a meeting of
the 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.
Article 15
COMPENSATION OF DIRECTORS
Section 15.1 Directors, as such, may receive a stated salary for their
services or a fixed sum and expenses for attendance at regular and special
meetings, or any combination of the foregoing as may be determined from time to
time by resolution of the Board of Directors, and nothing contained herein shall
be construed to preclude any director from serving the Corporation in any other
capacity and receiving compensation therefor.
Article 16
OFFICERS
Section 16.1 The officers of the Corporation shall be elected by the Board
of Directors at its organizational meeting and shall be a President, a Chairman
of the Board, a Secretary and Treasurer. The Board of Directors may elect one or
more Vice Presidents and such other officers and appoint such agents as it shall
deem necessary, who shall hold their offices for such terms, have such authority
and perform such duties as may from time to time be prescribed by the Board of
Directors. Any number of offices may be held by the same person, except that the
offices of Chairman, President, Treasurer and Chief Financial Officer, if any,
shall not be held by the same person or persons.
Section 16.2 The compensation of all officers of the Corporation shall be
fixed by the Board of Directors.
Section 16.3 Each officer shall hold office for a term of one year and
until his successor has been selected and qualified or until his earlier death,
resignation or removal. Any officer may resign at any time upon written notice
to the Corporation. The resignation shall be effective upon receipt thereof by
the Corporation or at such subsequent time as may be specified in the notice of
resignation. The Corporation may secure the fidelity of any or all of the
officers by bond or otherwise.
Section 16.4 Any officer or agent of the Corporation may be removed by the
Board of Directors with or without cause. The removal shall be without prejudice
to the contract rights, if any,
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of any person so removed. Election or appointment of an officer or agent shall
not of itself create contract rights.
Section 16.5 An officer shall perform his duties as an officer in good
faith, in a manner he reasonably believes to be in the best interests of the
Corporation and with such care, including reasonable inquiry, skill and
diligence, as a person of ordinary prudence would use under similar
circumstances. A person who so performs his duties shall not be liable by reason
of having been an officer of the Corporation.
Article 17
THE CHAIRMAN OF THE BOARD
Section 17.1 The Board of Directors shall appoint one of its members to be
the Chairman of the Board. He shall preside at all meetings of the shareholders
and directors; shall supervise the carrying out of the policies adopted or
approved by the Board; shall have general executory powers in addition to those
specific powers conferred by these By-laws; and shall also have and may exercise
such further powers and duties as from time to time may be conferred upon or
assigned to him by the Board of Directors.
Article 18
THE PRESIDENT
Section 18.1 The Board of Directors shall appoint one of its members to be
President. He shall be the chief executive officer of the Corporation. He shall
supervise the carrying out of the policies adopted or approved by the Board of
Directors; shall have general and active management of the business of the
Corporation; shall see that all orders and resolutions of the Board of Directors
are put into effect, subject, however, to the right of the Board of Directors to
delegate any specific powers, except such as may be by statute exclusively
conferred on any particular officer or officers of the Corporation. The
President shall execute bonds, mortgages and other contracts requiring a seal
under the seal of the Corporation, except where required or permitted by law to
be otherwise signed and executed and except where the signing and execution
thereof shall be expressly delegated by the Board of Directors to some other
officer or agent of the Corporation. He shall have general executory powers in
addition to those specific powers conferred by these By-laws. He shall also have
and may exercise such further powers and duties as from time to time may be
conferred upon or assigned to him by the Board of Directors. In the absence or
incapacity of the Chairman of the Board, the President shall preside at meetings
of the shareholders and the directors.
Article 19
THE VICE PRESIDENT
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Section 19.1 The Vice President or, if more than one, the Vice Presidents
in the order established by the Board of Directors shall, in the absence or
incapacity of the President, exercise all powers and perform the duties of the
President. The Vice Presidents, respectively, shall also have such other
authority and perform such other duties as may be provided in these By-laws or
as shall be determined by the Board of Directors or the President. Any Vice
President may, in the discretion of the Board of Directors, be designated as
"executive," "senior," or by departmental or functional classification.
Article 20
THE SECRETARY
Section 20.1 The Secretary shall attend all meetings of the Board of
Directors and of the shareholders and keep accurate records thereof in one or
more minute books kept for that purpose, shall attend to the giving of all
notices required by these By-laws to be given, and shall perform the duties
customarily performed by the secretary of a corporation and such other duties as
may be assigned to him by the Board of Directors or the President.
Article 21
THE TREASURER
Section 21.1 The Treasurer shall have the custody of the corporate funds
and securities; shall keep full and accurate accounts of receipts and
disbursements in books belonging to the Corporation and shall perform such other
duties as may be assigned to him by the Board of Directors or the President. He
shall give bond in such sum and with such surety as the Board of Directors may
from time to time direct.
Article 22
ASSISTANT OFFICERS
Section 22.1 Each assistant officer shall assist in the performance of the
duties of the officer to whom he is assistant and shall perform such duties in
the absence of the officer. He shall perform such additional duties as the Board
of Directors, the President, the Chairman of the Board or the officer to whom he
is assistant may from time to time assign him. Such officers may be given such
functional titles as the Board of Directors shall from time to time determine.
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Article 23
INDEMNIFICATION
Section 23.1 (Third Party Actions) The Corporation shall have power to
indemnify any person who was or is a party or is threatened to be made a party
to any threatened, pending or completed action or proceeding, whether civil,
criminal, administrative or investigative (other than an action by or in the
right of the corporation), by reason of the fact that he is or was a
representative of the Corporation, or is or was serving at the request of the
Corporation as a representative of another domestic or foreign corporation for
profit or not-for-profit, partnership, joint venture, trust or other enterprise,
against expenses (including attorneys' fees), judgments, fines and amounts paid
in settlement actually and reasonably incurred by him in connection with the
action or proceeding if he acted in good faith and in a manner he reasonably
believed to be in, or not opposed to, the best interests of the Corporation and,
with respect to any criminal proceeding, had no reasonable cause to believe his
conduct was unlawful. The termination of any action or proceeding by judgment,
order, settlement or conviction or upon a plea of nolo contendere or its
equivalent shall not of itself create a presumption that the person did not act
in good faith and in a manner that he reasonably believed to be in, or not
opposed to, the best interests of the Corporation and, with respect to any
criminal proceeding, had no reasonable cause to believe that his conduct was
unlawful.
Section 23.2 (Derivative Actions) The Corporation shall have power to
indemnify any person who was or is a party, or is threatened to be made a party,
to any threatened, pending or completed action by or in the right of the
Corporation to procure a judgment in its favor by reason of the fact that he is
or was a representative of the Corporation or is or was serving at the request
of the Corporation as a representative of another domestic or foreign
corporation for profit or not-for-profit, partnership, joint venture, trust or
other enterprise, against expenses (including attorneys' fees) actually and
reasonably incurred by him in connection with the defense or settlement of the
action if he acted in good faith and in a manner he reasonably believed to be
in, or not opposed to, the best interests of the Corporation. Indemnification
shall not be made under this section in respect of any claim, issue or matter as
to which the person has been adjudged to be liable to the Corporation unless and
only to the extent that the court of common pleas of the judicial district
embracing the county in which the registered office of the Corporation is
located or the court in which the action was brought determines upon application
that, despite the adjudication of liability but in view of all the circumstances
of the case, the person is fairly and reasonably entitled to indemnity for the
expenses that the court of common pleas or other court deems proper.
Section 23.3 (Mandatory Indemnification) To the extent that a
representative of the Corporation has been successful on the merits or otherwise
in defense of any action or proceeding referred to in Sections 23.1 (relating to
third party actions) or 23.2 (relating to derivative actions) or in defense of
any claim, issue or matter therein, he shall be indemnified against expenses
(including attorneys' fees) actually and reasonably incurred by him in
connection therewith.
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Section 23.4 (Procedure for Effecting Indemnification) Unless ordered by a
court, any indemnification under Sections 23.1 (relating to third party actions)
or 23.2 (relating to derivative actions) shall be made by the Corporation only
as authorized in the specific case upon a determination that indemnification of
the person is proper in the circumstances because he has met the applicable
standard of conduct set forth in those sections. The determination shall be
made:
(a) by the Board of Directors by a majority vote of a quorum consisting of
directors who were not parties to the action or proceeding;
(b) if such a quorum is not obtainable or if obtainable and a majority
vote of a quorum of disinterested directors so directs, by independent
legal counsel in a written opinion; or
(c) by the shareholders.
Section 23.5 (Advancing Expenses) Expenses (including attorneys' fees)
incurred in defending any action or proceeding referred to in this Article 23
may be paid by the Corporation in advance of the final disposition of the action
or proceeding upon receipt of an undertaking by or on behalf of the person to
repay the amount if it is ultimately determined that he is not entitled to be
indemnified by the Corporation as authorized in this Article 23 or otherwise.
Section 23.6 (Supplementary Coverage) (a) The indemnification and
advancement of expenses provided by, or granted pursuant to, the other sections
of this Article 23 shall not be deemed exclusive of any other rights to which a
person seeking indemnification or advancement of expenses may be entitled under
any By-law, agreement, vote of shareholders or disinterested directors or
otherwise, both as to action in his official capacity and as to action in
another capacity while holding that office. The Corporation may create a fund of
any nature, which may, but need not be, under the control of a trustee, or
otherwise secure or insure in any manner its indemnification obligations,
whether arising under or pursuant to this Section 23.6 or otherwise.
(b) Indemnification pursuant to subsection (a) of this Section 23.6 shall
not 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) Indemnification pursuant to subsection (a) of this Section 23.6 under
any By-law, agreement, vote of shareholders or directors or otherwise,
may be granted for any action taken or any failure to take any action
and may be made whether or not the Corporation would have the power to
indemnify the person under any other provision of law except as
provided in this Section 23.6 and whether or not the indemnified
liability arises or arose from any threatened, pending or completed
action by or in the right of the Corporation.
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Section 23.7 (Power to Purchase Insurance) The Corporation shall have power
to purchase and maintain insurance on behalf of any person who is or was a
representative of the Corporation or is or was serving at the request of the
Corporation as a representative of another domestic or foreign corporation for
profit or not-for-profit, partnership, joint venture, trust or other enterprise
against any liability asserted against him and incurred by him in any such
capacity, or arising out of his status as such, whether or not the Corporation
would have the power to indemnify him against that liability under the
provisions of this Article 23.
Section 23.8 (Application to Surviving or New Corporations) For the purpose
of this Article 23, references to "the Corporation" include all constituent
corporations absorbed in a consolidation, merger or division, as well as the
surviving or new corporations surviving or resulting therefrom, so that any
person who is or was a representative of the constituent, surviving or new
corporation, or is or was serving at the request of the constituent, surviving
or new corporation as a representative of another domestic or foreign
corporation for profit or not-for-profit, partnership, joint venture, trust or
other enterprise, shall stand in the same position under the provisions of this
Article 23 with respect to the surviving or new corporation as he would if he
had served the surviving or new corporation in the same capacity.
Section 23.9 (Application to Employee Benefit Plans) For purposes of this
Article 23:
(a) References to "other enterprises" shall include employee benefit plans
and references to "serving at the request of the Corporation" shall
include any service as a representative of the Corporation that
imposes duties on, or involves services by, the representative with
respect to an employee benefit plan, its participants or
beneficiaries.
(b) Excise taxes assessed on a person with respect to an employee benefit
plan pursuant to applicable law shall be deemed "fines."
(c) Action with respect to an employee benefit plan taken or omitted in
good faith by a representative of the Corporation in a manner he
reasonably believed to be in the interest of the participants and
beneficiaries of the plan shall be deemed to be action in a manner
that is not opposed to the best interests of the Corporation.
Section 23.10 (Duration and Extent of Coverage) The indemnification and
advancement of expenses provided by, or granted pursuant to, this Article 23
shall, unless otherwise provided when authorized or ratified, continue as to a
person who has ceased to be a representative of the Corporation and shall inure
to the benefit of the heirs and personal representative of that person.
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Article 24
SHARE CERTIFICATES
Section 24.1 The share certificates of the Corporation shall be numbered
and registered in a share register as they are issued; shall bear the name of
the registered holder, the number and class of shares represented thereby, the
par value of each share or a statement that such shares are without par value,
as the case may be; shall be signed by the Chairman of the Board or the
President and the Secretary or the Treasurer or any other person properly
authorized by the Board of Directors, and shall bear the corporate seal, which
seal may be a facsimile engraved or printed. Where the certificate is signed by
a transfer agent or a registrar, the signature of any corporate officer on such
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 by the Corporation with the
same effect as if the officer had not ceased to be such at the date of its
issue.
Article 25
TRANSFER OF SHARES
Section 25.1 Upon surrender to the Corporation of a share certificate duly
endorsed by the person named in the certificate or by attorney duly appointed in
writing and accompanied where necessary by proper evidence of succession,
assignment or authority to transfer, a new certificate shall be issued to the
person entitled thereto and the old certificate cancelled and the transfer
recorded upon the transfer books for shares of the Corporation. No transfer
shall be made if it would be inconsistent with the provisions of Article 8 of
the Pennsylvania Uniform Commercial Code.
Article 26
LOST CERTIFICATES
Section 26.1 Where a shareholder of the Corporation alleges the loss, theft
or destruction of one or more certificates for shares of the Corporation and
requests the issuance of a substitute certificate therefor, the Board of
Directors may direct a new certificate of the same tenor and for the same number
of shares to be issued to such person upon such person's making of an affidavit
in form satisfactory to the Board of Directors setting forth the facts in
connection therewith, provided that prior to the receipt of such request the
Corporation shall not have either registered a transfer of such certificate or
received notice that such certificate has been acquired by a bona fide
purchaser. When authorizing such issue of a new certificate the Board of
Directors may, in its discretion and as a condition precedent to the issuance
thereof, require the owner of such lost, stolen or destroyed
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certificate, or his heirs or legal representatives, as the case may be, to
advertise the same in such manner as it shall require and/or give the
Corporation a bond in such form and with surety or sureties, with fixed or open
penalty, as shall be satisfactory to the Board of Directors, as indemnity for
any liability or expense which it may incur by reason of the original
certificate remaining outstanding.
Article 27
DIVIDENDS
Section 27.1 The Board of Directors may, from time to time, at any duly
convened regular or special meeting or by unanimous consent in writing, declare
and pay dividends upon the outstanding shares of capital stock of the
Corporation in cash, property or shares of the Corporation, so long as any
dividend shall not be in violation of law and the Articles of Incorporation.
Section 27.2 Before payment of any dividend, there may be set aside out of
any funds of the Corporation available for dividends such sum or sums as the
Board of Directors from time to time, in their absolute discretion, think proper
as a reserve fund to meet contingencies, or for equalizing dividends, or for
repairing or maintaining any property of the Corporation, or for such other
purposes as the Board of Directors shall believe to be for the best interests of
the Corporation, and the Board of Directors may reduce or abolish any such
reserve in the manner in which it was created.
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Article 28
FINANCIAL REPORT TO SHAREHOLDERS
Section 28.1 The Chairman of the Board, the President and the Board of
Directors shall present prior to each annual meeting of the shareholders a full
and complete statement of the business and affairs of the Corporation for the
preceding year.
Article 29
INSTRUMENTS
Section 29.1 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
Chairman of the Board, the President or the Vice President and Secretary or
Assistant Secretary or Treasurer or Assistant Treasurer of the Corporation,
shall be held to have been properly executed for and in behalf of the
Corporation.
Section 29.2 The affixation of the corporate seal shall not be necessary to
the valid execution, assignment or endorsement by the Corporation of any
instrument or other document.
Article 30
FISCAL YEAR
Section 30.1 The fiscal year of the Corporation shall be the calendar year.
Article 31
SEAL
Section 31.1 The President, the Treasurer, the Secretary and any Assistant
Treasurer or Assistant Secretary, or any other officer designated by the Board
of Directors, shall have the authority to affix the corporate seal to any
document requiring such seal and to attest the same. The corporate seal shall
have inscribed thereon the name of the Corporation, the year of its organization
and the
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words "Corporate Seal, Pennsylvania." Such seal may be used by causing it or a
facsimile thereof to be impressed or affixed in any manner reproduced.
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Article 32
NOTICES AND WAIVERS THEREOF
Section 32.1 Whenever written notice is required to be given to any person
under the provisions of applicable law, by the Articles of Incorporation or of
these By-laws, it may be given to the person either personally or by sending a
copy thereof by first class or express mail, postage prepaid, or by telegram
(with messenger service specified), telex or TWX (with answer-back received) or
courier service, charges prepaid, or by telecopier, to his address (or to his
telex, TWX, telecopier or telephone number) appearing on the books of the
Corporation or, in the case of directors, supplied by him to the Corporation for
the purpose of notice. If the notice if sent by mail, telegraph or courier
service, it shall be deemed to have been given to the person entitled thereto
when deposited in the United States mail or with a telegraph office or courier
service for delivery to that person or, in the case of telex or TWX, when
dispatched. A notice of meeting shall specify the place, day and hour of the
meeting and any other information required by any other provision of these
By-laws.
Section 32.2 Whenever any written notice is required to be given under the
provisions of applicable law, the Articles of Incorporation or of these By-laws,
a waiver thereof in writing, signed by the person or persons entitled to the
notice, whether before or after the time stated therein, shall be deemed
equivalent to the giving of the notice. Except as otherwise required by these
By-laws, neither the business to be transacted at, nor the purpose of, a meeting
need be specified in the waiver of notice of the meeting. In the case of a
special meeting of shareholders, the waiver of notice shall specify the general
nature of the business to be transacted.
Section 32.3 Attendance of a person at any meeting shall constitute a
waiver of notice of the meeting except where a person attends a meeting for the
express purpose of objecting, at the beginning of the meeting, to the
transaction of any business because the meeting was not lawfully called or
convened.
Section 32.4 Whenever any notice or communication is required to be given
to any person under the provisions of applicable law, the Articles of
Incorporation, these By-laws, the terms of any agreement and any other
instrument or as a condition precedent to taking any corporate action, and
communication with that person is then unlawful, the giving of the notice or
communication to that person shall not be required and there shall be no duty to
apply for a license or other permission to do so. Any action or meeting that is
taken or held without notice or communication to that person shall have the same
validity as if the notice or communication had been duly given. If the action
taken is such as to require the filing of any document with respect thereto
under any provision of law or any agreement or other instrument, it shall be
sufficient, if such is the fact and if notice or communication in required, to
state therein that notice or communication was given to all persons entitled to
receive notice or communication except persons with whom communication was
unlawful.
Section 32.5 Section 32.4 shall also be applicable to any shareholder with
whom the Corporation has been unable to communicate for more than twenty-four
(24) consecutive months
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because communications to the shareholder are returned unclaimed or the
shareholder has otherwise failed to provide the Corporation with a current
address. Whenever the shareholder provides the Corporation with a current
address, Section 32.4 shall cease to be applicable to the shareholder under this
Section 32.5.
Article 33
EMERGENCIES
Section 33.1 The Board of Directors may adopt emergency By-laws, subject to
repeal or change by action of the shareholders, which shall, notwithstanding any
different provisions of law, of the Articles of Incorporation or of these
By-laws, be effective during any emergency resulting from an attack on the
United States, a nuclear disaster or another catastrophe as a result of which a
quorum of the Board of Directors cannot readily be assembled. The emergency
By-laws may make any provision that may be appropriate for the circumstances of
the emergency including, procedures for calling meetings of the Board of
Directors, quorum requirements for meetings and procedures for designating
additional or substitute directors.
Section 33.2 The Board of Directors, either before or during any emergency,
may provide, and from time to time modify, lines of succession in the event that
during the emergency any or all officers or agents of the Corporation shall for
any reason be rendered incapable of discharging their duties and may, effective
in the emergency, change the head offices or designate several alternative head
offices or regional offices of the Corporation or authorize the officers to do
so.
Section 33.3 A representative of the Corporation acting in accordance with
any emergency By-laws shall not be liable except for willful misconduct and
shall not be liable for any action taken by him in good faith in an emergency in
furtherance of the ordinary business affairs of the Corporation even though not
authorized by the emergency or other By-laws then in effect.
Section 33.4 To the extent not inconsistent with any emergency By-laws so
adopted, the By-laws of the Corporation shall remain in effect during any
emergency and, upon its termination, the emergency By-laws shall cease to be
effective.
Section 33.5 Unless otherwise provided in emergency By-laws, notice of any
meeting of the Board of Directors during an emergency shall be given only to
those directors to whom it is feasible to reach at the time and by such means as
are feasible at the time, including publication, radio or television. To the
extent required to constitute a quorum at any meeting of the Board of Directors
during any emergency, the officers of the Corporation who are present shall,
unless otherwise provided in emergency By-laws, be deemed, in order of rank and
within the same rank in order of seniority, directors for the meeting.
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Article 34
AMENDMENTS
Section 34.1 These By-laws may be altered, amended or repealed by the
affirmative vote of the holders of at least seventy-five percent (75%) of the
outstanding shares of Common Stock at any regular or special meeting duly
convened after notice to the shareholders of that purpose, or by a majority vote
of the members of the Board of Directors at any regular or special meeting
thereof duly convened after notice to the directors of that purpose, subject
always to the power of the shareholders to change such action of the Board of
Directors by the affirmative vote of the holders of seventy-five percent (75%)
of the outstanding shares of Common Stock.
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EXHIBIT E
EXCERPTS FROM SECTION 215a
OF THE NATIONAL BANK ACT
CONCERNING DISSENTERS' RIGHTS
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EXCERPTS FROM SECTION 215a OF THE
NATIONAL BANK ACT RELATING TO DISSENTERS' RIGHTS
(b) If a merger shall be voted for at the called meetings by the necessary
majorities of the shareholders of each association or State bank participating
in the plan of merger, and thereafter the merger shall be approved by the
Comptroller, any shareholder of any association or State bank to be merged into
the receiving association who has voted against such merger at the meeting of
the association or bank of which he is a stockholder, or has given notice in
writing at or prior to such meeting to the presiding officer that he dissents
from the plan of merger, shall be entitled to receive the value of the shares so
held by him when such merger shall be approved by the Comptroller upon written
request made to the receiving association at any time before thirty days after
the date of consummation of the merger, accompanied by the surrender of his
stock certificates.
(c) The value of the shares of any dissenting shareholder shall be
ascertained, as of the effective date of the merger, by an appraisal made by a
committee of three persons, composed of (1) one selected by the vote of the
holders of the majority of the stock, the owners of which are entitled to
payment in cash; (2) one selected by the directors of the receiving association;
and (3) one selected by the two so selected. The valuation agreed upon by any
two of the three appraisers shall govern. If the value so fixed shall not be
satisfactory to any dissenting shareholder who has requested payment, that
shareholder may, within five days after being notified of the appraised value of
his shares, appeal to the Comptroller, who shall cause a reappraisal to be made
which shall be final and binding as to the value of the shares of the appellant.
(d) If, within ninety days from the date of consummation of the merger, for
any reason one or more of the appraisers is not selected as herein provided, or
the appraisers fail to determine the value of such shares, the Comptroller shall
upon written request of any interested party cause an appraisal to be made which
shall be final and binding on all parties. The expenses of the Comptroller in
making the reappraisal or the appraisal, as the case may be, shall be paid by
the receiving association. The value of the shares ascertained shall be promptly
paid to the dissenting shareholders by the receiving association. The shares of
stock of the receiving association which would have been delivered to such
dissenting shareholders had they not requested payment shall be sold by the
receiving association at an advertised public auction, and the receiving
association shall have the right to purchase any of such shares at such public
auction, if it is the highest bidder therefor, for the purpose of reselling such
shares within thirty days thereafter to such person or persons and at such price
not less than par as its board of directors by resolution may determine. If the
shares are sold at public auction at a price greater than the amount paid to the
dissenting shareholders, the excess in such sale price shall be paid to such
dissenting shareholders. The appraisal of such shares of stock in any State bank
shall be determined in the manner prescribed by the law of the State in such
cases, rather than as provided in this section, if such provision is made by the
law of the State in such cases, rather than as provided in this section, if such
provision is made in the State law; and no such merger shall be in contravention
of the law of the State under which such bank is incorporated. The provisions of
this subsection shall apply only to shareholders of (and stock owned by them in)
a bank or association being merged into the receiving association.
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Section 215(b)(4) of the National Bank Act defines the term "receiving
association," as used in Section 215a, to mean the national banking association
into which one or more national banking associations or one or more State banks,
located within the same State, merge.
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PART II. INFORMATION NOT REQUIRED IN PROSPECTUS
Item 20. Indemnification of Directors and Officers.
Subchapter D of Chapter 17 of the Pennsylvania Business Corporation Law of
1988, as amended (15 Pa. C.S. Sections 1741-1750) provides that a business
corporation shall have the power under certain circumstances to indemnify
directors, officers, employees and agents against certain expenses incurred by
them in connection with any threatened, pending or completed action, suit or
proceeding. The following discussion is qualified, in its entirety, by the full
text of Subchapter D of Chapter 17 of the Pennsylvania Business Corporation Law
of 1988, as amended, attached as Exhibit 99D.
Section 1721 of the Pennsylvania Business Corporation Law of 1988, as
amended (the "BCL") (relating to the Board of Directors) declares that unless
otherwise provided by statute or in a bylaw adopted by the shareholders, all
powers enumerated in section 1502 (relating to general powers) and elsewhere in
the BCL or otherwise vested by law in a business corporation shall be exercised
by or under the authority of, and the business and affairs of every business
corporation shall be managed under the direction of, a board of directors. If
any such provision is made in the by-laws, the powers and duties conferred or
imposed upon the board of directors under the BCL shall be exercised or
performed to such extent and by such person or persons as shall be provided in
the by-laws. Persons upon whom the liabilities of directors are imposed by this
section shall to that extent be entitled to the rights and immunities conferred
by or pursuant to this part and other provisions of law upon directors of a
corporation
Section 1712 of the BCL provides that a director of a business corporation
shall stand in a fiduciary relation to the corporation and shall perform his
duties as a director, including his duties as a member of any committee of the
board upon which he may serve, in good faith, in a manner he reasonably believes
to be in the best interests of the corporation and with such care, including
reasonable inquiry, skill and diligence, as a person of ordinary prudence would
use under similar circumstances. In performing his duties, a director shall be
entitled to rely in good faith on information, opinions, reports or statements,
including financial statements and other financial data, in each case prepared
or presented by any of the following:
1. one or more officers or employees of the corporation whom the
director reasonably believes to be reliable and competent in the matters
presented;
2. counsel, public accountants or other persons as to matters which
the director reasonably believes to be within the professional or expert
competence of such person; or
3. a committee of the board upon which he does not serve, duly
designated in accordance with law, as to matters within its designated
authority, which committee the director reasonably believes to merit
confidence.
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A director shall not be considered to be acting in good faith, if he has
knowledge concerning the matter in question that would cause his reliance to be
unwarranted.
Section 1716 of the BCL states that in discharging the duties of their
respective positions, the board of directors, committees of the board and
individual directors of a business corporation may, in considering the best
interests of the corporation, consider the effects of any action upon employees,
upon suppliers and customers of the corporation and upon communities in which
offices or other establishments of the corporation are located, and all other
pertinent factors. The consideration of those factors shall not constitute a
violation of the preceding paragraph. In addition, absent breach of fiduciary
duty, lack of good faith or self-dealing, actions taken as a director or any
failure to take any action shall be presumed to be in the best interests of the
corporation.
Moreover, Section 1713 addresses the personal liability of directors and
states that if a bylaw adopted by the shareholders so provides, a director shall
not be personally liable, as such, 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
office under this section; and
2. the breach or failure to perform constitutes self-dealing, willful
misconduct or recklessness.
The provisions discussed above shall not apply to:
1. the responsibility or liability of a director pursuant to any
criminal statute; or
2. the liability of a director for the payment of taxes pursuant to
local, state or federal law.
Section 1714 of the BCL states that a director of a business corporation
who is present at a meeting of its 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 dissent is entered in the minutes of the meeting or unless he
files his written dissent to the action with the secretary of the meeting before
the adjournment thereof or transmits the dissent in writing to the secretary of
the corporation immediately after the adjournment of the meeting. The right to
dissent shall not apply to a director who voted in favor of the action. Nothing
in this Section 1714 shall bar a director from asserting that minutes of the
meeting incorrectly omitted his dissent if, promptly upon receipt of a copy of
such minutes, he notifies the secretary, in writing, of the asserted omission or
inaccuracy.
R-2
<PAGE>
Section 1741 of the BCL (relating to third party actions) provides that
unless otherwise restricted in its by-laws, a business corporation shall have
the power to indemnify any person who was or is a party, or is threatened to be
made a party to any threatened, pending or completed action or proceeding,
whether civil, criminal, administrative or investigative (other than an action
by or in the right of the corporation), by reason of the fact that such person
is or was a representative of the corporation, or is or was serving at the
request of the corporation as a representative of another domestic or foreign
corporation for profit or not-for-profit, partnership, joint venture, trust or
other enterprise, against expenses (including attorneys' fees), judgments, fines
and amounts paid in settlement actually and reasonably incurred by such person
in connection with the action or proceeding if such person acted in good faith
and in a manner he reasonably believed to be in, or not opposed to, the best
interests of the corporation, and, with respect to any criminal proceeding, had
no reasonable cause to believe his conduct was unlawful. The termination of any
action or proceeding by judgment, order, settlement or conviction or upon a plea
of nolo contendere or its equivalent shall not of itself create a presumption
that the person did not act in good faith and in a manner that he reasonably
believed to be in, or not opposed to, the best interests of the corporation, and
with respect to any criminal proceeding, had reasonable cause to believe that
his conduct was not unlawful.
Section 1742 of the BCL (relating to derivative actions) provides that
unless otherwise restricted in its by-laws, a business corporation shall have
the power to indemnify any person who was or is a party, or is threatened to be
made a party, to any threatened, pending or completed action by or in the right
of the corporation to procure a judgment in its favor by reason of the fact that
such person is or was a representative of the corporation, or is or was serving
at the request of the corporation as a representative of another domestic or
foreign corporation for profit or not-for-profit, partnership, joint venture,
trust or other enterprise, against expenses (including attorneys' fees) actually
and reasonably incurred by such person in connection with the defense or
settlement of the action if such person acted in good faith and in a manner he
reasonably believed to be in, or not opposed to the best interests of the
corporation. Indemnification shall not be made under this section in respect of
any claim, issue or matter as to which such person has been adjudged to be
liable to the corporation unless, and only to the extent that, the court of
common pleas of the judicial district embracing the county in which the
registered office of the corporation is located or the court in which such
action was brought determines upon application that, despite the adjudication of
liability but in view of all the circumstances of the case, such person is
fairly and reasonably entitled to indemnity for such expenses which the court of
common pleas or such other court shall deem proper.
Section 1743 of the BCL (relating to mandatory indemnification) provides
for mandatory indemnification of directors and officers such that to the extent
that a representative of the business corporation has been successful on the
merits or otherwise in defense of any action or proceeding referred to in
Sections 1741 (relating to third party actions) or 1742 (relating to derivative
actions), or in defense of any claim, issue or matter therein, such person shall
be indemnified against expenses (including attorneys' fees) actually and
reasonably incurred by such person in connection therewith.
Section 1744 of the BCL (relating to procedure for effecting
indemnification) provides the procedure for effecting indemnification. Under
this section unless ordered by a court, any indemnification under Section 1741
(relating to third party actions) or 1742 (relating to derivative
R-3
<PAGE>
actions) shall be made by the business corporation only as authorized in the
specific case upon a determination that indemnification of the representative is
proper in the circumstances because such person has met the applicable standard
of conduct set forth in those sections. The determination shall be made:
1. by the Board of Directors by a majority vote of a quorum
consisting of directors who were not parties to the action or
proceeding;
2. if such quorum is not obtainable, or, if obtainable and a
majority vote of a quorum of disinterested directors so directs,
by independent legal counsel in a written opinion; or
3. by the shareholders.
Section 1745 of the BCL (relating to advancing expenses) provides that
expenses (including attorneys' fees) incurred in defending any action or
proceeding referred to above may be paid by the business corporation in advance
of the final disposition of the action or proceeding upon receipt of an
undertaking by or on behalf of the representative to repay such amount if it is
ultimately determined that such person is not entitled to be indemnified by the
corporation as authorized by the BCL or otherwise.
Section 1746 of the BCL (relating to supplementary coverage) provides that
the indemnification and advancement of expenses provided by or granted pursuant
to the other sections of the BCL shall not be deemed exclusive of any other
rights to which a person seeking indemnification or advancement of expenses may
be entitled under any other by-law, agreement, vote of shareholders or
disinterested directors or otherwise, both as to action in such person's
official capacity and as to action in another capacity while holding such
office.
Section 1746 of the BCL also provides that indemnification referred to
above shall not 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.
Section 1746 further declares that indemnification under any bylaw,
agreement, vote of shareholders or directors or otherwise, may be granted for
any action taken or any failure to take any action and may be made whether or
not the corporation would have the power to indemnify the person under any other
provision of law except as provided in this section and whether or not the
indemnified liability arises or arose from any threatened, pending or completed
action by or in the right of the corporation. Such indemnification is declared
to be consistent with the public policy of the Commonwealth of Pennsylvania.
Section 1747 of the BCL (relating to the power to purchase insurance)
provides that unless otherwise restricted in its by-laws, a business corporation
shall have power to purchase and maintain
R-4
<PAGE>
insurance on behalf of any person who is or was a representative of the
corporation or is or was serving at the request of the corporation as a
representative of another domestic or foreign corporation for profit or
not-for-profit, partnership, joint venture, trust or other enterprise against
any liability asserted against him and incurred by him in any such capacity, or
arising out of his status as such, whether or not the corporation would have the
power to indemnify him against that liability under the provisions of the BCL.
Such insurance is declared to be consistent with the public policy of the
Commonwealth of Pennsylvania.
Section 1748 of the BCL (relating to application to surviving or new
corporations) provides that for the purposes of the BCL, references to "the
corporation" include all constituent corporations absorbed in a consolidation,
merger or division, as well as the surviving or new corporations surviving or
resulting therefrom, so that any person who is or was a representative of the
constituent, surviving or new corporation, or is or was serving at the request
of the constituent, surviving or new corporation as a representative of another
domestic or foreign corporation for profit or not-for-profit, partnership, joint
venture, trust or other enterprise, shall stand in the same position under the
provisions of the BCL with respect to the surviving or new corporation as he
would if he had served the surviving or new corporation in the same capacity.
Section 1749 of the BCL (referring to application to employee benefit
plans) states that for the purposes of the BCL:
1. references to "other enterprises" shall include employee benefit
plans and references to "serving at the request of the corporation" shall
include any service as a representative of the business corporation that
imposes duties on, or involves services by, the representative with respect
to an employee benefit plan, its participants or beneficiaries;
2. excise taxes assessed on a person with respect to an employee
benefit plan pursuant to applicable law shall be deemed "fines"; and
3. action with respect to an employee benefit plan taken or omitted in
good faith by a representative of the corporation in a manner he reasonably
believed to be in the interest of the participants and beneficiaries of the
plan shall be deemed to be action in a manner that is not opposed to the
best interests of the corporation.
Section 1750 of the BCL (relating to duration and extent of coverage)
declares that the indemnification and advancement of expenses provided by, or
granted pursuant to, the BCL shall, unless otherwise provided when authorized or
ratified, continue as to a person who has ceased to be a representative of the
corporation and shall inure to the benefit of the heirs and personal
representative of that person.
Article 23 of the By-laws of the Registrant provides for indemnification to
the full extent authorized by Pennsylvania law.
R-5
<PAGE>
Insofar as indemnification for liabilities arising under the 1933 Act may
be permitted to directors, officers and controlling persons of the Registrant
pursuant to the foregoing provisions 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 1933 Act and is,
therefore, unenforceable. In the event that a claim for indemnification against
such liabilities (other than the payment by Registrant of expenses incurred or
paid by a director, officer of controlling person of the Registrant in the
successful defense of any action, suit or proceeding) is asserted by a director,
officer or controlling person in connection with the securities being
registered, the Registrant will, unless in the opinion of its counsel the manner
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 1933 Act and will be governed by the final
adjudication of such issue.
Item 21. Exhibits and Financial Statement Schedules.
(a) Exhibits.
2A Plan of Reorganization dated as of September 10, 1998, among
Registrant, The First National Bank of Marysville and The First
National Interim Bank of Marysville -Filed as Exhibit A to the Proxy
Statement/Prospectus included in this Registration Statement.
2B Plan of Merger dated as of September 10, 1998, between The First
National Bank of Marysville and The First National Interim Bank of
Marysville -- Filed as Exhibit B to the Proxy Statement/Prospectus
included in this Registration Statement.
3(i) Articles of Incorporation of Registrant -- Filed as Exhibit C to the
Proxy Statement/Prospectus included in this Registration Statement.
3(ii)By-laws of Registrant -- Filed as Exhibit D to the Proxy
Statement/Prospectus included in this Registration Statement.
5 Opinion of Shumaker Williams, P.C. of Camp Hill, Pennsylvania, Special
Counsel to Registrant, as to the legality of the shares of
Registrant's stock being registered.
8 Opinion of Shumaker Williams, P.C. of Camp Hill, Pennsylvania, Special
Counsel to Registrant, dated December 4, 1998, as to the tax treatment
of the proposed transactions.
23 Consent of Shumaker Williams, P.C. of Camp Hill, Pennsylvania, Special
Counsel to Registrant -- Contained in Opinion Letter as Exhibit 5.
R-6
<PAGE>
24 Power of Attorney given by the Officers and Directors of the
Registrant -- Located on Signature Page of the Registration Statement.
99A Definitive copy of Letter to Shareholders of The First National Bank
of Marysville -Included in this Registration Statement immediately
preceding the Notice of Special Meeting of Shareholders and the Proxy
Statement/Prospectus.
99B Definitive copy of Notice of Special Meeting of Shareholders of The
First National Bank of Marysville -- Included in this Registration
Statement immediately preceding the Proxy Statement/Prospectus.
99C Definitive copy of Form of Proxy for use by the Shareholders of The
First National Bank of Marysville.
99D Subchapter D of Chapter 17 of the Pennsylvania Business Corporation
Law of 1988, as amended, (15 Pa. C.S. Sections 1741-1750) relating to
indemnification.
99E Excerpts from Section 215a of the National Bank Act Relating to
Dissenters' Rights -Filed as Exhibit E to the Proxy
Statement/Prospectus included in this Registration Statement.
(b) Not Applicable.
(c) Not Applicable.
Item 22. Undertakings.
(a) Undertakings furnished pursuant to Item 512 of Regulation S-B:
(a) The undersigned registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being
made, a post-effective amendment to this registration statement:
(i) To include any prospectus required by section 10(a)(3)
of the Securities Act of 1933;
(ii) To reflect in the Proxy Statement/Prospectus any facts
or events arising after the effective date of the registration
statement (or the most recent post-effective amendment thereof)
which, individually
R-7
<PAGE>
or in the aggregate, represent a fundamental change in the
information set forth in the registration statement.
Notwithstanding the foregoing, any increase or decrease in volume
of securities offered (if the total dollar value of securities
offered would not exceed that which was registered) and any
deviation from the low or high end of the estimated maximum
offering range may be reflected in the form of prospectus filed
with the Commission pursuant to Rule 424(b) (Section 230.424(b)
of this chapter) if, in the aggregate, the changes in volume and
price represent no more than a 20% change in the maximum
aggregate offering price set forth in the "Calculation of
Registration Fee" table in the effective registration statement;
(iii) To include any material information with respect to
the plan of distribution not previously disclosed in the
registration statement or any material change to such information
in the registration statement;
(2) That, for the purpose of determining any liability under the
Securities Act of 1933, each such post-effective amendment shall be
deemed to be a new registration statement relating to the securities
offered therein, and the offering of such securities at that time
shall be deemed to be the initial bona fide offering thereof.
(3) To remove from registration by means of a post-effective
amendment any of the securities being registered which remain unsold
at the termination of the offering.
(b) The Registrant undertakes to supplement the prospectus, after the end
of the subscription period, to include the results of the subscription
offer, the transactions by the underwriters during the subscription
period, the amount of unsubscribed securities that the underwriters
will purchase and the terms of any later reoffering. If the
underwriters make any public offering of the securities on terms
different from those on the cover page of the prospectus, the
underwriter will file a post-effective amendment to state the terms of
such offering.
(c) Not applicable.
(d) Not applicable.
(e) Insofar as indemnification for liabilities arising under the 1933 Act
may be permitted to directors, officers and controlling persons of the
Registrant pursuant to the foregoing provisions or otherwise, the
Registrant has been advised that in the opinion of the Securities and
Exchange Commission such indemnification is against public
R-8
<PAGE>
policy as expressed in the 1933 Act and is, therefore, unenforceable.
In the event that a claim for indemnification against such liabilities
(other than the payment by Registrant of expenses incurred or paid by
a director, officer of controlling person of the Registrant in the
successful defense of any action, suit or proceeding) is asserted by a
director, officer or controlling person in connection with the
securities being registered, the Registrant will, unless in the
opinion of its counsel the manner 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 1933 Act and will be governed by the final
adjudication of such issue.
(f) Not applicable.
Undertakings furnished pursuant to Item 22(b) and (c):
(b) The undersigned Registrant hereby undertakes to respond to requests
for information that is incorporated by reference into the Proxy
Statement/ Prospectus pursuant to Items 4, 10(b), 11, or 13 of this
Form, within one business day of receipt of such request, and to send
the incorporated documents by first class mail or other equally prompt
means. This includes information contained in documents filed
subsequent to the effective date of the registration statement through
the date of responding to the request.
(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.
R-9
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this Amendment No. 3 to the Registration Statement No.
333-64457, on Form S-4 to be signed on its behalf by the undersigned, thereunto
duly authorized in Marysville, Commonwealth of Pennsylvania on December 18,
1998.
FIRST PERRY BANCORP, INC.
By: /s/ William L. Hummel
-------------------------------------
William L. Hummel
President and Chief Executive Officer
Pursuant to the requirements of the Securities Act of 1933, this Amendment
to the Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
<TABLE>
<CAPTION>
Signature and Capacity Date
- ---------------------- ----
<S> <C>
William L. Hummel, December 18, 1998
President and Chief Executive Officer, Director
(Principal Executive Officer and Principal Financial Officer)
Larry D. Reich, December 18, 1998
Senior Vice President, Secretary, Treasurer
(Principal Accounting Officer)
Kenneth C. Toomey, December 18, 1998
Chairman of the Board, Director
H. Robert Asper, Director December 18, 1998
David M. Benfer, Director December 18, 1998
Arthur M. Feld, Director December 18, 1998
Keith A. Rohrer, Director December 18, 1998
John M. Schrantz, Director December 18, 1998
Raymond A. Smith, Director December 18, 1998
Robert K. Watts, Director December 18, 1998
</TABLE>
R-10
<PAGE>
/s/ William L. Hummel
- ---------------------
William L. Hummel
(Attorney-in-Fact)
/s/ Larry D. Reich
- --------------------
Larry D. Reich
(Attorney-in-Fact)
R-11
<PAGE>
<TABLE>
INDEX TO EXHIBITS
<CAPTION>
Exhibit Index Page in Manually
Number Signed Original
------------ ---------------
<S> <C> <C>
2A Plan of Reorganization dated as of September 10, 1998, A-1
among Registrant, The First National Bank of Marysville and
The First National Bank of Marysville -- Filed as Exhibit A to
the Proxy Statement/Prospectus included in this Registration
Statement.
Plan of Merger dated as of September 10, 1998, between The B-1
First National Bank of Marysville and The First National Interim
Bank of Marysville -- Filed as Exhibit B to the Proxy
Statement/Prospectus included in this Registration Statement.
3(i) Articles of Incorporation of Registration -- Filed as Exhibit C C-1
to the Proxy Statement/Prospectus included in this
Registration Statement.
3(ii) By-laws of Registrant -- Filed as Exhibit D to the Proxy D-1
Statement/Prospectus included in this Registration Statement.
5 Opinion of Shumaker Williams, P.C. of Camp Hill, Pennsylvania, R-19
Special Counsel to Registrant, as to the legality of the
shares of Registrant's stock being registered.
8 Opinion of Shumaker Williams, P.C. of Camp Hill, Pennsylvania,
Special Counsel to Registrant, dated December 4, 1998, as to the
tax treatment of the proposed transactions. R-22
23 Consent of Shumaker Williams, P.C. of Camp Hill, Pennsylvania, R-19
Special Counsel to Registrant -- Contained in Opinion Letter as
Exhibit 5.
Power of Attorney given by the Officers and Directors of the
Registrant -- Incorporated herein by Reference and located on
Signature Page of the Registration Statement (previously filed).
R-12
<PAGE>
99A Definitive copy of Letter to Shareholders of The First National 1-3
Bank of Marysville -- Included in this Registration Statement
immediately preceding the Notice of Special Meeting of
Shareholders and the Proxy Statement/Prospectus.
99B Definitive copy of Notice of Special Meeting of Shareholders 1-5
of The First National Bank of Marysville -- Included in this
Registration Statement immediately preceding the Proxy
Statement/Prospectus.
99C Definitive copy of Form of Proxy for use by the Shareholders R-35
of The First National Bank Marysville.
99D Subchapter D of Chapter 17 of the Pennsylvania Business R-38
Corporation Law of 1988, as amended, (15 Pa. C.S.
ss.1741-1750) relating to indemnification.
99E Excerpts from Section 215a of the National Bank Act Relating to E-1
Dissenters' Rights -- Filed as Exhibit E to the Proxy
Statement/ Prospectus included in this Registration Statement.
R-13
</TABLE>
EXHIBIT 2A
PLAN OF REORGANIZATION DATED AS OF SEPTEMBER 10, 1998
AMONG REGISTRANT, THE FIRST NATIONAL BANK OF MARYSVILLE AND
THE FIRST NATIONAL INTERIM BANK OF MARYSVILLE -- FILED AS
EXHIBIT A TO THE PROXY STATEMENT/PROSPECTUS
INCLUDED IN THIS REGISTRATION STATEMENT
R-14
EXHIBIT 2B
PLAN OF MERGER DATED AS OF SEPTEMBER 10, 1998
BETWEEN THE FIRST NATIONAL BANK OF MARYSVILLE AND
THE FIRST NATIONAL INTERIM BANK OF MARYSVILLE --
FILED AS EXHIBIT B TO THE PROXY STATEMENT/PROSPECTUS
INCLUDED IN THIS REGISTRATION STATEMENT
R-15
EXHIBIT 3i
ARTICLES OF INCORPORATION OF REGISTRANT --
FILED AS EXHIBIT C TO THE PROXY STATEMENT/PROSPECTUS
INCLUDED IN THIS REGISTRATION STATEMENT
R-16
EXHIBIT 3ii
BY-LAWS OF REGISTRANT -- FILED AS EXHIBIT D
TO THE PROXY STATEMENT/PROSPECTUS INCLUDED
IN THIS REGISTRATION STATEMENT
R-17
EXHIBIT 5
OPINION OF SHUMAKER WILLIAMS, P.C.
OF CAMP HILL, PENNSYLVANIA
SPECIAL COUNSEL TO REGISTRANT AS TO THE
LEGALITY OF THE SHARES OF REGISTRANT'S
STOCK BEING REGISTERED
R-18
<PAGE>
SHUMAKER WILLIAMS, P.C.
P. O. Box 88
Harrisburg, Pennsylvania 17108
September 28, 1998
Mr. William L. Hummel
President and Chief Executive Officer
THE FIRST NATIONAL BANK OF MARYSVILLE
101 Lincoln Street
P. O. Box B
Marysville, Pennsylvania 17053
RE: The First National Bank of Marysville
Formation of a One-Bank Holding Company
Dear Mr. Hummel:
We have been engaged as Special Counsel to The First National Bank of
Marysville (the "Bank") and First Perry Bancorp, Inc., a Pennsylvania business
corporation (the "Company"), in connection with the organization of the Company
as a bank holding company and the preparation and filing of all relevant
documents with the Federal Reserve Board, the Comptroller of the Currency,
applicable state securities law administrators, and the Securities and Exchange
Commission ("SEC").
We have prepared a Registration Statement on Form S-4 to be filed with the
SEC, that includes a Proxy Statement/Prospectus, under the provisions and
regulations of the Securities Act of 1933, as amended, relating to the offering
by the Company of a maximum of 408,000 shares of its common stock, par value
$.25 per share (the "Common Stock"). The Common Stock will be issued pursuant to
the Plan of Reorganization dated September 10, 1998 (the "Plan of
Reorganization") among the Company, the Bank, and The First National Interim
Bank of Marysville (the "Interim Bank"). Under
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<PAGE>
the Plan of Reorganization, the Bank will merge with and into Interim Bank and
each share of the Bank's outstanding common stock, par value $.50 per share,
(other than shares as to which dissenters' rights have been perfected) will be
converted into two (2) shares of the Common Stock, par value $.25 per share, of
the Company.
As Special Counsel to the Company and the Bank, we have supervised all
corporate proceedings in connection with the preparation and filing of the
Registration Statement, including the Proxy Statement/Prospectus, with the SEC
and with the appropriate state securities administrators. We have reviewed the
Company's Articles of Incorporation and By-laws, as presently in effect. We have
prepared and reviewed an executed copy of the Plan of Reorganization, copies of
the Company's corporate minutes and other proceedings and records relating to
the authorization and issuance of the Common Stock, and such other documents and
matters of law as we have deemed necessary in order to render this opinion.
Based upon the foregoing, and in reliance thereon, it is our opinion that,
upon the consummation of the Plan of Reorganization and the Plan of Merger in
accordance with their respective terms, each of the shares of Common Stock
issued pursuant to the Registration Statement will be duly authorized, legally
and validly issued and outstanding, and fully paid and non-assessable on the
basis of present legislation.
We hereby consent to the use of this opinion in the Registration Statement,
and we further consent to the reference to our name in the Proxy
Statement/Prospectus included in the Registration Statement under the caption
"Description of the Holding Company's Stock - Legal Opinion".
Sincerely yours,
SHUMAKER WILLIAMS, P.C.
By /s/Nicholas Bybel, Jr.
--------------------------
Nicholas Bybel, Jr.
R-20
EXHIBIT 8
OPINION OF SHUMAKER WILLIAMS, P.C.
OF CAMP HILL, PENNSYLVANIA
SPECIAL COUNSEL TO REGISTRANT, AS TO THE
TAX TREATMENT OF PROPOSED TRANSACTIONS
R-21
<PAGE>
December 4, 1998
Board of Directors Board of Directors
FIRST PERRY BANCORP, INC. THE FIRST NATIONAL BANK
101 Lincoln Street OF MARYSVILLE
P. O. Box B 101 Lincoln Street
Marysville, Pennsylvania 17053-0017 P. O. Box B
Marysville, Pennsylvania 17053-0017
Re: Merger of The First National Bank of Marysville with and into The
First National Interim Bank of Marysville, a Subsidiary of First Perry
Bancorp, Inc.
Dear Members of the Boards:
You have asked for our opinion regarding certain federal income tax
consequences of the merger of The First National Bank of Marysville (the "Bank")
with and into The First National Interim Bank of Marysville (the "Surviving
Bank") pursuant to which the shareholders of the Bank will receive voting common
stock of the Surviving Bank's parent, First Perry Bancorp, Inc. (the "Holding
Company").
In rendering our opinion, we have examined and relied upon the accuracy and
completeness of the facts, information, covenants, and representations contained
in originals or copies, certified or otherwise identified to our satisfaction,
of the Plan of Reorganization, dated September 10, 1998, among the Holding
Company, the Surviving Bank and the Bank (the "Plan of Reorganization"), the
Plan of Merger, dated September 10, 1998, by and between the Bank and the
Surviving Bank (the "Plan of Merger"), Amendment No. 2 to the First Perry
Bancorp, Inc. Registration Statement, Form S-4, filed with the Securities and
Exchange Commission on December 4, 1998, and such other documents as we have
deemed necessary or appropriate as a basis for the opinion set forth below. In
addition, we have relied upon the facts contained in certain statements and
representations previously made by executives of the Holding Company and the
Bank, including facts contained in certain statements and representations made
in letters received by us from First Perry Bancorp, Inc. and The First National
Bank of Marysville dated as of the date of this opinion. The transactions under
the Plan of Reorganization and the Plan of Merger are hereinafter collectively
referred to as the "merger transaction".
R-22
<PAGE>
In rendering our opinion, we have assumed: (a) that all parties have the
legal right, power, capacity and authority to enter into and perform all
obligations under the Plan of Reorganization and the Plan of Merger; (b) the due
and proper execution and delivery of all relevant or necessary instruments and
documents; (c) the receipt of all federal and state regulatory approvals
necessary to consummate the merger transaction; and (d) the satisfaction or
proper waiver of any other conditions under the Plan of Reorganization and the
Plan of Merger so that the merger transaction may be consummated. All statements
in this letter regarding the federal income tax consequences of this merger
transaction are based upon the Internal Revenue Code of 1986, as amended (the
"Code"), the Treasury Regulations promulgated by the United States Department of
Treasury (the "Regulations"), current positions of the Internal Revenue Service
(the "IRS") as contained in published Revenue Rulings and Procedures, current
published administrative positions of the IRS, and existing court decisions, all
as in effect as of this date and each of which is subject to change at any time.
Our opinion is based upon and assumes the following Factual Background and
Assumptions relating to the merger transaction:
I. Factual Background
A. The Bank is a national banking association organized under the laws of
the United States of America. The Bank is a full-service commercial
bank which commenced operations in 1904. Its principal place of
business is located at 101 Lincoln Street, Marysville, Pennsylvania.
The Bank is authorized to issue 225,000 shares of common stock, par
value Fifty Cents ($.50) per share, of which on June 30, 1998, 204,000
shares were issued and outstanding (the "Bank Common Stock"). The Bank
Common Stock is the only class of security, authorized or outstanding,
of the Bank. The Bank has approximately 110 shareholders. The Bank
Common Stock is not publicly traded in any established market and,
therefore, no price quotes are readily available. Recent sales of the
Bank Common Stock have occurred solely between individuals in limited
over the counter transactions and in direct, privately negotiated
transactions. The most recent sale prior to the public announcement of
the merger on June 8, 1998, as to which management of the Bank is
aware of the sales price, occurred on January 5, 1998, at a price of
Thirty-Nine Dollars ($39.00) per share.
B. The Surviving Bank is also a national banking association organized
under the laws of the United States of America. The Surviving Bank is
being organized solely to engage in the merger transaction. The
Surviving Bank is authorized to issue 2,000,000 shares of common
stock, par value Twenty-Five Cents ($.25) per share (the "Surviving
Bank Common Stock"). The Surviving Bank Common Stock is the only class
of security, authorized or outstanding, of the Surviving Bank. In
accordance with 12 U.S.C.ss.21 et -- seq. (The "National Bank Act"),
ten organizers of the Surviving Bank each have --- subscribed to
purchase 4,000 shares of Surviving Bank Common Stock for Thirty Cents
($.30) per share. The organizers have executed a Stock Repurchase
Agreement which
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requires that, at consummation of the merger transaction, the Holding
Company will purchase the 40,000 shares held or to be purchased by
these ten organizers for Thirty cents ($.30) per share. In addition,
the Holding Company will purchase 368,000 shares of Surviving Bank
Common Stock for Thirty Cents ($.30) per share.
C. The Holding Company is a business corporation organized on August 14,
1998, under the laws of the Commonwealth of Pennsylvania. The Holding
Company is solely organized to engage in the business and activities
associated with bank holding companies. The Holding Company is
authorized to issue 2,000,000 shares of common stock, par value
Twenty-Five Cents ($.25) per share (the "Holding Company Common
Stock"). The Holding Company Common Stock is the only class of
security, authorized or outstanding, of the Holding Company. The
Holding Company will issue 408,000 shares of Holding Company Common
Stock to be exchanged for 204,000 shares of Bank Common Stock on a 2
to 1 basis in connection with the merger transaction pursuant to
Section 7.2 of the Plan of Merger. The four incorporators of the
Holding Company have each purchased one share of Holding Company
Common Stock for Twenty-Five Cents ($.25) per share. The four
incorporators have executed a Stock Repurchase Agreement which
requires that, at consummation of the merger transaction, the Holding
Company will purchase the 4 shares held by these four incorporators
for Twenty-Five Cents ($.25) per share. After the consummation of the
merger transaction, the Holding Company will have approximately 110
shareholders of record, less any dissenting shareholders who exercise
their rights of appraisal and payment in cash for their stock pursuant
to 12 U.S.C. Section 215 et seq. (the "National Bank Merger Act").
D. In order to comply with minimum capitalization requirements under
national banking laws, the Surviving Bank will be initially
capitalized as follows: One Hundred Two Thousand Dollars ($102,000.00)
in capital stock and Twenty Thousand Four Hundred Dollars ($20,400.00)
in surplus. In order to provide the Surviving Bank with this required
minimum capitalization at the time of the consummation of the merger
transaction, the Holding Company temporarily will borrow One Hundred
Twenty-Two Thousand Four Hundred Dollars ($122,400.00) from a
non-affiliated Pennsylvania bank. The Holding Company will then
purchase 368,000 shares of Surviving Bank Common Stock for One Hundred
Ten Thousand Four Hundred Dollars ($110,400.00), or Thirty Cents
($.30) per share. Under the Plan of Reorganization, the organizers of
the Surviving Bank may transfer their subscription rights for 40,000
shares of Surviving Bank Common Stock to the Holding Company
immediately prior to the effective date of the merger transaction so
that the Holding Company can purchase such shares for Twelve Thousand
Dollars ($12,000.00), or Thirty Cents ($.30) per share.
E. In accordance with the National Bank Merger Act, the Bank will merge
with and into the Surviving Bank. Upon the effective date of the
merger: (a) the separate corporate existence of the Bank will
terminate; (b) the Surviving Bank will acquire all of the
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assets and assume all of the liabilities of the Bank; (c) the
Surviving Bank will change its name to that of the Bank; and (c) the
Surviving Bank will continue to carry on the banking business
previously carried on by the Bank at the same principal offices. The
approval of shareholders owning at least two-thirds of the outstanding
stock of both the Bank and the Surviving Bank are required by law to
approve the merger.
F. The shareholders of the Bank will be entitled to receive two (2)
shares of Holding Company Common Stock in exchange for each share of
the Bank Common Stock held by the shareholder on the effective date of
the merger. Pursuant to Section 7.2 of the Plan of Merger, each
outstanding share of the Bank will be deemed to be converted into two
(2) shares of the Holding Company Common Stock without any action on
the part of the shareholder, and the outstanding certificates
representing shares of stock of the Bank will thereafter represent
shares of stock of the Holding Company at the one-to- two conversion
ratio.
G. Shareholders of the Bank who dissent to the merger, if any, will
receive cash for their shares of stock in the Bank, pursuant to the
National Bank Merger Act. After cash payment has been made to the
dissenting shareholders, the shares of the Holding Company to which
they would have been entitled must be sold at public auction or in
such other manner as is approved by the Comptroller of the Currency.
If these shares are sold at a price greater than the amount paid by
the Bank to the dissenting shareholders, the excess must be paid to
the dissenting shareholders.
I. After the consummation of the merger transaction, the Surviving Bank
and the Holding Company will file a consolidated return for federal
income tax purposes.
II. Assumptions
A. The operation of the Bank, via the merger into the Surviving Bank and
as a subsidiary of the Holding Company, will provide greater
flexibility in financing, in engaging in non-banking activities, in
protecting against an unfriendly takeover, and in responding to
changes in Pennsylvania law that provide for expanded branching and
multi-bank holding companies.
B. The fair market value of the Holding Company Common Stock and other
consideration received by each shareholder of the Bank will be
approximately equal to the fair market value of the Bank Common Stock
surrendered in exchange.
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<PAGE>
C. There is no plan or intention by the shareholders of Bank to sell,
exchange or otherwise dispose of a number of shares of Holding Company
Common Stock received in the transaction that would reduce the Bank
shareholders' ownership of Holding Company Common Stock to a number of
shares having a value, as of the effective date of the merger
transaction, of less than fifty percent (50%) of the value of all of
the formerly outstanding Bank Common Stock as of the same date. In
addition, there have not been to date any transfers of Bank Common
Stock by any shareholders thereof which have been made in
contemplation of the merger transaction.
D. The Surviving Bank will acquire at least ninety percent (90%) of the
fair market value of the net assets and at least seventy percent (70%)
of the fair market value of the gross assets held by the Bank
immediately prior to the merger transaction. For the purposes of this
assumption, amounts paid by the Bank to shareholders who receive cash
or other property, assets of the Bank used to pay its reorganization
expenses, and all redemptions and distributions (except for regular,
normal dividends) made by the Bank immediately preceding the merger
transaction, are and will be included as assets of the Bank held
immediately prior to the merger transaction. The Bank has not redeemed
any Bank Common Stock, has not made any distribution with respect to
any Bank Common Stock, and has not disposed of any of its assets in
anticipation of or as a part of a plan for the acquisition of Bank by
Surviving Bank.
E. The Holding Company has no plan or intention to redeem or otherwise
reacquire any of its stock to be issued in the merger transaction.
F. The assumption by Surviving Bank of the liabilities of Bank pursuant
to the merger transaction will be for a bona fide business purpose and
the principal purpose of any such assumption will not be the avoidance
of federal income tax on the transfer of assets of Bank to Surviving
Bank pursuant to the merger transaction.
G. The liabilities of the Bank assumed by the Surviving Bank and the
liabilities to which the transferred assets of the Bank are subject
will be incurred by the Bank in the ordinary course of its business,
and will be associated with the assets to be transferred. No
liabilities of any person other than Bank will be assumed by Surviving
Bank or Holding Company in the merger transaction, and none of the
shares of Bank to be surrendered in exchange for Holding Company
Common Stock in the merger transaction will be subject to any
liabilities.
H. Following the merger transaction, the Surviving Bank will continue the
historic business of the Bank or use a significant portion of the
Bank's business assets in a business.
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<PAGE>
I. The Holding Company, the Bank, the Surviving Bank and the shareholders
of the Bank will pay their respective expenses, if any, incurred in
connection with the merger transaction.
J. There is no intercorporate indebtedness existing between the Holding
Company and the Bank or between the Surviving Bank and the Bank that
was issued or acquired, or will be settled at a discount.
K. The Bank is not under the jurisdiction of a court in a Title 11 or
similar case within the meaning of Code Section 368(a)(3)(A).
L. The adjusted basis and fair market value of the Bank's assets to be
transferred to the Surviving Bank will, in each instance, equal or
exceed the sum of the Bank's liabilities to be assumed by the
Surviving Bank, plus the liabilities, if any, to which the transferred
assets are subject.
M. No stock of the Surviving Bank will be issued to any of the
shareholders of the Bank in the merger transaction.
N. There is no larger integrated transaction of which the merger
transaction constitutes only one step.
O. The expenses of the merger transaction and the amount to be paid to
dissenters, if any, will not exceed ten percent (10%) of the fair
market value of the net assets of the Bank.
P. There are no fractional shares of the Bank Common Stock outstanding
and no fractional shares will be issued or redeemed in the merger
transaction.
Q. The Surviving Bank has no plan or intention of disposing of the assets
of the Bank to be received by it in the merger transaction, other than
in the ordinary course of business.
R. None of the compensation received by any shareholder-employees of the
Bank will be separate consideration for, or allocable to, any of their
shares of the Bank Common Stock; none of the shares of the Holding
Company Common Stock received by any shareholder-employees will be
separate consideration for, or allocable to, any employment agreement;
and the compensation paid to any shareholder-employees will be for
services actually rendered and will be commensurate with amounts paid
to third parties bargaining at arm's-length for similar services.
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<PAGE>
S. There is no present plan or intention to issue any of the authorized
common stock of the Holding Company in excess of the amounts described
in this letter in the merger transaction.
T. Prior to the effective date of the merger transaction, neither the
Holding Company nor the Surviving Bank will hold either directly or
indirectly any stock or securities in the Bank.
Based on the foregoing and subject to and specifically relying upon the
aforesaid Factual Background and Assumptions and other matters herein referred
to, and to the extent that this Factual Background and these Assumptions remain
unchanged between the date of this opinion and the date of the merger, it is our
opinion that:
1. No gain or loss will be recognized to either the Holding Company, the
Surviving Bank or the Bank on the transfer of substantially all of the Bank's
assets to the Surviving Bank in exchange for the Holding Company Common Stock
and the assumption by the Surviving Bank of all of the liabilities of the Bank
plus the liabilities to which the acquired assets of the Bank may be subject.
2. No gain or loss will be recognized to the shareholders of the Bank upon
the exchange of their Bank Common Stock solely for the Holding Company Common
Stock pursuant to the Plan of Reorganization and Plan of Merger, except for that
gain or loss which is recognized due to the receipt of cash which is received in
lieu of the issuance of fractional shares of Holding Company Common Stock.
3. The shareholders of the Bank who dissent to the merger, if any, and who
receive cash for their shares of Bank Common Stock will recognize gain or loss
to the extent of the difference between the amount the cash received and the
adjusted tax basis of such shares, provided that the surrender of Bank Common
Stock is treated as a redemption of stock to which Section 302(a) of the Code
applies. It is possible, however, that the provisions of Section 302(a) will not
apply to a particular dissenting shareholder due to Code rules that require that
certain shareholders be treated as owning shares actually owned by other
individuals and entities (i.e., certain individuals related to the shareholder
and certain partnerships, estates, trusts and corporations in which the
shareholder has an interest); if so, the amounts paid to the dissenting
shareholder may be taxable as dividends because they would be treated as
distributions to which Code Section 301 applies and not as a redemption under
Code Section 302(a).
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<PAGE>
4. The basis of the shares of the Holding Company Common Stock to be
received by the shareholders of the Bank will be the same as the basis of the
shares of Bank Common Stock exchanged therefor.
5. The holding period of the shares of the Holding Company Common Stock to
be received by the shareholders of the Bank will include the period during which
the Bank Common Stock, surrendered in exchange therefor, was held by the
shareholders of the Bank, provided the Bank Common Stock was held as a capital
asset in the hands of the shareholders of the Bank at the time of the exchange.
6. Subject to limitations under Code Sections 381 and 382 and certain U. S.
Treasury Regulations promulgated under Code Section 1502, where applicable,
Surviving Bank, as the surviving bank to the merger, will carry-over and take
into account all accounting items and tax attributes, and tax basis and holding
periods of the assets of the Bank.
The opinions set forth in this letter are given and based upon the factual
background and the existence of the assumed facts as hereinabove set forth, all
as of the date of this letter. Should any facts or assumptions be otherwise than
as hereinabove set forth or change after the date of this letter, no opinion is
made or expressed with respect thereto or as to the legal, tax or other
consequences thereof. We make no and disclaim any opinion as to any facts
occurring after the date of this letter or as to the legal, tax or other
consequences thereof. We assume no obligation to investigate, research or
determine any facts or laws, rules or regulations occurring, existing or in
effect after the date hereof, or to update or supplement any of the opinions
herein expressed to reflect any facts or circumstances or changes in law that
hereafter may occur or come to our attention.
The Holding Company, the Bank, the Surviving Bank and their respective
shareholders may rely upon this opinion letter. No other person, whether natural
or otherwise, may rely upon this opinion letter, and it may not be disclosed to
any other persons without our prior written consent. The opinions set forth in
this opinion letter are not binding on the Internal Revenue Service.
Sincerely,
/s/ SHUMAKER WILLIAMS, P.C.
---------------------------
SHUMAKER WILLIAMS, P.C.
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NB/py:90328
EXHIBIT 23
CONSENT OF SHUMAKER WILLIAMS, P.C.
OF CAMP HILL, PENNSYLVANIA
SPECIAL COUNSEL TO REGISTRANT
CONTAINED IN OPINION LETTER AS EXHIBIT 5
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EXHIBIT 24
POWER OF ATTORNEY --
INCORPORATED HEREIN BY REFERENCE, LOCATED ON
SIGNATURE PAGE OF THE REGISTRATION STATEMENT
(PREVIOUSLY FILED)
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EXHIBIT 99A
DEFINITIVE COPY OF LETTER TO SHAREHOLDERS
OF THE FIRST NATIONAL BANK OF MARYSVILLE --
INCLUDED IN THIS REGISTRATION STATEMENT
IMMEDIATELY PRECEDING THE NOTICE OF
SPECIAL MEETING OF SHAREHOLDERS AND
THE PROXY STATEMENT/PROSPECTUS
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EXHIBIT 99B
DEFINITIVE COPY OF NOTICE OF
SPECIAL MEETING OF SHAREHOLDERS
OF THE FIRST NATIONAL BANK OF MARYSVILLE --
INCLUDED IN THIS REGISTRATION STATEMENT
IMMEDIATELY PRECEDING THE PROXY STATEMENT/PROSPECTUS
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EXHIBIT 99C
DEFINITIVE COPY OF FORM OF PROXY
FOR USE BY THE SHAREHOLDERS OF
THE FIRST NATIONAL BANK OF MARYSVILLE
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<PAGE>
THE FIRST NATIONAL BANK OF MARYSVILLE
PROXY
SPECIAL MEETING OF SHAREHOLDERS TO BE HELD ON JANUARY 20, 1999
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby constitutes and appoints Pamela Ford and Sarah
Fitting and each or any of them, proxies of the undersigned, with full power of
substitution, to vote all of the shares of The First National Bank of Marysville
(the "Bank") that the undersigned may be entitled to vote at the Special Meeting
of Shareholders of the Bank to be held at Bethany United Methodist Church, 400
Lansvale Street, Marysville, Pennsylvania 17053 on Wednesday, January 20, 1999,
at 2:00 p.m., Eastern Standard Time, and at any adjournment or postponement
thereof as follows:
1. PROPOSAL TO APPROVE AND ADOPT THE PLAN OF REORGANIZATION AND PLAN OF MERGER
DATED AS OF SEPTEMBER 10, 1998, PROVIDING, AMONG OTHER THINGS, FOR THE
MERGER OF THE BANK AND THE FIRST NATIONAL INTERIM BANK OF MARYSVILLE (THE
"INTERIM BANK"), A NATIONAL BANKING ASSOCIATION ORGANIZED UNDER THE LAWS OF
THE UNITED STATES AND A SUBSIDIARY OF THE FIRST PERRY BANCORP, INC. (THE
"HOLDING COMPANY"), AND FOR THE AUTOMATIC CONVERSION OF EACH SHARE OF THE
COMMON STOCK OF THE BANK INTO TWO (2) SHARES OF THE COMMON STOCK OF THE
HOLDING COMPANY.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
The Board of Directors recommends a vote FOR this proposal.
2. PROPOSAL TO ADJOURN THE SPECIAL MEETING OF SHAREHOLDERS TO PERMIT FURTHER
SOLICITATION OF PROXIES IN THE EVENT THERE ARE NOT SUFFICIENT VOTES AT THE
TIME OF THE MEETING TO CONSTITUTE A QUORUM OR TO APPROVE THE PLAN OF
REORGANIZATION AND PLAN OF MERGER.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
The Board of Directors recommends a vote FOR this proposal.
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<PAGE>
3. In their discretion, the proxies are authorized to vote upon such other
business as may properly come before the Special Meeting of Shareholders
and any adjournment or other postponement thereof.
THIS PROXY, WHEN PROPERLY SIGNED, WILL BE VOTED IN THE MANNER DIRECTED
HEREIN BY THE UNDERSIGNED SHAREHOLDER(S). IF NO DIRECTION IS MADE, THIS PROXY
WILL BE VOTED FOR PROPOSALS 1 AND 2.
Dated: , 199___
Signature
Signature
Number of Shares Held of Record on December 11, 1998:
- ----------------
THIS PROXY MUST BE DATED, SIGNED BY THE SHAREHOLDER(S) AND RETURNED
PROMPTLY TO THE BANK IN THE ENCLOSED ENVELOPE. WHEN SIGNING AS ATTORNEY,
EXECUTOR, ADMINISTRATOR, TRUSTEE OR GUARDIAN, PLEASE GIVE FULL TITLE. IF MORE
THAN ONE TRUSTEE, ALL SHOULD SIGN. IF STOCK IS HELD JOINTLY, EACH OWNER SHOULD
SIGN.
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EXHIBIT 99D
STATUTES RELATING TO INDEMNIFICATION
Subchapter D of Chapter 17 of the Pennsylvania
Business Corporation Law of 1988, (15 Pa. C.S.
ss.ss.1741-1750, as amended).
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<PAGE>
STATUTES RELATING TO INDEMNIFICATION
Subchapter D of Chapter 17 of the
Pennsylvania Business Corporation
Law of 1988, (15 Pa. C.S. ss.ss.1741-
1750), as amended
Subchapter D. Indemnification
Section 1741. Third-party actions.
Unless otherwise restricted in its bylaws, a business corporation shall
have power to indemnify any person who was or is a party or is threatened to be
made a party to any threatened, pending or completed action or proceeding,
whether civil, criminal, administrative or investigative (other than an action
by or in the right of the corporation), by reason of the fact that he is or was
a representative of the corporation, or is or was serving at the request of the
corporation as a representative of another domestic or foreign corporation for
profit or not-for-profit, partnership, joint venture, trust or other enterprise,
against expenses (including attorneys' fees), judgments, fines and amounts paid
in settlement actually and reasonably incurred by him in connection with the
action or proceeding if he acted in good faith and in a manner he reasonably
believed to be in, or not opposed to, the best interests of the corporation and,
with respect to any criminal proceeding, had no reasonable cause to believe his
conduct was unlawful. The termination of any action or proceeding by judgment,
order, settlement or conviction or upon a plea of nolo contendere or its
equivalent shall not of itself create a presumption that the person did not act
in good faith and in a manner that he reasonably believed to be in, or not
opposed to, the best interests of the corporation and, with respect to any
criminal proceeding, had reasonable cause to believe that his conduct was
unlawful.
Section 1742. Derivative and corporate actions.
Unless otherwise restricted in its bylaws, a business corporation shall
have power to indemnify any person who was or is a party, or is threatened to be
made a party, to any threatened, pending or completed action by or in the right
of the corporation to procure a judgment in its favor by reason of the fact that
he is or was a representative of the corporation or is or was serving at the
request of the corporation as a representative of another domestic or foreign
corporation for profit or not-for-profit, partnership, joint venture, trust or
other enterprise, against expenses (including attorneys' fees) actually and
reasonably incurred by him in connection with the defense or settlement of the
action if he acted in good faith and in a manner he reasonably believed to be
in, or not opposed to, the best interests of the corporation. Indemnification
shall not be made under this section in respect of any claim, issue or matter as
to which the person has been adjudged to be liable to the corporation unless and
only to the extent that the court of common pleas of the judicial district
embracing the county in which the registered office of the corporation is
located or the court in which the action was brought determines upon application
that, despite the adjudication of liability but in view of all the
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<PAGE>
circumstances of the case, the person is fairly and reasonably entitled to
indemnity for the expenses that the court of common pleas or other court deems
proper.
Section 1743. Mandatory indemnification.
To the extent that a representative of a business corporation has been
successful on the merits or otherwise in defense of any action or proceeding
referred to in section 1741 (relating to third-party actions) or 1742 (relating
to derivative and corporate actions) or in defense of any claim, issue or matter
therein, he shall be indemnified against expenses (including attorneys' fees)
actually and reasonably incurred by him in connection therewith.
Section 1744. Procedure for effecting indemnification.
Unless ordered by a court, any indemnification under section 1741 (relating
to third-party actions) or 1742 (relating to derivative and corporate actions)
shall be made by the business corporation only as authorized in the specific
case upon a determination that indemnification of the representative is proper
in the circumstances because he has met the applicable standard of conduct set
forth in those sections. The determination shall be made: (1) by the board of
directors by a majority vote of a quorum consisting of directors who were not
parties to the action or proceeding; (2) if such a quorum is not obtainable or
if obtainable and a majority vote of a quorum of disinterested directors so
directs, by independent legal counsel in a written opinion; or (3) by the
shareholders.
Section 1745. Advancing expenses.
Expenses (including attorneys' fees) incurred in defending any action or
proceeding referred to in this subchapter may be paid by a business corporation
in advance of the final disposition of the action or proceeding upon receipt of
an undertaking by or on behalf of the representative to repay the amount if it
is ultimately determined that he is not entitled to be indemnified by the
corporation as authorized in this subchapter or otherwise.
Section 1746. Supplementary coverage.
(a) General rule. The indemnification and advancement of expenses provided by,
or granted pursuant to, the other sections of this subchapter shall not be
deemed exclusive of any other rights to which a person seeking
indemnification or advancement of expenses may be entitled under any bylaw,
agreement, vote of shareholders or disinterested directors or otherwise,
both as to action in his official capacity and as to action in another
capacity while holding that office. Section 1728 (relating to interested
directors or officers; quorum) and, in the case of a registered
corporation, section 2538 (relating to approval of transactions with
interested shareholders) shall be applicable to any bylaw, contract or
transaction authorized by the directors under this section. A corporation
may create a fund of any nature, which may, but need not be, under the
control of a trustee, or otherwise secure or insure
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<PAGE>
in any manner its indemnification obligations, whether arising under or
pursuant to this section or otherwise.
(b) When indemnification is not to be made. Indemnification pursuant to
subsection (a) shall not 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. The articles may
not provide for indemnification in the case of willful misconduct or
recklessness. (c) Grounds. Indemnification pursuant to subsection (a) under
any bylaw, agreement, vote of shareholders or directors or otherwise may be
granted for any action taken or any failure to take any action and may be
made whether or not the corporation would have the power to indemnify the
person under any other provision of law except as provided in this section
and whether or not the indemnified liability arises or arose from any
threatened, pending or completed action by or in the right of the
corporation. Such indemnification is declared to be consistent with the
public policy of this Commonwealth. Section 1747. Power to purchase
insurance. Unless otherwise restricted in its bylaws, a business
corporation shall have power to purchase and maintain insurance on behalf
of any person who is or was a representative of the corporation or is or
was serving at the request of the corporation as a representative of
another domestic or foreign corporation for profit or not-for-profit,
partnership, joint venture, trust or other enterprise against any liability
asserted against him and incurred by him in any such capacity, or arising
out of his status as such, whether or not the corporation would have the
power to indemnify him against that liability under the provisions of this
subchapter. Such insurance is declared to be consistent with the public
policy of this Commonwealth.
Section 1748. Application to surviving or new corporations.
For the purposes of this subchapter, references to "the corporation"
include all constituent corporations absorbed in a consolidation, merger or
division, as well as the surviving or new corporations surviving or resulting
therefrom, so that any person who is or was a representative of the constituent,
surviving or new corporation, or is or was serving at the request of the
constituent, surviving or new corporation as a representative of another
domestic or foreign corporation for profit or not-for-profit, partnership, joint
venture, trust or other enterprise, shall stand in the same position under the
provisions of this subchapter with respect to the surviving or new corporation
as he would if he had served the surviving or new corporation in the same
capacity.
Section 1749. Application to employee benefit plans.
For purposes of this subchapter:
(1) References to "other enterprises" shall include employee benefit
plans and references to "serving at the request of the corporation" shall
include any service as a representative of the business corporation that
imposes duties on, or involves services by, the representative with respect
to an employee benefit plan, its participants or beneficiaries.
(2) Excise taxes assessed on a person with respect to an employee
benefit plan pursuant to applicable law shall be deemed "fines."
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<PAGE>
(3) Action with respect to an employee benefit plan taken or omitted
in good faith by a representative of the corporation in a manner he
reasonably believed to be in the interest of the participants and
beneficiaries of the plan shall be deemed to be action in a manner that is
not opposed to the best interests of the corporation.
Section 1750. Duration and extent of coverage.
The indemnification and advancement of expenses provided by, or granted
pursuant to, this subchapter shall, unless otherwise provided when authorized or
ratified, continue as to a person who has ceased to be a representative of the
corporation and shall inure to the benefit of the heirs and personal
representative of that person.
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EXHIBIT 99E
EXCERPTS FROM SECTION 215a OF THE NATIONAL BANK
ACT RELATING TO DISSENTERS' RIGHTS -- FILED AS
EXHIBIT E TO THE PROXY STATEMENT/PROSPECTUS INCLUDED
IN THIS REGISTRATION STATEMENT
