As filed with the Securities and Exchange Commission on March 31, 1995
Registration No. 33-_____
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
_______________
FORM S-2
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
_______________
PROGRESS FINANCIAL CORPORATION
(Exact name of Registrant as specified in its charter)
Delaware 23-2413363
(State or other (I.R.S. employer
jurisdiction of identification no.)
organization)
Plymouth Meeting Executive Campus
600 West Germantown Pike
Plymouth Meeting, Pennsylvania 19462-1003
(610) 825-8800
(Address, including zip code, and telephone number, including area code
of Registrant's principal executive offices)
_______________
W. Kirk Wycoff
President and Chief Executive Officer
Progress Financial Corporation
Plymouth Meeting Executive Campus
600 West Germantown Pike
Plymouth Meeting, Pennsylvania 19462-1003
(610) 825-8800
(Name, address, including zip code, and telephone number
including area code, of agent for service)
_______________
Copies to:
Jeffrey D. Haas, Esq.
Philip R. Bevan, Esq.
Elias, Matz, Tiernan & Herrick L.L.P.
734 Fifteenth Street, N.W., Suite 1200
Washington, D.C. 20005
(202) 347-0300
Approximate date of commencement of proposed sale to the public: As
soon as practicable after this Registration Statement becomes effective.
<PAGE>
If the Registrant elects to deliver its latest annual report to
security holder or a complete and legible facsimile thereof, pursuant to
Item 11(a)(1) of this Form, check the following box. [ X ].
If any of the securities being registered on this Form are to be
offered on a delayed or continuous basis pursuant to Rule 415 under the
Securities Act of 1933, other than securities offered only in connection
with dividend or interest reinvestment plans, check the following box. [ X ]
CALCULATION OF REGISTRATION FEE
<TABLE>
Proposed
Proposed Maximum
Title of Each Class of Maximum Aggregate Amount of
Securities to be Amount to be Offering Price Offering Price(2) Registration Fee
Registered Registered(1) Per Unit(2) Unit(2)
<S> <C> <C> <C> <C>
Warrants 300,000 $6.00 $1,800,000 $620.69
Common Stock,
$1.00 par
value per share 300,000(3) -- -- --
</TABLE>
(1) Pursuant to Rule416 promulgated under the Securities Act of 1933,
as amended, there are also being registered such additional shares
of Common Stock as may become issuable pursuant to the
anti-dilution provisions of the Warrants.
(2) Estimated solely for the purposes of calculating the Registration
Fee pursuant to the provisions of Rule 457(g).
(3) Represents the estimated number of shares which may be issued
pursuant to the exercise of the Warrants.
The Registrant hereby amends this Registration Statement on such date
or dates as may be necessary to delay its effective date until the
Registrant shall file a further Amendment which specifically states that
this Registration Statement shall thereafter become effective in
accordance with Section 8(a) of the Securities Act of 1993 or until the
Registration Statement shall become effective on such date as the
Commission, acting pursuant to said Section 8(a), may determine.
<PAGE>
PROGRESS FINANCIAL CORPORATION
CROSS REFERENCE SHEET
Showing the Location in the Prospectus of Information Required
by Items 1 through 13 of Part I of Form S-2
<TABLE>
Registration Statement
Item Number and Caption Location or Caption in Prospectus
<S> <S>
1. Forefront of Registration Statement and Outside Outside Front Cover Page
Front Cover of Prospectus
2. Inside Front and Outside Back Cover Pages of Inside Front and Outside Back Cover Pages;
Prospectus Available Information; Incorporation of
Certain Documents by Reference
3. Summary Information, Risk Factors and Ratio of Summary; Special Considerations
Earnings to Fixed Changes
4. Use of Proceeds Use of Proceeds
5. Determination of Offering Price Not Applicable
6. Dilution Not Applicable
7. Selling Security Holders Selling Warrant Holders
8. Plan of Distribution Outside Front Cover Page; Plan of
Distribution
9. Description of Securities to be Registered Description of Securities
10. Interests of Named Experts and Counsel Not Applicable
11. Information With Respect to the Registrant Summary; Incorporation of Certain Documents
by Reference
12. Incorporation of Certain Information by Reference Incorporation of Certain Documents by
Reference
13. Disclosure of Commission Position and *
Indemnification for Securities Act Liabilities
</TABLE>
* Item is omitted because answer is negative or item is inapplicable.
<PAGE>
Subject to Completion - Dated , 1995
PROSPECTUS
PROGRESS FINANCIAL CORPORATION
300,000 Warrants
to Purchase 300,000 shares
of Common Stock
This Prospectus relates to the public offering of up to 300,000
Warrants (the "Warrants") issued by Progress Financial Corporation (the
"Company") by the holders thereof (the "Selling Warrant Holders"). See
"Selling Warrant Holders" herein. Each Warrant entitles the holder
thereof to purchase one share of the Company's Common Stock, $1.00 par
value per share (the "Common Stock"), at an exercise price of $6.00,
subject to adjustment, at any time prior to 5:00 p.m., Eastern Time, on
June 30, 1999. This Prospectus also relates to the issuance of the
Common Stock by the Company upon the exercise of such Warrants. The
Selling Warrant Holders directly, through agents designated from time to
time, or through dealers or underwriters also to be designated, may sell
the Warrants from time to time on terms to be determined at the time of
sale. To the extent required, the specific Warrants to be sold, names
of the Selling Warrant Holders, purchase price, public offering price,
the names of any such agent, dealer or underwriter, and any applicable
commission or discount with respect to a particular offer will be set
forth in an accompanying Prospectus Supplement. See "Plan of
Distribution."
The Selling Warrant Holders and any broker-dealer, agents or
underwriters that participate with the Selling Warrant Holders in the
distribution of the Warrants may be deemed to be "underwriters" within
the meaning of the Securities Act and any commission received by them
and any profit on the resale of the Warrants purchased by them may be
deemed to be underwriting commissions or discounts under the Securities
Act. See "Plan of Distribution" herein for indemnification
arrangements.
THE SECURITIES OFFERED HEREBY INVOLVE CERTAIN RISKS. SEE "SPECIAL
CONSIDERATIONS."
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
COMMISSION NOR ANY STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY
OR ADEQUACY OF THIS PROSPECTUS, ANY REPRESENTATION TO THE CONTRARY
IS A CRIMINAL OFFENSE.
The date of this Prospectus is , 1995
RED HERRING
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH
THE SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD
NOR MAY OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION
STATEMENT BECOMES EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN
OFFER TO SELL OR THE SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE
ANY SALE OF THESE SECURITIES IN ANY STATE IN WHICH SUCH OFFER,
SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR TO REGISTRATION OR
QUALIFICATION UNDER THE SECURITIES LAWS OF ANY SUCH STATE.
<PAGE>
There has previously been no public market for the Warrants offered
hereby and the Warrants will not be listed on a national securities
exchange or qualified for trading on the automated quotation system of
the National Association of Securities Dealers, Inc. ("NASD"). See
"Special Considerations - Absence of Market." The Common Stock of the
Company is traded in the over-the-counter market and is quoted through
the Nasdaq National Market System under the symbol "PFNC." The last
sale price of the Company's Common Stock as reported by Nasdaq on March
24, 1995 was $4.625 per share.
The Company is paying all the expenses of registering the Warrants
and underlying Common Stock under the Securities Act of 1933, as amended
("Securities Act") (including filing, legal, and miscellaneous expenses
in connection with the registration) which are estimated to aggregate
approximately $26,000. The Company will not receive any of the proceeds
from any sale of the Warrants by the Selling Warrant Holders. It is
anticipated that the Company will maintain a current prospectus until
the earlier to occur of June 30, 1996 or until all the Warrants are
sold. The Company will use its best efforts to maintain the
effectiveness of the registration statement with respect to the Common
Stock to be issued upon exercise of the Warrants until the earlier to
occur of June 30, 1999 or the exercise of all the Warrants. Each of the
Selling Warrant Holders will severally pay or assume underwriting
discounts, brokerage commissions or other charges incurred in any
respective sale by them of the Warrants.
AVAILABLE INFORMATION
The Company is subject to the informational requirements of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), and in
accordance therewith files reports, proxy statements and other
information with the Securities and Exchange Commission (the
"Commission"). Such reports, proxy statements and other information can
be inspected and copied at the Commission's public reference rooms
located at 450 Fifth Street, N.W., Washington, D.C. 20549, and at the
Commission's Regional Offices at Northwestern Atrium Center, 500 West
Madison Street, Suite 1400, Chicago, Illinois 60661, and 7 World Trade
Center, Suite 1300, New York, New York 10048. Copies of such material
can be obtained from the Public Reference Section of the Commission at
450 Fifth Street, N.W., Washington, D.C. 20549, at prescribed rates.
The Common Stock is listed on the Nasdaq National Market System, and
such reports, proxy statements and other information concerning the
Company also may be inspected at the offices of the NASD, 1735 K Street,
N.W., Washington, D.C. 20006.
The Company has filed a Registration Statement on Form S-2 (herein
together with all amendments and exhibits thereto, called the
"Registration Statement") under the Securities Act with respect to the
Warrants and the underlying Common Stock offered hereby. This
Prospectus does not contain all the information set forth in the
Registration Statement. For further information with respect to the
Company and the Warrants and the underlying Common Stock offered hereby,
reference is made to the Registration Statement. Statements contained
in the Prospectus concerning provisions of certain documents are not
necessarily complete and, in each instance, reference is made to the
copy of such document filed as an exhibit to the Registration Statement
or attached hereto, each such statement being qualified in all respects
by such references.
So long as any of the Warrants are outstanding, whether or not the
Company is subject to the reporting requirements of Section 13(a) or
15(d) of the Exchange Act, the Company will provide to all holders of
the Warrants copies of such annual reports, quarterly reports and other
documents that the Company would be required to file with the Commission
pursuant to Section 13(a) or 15(d) of the Exchange Act.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
This Prospectus is summary in nature, does not purport to be a full
and complete statement of the business, affairs and financial condition
of the Company and should be read in conjunction with the following
document of the Company which has been filed with the Commission and is
hereby incorporated by reference into this Prospectus: the Company's
Annual Report on Form 10-KSB for the year ended December 31, 1994.
All documents filed by the Company pursuant to Sections 13(a) or
15(d) of the Exchange Act subsequent to the date hereof are hereby
incorporated by reference in this Prospectus and shall be deemed a part
hereof from the date of filing such documents with the Commission. Any
statement contained herein, in any supplement or amendment hereof or in
a document all or any portion of which is incorporated or deemed to be
incorporated by reference herein shall be deemed to be modified or
superseded for purposes of this Prospectus to the extent that a
statement contained herein or in any supplement or amendment hereof
modifies or supersedes such statement. Any statement so modified or
superseded shall not be deemed, except as so modified or superseded, to
constitute a part of this Prospectus or any supplement or amendment
hereof.
Neither the delivery of this Prospectus nor any sale of securities
made hereunder shall, under any circumstances, create any implication
that there has been no change in the affairs of the Company or its
affiliates since the date hereof or that the information contained
herein is correct as of any time subsequent to its date.
This Prospectus is accompanied by the Company's Form 10-KSB for the
year ended December 31, 1994. Copies of the documents incorporated by
reference herein are available from the Company without charge (other
than exhibits to such document, unless such exhibits are specifically
incorporated by reference into the information that this Prospectus
incorporates) to any person to whom this Prospectus is delivered, upon
written request of such person. Requests for such copies should be
directed to W. Kirk Wycoff, Chairman, President and Chief Executive
Officer of the Company, at the Company's offices located at Plymouth
Meeting Executive Campus, 600 West Germantown Pike, Plymouth Meeting,
Pennsylvania 19462-1003. The Company's telephone number is (610) 825-
8800.
SUMMARY
The following summary does not purport to be complete and is
qualified in its entirety by the more detailed information, including
the Consolidated Financial Statements and related Notes, accompanying
this Prospectus.
The Company
Progress Financial Corporation is a Delaware-chartered, registered
thrift holding company headquartered in Plymouth Meeting, Pennsylvania.
The Company is the sole stockholder of Progress Federal Savings Bank, a
federally chartered savings bank (the "Bank"), which has been engaged in
the thrift business since 1878. The Company was organized in 1986 in
connection with the reorganization of the Bank into a thrift holding
company structure. The Bank conducts its business through six full-
service offices located in Montgomery County, one full-service office in
Delaware County and one full-service office in the Andorra section of
Philadelphia in southeastern Pennsylvania. The Bank expects to open a
full-service office in Chester County in April 1995. Unless the context
otherwise requires, references herein to the Company include the Bank.
At December 31, 1994, the Company had total consolidated assets of
$348.2 million, total consolidated liabilities of $335.2 million,
including total consolidated deposits of $284.0 million, and total
consolidated stockholders' equity of $13.0 million.
The principal business of the Company has in the past consisted of
attracting deposits from the general public through its offices and
using such deposits to originate loans secured by first mortgage liens
on existing single-family residential real estate and existing multi-
family residential and commercial real estate, construction loans (which
in the past included land acquisition and development loans), commercial
business loans, consisting primarily of loans to small and medium-sized
businesses, and various consumer loans. The Company originates single-
family residential real estate loans for sale in the secondary market
and secured consumer loans, such as home equity loans and lines of
credit. The Company also originates commercial business loans to small
and medium sized businesses in the communities its branches serve and
commercial real estate (including multi-family residential) and
residential construction loans. In addition, the Company invests in
mortgage-backed securities which are insured or guaranteed by the U.S.
Government and agencies thereof and other similar investments permitted
by applicable laws and regulations. The Bank is also involved in real
estate development and related activities, through its subsidiaries,
primarily to facilitate the completion and sale of certain property held
as real estate owned.
The principal sources of funds for the Company's activities are
amortization and repayment of loans, proceeds from sales of assets
classified as available for sale, net savings inflows and advances from
the Federal Home Loan Bank ("FHLB") of Pittsburgh. The Company's
principal sources of revenues are interest and other payments on loans,
including origination and servicing fees, interest on investments and
mortgage-backed securities, service charges on deposits, gains (losses)
from mortgage banking activities and from the sale of loans and
mortgage-backed securities classified as available for sale and loan and
other fee income. Its principal expenses are interest paid on deposits
and advances from the FHLB of Pittsburgh, provisions for possible loan
losses and real estate owned, personnel, occupancy and equipment, and
other administrative expenses.
The Company, as a registered savings and loan holding company, is
subject to examination and regulation by the Office of Thrift
Supervision ("OTS") and is subject to various reporting and other
requirements of the Commission. The Bank, as a federally chartered
savings bank, is subject to comprehensive regulation and examination by
the OTS, as its chartering authority and primary regulator, and by the
Federal Deposit Insurance Corporation ("FDIC"), which administers the
Savings Association Insurance Fund ("SAIF"), which insures the Bank's
deposits to the maximum extent permitted by law. The Bank is a member
of the FHLB of Pittsburgh, which is one of the 12 regional banks which
comprise the FHLB System. The Bank is further subject to regulations of
the Board of Governors of the Federal Reserve System ("Federal Reserve
Board") governing reserves required to be maintained against deposits
and certain other matters.
The Company's principal executive offices are located at Plymouth
Meeting Executive Campus, 600 West Germantown Pike, Plymouth Meeting,
Pennsylvania 19462-1003, and its telephone number is (610) 825-8800.
Special Considerations
The Company has experienced financial and operating problems in
recent periods and for these and other reasons an investment in the
Warrants and the underlying Common Stock involves a certain degree of
risk. Prospective purchasers should carefully consider the matters set
forth under "Special Considerations."
Summary of Terms of the Warrants
Warrants offered hereby. . .Up to 300,000 Warrants are being offered
hereby by the Selling Warrant Holders
listed herein. See "Selling Warrant
Holders."
Expiration Date . . . . . The Warrants can be exercised, in whole
or in part, at any time prior to 5:00
p.m., Eastern Time, on June 30, 1999.
Exercise Price . . . . . Each Warrant entitles the holder thereof
to purchase one share of Common Stock at
an exercise price of $6.00 per share,
subject to adjustment in certain
situations. See "Description of the
Warrants."
Dividend Policy
The Company is currently not paying dividends on the Common Stock.
The Company's ability to pay dividends on the Common Stock depends on
the receipt of dividends from the Bank. Due to its financial condition,
its recent results of operations and regulatory restrictions on the
payment of dividends by the Bank, the Company does not anticipate
resuming the payment of dividends on the Common Stock in the foreseeable
future. See "Market Price for Common Stock and Dividends - Dividends."
SELECTED CONSOLIDATED FINANCIAL AND OTHER DATA
(Dollars in Thousands, Except Per Share Data)
The selected consolidated financial and other data set forth below
should be read in conjunction with, and is qualified in its entirety by,
the more detailed information, including the Consolidated Financial
Statements and related Notes. See "Available Information."
<TABLE>
December 31,
1994 1993 1992 1991 1990
<S> <C> <C> <C> <C> <C>
FINANCIAL CONDITION DATA:
Total assets $348,189 $333,209 $291,542 $312,622 $324,708
Loans, net 205,771 158,268 153,734 193,789 277,490
Loans held for sale(1) 351 16,744 2,761 -- --
Investment securities:
Available for sale 4,627 -- -- -- --
Held to maturity 12,866 4,632 5,260 2,212 1,694
Mortgage-backed securities:
Available for sale(1) 9,103 8,893 25,072 -- --
Held to maturity 93,673 117,054 60,939 47,875 315
Deposits 283,958 273,583 245,015 265,197 292,478
Borrowings 47,052 40,536 36,071 38,585 12,500
Stockholders' equity 13,021 14,787 6,877 5,599 15,844
Delinquent loans(2) 1,001 1,911 9,859 9,072 12,018
Non-performing assets(2) 9,085 17,628 34,829 50,427 29,239
Allowance for possible loan losses 1,502 2,113 2,703 5,483 4,123
Book value per share(3) 3.98 4.52 6.81 5.54 15.69
</TABLE>
<TABLE>
Year Ended December 31,
1994 1993 1992 1991 1990
<S> <C> <C> <C> <C> <C>
OPERATIONS DATA:
Interest income $22,830 $20,824 $21,979 $ 27,122 $34,834
Interest expense 12,505 11,465 13,737 18,010 21,775
Net interest income 10,325 9,359 8,242 9,112 13,059
Provision for possible loan losses 521 368 275 10,144 4,696
Net interest income (expense) after
provision 9,804 8,991 7,967 (1,032) 8,363
for possible loan losses
Gain (loss) from sales of securities (322) 215 1,197 341 ---
Gain (loss) from mortgage banking (176) 606 1,428 319 ---
activities
Income (loss) on properties sold (62) 102 1,218 153 ---
Other income 2,105 1,303 1,774 1,038 1,518
Provision for real estate owned 1,576 1,733 2,835 2,607 2,015
Other expense 10,489 9,835 9,397 10,280 11,610
Income (loss) before income taxes (716) (351) 1,352 (12,068) (3,744)
(benefit)
Income tax expense (benefit) -- (1,034) 74 (1,823) (755)
Net income (loss) $ (716) $ 683 $ 1,278 $(10,245) $(2,989)
Net income (loss) per share $ (.22) $ .29 $ 1.27 $ (10.14) $ (2.96)
Cash dividends per share $ --- $ --- $ --- $ --- $ .12
</TABLE>
<TABLE>
At or For the Year Ended December 31,
1994 1993 1992 1991 1990
<S> <C> <C> <C> <C> <C>
Other Data(4):
Return (loss) on average assets (.21)% .21% .42% (3.31)% (.92)%
Return (loss) on average equity (5.24)% 6.25 20.93 (101.81) (16.60)
Average equity to average 4.01 3.42 1.99 3.24 5.52
assets
Dividend payout ratio --- --- --- --- (.04)
Net interest margin(5) 3.23 3.25 3.13 3.31 4.30
Interest rate spread(5) 3.04 3.26 3.47 3.44 3.97
Non-performing loans as a
percent of total loans at end of
period(2) 2.19 3.42 4.37 7.03 4.85
Non-performing assets as a
percent of total assets at end
of period(2) 2.61 5.29 11.95 16.13 9.00
Allowance for possible loan
losses as a percent of non-
performing loans at end of
period 33.00 34.92 38.83 39.14 30.19
Net charge-offs as a percent of
average loans .60 .64 1.69 3.51 0.65
Capital Ratios(6):
Tangible 4.57 4.14 2.36 1.54 4.70
Core 4.57 4.14 2.36 1.54 4.70
Risk-based 9.47 9.39 5.37 3.33 6.62
Full service banking offices 8 8 7 8 8
</TABLE>
(1) Loans classified as held for sale are carried at the lower of
aggregate cost or fair value. Mortgage-backed securities and
investment classified as available for sale in 1994 were carried
at fair value. Mortgage-backed securities classified as available
for sale in prior periods were carried at the lower of amortized
cost or fair value.
(2) Delinquent loans consist of loans which are 30 to 89 days overdue.
Non-performing loans consist of non-accrual loans and accruing
loans 90 days or more overdue; and non-performing assets consist
of non-performing loans and real estate owned, which include
in-substance foreclosures and repossessions, in each case net of
related reserves.
(3) Book value per share represents stockholders' equity divided by
the number of shares of Common Stock issued and outstanding.
(4) With the exception of end of period ratios, all ratios are based
on average daily balances during the indicated periods.
(5) Interest rate spread represents the difference between the
weighted average yield on interest-earning assets and the weighted
average cost of interest-bearing liabilities (which do not include
non-interest-bearing accounts), and net interest margin represents
net interest income as a percent of average interest-earning
assets.
(6) For additional information concerning the Bank's compliance with
its regulatory capital requirements, see "Regulatory Capital."
SPECIAL CONSIDERATIONS
An investment in the Warrants and the underlying Common Stock involves
certain investment risks. In determining whether or not to make an
investment in the Warrants, prospective purchasers should carefully
consider the matters set forth below, as well as the other information
included or incorporated by reference in this Prospectus.
Financial Condition and Results of Operations
The Company has experienced serious financial and operational problems
in recent years primarily as a result of the economic recession and a
decline in real estate values in the Company's market area. These
conditions have had a material adverse effect on the quality of the
Company's loan portfolio and contributed to substantial increases in the
Company's non-performing assets in 1990 and 1991, which consist of non-
accrual loans and accruing loans 90 days or more overdue (collectively
"non-performing loans"), as well as real estate acquired by the Company
through foreclosure proceedings, real estate acquired through acceptance
of a deed in lieu of foreclosure, and loans classified as in-substance
foreclosures (collectively "real estate owned" or "REO"). The Company's
non-performing assets increased from $17.5 million or 5.2% of total
assets at December 31, 1989 to $50.4 million or 16.1% of total assets at
December 31, 1991. Since the change in senior management during 1991
and the reorganization of the Company's asset recovery department during
the fourth quarter of 1991, the Company's primary focus has been to
improve the credit quality of the Company's assets through the early
identification of potential problem assets and the administration,
rehabilitation or liquidation of the Company's non-performing assets.
Non-performing assets have since declined and totalled $9.1 million or
2.6% of total assets at December 31, 1994.
The high levels of non-performing assets necessitated provisions for
possible loan losses, which are charged to the Company's operations, of
$10.1 million, $275,000, $368,000 and $521,000 during fiscal 1991, 1992,
1993 and 1994, respectively. These provisions were established in large
part as a result of the levels of net loan charge-offs, which amounted
to $8.8 million, $3.1 million, $1.1 million and $1.1 million during
fiscal 1991, 1992, 1993 and 1994, respectively, and in order to maintain
the Company's total allowance for possible loan losses at a level deemed
adequate by management to absorb the risks inherent in the Company's
loan portfolio. In addition, the Company established provisions for REO
of $2.6 million, $2.8 million, $1.7 million and $1.6 million in 1991,
1992, 1993, and 1994, respectively.
At December 31, 1994, the Company's allowance for possible loan losses
amounted to $1.5 million or .7% and 33.0% of total loans and total non-
performing loans, respectively, and the net carrying value of REO
amounted to $4.5 million at such date. Future additions to the
allowance for possible loan losses or reductions in carrying values of
REO could become necessary as a result of further deterioration in the
real estate market and the economy in the Company's primary market area,
future increases in non-performing assets or for other reasons, which
would adversely affect the Company's results of operations. In
addition, various regulatory agencies, as an integral part of their
examination process, periodically review the Company's allowance for
possible loan losses and the carrying value of its REO. Such agencies
may require the Company to make additions to the allowance for possible
loan losses and adjustments to the carrying values of REO based on their
judgments about information available to them at the time of their
examination. The Company and the Bank were most recently examined by
the OTS during the quarter ended December 31, 1994.
The future success of the Company is dependent upon the quality of its
assets. Although management of the Company has devoted substantial time
and resources to the identification, collection and work-out of non-
performing assets, the real estate markets and the overall economy in
its market area is likely to be a significant determinant of the quality
of the Company's assets in future periods and, thus, its financial
condition and results of operations. In particular, although the
Company has been able to reduce the amount of its non-performing assets
in recent years, such assets amounted to $9.1 million or 2.6% of total
assets at December 31, 1994. In addition, the Company's loan portfolio
includes a large percentage of commercial real estate loans, which
generally involve a higher degree of risk than single-family residential
loans. The Company's future results of operations may be adversely
affected if the Company is unable to work-out or dispose of its non-
performing assets on a timely basis or if the values of such properties
decline further. Although management utilizes its best judgment in
providing for losses with respect to its non-performing assets, there
can be no assurance that the Company will be able to dispose of such
non-performing assets without establishing additional provisions for
losses on loans or further reductions in the carrying value of its real
estate owned.
Regulation
The Company, as a savings and loan holding company, and the Bank, as a
federally chartered savings bank, are subject to extensive governmental
supervision and regulation,which is intended primarily for the
protection of depositors. In addition, the Company and the Bank are
subject to changes in federal and state law, as well as changes in
regulations, governmental policies and accounting principles. The
effects of any such potential changes cannot be accurately predicted at
this time but could adversely affect the business and operations of the
Company and the Bank.
Economic Conditions
Prevailing economic conditions, as well as government policies and
regulations concerning, among other things, monetary and fiscal affairs,
significantly affect the operations of financial institutions such as
the Bank and financial institution holding companies such as the
Company. In particular, because the Company's lending activities are
conducted primarily in its market area in southeastern Pennsylvania,
economic conditions and the market for real estate in this area
significantly affect the Company's financial condition and operations.
Excess real estate inventory, coupled with a general economic decline,
adversely affected the real estate market in general and the Company's
market area in particular in recent years and contributed to the
increases in the Company's non-performing assets during such years.
These conditions could continue to adversely affect the financial
condition and operations of the Company in future periods.
The Company's net interest income, which is the difference between the
interest income received on its interest-earning assets, including
loans, mortgage-backed securities and investment securities, and the
interest expense incurred in connection with its interest-bearing
liabilities, including deposits and borrowings, can be significantly
affected by changes in market interest rates. The Company actively
monitors its assets and liabilities in an effort to minimize the effects
of changes in interest rates, primarily by altering the mix and maturity
of the Company's loans, investments and funding sources.
Dividends
The Company suspended dividend payments on the Common Stock after the
second quarter of 1990. Due to its financial condition and its recent
results of operations, management of the Company does not anticipate the
resumption of dividend payments on the Common Stock in the foreseeable
future. For a discussion of the requirements and limitations relating
to the Company's ability to pay dividends to stockholders and the
ability of the Bank to pay dividends to the Company, see "Market Price
for Common Stock and Dividends."
Possible Limitation of Tax Benefits
Acquisitions of Common Stock by persons who are not currently holders
of the Common Stock, or by current holders whose acquisition would
increase or maintain their equity ownership in the Company above 5%,
could result in an "ownership change" for federal income tax purposes.
If an "ownership change" occurs, an annual limitation would be imposed
on the Company's ability to utilize its net operating loss carryforwards
and on its ability to deduct, in the future, losses which have not yet
been recognized for tax purposes if certain threshold limitations on the
amount of such losses were exceeded. There can be no assurance that an
"ownership change" will not occur as a result of the exercise of the
Warrants or in the future as a result of the cumulative effect of the
exercise of the Warrants and other acquisitions and transfers of Common
Stock. In addition, while management believes that the amount of losses
which have not yet been recognized for tax purposes by the Company and
its subsidiaries is less than the applicable amounts beyond which
limitations would apply to the deduction of such losses in the event of
an "ownership change," no assurance can be given that such limitations
will not apply. For further information, see "Certain Federal Income
Tax Consequences Relating to the Warrants - Possible Limitation of Tax
Benefits."
Absence of Market
There has previously been no public market for the Warrants offered
hereby and the Warrants will not be listed on a national securities
exchange or qualified for trading on the automated quotation system of
the NASD. As a result, only a limited trading market is expected to
develop for the Warrants for the foreseeable future, and there can be no
assurance that a trading market will develop or, if one develops, that
it will continue. To the extent that a trading market develops, no
assurance can be provided that the market prices will equal or exceed
the issuance prices of the securities offered hereby. If an effective
market for the Warrants does not develop, purchasers of the Warrants may
be unable to dispose of such securities, or may be able to dispose of
them only to a small universe of prospective purchasers by means of a
private sale, which may not result in as high a price as could be
obtained in the event that there was a public market for such
securities. The market price of the Common Stock could also be subject
to significant fluctuations in response to variations in quarterly
operating results and other factors. In addition, the stock market in
recent years has experienced extreme price and volume fluctuations that
often have been unrelated or disproportionate to the operating
performance of companies. These broad fluctuations may adversely affect
the market price of the Common Stock. In light of the foregoing and the
market considerations discussed above, purchasers should therefore
consider the potentially illiquid nature of the Warrants and should only
purchase any such securities with a long-term investment intent.
Anti-takeover Provisions
Certain provisions of the Company's Certificate of Incorporation and
Bylaws and the Delaware General Corporation Law ("DGCL"), as well as a
shareholder rights plan adopted by the Company, could have the effect of
discouraging non-negotiated takeover attempts which certain stockholders
might deem to be in their interest and making it more difficult for
stockholders of the Company to remove members of its Board of Directors
and management. In addition, various federal laws and regulations could
affect the ability of a person, firm or entity to acquire the Company or
shares of its Common Stock. See "Restrictions on Acquisition of the
Company" and "Description of Capital Stock."
USE OF PROCEEDS
The Warrants offered hereby are offered by the Selling Warrant
Holders. See "Selling Warrant Holders" and "Plan of Distribution." The
Company will not receive any proceeds from the sale of the Warrants by
the Selling Warrant Holders. Each Warrant entitles the holder thereof
to purchase one share of Common Stock at an exercise price of $6.00 at
any time prior to 5:00 p.m., Eastern Time, on June 30, 1999. The
proceeds from the exercise, if any, of Warrants will be used by the
Company for general corporate purposes.
SELLING WARRANT HOLDERS
The following table sets forth certain information as of the date
hereof, with respect to the Warrants held by each Selling Warrant
Holder. None of the Warrant Holders has had a material relationship
with the Company within the past three years other than as a result of
the ownership of the Warrants except as noted herein. The Warrants
offered by this Prospectus may be offered from time to time by the
Selling Warrant Holders named below:
<TABLE>
Number of Shares of Common
Percent of Warrants Stock Issuable Upon Exercise
Warrant Holder Number of Warrants Outstanding of Warrants
<S> <C> <C> <C>
Benefit Designs Inc. Pension
Plan(1) 12,500 4.17% 12,500
Financial East, L.P. 12,500 4.17 12,500
Firstrust Savings Bank 37,500 12.50 37,500
G.W. Realty Associates(2) 12,500 4.17 12,500
Investors Insurance
Corporation(3) 50,000 16.67 50,000
Arthur J. Kania 25,000 8.33 25,000
Kobrovsky Family Trust 7,500 2.50 7,500
William L. Mueller(4) 25,000 8.33 25,000
1993 SOP Partners, L.P. 50,000 16.67 50,000
Lisa Sussman 5,000 1.67 5,000
Deborah Stephens 12,500 4.17 12,500
Charles J. Tornetta(4) 25,000 8.33 25,000
Roxborough-Manayunk
Federal Savings Bank 25,000 8.33 25,000
Total 300,000 100.0% 300,000
</TABLE>
The Selling Warrant Holders may offer all or some of the Warrants
which they hold pursuant to the offering contemplated by this
Prospectus. Therefore, no estimate can be given as to the amount of
Warrants that will be held by the Selling Warrant Holders upon
completion of such offering.
(1) Mr. Daggett, a director of the Company and the Bank, is trustee of
the Plan and President of Benefit Designs, Inc.
(2) W. Kirk Wycoff, Chairman of the Board, President and Chief
Executive Officer of the Company and the Bank, serves as general
partner of G.W. Realty Associates.
(3) Mr. Donald U. Goebert, a director of the Company and the Bank, is
a director of Investors Insurance Corporation.
(4) Serves as a director of the Company and the Bank.
PLAN OF DISTRIBUTION
The Warrants may be sold from time to time to purchasers directly by
any of the Selling Warrant Holders. Alternatively, the Selling Warrant
Holders may from time to time offer the Warrants through underwriters,
dealers or agents, who may receive compensation in the form of
underwriting discounts, concessions or commissions from the Selling
Warrant Holders and/or the purchasers of Warrants for whom they may act
as agent. The Selling Warrant Holders and any underwriters, dealers or
agents that participate in the distribution of Warrants may be deemed to
be underwriters, and any profit on the sale of the Warrants by them and
any discounts, commissions or concessions received by any such
underwriters, dealers or agents might be deemed to be underwriting
discounts and commissions under the Securities Act. At the time a
particular offer of Warrants is made, to the extent required, a
Prospectus Supplement will be distributed which will set forth the
aggregate amount of Warrants being offered and the terms of the
offering, including the name or names of any underwriters, dealers or
agents, any discounts, commissions and other items constituting
compensation from the Selling Warrant Holders and any discounts,
commissions or concessions allowed or reallowed or paid to dealers.
The Warrants may be sold from time to time in one or more transactions
at a fixed offering price, which may be changed, or at varying prices
determined at the time of sale or at negotiated prices.
The Company will pay substantially all of the expenses incident to the
offering and sale of the Warrants to the public other than commissions
and discounts of underwriters, dealers or agents. Under agreements
entered into the Company, the Selling Warrant Holders will be
indemnified by the Company against certain civil liabilities, including
liabilities under the Securities Act.
MARKET PRICE FOR COMMON STOCK AND DIVIDENDS
Market Price for Common Stock
The Common Stock is traded in the over-the-counter market on the
Nasdaq National Market System under the symbol "PFNC." The following
table sets forth the high and low sales prices of the Common Stock as
reported by the Nasdaq National Market System and the cash dividends
declared per share of Common Stock during the periods indicated.
<TABLE>
Sales Price
Dividends
High Low Per Share
1993
<S> <C> <C> <C>
First Quarter $7.25 $3.00 --
Second Quarter 7.50 3.50 --
Third Quarter 5.50 3.50 --
Fourth Quarter 5.25 4.25 --
1994
First Quarter 6.25 4.50 --
Second Quarter 5.625 4.25 --
Third Quarter 5.50 4.25 --
Fourth Quarter 5.50 3.50 --
1995
First Quarter 5.00 4.25 --
(through March 24,
1995
</TABLE>
On , 1995, the last trading day before the commencement of
the offering of the securities offered hereby, the closing sale price of
a share of Common Stock on the Nasdaq National Market System was $ .
As of December 31, 1994, there were 3,275,000 shares of Common Stock
outstanding, which were held by approximately 1,400 holders of record.
The number of holders of record does not reflect the number of persons
or entities who or which hold their stock in nominee or "street" name
through various brokerage firms or other entities. Although the Common
Stock is traded on the Nasdaq National Market System, historically, the
Common Stock has not been actively traded.
Dividends
The Company suspended dividend payments on the Common Stock after the
second quarter of 1990. Due to its financial condition, its recent
results of operations and regulatory restrictions on the payment of
dividends imposed on the Bank, the Company does not anticipate the
resumption of dividend payments on the Common Stock in the foreseeable
future.
The Company's ability to pay dividends on the Common Stock will depend
on the receipt of dividends from the Bank. In addition, the Company's
ability to pay dividends on the Common Stock will be affected by its
obligation to pay interest on the $3.0 million of 8.25% Subordinated
Notes due 2004 (the "Notes") issued in connection with the initial sale
of the Warrants in June 1994. Interest expense on such Notes amounts to
approximately $248,000 per year. Applicable rules and regulations of
the OTS impose limitations on capital distributions by savings
institutions. Savings institutions, such as the Bank, which have
capital in excess of all fully phased-in capital requirements before and
after the proposed capital distribution are permitted, after giving
prior notice to the OTS, to make capital distributions during a calendar
year up to the greater of (i) 100% of net income to date during the
calendar year, plus the amount that would reduce by one-half its
"surplus capital" (excess capital over its fully phased-in capital
requirements) at the beginning of the calendar year or (ii) 75% of its
net income over the most recent four-quarter period. However, such
capital distribution may not reduce surplus capital below the fully
phased-in capital requirement at the date of the capital distribution.
Institutions with less capital are more restricted in the payment of
dividends and no institution can pay dividends if such payment would
cause the institution to no longer satisfy its capital requirements.
Furthermore, institutions may not be permitted by the OTS to distribute
the full amount of dividends otherwise permitted under the regulations
due to safety and soundness concerns.
REGULATORY CAPITAL
The following is a reconciliation of the Bank's capital determined in
accordance with generally accepted accounting principles ("GAAP") to
regulatory tangible, core, and risk-based capital at December 31, 1994.
<TABLE>
Tangible Core Risk-Based
Capital % Capital % Capital %
(Dollars in Thousands)
<S> <C> <C> <C> <C> <C> <C>
Adjusted GAAP capital $15,584 $15,584 $15,584
General valuation --- --- 1,502
allowance
Unrealized loss on
securities 1,051 1,051 1,051
available for sale
Goodwill (192) (192) (192)
Investment in joint
venture (8) (8) (8)
Non-qualifying deferred tax
asset (520) (520) (520)
Total 15,915 4.57% 15,915 4.57% 17,417 9.47%
Minimum capital 5,225 1.50 10,450 3.00 14,708 8.00
requirement
Regulatory capital - excess $10,690 3.07% $ 5,465 1.57% $ 2,709 1.47%
</TABLE>
MANAGEMENT AND PRINCIPAL STOCKHOLDERS
BOARD OF DIRECTORS AND EXECUTIVE OFFICERS. The following table sets
forth certain information regarding each director and executive officer
of the Company, including information regarding their age and the number
and percent of shares of Common Stock beneficially owned by such persons
as of February 28, 1995. No director is related to any other director
or executive officer of the Company or the Bank by blood, marriage or
adoption, and there were no arrangements or understandings between a
director and any other person pursuant to which such person was elected
as a director. The Company does not have any executive officers who are
not also directors.
<TABLE>
Amount and Percentage of Shares
Year of Beneficially Owned as of
Director Expiration February 28, 1995
Name Age(1) Since of Term
Amount Percentage
<S> <C> <C> <C> <C> <C>
John E. F. Corson 54 1991 1996 6,750(2) *
William O. Daggett, Jr. 54 1990 1995 74,480(3) 2.26%
Donald F. U. Goebert 58 1987 1996 190,516(4) 5.72
Joseph R. Klinger 52 1992 1995 8,250(2) *
Paul M. LaNoce 35 1991 1996 15,250(2) *
A. John May, III 39 1993 1997 7,943(5) *
William L. Mueller 43 1990 1995 90,476(6) 2.74
Charles J. Tornetta 64 1991 1997 47,908(7) 1.45
W. Kirk Wycoff 37 1991 1997 165,655(8) 4.89
</TABLE>
* Represents less than 1% of the issued and outstanding Common Stock
of the Company.
(1) As of February 28, 1995.
(2) Includes options to purchase 5,250 shares subject to stock options
which are exercisable within 60 days of February 28, 1995.
(3) Includes 47,230 shares owned by companies of which Mr. Daggett is
a director, officer and 10% stockholder, 12,500 Warrants and 5,250
shares subject to stock options which are exercisable within 60
days of February 28, 1995.
(4) Includes 135,266 shares owned by a company of which Mr. Goebert is
a director, officer and 10% stockholder, 50,000 Warrants and 5,250
shares subject to stock options which are exercisable within 60
days of February 28, 1995.
(5) Includes options purchase 250 shares subject to stock options
which are exercisable within 60 days of February 28, 1995.
(6) Includes 15,114 shares held jointly by Mr. Mueller with or for the
benefit of certain family members, 25,000 Warrants and 5,250
shares subject to stock options which are exercisable within 60
days of February 28, 1995.
(7) Includes 25,000 Warrants and 5,250 shares subject to stock options
which are exercisable within 60 days of February 28, 1995.
(8) Includes 7,000 shares held jointly by Mr. Wycoff with or for the
benefit of certain family members, 12,500 Warrants and 100,000
shares subject to stock options which are exercisable within 60
days of February 28, 1995.
Principal Stockholders
The following table sets forth certain information relating to
the only persons known to the Company to be the beneficial owners of 5%
or more of the Company's Common Stock as of February 28, 1995, and the
amount of Common Stock of the Company held by all directors and
executive officers of the Company as a group as of such date. The
information below is based upon filings made pursuant to the Exchange
Act and information furnished by the respective individuals.
<TABLE>
Amount of Common
Stock
Name and Address of Beneficially Owned Percent of
Beneficial Owner as of February 28, 1995 Common Stock
<S> <C> <C>
SOP Partners, L.P. 250,000(1) 7.52%
Two World Trade Center
104th Floor
New York, New York 10048
Investors Insurance 190,516(2) 5.72%
Corporation
3030 Hartley Road
Jacksonville, Florida 32257
Directors and executive 607,228(3) 17.17%
officers of the Company
as a group (9 persons)
</TABLE>
(1) Includes 50,000 Warrants.
(2) Mr. Donald W. Goebert, a director of the Company and the Bank, is
a director of the Corporation. Includes 5,250 shares subject to
stock options held by Mr. Goebert which are exercisable within 60
days of February 28, 1995. Also includes 50,000 Warrants.
(3) Includes 7,000 shares which are held jointly by Mr. Wycoff with
or for the benefit of certain family members, 47,230 shares which
are owned by companies of which Mr. Daggett is a director,
officer or 10% stockholder, 135,266 shares owned by companies of
which Mr. Goebert is a director, officer or 10% stockholder and
15,114 shares held jointly by Mr. Mueller with or for the benefit
of certain family members. Also includes 137,000 shares subject
to stock options which are exercisable within 60 days from
February 28, 1995 and 125,000 shares subject to the Warrants held
by the group.
DESCRIPTION OF THE WARRANTS
The terms of the Warrants are set forth in Schedule E to the
Subscription Agreement previously entered into with the Company and each
Selling Warrant Holder in connection with the sale of the Warrants and
the Notes in June 1994, which is attached hereto as Appendix A, and the
form of Warrant Certificate. The following is a summary of the material
provisions of the Warrants which is qualified in its entirety by the
provisions of Appendix A hereto and the form of Warrant Certificate (a
copy of which is available upon request to the Company). THE WARRANTS
AND THE UNDERLYING COMMON STOCK ARE NOT SAVINGS ACCOUNTS OR DEPOSITS OF
THE COMPANY OR THE BANK AND ARE NOT INSURED BY THE FDIC, ANY OTHER
GOVERNMENTAL AGENCY OR OTHERWISE.
Each Warrant entitles the holder thereof to purchase one share of the
Company's Common Stock at an exercise price (the "Exercise Price") of
$6.00 at any time prior to 5:00 p.m., Eastern Time, on June 30, 1999.
The Exercise Price is subject to adjustment upon the occurrence of
certain events, including the issuance of Common Stock as a dividend or
distribution on the Common Stock and subdivisions, combinations and
certain reclassifications of Common Stock. No adjustment in the
Exercise Price will be required unless such adjustment would require a
change of at least 1% of the Exercise Price then in effect; provided,
however, that any adjustment that would otherwise be required to be made
shall be carried forward and taken into account in any subsequent
adjustment.
The Warrants do not confer upon the holders thereof any of the rights
or privileges of a stockholder. Accordingly, the Warrants do not
entitle holders thereof to receive any dividends, to vote, to call
meetings or to receive any distribution upon a liquidation of the
Company. The Company has authorized and reserved for issuance a number
of shares of Common Stock sufficient to provide for the exercise of the
rights represented by the Warrants. Shares issued upon exercise of the
Warrants will be fully paid and non-assessable. Warrants not exercised
prior to 5:00 p.m, Eastern Time, on June 30, 1999, shall become null and
void.
The Warrants may be exercised during the exercise period stated above
by delivery of the Warrant Certificate, with the subscription form on
the reverse side of the Warrant Certificate fully executed, to the
Company's transfer agent, American Stock Transfer & Trust Company, 40
Wall Street, New York, New York 10005, together with a check payable to
the Company in an amount equal to the Exercise Price multiplied by the
number of shares of Common Stock being purchased. The Company or its
transfer agent will issue a new Warrant Certificate representing the
unexercised but not expired Warrants.
The Company has agreed to use its best efforts to continuously
maintain the effectiveness of the Registration Statement until the
second anniversary of the initial issuance of the Warrants (June 30,
1996) or the earlier sale of all of the Warrants. The Company will also
use its best efforts to continuously maintain the effectiveness of the
Registration Statement as it relates to the Common Stock purchasable
upon the exercise of the Warrants until June 30, 1999 or the earlier
exercise of all of the Warrants.
CERTAIN FEDERAL INCOME TAX CONSEQUENCES
RELATING TO THE WARRANTS
The following summary of United States Federal income tax consequences
of ownership and disposition of the Warrants is based on the Internal
Revenue Code of 1986, as amended ("Code"), to the date hereof, existing
and proposed treasury regulations and applicable judicial and
administrative determinations, all of which are subject to change at
any time by legislative, judicial, or administrative action possibly
with retroactive effect. This summary discusses only Warrants held as
capital assets within the meaning of the Code. The tax treatment of the
holders of the Warrants may vary depending upon their particular
situations. Certain holders (including insurance companies, tax exempt
organizations, financial institutions, broker-dealers, foreign entities
and individuals who are not citizens or residents of the United States)
may be subject to special rules not discussed below. Each purchaser
should consult his or her own tax advisor as to the particular tax
consequences of purchasing, holding, converting and disposing of
Warrants, including the applicability and effect of any state, local, or
foreign tax laws and any recent changes in applicable tax laws.
DISPOSITION OF WARRANTS
In general, the holder of Warrants will recognize gain or loss upon
the sale, exchange, retirement or other disposition of the Warrants
measured by the difference between the amount of cash and the fair
market value of property received, and the holder's tax basis in the
Warrants. The gain or loss on the sale or redemption of Warrants will
be long-term capital gain or loss, provided the Warrants were held as a
capital asset and had been held for more than one year.
POSSIBLE LIMITATION OF TAX BENEFITS
At December 31, 1994, the Company and the Bank had a net operating
loss carryforward for federal tax purposes of approximately $7.3
million, $1.1 million of which expires in 2006, $4.5 million of which
expires in 2007, $654,000 of which expires in 2008 and $1.0 million of
which expires in 2009. In addition, at such date, the Company and the
Bank had an allowance for possible loan losses of approximately $1.5
million. The majority of the allowance for possible loan losses is
anticipated to give rise to deductible losses in the current and future
years. In addition, approximately $3.0 million of losses on loans and
other assets have been recognized in prior years for financial
accounting purposes, and it is anticipated that such losses will be
recognized in future years for tax purposes. Losses which the Company
and the Bank have not yet recognized for tax purposes that may be
utilized to offset taxable income in the current, or a past or future
year are sometimes referred to as "Built-in Losses."
If an "ownership change," discussed below, occurs with respect to the
Company and the Bank, either in connection with the transactions
contemplated hereby, or in future years as a result of transactions
unrelated thereto, the Company and the Bank may be limited in their
ability to use their net operating loss carryforward. In addition, if
the Built-in Losses of the Company and the Bank (netted against gains
which they have not yet recognized for tax purposes, together, the "Net
Unrealized Built-In Losses" of the Company and the Bank) exceed certain
threshold amounts, the Company may be limited in its ability to use its
Built-in Losses to offset otherwise taxable income in the current or a
future year. Accordingly, two factors are involved in evaluating
whether the ability of the Company and the Bank to deduct their Built-in
Losses will be limited in the current, or a past or future year. The
first factor is whether the Company and the Bank have undergone an
"ownership change," as defined. The second factor is whether the Net
Unrealized Built-In Losses of the Company and the Bank exceed the
applicable threshold limitations, discussed below, at the time such an
"ownership change" occurs.
The determination whether an "ownership change" has occurred is made
by (i) determining, in the case of any 5% stockholder, the increase, if
any, in the percentage ownership of such 5% stockholder at the end of
any three-year testing period relative to such stockholder's lowest
percentage ownership at any time during such testing period, and
expressing such increase in terms of percentage points (for example, a
stockholder whose percentage ownership increased from 2% to 9% during
the testing period will be considered to have had an increase of 7
percentage points), and (ii) aggregating such percentage point increases
for all 5% stockholders during the applicable testing period. For
purposes of the preceding sentence, any direct or indirect holder,
taking into account certain attribution rules, of 5% or more of the
Company's stock is a 5% stockholder, and all holders of less that 5%
collectively are generally treated as a single 5% stockholder. An
"ownership change" will occur as of the end of any three-year testing
period if the aggregate percentage point increases for all 5%
stockholders for such testing period exceeds 50 percentage points.
The IRS has issued regulations which provide that if a corporation
with a net built-in loss or net operating loss carryforwards issues
stock for cash, a percentage of the stock issued equal to one-half of
the percentage of stock owned by the group of less-than-5% stockholders
immediately before the issuance (the "Pre-Issuance Public Group") will
be presumed to have been acquired by the Pre-Issuance Public Group. The
amount of stock subject to this presumption is limited to the amount of
stock issued less the amount of stock acquired by 5% stockholders (other
than the Pre-Issuance Public Group). The corporation may treat the Pre-
Issuance Public Group as acquiring more stock than the amount presumed
to be acquired if it knows that the amount actually acquired by the Pre-
Issuance Public Group is greater. Accordingly, the Company's
stockholders may be deemed to have purchased a percentage of the shares
issuable upon exercise of the Warrants being offered, reducing the
likelihood that the initial offering of the Warrants resulted in an
ownership change of the Company and the Bank.
IRS regulations also provide that outstanding stock options to acquire
shares of Common Stock of the Company will only be considered to have
been exercised for the purpose of determining whether there has been an
ownership change if the options had been issued for an abusive principal
purpose, as defined. Since the Company's outstanding stock options were
ordinary options designed to provide compensation to officers, and were
not issued for the purpose of manipulating the timing of an ownership
change, or for another prescribed purpose, it appears that such options
will not be required to be considered to have been exercised.
Other regulations provide that shares held in the name of an
investment advisor may be deemed to be owned by the persons represented
by such investment advisor in relation to their relative economic
interest, based on the facts and circumstances. Shares acquired by a 5%
stockholder during a three-year testing period are deemed to have been
acquired proportionately from each public group of stockholders in
existence prior to the 5% stockholder's purchase of such shares.
Based upon an analysis of its known 5% stockholders during the past
three years, the Company believes that the initial offering of the
Warrants did not cause an "ownership change" to have occurred. However,
no assurance may be given that an "ownership change" will not occur as a
result of the transactions contemplated hereby or in the future as a
result of the cumulative effect of the transactions contemplated hereby
and other acquisitions and transfers of Common Stock.
Section 382 of the Code provides that, if the amount of Net Unrealized
Built-in Losses of a corporation, generally, the cumulative amount by
which its tax basis in its assets exceeds the fair market value of such
assets, are greater than the lesser of: (i) 15 percent of the fair
market value of the corporation's assets or (ii) $10 million, then the
corporation's Net Unrealized Built-In Losses will be subject to
limitation under Section 382 of the Code if the corporation were to
experience an "ownership change," as defined.
Management of the Company believes, based upon a review of its
consolidated assets and liabilities undertaken in connection herewith,
that, its unrealized built-in gains (generally, the amount by which the
fair market value of certain assets of the Company and the Bank exceed
the tax basis of such assets), when netted against its unrealized built-
in losses (including the reserve for possible loan losses), would result
in an amount of Net Unrealized Built-In Losses that would be less than
the applicable threshold amounts set forth above. Accordingly,
management believes that, in the event of an "ownership change" in
conjunction with the transactions contemplated hereby, the Company and
the Bank would be considered to have no Net Unrealized Built-In Losses
and that it would continue to be able to utilize its Built-in Losses
without limitation. No assurance can be given that the IRS would concur
with the Company's review of its assets and liabilities and its
conclusion that no limitation would apply to the deduction of Built-in
Losses by the Company and the Bank.
If an "ownership change" occurs with respect to the Company and the
Bank, an annual limitation (the "Section 382 Limitation") would be
imposed pursuant to Section 382 of the Code on the rate at which net
operating loss carryforwards could be deducted against taxable income.
In addition, if the Net Unrealized Built-In Losses of the Company and
the Bank were deemed to exceed the above threshold amounts, the Company
would be limited to the Section 382 Limitation in the rate at which it
could deduct its Built-in Losses as they are recognized. The Section
382 Limitation would be computed by multiplying the aggregate fair
market value of the Common Stock immediately prior to an "ownership
change" by the then-applicable interest rate published by the IRS for
this purpose. Based upon the market value of the outstanding Common
Stock on December 31, 1994, Section 382 could limit the Company's
ability to utilize in any one year more than $919,000 of its net
operating loss carryforward and its as yet unrecognized Built-in Losses
in the event that the Offering were deemed to result in an "ownership
change." The limitation on the use of Built-in Losses would apply only
with respect to Built-in Losses recognized in the five year period
beginning on the date of the "ownership change." Further, the
legislative history regarding Section 382 of the Code provides that
Built-In Losses may only be carried forward, and may not be carried
back. Accordingly, if the Section 382 Limitation were to apply to the
Company and the Bank to limit the rate of utilization of such losses, it
is uncertain whether the Company and the Bank would be able to fully
utilize their net operating loss carryforward and Built-in-Losses in the
current, or a past or future year.
Transactions in shares of Common Stock which generally are beyond the
control of the Company, could result in an unanticipated increase in the
ownership of Common Stock by one or more 5% shareholders. If a
sufficient number of shares of Common Stock were sold or purchased by an
applicable stockholder group in the current or future years, an
ownership change could occur and the Section 382 Limitation may then be
applicable to the Company and its subsidiaries. In such circumstances,
the determination whether the Company and its subsidiaries have Net
Unrealized Built-in Losses in excess of the applicable threshold amounts
would be made as of the date of such a future "ownership change".
RESTRICTIONS ON ACQUISITION OF THE COMPANY
GENERAL
The Certificate of Incorporation and Bylaws of the Company, the DGCL
and applicable federal laws and regulations contain certain provisions
which may be deemed to have a potential anti-takeover effect. Such
provisions may have the effect of discouraging a future takeover attempt
which is not approved by the Board of Directors but which the Company's
stockholders may deem to be in their best interest or in which
stockholders may receive a substantial premium for their shares over
then current market prices. As a result, stockholders who might desire
to participate in such a transaction may not have an opportunity to do
so. Certain of such provisions also may make it more difficult for
stockholders of the Company to remove members of its Board of Directors
and management. The Company is not aware of any existing or threatened
effort to acquire control of the Company.
The following description of certain provisions of the Certificate of
Incorporation and Bylaws of the Company, the DGCL and applicable federal
laws and regulations is necessarily general and is qualified by
reference to such Certificate of Incorporation and Bylaws, the DGCL and
applicable federal laws and regulations.
CERTIFICATE OF INCORPORATION AND BYLAWS
AUTHORIZED BUT UNISSUED SHARES OF CAPITAL STOCK. The Company
currently has 1,000,000 authorized but unissued shares of Preferred
Stock and 6,000,000 authorized shares of Common Stock, of which
3,275,000 shares were issued and outstanding as of February 28, 1995.
As a general matter, the existence of unissued and unreserved shares of
capital stock provides a board of directors with the ability to cause
the issuance of shares of capital stock under circumstances that might
prevent or render more difficult or costly the completion of a takeover
of a company by diluting the voting or other rights of any proposed
acquiror, by creating a substantial voting block in institutional or
other hands that might undertake to support the position of a board of
directors, by effecting an acquisition that might complicate or preclude
a takeover or otherwise.
The Board of Directors also has the authority to issue shares of
Preferred Stock with such terms as it deems advisable. In the event of
a proposed merger, tender offer or other attempt to gain control of the
Company which the Board of Directors does not approve, the Board of
Directors could authorize the issuance of a series of Preferred Stock
with rights and preferences which could impede the completion of such a
transaction. An effect of the possible issuance of Preferred Stock,
therefore, may be to deter a future takeover attempt. See "Description
of Capital Stock - Preferred Stock."
In addition to the authorized but unissued shares of Common Stock and
Preferred Stock, the Company has adopted a shareholder rights plan which
generally would cause substantial dilution to a person or group that
acquires 20% or more of the outstanding shares of Common Stock. See
"Description of Capital Stock - Preferred Stock Purchase Rights."
BOARD OF DIRECTORS. The Certificate of Incorporation provides that
the Board of Directors of the Company shall be divided into three
classes as nearly equal in number as the then total number of directors
permits, with one class to be elected annually for a term of three years
and until their successors are elected and qualified. See "Management
and Principal Stockholders - Board of Directors." Vacancies occurring
in the Board of Directors of the Company by reason of an increase in the
number of directors may be filled by a vote of 67% of the remaining
directors, and any directors so chosen shall hold office until the next
election of directors by stockholders and until their successors are
elected and qualified. Any other vacancy in the Board of Directors,
whether by reason of death, resignation, disqualification, removal or
other cause, may be filled by a vote of 67% of the remaining directors,
and any directors so chosen shall hold office until the next election of
the class for which such directors shall have been chosen and until
their successors are elected and qualified.
Directors of the Company may be removed from office only for cause by
the affirmative vote of the holders of 67% or more of the outstanding
shares of Common Stock entitled to vote generally in the election of
directors. Cause for removal exists only if the director whose removal
is proposed either has been convicted of a felony or has been adjudged
by a court of competent jurisdiction to be liable for gross negligence
or misconduct in the performance of such directors' duty to the Company.
MEETINGS OF STOCKHOLDERS. Special meetings of stockholders of the
Company, for any purpose or purposes, may be called only upon the
affirmative vote of 67% of the Board of Directors and may not be called
by the stockholders of the Company.
STOCKHOLDER NOMINATIONS AND PROPOSALS. The Certificate of
Incorporation of the Company generally provides that stockholders must
provide the Company with written notice of stockholder nominations for
election as directors and stockholder proposals not later than 30 days
prior to the date of the scheduled annual meeting; provided, however,
that if fewer than 21 days' notice of the meeting is given to
stockholders, such written notice must be received not later than the
close of the tenth day following the day on which notice of the meeting
was mailed to stockholders. Stockholder proposals which are proposed to
be included in the Company's proxy materials must be submitted in
accordance with the notice and other requirements of Rule 14a-8 under
the Exchange Act. In each case the stockholder also is required to
submit specified information regarding such stockholder and the proposed
nominee(s) and/or business to be acted upon at a meeting of
stockholders.
SUPERMAJORITY PROVISION. The Certificate of Incorporation of the
Company includes a provision which generally requires the affirmative
vote of 67% of the Company's stockholders to approve a merger or
consolidation involving the Company or the sale, lease, exchange or
other disposition of all or substantially all of the assets of the
Company. This voting requirement is not applicable, however, if the
Board of Directors of the Company shall have approved the transaction by
a vote of 67% of the entire Board.
FAIR PRICE PROVISION. The Certificate of Incorporation includes a
provision which governs any proposed "business combination" (defined
generally to include certain sales, purchases, exchanges, leases,
transfers, dispositions or acquisitions of assets, mergers or
consolidations, or certain reclassifications of securities of the
Company) between the Company or its subsidiaries, on the one hand, and a
"Related Person," on the other hand. A "Related Person" is defined
generally to include any person, partnership, corporation, group or
other entity (other than the Company and its subsidiaries) which is the
beneficial owner (as defined) of 10% or more of the shares of the
Company entitled to vote generally in an election of directors ("Voting
Shares").
Under the Certificate of Incorporation, if certain specified
conditions are not met, neither the Company nor any of its subsidiaries
may become a party to any business combination with a Related Person
without the prior affirmative vote at a meeting of the Company's
stockholders by the holders of at least 80% of all shares outstanding
and entitled to vote thereon (the Company's "Voting Shares"), voting
separately as a class, and by an "Independent Majority of Stockholders,"
which is defined to mean the holders of a majority of the outstanding
Voting Shares that are not beneficially owned, directly or indirectly,
by a Related Person. If such approval were obtained, the specific
conditions would not have to be met. Such conditions also would not
have to be met if the Board of Directors approved the business
combination at times and by votes specified in the Certificate of
Incorporation. The conditions necessary to avoid the vote of 80% of the
Company's outstanding Voting Shares and of an Independent Majority of
Stockholders include conditions providing that, upon consummation of the
business combination, the stockholders would receive at least a certain
minimum price per share for their shares.
AMENDMENTS TO CERTIFICATE OF INCORPORATION AND BYLAWS. The
affirmative vote of a majority of the issued and outstanding voting
stock of the Company is required to amend the Certificate of
Incorporation, with the exception of certain sections thereof, including
provisions relating to business combinations, which can only be amended
by a vote of 67% of the whole Board of Directors, a majority of the
Continuing Directors, as defined, the vote of at least 67% of the Voting
Shares, and an Independent Majority of Stockholders entitled to vote
thereon.
The Bylaws may be altered, amended or repealed or new bylaws adopted
by the Board of Directors at a regular or special meeting upon the
affirmative vote of both 67% of the whole Board of Directors and a
majority of the Continuing Directors, as defined. The Bylaws may also
be altered, amended or repealed by the stockholders upon the affirmative
vote of 67% of the outstanding Voting Shares of the Company and by an
Independent Majority of Stockholders.
FEDERAL LAWS AND REGULATIONS
Federal laws and regulations generally require any person who intends
to acquire control of a savings and loan holding company or savings
institution to give at least 60 days prior written notice to the OTS.
"Control" is defined as the power, directly or indirectly, to direct the
management or policies of a savings institution or to vote 25% or more
of any class of voting securities of the savings institution. In
addition to the foregoing restrictions, a company must secure the
approval of the OTS before it can acquire control of a savings
institution. Under federal regulations, a person (including business
entities) is deemed conclusively to have acquired control if, among
other things, such person acquires: (a) 25% or more of any class of
voting stock of the savings institution; (b) irrevocable proxies
representing 25% or more of any class of voting stock of the savings
institution; (c) any combination of voting stock and irrevocable proxies
representing 25% or more of any class of such institution's voting
stock; or (d) control of the election of a majority of the directors of
the savings institution. In addition, a rebuttable presumption of
control arises in the event a person acquires more than 10% of any class
of voting stock (or more than 25% of any class of non-voting stock) and
is subject to one or more of eight enumerated control factors. Such
regulations also set forth rebuttable presumptions of concerted action
and the procedures to follow to rebut any such presumptions. The OTS is
specifically empowered to disapprove such an acquisition of control if
it finds, among other reasons, that (i) the acquisition would
substantially lessen competition; (ii) the financial condition of the
acquiring person might jeopardize the institution or its depositors; or
(iii) the competency, experience or integrity of the acquiring person
indicates that it would not be in the interest of the depositors, the
institution or the public to permit the acquisition of control by such
person.
DELAWARE GENERAL CORPORATION LAW
Section 203 of the DGCL generally provides that a Delaware corporation
shall not engage in any "business combination" with an "interested
stockholder" for a period of three years following the date that such
stockholder became an interested stockholder unless (1) prior to such
date the board of directors of the corporation approved either the
business combination or the transaction which resulted in the
stockholder becoming an interested stockholder; or (2) upon consummation
of the transaction which resulted in the stockholder becoming an
interested stockholder, the interested stockholder owned at least 85% of
the voting stock of the corporation outstanding at the time the
transaction commenced, excluding for this purpose, shares owned by
persons who are directors and also officers and shares owned by employee
stock ownership plans in which employee participants do not have the
right to determine confidentially whether the shares held subject to the
plan will be tendered in a tender offer or exchange offer; or (3) on or
subsequent to such date, the business combination is approved by the
board of directors and authorized at an annual or special meeting of
stockholders by the affirmative vote of at least 66 2/3% of the
outstanding voting stock which is not owned by the interested
stockholder. The three-year prohibition on business combinations with
an interested stockholder does not apply under certain circumstances,
including business combinations with a corporation which does not have a
class of voting stock that is (i) listed on a national securities
exchange, (ii) authorized for quotation on an inter-dealer quotation
system of a registered national securities association, or (iii) held of
record by more than 2,000 stockholders, unless in each case this result
was directly or indirectly caused by the interested stockholder.
An "interested stockholder" generally means any person that (i) is the
owner of 15% or more of the outstanding voting stock of the corporation
or (ii) is an affiliate or associate of the corporation and was the
owner of 15% or more of the outstanding voting stock of the corporation
at any time within the three-year period immediately prior to the date
on which it is sought to be determined whether such person is an
interested stockholder; and the affiliates and associates of such a
person. The term "business combination" is broadly defined to include a
wide variety of transactions, including mergers, consolidations, sales
of 10% or more of a corporation's assets and various other transactions
which may benefit an interested stockholder.
DESCRIPTION OF CAPITAL STOCK
The Company is currently authorized to issue up to 6,000,000 shares of
Common Stock, par value $1.00 per share, and 1,000,000 shares of
Preferred Stock, par value $.01 per share. At February 28, 1995 the
Company had 3,275,000 shares of Common Stock issued and outstanding and
no shares of Preferred Stock issued or outstanding. THE CAPITAL STOCK
OF THE COMPANY DOES NOT REPRESENT OR CONSTITUTE A DEPOSIT ACCOUNT AND IS
NOT INSURED BY THE FDIC.
COMMON STOCK
GENERAL. Each share of Common Stock has the same relative rights and
is identical in all respects with each other share of Common Stock. The
Common Stock is not subject to call for redemption and, upon receipt by
the Company of the full purchase price therefor, each share of Common
Stock offered hereby will be fully paid and non-assessable.
VOTING RIGHTS. Except as provided in any resolution or resolutions
adopted by the Board of Directors establishing any series of Preferred
Stock, the holders of Common Stock possess exclusive voting rights in
the Company. Each holder of Common Stock is entitled to one vote for
each share held on all matters voted upon by stockholders. Stockholders
are not permitted to cumulate votes in elections of directors.
DIVIDENDS. The holders of the Common Stock are entitled to such
dividends as may be declared from time to time by the Board of Directors
of the Company out of funds legally available therefor. For a
discussion of the requirements and limitations relating to the Company's
ability to pay dividends to stockholders and the ability of the Bank to
pay dividends to the Company. See "Market Price for Common Stock and
Dividends."
PRE-EMPTIVE RIGHTS. Holders of the Common Stock do not have any pre-
emptive rights with respect to any shares which may be issued by the
Company in the future; the Company, therefore, may sell shares of Common
Stock without first offering them to its then-existing stockholders.
LIQUIDATION. In the event of any liquidation, dissolution or winding
up of the Company, the holders of the Common Stock would be entitled to
receive, after payment of all debts and liabilities of the Company, all
assets of the Company available for distribution, subject to the rights
of the holders of any Preferred Stock which may be issued with a
priority in liquidation or dissolution over the holders of the Common
Stock.
PREFERRED STOCK
The Board of Directors of the Company is authorized to issue Preferred
Stock and to fix and state voting powers, designations, preferences or
other special rights of such shares and the qualifications, limitations
and restrictions thereof. The Preferred Stock may be issued in
distinctly designated series, may be convertible into Common Stock and
may rank prior to the Common Stock as to dividend rights, liquidation
preferences, or both.
The authorized but unissued shares of Preferred Stock (as well as the
authorized but unissued and unreserved shares of Common Stock) are
available for issuance in future mergers or acquisitions, in a future
public offering or private placement or for other general corporate
purposes. Except as otherwise required to approve the transaction in
which the additional authorized shares of Preferred Stock would be
issued, stockholder approval generally would not be required for the
issuance of these shares. Depending on the circumstances, however,
stockholder approval may be required pursuant to the requirements for
continued listing of the Common Stock on the Nasdaq National Market
System or the requirements of any exchange on which the Common Stock may
then be listed.
PREFERRED STOCK PURCHASE RIGHTS
In April 1990, the Company's Board of Directors declared a dividend
distribution of one preferred stock purchase right ("Right") for each
outstanding share of Common Stock. Each Right entitles each registered
holder, upon the occurrence of certain events, to purchase from the
Company a unit consisting of one one-hundredth of a share (a "Rights
Unit") of Series A Junior Participating Preferred Stock, par value $.01
per share, at a purchase price of $40.00 per Rights Unit (the "Purchase
Price"), subject to adjustment. The description and terms of the Rights
are set forth in a Rights Agreement (the "Rights Agreement") between the
Company and American Stock Transfer and Trust Company, as Rights Agent.
The Rights will separate from the Common Stock and be distributed on a
date ("Distribution Date") which will occur upon the earlier of (i) ten
business days following a public announcement that a person or group of
affiliated or associated persons, other than employee benefit plans of
the Company (an "Acquiring Person"), has acquired beneficial ownership
of 20% or more of the outstanding shares of Common Stock (the "Stock
Acquisition Date"), or (ii) ten business days (or such later date as may
be determined by action of the Board of Directors of the Company prior
to such time as any person becomes an Acquiring Person) following the
commencement of a tender offer or exchange offer that would result in a
person or group beneficially owning 20% or more of such outstanding
shares of Common Stock.
Until the Distribution Date, (i) the Rights will be evidenced by the
Common Stock certificates and will be transferred with and only with
such Common Stock certificates, (ii) new Common Stock certificates
issued after the Rights were declared, including shares to be issued in
the Offering, will contain a notation incorporating by reference the
Rights Agreement and (iii) the surrender for transfer of any certificate
for Common Stock outstanding will also constitute the transfer of the
Rights associated with the Common Stock represented by such certificate.
As soon as practicable after the Distribution Date, separate
certificates representing the Rights (the "Rights Certificates") will be
mailed to the holders of record of the Common Stock as of the close of
business on the Distribution Date and, thereafter, the separate Rights
Certificates alone will represent the Rights. The Rights will not be
exercisable until the Distribution Date and will cease to be exercisable
at the close of business on May 11, 2000, unless the Rights are earlier
redeemed by the Company as described below.
Unless the Rights are redeemed earlier pursuant to the Rights
Agreement, in the event that, at any time following the Stock
Acquisition Date, (i) the Company is involved in a merger or other
business combination in which the Company is not the surviving
corporation or in which the Common Stock of the Company is changed into
or exchanged for other securities of any other person or cash or any
other property, or (ii) 50% or more of the Company's assets or earning
power is sold or transferred, each holder of a Right shall thereafter
have the right to receive, upon exercise and payment of the Purchase
Price, common stock of the acquiring company having a value equal to two
times the exercise price of the Right. In addition, unless the Rights
are redeemed pursuant to the Rights Agreement, in the event that any
person or group of affiliated or associated persons becomes an Acquiring
Person, the Rights Agreement provides that proper provision shall be
made so that each holder of a Right will thereafter have the right to
receive, upon exercise and payment of the Purchase Price, Common Stock
(or, in certain circumstances, cash, property or other securities of the
Company) having a value equal to two times the exercise price of the
Right. The events set forth in this paragraph are referred to in the
Rights Agreement as a "Triggering Event." Following the occurrence of a
Triggering Event, any Rights that are, or (under certain circumstances)
were, beneficially owned by any Acquiring Person shall immediately
become null and void.
At any time after a person becomes an Acquiring Person, the Company
may exchange all or part of the Rights (other than Rights which
previously have been voided as set forth above) for shares of Common
Stock (an "Exchange") at an exchange ratio of one share per Right, as
such may be appropriately adjusted to reflect any stock split or similar
transaction.
In general, the Company may redeem the Rights in whole, but not in
part, at any time until ten days following the Stock Acquisition Date,
at a price of $.01 per Right ("Redemption Price"). Immediately upon the
action of the Board of Directors ordering redemption of the Rights, the
Rights will terminate and the only right of the holders of Rights will
be to receive the Redemption Price. Until a Right is exercised or
exchanged, the holder thereof, as such, will have no rights as a
stockholder of the Company, including the right to vote or to receive
dividends.
Preferred Stock purchasable upon exercise of the Rights will not be
redeemable. Each share of Preferred Stock will be entitled to a minimum
preferential quarterly dividend payment of $1 per share but will be
entitled to an aggregate dividend of 100 times the dividend declared per
share of Common Stock. In the event of liquidation, the holders of the
Preferred Stock will be entitled to a minimum preferential liquidation
payment of $100 per share but will be entitled to an aggregate payment
of 100 times the payment made per share of Common Stock. Each share of
Preferred Stock will have 100 votes, voting together with the Common
Stock. Finally, in the event of any merger, consolidation or other
transaction in which shares of Common Stock are exchanged, each share of
Preferred Stock will be entitled to receive 100 times the amount
received per share of Common Stock.
The Rights may have certain antitakeover effects. The Rights would
cause substantial dilution to a person or group that acquires 20% or
more of the outstanding shares of Common Stock of the Company if a
Triggering Event thereafter occurs without the Rights having been
redeemed or in the event of an Exchange. However, the Rights should not
interfere with any merger or other business combination approved by the
Board of Directors because the Rights are redeemable under certain
circumstances.
TRANSFER AGENT
The transfer agent and registrar for the Warrants and the Common Stock
is American Stock Transfer & Trust Company, New York, New York.
EXPERTS
The consolidated financial statements of the Company as of December
31, 1994 and 1993 and for each of the two years in the period ended
December 31, 1994 have been audited by Coopers & Lybrand L.L.P.,
independent certified public accountants, as stated in their report
thereon dated January 18, 1995. Such consolidated financial statements
are incorporated herein by reference in reliance upon such report given
upon the authority of such firm as experts in accounting and auditing.
The consolidated financial statements of the Company for the year
ended December 31, 1992 have been audited by KPMG Peat Marwick LLP,
independent certified public accountants, as stated in their report
thereon dated January 22, 1993, except for the last paragraph thereof
which is as of February 16, 1993. Such report contains an explanatory
paragraph that states that (i) at December 31, 1992, the Bank failed to
meet the minimum capital thresholds under the Federal Deposit Insurance
Corporation Improvement Act of 1991 to be considered "adequately
capitalized" and was categorized as "significantly undercapitalized,"
(ii) the Bank had filed a capital plan for attaining the required levels
of regulatory capital and that such plan had been accepted by the OTS,
but that on February 16, 1993 the Bank had submitted an amendment to its
plan and the Bank had not received notification as to acceptance or
rejection of its amended capital plan, (iii) because the Bank did not
meet the minimum capital thresholds to be considered "adequately
capitalized" it was subject to certain operating restrictions such as
growth limitations on executive compensation, and restriction on deposit
interest rates, (iv) failure to increase its capital ratios in
accordance with its capital plan or further declines in its capital
ratios exposed the Bank to additional restrictions and regulatory
actions, including regulatory take-over, (v) there was substantial doubt
abut the Company's ability to continue as a going concern, and (vi) the
ability of the Company to continue as a going concern is dependent upon
many factors including regulatory action and the ability of management
to achieve its plan. Such consolidated financial statements are
incorporated herein by reference in reliance upon such report given upon
the authority of such firm as experts in accounting and auditing.
LEGAL MATTERS
Certain legal matters relating to the Warrants and the underlying
Common Stock will be passed upon for the Company by Elias, Matz, Tiernan
& Herrick L.L.P., 734 15th Street, N.W., 12th Floor, Washington, D.C.
20005.
APPENDIX A
TERMS OF THE WARRANTS
1. The Warrants which comprise a part of the Units are part of a
duly authorized issue of 300,000 Warrants evidencing the right to
purchase an aggregate of up to 300,000 shares of Common Stock and are
issued in connection with the Company's offering of 12 Units, each Unit
consisting of $250,000 in principal amount of the Company's 8.25%
Subordinated Notes due 1999 (the "Notes") and 25,000 Warrants to
purchase 25,000 shares of Common Stock.
2. The shares of Common Stock of the Company subject to purchase
hereunder are the shares of Common Stock of the Company as they may
exist on the date of the exercise of the Warrants, whether or not the
rights or interests represented by such shares are equivalent to the
rights or interests represented by the shares of Common Stock of the
Company authorized at the date of initial issuance of the Warrants.
3. The Warrants are subject to the following terms and conditions:
(a) The Warrants are exercisable, at the option of the holder
hereof, either in whole or from time to time in part (but not as to a
fractional share of Common Stock), at any time during the period
commencing on the Closing Date (as defined in Schedule C to the
Agreement) and terminating on the Expiration Date, as defined below.
The Warrants shall expire in their entirety and no longer be
exercisable at the close of business on the Expiration Date. Upon
surrender of the Warrant Certificate and payment of the Purchase Price
(as defined below), the Company shall issue and deliver or instruct
its transfer agent to issue and cause to be delivered with all
reasonable dispatch to or upon the written order of the holder and in
such name or names as the holder may designate, a certificate or
certificates for the number of full shares of Common Stock so
purchased upon the exercise of such Warrants. In case of the purchase
of less than all the shares purchasable under the Warrants owned by
the holder, the Company shall cancel the Warrant Certificate upon the
surrender thereof and shall execute and deliver or instruct its
transfer agent to deliver a new Warrant Certificate of like tenor for
the balance of the shares purchasable thereunder.
(b) The term "Expiration Date" shall mean 5:00 p.m., Eastern Time,
on June 30, 1999, or if said Date shall in the Commonwealth of
Pennsylvania be a holiday or a day on which financial institutions are
authorized to close, then the next following date which in the
Commonwealth of Pennsylvania is not a holiday or a day on which
financial institutions are authorized to close.
(c) The purchase price for each share of Common Stock purchasable
pursuant to the exercise of the Warrants (hereafter referred to as the
"Purchase Price") shall be $6.00 per share subject to adjustment as
provided in subsection (i) below. Payment of the aggregate Purchase
Price shall be paid by check, money order, certified or bank cashier's
check or by wire transfer.
(d) The Company shall not be required to issue certificates
representing fractions of shares of Common Stock.
(e) The Company will, at all times while the Warrants are
exercisable, keep reserved, out of its authorized Common Stock, a
number of shares of Common Stock sufficient to provide for the
exercise of the rights of purchase represented by the outstanding
Warrants. Promptly after the Expiration Date, no shares will be
subject to reservation in respect of such Warrants. The Company will
take all such action as may be necessary to insure that all shares of
capital stock issued upon exercise of these Warrants will be duly and
validly authorized and issued and fully paid and non-assessable.
(f) Subject to compliance with the provisions of Section 7 of the
Agreement, the Warrants and all rights hereunder are transferable in
whole or in part upon the books of the Company by the registered
holder thereof in person or by his duly authorized attorney, upon
surrender of the Warrants duly endorsed, at the principal office of
the Company or at such other office as shall have theretofore been
designated by the Company by notice pursuant hereto; provided,
however, the Warrants may not be transferred prior to the earlier to
occur of the date of effectiveness of the registration statement
relating to the registration of the Warrants for resale or June 30,
1995.
(g) Upon receipt by the Company of evidence reasonably
satisfactory to it of the loss, theft, or destruction or mutilation of
a Warrant Certificate, and in case of loss, theft or destruction, of
indemnity or security reasonably satisfactory to it, and reimbursement
to the Company of all reasonable expenses incidental thereto, and upon
surrender and cancellation of such Warrant Certificate, if mutilated,
the Company will make and deliver or instruct its transfer agent to
deliver a new Warrant Certificate of like tenor, in lieu of such
Warrant Certificate.
(h) Prior to the exercise of the Warrants, the holder of such
Warrants shall not be entitled to any rights of a stockholder of the
Company, including without limitation the right to vote, to receive
dividends or other distributions.
(i) The number and kind of securities purchasable upon the
exercise of each Warrant and the Purchase Price shall be subject to
adjustment from time to time upon the happening of certain events as
hereinafter set forth:
(1) The number of shares purchasable upon the exercise of each
Warrant and the Purchase Price shall be subject to adjustment as
follows:
(A) In case the Company shall (i) pay a dividend in shares of
Common Stock or make a distribution in shares of Common Stock,
(ii) subdivide its outstanding shares of Common Stock into a
greater number of shares, (iii) combine its outstanding shares of
Common Stock into a smaller number of shares of Common Stock, or
(iv) issue by reclassification of its shares of Common Stock or
capital reorganization other securities of the Company, the
number of shares purchasable upon exercise of each Warrant
immediately prior thereto shall be adjusted so that the holder of
each Warrant shall be entitled to receive the kind and number of
shares or other securities of the Company which the holder would
have owned or have been entitled to receive after the happening
of any of the events described above, had such Warrant been
exercised immediately prior to the happening of such event or any
record date with respect thereto. An adjustment made pursuant to
this Section (i)(1)(A) shall become effective immediately after
the effective date of such event retroactive to the record date,
if any, for such event.
(B) No adjustment in the number of shares purchasable
hereunder shall be required unless such adjustment would require
an increase or decrease of at least one percent (1%) in the
number of shares purchasable upon the exercise of each Warrant;
provided, however, that any adjustments which by reason of this
Section (i)(1)(B) are not required to be made shall be carried
forward and taken into account in any subsequent adjustment; and,
provided, further, that all adjustments carried forward by reason
of this Section (i)(1)(B) shall be taken into account and the
number of shares purchased upon the exercise of each Warrant
shall be adjusted as of seven (7) days prior to the Expiration
Date. If any adjustment is carried forward pursuant to this
Section (i)(1)(B), the Company may make the election available
pursuant to Treasury Regulation (section) 1.305-3(d)(2)(iii).
All calculations shall be made to the nearest one-hundredth of a
share.
(C) Whenever the number of shares purchasable upon the
exercise of each Warrant is adjusted, as herein provided, the
Purchase Price payable upon exercise of each Warrant shall be
adjusted by multiplying the Purchase Price immediately prior to
the adjustment by a fraction, of which the numerator shall be the
number of shares purchasable upon the exercise of each Warrant
immediately prior to the adjustment, and of which the denominator
shall be the number of shares so purchasable immediately
thereafter.
(D) For the purpose of this Subsection (i)(1), the term
"shares of Common Stock" shall mean (i) the class of stock
designated as the Common Stock of the Company at the Closing
Date, or (ii) any other class of stock resulting from successive
changes or reclassifications of such shares consisting solely of
changes in par value, or from par value to no par value, or from
no par value to par value. In the event that at any time, as a
result of an adjustment made pursuant to Section (i)(1)(A) above,
the holder shall become entitled to purchase any shares of the
Company other than shares of Common Stock, thereafter the number
of such other shares so purchasable upon exercise of each Warrant
and the Purchase Price of such shares shall be subject to
adjustment from time to time in a manner and on terms as nearly
equivalent as practicable to the provisions with respect to the
shares contained in Section (i)(1)(A) through (i)(1)(C),
inclusive, above.
(2) Whenever the number of shares purchasable upon the exercise
of each Warrant or the Purchase Price of such shares is adjusted,
as herein provided, the Company shall cause to be mailed by first
class mail, postage prepaid, to each holder, notice of such
adjustment or adjustments setting forth the number of shares
purchasable upon the exercise of each Warrant and the Purchase
Price of such shares after such adjustment, setting forth a brief
statement of the facts requiring such adjustment and setting forth
the computation by which such adjustment was made. Any failure by
the Company to give notice to the holder or any defect therein
shall neither affect the validity of such adjustment or of the
event resulting in the adjustment, nor of the holder's rights to
such adjustment.
(3) Except as provided in Sections (i)(1) and (i)(5) hereof, no
adjustment in respect of any dividends or distributions shall be
made during the term of a Warrant or upon the exercise of a
Warrant.
(4) (A) In case of any consolidation of the Company with or
merger of the Company into another corporation or in case of any
sale or conveyance to another corporation of the property of the
Company as an entirety or substantially as an entirety, such
successor or purchasing corporation may assume the obligations
hereunder, and may execute with the Company an agreement that
each holder shall have the right thereafter upon payment of the
Purchase Price in effect immediately prior to such transaction to
purchase upon exercise of each Warrant the kind and amount of
shares and other securities and property (including cash) which
he would have owned or have been entitled to receive after the
happening of such consolidation, merger, sale or conveyance had
such Warrant been exercised immediately prior to such action.
The Company shall mail by first class mail, postage prepaid, to
each Holder, notice of the execution of any such agreement. Such
agreement shall provide for adjustments, which shall be as nearly
equivalent as may be practicable to the adjustments provided for
in Section (i). The provisions of this Section (i)(4) shall
similarly apply to successive consolidations, mergers, sales or
conveyances.
(B) In the event that such successor corporation does not
execute such an agreement with the Company as provided in Section
(i)(4)(A), then each holder shall be entitled to exercise
outstanding Warrants during a period of at least 30 days, which
period terminates at least seven (7) days prior to consummation
of the consolidation, merger, sale or conveyance, and thereby
receive consideration in the consolidation, merger, sale or
reconveyance on the same basis as other previously outstanding
shares of the same class as the shares acquired upon exercise.
Warrants not exercised in accordance with this Section (i)(4)(B)
before consummation of the transaction will be cancelled and
become null and void. The Company shall mail by first class
mail, postage prepaid, to each holder, at least 10 days prior to
the first date on which the Warrant shall become exercisable
pursuant to the provisions of this Section (i)(4)(B), notice of
the proposed transaction setting forth the first and last date on
which the holder may exercise outstanding Warrants and a
description of the terms of this Warrant providing for
cancellation of the Warrants in the event that Warrants are not
exercised by the prescribed date.
(C) The Company's failure to give any notice required by this
Section (i)(4) or any defect therein shall not affect the
validity of any such agreement, consolidation, merger, sale or
conveyance of property.
(5) In case (a) the Company shall make any distribution of its
assets to holders of its shares of Common Stock as a liquidation or
partial liquidation dividend or (b) the Company shall liquidate,
dissolve or wind up its affairs (other than in connection with a
consolidation, merger or sale of all or substantially all of its
property, assets and business as an entity), then the Company shall
cause to be mailed to each holder, by first class mail, at least 20
days prior to the applicable record date, a notice stating the date
on which such distribution, liquidation, dissolution or winding up
is expected to become effective, and the date on which it is
expected that holders of shares of Common Stock of record shall be
entitled to exchange their shares of Common Stock for securities or
other property or assets (including cash) deliverable upon such
distribution, liquidation, dissolution or winding up, and that each
holder may exercise outstanding Warrants during the 20-day period
and, thereby, receive consideration in the liquidation on the same
basis as other previously outstanding shares of the same class as
the shares acquired upon exercise. The Company's failure to
provide the notice required by this Section (i)(5) or any defect
therein shall not affect the validity of such distribution,
liquidation, dissolution or winding up.
(6) Irrespective of any adjustments in the Purchase Price or the
number or kind of shares purchasable upon the exercise of the
Warrants, Warrants theretofore or thereafter issued may continue to
express the same price and number and kind of shares as are stated
in the Warrants initially issued.
(j) the Company may deem and treat the registered holder of the
Warrants as the absolute owner of such Warrants (notwithstanding any
notations of ownership or writing on the Warrant Certificate
evidencing such Warrants made by anyone other than the Company) for
all purposes and shall not be affected by any notice to the contrary.
(k) All notices, requests, consents and other communications
hereunder shall be in writing and shall be deemed to have been made
when delivered or mailed first class postage prepaid or delivered to a
telegraph office for transmission:
(i) if to the registered holder of the Warrants, at the address
of such holder as shown on the books of the Company; or
(ii) if to the Company, Plymouth Meeting Executive Campus, 600
West Germantown Pike, Plymouth Meeting, Pennsylvania 19462-1003, or
at such other address as may have been furnished to the holder of
the Warrants in writing by the Company.
No person is authorized to give any information or
to make any representation not contained in this
Prospectus and any information or representation
not included herein must not be relied upon as
having been authorized by the Company. This
Prospectus does not constitute an offer of any
securities other than the securities to which it
relates or an offer to any person in any
jurisdiction where such an offer would be
unlawful. Neither the delivery of this Prospectus
nor any sale made hereunder shall, under any
circumstances, create any implication that there
has been no change in the affairs of the Company
since the date hereof.
_________________________
TABLE OF CONTENTS
_________________________
Page
Available Information . . . . . . . . . . . . . 2
Incorporation of Certain Documents
by Reference . . . . . . . . . . . . . . . 3
Summary . . . . . . . . . . . . . . . . . . . . 4
Selected Consolidated Financial
and Other Data . . . . . . . . . . . . . . . 7
Special Considerations . . . . . . . . . . . . 8
Use of Proceeds . . . . . . . . . . . . . . . . 12
Selling Warrant Holders . . . . . . . . . . . 13
Plan of Distribution . . . . . . . . . . . . . 14
Market Price for Common Stock
and Dividends . . . . . . . . . . . . . . . . 15
Regulatory Capital . . . . . . . . . . . . . . 17
Management and Principal
Stockholders . . . . . . . . . . . . . . . . 18
Description of the Warrants . . . . . . . . . . 20
Certain Federal Income Tax
Consequences Relating to
the Warrants . . . . . . . . . . . . . . . . 22
Restrictions on Acquisition
of the Company . . . . . . . . . . . . . . . 25
Description of Capital Stock . . . . . . . . . 30
Experts . . . . . . . . . . . . . . . . . . . . 33
Legal Matters . . . . . . . . . . . . . . . . . 34
Appendix A . . . . . . . . . . . . . . . . . A-1
PROGRESS
FINANCIAL
CORPORATION
300,000 WARRANTS
____________________
PROSPECTUS
____________________
________, 1995
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 14. Other Expenses of Issuance and Distribution.
The following table sets forth the estimated expenses in connection
with the issuance and distribution of the securities being registered,
all of which are being borne by the Registrant:
Securities and Exchange Commission ("Commission")
registration fee. . . . . . . . . . . . . . . . . . . . $ 620.69
Accounting fees and expenses . . . . . . . . . . . . . . 8,000.00
Legal fees and expenses . . . . . . . . . . . . . . . . . 15,000.00
Printing . . . . . . . . . . . . . . . . . . . . . . . . 1,000.00
Blue Sky qualification fees and expenses . . . . . . . . 1,000.00
Miscellaneous . . . . . . . . . . . . . . . . . . . . . . 379.31
$26,000.00
Item 15. Indemnification of Directors and Officers.
Section 145 of the Delaware General Corporation Law ("DGCL") sets
forth circumstances under which directors, officers, employees and
agents may be insured or indemnified against liability which they may
incur in their capacity as such. The Certificate of Incorporation and
Bylaws of the Company provide that the directors, officers, employees
and agents of the Company shall be indemnified to the full extent
permitted by law. Such indemnity shall extend to expenses, including
attorney's fees, judgments, fines and amounts paid in the settlement,
prosecution or defense of the foregoing actions. Section 102(b)(7) of
the DGCL sets forth circumstances which a director's personal liability
to a corporation or its stockholders for money damages for breach of
fiduciary duty as a director may be eliminated or limited. The
Certificate of Incorporation provides for the limitation of personal
liability of directors to stockholders for monetary damages to the
Company or its stockholders for such director's breach of fiduciary duty
as a director of the Company to the full extent permitted by law.
The Company carries a liability insurance policy for its officers and
directors.
ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.
The exhibits and financial statement schedules filed as a part of
this Registration Statement are as follows:
(a) List of Exhibits:
<TABLE>
Exhibit No. Exhibit Location
<S> <C> <C>
3(a) Certificate of Incorporation (1)
3(b) Bylaws (2)
4(a) Specimen Common Stock certificate (3)
4(b) Specimen Preferred Stock Purchase
Rights certificate (4)
4(c) Terms of Warrants (5)
5 Opinion of Elias, Matz, Tiernan &
Herrick L.L.P. regarding legality of
securities being registered E-2
10(a) Key Employee Stock Compensation Plan (3)
10(b) Amendment, dated December 15, 1987,
to Key Employee Stock Compensation
Plan (6)
10(c) 1993 Stock Incentive Plan (7)
10(d) 1993 Directors' Stock Option Plan (7)
10(e) Stockholders Rights Agreement, dated
April 25, 1990, between the
Registrant and American Stock
Transfer and Trust Company, as
Rights Agent (4)
13 Annual Report to Stockholders for the
year ended December 31, 1994 (8)
22 Subsidiaries of the Company (8)
24(a) Consent of Elias, Matz, Tiernan &
Herrick L.L.P. (contained in the
opinion included as Exhibit 5)
24(b) Consents of Independent Public Accountants E-5
25 Power of Attorney (included in the
signature page to this Registration
Statement)
</TABLE>
_______________
(1) Exhibit is incorporated by reference to the Registrant's Annual
Report on Form 10-K for the year ended December 31, 1987 filed by
the Registrant with the Commission.
(2) Exhibit is incorporated by reference to the Registrant's
Registration Statement on Form S-4 (File No. 33-3685) filed with the
Commission on March 3, 1986.
(3) Exhibit is incorporated by reference to the Registrant's
Registration Statement on Form S-8 (File No. 33-10160) filed with the
Commission on November 13, 1986.
(4) Exhibit is incorporated by reference to the Registrant's
Registration Statement on Form 8-A filed with the Commission on April
30, 1990.
(5) Appended to Prospectus.
(6) Exhibit is incorporated by reference to the Registrant's
Registration Statement on Form S-8 (File No. 33-19570) filed with the
Commission on January 19, 1988.
(7) Exhibit is incorporated by reference to the Registrant;
Registration Statement on Form S-1 (File No. 33-59218) filed with the
Commission on March 8, 1993.
(8) Incorporated by reference to the Registrant's Annual Report on
Form 10-KSB for the year ended December 31, 1994 filed with the
Commission on March 24, 1995.
(b) Financial Statement Schedules.
No financial statement schedules are filed because the required
information is not applicable or is included in the Consolidated
Financial Statements or related Notes.
ITEM 17. UNDERTAKINGS
The undersigned Registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being
made, a post-effective amendment to this Registration Statement:
(i) To include any prospectus required by Section 10(a)(3) of
the Securities Act of 1933;
(ii) To reflect in the 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;
(iii) To include any material information with respect to the
plan of distribution not previously disclosed in the Registration
Statement or any material change to such information in the Registration
Statement.
(2) That, for the purpose of determining any liability under the
Securities Act of 1933, each such post-effective amendment shall be
deemed to be a new registration statement relating to the securities
offered therein, and the offering of such securities at that time shall
be deemed to be the initial bona fide offering thereof.
(3) To remove from registration by means of a post-effective
amendment any of the securities being registered which remain unsold at
the termination of the offering.
Insofar as indemnification for liabilities arising under the
Securities Act of 1933 (the "Act") may be permitted to directors,
officers and controlling persons of the Registrant pursuant to the
foregoing provisions, or otherwise, the Registrant has been advised that
in the opinion of the Commission such indemnification is against public
policy and expressed in the Act, and is therefore, unenforceable. In
the event that a claim for indemnification against such liabilities
(other than the payment by the Registrant of expenses incurred or paid
by a director, officer or controlling person of the Registrant in the
successful defense of any action, suit or proceeding) is asserted by
such director, officer or controlling person in connection with the
securities being registered, the Registrant will, unless in the opinion
of its counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in the Act
and will be governed by the final adjudication of such issue.
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933,
the Registrant has duly caused this Registration Statement to be signed
on its behalf by the undersigned, thereunto duly authorized, in the City
of Plymouth Meeting, Commonwealth of Pennsylvania on the 31st day of
March 1995.
PROGRESS FINANCIAL CORPORATION
By: /s/ W. Kirk Wycoff Date: March 31, 1995
W. Kirk Wycoff
Director, President and
Chief Executive Officer
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. Each person whose signature
appears below hereby makes, constitutes and appoints W. Kirk Wycoff his
true and lawful attorney, with full power to sign for such person and in
such person's name and capacity indicated below any and all amendments
to this Registration Statement, hereby ratifying and confirming such
person's signature as it may be signed by said attorney to any and all
amendments.
/s/ W. Kirk Wycoff Date: March 31, 1995
W. Kirk Wycoff
Director, President and
Chief Executive Officer
(principal executive officer)
/s/ Peter J. Meier Date: March 31, 1995
Peter J. Meier
Vice President and Corporate
Controller (principal accounting
officer)
/s/ William O. Daggett, Jr. Date: March 31, 1995
William O. Daggett, Jr.
Director
/s/ John E. F. Corson Date: March 31, 1995
John E. F. Corson
Director
/s/ Donald F. U. Goebert Date: March 31, 1995
Donald F. U. Goebert
Director
/s/ Joseph R. Klinger Date: March 31, 1995
Joseph R. Klinger
/s/ Paul M. LaNoce Date: March 31, 1995
Paul M. LaNoce
Director
/s/ A. John May, III Date: March 31, 1995
A. John May, III
Director
/s/ William L. Mueller Date: March 31, 1995
William L. Mueller
Director
/s/ Charles J. Tornetta Date: March 31, 1995
Charles J. Tornetta
Director
<PAGE>
EXHIBIT 5
Opinion of Elias, Matz, Tiernan & Herrick L.L.P.
regarding legality of securities being registered
<PAGE>
[Form of Opinion]
, 1995
Board of Directors
Progress Financial Corporation
Plymouth Meeting Executive Campus
600 West Germantown Pike
Plymouth Meeting, Pennsylvania 19462-1060
Gentlemen:
We are acting as special counsel to Progress Financial Corporation,
Plymouth Meeting, Pennsylvania (the "Company"), in connection with the
preparation and filing with the Securities and Exchange Commission ("SEC")
pursuant to the Securities Act of 1933, as amended, of a Registration
Statement on Form S-2 ("Registration Statement"), relating to (i) the
resale by selling security holders of up to 300,000 Warrants (the
"Warrants") to purchase the common stock, par value $1.00 per share (the
"Common Stock"), of the Company and (ii) the issuance of the shares of
Common Stock upon the exercise of such Warrants. Each Warrant entitles the
holder thereof to purchase one share of Common Stock at an exercise price
of $6.00 at any time prior to 5:00 P.M., Eastern Time, on June 30, 1999
("Warrant Share").
In this regard, we have examined originals or copies, certified or
otherwise identified to our satisfaction, of the Articles of Incorporation
and Bylaws of the Company, Board of Directors' resolutions and such other
documents and corporate records as we deemed appropriate for the purpose of
rendering this opinion. In addition, we have assumed, without independent
verification, the genuiness of all signatures and the authenticity of all
documents furnished to us and the conformance in all respects of copies to
originals.
Based upon the foregoing and subject to the qualifications and
assumptions set forth herein, we are of the opinion as of the date hereof
that:
1. The Warrants have been duly and validly authorized and legally
issued by the Company and are binding obligations of the Company
in accordance with their terms, except as such may be qualified by
the effect of applicable bankruptcy, moratorium, insolvency,
reorganization and other laws and legal principles affecting or
limiting creditors' rights generally.
2. The Warrant Shares to be issued upon the exercise of the Warrants
have been duly and validly authorized and, assuming that (i) the
Warrant Shares so issuable will continue to be validly authorized
on the dates of exercise of the Warrants, (ii) on the dates of
exercise, the Warrants are and continue to constitute valid, legal
and binding obligations of the Company and will be enforceable as
to the Company in accordance with their terms, (iii) no change
occurs in the applicable law or the pertinent facts, (iv) the
provisions of "blue sky" and other securities laws as may be
applicable have been complied with, and (v) the Warrants are
exercised in accordance with their terms and the exercise price
for the Warrant Shares is paid in accordance with the terms of the
Warrants, the Warrant Shares so issued will be legally issued,
fully paid and non-assessable.
We consent to the filing of this opinion as an exhibit to the
Registration Statement and to the reference to our name under the caption
"Legal Matters" in the Prospectus included in the Registration Statement.
Very truly yours,
ELIAS, MATZ, TIERNAN & HERRICK L.L.P.
By:
Philip Ross Bevan, a Partner
EXHIBIT 24(b)
Consents of Independent Public Accountants
(logo of KPMG Peat Marwick LLP)
CONSENT OF INDEPENDENT AUDITORS
To the Stockholders and Board of Directors
Progress Financial Corporation:
We consent to the use of our report dated January 22, 1993 except for
matters referred to below, which are as of February 16, 1993, on the
consolidated financial statements of Progress Financial Corporation,
incorporated by reference herein and to the reference to our firm under
the heading "Experts" in the prospectus.
Our report contains an explanatory paragraph that states that i) at
December 31, 1992, Progress Federal Savings Bank (the Bank), the
principal wholly-owned subsidiary of the Company, failed to meet the
minimum capital thresholds under the Federal Deposit Insurance
Corporation Improvement Act of 1991 ("FDICIA") to be considered
"adequately capitalized" and is categorized as "significantly
undercapitalized," ii) the Bank filed a capital plan for attaining the
required levels of regulatory capital and that plan has been accepted by
the OTIS, but that on February 16, 1993 the Bank submitted an amendment
to its plan and the Bank had not received notification as to acceptance
or rejection of its amended capital plan, iii) because the Bank does not
meet the minimum capital thresholds to be considered "adequately
capitalized" it is subject to certain operating restrictions such as
growth limitations, prohibition on dividend payments, increased
supervisory monitoring by its primary regulator, limitations on
executive compensation, and restriction on deposit interest rates, iv)
failure to increase its capital ratios in accordance with its capital
plan or further declines in its capital ratios exposes the Bank to
additional restrictions and regulatory actions, including regulatory
take-over, v) there is substantial doubt about the Company's ability to
continue as a going concern, and vi) the ability of the Company to
continue as a going concern is dependent upon many factors including
regulatory action and the ability of management to achieve its plan.
(signature of KPMG Peat Marwick)
Philadelphia, Pennsylvania
March 28, 1995
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the incorporation by reference in this registration
statement on Form S-2 of our report dated January 18, 1995, on our
audits of the consolidated financial statements of Progress Financial
Corporation and Subsidiaries. We also consent to the reference to our
firm under the caption "Experts."
(signature of Coopers & Lybrand L.L.P.)
Coopers & Lybrand L.L.P.
2400 Eleven Penn Center
Philadelphia, Pennsylvania
March 28, 1995
