As filed with the Securities and Exchange Commission on March 10, 2000
Registration No. _________
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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM S-4
REGISTRATION STATEMENT
UNDER THE SECURITIES ACT OF 1933
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SOMERSET TRUST HOLDING COMPANY
(Exact name of Registrant as specified in its charter)
Pennsylvania 6021 Applied For
- - ------------------------------- ---------------------------- -------------------
(State or other jurisdiction of (Primary Standard Industrial (I.R.S. Employer
incorporation or organization) Classification Code Number) Identification No.)
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G. Henry Cook
President and Chief Executive Officer
SOMERSET TRUST HOLDING COMPANY SOMERSET TRUST HOLDING COMPANY
151 West Main Street 151 West Main Street
P. O. Box 777 P. O. Box 777
Somerset, Pennsylvania 15501-0777 Somerset, Pennsylvania 15501-0777
(814) 443-3661 (814) 443-3661
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(Address, including ZIP Code, and telephone (Name, address, including ZIP Code, and
number, including area code, of registrant's telephone number, including area
principal executive offices) code, of agent for service)
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With a Copy to:
Paul A. Adams, 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. X
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CALCULATION OF REGISTRATION FEE
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Title of Each Class Amount Proposed Proposed Maximum Amount of
of Securities to to be Offering Price Aggregate Registration
be Registered Registered Per Share(1) Offering Price(1) Fee
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Common Stock, without
par value 2,450,000 shares $ 9.345964 $22,897,612 $6,044.97
- - -------------------------------------------------------------------------------------------------------------
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(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
612,500 outstanding shares of common stock of Somerset Trust Company, par
value $1.00, of $37.383856 per share as of December 31, 1999, the latest
practicable date prior to the date of filing this Registration Statement,
and estimated based upon the issuance of a maximum of 2,450,000 shares of
Registrant's common stock, without par value, in the reorganization of
Somerset Trust Company as a subsidiary of Registrant. Registrant will issue
four shares of common stock in exchange for each share of bank common
stock, resulting in the proposed offering price per share which is
one-fourth of the bank's per share book value.
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Proxy Statement/Prospectus
SOMERSET TRUST HOLDING COMPANY
Prospectus for 2,450,000 Shares of Common Stock
SOMERSET TRUST COMPANY
Proxy Statement for the Annual Meeting of Shareholders
We provide this proxy statement/prospectus to you in connection with
the solicitation of proxies to be used at the Annual Meeting of Shareholders of
Somerset Trust Company to be held on Thursday, April 20, 2000, at 1:00 p.m.,
Eastern Time, at the bank's main office. At the meeting, shareholders will vote
on a proposal to approve the reorganization of the bank as the wholly owned
subsidiary of Somerset Trust Holding Company and will vote to elect five
directors. The proposed reorganization, the election of directors, and related
matters that shareholders will vote on at the meeting are described in this
document. The bank's common stock is traded on a very limited basis in the local
over-the-counter market.
In addition to being the bank's proxy statement, this document is the
prospectus of Somerset Trust Holding Company, the proposed holding company for
the bank. If the proposed reorganization takes place, Somerset Trust Holding
Company will issue four shares of its common stock for each whole share of the
bank's outstanding common stock as part of the reorganization We anticipate that
the holding company's common stock will trade on a very limited basis in the
local over-the-counter market.
The proposed reorganization involves elements of risk, which are
described under "Risk Factors" beginning on page 7.
Neither the Securities and Exchange Commission, the Board of Governors
of the Federal Reserve, the Federal Deposit Insurance Corporation, the
Pennsylvania Department of Banking, the Pennsylvania Securities Commission nor
any other state securities commission has approved or disapproved these
securities or determined if this document is truthful or complete. Any
representation to the contrary is a criminal offense.
The shares of holding company common stock offered in this proxy
statement/ prospectus are not savings accounts, deposits, or other obligations
of a bank or savings association and are not insured by the Federal Deposit
Insurance Corporation or any other governmental agency. There can be no
assurance that the trading price of the common stock being offered will not
decrease at any time.
The date of this proxy statement/prospectus is March 30, 2000.
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Table of Contents
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Summary...........................................................................................................1
Basic Information..........................................................................................1
Address/Telephone Number............................................................................1
Type of Organization................................................................................1
Date, Time and Place of the Annual Meeting..........................................................1
Proposals to be Voted upon at the Annual Meeting....................................................1
Questions and Answers about the Proposed Reorganization....................................................2
What are you proposing..............................................................................2
Why are you proposing to form a bank holding company................................................2
What will happen to my stock........................................................................2
How will the 4-for-1 exchange affect the value of my stock..........................................3
Why have you chosen the 4-for-1 exchange ratio......................................................3
Will I have to turn in my stock certificates........................................................3
Does formation of a holding company affect my federal income taxes..................................3
Will management of the bank change after the reorganization.........................................4
If the shareholders approve the reorganization, when will it occur..................................4
Will I have "dissenters' rights of appraisal" under Pennsylvania law if I
vote against the plan of reorganization and plan of merger....................................4
Approval of Reorganization of Somerset Trust Company as the Subsidiary of
Somerset Trust Holding Company.............................................................................4
Questions and Answers about Voting at the Annual Meeting...................................................5
Who is entitled to vote.............................................................................5
How do I vote.......................................................................................5
How does discretionary authority apply..............................................................5
Is my vote confidential.............................................................................5
What constitutes a quorum...........................................................................5
What vote is required to approve each proposal......................................................5
What percentage of stock do the directors and officers own..........................................6
Who are the largest principal shareholders..........................................................6
Risk Factors......................................................................................................7
The holding company could issue additional shares of common stock without shareholder
approval for various corporate purposes, including to delay or prevent a potential
acquisition.........................................................................................7
The holding company's issuance of additional shares of common stock could dilute or
depress the value of your shares of the holding company's common stock..............................7
The Pennsylvania Business Corporation Law of 1988 contains certain strong anti-takeover
provisions which could delay or prevent an acquisition..............................................7
Reorganizing the bank into a holding company structure will add an additional layer of
government regulation which will result in additional costs.........................................8
The forward-looking statements we make in this document are inherently uncertain...........................8
Information contained in this proxy statement/prospectus may become inaccurate after the
date of the proxy statement/prospectus..............................................................9
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Per Share Price Information.......................................................................................9
General Information about the Annual Meeting......................................................................9
Time and Place of Annual Meeting...........................................................................9
Purpose of the Annual Meeting.............................................................................10
Voting Procedures................................................................................................10
Voting Securities and Record Date.........................................................................10
Quorum ...................................................................................................11
Vote Required for Approval................................................................................11
Reorganization Proposal............................................................................11
Proposal to Fix the Number of Directors............................................................11
Election of Directors..............................................................................11
Adjournment........................................................................................11
Solicitation of Proxies...................................................................................12
Voting by Proxy and Revocation of Proxies.................................................................12
Beneficial Ownership of the Bank's Common Stock by Principal Owners and Management...............................13
Proposal No. 1: Reorganization of Somerset Trust Company as the Subsidiary of
Somerset Trust Holding Company............................................................................16
Description of Reorganization Procedure...................................................................16
Amendment or Termination of the Plan of Reorganization and Plan of Merger.................................16
Exchange of Stock, 4-for-1 Exchange Ratio.................................................................17
Exchange of Stock Certificates............................................................................17
Failure to Surrender Stock Certificates...................................................................18
Reasons for the Proposed Reorganization...................................................................18
Financing..........................................................................................18
Authorized Capital...........................................................................18
Debt Financing...............................................................................19
Trust Preferred Stock........................................................................19
Non-Banking Activities.............................................................................20
Flexibility in Responding to Changes in Law........................................................20
Bank Acquisitions..................................................................................20
Dissenters' Rights of Appraisal...........................................................................20
General............................................................................................20
Fair Value.........................................................................................21
Notice of Intention to Dissent.....................................................................21
Notice to Demand Payment...........................................................................21
Failure to Comply with Notice to Demand Payment, etc...............................................21
Payment of Fair Value of Shares....................................................................21
Estimate by Dissenter of Fair Value of Shares......................................................22
Valuation Proceeding...............................................................................22
Costs and Expenses.................................................................................22
Conditions to the Reorganization..........................................................................23
Closing Date..............................................................................................24
Tax Consequences..........................................................................................24
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Accounting Treatment......................................................................................26
Trading and Resale of Holding Company Common Stock........................................................26
Capitalization............................................................................................28
Other Financial Information...............................................................................29
Description of the Holding Company...............................................................................30
Organization and Description of Business..................................................................30
Properties................................................................................................30
Management................................................................................................30
Executive and Director Compensation.......................................................................31
Information about Beneficial Ownership of Significant Shareholders, Directors and
Executive Officers.................................................................................31
Relationships and Related Transactions....................................................................31
Directors' and Officers' Indemnification and Limits on Liability..........................................32
Supervision and Regulation of the Holding Company.........................................................32
The Securities Act of 1933 -The Offer and Sale of Securities.......................................32
The Securities Exchange Act of 1934 -Periodic Reporting Requirements...............................32
The Bank Holding Company Act of 1956 -Supervision by the Federal Reserve
Board........................................................................................32
General Supervision by the Federal Reserve Board.............................................33
Restrictions on Acquiring Control of other Banks and Companies...............................33
Anti-Tie-In Provisions.......................................................................33
Restrictions on Extensions of Credit by Banks to their Holding Companies.....................34
Risk-Based Capital Guidelines................................................................34
Capital Leverage Ratio Requirements..........................................................34
Restrictions on Control Changes..............................................................34
The Pennsylvania Banking Code of 1965 -Supervision by the Pennsylvania
Department of Banking........................................................................35
The Riegle-Neal Interstate Banking and Branching Efficiency Act of 1994 -
Interstate Banking...........................................................................35
Permitted Activities......................................................................................35
Permitted Activities for Financial Holding Companies......................................................39
Proposal No. 2: To Fix the Number of Directors to be Elected.....................................................40
Proposal No. 3: Election of Bank Directors.......................................................................40
Description of the Bank..........................................................................................41
History...................................................................................................41
Offices...................................................................................................41
Description of Business...................................................................................42
Properties................................................................................................44
Supervision and Regulation of the Bank....................................................................44
Pennsylvania Banking Law...........................................................................45
Federal Banking Law................................................................................45
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Restrictions on Activities between a Holding Company and its Subsidiary
Bank..................................................................................46
Capital Adequacy Guidelines..................................................................46
FDIC Insurance Assessments...................................................................47
Meeting the Needs of the Community...........................................................48
Truth-In-Savings.............................................................................48
Restrictions on Control Changes..............................................................49
Suspicious Activities Reports................................................................49
Interstate Banking...........................................................................49
Securities Regulation..............................................................................49
The Gramm-Leach-Bliley Act (Financial Services Reform Act..........................................50
New Legislation....................................................................................50
Legal Proceedings.........................................................................................51
Information as to Nominees and Directors..................................................................51
Board Meetings, Compensation of Directors.................................................................52
Procedure for Nominating Directors........................................................................53
Committees of the Board of Directors......................................................................53
Principal Officers........................................................................................55
Executive Compensation....................................................................................56
Compensation Committee Report on Executive Compensation...................................................56
Chief Executive Officer Compensation ...................................................57
Executive Officers.................................................................................57
Officer Incentive Program..........................................................................58
Executive Officer Bonus............................................................................58
Conclusion.........................................................................................58
Compensation Committee Interlocks and Insider Participation...............................................58
401(k) Profit-Sharing Plan................................................................................59
Employee Stock Ownership Plan (ESOP)......................................................................59
Top Hat Deferred Compensation Pan.........................................................................59
Defined Benefit Pension Plan..............................................................................59
Relationships between Officer and Directors and Transactions between Officer and
Directors and the Bank.............................................................................61
Family Relationships...............................................................................61
Indebtedness of Management.........................................................................61
Description of the Bank's Capital Securities.....................................................................62
Common Stock..............................................................................................62
Voting Rights......................................................................................62
Preemptive Rights..................................................................................62
Liquidation........................................................................................62
Liability for Further Assessments..................................................................62
Sinking Fund Provision.............................................................................62
Redemption Provision...............................................................................62
Capital Requirements under State Banking Law.......................................................62
Dividends..........................................................................................62
Comparative Market Prices.................................................................................63
Trade Price High's and Low's..............................................................................64
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Description of the Holding Company's Capital Securities..........................................................64
Common Stock..............................................................................................64
Voting Rights......................................................................................64
Preemptive Rights..................................................................................64
Liquidation........................................................................................65
Liability for Further Assessments..................................................................65
Sinking Fund Provision.............................................................................65
Redemption or Conversion Rights....................................................................65
Dividends..........................................................................................65
Issuance of Additional Securities.........................................................................65
Legal Opinion.............................................................................................66
Anti-Takeover Effect of Provisions in Articles and Bylaws.................................................66
Authorized Capital.................................................................................66
Classified Board...................................................................................66
Anti-takeover Provisions Applicable to Registered Corporations............................................67
Comparison of Shareholder Rights.................................................................................71
Independent Auditors.............................................................................................77
Shareholder Proposals............................................................................................77
Other Matters....................................................................................................78
Where You Can Find More Information..............................................................................79
The Holding Company's Registration Statement..............................................................79
Annual Reports............................................................................................79
Periodic Reports and Information Filed with the SEC Following the Reorganization..........................79
Annex A Plan of Reorganization and Exhibit A, Plan of Merger
Annex B Articles of Incorporation of Somerset Trust Holding Company
Annex C Bylaws of Somerset Trust Holding Company
Annex D Statutes Regarding Dissenters' Rights
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SUMMARY
The following summary, including the questions and answers, are
designed to help you understand various matters relating to the annual meeting.
This summary only highlights information in the proxy statement/prospectus. The
remainder of the proxy statement/prospectus and annexes contain more detailed
information. We urge you to read the entire proxy statement/prospectus and
annexes to fully understand the proposed reorganization and other matters.
You should rely only on the information contained or referred to in
this proxy statement/prospectus or any supplement. Neither Somerset Trust
Holding Company nor Somerset Trust Company has authorized anyone else to provide
you with different or additional information.
Basic Information
Address/Telephone Number:
The mailing and physical address of the principal executive offices of
Somerset Trust Holding Company and of Somerset Trust Company is:
151 West Main Street
P. O. Box 777
Somerset, Pennsylvania 15501-0777
The telephone number of the holding company and the bank is (814)
443-3661.
Type of Organization:
Somerset Trust Holding Company is a Pennsylvania business corporation,
and Somerset Trust Company is a Pennsylvania-chartered bank and trust company.
The same persons who serve on the board of directors of the bank serve as the
holding company's directors. The holding company has no operating history.
Date, Time and Place of the Annual Meeting:
Thursday, April 20, 2000, 1:00 p.m., Eastern Time, at the Board Room at
Somerset Trust Company's main office located at 151 West Main Street, Somerset,
Pennsylvania 15501-0777.
Proposals to be Voted upon at the Annual Meeting:
o To approve and adopt the plan of reorganization and related plan of
merger, dated March ____, 2000, providing for the reorganization of the
bank as the wholly owned subsidiary of Somerset Trust Holding Company;
o To fix the number of directors of Somerset Trust Company to be elected
at the annual meeting at five;
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o To elect five directors to the board of directors of Somerset Trust
Company, including three directors to serve for a three-year term, one
director to serve for a two-year term, and one director to serve for a
one-year term, and until their successors have been duly elected and
qualified;
o To ratify the selection of Stokes, Kelly & Hinds, L.L.C., Certified
Public Accountants, of Pittsburgh, Pennsylvania, as the independent
auditors of Somerset Trust Company for the year ending December 31,
2000;
o If necessary, to adjourn the annual meeting to a later date to permit
further solicitation of proxies if there are insufficient votes at the
time of the meeting to constitute a quorum or to approve the plan of
reorganization and plan of merger; and
o To transact other business as may properly come before the annual
meeting and any adjournment of the meeting.
Questions and Answers
about the Proposed Reorganization
What are you proposing?
We are asking you to approve a plan of reorganization and related plan
of merger that would result in the reorganization of Somerset Trust Company into
a holding company structure. These agreements provide for the reorganization of
the bank as the wholly owned subsidiary of Somerset Trust Holding Company. The
reorganization will occur through the merger of Somerset Interim Bank into the
bank. Somerset Interim Bank is a Pennsylvania-chartered interim banking
institution , organized as the subsidiary of Somerset Trust Holding Company to
facilitate the proposed reorganization.
Why are you proposing to form a bank holding company?
In our opinion, the reorganization of the bank into a holding company
structure will provide greater flexibility in:
o Financing,
o Engaging in non-banking activities, and
o Responding to changes in law.
What will happen to my stock?
Upon the completion 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 automatically
own four shares of the holding company's common stock for each share of common
stock of the bank owned prior to the reorganization. The holding company will
not issue fractional shares in connection with the reorganization, except that
fractional bank shares held in the bank's Employee Stock Ownership Plans, or
ESOP's, shall automatically be exchanged at the 4-for-1 ratio for holding
company common stock, regardless
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of whether the exchange results in fractional interests in holding company
common stock. Except for bank shares held in these plans, the holding company
will pay for any fractional interests in cash.
How will the 4-for-1 exchange affect the value of my stock?
We cannot predict changes in market value. However, we anticipate that
the 4-for-1 exchange ratio will have the same effect as a 4-for-1 stock split of
the bank's common stock. Immediately after the reorganization, the market value
per share of the holding company's common stock is likely to be about one-fourth
of the market value per share of the bank's common stock immediately prior to
the reorganization. As a result, the total market value of your shares
immediately after the reorganization is likely to remain about the same as
before the reorganization.
Why have you chosen the 4-for-1 exchange ratio?
We have chosen the 4-for-1 exchange ratio to create a more liquid
market for the holding company's common stock. We believe that the exchange
ratio will make the holding company's common stock more affordable to persons in
the communities in which the bank does business and will enhance the trading
volume and marketability of the shares. The 4-for-1 exchange ratio also provides
the holding company with more flexibility to issue additional shares of common
stock to raise additional capital, because the market value per share will be
less.
Will I have to turn in my stock certificates?
You must exchange your stock certificates, bearing the name "Somerset
Trust Company," for new stock certificates, bearing the name "Somerset Trust
Holding Company." At its option, the holding company may withhold dividends
payable after the reorganization to those who have received notification to
exchange their stock certificates but have not done so within a reasonable
period of time. The holding company will pay any dividends withheld, without
interest, upon the surrender of the bank stock certificates.
In the event that you do not surrender your stock certificates within
two years of receiving notification to exchange your certificates, the holding
company may sell the shares of holding company common stock that it would
otherwise have issued you. The holding company will hold the net proceeds of the
sale in a non-interest bearing account for your benefit. After this sale, you
could collect the net sales proceeds upon your surrender of the bank stock
certificates.
Does formation of a holding company affect my federal income taxes?
The proposed reorganization will be a tax-free reorganization under
federal tax laws. The holding company and the bank have obtained a tax opinion
on this matter from legal counsel, described in detail on page 23. You will not
recognize any gain or loss for federal income tax purposes upon your receipt of
Somerset Trust Holding Company common stock in exchange for your shares of the
bank's common stock. However, you will recognize a gain or loss upon the receipt
of cash instead of holding company stock if you are a dissenting shareholder or
upon the
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receipt of cash for any fractional interests in the bank's common stock. You
should consult your own tax advisors concerning the specific tax consequences of
the reorganization to you, including any state or local tax consequences.
Will management of the bank change after the reorganization?
Management of the bank will not change as a result of the
reorganization. The current members of the bank's board of directors were
elected to serve as the board of directors of the holding company until its
first annual meeting of shareholders in 2001. With one exception, the executive
officers of the holding company, including the President, are also executive
officers of the bank.
If the shareholders approve the reorganization, when will it occur?
We would like to complete the reorganization as soon as possible after
the annual meeting. In order to complete the reorganization, the bank, the
interim bank and the holding company must obtain regulatory approvals from the
Pennsylvania Department for Banking, the Federal Deposit Insurance Corporation,
or FDIC, and the Board of Governors of the Federal Reserve System. The
applications for these regulatory approvals are currently _________. If the
necessary approvals are issued in time, we anticipate completing the
reorganization immediately after obtaining shareholder approval, by June 30,
2000.
Will I have dissenters' rights of appraisal under Pennsylvania law if I vote
against the plan of reorganization and plan of merger?
You will be entitled to receive cash payment of the fair value of your
shares if the reorganization is completed if you:
o Do not vote in favor of the plan of reorganization and plan of
merger; and
o If you comply with the statutory requirements of Pennsylvania law
concerning dissenters' rights of appraisal.
To be eligible to demand payment for your shares as a dissenter, you
must file with the bank, prior to the vote on the proposal, a written notice of
intention to demand payment for the fair value of your shares if the
reorganization is completed. Voting against the plan of reorganization and plan
of merger at the annual meeting will not perfect a shareholder's dissenter's
rights. Please see "Proposal No. 1: Approval of Reorganization of Somerset Trust
Company as the Subsidiary of Somerset Trust Holding Company - Dissenters' Rights
of Appraisal" below.
Please also refer to "Voting Procedures," "Beneficial Ownership of the
Bank's Common Stock By Principal Shareholders and Management," "Board of
Directors and Executive Officers," and "Transactions and Indebtedness of
Management" for general information on voting procedures, principal shareholders
and management.
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Questions and Answers
about Voting at the Annual Meeting
Who is entitled to vote?
Holding the bank's common stock at the close of business on March 10,
2000, the record date, entitles the holder to attend and vote at the meeting. On
the record date, approximately 612,500 shares of the bank's common stock were
outstanding. Each share of the bank's common stock entitles its holder to one
vote on all matters presented at the meeting.
How do I vote?
There are two methods. You may vote by completing and mailing the
enclosed proxy form or by attending the annual meeting and voting in person. If
you vote by proxy but wish to change your vote prior to the annual meeting, you
may do so by following the procedures described on page 12.
How does discretionary authority apply?
If you sign your proxy but do not make any selections, you give
discretionary authority to the proxy holders to vote on the five proposals. In
addition, every proxy gives the holder discretionary authority to vote on other
matters that arise at the meeting of which management is not aware. However, the
proxy holders will not vote any proxy that withholds authority or that is voted
against the reorganization in favor of any adjournment of the meeting.
Is my vote confidential?
Yes. Only the judges of election and the proxy holders will have access
to your proxy. All comments will remain confidential unless you ask that your
name be disclosed.
What constitutes a quorum?
Each matter to be acted upon at the meeting requires the presence of a
quorum. As of March 10, 2000, 612,500 shares of common stock were issued and
outstanding. The holders of a majority of the outstanding shares, or 306,251
shares, must be present or represented by proxy, in order to establish a quorum.
If you vote by proxy or in person, you will be considered part of the quorum.
What vote is required to approve each proposal?
o Approval and adoption of the plan of reorganization and related plan of
merger requires the affirmative vote of the holders of at least
two-thirds of the outstanding shares of the bank's common stock.
o The five nominees for bank director receiving the highest number of
votes cast by shareholders entitled to vote for the election of
directors shall be elected.
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The following proposals require the affirmative vote of a majority of
the shares present and entitled to vote at the meeting, in person or by proxy:
o Fixing the number of bank directors to be elected at five;
o Ratifying the bank's independent auditors; and
o Adjourning the meeting to a later date if necessary.
What percentage of stock do the directors and executive officers own?
Approximately 6.11% of our common stock as of March 10, 2000.
Who are the largest principal shareholders?
The Edward Scull Trust holds 13.22% of the outstanding shares of the
bank's common stock. The trust benefits the nephews and nieces of the late
Edward Scull. George S. Cook , the father of G. Henry Cook, President and Chief
Executive Officer of the bank, and of Thomas J. Cook, Senior Vice President of
the bank, is a beneficiary of the trust.
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RISK FACTORS
You should carefully consider all information in this document,
especially the risk factors below, in determining how to vote.
The holding company could issue additional shares of common stock without
shareholder approval for various corporate purposes, including to delay or
prevent a potential acquisition.
The holding company's authorized capital consists of 4.0 million shares
of common stock. A large number of authorized shares will generally permit the
board of directors to have as much flexibility as possible to issue additional
shares, without prior shareholder approval, for proper corporate purposes,
including financing, acquisitions, stock dividends, stock splits, and employee
incentive plans. These additional shares could also be used by the board of
directors to delay or prevent a third party's attempt to gain control over the
holding company. This could be accomplished by issuing new shares to a
management-friendly party. By comparison, the bank has 612,500 authorized shares
of common stock, all of which are issued and outstanding. The issuance of new
bank shares would require shareholder approval to increase the bank's number of
authorized shares.
The holding company's issuance of additional shares of common stock could dilute
or depress the value of your shares of the holding company's common stock.
We anticipate that the holding company will issue approximately
2,450,000 shares of common stock, if the reorganization is completed, and
approximately 1,550,000 shares of common stock will remain unissued. Sales of
additional shares of stock, or the perception that shares may be sold, could
negatively affect the market price of the holding company's stock.
The issuance of additional shares could also dilute the percentage
ownership interest and corresponding voting power of the prior shareholders.
Shareholders of the holding company, like shareholders of the bank, will not
have preemptive rights, which is the right to subscribe for additional shares
being offered on a proportional basis to their stock ownership percentage.
The Pennsylvania Business Corporation Law of 1988 contains strong anti-takeover
provisions that apply to corporations registered under Section 12 of the
Securities Exchange Act of 1934 and which could delay or prevent an acquisition.
The Pennsylvania Banking Code of 1965 governs the rights of
shareholders of the bank, but the Pennsylvania Business Corporation Law of 1988
will govern the rights of shareholders of the holding company. Under the
Business Corporation Law, strong anti-takeover provisions apply to corporations
that have their securities registered with the SEC under Section 12 of the
Securities Exchange Act of 1934. Although we do not anticipate that the holding
company will be required to register under Section 12 in the near future, the
holding company would be required to register its stock under Section 12 within
120 days of the end of the calendar year in which it has more than 500
shareholders and more than $10 million in assets on a consolidated basis. As of
December 31, 1999, the bank had about $280 million in assets and 410
shareholders, and the holding company is expected to have about the same number
of
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shareholders after the reorganization. These anti-takeover provisions will not
apply until the holding company is registered under a Section 12.
However, after the proposed reorganization, the holding company will
automatically become an SEC-reporting company under Section 15(d) of the 1934
Act. A few of the anti-takeover provisions of the Business Corporation Law apply
to Section 15(d) companies. To the extent the holding company is permitted by
law to do so, it has opted out of these provisions specifically applicable to
Section 15(d)companies. See section entitled "Description of the Holding
Company's Capital Securities - Anti-Takeover Provisions Applicable to Registered
Corporations."
Reorganizing the bank into a holding company structure will add an additional
layer of government regulation that will result in additional costs.
The bank is already subject to extensive governmental supervision,
regulation and control, and the reorganization will result in additional
regulation. The holding company will have additional filing and reporting
requirements under both the Securities Exchange Act of 1934 and the Securities
Act of 1933:
o After completion of the reorganization, as and SEC reporting company
the holding company will file periodic financial reports, proxy
statements and other information with the SEC.
o The holding company must also file registration statements with the SEC
under the Securities Act of 1933, as well as with state securities
commissions under state securities laws, for the offer and sale of its
securities to the public. Presently, the bank is exempt from the
registration requirements under the 1933 Act and from most state
registration requirements because of exemptions for bank securities.
These additional filings under both the 1933 and 1934 Acts will entail
additional costs, including legal fees.
The holding company will also be subject to the provisions and
restrictions of the Bank Holding Company Act of 1956 and to supervision by the
Board of Governors of the Federal Reserve System. It must file an annual report
with the Federal Reserve Board, which may also conduct examinations of the
holding company. These requirements are designed to protect the safety and
soundness of the bank subsidiaries of holding companies. As a result, the
holding company will incur legal and other costs. See "Description of the
Holding Company Supervision and Regulation of the Holding Company" below.
The forward-looking statements we make in this document are inherently
uncertain.
This proxy statement/prospectus contains forward-looking statements
including statements regarding intent, belief, anticipation or current
expectations about matters that may or may not occur in the future. A
forward-looking statement is any statement that is not a historical fact. These
statements are subject to risks, uncertainties and assumptions. These include
the risk that projected trends for the continued growth of the bank will not
occur. If one or more of these
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<PAGE>
risks or uncertainties occurs or if underlying assumptions prove incorrect,
actual results, performance or achievements in 2000 and beyond could differ
materially from those stated.
Please read the following warnings as to limitations on the accuracy of
information in this proxy statement/prospectus and on the extent of this
offering.
You should not assume that the information in this proxy
statement/prospectus or any supplement is accurate as of any other date than the
date indicated on those documents.
This proxy statement/prospectus does not constitute an offer of
securities in any jurisdiction in which, or to any person to whom, it is not
permitted. Neither does this proxy statement/prospectus cover resales of shares
of holding company common stock after completion of the proposed reorganization,
and no person is authorized to make use of this proxy statement/prospectus in
connection with any resale.
PER SHARE PRICE INFORMATION
There has never been an organized public trading market for the bank's
common stock. Bank common stock is traded over-the-counter from time to time.
The last reported sale of bank common stock prior to the public announcement of
the reorganization on February 18, 2000, was a trade of 580 shares at $55.00 per
share on February 16, 2000. Due to the infrequency of trading and the fact that
these trades are generally private transactions, we are unable to determine
actual trading prices on any given date.
Because Somerset Trust Holding Company was not yet incorporated at the
time of the public announcement on February 18, 2000, the holding company's
common stock had no market value. We anticipate that after the reorganization,
the per share market value of the holding company's common stock will be
approximately one-fourth of the per share market value of the bank's common
stock immediately after the reorganization, based on the 4-for-1 stock exchange
ratio.
GENERAL INFORMATION ABOUT THE ANNUAL MEETING
Time and Place of Annual Meeting
The board of directors of Somerset Trust Company, a
Pennsylvania-chartered bank and trust company, is furnishing this proxy
statement to solicit your proxy for use at the Annual Meeting of Shareholders of
the bank and any adjournment of the meeting. The annual meeting will be held at
the Board Room at the bank's main office at 151 West Main Street, Somerset,
Pennsylvania 15501-0777, on Thursday, April 20, 2000, at 1:00 p.m., Eastern
Time.
9
<PAGE>
Purpose of the Annual Meeting
At the annual meeting, the board of directors of the bank will request
that shareholders:
o Consider and act upon a proposal to approve and adopt a plan of
reorganization and related plan of merger, dated March ___, 2000,
providing for
o The reorganization of Somerset Trust Company as the wholly
owned subsidiary of Somerset Trust Holding Company through
the merger of Somerset Interim Bank, a Pennsylvania-chartered
interim banking institution and wholly owned subsidiary of
Somerset Trust Holding Company, into Somerset Trust Company;
and
o The exchange of each share of common stock of Somerset Trust
Company for four shares of common stock of Somerset Trust
Holding Company;
o Fix the number of bank directors to be elected at the annual
meeting at five;
o Elect five directors of the bank, including three to serve for a
three-year term, one to serve for a two-year term and one to serve
for a one-year term, and until their successors are properly
elected and qualified;
o Ratify the selection of Stokes, Kelly & Hinds, L.L.C., Certified
Public Accountants, of Pittsburgh, Pennsylvania, as the bank's
independent auditors for the year ending December 31, 2000;
o Consider any adjournment of the meeting to a later date, if
necessary, to permit further solicitation of proxies in the event
there are insufficient votes at the time of the meeting to
constitute a quorum or to approve the plan of reorganization and
plan of merger; and
o Transact any other business that may properly come before the
annual meeting and any adjournment of the meeting.
VOTING PROCEDURES
Voting Securities and Record Date
The board of directors of the bank has fixed the close of business on
March 10, 2000, as the record date for the determination of shareholders of the
bank entitled to vote at the annual meeting. On the record date, the bank had
issued and outstanding approximately 612,500 shares of common stock, par value
$1.00 per share, the only authorized class of stock. Approximately 410
shareholders held these shares. Each outstanding share of common stock entitles
the record holder to one vote.
10
<PAGE>
Quorum
Under Pennsylvania law and the bylaws of the bank, the presence of a
quorum is required for each matter to be acted upon at the annual meeting. The
holders of a majority of the outstanding shares of common stock, or 306,251
shares, must be present at the meeting, either in person or by proxy, to
establish a quorum. For purposes of establishing a quorum, the bank will count
as present shareholders represented by proxies marked "withhold" or "abstain."
"Broker non-votes" will not be counted in determining the presence of a quorum
for the particular matter. "Broker non-votes" are shares represented at the
meeting held by brokers or nominees as to which instructions have not been
received from the beneficial owners or persons entitled to vote and the broker
or nominee does not have the discretionary voting power on a particular matter.
In the absence of a quorum, the board of directors of the bank intends to
adjourn the meeting to another place and time without further notice to
shareholders, until a quorum is present.
Vote Required for Approval
Reorganization Proposal. Assuming the presence of a quorum, the
required vote for the approval of the reorganization is the affirmative vote of
at least two-thirds of the total outstanding shares of common stock. Abstentions
and broker non-votes are not votes cast and therefore do not count either for or
against the approval and adoption of matters before the meeting. Although
abstentions and broker non-votes are not votes cast, they have the practical
effect of votes cast against the reorganization proposal.
If you abstain from voting and do not follow the requirements under
Pennsylvania law for dissenters' rights of appraisal, and if at least two-thirds
of the outstanding shares of bank common stock vote in favor of the
reorganization, you will automatically, without any action on your part, receive
four shares of holding company common stock in exchange for each share of bank
common stock you hold. However, you will be required to surrender your bank
stock certificates for holding company stock certificates.
Election of Directors. Assuming the presence of a quorum, the five
nominees for director receiving the highest number of votes cast by shareholders
entitled to vote for the election of directors shall be elected. Votes withheld
and broker non-votes will count neither for nor against the election of a
nominee. Only in the election of directors, each shareholder may, in person or
by proxy, multiply the number of votes to which he or she may be entitled by the
number of directors to be elected. This is known as "cumulative voting." The
shareholder may cast all of his or her cumulative votes for one director
candidate, or he or she may distribute the votes among any two or more
candidates.
Other Proposals. A majority of shares present, in person or by proxy,
is necessary to approve the following proposals:
o Fixing the number of bank directors to be elected;
o Ratifying the bank's independent auditors; and
o Adjourning the meeting if necessary.
Although abstentions and broker non-votes do not count either for or
against the proposal, they have the practical effect of reducing the number of
affirmative votes required to
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<PAGE>
achieve a majority for the matter by reducing the total number of shares voted
from which the required majority is calculated.
Solicitation of Proxies
The bank's board of directors is sending this proxy
statement/prospectus and the enclosed proxy form to shareholders of the bank on
or about March 30, 2000.
In connection with the solicitation of proxies, the bank will:
o Bear the cost of soliciting proxies and
o Reimburse brokerage firms and other custodians, nominees and
fiduciaries for their reasonable forwarding expenses to the
beneficial owners of the stock.
We estimate that the total amount spent by us on the proxy solicitation
will be no more than $2,500. As of March 10, 2000, we have not spent any funds
on proxy solicitation.
The directors, officers and employees of the bank may also solicit
proxies personally or by telephone, telegraph, facsimile transmission or other
electronic means. The bank will not pay additional compensation for such
solicitation.
Voting by Proxy and Revocation of Proxies
By properly completing and signing a proxy form, you will be appointing
the proxy holders to vote your shares at the annual meeting according to your
instructions on the proxy form. If a proxy is completed, signed and returned
without indicating any voting instructions, the shares represented by the proxy
will be voted:
o FOR the approval and adoption of the plan of reorganization and
related plan of merger;
o FOR the proposal to fix the number of bank directors to be elected
at the annual meeting at five;
o FOR the election of the five nominees for bank director named
below;
o FOR the ratification of Stokes, Kelly & Hinds, L.L.C., Certified
Public Accountants of Pittsburgh, Pennsylvania, as the bank's
independent auditors for the year ending December 31, 2000; and
o FOR the 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 reorganization proposal.
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<PAGE>
However, the proxy holders will not vote any proxy that withholds
authority or that is voted against the reorganization in favor of any
adjournment of the meeting.
A proxy also gives the persons named as proxy holders the right to vote
on other matters incidental to the conduct of the meeting. If other matters are
properly brought before the meeting, the proxy holders will vote your proxy in
accordance with the recommendations of the bank's management.
Execution and return of the enclosed proxy will not affect your right
to attend the annual meeting and vote in person if you first give notice to
Thomas J. Cook, Secretary of the bank. A shareholder of the bank who returns a
proxy may revoke the proxy prior to the time it is voted:
o By giving written notice of revocation to Thomas J. Cook,
Secretary, Somerset Trust Company, P.O. Box 777, 151 West Main
Street, Somerset, Pennsylvania 15501;
o By delivering a properly executed proxy bearing a later date to
the Secretary of the bank; or
o By voting in person after giving written notice to the Secretary
of the bank.
Attendance by a shareholder at the annual meeting will not by itself
revoke a proxy.
BENEFICIAL OWNERSHIP OF THE BANK'S COMMON STOCK
BY PRINCIPAL SHAREHOLDERS AND MANAGEMENT
The following table provides information, as of March 10, 2000, with
respect to the following beneficial owners of the bank's common stock:
o Each shareholder who owns more than 5% of the bank's outstanding
common stock, either on the bank's records or indirectly as a
"beneficial" owner,
o Each director of the bank,
o Each nominee for director, and
o All bank executive officers and directors as a group.
We determined beneficial ownership by applying the General Rules and
Regulations of the SEC, which state that a person may be credited with the
ownership of common stock:
o Owned by or for the person's spouse, minor children or any other
relative sharing the person's home;
o Of which the person shares voting power, which includes the power
to vote or to direct the voting of the stock; and
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<PAGE>
o Of which the person has investment power, which includes the power
to dispose or direct the disposition of the stock.
Also, a person who has the right to acquire beneficial ownership of
shares within 60 days after March 10, 2000, will be considered to own the
shares. Unless otherwise indicated, the persons listed own their shares directly
as individuals.
<TABLE>
<CAPTION>
Amount and Nature of
Beneficial Ownership of Percentage of Bank's Common
Bank's Common Stock (1) Stock Beneficially Owned (2)
----------------------- ----------------------------
Name and Address
of 5% Holder
- - ------------
<S> <C> <C>
Edward Scull Trust 80,960 13.22%
Attn: Patrick Wallace,
Vice President/Trust Office
Ligonier Office
PNC Bank NA
204 E. Main Street
Ligonier, PA 15658(3)
Name of Individual and
Position with Bank
- - ------------------
G. Henry Cook, President and Chief 4,852.64 (4) *
Executive Officer, Chairman
and Director
Thomas J. Cook 4,170.92 (5) *
Senior Vice President, Secretary,
Director
Jon C. Clapper, 250 (6) *
Director
Barbara Wheeler Davies, 6,960 (7) 1.14%
Director
Dean M. Hottle 6,200 (8) 1.01%
Director
John M. Kriak 600 (9) *
Director
Alan L. Miller 8,700 (10) 1.42%
Director
Lloyd E. Mostoller 608 (11) *
Director
Marlin C. Sherbine 150 *
Director
Richard C. Yeager 1,000(12) *
Director
Edward R. Zeigler 1,090(13) *
Director
</TABLE>
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<PAGE>
<TABLE>
<CAPTION>
Amount and Nature of
Beneficial Ownership of Percentage of Bank's Common
Bank's Common Stock (1) Stock Beneficially Owned (2)
----------------------- ----------------------------
<S> <C> <C>
All Executive Officers and Directors 37,395.56 6.11%
as a Group (14 persons in total)
</TABLE>
- - ----------------------
* Represents beneficial ownership of less than 1% of the bank's common
stock.
(1) Information furnished by the directors and the bank.
(2) Based on 612,500 outstanding shares of common stock as of March 10,
2000.
(3) George S. Cook, father of G. Henry Cook and Thomas J. cook, is a
one-sixth beneficiary of the trust, which benefits the nephews and
nieces of the late Edward Scull. In addition, George S. Cook holds
24,560 shares, either individually or jointly with his spouse.
(4) Includes 40 shares held jointly with spouse, 200 shares held
individually by spouse, 400 shares held by his minor children,
1,104.7897 vested but undistributed shares held in the bank's ESOP, and
87.85 unvested shares held in the bank's non-qualified ESOP. In
addition, G. Henry Cook's parents, George S. and Eve Cook, beneficially
own 25,560 shares. George S. Cook is also a beneficiary of the Edward
Scull Trust, listed as a principal shareholder. G. Henry Cook's
brother, Thomas J. Cook, is an executive officer of the bank and is
listed in this table.
(5) Includes 130 shares held jointly with spouse, 200 shares held
individually by spouse, 829.5885 vested but undistributed shares held
in the bank's ESOP, and 61.33 unvested shares held in the bank's
non-qualified ESOP, and 600 shares owned by his adult child residing at
home. In addition, Thomas J. Cook's parents, George S. and Eve Cook,
beneficially own 25,560 shares. George S. Cook is also the chairman and
a beneficiary of the Edward Scull Trust, a principal shareholder.
Thomas J. Cook's brother, G. Henry Cook, President of the bank, is an
executive officer of the bank and is listed in this table.
(6) Owned jointly with spouse.
(7) Held in trust. Ms. Davies is the beneficiary. In addition, Ms. Davies'
mother, Joan Wheeler, a prior director of the bank, owns 2,370 shares
individually and 4,340 shares jointly with her husband.
(8) Includes 3,000 shares held individually by spouse.
(9) Includes 400 shares held jointly with spouse.
(10) Includes 1,235 shares held jointly with spouse and 1,485 shares
held individually by spouse
(11) Held jointly with spouse.
(12) Held jointly with spouse.
(13) Includes 950 shares held jointly with spouse and 50 held
individually by his adult son who resides at home.
In terms of the number of shares, as of March 10, 2000, the affirmative
votes of the holders of at least approximately 408,334 shares will result in the
approval of the proposed reorganization. The officers and directors, as a group,
own 37,395.56 shares, or approximately 9.16% of the shares representing
affirmative votes needed to approve the reorganization.
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<PAGE>
PROPOSAL NO. 1:
REORGANIZATION OF SOMERSET TRUST COMPANY
AS THE SUBSIDIARY OF SOMERSET TRUST HOLDING COMPANY
Description of Reorganization Procedure
We are asking that you approve a plan of reorganization and related
plan of merger that would result in the reorganization of the bank as a
subsidiary of Somerset Trust Holding Company. The reorganization involves two
steps. First, we incorporated Somerset Trust Holding Company under the
Pennsylvania Business Corporation Law of 1988 to be the holding company for the
bank, and we organized Somerset Interim Bank under the Pennsylvania Banking Code
of 1965 as its wholly owned subsidiary. Somerset Trust Holding Company is a
Pennsylvania business corporation, and the interim bank is a
Pennsylvania-chartered interim banking institution. Neither the holding company
nor the interim bank will conduct any business prior to the reorganization. On
March _____, 2000, the boards of directors of the holding company, bank and the
interim bank unanimously approved the plan of reorganization and related plan of
merger. We are incorporating the plan of reorganization and plan of merger into
this proxy statement/prospectus and attaching them as Annex A.
Next, under the terms of the plan of reorganization and plan of merger,
if the bank's shareholders approve the transaction and other conditions are met,
the interim bank will merge into the bank on the effective date of the
reorganization. The bank will survive as the wholly owned subsidiary of Somerset
Trust Holding Company. At that time, the shareholders of the bank will
automatically become shareholders of the holding company. Each whole outstanding
share of the bank's common stock will automatically represent four shares of the
holding company's common stock. The prior shareholders of the bank will cease to
have any rights as shareholders of the bank, and their rights will be based
solely on their shares of holding company common stock. Alternatively, if
demanded in accordance with Subchapter D of Chapter 15 of the Pennsylvania
Business Corporation Law of 1988, a shareholder of the bank will have the right
to receive cash in the amount of the appraised value of his or her shares of the
bank's common stock. See "Dissenters' Rights of Appraisal" below. After the
reorganization, the bank will continue its banking business substantially
unchanged and under substantially the same management.
Assuming that no shareholder exercises his or her appraisal rights, the
number of shares of the holding company outstanding immediately after the
reorganization will be approximately four times the number of shares of the bank
outstanding prior to the reorganization.
Amendment or Termination of the Plan of Reorganization and Plan of Merger
The boards of directors of the holding company, the bank 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 exchange of shares of
the bank for shares of the holding company without shareholder approval.
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<PAGE>
The boards of directors of the holding company, the bank and the
interim bank may terminate the plan of reorganization and plan of merger by
mutual consent either before or after approval by the bank's shareholders if the
bank's board of directors believes the reorganization would be inadvisable for
any other proper reason.
Exchange of Stock, 4-for-1 Exchange Ratio
On the day of the reorganization, shareholders of the bank who have not
perfected dissenters' rights will become shareholders of the holding company
without any action by the shareholders. Generally, they will automatically own
four times the number of shares of the holding company's common stock as they
previously owned of the bank's common stock. Each whole outstanding share of the
bank's common stock, par value $1.00 per share, will become four shares of
common stock, without par value, of the holding company. Shares held in the
bank's two employee stock option plans will also be automatically exchanged for
holding company stock. We anticipate that immediately after the reorganization,
that each share common stock of the holding company will have a market value of
about one-fourth that of each share of bank common stock prior to the
reorganization.
The holding company will not issue fractional shares of common stock in
the reorganization, except that fractional bank shares held in the bank's
Employee Stock Ownership Plans shall automatically be exchanged at the 4-for-1
ratio for holding company common stock, regardless of whether the exchange
results in fractional interests in holding company common stock. Except for bank
shares held in these plans, the holding company will pay each former shareholder
of the bank cash in an amount equal to the fair market value of any fractional
share interest in holding company stock.
You should not interpret the fact that the holding company's stock has
no par value as a negative aspect of the exchange. Par value for corporations
has little meaning in today's marketplace. In organizing the holding company, we
decided not to assign a par value to its common stock in order to provide for
cleaner bookkeeping and maximum flexibility. The lack of par value is not likely
to affect the market value of the common stock issued in the exchange.
Exchange of Stock Certificates
Following the reorganization and until properly requested and
surrendered, each outstanding stock certificate of the bank will, for all
corporate purposes, represent the number of whole shares of the holding company
that the holder would be entitled to receive upon its surrender.
The bank and the holding company will require that shareholders
exchange their present stock certificates, bearing the name "Somerset Trust
Company," for new stock certificates, bearing the name "Somerset Trust Holding
Company." After the reorganization, the bank and the holding company will send
shareholders a notice requiring surrender of the stock certificates of the bank
in exchange for stock certificates of the holding company. The holding company
may withhold dividends payable after the reorganization from those shareholders
who do not exchange their present stock certificates for new stock certificates
within a reasonable period of time after receiving the notification to exchange
their certificates. The holding company will pay
17
<PAGE>
any dividends withheld, without interest, to former shareholders of the bank
upon the proper surrender of the bank's common stock certificates.
Failure to Surrender Stock Certificates
Shareholders of the bank must surrender their stock certificates within
two years of receiving notification to exchange their certificates. In the event
that any former shareholder of the bank does not surrender his or her stock
certificates within that time, the holding company may sell the shares of
holding company common stock that would otherwise have been issued. The bank
will hold the net proceeds of the sale, together with any cash to which the
shareholder is entitled instead of the issuance of a fractional share and any
previously accrued and unpaid dividends, in a non-interest bearing account for
the shareholder's benefit. After this sale, the only right of the holders of the
unsurrendered outstanding certificates will be the right to collect the net
sales proceeds, cash and accumulated dividends held for their account.
Generally, the net proceeds, cash and accumulated dividends will be paid to the
former shareholder of the bank, without interest, only upon the proper surrender
of the bank's stock certificates.
Reasons for the Proposed Reorganization
In our opinion, the reorganization of the bank into a holding company
structure will provide greater flexibility in:
o Financing,
o Engaging in non-banking activities,
o Responding to changes in law, and
o Acquiring other banks.
Financing. In order for the bank to continue to grow, additional
capital may be necessary. One of the advantages of formation of a holding
company is the greater number of alternatives for raising capital. When used,
these alternatives as described below may support the growth of the bank and
holding company:
o Authorized Capital. The authorized capitalization of the holding
company is 4.0 million shares of common stock. Currently, the bank
is only authorized to issue up to 612,500 shares of common stock.
The same number of shares are issued and outstanding. If the plan
of reorganization and plan of merger are approved, we anticipate
that the holding company will issue approximately 2,450,000 shares
of its common stock in the reorganization. As a result, the
holding company would have approximately 1,550,000 authorized but
unissued shares of common stock.
We have no current plans to approve future issuances of additional
shares of common stock. However, we have authorized a larger
number of shares of common stock so that we have shares available
to provide us with additional business and financing flexibility
in the future. The board of directors may use the additional
shares without further shareholder approval to:
18
<PAGE>
o Issue stock dividends and effect stock splits,
o Raise capital,
o Provide equity incentives to employees, officers or directors,
o Establish strategic relationships with other companies,
o Expand the holding company's business through the acquisition
of other businesses, and
o Oppose a hostile takeover attempt or delay or prevent an
acquisition.
Also, we believe that the 4-for-1 exchange ratio will make the
market for the holding company's common stock more liquid than the
market for the bank's common stock, and this should add to our
flexibility.
The further issuance of common stock could dilute the voting
rights and book value per share of the common stock of the holding
company. See "Risk Factors."
o Debt Financing. The ability to incur indebtedness at the holding
company level and to contribute the proceeds to the bank as equity
capital provides further flexibility.
o Trust Preferred Stock. The issuance of trust preferred stock is
one alternative for raising capital. Although the manner in which
trust preferred stock is issued is very complicated, the basic
form of the transaction is as follows:
o A holding company creates a special trust subsidiary, usually
a Delaware business trust.
o The subsidiary issues preferred stock to interested investors.
o The holding company then issues long-term debt to the
subsidiary in return for the subsidiary paying the holding
company the proceeds from the sale of the trust preferred
stock. The holding company must pay interest to the subsidiary
that the subsidiary passes through to the holders of the trust
preferred stock.
The advantages of trust preferred stock to the holding company are
that:
o It qualifies as "Tier 1" capital; A term used by regulators to
identify the safest type of capital; and a key factor examined
by the holding company's regulators in determining whether a
holding company is adequately capitalized.
o Under current tax law, the holding company's payment of
interest to a subsidiary is tax deductible.
o The issuance of trust preferred stock will not dilute the
holding company's common stock equity ownership or earnings
per share.
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<PAGE>
A bank may not issue trust preferred stock. The holding company
structure is necessary to issue such securities. Although we have no plans to
issue trust preferred stock at this time, it is possible that we may use this
form of financing in the future.
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 to expand in this
way. Subsidiaries of the holding company not engaged in banking, but rather in
activities related to banking, are not subject to geographic restrictions. See
section entitled "Description of the Holding Company - Permitted Activities."
Flexibility in Responding to Changes in Law. The holding company
structure will generally provide more flexibility in responding to changes in
banking and corporate law. For example, the Gramm-Leach-Bliley Act became law on
November 12, 1999. The law repeals provisions in the Banking Act of 1933, also
known as the Glass-Steagall Act, to permit a special type of bank holding
company, namely, a financial holding company, that may engage in any financial
activities that are "financial in nature or incidental to such activities," to
include insurance underwriting, agency and brokerage services and investment
banking and securities brokerage services.
Bank Acquisitions. Although we currently have no plans to acquire other
banks, the holding company structure will permit greater flexibility in
acquiring other banking institutions in the future, if we decide to do so. Under
the Riegle-Neal Interstate Banking and Branching Efficiency Act of 1994,
adequately capitalized and well-managed bank holding companies may acquire banks
in any state, subject to deposit concentration limits and approval by the
Federal Reserve Board. The Act also permits interstate mergers between
adequately capitalized and managed banks, subject to approval by the appropriate
regulators. The Act further permits the establishment of new branches in another
state if the law of the state where the new branch is located expressly permits
it. However, the ability to acquire another bank, either within Pennsylvania or
outside Pennsylvania, as an additional subsidiary of the holding company,
without merging Somerset Trust Company and the target bank, gives us more
options for growth.
Dissenters' Rights of Appraisal
General. Under the Pennsylvania Banking Code of 1965, which directs
that dissenter's rights are governed by the Pennsylvania Business Corporation
Law of 1988, shareholders of the bank's common stock have the right to dissent
from the merger and reorganization and to obtain payment of the "fair value" of
their shares in the event we complete the reorganization. The Pennsylvania
Business Corporation Law of 1988 also grants shareholders of the bank the right
to dissent from the transaction and receive the "fair value" of their shares.
If you contemplate exercising your right to dissent, we urge you to
read carefully the provisions of Subchapter D of Chapter 15 of the Pennsylvania
Business Corporation Law of 1988, which is attached to this proxy
statement/prospectus as Exhibit E. A discussion of the provisions of the statute
is included here. The discussion describes the steps that you must take if you
want to exercise your right to dissent. You should read both this summary and
the full text of the law.
20
<PAGE>
Send any written notice or demand required concerning your exercise of
dissenters' rights to G. Henry Cook, President, Somerset Trust Company, P.O. Box
777, 151 West Main Street, Somerset, Pennsylvania 15501.
Fair Value. The term "fair value" means the value of a share of the
bank's common stock immediately before the day of the merger and reorganization,
taking into account all relevant factors, but excluding any appreciation or
depreciation in anticipation of the reorganization
Notice of Intention to Dissent. If you wish to dissent, you must:
o File a written notice of intention to demand payment of the fair
value of your shares if the reorganization is completed, prior to
the vote of shareholders on the reorganization at the annual
meeting;
o Make no change in your beneficial ownership of stock from the date
you give notice through the day of the reorganization; and
o Not vote your stock for approval of the plan of reorganization and
plan of merger.
Voting in favor of the reorganization constitutes a waiver of
dissenter's rights of appraisal. Further, neither a proxy marked against
approval of the reorganization nor a vote at the annual meeting against approval
of the reorganization satisfies the necessary written notice of intention to
dissent. A separate written notice must be filed with the bank prior to the vote
of shareholders on the reorganization, as described above.
Notice to Demand Payment. If the reorganization is approved by the
required vote of shareholders, the bank will mail a notice to all dissenters who
gave due notice of intention to demand payment and who did not vote for approval
of the plan of reorganization and plan of merger. The notice will state where
and when you must deliver a written demand for payment and where you must
deposit certificates for stock in order to obtain payment. The notice will
include a form for demanding payment and a copy of the law. The time set for
receipt of the demand for payment and deposit of stock certificates will be not
less than 30 days from the date of mailing of the notice.
Failure to Comply with Notice to Demand Payment, etc. You must take
each step in the indicated order and in strict compliance with the statute to
keep your dissenters' rights. If you fail to follow the steps, you will lose you
right to dissent and you will receive four shares of Somerset Trust Holding
Company's common stock for each share of the bank's common stock that you hold.
Payment of Fair Value of Shares. Promptly after the reorganization, the
bank will send dissenters, who have timely filed the demand for payment and
deposited their stock certificates,
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<PAGE>
the amount that the bank estimates to be the fair value of the stock. The
remittance or notice will be accompanied by:
o A closing balance sheet and statement of income of the bank for a
fiscal year ending not more than 16 months before the date of
remittance or notice together with the latest available interim
financial statements;
o A statement of the bank's estimate of the fair value of its common
stock; and
o A notice of the right of the dissenter to demand supplemental
payment, accompanied by a copy of the law.
Estimate by Dissenter of Fair Value of Shares. If a dissenter believes
that the amount stated or remitted by the bank is less than the fair value of
the stock, the dissenter may send an estimate of the fair value of the stock to
the bank. If the bank remits payment of estimated value of a dissenter's stock
and the dissenter does not file his or her own estimate within 30 days after the
bank mailed its remittance, the dissenter will be entitled to no more than the
amount remitted by the bank.
Valuation Proceeding. If any demands for payment remain unsettled
within 60 days after the latest to occur of:
o The reorganization,
o The bank's timely receipt of any demands for payment, or
o The bank's timely receipt of any estimates by dissenters of
the fair value,
then, the bank may file an application, in the Court of Common Please of
Somerset County, requesting that the court determine the fair value of the
stock. If this happens, all dissenters, no matter where they reside, whose
demands have not been settled, shall be made parties to the proceeding. In
addition, a copy of the application will be delivered to each dissenter.
If the bank fails to file the application, then any dissenter, on
behalf of all dissenters who have made a demand and who have not settled their
claim against the bank, may file an application in the name of the bank at any
time within the 30-day period after the expiration of the 60-day period and
request that the Somerset County Court determine the fair value of the shares.
The fair value determined by the Court may, but need not, equal the dissenters'
estimates of fair value. If no dissenter files an application, then each
dissenter entitled to do so shall be paid the bank's estimates of the fair value
of the common stock and no more, and may bring an action to recover any amount
not previously remitted, plus interest at a rate the Court finds fair and
equitable.
Costs and Expenses. The costs and expenses of any valuation proceedings
in the Somerset County Court, including the reasonable compensation and expenses
of any appraiser appointed by the Court to recommend a decision on the issue of
fair value, will be determined by
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<PAGE>
the Court and assessed against the bank except that any part of the costs and
expenses may be apportioned and assessed by the Court against all or any of the
dissenters who are parties and whose action in demanding supplemental payment
the Court finds to be arbitrary, vexatious or in bad faith.
Conditions To The Reorganization
The reorganization will not occur unless the following conditions are
met:
o "Shareholders approve the transaction,"
o The Pennsylvania Department of Banking must approve the
organization of the interim bank and the merger of the interim
bank into the bank. On March ___, 2000, the organizers of the
interim bank filed an application with the Department of Banking
for approval to charter the interim bank. After receiving approval
for the interim bank charter, we will file an application to merge
with the interim bank. The Department of Banking must grant
approval for the proposed merger prior to completion of the
proposed transactions.
o The interim bank must also file an Application for Federal Deposit
Insurance with the Federal Deposit Insurance Corporation to obtain
federal insurance to cover deposits. On March ___, 2000, we filed
this application with the FDIC. The application remains pending.
o Under the Bank Merger Act, the Board of Governors of the Federal
Reserve System, as the bank's primary federal regulator, must
approve the merger of the bank into the interim bank. We will file
a Bank Merger Act application with the federal reserve after the
Department of Banking has approved the interim bank charter
application. The Federal Reserve must approve the merger between
the bank and the interim bank prior to completion of the proposed
transactions.
o The formation of a bank holding company requires the approval, or
letter of nonobjection, of the Board of Governors of the Federal
Reserve System. The holding company filed a notice with the
Federal Reserve Bank of Cleveland of its proposal to become a bank
holding company on March ___, 2000, and the Federal Reserve Board
issued a letter of nonobjection to the proposal on __________,
2000.
In general, the bank regulatory authorities may disapprove this
transaction if the reorganization and merger of the interim bank with and into
the 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 interim bank with the bank may not occur
for 15 days from the date of the latest approval by the Pennsylvania Department
of Banking, the FDIC and Federal Reserve Board. If the United States Department
of Justice has issued a challenge on anti-trust grounds, the regulators may
extend the waiting period. The merger of the interim bank with the
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<PAGE>
bank and the reorganization of the bank into a one-bank holding company cannot
proceed in the absence of these regulatory approvals. We cannot assure that the
bank regulatory authorities will issue all necessary approvals for the
reorganization and merger, or that they will issue the approvals in a timely
manner. If the regulators issue the necessary approvals in time, the bank and
holding company anticipates completing the reorganization immediately after
obtaining shareholder approval, by June 30, 2000.
The approval of the bank regulatory authorities reflects only their
view that the transaction does not violate the competitive standards of the law
and is consistent with regulatory concerns relating to bank management and to
the safety and soundness of the banking system. You should not interpret their
approval as an opinion by the bank regulatory authorities that the
reorganization is favorable to shareholders from a financial point of view or
that the terms of the exchange are fair. The bank regulatory authorities'
approval is not an endorsement or recommendation of the reorganization and
merger.
Closing Date
The reorganization and the merger of the interim bank with the bank
will take place at the time specified on the letters of official certification
to be issued by the Department of Banking and the Federal Reserve. Presently,
the bank plans to request that the Pennsylvania Department of Banking and the
Federal Reserve issue their certification for closing the transaction by no
later than June 30, 2000. Neither the Department of Banking nor the Federal
Reserve has yet approved the proposed transactions. Furthermore, the Department
of Banking and the Federal Reserve will not issue their letters of certification
for closing the transaction until the bank gives notice to the Department of
Banking and the Federal Reserve 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 regulators' approval
is not an endorsement or recommendation of the reorganization and merger.
Tax Consequences
Shumaker Williams, P.C., Special Counsel to the bank and holding
company, issued a tax opinion dated March 9, 2000, regarding federal tax
consequences of the proposed transaction, the contents of which are summarized
below. The opinion is attached as an exhibit to the Registration Statement,
filed with the SEC, of which this proxy/prospectus forms a part. This is only a
general description of the material federal income tax consequences of the
reorganization. We recommend that you consult your own tax advisors as to
particular facts and circumstances that may be unique to you and not common to
shareholders as a whole and also as to any estate, gift, state, local or foreign
tax consequences arising out of this transaction. We do not anticipate that the
law will change before closing.
The following is a summary of the opinion of Shumaker Williams, P.C.
and is not binding on the Internal Revenue Service. Under the current provisions
of the Internal Revenue Code of 1986, we anticipate that:
o The bank, the holding company and the interim bank will recognize
no gain or loss because of the reorganization;
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<PAGE>
o The bank's shareholders will recognize no gain or loss upon the
exchange of the bank's common stock solely for the holding
company's common stock in accordance with the reorganization,
except for
o That gain or loss recognized due to the receipt of cash which
is received by any dissenting shareholder of the bank, and
o That gain or loss recognized due to the receipt of cash by any
shareholder in lieu of fractional shares of the holding
company's common stock;
o The tax basis of the holding company's common stock received by
each of the bank's shareholders will be the same as the tax basis
of the bank's common stock owned prior to the reorganization by
the shareholder;
o The holding period of the holding company's common stock received
by the bank's shareholders, generally, 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
exchange;
o The payment of cash to the bank's shareholders in lieu of their
fractional share interests of the holding company's common stock
generally will represent a distribution in full payment in
exchange for the fractional share interest in the holding company
and will qualify as a capital gain or loss; and
o Any distribution by the surviving bank to the holding company for
the repayment of the loan to charter the interim bank will not
have any tax consequence.
(End of Summary of Opinion by Shumaker Williams, P.C.)
In general, under Section 302(a) of the Internal Revenue Code,
dissenting shareholders will treat any cash they receive from the bank in
redemption of their bank common stock as a capital gain or loss, if the shares
are held as a capital asset. Otherwise, the tax law would require shareholders
to treat cash as ordinary income. It is possible, however, that the provisions
of Section 302(a) will not apply to a particular dissenting shareholder due to
rules that treat some shareholders as owning shares actually owned by other
individuals and entities, including certain individuals related to the
shareholder and certain partnerships, estates, trusts and corporations in which
the shareholder has an interest. If these rules apply, the amounts the bank pays
to the dissenting shareholder may be taxable as dividends.
Under current Pennsylvania personal income tax law, shareholders who
reside in Pennsylvania will not recognize a gain or loss on the exchange of the
bank's common stock for the holding company's common stock, except for
shareholders exercising dissenters' rights and except for fractional shares. The
holding company's common stock under current Pennsylvania law is not subject to
personal property taxes in the various counties of Pennsylvania.
In some jurisdictions, the state and local law treats shares of common
stock of a business corporation like the holding company differently from shares
of stock of a banking institution.
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<PAGE>
We urge you to consult your own tax advisors to make an individual appraisal of
the federal, state and local income tax and personal property and other tax
consequences of the reorganization and the exercise of dissenters' rights.
Accounting Treatment
We intend to treat the proposed reorganization as a
pooling-of-interests for financial accounting purposes. The pooling-of-interest
method of accounting for a business combination reflects the union of ownership
between the entities involved. Results of operations are restated for prior
periods as if the entities involved had always been combined. Immediately after
the reorganization, its consolidated financial statements of the holding company
will be substantially equivalent to the bank's financial statements prior to the
reorganization. The holding company's parent-only financial statements will
reflect its investment in 100% of the shares of the bank's common stock.
Trading and Resale of Holding Company Common Stock
The bank's shares are sold from time to time in the over-the-counter
market and in private transactions. Initially, we do not expect that holding
company's common stock will trade on a more frequent basis following the merger.
We have no plans to list shares of the holding company's common stock on any
stock exchange, although we may do so in the future.
The holding company is registering its common stock to be issued in the
reorganization with the SEC under the Securities Act of 1933. Following the
reorganization, former shareholders may freely resell or otherwise transfer
their shares, except those former shareholders who are deemed "affiliates" of
the holding company, within the meaning of Rules 144 and 145 under the
Securities Act. An affiliate is any person who directly or indirectly controls,
is controlled by, or is under common control with the holding company. In
general terms, any person who is an executive officer, director or 10%
shareholder of the bank at the time of the shareholders' meeting may be deemed
to be an affiliate of the bank, and an affiliate of the holding company upon
completion of the reorganization, for purposes of Rules 144 and 145. This proxy
statement/prospectus does not cover resales of shares of the holding company's
common stock to be issued to affiliates of the holding company in connection
with the transaction.
The holding company's common stock received by persons who are deemed
to be affiliates of the holding company may be resold only:
o In compliance with the resale provisions of Rule145(d);
o In compliance with the provisions of another applicable exemption
from the registration requirements of the Securities Act; or
o Pursuant to an effective registration statement filed with the
SEC.
In general terms, Rules 144 and 145(d) under the Securities Act permit
an affiliate of the holding company to sell shares of the holding company's
common stock received by him or her
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<PAGE>
in ordinary brokerage transactions subject to limitations on the number of
shares that may be resold in any consecutive 3- month period. Generally, the
affiliate, not acting in concert with others, may not sell that number of shares
which is more than 1% of the outstanding shares of the holding company's common
stock during the 3-month period.
The ability of affiliates to resell shares of the holding company's
common stock received in the transaction under Rule 144 and Rule 145(d) is
subject to the holding company's having satisfied its 1934 Act reporting
requirements, if any, for specified periods prior to the time of sale.
The limitations under Rules 144 and 145(d) will cease to apply in the
case of a person who is no longer an affiliate of the holding company and has
not been an affiliate of the holding company for at least three months, if a
period of at least two years has elapsed since the date the prior affiliate
acquired the holding company's shares in the reorganization.
Finally, under accounting rules for a pooling-of-interest transaction,
an affiliate of the bank may not, as a general rule and subject to an exception
in the case of some very small sales:
o Sell any shares of the holding company's common stock during the
30-day period immediately preceding the day of the reorganization;
or
o Sell any shares of the holding company's common stock received by
him or her in exchange for shares of the bank's common stock until
after the publication of financial results covering at least 30
days of post-reorganization operations.
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<PAGE>
Capitalization
We set forth below the capitalization:
o Of the bank on December 31, 1999,
o Of the interim bank at its organization on _________, 2000, and
o Of the holding company at initial formation on March 3, 2000.
<TABLE>
<CAPTION>
Somerset Trust Somerset Somerset Trust
Company Interim Bank Holding Company
------- ------------ ---------------
<S> <C> <C> <C>
Prior to Merger
Number of Shares Authorized,
Common Stock, par value
$1.00 for bank, $1.00 for interim
bank and without par value
for holding company............... 612,500 1,000,000 4,000,000
Number of Shares outstanding:
Common Stock....................... 612,500 100,000 (1) 3 (2)
Capital Accounts:
Common Stock....................... 612,500 100,000 (1) 3 (2)
Capital Surplus.................... 2,501,959 55,000 (1)
Retained Earnings.................. 23,143,036 0 0
Accumulated other
Comprehensive (loss) income........ (3,267,383) 0 0
Unearned ESOP shares............... (92,500) 0 0
-------- - -
Total Equity Capital..................... 22,897,612 155,000 3
</TABLE>
Set forth below is the same information, as adjusted to reflect the
reorganization and the merger of the interim bank into the bank:
After Merger
<TABLE>
<S> <C> <C> <C>
Number of Shares Authorized,
Common Stock, par value
$1.00 for bank, $1.00 for interim
bank and without par value
for holding company 612,500 0 4,000,000
Number of Shares Outstanding:
Common Stock par value
$1.00 for bank, $1.00 for
interim bank and without
par value for holding
company............................. 612,500 0 (3) 2,450,000 (4)
Capital Accounts:
Common Stock........................ 612,500 0 3,114,459
Capital Surplus..................... 2,501,959 0 --
Retained Earnings................... 23,143,036 0 23,143,036
Accumulated other
Comprehensive (loss) Income..... (3,267,383) 0 (3,267,383)
Unearned ESOP shares.............. (92,500) 0 (92,500)
-------- - --------
Total Equity Capital..................... 22,897,612 (5) 0 22,897,612 (6)
</TABLE>
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<PAGE>
- - --------------------
(1) Represents shares issued upon the initial capitalization of the interim
bank for $1.55 per share. The organizers of the interim bank subscribed
for 3,000 shares, and Somerset Trust Holding Company subscribed for
97,000 shares. At the time the merger is completed, the organizers will
transfer their 3,000 shares to Somerset Trust Holding Company at the
same purchase price, $1.55 per share. The $55,000 in capital surplus
includes a $5,000 expense fund, as required by the Pennsylvania Banking
Code of 1965.
(2) Represents three shares issued to the incorporators of the holding
company for $1.00 per share. At the time of the merger, Somerset Trust
Holding Company will repurchase these shares at the same purchase
price, $1.00 per share, and retire them.
(3) Represents the merger of the interim bank into the bank. At the time of
the merger, the 100,000 shares of interim bank common stock will be
exchanged for 612,500 shares of bank common stock.
(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. No fractional
shares of holding company common stock will be issued in the
reorganization, except that fractional bank shares held in the bank's
Employee Stock Ownership Plans, or ESOP's, shall automatically be
exchanged at the 4-for-1 ratio for holding company common stock,
regardless of whether the exchange results in fractional interests in
holding company common stock. Except for bank shares held in these
plans, the holding company will pay for any fractional interests in
cash. The payment of cash to fractional shareholders and to
shareholders who exercise their dissenters' rights could reduce the
number of outstanding shares the holding company issues.
(5) Total equity capital reflects the capital accounts after payment of the
$155,000 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 an unaffiliated bank
in Pennsylvania at approximately prime rate. If the proposed
reorganization had occurred on January 1, 1999, the payment of the
dividend to repay the holding company' s loan would have reduced
interest income for the bank's 1999 fiscal year by less than $500.
(6) Amounts after the merger are on a consolidated basis.
Other Financial Information
Immediately following the effective time of the reorganization, the
consolidated financial statements of Somerset Trust Holding Company will be
substantially the same as the bank's financial statements immediately prior to
the reorganization. Prior to the closing of the reorganization, the holding
company will not have commenced operations and will have no material assets or
liabilities.
Please refer to the bank's 1999 Annual Report, which is being delivered
to bank shareholders with this proxy statement/prospectus, for additional
financial information about the bank.
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<PAGE>
DESCRIPTION OF THE HOLDING COMPANY
Organization and Description of Business
We organized the holding company as a Pennsylvania business corporation
on March 3, 2000, for the purpose of forming a bank holding company. The
articles of incorporation of the holding company authorize the issuance of up to
4.0 million shares of common stock, without par value. The holding company has
authorized the issuance of three shares of its common stock to its three
incorporators.
We expect that the primary function of the holding company will be to
own of all of the bank's common stock. The holding company's profitability will
depend on the financial results of its operating subsidiary, the bank. In the
future, we may decide to acquire or form additional subsidiaries, which could
include other banks.
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
completion of the proposed reorganization. Until the day of the reorganization,
the holding company will use the bank's space and employees without payment.
After the reorganization, it will reimburse the bank on a fair and reasonable
basis for all services furnished to it and for all expenses which the bank pays
on its behalf
Copies of the articles of incorporation and by-laws of the holding
company are attached to this proxy statement/prospectus as Annexes B and C. We
recommend that you read them carefully.
Properties
The holding company does not own or lease any properties. For
information about properties which the bank owns or leases, see "Description of
the Bank - Properties."
Management
The same persons who serve on the board of directors of the bank also
serve on the board of directors of the holding company. See "Description of the
Bank - Directors and Executive Officers" below. After the reorganization, the
holding company will be the sole shareholder of the bank and will elect
approximately one-third of the directors of the bank annually to serve for a
three-year term. The board of directors of the holding company will appoint the
officers of the holding company annually.
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<PAGE>
The following table provides information about the current officers of
the holding company. All of these officers also serve as officers of the bank
and are employees of the bank.
<TABLE>
<CAPTION>
Age as of
Name March 10, 2000 Position
---- -------------- --------
<S> <C> <C>
G. Henry Cook 50 President and Chief Executive
Officer, Chairman of the Board
Andrew F. Cook 43 Vice President
Richard W. Stern 51 Treasurer
Thomas J. Cook 46 Secretary
</TABLE>
Executive and Director Compensation
Because the holding company was not in existence in 1999, it paid no
compensation to its directors and officers for that year. Further, the holding
company has paid no compensation to its directors or officers to date in 2000.
We anticipate that together the holding company and the bank will pay directors
and officers the same compensation which they currently receive, with such
increases in the future as may have occurred had the proposed reorganization not
occurred. Although the holding company will hold several board meetings each
year, we expect the total amount spent on directors for their attendance at
board meetings to remain the same as before the reorganization. The holding
company will not pay its directors separate compensation for their attendance at
board meetings, but the bank will continue to compensate directors for their
attendance at bank board meetings. See "Description of the Bank - Director
Compensation" below.
Information about Beneficial Ownership of Significant Shareholders, Directors
and Executive Officers
After the reorganization, we anticipate that the percentage ownership
of the holding company by each of its significant shareholders, directors and
executive officers will be approximately the same as each such individual's
percentage ownership of the bank immediately prior to the reorganization. See
"Beneficial Ownership of the Bank's Common Stock by Principal Shareholders and
Management." Andrew F. Cook, who is not an executive officer of the bank but who
is Vice President of the holding company, beneficially owned 3,350 shares of
bank common stock, as of March 10, 2000, which includes 2,550 shares held
directly, 200 shares held individually by his spouse, and 600 shares held by his
three minor children.
Relationships and Related Transactions
G. Henry Cook, President and Chief Executive Officer, Andrew F. Cook,
Vice President, and Thomas J. Cook, Secretary, are brothers. Their father,
George S. Cook, is a beneficiary of the Edward Scull Trust, a principal
shareholder of the bank, which will become a principal shareholder of the
holding company after the reorganization. In addition, the information regarding
material relationships between the directors and officers of the bank and
transactions between the directors and officers of the bank and the bank also
applies to the holding company. Please refer to "Description of the Bank -
Relationships and Related Transactions."
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<PAGE>
Directors' and Officers' Indemnification and Limits on Liability
The holding company's bylaws provide for indemnification of its
directors, officers, employees and agents against liabilities and expenses
incurred in legal proceedings concerning the holding company, to the fullest
extent permitted under Pennsylvania corporate law. Indemnification will only
apply to persons who act in good faith, in a manner he or she reasonably
believed to be in the best interest of the company, without willful misconduct
or recklessness.
We expect to extend the 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 Securities Act of 1933. In the opinion of the SEC, indemnification of
officers, directors or persons controlling the holding company for liabilities
arising under the 1933 Act is against public policy and unenforceable.
The holding company's bylaws also limit the liability of directors for
monetary damages to acts of self-dealing, willful misconduct or recklessness,
unless the act constitutes a crime or involves liability for the payment of
taxes. We believe that these provisions will help reduce baseless litigation,
but they may also make it more difficult for shareholders to sue these persons
on behalf of the company.
Supervision and Regulation of the Holding Company
The Securities Act of 1933 - The Offer and Sale of Securities. Under
the1933 Act, the holding company will be subject to the jurisdiction of the SEC
for matters relating to the offer and sale of its securities. Presently, the
bank is exempt from the SEC registration requirements and most state
registration requirements because of exemptions for bank stock. Accordingly,
additional issuances of the holding company's stock to raise capital or for
dividend reinvestment, stock option and other plans will require registration,
absent any exemption from registration. Registration will result in additional
costs that the bank does not presently have to incur.
The Securities Exchange Act of 1934 - Periodic Reporting Requirements.
The bank's common stock is not registered under Section 12 of the Securities
Exchange Act of 1934 and is not subject to the 1934 Act periodic reporting
requirements under Section 15(d) or to regulations regarding proxy solicitations
or tender offers. After the reorganization, however, Section 15(d) of the 1934
Act will require that the holding company will file periodic reports, proxy
statements and other information with the SEC, although the holding company will
not be SEC-registered under Section 12. The reports will include consolidated
financial information about the holding company and the bank.
The Bank Holding Company Act of 1956 - Supervision by the Federal
Reserve Board. On the day of the reorganization, 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 following restrictions will
apply:
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<PAGE>
o General Supervision by the Federal Reserve Board. As a bank
holding company, our activities will be limited to the business
of banking and activities closely related or incidental to
banking. Bank holding companies are required to file periodic
reports with and are subject to examination by the Federal
Reserve Board. The Board has adopted a risk-focused supervision
program for small shell bank holding companies which is tied to
the examination results of the subsidiary bank. The Federal
Reserve Board has issued regulations under the Bank Holding
Company Act that require a bank holding company to serve as a
source of financial and managerial strength to its subsidiary
banks. As a result, the Federal Reserve Board may require that
the holding company stand ready to provide adequate capital
funds to Somerset Trust Company during periods of financial
stress or adversity.
o Restrictions on Acquiring Control of other Banks and Companies.
A bank holding company may not:
o Acquire direct or indirect control of more than 5% of
the outstanding shares of any class of voting stock, or
substantially all of the assets of, any bank, or
o Merge or consolidate with another bank holding company
without prior approval of the Federal Reserve Board.
In addition, a bank holding company may not:
o Engage in a non-banking business, or
o Acquire ownership or control of more than 5% of the
outstanding shares of any class of voting stock of any
company engaged in a non-banking business
unless the business is determined by the Federal Reserve Board
to be so closely related to banking as to be a proper incident
to banking. In making this determination, the Federal Reserve
Board considers whether these activities offer benefits to the
public that outweigh any possible adverse effects.
o Anti-Tie-In Provisions. A bank holding company and its
subsidiaries may not engage in certain tie-in arrangements in
connection with any extension of credit or provision of any
property or services. The so-called "anti-tie-in" provisions
state generally that a bank may not:
o Extend credit,
o Lease or sell property, or
o Furnish any service to a customer on the condition that
the customer provide additional credit or service to the
bank or its affiliates, or on the condition that the
customer not obtain other credit or service from a
competitor of the bank.
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<PAGE>
o Restrictions on Extensions of Credit by Banks to their Holding
Companies. Subsidiary banks of a bank holding company are also
subject to restrictions imposed by the Federal Reserve Act on:
o Any extensions of credit to the bank holding company or
any of its subsidiaries,
o Investments in the stock or other securities of the bank
holding company, and
o Taking these stock or securities as collateral for loans
to any borrower.
o Risk-Based Capital Guidelines. Bank holding companies must
comply with the Federal Reserve Board's risk- based capital
guidelines. The required minimum ratio of total capital to
risk-weighted assets, including certain off-balance sheet
activities, such as standby letters of credit, is 8%. At least
half of the total capital is required to be "Tier I Capital,"
consisting principally of common stockholders' equity, less
certain intangible assets. The remainder, "Tier II Capital," may
consist of:
o Some types of preferred stock,
o A limited amount of subordinated debt,
o Some forms of hybrid capital instruments,
o Other debt securities, and
o A limited amount of the general loan loss allowance.
The risk-based capital guidelines are required to take adequate
account of interest rate risk, concentration of credit risk, and
risks of nontraditional activities.
o Capital Leverage Ratio Requirements. The Federal Reserve Board
requires a banking holding company to maintain a leverage ratio
of a minimum level of Tier I capital (as determined under the
risk-based capital guidelines) equal to 3% of average total
consolidated assets for those bank holding companies that have
the highest regulatory examination rating and are not
contemplating or experiencing significant growth or expansion.
All other bank holding companies are required to maintain a
ratio of at least 1% to 2% above the stated minimum. The bank is
subject to almost identical capital requirements adopted by the
FDIC.
o Restrictions on Control Changes. The Change in Bank Control Act
of 1978 requires persons seeking control of a bank or bank
holding company to obtain approval from the appropriate federal
banking agency before completing the transaction. "Control" is
generally presumed to be the power to vote 10% or more of a
company's voting stock. The Federal Reserve Board is responsible
for reviewing changes in control of bank holding companies. In
doing so, the Federal Reserve Board reviews the financial
position, experience and integrity of the acquiring person and
the effect on the financial condition of the bank holding
company, relevant markets and federal deposit insurance funds.
34
<PAGE>
The Pennsylvania Banking Code of 1965 - Supervision by the Pennsylvania
Department of Banking. As a Pennsylvania bank holding company, the holding
company will also be subject to regulation and examination by the Pennsylvania
Department of Banking. For example, the holding company must obtain the
Department's approval to acquire any additional banks located in Pennsylvania.
The Riegle-Neal Interstate Banking and Branching Efficiency Act of
1994 - Interstate Banking. Prior to the passage of the Riegle-Neal Interstate
Banking and Branching Efficiency Act of 1994, also known as the Interstate
Banking Act, the Bank Holding Company Act prohibited a bank holding company
located in one state from acquiring a bank located in another state, unless the
law of the state where the bank to be acquired was located specifically
authorized the acquisition. Similarly, prior law generally prohibited interstate
branching by a single bank. The Interstate Banking Act permits an adequately
capitalized and adequately managed bank holding company to acquire a bank in
another state whether or not the law of that other state permits the
acquisition, subject to deposit concentration caps and approval by the Federal
Reserve Board. The law permits states to require stricter concentration
limitations or to require that the target be in existence for up to 5 years
before an out-of-state bank or bank holding company may acquire it. In contrast
to interstate acquisitions and mergers, the Interstate Banking Act permits
acquisitions of less than all branches of a bank only if the state's laws permit
it.
In addition, under the Interstate Banking Act, an adequately
capitalized and well managed bank can engage in interstate expansion by merging
with a bank in another state, unless the other state affirmatively opted out of
the legislation before June 1, 1997. The Interstate Banking Act also permits the
establishment of new branches in another state, but only if a state
affirmatively opts in by adopting appropriate legislation.
Finally, a bank holding company or bank may not acquire a bank outside
its home state primarily for the purpose of deposit production, and the
transaction must not have a negative impact on the communities that the target
bank serves.
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 of banking. In 1997, the Federal Reserve Board
significantly expanded its list of permissible non-banking activities to improve
the competitiveness of bank holding companies. The following list includes
activities that a holding company may presently conduct and is subject to change
by the Federal Reserve Board:
o Making, acquiring or servicing loans and other extensions of
credit for its own account or for the account of others.
o Any activity used in connection with making, acquiring,
brokering, or servicing loans or other extensions of credit, as
determined by the Federal Reserve Board. The Board has
determined that the following activities are permissible:
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<PAGE>
o Real estate and personal property appraising;
o Arranging commercial real estate equity financing;
o Check-guaranty services;
o Collection agency services;
o Credit bureau services;
o Asset management, servicing, and collection activities;
o Acquiring debt in default, if the holding company
divests shares or assets securing debt in default that
are not permissible investments for bank holding
companies within prescribed time periods, and meets
certain other conditions; and
o Real estate settlement services.
o Leasing personal and real property or acting as agent, broker,
or advisor in leasing property, provided that:
o The lease is a nonoperating lease;
o The initial term of the lease is at least 90 days;
o If real property is being leased, the transaction will
compensate the lessor for at least the lessor's full
investment in the property and costs, with certain other
conditions.
o Operating nonbank depository institutions, including an
industrial bank or savings association.
o Performing functions or activities that may be performed by a
trust company (including activities of a fiduciary, agency or
custodial nature), in the manner authorized by federal or state
law, so long as the holding company is not a bank.
o Acting as investment or financial advisor to any person,
including:
o Serving as investment advisor to an investment company
registered under the Investment Company Act of 1940;
o Furnishing general economic information and advice,
general economic statistical forecasting services, and
industry studies;
o Providing advice in connection with mergers,
acquisitions, divestitures, investments, joint ventures,
capital structuring, financing transactions, and
conducting financial feasibility studies;
o Providing general information, statistical forecasting,
and advice concerning any transaction in foreign
exchange, swaps and similar transactions, commodities,
and options, futures and similar instruments;
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<PAGE>
o Providing educational courses and instructional
materials to consumers on individual financial
management matters; and
o Providing tax planning and tax preparation services to
any person.
o Agency transactional services for customer investments,
including:
o Securities brokerage -- Providing securities brokerage
services, whether alone or in combination with
investment advisory services, and incidental activities,
including related securities credit activities compliant
with Federal Reserve Board Regulation T and custodial
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.
o Riskless-principal transactions -- Buying and selling
all types of securities in the secondary market on the
order of customers as a "riskless principal."
o Private-placement services -- Acting as agent for the
private placement of securities in accordance with the
requirements of the Securities Act of 1933 and the rules
of the Commission.
o Futures commission merchant -- Acting as a futures
commission merchant for unaffiliated persons in the
execution and clearance of any futures contract and
option on a futures contract traded on an exchange in
the United States or abroad, if the activity is
conducted through a separately incorporated subsidiary
of the bank holding company and the company satisfies
certain other conditions.
o Investment transactions as principal:
o Underwriting and dealing in government obligations and
money market intruments, including bankers' acceptances
and certificates of deposit, under the same limitations
applicable if the activity were performed by the bank
holding company's subsidiary member banks.
o Engaging as principal in:
o Foreign exchanges, and
o Forward contracts, options, futures, options on
futures, swaps, and similar contracts, with
certain conditions.
o Buying and selling bullion, and related activities.
o Management consulting and counseling activities:
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<PAGE>
o Subject to some limitations, management consulting on
any matter to unaffiliated depository institutions, or
on any financial, economic, accounting, or audit matter
to any other company.
o Providing consulting services to employee benefit,
compensation, and insurance plans, including designing
plans, assisting in the implementation of plans,
providing administrative services to plans, and
developing employee communication programs for plans.
o Providing career counseling services to:
o A financial organization and individuals currently
employed by, or recently displaced from, a
financial organization;
o Individuals who are seeking employment at a
financial organization; and
o Individuals who are currently employed in or who
seek positions in the finance, accounting, and
audit departments of any company.
o Support services:
o Providing limited courier services; and
o Printing and selling checks and related items requiring
magnetic ink character recognition.
o Insurance agency and underwriting:
o Subject to some limitations, acting as principal, agent,
or broker for credit life, accident, health and
unemployment insurance that is directly related to an
extension of credit by the bank holding company or any
of its subsidiaries.
o Engaging in any insurance agency activity in a place
where the bank holding company or a subsidiary of the
bank holding company has a lending office and that has a
population not exceeding 5,000 or has inadequate
insurance agency facilities, as determined by the
Federal Reserve Board.
o Supervising, on behalf of insurance underwriters, the
activities of retail insurance agents who sell fidelity
insurance and property and casualty insurance on the
real and personal property used in the bank holding
company's operations or its subsidiaries, and group
insurance that protects the employees of the bank
holding company or its subsidiaries.
o Engaging in any insurance agency activities if the bank
holding company has total consolidated assets of $50
million or less, with the sale of life
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<PAGE>
insurance and annuities being limited to sales in small
towns or as credit insurance.
o Making equity and debt investments in corporations or projects
designed primarily to promote community welfare, and providing
advisory services to these programs.
o Subject to some limitations, providing others financially
oriented data processing or bookkeeping services.
o Issuing and selling money orders, travelers' checks and United
States savings bonds.
o 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.
o Providing tax planning and preparation advice.
Permitted Activities for Financial Holding Companies
The Gramm-Leach-Bliley Financial Services Modernization Act, signed
into law on November 12, 1999, amends the Bank Holding Company Act of 1956 to
create a new category of holding company - the "financial holding company." To
be designated as a financial holding company, a bank holding company must file
an application with the Federal Reserve Board. The holding company must be well
capitalized and well managed, as determined by Federal Reserve Board
regulations. Once a bank holding company becomes a financial holding company,
the holding company or its affiliates may engage in any financial activities
that are "financial in nature or incidental to such activities." Furthermore,
the Federal Reserve may approve a proposed activity if it is "complementary" to
financial activities and does not threaten the safety and soundness of banking.
The act provides an initial list of activities that constitute activities that
are financial in nature, including:
o Lending and deposit activities,
o Insurance activities, including underwriting, agency and
brokerage,
o Providing financial investment advisory services,
o Underwriting in, and acting as a broker or dealer in,
securities,
o Merchant banking, and
o Insurance company portfolio investment.
The primary tool granted the Federal Reserve under the Act is the
authority to require that the financial holding company remain well capitalized
and well managed.
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<PAGE>
PROPOSAL NO. 2:
TO FIX THE NUMBER OF BANK DIRECTORS
TO BE ELECTED
Article II of the bylaws of the bank provides for a board of directors
not less than five nor more than 25 in number. Articles II of the bank's bylaws
also states that the shareholders shall determine the number of directors to be
elected at the annual meeting. The board of directors is proposing that
shareholders fix the number of directors to be elected at five, resulting in a
total of eleven directors on the board. Unless otherwise instructed, the proxy
holders will vote the proxies for this proposal.
The board of directors recommends that shareholders vote FOR the
proposal to fix the number of directors to be elected at five.
PROPOSAL NO. 3:
ELECTION OF BANK DIRECTORS
Articles II of the bylaws provides further for a classified board of
directors with staggered three-year terms of office. Under the bylaws and the
Pennsylvania Banking Code of 1965, every director must be a shareholder of the
bank. In addition, no person who is 70 years of age or older shall qualify to be
a director. However, any director who is elected or appointed to a term of
office during which he or she attains the age of 70 years shall be eligible to
continue to serve until the expiration of that term of office. Upon the end of
that term, the director is given the status of Director Emeritus.
At the 2000 Annual Meeting of Shareholders, five directors shall be
elected to serve for the terms indicated below and until their successors are
elected and qualified. The nominees are the current directors whose term expires
this year, namely,
o Barbara Wheeler Davies, to serve for a one-year term;
o Jon C. Clapper, to serve for a two-year term;
o G. Henry Cook, to serve for a three-year term;
o Alan L. Miller, to serve for a three-year term; and
o Richard C. Yeager, to serve for a three-year term.
The bylaws provide that the term of each director shall be for three
years, with as nearly as possible, one-third of the directors elected each year.
The board of directors has determined that, in order to have about one-third of
the directors elected in future years for three-year terms, the above terms of
office are necessary. Effective as of March 1, 2000, Barbara Wheeler Davies was
appointed as a director following the resignation of Joan Wheeler. Ms. Davies is
the daughter of Ms. Wheeler. In addition, during 1999 the board increased the
total number of directors from ten to eleven and appointed Jon C. Clapper on May
20, 1999, to fill the vacancy resulting from the increase in the number of
directors. The board has determined that each of
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<PAGE>
these new directors should be elected for less than a full three-year term in
order to balance the number of directors to be elected in future years.
Unless otherwise instructed, the proxy holders will vote the proxies
for the election of the above-named nominees. If any nominee should become
unavailable for any reason, proxies will be voted in favor of a substitute
nominee as the board of directors shall determine. The board of directors has no
reason to believe the nominees named will be unable to serve, if elected.
Between annual meetings, a majority of directors in office may fill any vacancy
occurring on the board of directors for any reason.
The board of directors recommends that shareholders vote FOR the
election of the three nominees for director.
DESCRIPTION OF THE BANK
History
Somerset Trust Company was incorporated on December 20, 1900, as a
Pennsylvania corporation to insure real estate titles, under the Act of April
29, 1874, entitled "An Act to provide for the incorporation and regulation of
certain corporations." It later expanded to become a bank and trust company and
in 1953 merged with the First National Bank of Somerset, organized as a national
bank in 1889. The bank is a member of the Federal Reserve System, and deposits
held by the bank are insured by the FDIC to the maximum extent permitted by law.
The bank's headquarters and main office are at 151 West Main Street, Somerset,
Somerset County, Pennsylvania 15501.
Offices
The bank currently has 9 full-service offices, including its main
office, in the counties of Somerset and Cambria, Pennsylvania, as follows:
o 4 in Somerset (Main Office, Somerset Plaza Office, Georgian
Place, and Glades Pike Office),
o 2 in Johnstown,
o 1 in Berlin,
o 1 in Meyersdale, and
o 1 in Hooversville.
The bank has automated teller machines, or ATM's, at all of its offices
and 17 stand-alone automatic tellers in the surrounding communities and the
Seven Springs and Hidden Valley Resorts.
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<PAGE>
Description of Business
The bank engages in a full service commercial and consumer banking
business, including the following services:
o Accepting time and demand deposits,
o Providing personal and business checking accounts at competitive
rates,
o Making secured and unsecured commercial and consumer loans, and
o Providing trust services.
The bank is a locally managed community bank that seeks to provide
personal attention and professional assistance to its customer base which
consists principally of individuals and small and medium-sized businesses. The
bank's philosophy includes offering direct access to its officers and personnel,
providing friendly, informed and courteous service, local and timely decision
making, flexible and reasonable operating procedures, and consistently-applied
credit policies.
The bank's acceptance of time demand and savings deposits includes
passbook accounts, statement savings accounts, NOW accounts, money market
accounts, regular savings accounts, certificates of deposit and club accounts.
The bank also offers overdraft protection to its checking customers. The bank
has a trust department offering a wide range of trust and fiduciary services,
including a range of investment services.
The bank makes secured and unsecured commercial, consumer, installment
and construction loans. Residential mortgages and small business loans have
always been at the core of the bank's portfolio. Consumer loans include
revolving credit lines and commercial lending.
The bank offers the following support services to make financial
management more efficient and convenient for its customers:
<TABLE>
<S> <C> <C> <C>
o on-line banking, o payroll deduction plan,
o telephone banking, o safe deposit boxes,
o direct deposit, drive-in banking, o signature guarantees,
o discount brokerage services, o travelers' checks,
o federal tax depository, o treasury securities,
o ATM's, o U.S. savings bonds,
o MasterCard/Visa credit card o individual retirement accounts, and
services, o utility and municipal payments.
o night deposit services, o money orders
o notary public services, o treasurer's checks
</TABLE>
The bank's primary service area is located in Somerset County and the
greater Johnstown area in Cambria County, Pennsylvania. Within the defined
service area of the bank's main office, the banking business is highly
competitive. The bank is the only financial institution
42
<PAGE>
headquartered in Somerset, Pennsylvania. The bank competes primarily
with five other banking institutions and one other savings and loan association
with offices in Somerset County. Many of its competitors, such as PNC Bank, a
money market bank headquartered in Pittsburgh, and the regional banking
institutions, Laurel Bank, U.S. Bank and First Commonwealth Bank, have greater
assets, capital and lending limits than Somerset Trust Company. Within the
bank's Somerset County marketplace, the bank places third in terms of market
share, based on deposits from that area, after Laurel Bank and PNC Bank. In the
greater Johnstown area, the bank competes with many of the same entities present
in Somerset County. There are six other banks and one savings and loan
association in the Johnstown area, all of which have a greater market share than
Somerset Trust Company, based on deposit share. The bank also competes with
other types of financial institutions, including credit unions, finance
companies, brokerage firms, insurance companies and retailers. Deposit
deregulation has intensified the competition for deposits among banks in recent
years.
As of December 31, 1999, the bank had:
o Total assets of approximately $279,591,876,
o Total shareholders' equity of approximately $22,897,612, and
o Total liabilities of approximately $256,694,264, which includes
$195,396,286 of deposits.
Major classifications of loans and leases are summarized as follows:
<TABLE>
<CAPTION>
--------------------------------------------------------------------------
December 31, December 31, December 31, December 31,
1999 1998 1997 1996
--------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Loan and Lease Classifications:
Commercial and Other Loans $ 99,838,486 $ 87,365,752 $ 84,972,396 $ 81,856,249
Real Estate Mortgage 40,806,306 38,621,217 35,828,620 34,205,265
Installment 19,993,148 13,363,117 6,110,203 6,827,309
Credit Card 2,216,139 2,043,338 2,309,175 2,373,457
Student Loans 3,109,191 2,595,821 2,042,902 1,411,293
Home Equity 2,246,077 1,973,690 2,291,533 2,544,649
Other 1,661,074 483,167 220,692 108,580
------------- ------------- -------------- -------------
169,870,421 146,446,102 133,775,521 129,326,802
Less Unearned Income (55,726) (62,022) (87,481) (245,733)
Less Deferred Net Loan Fees (191,822) (163,778) (217,093) (144,742)
Less Allowance for Loan Losses (3,564,036) (3,758,983) (3,716,605) (3,156,358)
------------- ------------- -------------- -------------
Net Loans $ 166,058,837 $ 142,461,319 $ 129,754,342 $ 125,779,969
============= ============= ============== =============
</TABLE>
On March 10, 2000, the bank had approximately 167 employees, including
118 full-time employees and 49 part-time employees. Management considers
relations with our employees to be good.
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<PAGE>
Properties
Below is a schedule of all the bank's properties, showing the location,
whether the property is owned or leased and its use:
<TABLE>
<CAPTION>
Type of
Property Location Ownership Use
-------- -------- --------- ---
<S> <C> <C> <C>
1 151 West Main Street Own Corporate Headquarters
Somerset, PA 15501 Main Office
2 1614 N. Center Ave. Own Somerset Plaza Office/
Somerset, PA 15501 Branch
3 4185 Glades Pike Own Glades Pike Office/
Somerset, PA 15501 Branch
4 316 Georgian Place Lease Georgian Place/
Somerset, PA 15501 Branch
5 420 Main Street Own Berlin Office/
Berlin, PA 15530 Branch
6 116 Market Street Own Johnstown Office/
Johnstown, PA 15901 Branch
7 3200 Elton Road Lease Richland Office/
Johnstown, PA 15904 Branch
8 234 Main Street Own Meyersdale Office/
Meyersdale, PA 15552 Branch
9 301 Barn Street Lease Hooversville Office/
Hooversville, PA 15936 Branch
</TABLE>
In addition, the bank has purchased property located at 1416 Scalp
Avenue, Johnstown, Pennsylvania. We intend to move the Johnstown Office, located
at 3200 Elton Road, to this new location. We have received the requisite
approvals of the Pennsylvania Department of Banking and the Federal Reserve.
Supervision and Regulation of the Bank
As Pennsylvania-chartered bank and trust company that is a member of
the Federal Reserve System, the bank is subject to supervision, regulation and
examination by the Pennsylvania Department of Banking and the Board of Governors
of the Federal Reserve System. The bank is subject to numerous requirements and
restrictions under federal and state law, including
o Requirements to maintain reserves against loans and lease
losses,
o Restrictions on the types and amounts of loans that may be
granted and the interest that may be charged on the loans,
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<PAGE>
o Limitations on the types of investments the bank may make and
the types of services the bank may offer, and
o Restrictions on loans to insiders of the bank or other insider
transactions.
Various consumer loan regulations also affect the operations of the
bank. In addition, the actions of the Federal Reserve Board, as it attempts to
control the money supply and credit availability in order to influence the
economy, impact commercial banks. The proposed reorganization will not
significantly change the authority of these agencies over the bank. The
information below highlights various aspects of regulation of the bank under
Pennsylvania and federal laws.
Pennsylvania Banking Law
The laws of Pennsylvania applicable to the bank include, among other
things, provisions that:
o Limit the scope of the bank's business;
o Require the maintenance of reserves against loans and lease
losses;
o Limit the type and amount of loans that may be made and the
interest that may be made and that may be charged on loans;
o Restrict investments and borrowings by the bank;
o Limit the payment of dividends; and
o Regulate branching activities and mergers and acquisitions.
Generally, the bank must obtain prior approval from the Department of
Banking for the acquisition of shares of stock. Pursuant to Pennsylvania law,
the bank may purchase, sell and hold investments in the form of bonds, notes and
debentures to the extent permitted by federal law.
Pennsylvania banking law also requires that a bank obtain the approval
of the Department of Banking for any merger where the surviving bank would be a
Pennsylvania-chartered bank. In reviewing the merger application, the Department
of Banking considers, among other things, whether the merger would be consistent
with adequate and sound banking practices and is in the public interest, on the
basis of several factors, including the potential effect of the merger on
competition and the convenience and needs of the affected communities.
Any person intending to acquire more than 10% of outstanding voting
shares of stock in a financial institution located in Pennsylvania must obtain
the prior approval of the Department of Banking.
In addition, the Department of Banking conducts regular examinations of
the bank and coordinates these examinations with the Federal Reserve.
Federal Banking Law
The bank is a member of the Federal Reserve System. The Federal Reserve
Board oversees and manages the entire Federal Reserve system. In addition,
twelve Federal Reserve
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<PAGE>
banks and their branches provide a second level of supervision throughout the
nation's twelve Federal Reserve districts. A 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. 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.
An important function of the Federal Reserve System is to regulate the
money supply and interest rates. The monetary policies and regulations of the
Federal Reserve Board have had, and will continue to have, a significant effect
on its 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.
The effect of such policies and regulations upon the future business and
earnings of the bank cannot be predicted.
As the bank's primary federal regulator, the Federal Reserve conducts
regular examinations of the bank at least every 18 months. Also, Federal Reserve
regulations require the bank to file periodic financial information. The bank
must obtain the Federal Reserve's prior approval for such activities as the
establishment and relocation of branches and offices and for mergers and
acquisitions. Generally, the bank may not engage in any activity that would be
an unsafe and unsound banking practice. Federal Reserve regulations prohibit the
bank from engaging in activities and investments that are not also permissible
for national banks. Generally, any non-banking activities in which the bank
engages must be so closely related to banking as to be "incidental" to banking.
Restrictions on Activities between a Holding Company and its Subsidiary
Bank. A subsidiary bank of a bank holding company, which the bank would become
upon completion of the proposed reorganization, is subject to 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 limitations and reporting requirements on
extensions of credit by a bank to principal shareholders of its parent holding
company, among others, and 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.
Capital Adequacy Guidelines. The bank must comply with the federal
risk-based capital guidelines. Under the Federal Deposit Insurance Corporation
Improvement Act of 1991, the FDIC and the Federal Reserve have regulations
defining the levels at which an insured institution would be considered:
o Well capitalized
o Adequately capitalized
o Undercapitalized
o Significantly undercapitalized
o Critically undercapitalized.
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<PAGE>
To be adequately capitalized, the required minimum ratio of total
capital to risk-weighted assets, including some off-balance sheet activities,
such as standby letters of credit, is 8%. To be well capitalized, this
risk-based ratio must be at least 10%. At least half of the total capital is
required to be "Tier I Capital," consisting principally of common stockholders'
equity, less certain intangible assets. The remainder, "Tier II Capital," may
consist of:
o Some types of preferred stock,
o A limited amount of subordinated debt,
o Some forms of hybrid capital instruments,
o Other debt securities, and
o A limited amount of the general loan loss allowance.
The risk-based capital guidelines must take into account interest rate risk,
concentration of credit risk, and risks of nontraditional activities. As of
December 31, 1999, the bank satisfied the criteria to be classified as "well
capitalized," and we do not expect the proposed reorganization to change the
bank's capitalization.
The Federal Reserve could reclassify a "well-capitalized" institution
as "adequately capitalized" or require an "adequately capitalized" or
"undercapitalized" institution to comply with supervisory actions as if it were
in the next lower category. A reclassification could be made if the regulatory
agency determines that the institution is in an unsafe or unsound condition,
which could include unsatisfactory examination ratings. In the event an
institution's capital deteriorates to the undercapitalized category or below,
the law prescribes an increasing amount of regulatory intervention.
The bank is also subject to rules requiring a minimum ratio of
classified assets to capital, minimum earnings necessary to absorb losses, and a
minimum ratio of market value to book value for publicly held institutions.
FDIC Insurance Assessments. The FDIC insures the bank's deposits
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 bank's deposits have the
maximum insurance coverage provided by the FDIC, currently $100,000 per account.
The bank pays insurance premiums into the Bank Insurance Fund according to rates
established by the FDIC. The FDIC has discretion to increase premiums 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.
The FDIC has implemented a risk-related premium schedule for all
insured depository institutions that results in the assessment of premiums based
on capital and supervisory measures. Under the risk-related premium schedule,
the FDIC assigns, on a semiannual basis, each depository institution to one of
three capital groups, as follows:
o Well-capitalized,
o Adequately capitalized or
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<PAGE>
o Undercapitalized
and further assigns such institutions to a subgroup within a capital group. The
institution's subgroup assignment is based upon the FDIC's judgment of the
institution's strength in light of supervisory evaluations, including
examination reports, statistical analyses and other information relevant to
measuring the risk posed by the institution. Only institutions with a total
capital to risk-adjusted assets ratio of 10% or greater, a Tier I capital to
risk-based assets ratio of 6% or greater, and a Tier I leverage ratio of 5% or
greater, are assigned to the well-capitalized group. As of December 31, 1999,
the bank was well capitalized for purposes of calculating insurance assessments.
The Bank Insurance Fund is presently fully funded at more than the
minimum amount required by law. Accordingly, the 1999 BIF assessment rates range
from zero for those institutions with the least risk, to $0.27 for every $100 of
insured deposits for institutions deemed to have the highest risk. The bank is
in the category of institutions that presently pay nothing for deposit
insurance. The FDIC adjusts the rates every six months.
While the bank presently pays no premiums for deposit insurance, it is
subject to assessments to pay the interest on bonds issued by the Financing
Corporation, which is known as FICO. FICO was created by Congress to issue bonds
to finance the resolution of failed thrift institutions. Prior to 1997, only
thrift institutions were subject to assessments to raise funds to pay the FICO
bonds.
On September 30, 1996, as part of the Omnibus Budget Act, Congress
enacted the Deposit Insurance Funds Act of 1996, which recapitalized the Savings
Association Insurance Fund and provided that commercial banks would be subject
to one-fifth of the assessment to which savings and loan associations are
subject for FICO bond payments through 1999. Beginning in 2000, commercial banks
and savings and loan associations will be subject to the same assessment for
FICO bonds.
Meeting the Needs of the Community. Under the Community Reinvestment
Act of 1977, as implemented by Federal Reserve regulations, the Federal Reserve
must determine whether the bank is meeting the credit needs of the community,
including low and moderate income neighborhoods, that it serves and must take
this record into account in its evaluation of most regulatory applications the
bank files with the Federal Reserve. The Federal Reserve makes publicly
available its evaluation of the bank's record of meeting the credit needs of its
entire community. This evaluation includes a descriptive rating of
o Outstanding
o Satisfactory
o Needs to improve, or
o Substantial noncompliance.
As of December 31, 1999, the bank had a satisfactory CRA rating.
Truth-In-Savings. The Bank Enterprise Act of 1991 requires
"truth-in-savings" on consumer deposit accounts so that consumers can make
meaningful comparisons between the
48
<PAGE>
competing claims of banks with regard to deposit accounts and products. Under
this provision, the bank is required to provide information to depositors
concerning the terms of their deposit accounts, and in particular, to disclose
the annual percentage yield. There are some operational costs of complying with
this law.
Restrictions on Control Changes. Under the Federal Change in Banking
Control Act of 1978, no person may acquire control of the bank without giving at
least 60 days prior written notice to the FDIC. "Control" is generally presumed
to be the power to vote 10% or more of the common stock of a bank. The FDIC may
disapprove any such acquisition of control.
Suspicious Activities Reports. Under the Bank Secrecy Act, banks must
report to the Internal Revenue Service currency transactions of more than
$10,000 or multiple transactions in any one day that aggregate in excess of
$10,000.
Interstate Banking. The bank may engage in interstate banking. See
"Description of the Holding Company - Supervision and Regulation - The
Riegle-Neal Interstate Banking and Branching Efficiency Act of 1994 -Interstate
Banking."
Securities Regulation
Upon attaining more than 500 shareholders and $10 million in assets, a
company must register its securities under Section 12 of the Securities Exchange
Act of 1934. A registered company is subject to the General Rules and
Regulations of the SEC for companies registered under the 1934 Act. These rules
and regulations relate to periodic financial reporting, reporting to
shareholders, proxy solicitation and insider trading. Banks must also register
under Section 12 if they meet the above described thresholds. However, banks
file their reports, proxy statements and other information with their primary
federal bank regulator, rather than the SEC. The bank does not currently have
its securities registered under the 1934 Act, and is not subject to its
reporting requirements.
After the reorganization, Section 15(d) of the 1934 Act will require
the holding company to file periodic financial and other business reports with
the SEC on a consolidated basis, including information about the bank. The SEC
registration of the holding company's securities being issued in the
reorganization will trigger these reporting requirements. Further, the holding
company will not fall under an exemption from such reporting requirements for
companies with less than 300 shareholders.
Presently, the bank is also exempt from the registration requirements
under the 1933 Act and state securities laws because of exemptions for bank
securities. The 1933 Act requires the registration with the SEC of securities
that are publicly issued, absent an exemption. The holding company will
generally be subject to the registration requirements of the 1933 Act.
Finally, under the Gramm-Leach-Bliley Act, discussed below, the
broker/dealer exemption formerly enjoyed by banks contained in the 1934 Act was
repealed, with the result that banks must comply with SEC broker/dealer
registration requirements if they engage in securities activities requiring such
registration. Several exemptions will continue to apply to a bank for
traditional transactions, such as trust activities.
49
<PAGE>
The Gramm-Leach-Bliley Act (Financial Services Reform Act)
On November 12, 1999, the Gramm-Leach-Bliley Act was signed into law.
We expect the financial services reform law to have a tremendous impact on all
financial institutions, including banks. However, the affected federal agencies
have not yet adopted new regulations under the law. This is expected to occur by
May 2000.
The impact of the act is two-fold. First, the act has swept away much
of the regulatory structure established in the 1930's under the Glass-Steagall
Act. The law creates opportunities for banks, other depository institutions,
insurance companies, and securities firms to enter into business combinations
that permit a single financial services organization to offer customers a
complete array of financial products. The result will be increased competition
in the market place for banks and other financial institutions, tempered by an
enhanced ability to compete in this new market. Banks, insurance companies and
securities firms may now affiliate through a "financial holding company" and
engage in a broad range of activities authorized by the Federal Reserve Board
and the Department of Treasury. The new activities that the act permits for
financial holding companies and their affiliates are those that are financial in
nature or incidental to financial activities, including insurance underwriting,
investment banking, investment advisory services and securities brokerage
services. The Federal Reserve maintains the authority to require that the
financial holding company remain well capitalized and well managed.
In addition, national banks are authorized to conduct these activities
through operating subsidiaries, under the supervision of the Department of
Treasury's Office of the Comptroller of the Currency, except that national bank
subsidiaries may not engage in insurance underwriting, merchant banking,
insurance company portfolio investment, or real estate investment and
development.
Secondly, the act has altered the regulatory boundaries for all
financial services organizations, including the bank. By repealing an exemption
from SEC broker/dealer registration formerly enjoyed by banks for their
securities activities, the act adds a layer of SEC regulation to the bank's
regulatory structure. For national banks, state insurance regulators will now be
able to license and regulate their insurance activities, as the act provides
that state insurance law will apply to national banks engaged in the
underwriting and sale of insurance products.
New Legislation
Proposed legislation is introduced in almost every legislative session
that would dramatically affect the regulation of the banking industry. At this
time, we cannot predict whether or not Congress will enact legislation and what
effect the legislation might have on the bank.
50
<PAGE>
Legal Proceedings
The nature of the bank's business generates some litigation involving
matters arising in the ordinary course of business. In the opinion of management
of the bank, however, no legal proceedings are pending, which, if determined
adversely to the bank, would materially affect the bank's undivided profits or
financial condition. There are no proceedings pending other than ordinary
routine litigation incidental to the business of the bank. In addition, to
management's knowledge, no government authorities have initiated or contemplated
any material legal actions against the bank.
Information as to Nominees and Directors
The bank's board of directors presently consists of 10 members,
approximately one-third of whom shareholders elect annually to serve for a term
of three years. The same directors who serve on the bank's board of directors
currently serve on the holding company's board of directors. After the
reorganization, the shareholders of the bank will become shareholders of the
holding company and will elect the board of directors of the holding company.
The holding company will be the sole shareholder of the bank and will elect the
bank's board of directors. We anticipate that the membership of the holding
company's board and the bank's board will differ, only in that we plan to bring
in new directors to the bank's board prior to nominating such individuals to
serve on the holding company's board. The following table provides selected
information about the directors of the bank, as of March 10, 2000:
<TABLE>
<CAPTION>
Year
Current Age as of
Term March 10, Principal Occupation Director of
Name Expires 2000 for last Five Years Bank Since
---- ------- ---- ------------------- ----------
The following three directors are also nominees
for director, to serve until 2003:
<S> <C> <C> <C> <C>
G. Henry Cook 2000 49 Chairman of the Board, President and 1982
Chief Executive Officer, Somerset Trust
Company
Alan L. Miller 2000 59 President, Luther P. Miller, Inc. 1988
(fuel distribution)
Richard C. Yeager 2000 52 Vice President/Secretary KirCon-Breco, 1987
Inc. (plumbing/heating/air conditioning)
</TABLE>
51
<PAGE>
<TABLE>
<CAPTION>
Year
Current Age as of
Term March 10, Principal Occupation Director of
Name Expires 2000 for last Five Years Bank Since
---- ------- ---- ------------------- ----------
The following director is also a nominee for
director, to serve until 2002:
<S> <C> <C> <C> <C>
Jon C. Clapper 2000 50 President, Clappers Industries, Inc., 199
(furniture manufacturer); Treasurer,
Clapper's Building Materials, Inc. (retail
sale of building materials)
The following director is also a nominee for
director, to serve until 2001:
Barbara Wheeler 2000 44 Customer Service, Wheeler Bros., Inc. 2000
Davies (Liquidator and Supplier of vehicle parts
to government)
The following directors are currently serving
three-year terms:
Thomas J. Cook 2001 46 Senior Vice President, Secretary and 1995
Corporate Counsel, Somerset Trust
Company
Dean M. Hottle 2001 66 Certified Public Accountant, Bulow, 1983
Hottle & Co.
John M. Kriak 2001 52 President, Group Genesis, LLC (business 1998
consultant) (since May 1999); Executive
Vice President Crown American Realty
Trust, May 1993 - May 1999
Edward R. Zeigler 2001 53 Owner, Hauger-Zeigler Funeral Home 1994
Lloyd E. Mostoller 2002 65 Owner, Mostoller's Country Corral 1990
Restaurant
Marlin C. Sherbine 2002 66 Farmer (Small Grains/Beef Cattle) 1997
</TABLE>
Board Meetings, Compensation of Directors
The board of directors held 12 regular meetings in 1999. Each of the
directors attended at least 75% of the combined total number of meetings of the
board of directors and the committees of which he or she was a member, with the
exception of Joan M. Wheeler. Ms. Wheeler resigned as a director, effective
February 17, 2000.
52
<PAGE>
During 1999, the bank paid a monthly fee of $500.00 to its directors
for participating in board meetings. In addition, the bank paid each director
who attended the executive committee $200 per meeting and each director who
attended other committee meetings $100 per meeting. In the aggregate, the bank
paid the board of directors $124,300 for all services rendered in 1999.
Procedure for Nominating Directors
The bank does not have a nominating committee. The entire board of
directors selects nominees for director. In addition, the bank does consider
nominations from shareholders. Shareholders who wish to nominate an individual
to serve as director may do so at the annual meeting.
Committees of the Board of Directors
During 1999, the bank's board of directors maintained seven standing
committees, as described below:
o The AUDIT COMMITTEE meets at least once a month to review and
coordinate both the outside and inside audits.
o The EXECUTIVE COMMITTEE of the bank meets weekly to review and
approve certain loans. The committee exercises the authority of
the board of directors in the intervals between board meetings
as far as permitted by law.
o The TRUST COMMITTEE meets at least once a month to determine the
policies and investments of the trust department and to confirm
the acceptance of all fiduciary relationships and the closing
out or relinquishment of all fiduciary relationships.
o The PERSONNEL COMMITTEE meets to review and set employee
compensation, human resource policies and incentive programs.
o The LONG RANGE PLANNING COMMITTEE meets to review the proposed
budget, to consider new products and marketing, and to set bank
operating goals.
o The ASSET-LIABILITY COMMITTEE meets monthly to review and manage
the assets and liabilities of the bank.
o The LOAN REVIEW COMMITTEE meets at least once a month to review
loan documentation and loan performance, with special emphasis
on classified and delinquent loans.
53
<PAGE>
The table below shows the membership of each committee described above
and the number of meetings each committee held in 1999.
Committees of the Board of Directors
of the Corporation and the Bank
<TABLE>
<CAPTION>
- - --------------------------------------------------------------------------------------------------------------------------
Board Member, Long-Range Asset Loan
As of December 31, 1999 Audit Executive Trust Personnel Planning Liability Review
- - --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
G. Henry Cook X X X X X X
- - --------------------------------------------------------------------------------------------------------------------------
Thomas J. Cook X X X X
- - --------------------------------------------------------------------------------------------------------------------------
Jon Clapper X X X X
- - --------------------------------------------------------------------------------------------------------------------------
Dean M. Hottle X X X
- - --------------------------------------------------------------------------------------------------------------------------
John M. Kriak X X X X
- - --------------------------------------------------------------------------------------------------------------------------
Alan L. Miller X X X X
- - --------------------------------------------------------------------------------------------------------------------------
Lloyd E. Mostoller X X
- - --------------------------------------------------------------------------------------------------------------------------
Marlin C. Sherbine X X X X
- - --------------------------------------------------------------------------------------------------------------------------
Joan M. Wheeler X X X X
- - --------------------------------------------------------------------------------------------------------------------------
Richard C. Yeager X X X X
- - --------------------------------------------------------------------------------------------------------------------------
Edward R. Zeigler X X X X X X
- - --------------------------------------------------------------------------------------------------------------------------
Committee Meetings
Held in 1999 12 16 11 1 0 12 12
- - --------------------------------------------------------------------------------------------------------------------------
</TABLE>
54
<PAGE>
Principal Officers
The following table shows selected information about the principal
officers of the bank. The board of directors elects the officers for one-year
terms, and the board has the discretionary authority to remove these individuals
from office.
<TABLE>
<CAPTION>
Office and Bank Number of Shares Age as of
Position Held Employee Beneficially March 10,
Name with the bank Since Since Owned(1) 2000
---- ------------- ----- ----- ----- ----
<S> <C> <C> <C> <C> <C> <C>
G. Henry Cook Chairman of the 1995 1969 4,852.64 (2) 49
Board
President, and 1989
Chief Executive
Officer
Thomas J. Cook Senior Vice 1991 1985 4,170.92 (3) 46
President,
Secretary and 1987
Corporate Counsel 1985
Richard W. Stern Senior Vice 1991 1977 1,890 (4) 51
President, Chief
Financial Officer
Donald E. Meese Senior Vice 1991 1971 374 (5) 62
President
Robert L. Enos Vice President, 1991 1975 550 (6) 48
Senior Loan
Officer
</TABLE>
- - ----------
(1) The securities "beneficially owned" by an individual are determined in
accordance with the definitions of "beneficial ownership" set forth in
the General Rules and Regulations of the Securities and Exchange
Commission and may include securities owned by or for the individual's
spouse and minor children and any other relatives who have 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 60 days after March 10, 2000. Beneficial ownership may
be disclaimed as to certain of the securities.
(2) Includes 40 shares held jointly with spouse, 200 shares held
individually by spouse, 400 shares held by his minor children,
1,104.7897 vested but undistributed shares held in the bank's ESOP, and
87.85 unvested shares held in the bank's non-qualified ESOP. In
addition, G. Henry Cook's parents, George S. and Eve Cook, beneficially
own 24,806 shares. George S. Cook is also a beneficiary of the Edward
Scull Trust, a principal shareholder. G. Henry Cook's brother, Thomas
J. Cook, is an executive officer of the bank and is listed in this
table.
(3) Includes 130 shares held jointly with spouse, 200 shares held
individually by spouse, 829.5885 vested but undistributed shares held
in the bank's ESOP, and 61.33 unvested shares held in the bank's
non-qualified ESOP, and 600 shares owned by his adult child residing at
home. In addition, Thomas J. Cook's parents, George S. and Eve Cook,
beneficially own 24,806 shares. George S. Cook is also a beneficiary of
the Edward Scull Trust, a principal shareholder. Thomas J. Cook's
brother, G. Henry Cook, President of the bank, is an executive officer
of the bank and is listed in this table.
(4) Vested but undistributed shares held in the bank's ESOP.
(5) Includes 250 shares held jointly with spouse.
(6) Vested but undistributed shares held in the bank's ESOP.
55
<PAGE>
Executive Compensation
The following table provides the annual compensation for services in
all capacities to the bank for the fiscal years ended December 31, 1999, 1998,
and 1997, for those persons who were at December 31, 1999,
o The Chief Executive Officer, and
o The four other most highly compensated executive officers of the
bank, to the extent such person's total annual salary and bonus
exceeded $100,000.
Summary Compensation Table
<TABLE>
<CAPTION>
Annual Compensation Long-Term Compensation
------------------- ----------------------
Awards Payouts
(a) (b) (c) (d) (e) (f) (g) (h) (i)
Securities
Other Restricted Underlying All other
Annual Stock Options/ LTIP Compen-
Name and Principal Salary Bonus Compen- Award(s) SARs Payouts sation
Position Year ($) ($) sation ($) (#) ($) ($)
-------- ---- --- --- ------ --- --- --- ---
<S> <C> <C> <C> <C> <C> <C> <C> <C>
G. Henry Cook, 1999 116,390 40,736 15,988.63 (1)
President and Chief 1998 105,840 12,930 11,885.66
Executive Officer 1997 94,500 11,937 12,200.36
Thomas J. Cook, 1999 87,100 21,775 12,667.35 (2)
Senior Vice President, 1998 79,200 8,997 5,153.79
Secretary and 1997 72,000 7,103 7,968.40
Corporate Counsel
</TABLE>
- - ----------
(1) Figure includes premiums paid on behalf of G. Henry Cook by the bank
for the following benefits: medical, dental, life and disability
insurance ($6,503.26 in 1999; $6,481.66 in 1998; and $6,457.90 in 1997)
and annual contributions by the bank to vested and unvested defined
contribution plans (the bank's ESOP and 401(k) plan) attributable to G.
Henry Cook.
(2) Figure includes premiums paid on behalf of Thomas J. Cook by the bank
for the following benefits: dental, life and disability insurance
($1,030.78 in 1999, 1998, and 1997) and annual contributions by the
bank to vested and unvested defined contribution plans (the bank's ESOP
and 401(k) plan) attributable to Thomas J. Cook.
Compensation Committee' Report on Executive Compensation
In fulfilling its fiduciary duties, the board of directors acts in the
best interests of the bank's shareholders, customers, and the communities served
by the bank. To accomplish the bank's strategic goals and objectives, the board
of directors engages competent persons, who undertake to accomplish these
objectives with integrity and with cost-effectiveness. The board of directors
fulfills part of its strategic mission through the compensation of these
individuals.
The bank seeks to offer competitive compensation opportunities for all
employees based on the individual's contribution and personal performance. The
Personnel Committee administers the compensation program. The committee seeks to
establish a fair compensation policy to govern executive officers' base salaries
and incentive plans to attract and motivate competent, dedicated and ambitious
managers, whose efforts will enhance the products and services of the bank, the
results of which will be improved profitability, increased dividends to the
bank's shareholders, and subsequent appreciation in the market value of the
bank's shares.
56
<PAGE>
The committee reviews and annually approves the compensation of the
banks' top executives, including the chief executive officer and four other
executive officers. As a guideline in determining base salaries, the board uses
a regional financial industry salary survey which covers financial institutions
in the Pennsylvania, Maryland, Ohio, and West Virginia market place.
The committee does not deem Section 162(m) of the Internal Revenue Code
to be applicable to the bank at this time. Section 162(m) limits the tax
deductibility by a company of compensation in excess of $1 million paid to any
of its five most highly compensated executive officers. However, compensation
which qualifies as "performance-based" is excluded from the $1 million limit if,
among other requirements, the compensation is payable only upon attainment of
pre-established objective performance goals under a plan approved by
shareholders. The committee intends to monitor the future application of Section
162(m) to the compensation paid to the bank's executive officers; and, in the
event that this section becomes applicable, the committee intends to amend the
bank's compensation plans to preserve the deductibility of the compensation
payable under the plans.
Chief Executive Officer Compensation
The committee determined that the Chief Executive Officer's 1999 base
salary of $116,390, an approximate 10% increase in base salary, combined with a
$40,736 bonus, is appropriate in light of the bank's performance
accomplishments. No direct correlation exists between the Chief Executive
Officer's compensation, the Chief Executive Officer's increase in compensation,
and the bank's performance, except as described below in determining incentive
awards. The committee subjectively determines the increase in the Chief
Executive Officer's compensation based on a review of all relevant information.
Executive Officers
The committee increased the compensation of the banks' executive
officers by approximately 8% in 1999. The committee determined the increases
based on its subjective analysis of the individual's contribution to the bank's
strategic goals and objectives. In determining whether strategic goals have been
achieved, the committee considers numerous factors, including the following: the
bank's performance as measured by earnings, revenues, return on assets, return
on equity, market share, total assets, and non-performing loans. Although the
committee measured the performance and increases in compensation in light of
these factors, no direct correlation exists between any specific criterion and
the employees' compensation; nor does the committee, in its analysis, attribute
specific weight to any such criteria. The committee makes a subjective
determination after review of all relevant information, including the above.
In addition to base salary, executive officers of the banks may
participate in the bank's 401(k) plan, retirement plan and two ESOP's, which
apply equally to all bank employees. In addition, the bank maintains an Officer
Incentive Program, described below.
57
<PAGE>
Officer Incentive Program
The bank maintains an Officer Incentive Program for all officers but
its five executive officers. Newly elected officers are eligible to enter the
program the second quarter of the year in which they are elected unless their
employment proposal states otherwise. Participating officers must receive an
overall satisfactory performance review or higher on their most current review
to receive an incentive payout. Eligible officers will receive an annual bonus
based on the bank's profitability and deposit growth for that year. Each
February, the board determines the specific formula for determining the bonus,
based on these criteria, for the year.
Executive Officer Bonus
The board of directors grants each executive officer an annual bonus at
its discretion.
Conclusion
General labor market conditions, the specific responsibilities of the
individual, and the individual's contributions to the bank's success influence
total compensation opportunities available to the bank's executive officers. The
committee reviews individuals on a calender year basis and strives to offer
compensation that is competitive with that offered by employers of comparable
size in our industry. Through these compensation policies, the bank strives to
meet its strategic goals and objectives to its constituencies and provide
compensation that is fair and meaningful to its executive officers.
This report is furnished by the bank's Personnel Committee, which
performs the functions of a compensation committee.
G. Henry Cook (Ex Officio) Alan L. Miller
Dean M. Hottle Edward R. Zeigler
Compensation Committee Interlocks and Insider Participation
G. Henry Cook, President and Chief Executive Officer, is an ex officio
member of the Personnel Committee which also performs the functions of a
compensation committee. In addition, Thomas J. Cook, Senior Vice President and
Secretary, is occasionally invited to participate in the committee's reviews.
The Personnel Committee makes recommendations to the board regarding
raises for the bank's executive officers, and the entire board votes on such
raises. G. Henry Cook and Thomas J. Cook do not participate in conducting their
own reviews. In addition, neither G. Henry Cook nor Thomas J. Cook votes on his
own pay raise, but each may vote on the other's raise. G. Henry Cook and Thomas
J. Cook are brothers.
58
<PAGE>
401(k) Profit-Sharing Plan
The bank currently maintains a 401(k) profit-sharing plan. To be
eligible to become a participant in the plan, an employee must have worked at
least one year during which the employee completed 1,000 hours of service. Any
eligible employee may elect to contribute certain portions of salary, wages,
bonus, or other direct remuneration to the plan. The board determines the amount
of optional contributions each year. Optional contributions are allocated among
all eligible employees in proportion to their compensation. 50% of this
contribution is deposited into the employee's "optional contribution account."
The remaining 50% may be taken in cash or deposited into the employee's "basic
contribution account." The bank contributes $0.10 for each $1.00 of basic
contribution to the plan. Employees may not make any basic contributions in
excess of $7,000, as adjusted for inflation, during any calendar year. The bank
contributed $253,801.97 to the 401(k) plan during 1999.
Employee Stock Ownership Plan (ESOP)
The bank has maintained an Employee Stock Ownership Plan (ESOP). An
employee who has completed one year of service and attained the age of 21 is
eligible to participate in the plan. Each year, the bank makes a contribution to
the plan in cash, bank common stock or other property, at the bank's discretion.
The amount of an employee's compensation received during the year determines his
or her share of the contribution. Once an employee has reached the age of 65, an
employee is entitled to his or her account balance in the plan. The employee
becomes fully vested upon five years of service, but no amount is vested prior
to that time. The bank contributed $60,000 to the ESOP in 1999.
Top Hat Deferred Compensation Plan
The bank has maintained a top hat unfunded deferred compensation plan
for a select group of officers. On an annual basis the board of directors
designates eligible employees to be participants in the plan. The board of
directors in its discretion may contribute to the plan for a particular plan
year. Each participant has a separate account. In each plan year a participant
receives a pro rata allocation of any employer contribution based on the
participant's compensation divided by aggregate compensation of all participants
in that year. The employer contributions are placed in a trust and will be
invested primarily in the common stock of the bank. A participant's separate
account is vested when the participant has completed at least ten years of
employment and has reached the age of 55. A participant's separate account is
also vested in the event of a change in the control of the bank. The bank
contributed $53,319.96 to the plan in 1999.
Defined Benefit Pension Plan
The bank maintains a non-contributory retirement plan. Only the bank
may make contributions to the plan. In 1999 the bank contributed $97,767 to the
plan. An employee is eligible to participate in the plan after one full year of
service, if he or she works over 1,000 hours annually. Normal retirement is at
65 years of age, if the employee has completed at least 10 years of credited
service. An employee also has the option of early retirement at age 55 and
59
<PAGE>
late retirement. Upon retirement, the normal payment form is a 10-year certain
and life annuity, but the employee may choose other payment forms that are the
actuarial equivalent.
The monthly pension is determined at any point in time as the product
of A plus B times C, as follows:
A. 35% of the employee's average monthly compensation reduced 1/15 for
each year of service less than 15 years if the employee had remained
employed until his or her normal retirement date.
B. 30% of the employee's average monthly compensation in excess of covered
compensation reduced 1/15 for each year of service less than 15 years
if the employee had remained employed until his or her normal
retirement date.
C. A fraction, not to exceed one, the numerator of which is the member's
actual years of credited service as of the date of determination and
the denominator of which is the number of years of credited service the
member would have completed had he remained employed until his normal
retirement date.
The following table shows the annual benefit under the plan, given
various annual compensation levels and given certain years of service with the
bank. For a participant hired at age 30, benefits are payable at age 65.
Years of service
<TABLE>
<CAPTION>
- - ------------------------------------------------------------------------------------------------------------------
Compensation 15 20 25 30 35
------------ -- -- -- -- --
- - ------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
$30,000 $4,500 $6,000 $7,500 $9,000 $10,500
- - ------------------------------------------------------------------------------------------------------------------
$70,000 10,500 14,000 17,500 21,000 24,500
- - ------------------------------------------------------------------------------------------------------------------
$110,000 16,500 22,000 27,500 33,000 38,500
- - ------------------------------------------------------------------------------------------------------------------
$150,000 22,500 30,000 37,500 45,000 52,500
- - ------------------------------------------------------------------------------------------------------------------
$200,000 24,000 32,000 40,000 48,000 56,000
- - ------------------------------------------------------------------------------------------------------------------
</TABLE>
60
<PAGE>
Relationships between Officer and Directors and Transactions between Officer and
Directors and the Bank
Family Relationships
Thomas J. Cook a Senior Vice President and director, is the brother of
G. Henry Cook, the Chairman of the Board and President and Chief Executive
Officer of the bank.
Indebtedness of Management
Except as described below, the bank has not entered into and does not
intend to enter into any material transactions with any director or executive
officer of the bank or their associates.
Some of our directors and officers and the companies with which they
are associated had banking transactions with the bank in the ordinary course of
its business during 1999, and the bank expects to continue such banking
transactions in the future.
Total loans outstanding from the bank at December 31, 1999, the latest
practicable date for determining this information, to the bank's officers and
directors as a group, members of their immediate families and companies in which
they had an ownership interest of 10% or more, amounted to approximately
$6,200,000, or approximately 27.08% of the total equity capital of the bank.
This amount was also the largest total amount of indebtedness outstanding during
1999 to the above described group. The bank made these loans in the ordinary
course of business on substantially the same terms, including interest rates and
collateral, as those prevailing at the time for comparable transactions with
other persons, and they did not involve more than the normal risk of collection
or present other unfavorable features.
61
<PAGE>
DESCRIPTION OF THE BANK'S CAPITAL SECURITIES
Common Stock
The Somerset Trust Company is authorized to issue 612,500 shares of
common stock, par value $1.00 per share, of which 612,500 shares were issued and
outstanding as of December 31, 1999. No other shares were issued or outstanding.
The bank is not authorized to issue any other class of stock. As of December 31,
2000, the bank had approximately 410 shareholders.
Voting Rights. Each share of common stock is entitled to one 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.
Preemptive Rights. The bank's common stock does not carry preemptive
subscription rights.
Liquidation. In the event of liquidation, dissolution or winding up of
the bank, shareholders are entitled to share ratably in all assets remaining
after payment of liabilities.
Liability for Further Assessments. The bank's shareholders are not
subject to further assessments by the bank on their shares.
Sinking Fund Provision. The bank's shares do not require a "sinking
fund" which is a separate capital reserve maintained to pay shareholders with
preferential rights for their investment in the event of liquidation or
redemption.
Redemption Provision. The bank's shareholders do not have a right of
redemption, which is the right to sell their shares back to the bank.
Capital Requirements under State Banking Law. Under the Pennsylvania
Banking Code of 1965, the bank must maintain capital surplus in an amount at
least equal to the amount if its capital consisting of the total par value of
its common stock.
Dividends. Each shareholder is entitled to receive dividends that may
be declared by the board of directors out of legally available funds. The bank
has historically paid quarterly cash dividends to its shareholders. The bank has
regularly paid quarterly dividends for at least 15 years. Payment of dividends
is subject to the restrictions in the Pennsylvania Banking Code of 1965, the
Federal Deposit Insurance Act and the Federal Reserve Act. The Pennsylvania
Banking Code provides that a bank may declare and pay dividends only out of
accumulated net earnings and only if the bank meets certain minimum capital
requirements. Directors are specifically liable for unlawful dividends.
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<PAGE>
The Federal Reserve generally prohibits payment of dividends that would
be an "unsafe or unsound banking practice." Further, an insured bank may not
declare and pay dividends if the Federal Reserve obtains a cease and desist
order for the bank.
The following table sets forth the dividends that the bank has paid its
shareholders since January 1998.
AMOUNTS OF DIVIDENDS PAID
Regular Cash In the
Month/Year Dividend Per Share($) Aggregate($)
- - ---------- ------------------ ---------
March 1998 .26 159,250
June 1998 .30 183,750
September 1998 .30 183,750
December 1998 .30 183,750
March 1999 .30 183,750
June 1999 .35 214,375
September 1999 .35 214,375
December 1999 .35 214,375
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, primarily in the bank's geographic service area. As of
February 23, 2000, the highest trade price known to management for transactions
of the bank's common stock was for a trade of 112 shares at $69.00 per share on
July 8, 1999. The most recent sale price as of February 23, 2000, was $55.00 per
share. The last reported sale of the bank's common stock prior to the public
announcement of the proposed reorganization was a trade of 580 shares at $55.00
per share on February16, 2000. This price may include retail markups, markdowns
or commissions. Due to the infrequency of trading and the fact that these trades
are generally private transactions, we are unable to determine actual trading
prices on any given date.
Because the holding company has no substantial assets or liabilities,
the holding company's common stock had no market value at the time of the public
announcement. We anticipate that after the reorganization, the per share market
value of the holding company's common stock will be approximately one-fourth of
the per share market value of the bank's common stock immediately after the
reorganization, based on the 4-for-1 stock exchange ratio.
Any estimate or expectation, however, may not be realized.
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<PAGE>
Trade Price High's and Low's
Bid price information for the bank's common stock is not available.
However, the bank does have information on trade prices. The following table
shows quarterly 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 1998 $57.00 $53.50
June 1998 69.00 68.00
Sept. 1998 69.75 67.00
Dec. 1998 68.50 64.50
March 1999 67.38 63.00
June 1999 68.75 65.00
Sept. 1999 69.00 60.00
Dec. 1999 66.00 58.00
DESCRIPTION OF THE HOLDING COMPANY'S CAPITAL SECURITIES
Common Stock
The authorized capital stock of Somerset Trust Holding Company consists
of 4.0 million shares of common stock, without par value. If the reorganization
had been completed on December 31, 1999, the holding company would have about
2,450,000 shares outstanding, which is four times the number of shares of bank
common stock outstanding on that date. Except for the common stock issued in the
reorganization, upon completion of the reorganization, no other shares of
capital stock will be issued or outstanding.
Voting Rights. Each share of common stock entitles its holder to one
vote on all matters upon which shareholders have the right to vote. The holders
of common stock are entitled to cumulate votes in the election of directors.
Preemptive Rights. The holding company's common stock does not carry
preemptive subscription rights.
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<PAGE>
Liquidation. In the event of liquidation, dissolution or winding up of
the holding company, the holders of common stock are entitled to share ratably
in all assets remaining after payment of liabilities.
Liability for Further Assessments. The holding company will not subject
shareholders to further assessments on their shares of common stock.
Sinking Fund Provision. The common stock does not require a "sinking
fund" which is a separate capital reserve maintained to pay shareholders with
preferential rights for their investment in the event of liquidation or
redemption.
Redemption or Conversion Rights. The holders of common stock do not
have a right of redemption, which is the right to sell their shares back to the
holding company, nor do they have a right to convert their shares into other
classes or series of stock.
Dividends. Each shareholder is entitled to receive dividends that may
be declared by the board of directors out of legally available funds. The bank
has paid continuous quarterly cash dividends since 1985. We presently intend to
retain the dividend policy of paying a quarterly dividend after the
reorganization. However, further dividends depend upon future earnings,
financial condition, appropriate legal restrictions and other relevant factors.
Under the Pennsylvania Business Corporation Law, the holding company
may not pay a dividend if afterwards:
o The holding company would be unable to pay its debts as they
become due, or
o The holding company's total assets would be less than its total
liabilities plus an amount needed to satisfy any preferential
rights of shareholders.
Cash available for dividend distribution to shareholders of the holding
company must initially come from dividends which the bank pays the holding
company. As a result, the legal restrictions on the bank's dividend payments
also affect the ability of the holding company to pay dividends. See
"Description of the Bank's Capital Securities - Common Stock."
Issuance of Additional Securities
The holding company has authorized common stock substantially in excess
of the number of shares that it will issue in connection with the
reorganization. As a result, we will have the flexibility to raise additional
capital and to make acquisitions through the issuance of holding company common
stock without prior approval by the holding company's shareholders. Issuance of
these shares could dilute the book value per share and the voting power of the
prior shareholders because the holding company has the right to issue new shares
without first offering the shares to shareholders in proportion to their current
ownership percentages. We currently have no plans for issuing additional shares
of common stock.
65
<PAGE>
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 stating that the shares of common stock of the holding
company to be issued in connection with the reorganization will be fully paid
and non-assessable by the holding company. "Non-assessable" means that the
holding company will not be able to assess fees for ownership of the shares. The
opinion is attached as an exhibit to the Registration Statement, filed with the
SEC, of which this proxy statement/prospectus forms a part.
Anti-Takeover Effect of Provisions in Articles and Bylaws
The holding company's articles of incorporation and by-laws contain
provisions that could be considered anti-takeover in purpose or effect. With the
exception of the holding company's high number of authorized shares, all of
these provisions are shared by the bank.
Authorized Capital. The anti-takeover provisions include:
o The authorization of 4.0 million shares of common stock, and
o The lack of preemptive rights for shareholders to subscribe to
purchase additional shares of stock on a pro rata basis.
These provisions generally permit the board of directors to have as
much flexibility as possible to issue additional shares, without prior
shareholder approval, for proper corporate purposes, including financing,
acquisitions, stock dividends, stock splits, and employee incentive plans.
However, these additional shares may also be used by the board of directors to
deter future attempts to gain control over the holding company. By comparison,
the bank has 612,500 shares of authorized common stock and also does not
guarantee preemptive rights.
Supermajority Vote for Approval of Extraordinary Transactions. Another
anti-takeover provision is the requirement in the articles of incorporation that
the affirmative vote of the holders of at least 66 2/3% of the outstanding
shares entitled to vote must approve any merger, consolidation, dissolution or
liquidation of the holding company or the sale of all or substantially all of
its assets. We included this provision to ensure that any extraordinary
corporate transaction could happen only if it receives a clear mandate from the
shareholders. However, this provision may give the holding company's directors
and/or the holders of a minority of the holding company's outstanding shares a
veto power over such mergers and consolidations. Under the Banking Code of 1965,
the holders of 66 2/3% of the bank's outstanding shares is likewise required to
approve an extraordinary business transaction.
Classified Board. Like the bylaws of the bank, the bylaws of the
holding company provide for a staggered board. A classified or staggered board
has the effect of moderating 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, this extension of time also
tends to discourage a tender offer or takeover bid. Article 9 of the by-laws of
the
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<PAGE>
holding company provides that at its 2001 Annual Meeting of Shareholders, the
shareholders shall elect eleven directors as follows:
o 3 Class A directors to serve until the 2002 Annual Meeting of
Shareholders,
o 4 Class B directors to serve until the 2003 Annual Meeting of
Shareholders, and
o 4 Class C directors to serve until the 2004 Annual Meeting of
Shareholders.
Shareholders shall elect each class in a separate election. At each
following annual meeting, shareholders will elect successors to the class of
directors whose term is then expiring to hold office for a term of 3 years.
Under the holding company's bylaws, the board of directors fills vacancies that
occur during the year until the next annual meeting of shareholders. At the next
annual meeting, an election will be held to fill the remainder of the vacated
term. Although the Business Corporation Law permits directors to fill vacancies
until the full term has expired, the directors of the holding company adopted
this more limited provision because it is identical to a provision in the bank's
bylaws.
Anti-takeover Provisions Applicable to Registered Corporations
Pennsylvania law provides strong anti-takeover defenses to corporations
that have their securities registered with the SEC under Section 12 of the
Securities Exchange Act of 1934, or that are subject to the reporting
requirements of Section 15(d). The law calls these corporations "Registered
Corporations." These provisions are in addition to provisions contained in the
company's articles of incorporation and bylaws. None of these provisions apply
to the bank.
Although Section 15(d) companies are included in the definition of
"Registered Corporation," most of these provisions apply only to Section 12
companies. The holding company will not be required to register under Section 12
until it has more than 500 shareholders. At that time, the holding company may
opt out of these provisions, if it so chooses, within a specified time period
and generally with prior shareholder approval.
Under its articles of incorporation, the holding company has opted out
of those provisions applicable to Section 15(d) companies, to the extent
permitted by law. For example, a statutory provision eliminating the right of
shareholders to call special meetings and another provision eliminating
shareholders' right to propose an amendment to the articles of incorporation do
not apply to the holding company under its current articles of incorporation.
However, the holding company may not opt out of some of the provisions
applicable to Section 15(d) companies. These mandatory provisions primarily
relate to the treatment of employees whose employment is terminated due to
business combinations and acquisitions, and to the preservation of labor
contracts in business combination transactions.
The following provisions apply to Section 12 companies:
One provision assures that all shareholders will receive the "fair
value" for their shares as the result of a "control transaction." This provision
will only apply when the holding company registers its securities under Section
12 of the 1934 Act. "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. Alternatively, if a
shareholder
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<PAGE>
believes the value of his or her shares is higher, he or she may demand an
appraisal procedure to receive the fair value of the shares as the date of the
control transaction, taking into account all relevant factors which may not be
reflected in the price paid for the shares. "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 of the shares to cast at least 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 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 is a relatively common practice in corporate takeovers to pay cash
to acquire controlling equity in a 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 payment, such as securities of the purchaser that do
not have an established trading market. The board of directors considers these
"two-tier pricing" tactics to be unfair to the holding company's shareholders.
By their very nature, these tactics tend 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. These sales in turn
facilitate the purchaser's acquisition of a sufficient interest in the company
to enable the purchaser to force the exchange of remaining shares for a lower
price in a business combination.
While the fair price provision in Pennsylvania law 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 future takeover proposal which it believes not to be in the
best interests of the holding company and its shareholders, whether or not the
proposal satisfies the minimum price, form of payment and procedural
requirements of the fair price provision.
Another provision of Pennsylvania law relates to a "Business
Combination" involving a Registered Corporation. This provision will only apply
when the holding company registers its securities under Section 12 of the 1934
Act. Business Combination includes the following transactions involving an
"Interested Shareholder":
o A merger or consolidation of the holding company with an
interested shareholder;
o A sale, lease, exchange, mortgage, pledge, transfer or other
disposition with the interested shareholder of the assets of the
holding company or certain of its subsidiaries;
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<PAGE>
o The issuance or transfer by the holding company or its
subsidiary of any shares of the holding company or its
subsidiary which has a total market value at least equal to 5%
of the total market value of all the company's outstanding
shares to an interested shareholder;
o The adoption of any plan for the liquidation or dissolution of
the holding company proposed by, or under any agreement with,
the interested shareholder;
o A reclassification of securities or recapitalization of the
holding company or any merger or consolidation of the holding
company with any subsidiary of the holding company or any other
transaction proposed by, or under any agreement with the
interested shareholder which has the effect of increasing the
interested shareholder's proportionate share of the outstanding
shares of the holding company; or
o The interested shareholder's receipt of the benefit, directly or
indirectly, of any loans or other financial assistance or any
tax credits or other tax advantages provided by 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 20% of
the votes that all shareholders would be entitled to cast in an election of
directors of the holding company. The above definitions also apply to an
interested shareholder's affiliate or associate.
Under Pennsylvania law, the holding company shall not engage in a
business combination with an interested shareholder other than:
o A business combination approved by the board of directors prior
to the date the interested shareholder acquires at least 20% of
the shares or where the board of directors of the holding
company has approved the purchase of shares by the interested
shareholder;
o 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 that purpose within 3 months after the interested
shareholder became the beneficial owner of shares entitling it
to cast at least 80% of the votes in an election of directors,
and if the business combination satisfies certain minimum
conditions, which are discussed below;
o A business combination approved by the affirmative vote of all
of the shareholders of the outstanding shares;
o 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 the interested shareholder at a
meeting called for that purpose no earlier than 5 years after
the interested shareholder's share acquisition date; and
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<PAGE>
o A business combination approved at a shareholders' meeting
called for that purpose no earlier than 5 years after the
interested shareholder's share acquisition date and that meets
certain minimum conditions, which are discussed below.
The certain minimum conditions discussed above generally require that
the total amount of the cash and the market value of any payments other than
cash, such as stock, bonds or debentures, to the shareholders of the holding
company be at least equal to the higher of the following:
o The highest price paid by the interested shareholder when the
interested shareholder was the beneficial owner of shares
entitling him to cast at least 5% of the votes in an election of
directors within the 5-year period immediately prior to the
announcement date of the business combination or within the
5-year period prior to time the interested shareholder became an
interested shareholder, whichever is higher, plus interest; or
o The market value per common share on the announcement date of
the business combination or on the share acquisition date,
whichever is higher, plus interest.
The Pennsylvania 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
professional investors will not profit at the expense of the holding company's
long-term public shareholders. 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, we believe that the business
combination provision would not preclude our opposition to any future takeover
proposal which we believe not to be in the best interests of the holding company
and its shareholders, whether or not the proposal satisfied the requirements of
the business combination provision, fair price provision or both.
Subchapter G of Chapter 25 of the Pennsylvania Business Corporation Law
also applies to registered corporations, but only Section 12 corporations. Under
Subchapter G, the acquisition of shares that increase the shareholder's control
of the corporation above 20, 33 or 50% of the voting power able to elect the
board of directors cannot be voted until a majority of disinterested
shareholders approves the restoration of the voting rights of those shares in
two separate votes:
o All disinterested shares of the corporation, and
o 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 their voting rights on transfer to another person who is not an
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<PAGE>
affiliate. If the shares constitute control-shares for the transferee, this
subchapter must be applied to that person as well. If the acquiring shareholder
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 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 only to Section
12 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 securities were acquired
24 months before to 18 months after becoming a control person. This provision
seeks to prevent speculative takeover attempts.
Finally, Pennsylvania law grants a Section 12 corporation the express
authority to treat individual shareholders differently and therefore may take
advantage of "poison pills." "Poison pills" generally consist of a shareholder
rights plan in which a corporation gives its shareholders the right to buy
common stock when specified events occur, such as a merger, which decreases the
value of the acquiror's holdings and the acquiror's percentage of ownership.
However, the holding company has opted out of this provision in its articles of
incorporation.
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 management 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.
COMPARISON OF SHAREHOLDER RIGHTS
After the reorganization, the shareholders of the bank will become
shareholders of the holding company. There are material differences in the
rights of shareholders of these two entities. These differences arise from
differences in the laws that govern the two entities and differences in their
articles and bylaws. The Pennsylvania Banking Code of 1965 presently governs the
rights of shareholders of the bank, but the Pennsylvania Business Corporation
Law of 1988 will govern the rights of shareholders of the holding company. The
most significant differences relate to anti-takeover protection. For a full
description of these anti-takeover provisions, including comparisons between the
holding company and the bank, please refer to "Description of the Holding
Company's Capital Securities - Anti-Takeover Effect of Provisions in Articles
and Bylaws, Anti-Takeover Provisions Applicable to Registered Corporations"
above.
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The following table shows the material differences between the rights
of shareholders of the bank and the rights of shareholders of the holding
company:
<TABLE>
<CAPTION>
======================================================================================================================
The Holding Company's
The Bank's Common Stock Common Stock
- - ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Authorized and 612,500 shares, par value $1.00 per 4,000,000 shares, without par value,
Outstanding share, authorized; of which authorized; of which approximately
approximately 612,500 were outstanding 2,450,000 shares would be outstanding if
on December 31, 1999. the reorganization occurred on December
31, 1999.
- - ----------------------------------------------------------------------------------------------------------------------
Voting 1 vote per share with cumulative voting 1 vote per share with cumulative voting
for directors. for directors.
- - ----------------------------------------------------------------------------------------------------------------------
Preemptive Rights No preemptive rights to subscribe for No preemptive rights to subscribe for
additional shares on a pro rata basis; additional shares on a pro rata basis; board
board of directors may grant preemptive of directors may grant preemptive rights as
rights as a contractual right of stock a contractual right of stock offering if it so
offering if it so chooses. chooses.
- - ----------------------------------------------------------------------------------------------------------------------
Dividends As declared by the board of directors; As declared by the board of directors; the
may be paid only out of accumulated net bank's dividend restrictions apply
earnings. Also, the bank must have indirectly to the holding company because
made any required transfers of net cash available for dividend distributions
earnings to surplus in order to maintain will initially come from dividends the
surplus at least equal to capital, prior to bank pays to the holding company. In
declaring the dividend. Surplus must addition, the holding company may not
not be reduced. Directors are pay a dividend if, after issuing the
specifically liable for unlawful dividend:
dividends.
o the holding company would be unable
to pay its debts as they become due,
or
o the holding company's total assets
would be less than its total
liabilities plus the amount needed to
satisfy any preferential rights of
shareholders.
- - ----------------------------------------------------------------------------------------------------------------------
Amendment of bylaws Under the bank's bylaws, approval by Under the holding company's bylaws,
the affirmative vote of the majority of approval by the affirmative vote of the
shares represented at a legally called majority of shares represented at a legally
meeting of shareholders, or by a vote of called meeting of shareholders, or by a
two-thirds of the members of the board vote of two-thirds of the members of the
of directors present at any regular board of directors present at any regular
meeting of the board, subject to the meeting of the board, subject to the power
power of shareholders to change such of shareholders to change such action.
action. Directors may not amend Directors may not amend bylaws which fix
bylaws which fix their qualification their qualification classification or term of
classification or term of office. office.
- - ----------------------------------------------------------------------------------------------------------------------
Shareholder Action to Approval by a vote of at least 66 2/3% of Under the holding company's articles of
Approve Mergers, outstanding shares. incorporation, approval by a vote of at
Consolidations, least 66 2/3% of outstanding shares.
Liquidation, Sales of
Substantially All Assets
- - ----------------------------------------------------------------------------------------------------------------------
</TABLE>
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<TABLE>
<CAPTION>
======================================================================================================================
The Holding Company's
The Bank's Common Stock Common Stock
- - ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Definition of Directors' The directors owe a fiduciary duty to the The directors owe a fiduciary duty to the
Fiduciary Duty bank. corporation. Under Section 1715 of the
Business Corporation Law, a director, in
considering the best interests of the
corporation, may consider the effects of
any action upon any or all groups affected
by such action, including shareholders,
employees, suppliers, customers and
creditors of the corporation, and upon
communities in which offices or other
establishments of the corporation are
located.
- - ----------------------------------------------------------------------------------------------------------------------
Right to Call Special Yes, upon request by the Chief Yes, because the holding company has
Shareholder Meetings Executive Officer, a majority of the opted out of the applicability of Section
board of directors or one or more 2521 of the Business Corporation Law,
shareholders entitled to cast at least 20% which takes away the statutory right of
of the votes that all shareholders are shareholder to call special meetings for
entitled to cast at a particular meeting. companies with securities registered under
Section 12 of the 1934 Act or with
reporting obligations under Section 15(d)
of the 1934 Act. Under the holding
company's bylaws, a special meeting may be
called upon request by the Chief Executive
Officer, a majority of the board of
directors or one or more shareholders
entitled to cast at least 20% of the votes
that all shareholders are entitled to cast
at a particular meeting.
- - ----------------------------------------------------------------------------------------------------------------------
Increase in Capital Approval by vote of a majority of the Approval by vote of a majority of the
Stock through Issuance directors. directors.
of Additional
Outstanding shares, if
shares are already
authorized under
articles of incorporation
- - ----------------------------------------------------------------------------------------------------------------------
Authorization of Approval by vote of shareholders Approval by vote of a majority of votes
Additional Shares, entitled to cast at least a majority of cast by all shareholders entitled to vote
through Amendment of votes which all shareholders are entitled and, if applicable, the affirmative vote of a
Articles of to cast and, if applicable, the majority of the votes cast in a vote of the
Incorporation affirmative vote of the holders of a holders of outstanding shares of the
majority of the outstanding shares of the affected class or series of stock.
affected class or series of stock.
- - ----------------------------------------------------------------------------------------------------------------------
Right to Propose Yes Yes, because the holding company has
Amendment to Articles opted out of the applicability of Section
2535 of the Business Corporation Law,
which takes away the statutory right of
shareholder to propose amendments to the
articles of incorporation for companies
with securities registered under Section
12 of the 1934 Act or with reporting
obligations under Section 15(d) of the
1934 Act.
- - ----------------------------------------------------------------------------------------------------------------------
</TABLE>
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<PAGE>
<TABLE>
<CAPTION>
======================================================================================================================
The Holding Company's
The Bank's Common Stock Common Stock
- - ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Amendment of Articles Approval by of a majority the votes Approval by a majority of the votes cast.
of Incorporation (other which all shareholders are entitled to
than authorization of cast.
additional shares)
- - ----------------------------------------------------------------------------------------------------------------------
Indemnification of Yes Yes
Directors and Officers
- - ----------------------------------------------------------------------------------------------------------------------
Dissenters' Rights of Yes Yes, because the holding company has
Appraisal opted out of the applicability of Section
2537 of the Business Corporation Law,
which takes away dissenters' rights in
relation to plans to transfer corporate
assets, for companies with securities
registered under Section 12 of the 1934
Act or with reporting obligations under
Section 15(d) of the 1934 Act.
- - ----------------------------------------------------------------------------------------------------------------------
Required to File No. Yes, will register and file reports and other
Reports under Section information with the SEC unless and until
15(d) of the Securities the number of shareholders is less than
Exchange Act of 1934 300.
- - ----------------------------------------------------------------------------------------------------------------------
Registered under No. No, until the holding company has assets
Section 12 of the of more than $10 million and more than
Securities Exchange 500 shareholders. Upon attaining the
Act of 1934 status of a Section 12 company, the
holding company will be subject to
material anti-takeover provisions in the
Business Corporation Law. The holding
company would have the opportunity to opt
out of these provisions through an
amendment to its articles of
incorporation, with prior shareholder
approval, and within specified time
frames.
- - ----------------------------------------------------------------------------------------------------------------------
Repurchase of Shares Cannot reduce or retire any part of its Stock can be repurchased if, after the
stock without prior regulatory approvals repurchase:
and shareholder approval; surplus must
remain at least equal to the amount of o The holding company would still
capital (defined as sum of par value of be able to pay its debts as they
issued and outstanding shares). become due or
o 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 10% of the
outstanding shares can be repurchased
in any 12 month period without prior
regulatory approval; the bank's
restrictions on reduction of capital
will indirectly apply to the holding
company as cash for distributions
will come from the bank.
- - ----------------------------------------------------------------------------------------------------------------------
</TABLE>
74
<PAGE>
<TABLE>
<CAPTION>
======================================================================================================================
The Holding Company's
The Bank's Common Stock Common Stock
- - ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Terms of Directors Directors serve staggered terms. Directors serve staggered terms; board is
Directors serve 3-year terms, with "classified" into Classes A, B and C.
approximately one-third of the directors Eventually, all directors shall serve 3-year
coming up for election each year. The terms, with approximately one-third of the
terms of new directors may be less, in directors coming up for election each year.
order to divide the board into thirds, as
nearly as possible.
- - ----------------------------------------------------------------------------------------------------------------------
Number of Directors Under the bank's bylaws, the board Under the holding company's bylaws, the
must consist of not less than five nor board must consist of not less than five nor
more than 25 directors. However, more than 25 directors. However,
amending the provision relating to the amending the provision relating to the
right of shareholders to change the right of shareholders to change the number
number of directors by more than two in of directors by more than two in a calendar
a calendar year requires the vote of two- year requires the vote of two-thirds of the
thirds of the shares voted by shares voted by shareholders voting in
shareholders voting in person or by person or by proxy at the meeting.
proxy at the meeting.
- - ----------------------------------------------------------------------------------------------------------------------
Directors' Mandatory Yes, under the bank's bylaws, a person Yes, under the holding company's bylaws,
Retirement who has reached the age of 70 may not a person who has reached the age of 70
be elected as a director. Directors who may not be elected as a director. Directors
reach the age of 70 while they are who reach the age of 70 while they are
serving may finish their term and serving may finish their term and
afterwards serve as a Director Emeritus. afterwards serve as a Director Emeritus.
- - ----------------------------------------------------------------------------------------------------------------------
Right to Change the Within the above limits, the Within the above limits, the shareholders
Number of Directors shareholders may increase or diminish may increase or diminish the number of
the number of directors at any regular or directors at any regular or special meeting
special meeting called for that purpose, called for that purpose, provided however,
provided however, that the board of that the board of directors may not be
directors may not be increased or increased or decreased in number by the
decreased in number by the shareholders shareholders during any calendar year by
during any calendar year by more than more than two members, unless the change
two members, unless the change is is approved by a vote of two-thirds of the
approved by a vote of two-thirds of the shares voted by the shareholders voting in
shares voted by the shareholders voting person or by proxy at the annual meeting
in person or by proxy at the annual or special meeting called for that purpose.
meeting or special meeting called for
that purpose.
Between annual meetings of Between annual meetings of shareholders,
shareholders, the board, by a majority the board, by a majority vote, may
vote, may increase the membership of increase the membership of the board, by
the board, by not more than two not more than two members and, by like
members and, by like vote, appoint vote, appoint shareholders to fill the
shareholders to fill the vacancies created vacancies created by the increase.
by the increase.
- - ----------------------------------------------------------------------------------------------------------------------
Right of Shareholders Under the bank's bylaws, the Under the holding company's bylaws, the
to Determine Number shareholders shall at each meeting for shareholders shall at each meeting for the
of Directors to Be the election of directors determine how election of directors determine how many
Elected many directors shall be elected at the directors shall be elected at the meeting.
meeting.
- - ----------------------------------------------------------------------------------------------------------------------
</TABLE>
75
<PAGE>
<TABLE>
<CAPTION>
======================================================================================================================
The Holding Company's
The Bank's Common Stock Common Stock
- - ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Right of Remaining Under the bank's bylaws, the remaining Under the holding company's bylaws, the
Directors to Fill directors may fill a vacancy on the remaining directors may fill a vacancy on
Vacancies on the Board board by a majority vote, but only between the board by a majority vote, but only
annual meetings of shareholders. As a between annual meetings of shareholders.
result, the persons appointed to fill As a result, the persons appointed to fill
vacancies must be elected by the vacancies must be elected by the
shareholders at the next annual meeting. shareholders at the next annual meeting.
======================================================================================================================
</TABLE>
76
<PAGE>
PROPOSAL NO. 4:
RATIFICATION OF INDEPENDENT AUDITORS
The board of directors of the bank has appointed Stokes, Kelly & Hinds,
L.L.C., Certified Public Accountants, of Pittsburgh, Pennsylvania, to audit the
financial statements of the bank for the fiscal year ending December 31, 2000.
The board proposes that the shareholders ratify this appointment. Stokes, Kelly
& Hinds advised the bank that none of its members has any financial interest in
the bank. Stokes, Kelly & Hinds also served as the bank's independent auditors
for the 1999 fiscal year.
The majority of shares present, in person or by proxy, and entitled to
vote at the annual meeting must vote in the affirmative to ratify the
appointment of Stokes, Kelly & Hinds as the bank's independent auditors for the
2000 fiscal year. A representative of the firm will be present at the annual
meeting to answer shareholders' questions. In the event that shareholders do not
ratify the selection of Stokes, Kelly & Hinds as the bank's independent auditors
for the 2000 fiscal year, the board of directors may appoint another accounting
firm to provide independent public accounting services for the 2000 fiscal year.
The board of directors recommends that shareholders vote FOR the
ratification of Stokes, Kelly & Hinds as the independent auditors for the bank
for the fiscal year ending December 31, 2000.
If the proposed reorganization is approved and implemented, it is
anticipated that the holding company will also select Stokes, Kelly & Hinds as
its auditor.
SHAREHOLDER PROPOSALS
In the event the proposed reorganization is approved and the holding
company becomes the one-bank holding company for the bank, any shareholder who,
in accordance with the proxy rules of the SEC, wishes to submit a proposal for
inclusion in the holding company's proxy statement for its 2000 Annual Meeting
of Shareholders must deliver the proposal in writing to Thomas J. Cook,
Secretary, at the holding company's principal executive offices, 151 West Main
Street, Somerset, Pennsylvania 15501, no later than November 30, 2000.
Also, for proposals which will not be included in the holding company's
proxy statement, if the holding company does not receive notice of a shareholder
proposal by February 13, 2001, the proxy holders at the 2001 Annual Meeting may
vote on the proposal at their discretion, as they consider in the best interests
of the holding company.
If the reorganization does not occur, then the above deadlines relating
to shareholder proposals shall apply to the bank for its 2001 Annual Meeting of
Shareholders.
77
<PAGE>
OTHER MATTERS
The board of directors does not know of any matters to be presented for
consideration other than the matters described in this proxy
statement/prospectus. However, if any other matters are properly presented for
consideration and voting at the Annual Meeting of Shareholders, the persons
named as proxy holders will vote the proxies in what they determine to be the
best interests of the bank. See "Where You Can Find More Information" below.
78
<PAGE>
-----------------------------------
Where You Can Find More Information
-----------------------------------
The Holding Company's Registration Statement
Somerset Trust Holding Company has filed with the Securities and
Exchange Commission in Washington, D.C., a registration statement under the
Securities Act of 1933 for its common stock to be issued in the proposed
reorganization. This proxy statement/prospectus statement is a part of the
registration statement.
This document does not contain all of the information, exhibits and
undertakings contained in the registration statement, which is on file with the
SEC in Washington, D.C. The registration statement and exhibits may be examined
during normal business hours, or copies obtained by mail at prescribed rates, at
the SEC's public reference room located at Room 1024, Judiciary Plaza, 450 Fifth
Street, N.W., Washington, D.C. 20549. You may obtain information on the
operation of the public reference room by calling the SEC at 1-800-SEC-0330.
The SEC also maintains a Web site that contains reports, proxy and
information statements and other information regarding registrants that file
electronically with the SEC. The address of the SEC's Web site is
http://www.sec.gov. The registration statement may be accessed from this Web
site.
Annual Reports
Somerset Trust Company is mailing a copy of the bank's Annual Report
for the fiscal year ended December 31, 1999, audited in accordance with
generally accepted auditing standards and containing financial information
prepared in accordance with generally accepted accounting principles, to
shareholders with this proxy statement/prospectus. You may obtain a copy of the
bank's 1998 Annual Report promptly and without charge by contacting G. Henry
Cook, President and Chief Executive Officer, Somerset Trust Company, 151 West
Main Street, Somerset, Pennsylvania 15501 (telephone 814-443-3661).
Periodic Reports and Information Filed with the SEC Following the Reorganization
Following the reorganization, Somerset Trust Holding Company will be
subject to the information reporting requirements of the Securities Exchange Act
of 1934, and will file periodic reports and other information with the SEC. The
financial information filed with the SEC will be consolidated with the bank's
financial information. You may inspect and copy such reports and other
information at the SEC's public reference facilities described above. You may
also obtain these documents at the SEC's Web site at http://www.sec.gov. In
addition, the holding company will provide consolidated annual financial reports
to shareholders.
79
<PAGE>
ANNEX A
PLAN OF REORGANIZATION
AND EXHIBIT A, PLAN OF MERGER
A-1
<PAGE>
PLAN OF REORGANIZATION
THIS AGREEMENT made as of this ____ day of March, 2000, among SOMERSET
TRUST HOLDING COMPANY, a Pennsylvania business corporation (the "Holding
Company"), SOMERSET TRUST COMPANY, Somerset, Pennsylvania, a
Pennsylvania-chartered bank and trust company (the "Bank"), and SOMERSET INTERIM
BANK (In Organization), a Pennsylvania- chartered banking institution 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
Pennsylvania Banking Code of 1965, as amended, (the "Banking Code") 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
Common Stock of the Bank into shares of Common Stock of the Holding Company and
the shares of Common Stock of the Interim Bank into shares of Common Stock of
the surviving bank in the Merger shall be as set forth in Section 2 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 Four
Million (4,000,000) shares of Common Stock, without par value, of which three
(3) shares are issued and outstanding. There are no outstanding options,
warrants, calls, convertible securities, subscriptions
A-2
<PAGE>
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 state-chartered bank and
trust company duly organized and validly existing under the Pennsylvania Banking
Code of 1965, as amended (the "Banking Code").
4.2. Capitalization. The Bank is authorized to issue 612,500 shares of
Common Stock, par value $1.00 per share, of which 612,500 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 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
Incorporation or Bylaws.
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 state-chartered
banking institution in the process of formation under the Banking Code.
5.2. Capitalization. Upon formation, the Interim Bank will be
authorized to issue One Hundred Thousand (100,000) shares of Common Stock, par
value $1.00 per share, of which 100,000 shares will be issued and outstanding
and owned by the Holding Company and three organizers immediately prior to the
Merger.
A-3
<PAGE>
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 Incorporation 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.
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 97,000 shares of Common Stock, par value $1.00 per share, of
Interim Bank for $1.55 per share, and shall cause the Interim Bank to do all
things necessary to obtain a charter as a state banking institution pursuant to
the Banking Code so as to permit the consummation of the Merger provided for in
the Plan of Merger. The Holding Company shall also purchase the 3,000 shares of
Common Stock of the Organizers of the Interim Bank upon consummation of the
Merger for $1.55 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 Banking Code
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 Banking
Code 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 Banking Code and applicable law.
A-4
<PAGE>
SECTION 8. COVENANTS OF THE INTERIM BANK.
The Interim Bank agrees that between the date hereof and the effective
time of the Merger:
8.1. Shareholder Approval. The Interim Bank shall submit this Agreement
and the Plan of Merger to its shareholder(s) for approval and adoption as
provided by the Banking Code 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 approval of the
shareholder(s) of the Interim Bank in accordance with the requirements of the
Banking Code 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.
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 Common 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.
A-5
<PAGE>
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 11 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 2 of the Plan of Merger may not be 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-6
<PAGE>
(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 Common 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 of shares of
Common 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 2 of the Plan of Merger.
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 2 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.
A-7
<PAGE>
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-8
<PAGE>
IN WITNESS WHEREOF, this Agreement has been executed as of the day and
year first above mentioned.
(SEAL)
ATTEST: SOMERSET TRUST HOLDING COMPANY
By:
- - ----------------------------- --------------------------
Thomas J. Cook, Secretary G. Henry Cook, President
(SEAL)
ATTEST: SOMERSET TRUST COMPANY
By:
- - ----------------------------- --------------------------
Thomas J. Cook, Secretary G. Henry Cook, President
(SEAL)
ATTEST: SOMERSET INTERIM BANK
By:
- - ----------------------------- --------------------------
Thomas J. Cook, Secretary G. Henry Cook, President
A-9
<PAGE>
PLAN OF MERGER
SOMERSET INTERIM BANK
with, into and under the charter of
SOMERSET TRUST COMPANY
THIS PLAN OF MERGER made between Somerset Trust Company (the "Bank"), a
Pennsylvania-chartered bank and trust company, located at 151 West Main Street,
Somerset, County of Somerset, in the Commonwealth of Pennsylvania, and Somerset
Interim Bank (In Organization) (the "Interim Bank"), a Pennsylvania-chartered
bank, located at 151 West Main Street, Somerset, County of Somerset, in the
Commonwealth of Pennsylvania (the two parties being sometimes collectively
referred to here in as the "Constituent Banks").
WHEREAS, Bank, Interim Bank and Somerset Trust Holding Company (the
"Holding Company"), a Pennsylvania business corporation of which Interim Bank is
a subsidiary, have entered into a Plan of Reorganization of even day herewith
(the "Plan of Reorganization"), providing for, among other things, the execution
of the Plan of Merger and for the merger (the "Merger") of Bank and Interim Bank
in accordance with the terms and conditions hereinafter set forth;
NOW, THEREFORE, the Constituent Banks, intending to be legally bound
hereby, agree to effect the Merger in accordance with the terms and conditions
hereinafter set forth.
Section 1. General.
1.1 The Merger. On the Effective Date, as hereinafter defined, Interim Bank
shall be merged with, into and under the charter of the Bank under the
Pennsylvania Banking Code of 1965, as amended (the "Banking Code"), the
separate existence of Interim Bank shall cease, and Bank shall be the
surviving Bank (the "Surviving Bank"), in accordance with this Plan of
Merger.
1.2 Name. The name of the surviving Bank shall be Somerset Trust Company,
and the location of its principal office shall be 151 West Main Street,
Somerset, Pennsylvania 15501.
1.3 Articles of Incorporation. At the Effective Date, the Articles of
Incorporation of the Bank, as in effect immediately prior to the
Effective Date, shall be the Articles of Incorporation of the Surviving
Bank.
1.4 By-laws. At the Effective Date, the By-laws of the Bank, as in effect
immediately prior to the Effective Date, shall be the By-laws of the
Surviving Bank.
1.5 Effect of Merger. On the Effective Date, the Surviving Bank shall
succeed, without further act or deed, to all of the property, rights,
powers, duties and obligations of the Constituent Banks in accordance
with the Banking Code. Any claim existing or action pending by or
A-10
<PAGE>
against either of the Constituent Banks may be prosecuted to judgment
as if the Merger had not taken place, and the Surviving Bank may be
substituted in its place.
1.6 Continuation in Business. The Surviving Bank shall continue in business
with the assets and liabilities of each of the Constituent Banks. The
Surviving Bank shall be a bank and trust company organized and having
perpetual existence under the laws of the Commonwealth of Pennsylvania.
Any branch offices of the Surviving Bank shall consist of the Bank's
present branch offices and any other branch office or offices that Bank
may be authorized to have as of the Effective Date.
1.7 Board of Directors. The Board of Directors of Bank immediately prior to
the consummation of the Merger shall serve as the officers of the
Surviving Bank from and after the Effective Date and until such time as
their successors have been duly elected and qualified.
1.8 Officers. 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 Surviving Bank from and after the Effective Date and
until such time as the Board of Directors of the Surviving Bank shall
otherwise determine.
1.9 Employees. On the Effective Date, all persons who are employees of the
Bank and of Interim Bank shall become employees of the Surviving Bank.
Section 2. Conversion of Shares. The manner and basis of converting shares of
Common Stock of the Constituent Banks shall be as follows:
2.1 Stock of Interim Bank. The shares of Common Stock, par value $1.00 per
share, of Interim Bank issued and outstanding immediately prior to the
Effective Date shall be converted into fully paid and non-assessable
shares of Common Stock of the Surviving Bank so that the number of
outstanding shares of Common Stock of the Surviving Bank at and after
the Effective Date shall equal the number of outstanding shares of
Common Stock of the Bank prior to the Effective Date and resulting in
all outstanding shares of Common Stock of the Surviving Bank being held
by the Holding Company at and after the Effective Date.
2.2 Stock of the Bank. Each share of Common Stock, par value $1.00 per
share, of Bank issued and outstanding immediately prior to the
Effective Date, except for shares owned by shareholders who shall have
duly perfected dissenters' rights in accordance with this Plan of
Merger and applicable law and except for fractional shares, shall, on
the Effective Date, by virtue of the Merger and without any action on
the part of the holder thereof, be converted into and become four (4)
shares of fully paid and nonassessable Common Stock, without par value,
of the Holding Company. No fractional shares of Common Stock and no
scrip or certificates therefor, shall be issued in connection with the
Merger, except that fractional shares of Bank Common Stock held in the
Bank's Employee Stock Ownership Plans shall be converted, regardless of
whether the conversion results in fractional interests in Holding
Company Common Stock. Except for Bank shares held in these plans, in
lieu of the issuance of any fractional share to which a shareholder
would otherwise be entitled, each former shareholder of the Bank shall
receive, in cash, an amount equal to the fair market
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<PAGE>
value of his or her fractional interest. From and after the Effective
Date, each certificate which, prior to the Effective Date, represented
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.
2.3 Treasury Stock. Each share of Common Stock, par value $1.00 per share,
of Bank held as a treasury share immediately prior to the Effective
Date, if any, shall thereupon and without notice be canceled.
2.4 Exchange Agent. Bank shall designate the Secretary or another officer
of the Holding Company or Bank to act as exchange agent to receive from
the holders thereof, certificates that, immediately prior to the
Effective Date, represented Bank's Common Stock and to exchange such
certificates for Common Stock of the Holding Company, as provided
herein and, if applicable, to pay cash for fractional shares of Bank
Common Stock pursuant to Section 2.2 above.
2.5 Exchange Procedure. If appointed pursuant to Section 2.4 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 Date, represented shares of 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 his 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 providing herein.
2.6 Failure to Surrender Certificates. Shareholders will be required to
surrender certificates representing shares of the Bank for certificates
representing shares of the Holding Company. All Bank Common Stock
certificates must be surrendered within two (2) years after notice that
surrender will be required. In the event that any former shareholder of
Bank shall not have properly surrendered his Common Stock certificates
within two (2) years after such notice, the shares of Holding Company
Common Stock that would otherwise have been issued to him may, at the
option of the Holding Company, be sold, and the net proceeds of such
sale, together with the cash (if any) to which he is entitled in lieu
of the issuance of a fractional share and any previously accrued
dividends, shall be held in a noninterest bearing account for his
benefit. From and after any such sale, the sole right of such former
shareholder of Bank shall be right to collect such net proceeds, cash
and accumulated dividends. Subject to all applicable laws of escheat,
such net proceeds, cash and accumulated dividends shall be paid to such
former shareholder of Bank, without interest, upon proper surrender of
his Common Stock certificates.
2.7 Dissenters' Rights. Shareholders of Bank shall be entitled to exercise
the rights provided in Subchapter D of Chapter 15 of the Pennsylvania
Business Corporation Law of 1988, as
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amended, (15 Pa.C.S.A. ss.1571 et. Seq.) ("Dissenters' Rights") with
respect to the Plan of Merger.
Section 3. Miscellaneous.
3.1 Conditions. The obligations of Bank and Interim Bank to effect the
Merger shall be subject to all of the terms and conditions contained in
the Plan of Reorganization.
3.2 Termination and Agreement. This Plan of Merger may be terminated or
amended prior to the Effective Date in the manner and upon the
conditions set forth in the Plan of Reorganization. If the Plan of
Reorganization is terminated pursuant to the terms thereof, this Plan
of Merger shall terminate simultaneously, and the Merger shall be
abandoned without further action of the parties hereto.
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<PAGE>
WITNESS the signatures and seals of said merging banks this ____ day of
March, 2000, 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.
ATTEST: SOMERSET TRUST COMPANY
By:
- - ----------------------------- --------------------------
Thomas J. Cook, Secretary G. Henry Cook, President
(SEAL)
ATTEST: SOMERSET INTERIM BANK
By:
- - ----------------------------- --------------------------
Thomas J. Cook, Secretary G. Henry Cook, President
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<PAGE>
ANNEX B
ARTICLES OF INCORPORATION
OF
SOMERSET TRUST HOLDING COMPANY
B-1
<PAGE>
ARTICLES OF INCORPORATION
OF
SOMERSET TRUST HOLDING COMPANY
In compliance with the requirements of 15 Pa.C.S. ss.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 Somerset Trust Holding Company.
2. The address, including street and number, if any, of this
Corporation's initial registered office in the Commonwealth of Pennsylvania is
151 West Main Street, Somerset, Pennsylvania 15501, and the county of venue is
Somerset.
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 Four Million (4,000,000) shares of Common Stock, without
par value. 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 are:
Number and
Name Address Class of Shares
---- ------- ---------------
G. Henry Cook 821 W. Race Street 1 share of
Somerset, PA 15501 common stock
Thomas J. Cook 334 W. Race Street 1 share of
Somerset, PA 15501 common stock
Andrew F. Cook 2212 W. Bakersville-Edie Rd. 1 share of
Somerset, PA 15501 common stock
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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 the holders of at least
two-thirds (662/3%) of the outstanding shares of Common Stock of the
Corporation.
8. Pursuant to Section 2501 of the Pennsylvania Business Corporation
Law of 1988, as amended, the provisions of Subchapters B, C and D of Chapter 25
(Registered Corporations) of the Pennsylvania Business Corporation Law of 1988,
as amended, shall not apply to the Corporation.
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<PAGE>
IN TESTIMONY WHEREOF, the Incorporators have signed these Articles of
Incorporation this _____ day of March, 2000.
- - -------------------------------- -------------------------------
G. Henry Cook, Incorporator Thomas J. Cook, Incorporator
- - --------------------------------
Andrew F. Cook, Incorporator
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<PAGE>
ANNEX C
BY-LAWS OF SOMERSET TRUST HOLDING COMPANY
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<PAGE>
BYLAWS
of
SOMERSET TRUST HOLDING COMPANY
Article 1
CORPORATION OFFICE
Section 1.1 The Corporation shall have and continuously maintain in
Pennsylvania a registered office. The registered office shall be 151 West Main
Street, Somerset, Pennsylvania 15501. 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 Chief Executive Officer, a majority of the Board of Directors or by
one or more shareholders entitled to cast at least twenty percent (20%) 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 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.
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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.
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.
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.
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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.
Section 4.4 In each election of directors, a shareholder is entitled to
vote his or her shares on a cumulative basis.
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
Section 6.1 The Board of Directors may fix a time, not more than forty
(40) 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.
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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.
Article 8
JUDGES OF ELECTION
Section 8.1 In advance of any meeting of shareholders, the Board of
Directors shall appoint three (3) judges of election, not candidates for office
and who need not be shareholders, to conduct the election or any vote at any
meeting or any adjournment thereof.
Section 8.2 In case any person appointed as a judge fails to appear or
fails or refuses to act, the vacancy shall 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
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<PAGE>
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.
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, which certificate the Secretary shall cause to be
recorded in the minutes of the meeting. 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 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 Every director shall be a shareholder of the Corporation.
Evidence of ownership shall be the list of shareholders prepared by the officer
having charge of the shareholder ledger.
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Section 9.3 No person who has reached the age of seventy (70) shall
qualify to be a director of the Corporation, but any director who is elected or
appointed to a term of office during which he or she attains the age of seventy
(70) shall be eligible to continue to serve until the expiration of that term of
office. Any director who attains the age of seventy (70) while serving as a
director shall, at the end of the term which he or she is then serving, be given
the status of Director Emeritus and shall have all rights and privileges of that
office.
Section 9.4 The number of directors that shall constitute the whole
Board of Directors shall be not less than five (5) nor more than twenty-five
(25). The Board of Directors shall be classified into three (3) classes, each
class to be elected for a term of three (3) years, with as nearly as possible,
each class consisting of one-third of the directors. The terms of the respective
classes shall expire in successive years as provided in Section 9.5 hereof.
Within the foregoing limits, the shareholders shall at each meeting of the
election of directors, determine how many directors shall be elected at the
meeting. The number of directors may be increased or diminished by the
shareholders at any regular meeting or any special meeting called for that
purpose, provided, however, that the Board of Directors may not be increased or
decreased in number by the shareholders during any calendar year by more than
two (2) members unless such increase or decrease in membership of the Board is
approved by a vote of two-thirds of the shares voted by the shareholders voting
in person or by proxy at any annual meeting or special meeting called for that
purpose.
Between annual meetings of the shareholders, the Board of Directors, by
a vote of a majority of the full Board, may increase the membership of the
Board, within the maximum above prescribed, by not more than two (2) members
and, by like vote, appoint shareholders to fill the vacancies created thereby.
Section 9.5 At the 2001 annual meeting of shareholders of the
Corporation, the shareholders shall elect eleven (11) directors as follows:
three (3) Class A directors to serve until the 2002 annual meeting of
shareholders, four (4) Class B directors to serve until the 2003 annual meeting
of shareholders, and four (4) Class C directors to serve until the 2004 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.
Section 9.6 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 9.7 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
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shall comply with Section 1782 of the Business Corporation Law of 1988, and any
amendments or supplements thereto.
Section 9.8 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 9.9 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.
Section 9.10 The Board of Directors may appoint each year such number
of Advisory Directors as the Board of Directors may from time to time determine.
Article 10
VACANCIES ON BOARD OF DIRECTORS
Section 10.1 Vacancies on the Board of Directors, resulting from the
death, retirement or resignation of a director during his or her term, 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 appointed
shall be a director until the next annual meeting. At the next annual meeting an
election shall be held to fill the remainder of the vacated term.
Section 10.2 In the event there shall be an increase in the number of
directors, then and in that event, the initial term of the new directors shall
be adjusted so as to provide as nearly as possible that one-third of all
directors shall be elected each year.
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:
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(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
persons.
(3) 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.
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:
(1) the director has breached or failed to perform the
duties of his office under this Article 11; and
(2) 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:
(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.
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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
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
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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.
Article 13
MEETINGS OF THE BOARD OF DIRECTORS
Section 13.1 A meeting for the purpose of organizing the new Board of
Directors and electing and appointing officers of the Corporation for the
succeeding year shall be held on the first regularly scheduled meeting of the
Board following the annual meeting of the shareholders.
Section 13.2 Regular meetings of the Board of Directors shall be held,
without notice, at such times as the Board may from time to time designate on
the third Thursday of each month. When such meeting falls upon a holiday, then
the meeting shall be held the next succeeding business day unless otherwise
designated by the Board. At least three (3) days advance written notice of such
change in meeting date shall be given to each director.
Section 13.3 Special meetings of the Board of Directors may be called
by the Chief Executive Officer 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 Chief Executive Officer in like manner and on like notice
upon the written request of any three (3) directors.
Section 13.4 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 13.5 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.
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.
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Article 15
COMPENSATION OF DIRECTORS
Section 15.1 Directors, Advisory Directors and Directors Emeriti, may
receive a stated salary for their services or a fixed sum and expenses for
attendance at regular and special meetings, and any committee 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, except that no salaried officer
may receive a fee for attendance at a committee meeting.
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/Chief
Executive Officer, Secretary and Treasurer. The Board of Directors shall also
elect one of its members as Chairman of the Board. The Board of Directors may
also 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 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, 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.
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Article 17
THE PRESIDENT
Section 17.1 The Board of Directors shall appoint one of its members to
be President. He shall also 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 Bylaws. 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 18
THE CHAIRMAN OF THE BOARD
Section 18.1 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 Bylaws; 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 19
THE VICE PRESIDENT
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,
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shall attend to the giving of all notices required by these Bylaws 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.
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
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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.
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:
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 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
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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.
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
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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.
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
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as a condition precedent to the issuance thereof, require the owner of such
lost, stolen or destroyed 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.
Article 28
FINANCIAL REPORT TO SHAREHOLDERS
Section 28.1 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
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.
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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 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.
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.
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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 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.
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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.
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 a majority of the outstanding shares
of stock entitled to vote thereon at any regular or special meeting duly
convened after notice to the shareholders of that purpose, or by a vote of
two-thirds 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
(except that the directors shall not make or alter any Bylaws fixing their
qualification, classification or term of office), 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 a majority of the outstanding shares of stock
entitled to vote thereon.
Section 34.2 The number of directors serving on the Board of Directors
shall not be increased or decreased by the shareholders in any calendar year by
more than two (2) at any annual meeting or special meeting called for that
purpose, nor may the length of term directors serve be changed at any annual
meeting or special meeting called for that purpose unless such change(s) is/are
approved by a vote of two-thirds of the shares voted by the shareholders voting
in person or by proxy at such annual meeting or special meeting, nor may this
section of the By-laws be altered or amended unless such alteration or amendment
shall be approved by two-thirds of the shareholders at any annual meeting or
special meeting called for that purpose.
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ANNEX D
STATUTES REGARDING
DISSENTERS' RIGHTS
D-1
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PENNSYLVANIA BANKING CODE OF 1965, AS AMENDED
Excerpt from Chapter 12
Section 1222. Rights of Dissenting Shareholders.
If a shareholder of an institution shall object to a proposed plan of
action of the institution authorized under a section of this act and such
section provides that the shareholder shall be entitled to rights and remedies
of a dissenting shareholder, the rights and remedies of such shareholder shall
be governed by the provisions of the Business Corporation Law applicable to
dissenting shareholders and shall be subject to the limitations on such rights
and remedies under those provisions. Shares acquired by an institution as a
result of the exercise of such rights by a dissenting shareholder may be held
and disposed of as treasury shares, or, in the case of a merger or
consolidation, as otherwise provided in the plan of merger or consolidation.
Excerpt from Chapter 16
Section 1607. Rights of Dissenting Shareholders.
(a) A shareholder of an institution which is a party to a plan in which
the proposed merger or consolidation will result in an institution subject to
this act who objects to the plan shall be entitled to the rights and remedies of
a dissenting shareholder provided under, and subject to compliance with, the
provisions of section 1222 of this act.
THE PENNSYLVANIA BUSINESS CORPORATION LAW OF 1988, AS AMENDED
Excerpt from Subchater 19C
Section 1930. Dissenters Rights
(a) General Rule. If any shareholder of a domestic business
corporation that is to be a party to a merger or consolidation
pursuant to a plan of merger or consolidation objects to the
plan of merger or consolidation and complies with the
provisions of Subchapter D of Chapter 15 (relating to
dissenters rights), the shareholder shall be entitled to the
rights and remedies of dissenting shareholders therein
provided, if any. See also section 1906(c) (relating to
dissenters rights upon special treatment).
Subchapter 15D - Dissenters Rights
Section 1571. Application and effect of subchapter.
(a) General rule. Except as otherwise provided in subsection (b), any
shareholder of a business corporation shall have the right to dissent from, and
to obtain payment of the fair value of his shares in the event of, any corporate
action, or to otherwise obtain fair value for his shares, where this part
expressly provides that a shareholder shall have the rights and remedies
provided in this subchapter. See:
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Section 1906(c) (relating to dissenters rights upon special treatment).
Section 1930 (relating to dissenters rights).
Section 1931(d) (relating to dissenters rights in share exchanges).
Section 1932(c) (relating to dissenters rights in asset transfers).
Section 1952(d) (relating to dissenters rights in division).
Section 1962(c) (relating to dissenters rights in conversion).
Section 2104(b) (relating to procedure).
Section 2324 (relating to corporation option where a restriction on
transfer of a security is held invalid).
Section 2325(b) (relating to minimum vote requirement).
Section 2704(c) (relating to dissenters rights upon election).
Section 2705(d) (relating to dissenters rights upon renewal of
election).
Section 2907(a) (relating to proceedings to terminate breach of
qualifying conditions).
Section 7104(b)(3) (relating to procedure).
(b) Exceptions.
(1) Except as otherwise provided in paragraph (2), the holders
of the shares of any class or series of shares that, at the
record date fixed to determine the shareholders entitled to
notice of and to vote at the meeting at which a plan specified
in any of section 1930, 1931(d), 1932(c) or 1952(d) is to be
voted on, are either:
(i) listed on a national securities exchange; or
(ii) held of record by more than 2,000
shareholders; shall not have the right to
obtain payment of the fair value of any such
shares under this subchapter.
(2) Paragraph (1) shall not apply to and dissenters rights
shall be available without regard to the exception provided in
that paragraph in the case of:
(i) shares converted by a plan if the shares are
not converted solely into shares of the
acquiring, surviving, new or other
corporation or solely into such shares and
money in lieu of fractional shares;
(ii) shares of any preferred or special class
unless the articles, the plan or the terms
of the transaction entitle all shareholders
of the class to vote thereon and require for
the adoption of the plan or the effectuation
of the transaction the affirmative vote of a
majority of the votes cast by all
shareholders of the class;
(iii) shares entitled to dissenters rights under
section 1906(c) (relating to dissenters
rights upon special treatment).
(3) The shareholders of a corporation that acquires by
purchase, lease, exchange or other disposition all or
substantially all of the shares, property or assets of another
corporation by the issuance of shares, obligations or
otherwise,
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with or without assuming the liabilities of the other
corporation and with or without the intervention of another
corporation or other person, shall not be entitled to the
rights and remedies of dissenting shareholders provided in
this subchapter regardless of the fact, if it be the case,
that the acquisition was accomplished by the issuance of
voting shares of the corporation to be outstanding immediately
after the acquisition sufficient to elect a majority or more
of the directors of the corporation.
(c) Grant of optional dissenters rights. The bylaws or a resolution of
the board of directors may direct that all or a part of the shareholders shall
have dissenters rights in connection with any corporate action or other
transaction that would otherwise not entitle such shareholders to dissenters
rights.
(d) Notice of dissenters rights. Unless otherwise provided by statute,
if a proposed corporate action that would give rise to dissenters rights under
this subpart is submitted to a vote at a meeting of shareholders, there shall be
included in or enclosed with the notice of meeting:
(1) a statement of the proposed action and a statement that
the shareholders have a right to dissent and obtain payment of
the fair value of their shares by complying with the terms of
this subchapter; and
(2) a copy of this subchapter.
(e) Other statutes. The procedures of this subchapter shall also be
applicable to any transaction described in any statute other than this part that
makes reference to this subchapter for the purpose of granting dissenters
rights.
(f) Certain provisions of articles ineffective. This subchapter may not
be relaxed by any provision of the articles.
(g) Cross references. See sections 1105 (relating to restriction on
equitable relief), 1904 (relating to de facto transaction doctrine abolished)
and 2512 (relating to dissenters rights procedure).
Section 1572. Definitions.
The following words and phrases when used in this subchapter shall have
the meanings given to them in this section unless the context clearly indicates
otherwise:
"Corporation." The issuer of the shares held or owned by the
dissenter before the corporate action or the successor by merger,
consolidation, division, conversion or otherwise of that issuer. A plan
of division may designate which of the resulting corporations is the
successor corporation for the purposes of this subchapter. The
successor corporation in a division shall have sole responsibility for
payments to dissenters and other liabilities under this subchapter
except as otherwise provided in the plan of division.
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"Dissenter." A shareholder or beneficial owner who is entitled
to and does assert dissenters rights under this subchapter and who has
performed every act required up to the time involved for the assertion
of those rights.
"Fair value." The fair value of shares immediately before the
effectuation of the corporate action to which the dissenter objects
taking into account all relevant factors, but excluding any
appreciation or depreciation in anticipation of the corporate action.
"Interest." Interest from the effective date of the corporate
action until the date of payment at such rate as is fair and equitable
under all of the circumstances, taking into account all relevant
factors including the average rate currently paid by the corporation on
its principal bank loans.
Section 1573. Record and beneficial holders and owners.
(a) Record holders of shares. A record holder of shares of a business
corporation may assert dissenters rights as to fewer than all of the shares
registered in his name only if he dissents with respect to all the shares
beneficially owned by any one person and discloses the name and address of the
person or persons on whose behalf he dissents. In that event, his rights shall
be determined as if the shares as to which he has dissented and his other shares
were registered in the names of different shareholders.
(b) Beneficial owners of shares. A beneficial owner of shares of a
business corporation who is not the record holder may assert dissenters rights
with respect to shares held on his behalf and shall be treated as a dissenting
shareholder under the terms of this subchapter if he submits to the corporation
not later than the time of the assertion of dissenters rights a written consent
of the record holder. A beneficial owner may not dissent with respect to some
but less than all shares of the same class or series owned by the owner, whether
or not the shares so owned by him are registered in his name.
Section 1574. Notice of intention to dissent.
If the proposed corporate action is submitted to a vote at a meeting of
shareholders of a business corporation, any person who wishes to dissent and
obtain payment of the fair value of his shares must file with the corporation,
prior to the vote, a written notice of intention to demand that he be paid the
fair value of his shares if the proposed action is effectuated, must effect no
change in the beneficial ownership of his shares from the date of such filing
continuously through the effective date of the proposed action and must refrain
from voting his shares in approval of such action. A dissenter who fails in any
respect shall not acquire any right to payment of the fair value of his shares
under this subchapter. Neither a proxy nor a vote against the proposed corporate
action shall constitute the written notice required by this section.
Section 1575. Notice to demand payment.
(a) General rule. If the proposed corporate action is approved by the
required vote at a meeting of shareholders of a business corporation, the
corporation shall mail a further notice to all dissenters who gave due notice of
intention to demand payment of the fair value of their shares and who refrained
from voting in favor of the proposed action. If the proposed corporate
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action is to be taken without a vote of shareholders, the corporation shall send
to all shareholders who are entitled to dissent and demand payment of the fair
value of their shares a notice of the adoption of the plan or other corporate
action. In either case, the notice shall:
(1) State where and when a demand for payment must be sent and
certificates for certificated shares must be deposited in
order to obtain payment.
(2) Inform holders of uncertificated shares to what extent
transfer of shares will be restricted from the time that
demand for payment is received.
(3) Supply a form for demanding payment that includes a
request for certification of the date on which the
shareholder, or the person on whose beneficial shareholder
dissents, acquired beneficial ownership of the shares.
(4) Be accompanied by a copy of this subchapter.
(b) Time for receipt of demand for payment. The time set for receipt of
the demand and deposit of certificated shares shall be not less than 30 days
from the mailing of the notice.
Section 1576. Failure to comply with notice to demand payment, etc.
(a) Effect of failure of shareholder to act. A shareholder who fails to
timely demand payment, or fails (in the case of certificated shares) to timely
deposit certificates, as required by a notice pursuant to section 1575 (relating
to notice to demand payment) shall not have any right under this subchapter to
receive payment of the fair value of his shares.
(b) Restriction on uncertificated shares. If the shares are not
represented by certificates, the business corporation may restrict their
transfer from the time of receipt of demand for payment until effectuation of
the proposed corporate action or the release of restrictions under the terms of
section 1577(a) (relating to failure to effectuate corporate action).
(c) Rights retained by shareholder. The dissenter shall retain all
other rights of a shareholder until those rights are modified by effectuation of
the proposed corporate action.
Section 1577. Release of restrictions or payment for shares.
(a) Failure to effectuate corporate action. Within 60 days after the
date set for demanding payment and depositing certificates, if the business
corporation has not effectuated the proposed corporate action, it shall return
any certificates that have been deposited and release uncertificated shares from
any transfer restrictions imposed by reason of the demand for payment.
(b) Renewal of notice to demand payment. When uncertified shares have
been released from transfer restrictions and deposited certificates have been
returned, the corporation may at any later time send a new notice conforming to
the requirements of section 1575 (relating to notice to demand payment), with
like effect.
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(c) Payment of fair value of shares. Promptly after effectuation of the
proposed corporate action, or upon timely receipt of demand for payment if the
corporate action has already been effectuated, the corporation shall either
remit to dissenters who have made demand and (if their shares are certificated)
have deposited their certificates the amount that the corporation estimates to
be the fair value of the shares, or give written notice that no remittance under
this section will be made. The remittance or notice shall be accompanied by:
(1) The closing balance sheet and statement of income of the
issuer of the shares held or owned by the dissenter or a
fiscal year ending not more than 16 months before the date of
remittance or notice together with the latest available
interim financial statements.
(2) A statement of the corporation's estimate of the fair
value of the shares.
(3) A notice of the right of the dissenter to demand payment
or supplemental payment, as the case may be, accompanied by a
copy of this subchapter.
(d) Failure to make payment. If the corporation does not remit the
amount of its estimate of the fair value of the shares as provided by subsection
(c), it shall return any certificates that have been deposited and release
uncertificated shares from any transfer restrictions imposed by reason of the
demand for payment. The corporation may make a notation on any such certificate
or on the records of the corporation relating to any such uncertificated shares
that such demand has been made. If shares with respect to which notation has
been so made shall be transferred, each new certificate issued therefor or the
records relating to any transferred uncertificated shares shall bear a similar
notation, together with the name of the original dissenting holder or owner of
such shares. A transferee of such shares shall not acquire by such transfer any
rights in the corporation other than those which the original dissenter had
after making demand for payment of their fair value.
Section 1578. Estimate by dissenter of fair value of shares.
(a) General rule. If the business corporation gives notice of its
estimate of the fair value of the shares, without remitting such amount, or
remits payment of its estimate of the fair value of a dissenter's shares as
permitted by section 1577(c) (relating to payment of fair value of shares) and
the dissenter believes that the amount stated or remitted is less than the fair
value of his shares, he may send to the corporation his own estimate of the fair
value of the shares, which shall be deemed a demand for payment of the amount or
the deficiency.
(b) Effect of failure to file estimate. Where the dissenter does not
file his own estimate under subsection (a) within 30 days after the mailing by
the corporation of its remittance or notice, the dissenter shall be entitled to
no more than the amount stated in the notice or remitted to him by the
corporation.
Section 1579. Valuation proceedings generally.
(a) General rule. Within 60 days after the latest of:
(1) effectuation of the proposed corporate action;
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(2) timely receipt of any demands for payment under Section
1575 (relating to notice to demand payment); or
(3) timely receipt of any estimates pursuant to Section 1578
(relating to estimate by dissenter of fair value of shares).
If any demands for payment remain unsettled, the business corporation
may file in court an application for relief requesting that the fair value of
the shares be determined by the court.
(b) Mandatory joinder of dissenters. All dissenters, wherever residing,
whose demands have not been settled shall be made parties to the proceeding as
in an action against their shares. A copy of the application shall be served on
each such dissenter. If a dissenter is a nonresident, the copy may be served on
him in the manner provided or prescribed by or pursuant to 42 Pacs Ch. 53
(relating to bases of jurisdiction and interstate and international procedure).
(c) Jurisdiction of the court. The jurisdiction of the court shall be
plenary and exclusive. The court may appoint an appraiser to receive evidence
and recommend a decision on the issue of fair value. The appraiser shall have
such power and authority as may be specified in the order of appointment or in
any amendment thereof.
(d) Measure of recovery. Each dissenter who is made a party shall be
entitled to recover the amount by which the fair value of his shares is found to
exceed the amount, if any, previously remitted, plus interest.
(e) Effect of corporation's failure to file application. If the
corporation fails to file an application as provided in subsection (a), any
dissenter who made a demand and who has not already settled his claim against
the corporation may do so in the name of the corporation at any time within 30
days after the expiration of the 60-day period. If a dissenter does not file an
application within the 30-day period, each dissenter entitled to file an
application shall be paid the corporation's estimate of the fair value of the
shares and no more, and may bring an action to recover any amount not previously
remitted.
Section 1580. Costs and expenses of valuation proceedings.
(a) General rule. The costs and expenses of any proceeding under
section 1579 (relating to valuation proceedings generally) including the
reasonable compensation and expenses of the appraiser appointed by the court,
shall be determined by the court and assessed against the business corporation
except that any part of the costs and expenses may be apportioned and assessed
as the court deems appropriate against all or some of the dissenters who are
parties and whose action in demanding supplemental payment under section 1578
(relating to estimate by dissenter of fair value of shares) the court finds to
be dilatory, obdurate, arbitrary, vexatious or in bad faith.
(b) Assessment of counsel fees and expert fees where lack of good faith
appears. Fees and expenses of counsel and of experts for the respective parties
may be assessed as the court deems appropriate against the corporation and in
favor of any or all dissenters if the corporation failed to comply substantially
with the requirements of this subchapter and may be
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assessed against either the corporation or a dissenter, in favor of any other
party, if the court finds that the party against whom the fees and expenses are
assessed acted in bad faith or in a dilatory, obdurate, arbitrary or vexatious
manner in respect to the rights provided by this subchapter.
(c) Award of fees for benefits to other dissenters. If the court finds
that the services of counsel for any dissenter were of substantial benefit to
other dissenters similarly situated and should not be assessed against the
corporation, it may award to those counsel reasonable fees to be paid out of the
amounts awarded to the dissenters who were benefitted.
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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.A. 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 full text of Subchapter D of Chapter 17 of the Pennsylvania
Business Corporation Law of 1988 is attached as Exhibit 99.4.
Section 1741 (relating to third party actions) provides that 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, 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 (relating to derivative actions) provides that 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, 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 (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
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indemnified against expenses (including attorneys' fees) actually and reasonably
incurred by such person in connection therewith.
Section 1744 (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 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 (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.
Section 1746 (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 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 (relating to the power to purchase insurance) provides
that 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
against any liability asserted against him and incurred
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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 Business Corporation Law. Such insurance is declared
to be consistent with the public policy of the Commonwealth of Pennsylvania.
Article 23 of the By-laws of the Registrant provides for the
indemnification of its directors, officers, employees and agents in accordance
with, and to the maximum extent permitted by, the provision of Subchapter D of
Chapter 17 of the Pennsylvania Business Corporation Law of 1988, as amended. In
addition, Registrant intends to purchase and maintain insurance against
liability for acts by these persons, as permitted by law.
Item 21. Exhibits and Financial Statement Schedules.
(a) Exhibits:
2.1 Plan of Reorganization dated as of March __, 2000,
among Registrant, Somerset Trust Company and Somerset
Interim Bank (included as Annex A to the Proxy
Statement/Prospectus contained herein).
2.2 Plan of Merger dated as of March ___, 2000, between
Somerset Trust Company and Somerset Interim Bank
(included as Exhibit A to the Plan of Reorganization,
which is included in Annex A to the Proxy
Statement/Prospectus contained herein).
3(i) Amended and Restated Articles of Incorporation of
Registrant (included as Annex B to the Proxy
Statement/Prospectus contained herein).
3(ii) By-laws of Registrant (included as Annex C to the
Proxy Statement/Prospectus contained herein).
5 Opinion of Shumaker Williams, P.C. of Camp Hill,
Pennsylvania, Special Counsel to Registrant, dated
March ___, 2000, 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
March ___, 2000, as to the tax consequences.
23 Consent of Shumaker Williams, P.C. of Camp Hill,
Pennsylvania, Special Counsel to Registrant (included
in Opinion Letter as Exhibit 5).
24 Power of Attorney given by the Officers and Directors
of the Registrant (included on Signature Page of the
Registration Statement).
99.1 Letter to Shareholders of Somerset Trust Company.
99.2 Notice of Annual Meeting of Shareholders of Somerset
Trust Company.
99.3 Form of Proxy for Use by the Shareholders of Somerset
Trust Company.
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99.4 Subchapter D of Chapter 17 of the Pennsylvania
Business Corporation Law of 1988, as amended, (15 PA.
C.S.A. Sections 1741-1750) relating to
indemnification.
99.5 Statutes Relating to Dissenters' Rights (included as
Annex D to the Proxy Statement/Prospectus contained
herein).
(b) Financial Statement Schedules:
None required.
(c) Opinions:
The opinions of Shumaker Williams, P.C., Special Counsel to
Registrant, are included as Exhibits 5 and 8.
Item 22. Undertakings.
(a) Undertakings furnished pursuant to Item 512 of Regulation S-K:
(1) The undersigned Registrant hereby undertakes:
(A) 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 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;
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(B) 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.
(C) 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 undersigned Registrant hereby undertakes that, for purposes
of determining any liability under the Securities Act of 1933,
each filing of the Registrant's annual report pursuant to
Section 13(a) or Section 15(d) of the Securities Exchange Act of
1934 (and, where applicable, each filing of an employee benefit
plan's annual report pursuant to Section 15(d) of the Securities
Exchange Act of 1934) that is incorporated by reference in this
registration statement 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.
(c) Not applicable.
(d) Not applicable.
(e) Not applicable.
(f) Not applicable.
(g) (1) The undersigned Registrant hereby undertakes as follows:
That prior to any public reoffering of the securities registered
hereunder through use of a prospectus which is a part of this
registration statement, by any person or party who is deemed to
be an underwriter within the meaning of Rule 145(c), the issuer
undertakes that such reoffering prospectus will contain the
information called for by the applicable registration form with
respect to reofferings by persons who may be deemed
underwriters, in addition to the information called for by the
other Items of the applicable form.
(2) The Registrant undertakes that every prospectus (i) that is
filed pursuant to paragraph (1) immediately preceding, or (ii)
that purports to meet the requirements of section 10(a)(3) of
the Act and is used in connection with an offering of securities
subject to Rule 415 (ss.230.415 of this chapter), will be filed
as part of an amendment to the registration statement and will
not be used until such amendment is effective, and that, for the
purposes 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.
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(b) Undertakings furnished pursuant to Item 22(b) and (c):
(1) 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.
(2) 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.
II-6
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the
Registrant has duly caused this Registration Statement on Form S-4 to be signed
on its behalf by the undersigned, thereunto duly authorized, in Somerset,
Somerset County, Commonwealth of Pennsylvania, on the 9th day of March, 2000.
SOMERSET TRUST HOLDING COMPANY
(Registrant)
By: /s/ G. Henry Cook
-------------------------------
G. Henry Cook,
President and Chief Executive Officer,
Chairman of the Board
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears
below constitutes and appoints G. Henry Cook and Thomas J. Cook, and each of
them, his true and lawful attorneys-in-fact and agents, with full power of
substitution and resubstitution, for him and in his name, place and stead, in
any and all capacities, to sign any and all amendments (including post-effective
amendments) to this Registration Statement, and to file the same, with all
exhibits thereto, and other documents in connection therewith, with the SEC,
granting unto said attorneys-in-fact and agents, and each of them, full power
and authority to do and perform each and every act and thing requisite and
necessary to be done, as fully to all intents and purposes as he might or could
do in person, hereby ratifying and confirming all that said attorneys-in-fact
and agents or either of them, or their or his substitutes, may lawfully do or
cause to be done by virtue thereof.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
Signature and Capacity Date
---------------------- ----
/s/ G. Henry Cook March 9, 2000
- - ----------------------------------------------
G. Henry Cook, President and
Chief Executive Officer, Chairman of the Board
(Principal Executive Officer)
/s/ Richard W. Stern March 9, 2000
- - ----------------------------------------------
Richard W. Stern, Treasurer
(Principal Financial and Accounting Officer)
II-7
<PAGE>
/s/ Jon C. Clapper March 9, 2000
- - ----------------------------------------------
Jon C. Clapper, Director
/s/ Andrew F. Cook March 9, 2000
- - ----------------------------------------------
Andrew F. Cook, Vice President
/s/ Thomas J. Cook March 9, 2000
- - ----------------------------------------------
Thomas J. Cook, Secretary, Director
/s/ John M. Kriak March 9, 2000
- - ----------------------------------------------
John M. Kriak, Director
/s/ Alan L. Miller March 9, 2000
- - ----------------------------------------------
Alan L. Miller, Director
/s/ Marlin C. Sherbine March 9, 2000
- - ----------------------------------------------
Marlin C. Sherbine, Director
/s/ Richard C. Yeager March 9, 2000
- - ----------------------------------------------
Richard C. Yeager, Director
/s/ Edward R. Ziegler March 9, 2000
- - ----------------------------------------------
Edward R. Ziegler, Director
II-8
<PAGE>
INDEX TO EXHIBITS
Exhibit
Number
2.1 Plan of Reorganization dated as of March ____, 2000, among
Registrant, Somerset Trust Company and Somerset Interim Bank
(included as Annex A to the Proxy Statement/Prospectus contained
herein).
2.2 Plan of Merger dated as of March__, 2000, between Somerset Trust
Company and Somerset Interim Bank (included as Exhibit A to the
Plan of Reorganization, which is included in Annex A to the
Proxy Statement/Prospectus contained herein).
3(i) Amended and Restated Articles of Incorporation of Registrant
(included as Annex B to the Proxy Statement/Prospectus contained
herein).
3(ii) By-laws of Registrant (included as Annex C to the Proxy
Statement/Prospectus contained herein).
5 Opinion of Shumaker Williams, P.C. of Camp Hill, Pennsylvania,
Special Counsel to Registrant, dated March__, 2000, 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 March__, 2000, as to the
tax treatment of the proposed transactions.
23 Consent of Shumaker Williams, P.C. of Camp Hill, Pennsylvania,
Special Counsel to Registrant (included in Opinion Letter as
Exhibit 5).
24 Power of Attorney given by the Officers and Directors of the
Registrant (included on Signature Page of the Registration
Statement).
99.1 Letter to Shareholders of Somerset Trust Company.
99.2 Notice of Annual Meeting of Shareholders of Somerset Trust
Company.
99.3 Form of Proxy for Use by the Shareholders of Somerset Trust
Company.
99.4 Subchapter D of Chapter 17 of the Pennsylvania Business
Corporation Law of 1988, as amended, (15 PA C.S.A. Sections
1741-1750) relating to indemnification.
i
<PAGE>
99.5 Statutes Relating to Dissenters' Rights (included as Annex D to
the Proxy Statement/Prospectus contained herein).
ii
Exhibit 5
EXHIBIT 5
OPINION OF SHUMAKER WILLIAMS, P.C. OF
CAMP HILL, PENNSYLVANIA, SPECIAL COUNSEL TO
REGISTRANT, DATED MARCH___, 2000, AS TO
THE LEGALITY OF THE SHARES OF REGISTRANT'S
STOCK BEING REGISTERED
<PAGE>
SHUMAKER WILLIAMS, P.C.
P. O. Box 88
Harrisburg, Pennsylvania 17108
March ___, 2000
Mr. G. Henry Cook
President and Chief Executive Officer
SOMERSET TRUST COMPANY
151 West Main Street
Somerset, Pennsylvania 15501
RE: Somerset Trust Company
Formation of a One-Bank Holding Company
Dear Mr. Cook:
We have been engaged as Special Counsel to Somerset Trust Company (the
"Bank") and Somerset Trust Holding Company, 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 Pennsylvania Department of Banking, the Federal Reserve Board, the Federal
Deposit Insurance Corporation, 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 2,450,000 shares of its common stock, without par
value (the "Common Stock"). The Common Stock will be issued pursuant to the Plan
of Reorganization dated March ___, 2000 (the "Plan of Reorganization") among the
Company, the Bank, and Somerset Interim Bank (the "Interim Bank"). Under the
Plan of Reorganization, the Interim Bank will merge with and into the Bank, and
each whole share of the Bank's outstanding common stock, par value $1.00 per
share, (other than shares as to which dissenters' rights have been perfected)
will be exchanged for four shares of the Common Stock, without par value, 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
1
<PAGE>
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 Capital Securities - Legal Opinion."
Sincerely yours,
SHUMAKER WILLIAMS, P.C.
By
---------------------
Paul A. Adams
2
Exhibit 8
EXHIBIT 8
OPINION OF SHUMAKER WILLIAMS, P.C.
OF CAMP HILL, PENNSYLVANIA,
SPECIAL COUNSEL TO REGISTRANT, DATED MARCH ___, 2000,
AS TO THE TAX TREATMENT OF PROPOSED TRANSACTIONS
<PAGE>
March ____, 2000
The Board of Directors The Board of Directors
SOMERSET TRUST HOLDING COMPANY SOMERSET TRUST COMPANY
151 West Main Street 151 West Main Street
Somerset, Pennsylvania 15501 Somerset, Pennsylvania 15501
Re: Merger of The Fidelity Deposit and Discount Interim Bank,
a Subsidiary of Somerset Trust Holding Company with and into
Somerset Trust Company
Dear Members of the Boards:
You have asked for our opinion regarding material federal income tax
consequences of the merger of Somerset Interim Bank (the "Interim Bank") with
and into Somerset Trust Company (the "Bank") pursuant to which the shareholders
of the Bank on the effective date of the merger will receive voting common stock
of the Interim Bank's parent, Somerset Trust Holding Company (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 March ___, 2000, among the
Holding Company, the Bank and the Interim Bank, the Plan of Merger, dated March
___, 2000, by and between the Bank and the Interim Bank, the Registration
Statement of Somerset Trust Holding Company on Form S-4, filed with the SEC on
March 10, 2000, 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 Somerset Trust Holding Company and Somerset Trust Company
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."
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
1
<PAGE>
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 Pennsylvania-chartered bank and trust company. The
Bank operates as a full-service commercial bank. Its principal
place of business is located at 151 West Main Street, Somerset,
Pennsylvania 15501. The Bank is authorized to issue 612,500
shares of common stock, par value One Dollar ($1.00) per share,
of which December 31, 1999, 612,500 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 410 shareholders. The Bank
Common Stock is publicly traded in the local over-the-counter
market, and price quotes are not 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 February 18,
2000, as to which management of the Bank is aware of the sales
price, occurred on February 16, 2000, at a price of Fifty- Five
Dollars ($55.00) per share.
B. The Interim Bank is a Pennsylvania-chartered banking
institution. The Interim Bank is being organized solely to
engage in the merger transaction. The Interim Bank is authorized
to issue 100,000 shares of common stock, par value One Dollar
($1.00) per share (the "Interim Bank Common Stock"). The Interim
Bank Common Stock is the only class of security, authorized or
outstanding, of the Interim Bank. In accordance with the
Pennsylvania Banking Code of 1965, as amended, three organizers
of the Interim Bank each have subscribed to purchase One
Thousand (1,000) shares of Interim Bank Common Stock for One
Dollar and Fifty-Five Cents ($1.55) per share. The organizers
have executed a Stock Repurchase Agreement which requires that,
at consummation of the merger transaction, the Holding Company
will purchase the Three Thousand (3,000) shares held or to be
purchased by these three organizers for One Dollar and
Fifty-Five Cents ($1.55) per share. In addition, the Holding
Company will purchase Ninety-Seven Thousand (97,000) shares of
Interim Bank Common Stock for One Dollar and Fifty-Five Cents
($1.55) per share.
2
<PAGE>
C. The Holding Company is a business corporation organized on March
___, 2000, 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 4,000,000 shares of
common stock, without par value (the "Holding Company Common
Stock"). If the reorganization had occurred as of December 31,
1999, the Holding Company would have issued approximately
2,450,000 shares of Holding Company Common Stock to be exchanged
for approximately 612,500 outstanding shares of Bank Common
Stock on a four-for-one basis in connection with the merger
transaction pursuant to Section 2.2 of the Plan of Merger. The
three incorporators of the holding company have each purchased
one share of Holding Company Common Stock for One Dollar ($1.00)
per share. The three incorporators have executed a Stock
Repurchase Agreement which requires that, at consummation of the
merger transaction, the Holding Company will purchase the three
(3) shares held by these incorporators for One Dollar ($1.00)
per share. After the consummation of the merger transaction, the
holding company will have approximately 410 shareholders of
record, less any dissenting shareholders who exercise their
rights of appraisal and payment in cash for their stock pursuant
to the Pennsylvania Banking Code of 1965, as amended, and the
Pennsylvania Business Corporation Law of 1988, as amended.
D. In order to comply with minimum capitalization requirements
under state banking laws, the Interim Bank will be initially
capitalized as follows: One Hundred Thousand Dollars
($100,000.00) in capital stock and Fifty-Five Thousand Dollars
($55,000.00) in surplus, which amount shall include an expense
fund of Five Thousand Dollars ($5,000.00). In order to provide
the Interim Bank with this required minimum capitalization at
the time of the consummation of the merger transaction, the
holding company temporarily will borrow One Hundred Fifty-Five
Thousand Dollars ($155,000.00) from a non-affiliated
Pennsylvania bank. The Holding Company will then purchase 97,000
shares of Interim Bank Common Stock for One Dollar and
Fifty-Five Cents ($1.55) per share. Under the Stock Repurchase
Agreement, the organizers of the Interim Bank may transfer their
subscription rights for Three Thousand (3,000) shares of Interim
Bank Common Stock to the Holding Company prior to the effective
date of the merger transaction so that the Holding Company can
purchase such shares for Four Thousand Six Hundred and Fifty
Dollars ($4,650), or One Dollar and Fifty-Five Cents ($1.55) per
share.
E. In accordance with the Banking Code of 1965, the Interim Bank
will merge with and into the Bank. Upon the effective date of
the merger: (a) the separate corporate existence of the Interim
Bank will terminate; (b) the Bank will survive and acquire all
of the assets and assume all of the liabilities of the Interim
Bank; (c) the surviving bank will continue to operate under the
name "Somerset Trust Company"; and (c) the surviving bank will
continue to carry on the Bank's banking business at the same
principal offices. The approval of shareholders owning at least
two-thirds of the
3
<PAGE>
outstanding stock of both the Bank and the Interim Bank are
required by law to approve the merger.
F. The shareholders of the Bank will be entitled to receive four
(4) shares of Holding Company Common Stock in exchange for each
whole share of the Bank Common Stock held by the shareholder on
the effective date of the merger. Pursuant to Section 2.2 of the
Plan of Merger, each outstanding whole share of the Bank will be
deemed to be exchanged for four (4) 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 four-for-one exchange 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 Pennsylvania Business Corporation Law of 1988.
H. After the consummation of the merger transaction, the 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 with the Interim 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 and federal 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.
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 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
Interim Bank immediately prior to the merger transaction. For
the
4
<PAGE>
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 the Interim Bank by the 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 the Bank of the liabilities of Interim 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 the Interim Bank to the Bank pursuant
to the merger transaction.
G. The liabilities of the Interim Bank assumed by the Bank and the
liabilities to which the transferred assets of the Interim 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 Interim
Bank will be assumed by the 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 Bank will continue the
historic business of the Bank or use a significant portion of
the Bank's business assets in a business.
I. The Holding Company, the Interim Bank, the 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 Interim Bank or between the Bank and the
Interim 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. On the date of the Merger, the fair market value of the assets
of the Interim Bank will exceed the sum of its liabilities
(including any liabilities to which its assets are subject).
5
<PAGE>
M. No stock of the 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. Except for shares held in the Bank's Employee Stock Ownership
Plans, no fractional shares will be issued or redeemed in the
merger transaction. Holders of fractional interests in Bank
Common Stock will receive cash in lieu thereof.
Q. The payment of cash in lieu of fractional shares of stock of
Bank was not separately bargained for consideration and is being
made for the purpose of saving Holding Company the expense and
inconvenience of issuing fractional shares.
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.
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, nor
is there any present plan or intention to issue any of the
authorized preferred stock of the Holding Company.
T. Prior to the effective date of the merger transaction, neither
the Holding Company nor the Interim Bank will hold either
directly or indirectly any stock or securities in the Bank.
U. The Interim Bank has no liabilities.
V. Holding Company, Interim Bank and Bank will pay their respective
expenses, if any, incurred in connection with the Merger. None
of Holding Company, Interim Bank, and Bank will pay any of the
expenses of the shareholders of Bank incurred in connection with
the Merger.
W. Interim Bank has not done business prior to the Merger.
6
<PAGE>
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 Bank or the Interim Bank on the transfer of
substantially all of the Interim Bank's assets to the Bank in
exchange for the Holding Company Common Stock and the assumption
by the Bank of all of the liabilities of the Interim Bank plus
the liabilities to which the acquired assets of the Interim 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).
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, the Bank, as the surviving bank
to the merger, will carry-over and take into account all
accounting
7
<PAGE>
items and tax attributes, and tax basis and holding periods of
the assets of the Interim 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 opinion 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 Interim Bank, the 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,
------------------------------
SHUMAKER WILLIAMS, P.C.
8
Exhibit 99.1
EXHIBIT 99.1
LETTER TO SHAREHOLDERS OF
SOMERSET TRUST COMPANY
<PAGE>
Somerset Trust Company
151 West Main Street
Somerset, Pennsylvania 15501
March 30, 2000
To Our Shareholders:
The Board of Directors of Somerset Trust Company cordially invites you
to attend our Annual Meeting of Shareholders at 1:00 p.m., Eastern Time, on
Thursday, April 20, 2000, at the Board Room at the bank's main office at 151
West Main Street, Somerset, Pennsylvania 15501.
The principal business of this year's meeting will be to vote on a
proposal to reorganize the bank into a bank holding company structure, to fix
the number of bank directors to be elected at the meeting at five, to elect five
new director to the bank's Board of Directors, and to ratify the Board's
selection of Stokes, Kelly & Hinds, L.L.C., as the bank's independent auditors
for the 2000 fiscal year.
The Board of Directors recommends that you vote in favor of the
proposal to approve and adopt a plan of reorganization and related plan of
merger that will reorganize the bank as the wholly owned subsidiary of Somerset
Trust Holding Company, a Pennsylvania corporation formed to become the bank's
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, we will exchange each share
of common stock of the bank presently held by you for four shares of common
stock of Somerset Trust Holding Company. If you approve and adopt the plan of
reorganization, the bank's 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 through the holding company.
The exchange of bank common stock into holding company common stock will be tax
free for federal income tax purposes.
To facilitate the reorganization, we established an interim bank as a
subsidiary of the holding company. The interim bank will merge into the bank as
provided for by the plan of merger. The proposal does not involve a merger
between the bank and another bank or company already in operation. After the
proposed reorganization, the bank will continue its banking business
substantially unchanged and under substantially the same management.
1
<PAGE>
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 these agreements and the reorganization they
provide. The approval and adoption of the plan of reorganization and plan of
merger require an affirmative vote of the holders of at least two-thirds of the
outstanding shares of the bank's common stock.
The Board of Directors also recommends that you vote in favor of the
other proposals and for the five nominees for director of the bank.
You are, of course, welcome to attend the Annual Meeting, but we
understand that this may not be possible. It is important that your shares be
represented and voted at the meeting whether or not you plan to attend. If
enough shareholders do not return their proxies, the company may have to incur
the expense of additional solicitation. To ensure your proper representation at
the meeting, please take a moment to sign, date and promptly mail the enclosed
proxy in the pre-addressed and stamped envelope. Even if you return a proxy, you
may vote in person if you give written notice to the Secretary of the bank and
attend the Annual Meeting.
We urge you to carefully review the enclosed proxy statement/prospectus
that describes the reorganization proposal in detail and which also includes
information relating to the election of bank directors and other proposals. The
reorganization involves elements of risk that are described under "Risk Factors"
beginning on page 7.
Again, the Board of Directors strongly recommends that you vote FOR all
of the proposals. On behalf of the Board of Directors, thank you for your
cooperation and continued support.
Very truly yours,
----------------------------------
G. Henry Cook, President and
Chief Executive Officer
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Exhibit 99.2
EXHIBIT 99.2
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS OF
SOMERSET TRUST COMPANY
<PAGE>
-----------------------------------------
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD ON APRIL 20, 2000
-----------------------------------------
To the Shareholders of Somerset Trust Company:
The Board of Directors will hold an Annual Meeting of Shareholders of
Somerset Trust Company at 1:00 p.m., Eastern Time, on Thursday, April 20, 2000,
at the Board Room at the bank's main office at 151 West Main Street, Somerset,
Pennsylvania 15501, for the following purposes:
o To consider and act upon a proposal to approve and adopt the
Plan of Reorganization and related Plan of Merger, dated March
___, 2000, providing for:
o The reorganization of the bank as the wholly owned
subsidiary of Somerset Trust Holding Company, a
Pennsylvania corporation organized by the bank to become
the bank's holding company, through the merger of the
bank with Somerset Interim Bank, a
Pennsylvania-chartered banking institution and
subsidiary of Somerset Trust Holding Company; and
o The exchange of each share of common stock of the bank
for four shares of common stock of Somerset Trust
Holding Company;
o To fix the number of directors to be elected at the Annual
Meeting at five, resulting in a Board of Directors consisting of
eleven directors.
o To elect three bank directors to serve for a three-year term,
one director to serve for a two-year term, and one director to
serve for a one-year term, and until their successors are
properly elected and qualified.
o To ratify the selection of Stokes, Kelly & Hinds, L.L.C.,
Certified Public Accountants, of Pittsburgh, Pennsylvania, as
the bank's independent auditors for the year ending December 31,
2000.
o To adjourn the meeting to a later date, if necessary, to permit
further solicitation of proxies if 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
o To transact any other business that lawfully comes before the
meeting and any adjournment of the meeting.
1
<PAGE>
Shareholders as of March 10, 2000, are entitled to notice of and to
vote at the Annual Meeting, either in person or by proxy.
We describe the reorganization to be voted upon at the meeting more
fully in the attached proxy statement/prospectus. Annex A consists of a copy of
the Plan of Reorganization and Plan of Merger. The proxy statement/prospectus
also contains information about the election of directors and other proposals.
We welcome your attendance at the meeting. Whether or not you expect to
attend the meeting in person, you are requested to complete, sign, date and
promptly return the enclosed proxy in the accompanying postage-paid envelope.
The prompt return of your proxy will save the bank expenses involved in further
communications. Even if you return a proxy, you may vote in person if you give
written notice to the Secretary of the bank and attend the Annual Meeting.
Returning your proxy will ensure your proper representation at the meeting.
The bank's Board of Directors is distributing the proxy
statement/prospectus, form of proxy and the bank's 1999 Annual Report to
shareholders on or about March 30, 2000.
By Order of the Board of Directors,
------------------------------------
G. Henry Cook, President and
Chief Executive Officer
March 30, 2000
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Exhibit 99.3
EXHIBIT 99.3
FORM OF PROXY FOR USE BY THE SHAREHOLDERS OF
SOMERSET TRUST COMPANY
<PAGE>
SOMERSET TRUST COMPANY
PROXY
FOR ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD ON APRIL 20, 2000
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS.
The undersigned hereby constitutes and appoints _______________________
and _____________________ and each or any of them, proxies of the undersigned,
with full power of substitution, to vote all of the shares of Somerset Trust
Company (the "Bank") that the undersigned may be entitled to vote at the Annual
Meeting of Shareholders of the Bank to be held at the Board Room at the Bank's
main office at 151 West Main Street, Somerset, Pennsylvania 15501 on Thursday,
April 20, 2000, at 1:00 p.m., Eastern Time, and at any adjournment or
postponement thereof as follows:
1. To consider and act upon a proposal to approve and adopt the Plan of
Reorganization and Plan of Merger, dated March ___, 2000, providing
for:
o The reorganization of the Bank as the wholly owned subsidiary of
Somerset Trust Holding Company, a Pennsylvania corporation
organized by the Bank to become the Bank's holding company,
through the merger of the Bank with Somerset Interim Bank, a
Pennsylvania-chartered banking institution and subsidiary of
Somerset Trust Holding Company;
o And the exchange of each share of common stock of the Bank for
four shares of common stock of Somerset Trust Holding Company
[ ] FOR [ ] AGAINST [ ] ABSTAIN
The Board of Directors recommends a vote FOR this proposal.
- - --------------------------------------------------------------------------------
2. To fix the number of bank directors to be elected at the Annual Meeting
at five, resulting in a Board of Directors consisting of eleven
directors.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
The Board of Directors recommends a vote FOR this proposal.
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<PAGE>
3. Election of five directors to serve on the Bank's Board of Directors,
as follows:
o To serve for a three-year term:
G. Henry Cook
Alan L. Miller
Richard C. Yeager
o To serve for a two-year term:
Jon C. Clapper
o To serve for a one-year term:
Barbara Wheeler Davies
[ ] FOR all nominees listed [ ] WITHHOLD AUTHORITY
above (except as marked to vote for ALL nominees
to the contrary below)* listed above
The Board of Directors recommends a vote FOR the election of these
nominees.
*Instruction: To withhold authority to vote for any individual nominee,
write that nominee's name on the space provided below:
- - --------------------------------------------------------------------------------
4. Proposal to ratify the selection of Stokes, Kelly & Hinds, L.L.C.,
Certified Public Accountants, of Pittsburgh, Pennsylvania, as the
independent auditors for the bank for the year ending December 31,
2000.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
The Board of Directors recommends a vote FOR this proposal.
- - --------------------------------------------------------------------------------
5. Proposal to adjourn the annual meeting of shareholders to a later date
to permit further solicitation of proxies if 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.
- - --------------------------------------------------------------------------------
6. In their discretion, the proxy holders are authorized to vote upon such
other business as may properly come before the Annual Meeting of
Shareholders and any adjournment.
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<PAGE>
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, 2, 3, 4 and 5.
Dated: , 2000
---------------------
----------------------------------------
Signature
----------------------------------------
Signature
Number of Shares Held of
Record on March 10, 2000:
- - -----------------------
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 99.4
EXHIBIT 99.4
SUBCHAPTER D OF CHAPTER 17 OF THE PENNSYLVANIA
BUSINESS CORPORATION LAW OF 1988, AS AMENDED,
(15 PA. C.S.A. SECTIONS 1741-1750) RELATING TO INDEMNIFICATION
<PAGE>
STATUTES RELATING TO INDEMNIFICATION
Subchapter D of Chapter 17 of the
Pennsylvania Business Corporation
Law of 1988, (15 PA C.S.A. ss.ss.1741-
1750), as amended
Subchapter D. Indemnification
ss.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.
ss.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
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<PAGE>
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.
ss.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.
ss.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.
ss.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.
ss.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
2
<PAGE>
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 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.
ss.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.
ss.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.
ss.1749. Application to employee benefit plans.
For purposes of this subchapter:
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<PAGE>
(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."
(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.
ss.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.
4
