As filed with the Securities and Exchange Commission on August 4, 1995
Registration No. 33-58377
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
_______________
PRE-EFFECTIVE AMENDMENT
NO. 1 TO
FORM S-3
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.
If the only securities being registered on this form are being offered
pursuant to dividend or interest reinvestment plans, please check the
following box. [ ].
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
Proposed Proposed
Title of Each Maximum Maximum
Class of Amount to Offering Aggregate Amount of
Securities to be Registered Price Per Offering Registration
be Registered (1) Unit(2) Price(2) Fee
Warrants 300,000 $6.00 $1,800,000 $620.69(3)
(1) Pursuant to Rule 416 promulgated under the Securities Act of 1933, as
amended, there are also being registered such additional Warrants 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) Previously paid.
The Registrant hereby amends this Registration Statement on such date
or dates as may be necessary to delay its effective date until the
Registrant shall file a further Amendment which specifically states that
this Registration Statement shall thereafter become effective in accordance
with Section 8(a) of the Securities Act of 1933 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-3
Registration Statement Location or Caption in
Item Number and Caption Prospectus
1. Forepart of Outside Front Cover Page
Registration Statement
and Outside Front
Cover of Prospectus
2. Inside Front and Inside Front and Outside
Outside Back Cover Back Cover Pages;
Pages of Prospectus Available Information;
Incorporation of Certain
Documents by Reference
3. Summary Information, Summary; Special
Risk Factors and Ratio Considerations
of Earnings to Fixed
Changes
4. Use of Proceeds Use of Proceeds
5. Determination of Not Applicable
Offering Price
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 Description of Securities
Securities to be
Registered
10. Interests of Named Not Applicable
Experts and Counsel
11. Material changes Recent Developments
12. Incorporation of Incorporation of Certain
Certain Information by Documents by Reference
Reference
13. Disclosure of *
Commission Position
and Indemnification
for Securities Act
Liabilities
* Item is omitted because answer is negative or item is inapplicable.
<PAGE>
Subject to Completion-Dated August __, 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. The Warrants are not exercisable until the earlier to occur of
the effectiveness of a registration statement related to the Common Stock
issuable upon exercise of the Warrants ("Common Stock Registration
statement") or May 31, 1996. The Warrants are exercisable at anytime
thereafter until 5:00 p.m., Eastern Time, on June 30, 1999. 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 "RISK FACTORS."
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 August __, 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 "Risk
Factors--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 July 31, 1995 was $5.625
per share.
The Company is paying all the expenses of registering the Warrants
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 $36,000. 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 with respect to the Warrants until the
earlier to occur of June 30, 1996 or until all the Warrants are sold. 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-3 (herein
together with all amendments and exhibits thereto, called the "Registration
Statement") under the Securities Act with respect to the Warrants 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 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 documents
of the Company which have been filed with the Commission and are hereby
incorporated by reference into this Prospectus:
(i) the Company's Annual Report on Form 10-K for the year ended
December 31, 1994 ("Annual Report");
(ii) the Company's Quarterly Report on Form 10-Q for the quarter
ended March 31, 1995;
(iii) the Company's Current Report on Form 8-K dated May 24,
1995; and
(iv) the Company's Current Report on Form 8-K dated August __,
1995.
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.
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, referenced above
and available from the Company.
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 Company plans to open one full-service
office in Chester County. Unless the context otherwise requires,
references herein to the Company include the Bank. At March 31, 1995, the
Company had total consolidated assets of $347.0 million, total consolidated
liabilities of $333.2 million, including total consolidated deposits of
$277.8 million, and total consolidated stockholders' equity of $13.7
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.
RISK FACTORS
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 "Risk
Factors."
SUMMARY OF TERMS OF THE WARRANTS
Warrants Offered Up to 300,000 Warrants are being offered
Hereby . . . . . . hereby by the Selling Warrant Holders
listed herein. See "Selling Warrant
Holders."
Exercise of
Warrants; Expiration The Warrants may not be exercised, in
Date . . . . . . . whole or in part, until the earlier to
occur of the effective date of the
Common Stock Registration Statement or
May 31, 1996. The Warrants may be
exercised thereafter, 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."
Registration Rights. . The Company has agreed to use its best
efforts to file no later than December
31, 1995, but in no event earlier than
December 1, 1995, the Common Stock
Registration Statement relating to the
shares of Common Stock issuable upon
exercise of the Warrants and to maintain
the effectiveness of such Common Stock
Registration Statement until the earlier
to occur of the exercise of all the
Warrants or June 30, 1999. 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."
<PAGE>
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 set forth in the Annual Report. See "Available
Information."
<TABLE>
<CAPTION>
MARCH 31, DECEMBER 31,
1995 1994 1993 1992 1991 1990
<S> <C> <C> <C> <C> <C> <C>
FINANCIAL CONDITION DATA:
Total assets $346,958 $348,189 $333,209 $291,542 $312,622 $324,708
Loans, net 210,147 205,771 158,268 153,734 193,789 277,490
Loans held for sale(1) 727 351 16,744 2,761 -- --
Investment securities:
Available for sale 13,022 4,627 -- -- -- --
Held to maturity 3,810 12,866 4,632 5,260 2,212 1,694
Mortgage-backed securities:
Available for sale(1) 90,601 9,103 8,893 25,072 -- --
Held to maturity 9,145 93,673 117,054 60,939 47,875 315
Deposits 277,849 283,958 273,583 245,015 265,197 292,478
Borrowings 47,821 47,052 40,536 36,071 38,585 12,500
Stockholders' equity 13,729 13,021 14,787 6,877 5,599 15,844
Delinquent loans(2) 1,223 1,001 1,911 9,859 9,072 12,018
Non-performing assets(2) 8,764 9,085 17,628 34,829 50,427 29,239
Allowance for possible loan 1,611 1,502 2,113 2,703 5,483 4,123
losses
Book value per share(3) 4.19 3.98 4.52 6.81 5.54 15.69
</TABLE>
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31, YEAR ENDED DECEMBER 31,
1995 1994 1994 1993 1992 1991 1990
<S> <C> <C> <C> <C> <C> <C> <C>
OPERATIONS DATA:
Interest income $6,498 5,078 $22,830 $20,824 $21,979 $ 27,122 $34,834
Interest expense 3,654 2,831 12,505 11,465 13,737 18,010 21,775
Net interest income 2,844 2,247 10,325 9,359 8,242 9,112 13,059
Provision for possible loan losses 100 50 521 368 275 10,144 4,696
Net interest income (expense) after
provision for possible loan losses 2,744 2,197 9,804 8,991 7,967 (1,032) 8,363
Gain (loss) from sales of securities (35) (70) (322) 215 1,197 341 --
Gain (loss) from mortgage banking (1) (126) (176) 606 1,428 319 --
activities
Income (loss) on properties sold (24) (37) (62) 102 1,218 153 --
Other income 342 141 2,105 1,303 1,774 1,038 1,518
Provision for real estate owned 75 -- 1,576 1,733 2,835 2,607 2,015
Other expense 2,693 2,526 10,489 9,835 9,397 10,280 11,610
Income (loss) before income taxes 378 45 (716) (351) 1,352 (12,068) (3,744)
(benefit)
Income tax expense (benefit) $ -- $ -- -- (1,034) 74 (1,823) (755)
Net income (loss) $ 378 $ .45 $ (716) $ 683 $ 1,278 $(10,245) $(2,989)
Net income (loss) per share $ .12 $ .01 $ (.22) $ .29 $ 1.27 $ (10.14) $ (2.96)
Cash dividends per share $ -- $ -- $ -- $ -- $ -- $ -- $ .12
</TABLE>
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31, AT OR FOR THE YEAR ENDED DECEMBER 31,
1995 1994 1994 1993 1992 1991 1990
<S> <C> <C> <C> <C> <C> <C> <C>
OTHER DATA(4):
Return (loss) on average assets .44% .01% (.21)% .21% .42% (3.31)% (.92)%
Return (loss) on average equity 11.42 .31 (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 3.86 4.44
Dividend payout ratio -- -- -- -- -- -- (.04)
Net interest margin(5) 3.49 2.97 3.23 3.25 3.13 3.31 4.30
Interest rate spread(5) 3.21 2.84 3.04 3.26 3.47 3.44 3.97
Non-performing loans as a
percent of total loans at end of
period(2) 2.03 3.38 2.19 3.42 4.37 7.03 4.85
Non-performing assets as a
percent of total assets at end
of period(2) 2.53 4.12 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 37.38 34.64 33.00 34.92 38.83 39.14 30.19
Net charge-offs as a percent of
average loans -- .02 .60 .64 1.69 3.51 0.65
Capital Ratios(6):
Tangible 4.74 4.12 4.57 4.14 2.36 1.54 4.70
Core 4.74 4.12 4.57 4.14 2.36 1.54 4.70
Risk-based 9.92 9.21 9.47 9.39 5.37 3.33 6.62
Full service banking offices 8 8 8 8 7 8 8
</TABLE>
<PAGE>
(1) Loans classified as held for sale are carried at the lower of
aggregate cost or fair value while mortgage-backed securities and
investment classified as available for sale are carried at 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."
RISK FACTORS
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.
HISTORICAL FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The Company has recognized operating losses in recent years due, to a
large extent, to the prior economic recession and the resulting decline in
real estate values in the Company's market area. These conditions had a
material adverse effect on the quality of the Company's loan portfolio and
contributed in 1990 and 1991 to substantial increases in the Company's non-
performing assets, 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 and real
estate acquired through acceptance of a deed in lieu of foreclosure
(collectively "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. In 1991, the Company
changed its senior management and began the process of improving 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. As a result of
management's efforts, the Company's non-performing assets have since
declined and totalled $8.8 million or 2.5% of total assets at March 31,
1995.
At March 31, 1995, the Company's allowance for loan losses amounted to
$1.6 million or 0.8% and 37.4% of total loans and total non-performing
loans, respectively, and the net carrying value of the Company's REO
amounted to $4.5 million at such date. The $4.5 million of REO at March
31, 1995 included a $3.4 million property which the Company has entered
into an agreement to sell for $3.2 million. Although there can be no
assurances, such sale is expected to be consummated in November 1995.
Future additions to the Company's allowance for loan losses or reductions
in carrying values of REO could become necessary in the event of a
deterioration in the real estate market and 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 loan
losses and the carrying value of its REO. Such agencies may require the
Company to make additions to the allowance for 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.
INCREASED EMPHASIS ON COMMERCIAL BUSINESS, RESIDENTIAL CONSTRUCTION,
COMMERCIAL REAL ESTATE AND CONSUMER LENDING
At March 31, 1995, the Company's commercial business loans,
residential construction loans, commercial real estate loans (including
multi-family residential loans) and consumer loans amounted to $12.2
million or 5.7%, $4.9 million or 2.3%, $75.4 million or 35.5% and $19.5
million or 9.2% of the Company's total loan portfolio (including loans
classified as held for sale), respectively.
The Company intends to increase its emphasis on commercial business,
residential construction, commercial real estate (primarily multi-family
residential) and consumer lending. Commercial business and commercial real
estate lending entails different and significant risks when compared to
single-family residential lending because such loans often involve large
loan balances to single borrowers and because the payment experience on
such loans is typically dependent on the successful operation of the
project or the borrower's business. Commercial real estate lending can
also be significantly affected by supply and demand conditions in the local
market for apartments, offices, warehouses or other commercial space.
Construction financing is generally considered to involve a higher degree
of risk of loss than long-term financing on improved, owner-occupied real
estate. Risk of loss on a construction loan is dependent largely upon the
accuracy of the initial estimate of the property's value at completion of
construction or development and the estimated cost (including interest) of
construction. During the construction phase, a number of factors could
result in delays and cost overruns. If the estimate of value proves to be
inaccurate, the Company may be confronted, at or prior to the maturity of
the loan, with a project, when completed, having a value which is
insufficient to assure full repayment. Finally, consumer lending is also
generally considered to involve additional credit risk than traditional
mortgage lending because of the type and nature of the collateral and, in
certain cases, the absence of collateral.
POTENTIAL EFFECTS OF CHANGES IN INTEREST RATES AND THE CURRENT INTEREST
RATE ENVIRONMENT
The operations of the Company are substantially dependent on its net
interest income, which consists of the difference between the interest
income earned on their interest-earning assets and the interest expense
paid on their interest-bearing liabilities. Like most financial
institutions, the Company's earnings are affected by changes in market
interest rates, which increased from early 1994 to early 1995, and other
economic factors beyond its control. As a result of borrowers refinancing
higher rate mortgage loans in 1993 and the rise in short-term interest
rates from early 1994 to early 1995, the Company's interest rate spread
decreased from 3.47% for 1992 to 3.26% for 1993 and 3.04% for 1994. For
the three months ended March 31, 1995, the Company's interest rate spread
amounted to 3.21%. Further increases in short-term interest rates could
adversely affect the Company's interest rate spreads and net interest
income in future periods.
In addition to affecting interest income and expense, changes in
interest rates also can affect the market value of the Company's interest-
earning assets, which are comprised of fixed and adjustable-rate
instruments. Generally, the market value of fixed-rate instruments
fluctuates inversely with changes in interest rates. At March 31, 1995,
the Company had $13.0 million of investment securities and $90.6 million of
mortgage-backed securities which were classified as held to maturity in
accordance with the terms of Statement of Financial Accounting Standards
No. 115 ("SFAS No. 115"). Such designation effectively restricts the
Company's ability to sell such assets in order to meet its liquidity needs
or in response to increases in interest rates. Generally, the
reclassification and sale of any of such assets could result in the
remainder of the Company's portfolio of investment and mortgage-backed
securities classified as held to maturity being reclassified as available
for sale. However, SFAS No. 115 permits an institution to reclassify
securities deemed held to maturity as available for sale under certain
circumstances in connection with a major business combination.
Consequently, in connection with the proposed combination with FJF
Financial, M.H.C. and its majority-owned subsidiary Roxborough-Manayunk
Federal Savings Bank (as hereinafter discussed under "Recent
Developments"), the Company may consider reclassifying a portion of its
investment and mortgage-backed securities portfolio from held to maturity
to available for sale in accordance with the Company's policies regarding
interest rate risk and credit risk. Pursuant to SFAS No. 115, securities
classified as available for sale must be reported at fair value, with
unrealized gains or losses being reported as a separate component of
stockholders' equity. The Company's investment and mortgage-backed
securities (including securities classified as available for sale) had an
aggregate carrying value and market value of $116.6 million and $112.1
million, respectively, at March 31, 1995. At March 31, 1995, the Company
had $727,000 of loans classified as held for sale.
The OTS has implemented an interest rate risk component into its risk-
based capital rules, which is designed to calculate on a quarterly basis
the extent to which the value of an institution's assets and liabilities
would change if interest rates increase or decrease. If the net portfolio
value of an institution would decline by more than 2% of the estimated
market value of the institution's assets in the event of a 200 basis point
increase or decrease in interest rates, then the institution is deemed to
be subject to a greater than "normal" interest rate risk and must deduct
from its capital 50% of the amount by which the decline in net portfolio
value exceeds 2% of the estimated market value of the institution's assets,
effective no earlier than June 30, 1995. As of March 31, 1995, if interest
rates increased by 200 basis points, the Bank's net portfolio value would
decrease by 2.93% of the estimated market value of the Bank's assets, as
calculated by the OTS, which would result in a $1.6 million capital
deduction if such deduction was currently required.
Changes in interest rates also can affect the average life of loans
and mortgage-related securities. Decreases in interest rates in recent
periods have resulted in increased prepayments of loans and mortgage-backed
securities, as borrowers refinanced to reduce borrowing costs. Under these
circumstances, the Company is subject to reinvestment risk to the extent
that it is not able to reinvest such prepayments at rates which are
comparable to the rates on the maturing loans or securities. A significant
increase in the level of interest rates may also have an adverse effect on
the ability of certain of the Company's borrowers with adjustable-rate
loans to repay their loans.
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."
RECAPITALIZATION OF SAIF AND EFFECT OF REDUCTION IN BIF PREMIUMS
Deposits of the Bank are presently insured by the SAIF. The
Resolution Trust Corporation ("RTC") Completion Act (the "RTC Completion
Act") authorized $8.0 billion in funding for the SAIF. However, such funds
only become available to the SAIF if the Chairman of the FDIC certifies
that the funds are needed to pay for losses of the SAIF; SAIF members are
unable to pay additional premiums to cover such losses without an adverse
effect on such institutions; and the premium increase could reasonably be
expected to result in greater losses to the government. The funds are
authorized through fiscal year 1998, or until the SAIF's reserve ratio
equals 1.25%, whichever occurs first, and the funds may only be used to pay
for losses at failed thrifts. Under the RTC Completion Act, SAIF members,
such as the Bank, could be required to pay higher deposit insurance
premiums in the future.
By contrast, financial institutions which are members of the BIF,
because it has higher reserves and is expected to be responsible for fewer
troubled institutions, are likely to experience lower deposit insurance
premiums in the future. The FDIC has proposed that the premium schedule
for BIF members be revised to provide a range of .04% to .31% of deposits,
so that well-capitalized and healthy BIF members would pay the lowest
premiums. The proposal is based on the FDIC's expectation that the BIF
will reach the required reserve ratio in mid-1995 as a result of the
decrease in bank failures in the past few years. The lower premiums for
BIF members are expected to take effect in the third quarter of 1995.
The disparity in deposit insurance premiums between SAIF members and
BIF members is exacerbated by the statutory requirement that both the SAIF
and BIF funds be recapitalized to a 1.25% of insured reserve deposits
ratio. While the BIF is expected to reach the required reserve ratio in
1995, the SAIF is not expected to reach such target until 2002. As a
result of this disparity, SAIF members could be placed at a material,
competitive disadvantage to BIF members with respect to pricing of loans
and deposits and the ability to achieve lower operating costs. In
addition, a significant increase in SAIF insurance premiums would likely
have an adverse effect on the operating expenses and results of operation
of the Bank.
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. As discussed herein, the
proposed business combination discussed under "Recent Developments" is
expected to result in an ownership change. 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."
RECENT DEVELOPMENTS
The Company and the Bank entered into an Agreement and Plan of
Reorganization dated as of May 24, 1995 ("Agreement") with FJF Financial,
M.H.C. ("FJF Financial") and FJF Financial's majority-owned subsidiary,
Roxborough-Manayunk Federal Savings Bank ("Roxborough-Manayunk") pursuant
to which such companies will be combined ("Transaction"). Roxborough-
Manayunk is a federally chartered stock savings bank which is approximately
87% owned by FJF Financial, which is a federally chartered mutual holding
company. Roxborough-Manayunk has six offices in Philadelphia and one
office each in Yeadon and Drexel Hill, Pennsylvania. At March 31, 1995,
Roxborough-Manayunk had consolidated assets of $278.6 million, consolidated
liabilities of $250.6 million and stockholders' equity of $23.0 million.
As part of the Transaction, FJF Financial will convert from mutual to
stock form and merge with and into Roxborough-Manayunk. Immediately
subsequent to the conversion, the Bank will merge with and into Roxborough-
Manayunk, with the resulting entity to operate as a wholly owned subsidiary
of the Company under the name "Progress Bank, F.S.B." In connection with
the Transaction, each publicly held share of common stock of Roxborough-
Manayunk will be converted into shares of Common Stock of the Company at an
exchange ratio which will be determined as part of an independent appraisal
of the companies. In addition, the Company will offer and sell additional
shares of Common Stock giving a priority purchasing right to qualifying
depositors and borrowers of Roxborough-Manayunk and, with any remaining
shares being offered to stockholders of Roxborough-Manayunk and the Company
and then to members of the general public.
Consummation of the Transaction is subject to, among other things, the
approval of the stockholders of the Company and Roxborough-Manayunk and the
members of FJF Financial as well as the receipt of all required regulatory
approvals. The Transaction may be terminated by the Company and the Bank,
if the independent appraisal of FJF Financial and Roxborough-Manayunk would
result in the number of shares to be issued in the Transaction (including,
on a fully diluted basis, the options to purchase common stock of
Roxborough-Manayunk which are converted into options to purchase Common
Stock) to exceed 64% of the total number of shares of Common Stock of
Common Stock (on a fully diluted basis) to be outstanding upon consummation
of the Transaction. Likewise, the Transaction may be terminated by FJF
Financial and Roxborough-Manayunk in the event that the independent
appraisal would result in the number of shares to be issued in the
Transaction (including, on a fully diluted basis, the options to purchase
common stock of Roxborough-Manayunk which are converted into options to
purchase Common Stock) to aggregate less than 56% of the total number of
shares of Common Stock (on a fully diluted basis) to be outstanding upon
consummation of the Transaction.
The issuance of the shares of Common Stock by the Company in
connection with the consummation of the Transaction will not result in any
change in either the number or exercise price of the Warrants pursuant to
the anti-dilution provisions thereof.
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. The
Warrants are not exercisable until the earlier to occur of May 31, 1996 or
the effectiveness of the Common Stock Registration Statement. The Warrants
are exercisable subsequent thereto, in whole or in part, 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.
Except as otherwise set forth herein, 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>
<CAPTION>
NUMBER OF SHARES OF COMMON
PERCENT OF WARRANTS STOCK ISSUABLE UPON EXERCISE
NUMBER OF WARRANTS OUTSTANDING OF WARRANTS
<S> <C> <C> <C>
Warrant Holder
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.(5) 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(6) 25,000 8.33 25,000
Total 300,000 100.0% 300,000
</TABLE>
18
(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.
(5) Sandler O'Neill Corporate Strategies ("Sandler O'Neill") a division of
Sandler O'Neill & Partners, L.P., an affiliate of 1993 SOP Partners,
L.P., has been engaged by the Company and FJF Financial to consult
with and advise them in the Transaction. Sandler O'Neill has also
agreed to use its best efforts to solicit purchase orders for shares
of Common Stock to be issued in the Transaction.
(6) These Warrants are expected to be cancelled upon consummation of the
Transaction if not sold prior thereto.
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.
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.
SALES PRICE
DIVIDENDS
HIGH LOW PER SHARE
1993
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 --
Second Quarter 6.25 4.50 --
Third Quarter 5.875 5.00
(through July 31,
1995)
On August __, 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 June 30, 1995, there were 3,280,000 shares of Common Stock
outstanding, which were held by approximately 1,100 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. It is
currently expected that the $250,000 in principal amount of the Notes held by
Roxborough-Manayunk will be cancelled in connection with the consummation of the
Transaction.
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 March 31, 1995.
<TABLE>
<CAPTION>
TANGIBLE CORE RISK-BASED
CAPITAL % CAPITAL % CAPITAL %
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
Adjusted GAAP capital $16,416 $16,416 $16,416
General valuation --- --- 1,611
allowance
Unrealized loss on
securities available 721 721 721
for sale
Goodwill (178) (178) (178)
Investment in joint (8) (8) (8)
venture
Non-qualifying deferred tax (520) (520) (520)
asset
Total 16,431 4.74% 16,431 4.74% 18,042 9.92%
Minimum capital requirement 5,203 1.50 10,405 3.00 14,551 8.00
Regulatory capital - excess $11,228 3.24% $ 6,026 1.74% $ 3,491 1.92%
</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
June 30, 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>
<CAPTION>
AMOUNT AND PERCENTAGE OF
YEAR OF SHARES BENEFICIALLY OWNED
DIRECTOR EXPIRATION AS OF
NAME AGE(1) SINCE OF TERM JUNE 30, 1995
AMOUNT PERCENTAGE
<S> <C> <C> <C> <C> <C>
John E. F. Corson 54 1991 1996 7000(2) *
William O. Daggett, Jr. 54 1990 1995 62,230(3) 1.9%
Donald F. U. Goebert 58 1987 1996 140,766(4) 4.3
Joseph R. Klinger 52 1992 1995 8,500(2) *
Paul M. LaNoce 35 1991 1996 15,500(2) *
A. John May, III 39 1993 1997 8,193(5) *
William L. Mueller 43 1990 1995 65,726(6) 2.0
Charles J. Tornetta 64 1991 1997 23,158(7) *
W. Kirk Wycoff 37 1991 1997 170,405(8) 5.0
</TABLE>
* Represents less than 1% of the issued and outstanding Common Stock of
the Company.
(1) As of June 30, 1995.
(2) Includes options to purchase 5,500 shares subject to stock options
which are exercisable within 60 days of June 30, 1995.
(3) Includes 47,230 shares owned by companies of which Mr. Daggett is a
director, officer and 10% stockholder and 5,500 shares subject to
stock options which are exercisable within 60 days of June 30, 1995.
Does not include 12,500 Warrants.
(footnotes continued on following page)
(4) Includes 135,266 shares owned by a company of which Mr. Goebert is a
director, officer and 10% stockholder and 5,500 shares subject to
stock options which are exercisable within 60 days of June 30, 1995.
Does not include 50,000 Warrants.
(5) Includes options to purchase 500 shares subject to stock options which
are exercisable within 60 days of June 30, 1995.
(6) Includes 15,114 shares held jointly by Mr. Mueller with or for the
benefit of certain family members and 5,500 shares subject to stock
options which are exercisable within 60 days of June 30, 1995. Does
not include 25,000 Warrants.
(7) Includes 5,500 shares subject to stock options which are exercisable
within 60 days of June 30, 1995. Does not include 25,000 Warrants.
(8) Includes 7,000 shares held jointly by Mr. Wycoff with or for the
benefit of certain family members and 116,250 shares subject to stock
options which are exercisable within 60 days of June 30, 1995. Does
not include 12,500 Warrants.
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 June 30, 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.
Amount of Common
Stock
Name and Address of Beneficially Owned Percent of
Beneficial Owner as of June 30, 1995 Common Stock
SOP Partners, L.P. 200,000(1) 6.1%
Two World Trade Center
104th Floor
New York, New York 10048
Directors and executive 501,478(2) 14.6
officers of the Company
as a group (9 persons)
(1) Does not include 50,000 Warrants.
(2) 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 155,250 shares subject to stock options which are
exercisable within 60 days from June 30, 1995. Does not include
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. In addition, the terms under which the Company has
agreed to register the shares of Common Stock issuable upon exercise of the
Warrants ("Registration Right") are set forth in Schedule C to the
Subscription Agreement which is attached hereto as Appendix B. The
following is a summary of the material provisions of the Warrants and the
Registration Rights which is qualified in its entirety by the provisions of
Appendices A and B 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. The Warrants may not be exercised prior to the earlier to occur of
May 31, 1996 or the effective date of the Common Stock Registration
Statement. The Warrants may be exercised, in whole or in part, any time
subsequent thereto until 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.
Under the terms of the Registration Rights, the Company has agreed to
use its best efforts to file the Common Stock Registration Statement by
December 31, 1995 but not earlier than December 1, 1995. In addition, the
Company has agreed to use its best efforts to maintain the effectiveness of
the Common Stock Registration Statement until the earlier to occur of the
exercise of all the Warrants or June 30, 1999. In the event that the
Common Stock Registration Statement is not effective by May 31, 1996 and
shares of Common Stock are issued upon the exercise of Warrants thereafter
(as permitted under the terms of the Warrants), the Company will take steps
to register such shares ( Registrable Shares ) of Common Stock for resale
in connection with obtaining effectiveness of the Common Stock Registration
Statement. The Registration Rights also provide that in the event that the
Company plans to repurchase or bid for shares of Common Stock, whether on
the open market or otherwise, the Company may request that holders of
Warrants that have not previously been sold pursuant to this Prospectus and
holders of Registrable Shares, if any, suspend or postpone the distribution
thereof for a period of 45 days or more; provided, however, the aggregate
amount of days during which the Company can delay the offering or
distribution of the Warrants and the Registrable Shares shall not exceed 90
days during any 12 month period.
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 earlier
to occur of the second anniversary of the initial issuance of the Warrants
(June 30, 1996) or the sale 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 March 31, 1995, the Company and the Bank had a net operating loss
carryforward for federal tax purposes of approximately $7.1 million,
$66,000 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 $1.6 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 $2.7 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.
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.
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, management
of the Company believes, based upon a review of its consolidated assets and
liabilities undertaken in connection with the Transaction, that, its
unrealized built-in gains (generally, the amount by which the fair market
value of certain assets of the Company 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, due to the
"ownership change" which is expected to occur as a result of the
Transaction, the Company 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.
Due to the "ownership change" with respect to the Company which is
expected to occur as a result of the Transaction, an annual limitation (the
"Section 382 Limitation") will 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 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 is computed by multiplying the aggregate fair market
value of the Company Common Stock immediately prior to the "ownership
change" by the then-applicable interest rate published by the IRS for this
purpose. Based upon the market value of the outstanding Company Common
Stock on March 31, 1995, Section 382 would limit the Company's ability to
utilize in any one year more than $1.1 million of its net operating loss
carryforward and its as yet unrecognized Built-in Losses. 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.
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 3,280,000 shares
were issued and outstanding as of June 30, 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."
In connection with the Transaction, the Company plans to amend its
Certificate of Incorporation to increase the amount of its authorized
Common Stock to 15,000,000 shares and its Preferred Stock to 3,000,000
shares.
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 June 30, 1995 the Company had
3,280,000 shares of Common Stock issued and outstanding and no shares of
Preferred Stock issued or outstanding. In connection with the Transaction,
the Company plans to amend its Certificate of Incorporation to increase the
amount of its authorized Common Stock to 15,000,000 shares and its
Preferred Stock to 3,000,000 shares. 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 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.
<PAGE>
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 commencing on the
earlier to occur of the effectiveness of the Common Stock Registration
Statement (as defined in Schedule C to the Agreement) [APPENDIX B TO
THE PROSPECTUS] or the passage of 12 months from the date of the
Amendment Number 1 to the Agreement [MAY 31, 1995] 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 (S) 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.
<PAGE>
APPENDIX B
REGISTRATION RIGHTS PROVISIONS
1. Definitions. For purposes of this Schedule C, the following terms
shall have the following meanings:
(a) "Closing Date" shall mean the date of initial issuance of the
Units, each Unit consisting of $250,000 principal amount of the Company's 8.25%
Subordinated Notes and 25,000 Warrants to purchase shares of Common Stock.
(b) "Common Stock" shall mean the common stock of the Company, par
value $1.00 per share.
(c) "Prospectus" shall mean the prospectus included in the
Registration Statement or the Common Stock Registration Statement, as amended or
supplemented by any prospectus supplement filed in any post- effective amendment
to either the Registration Statement or the Common Stock Registration Statement
and all documents incorporated by reference therein.
(d) "Registrable Shares" shall mean the shares of Common Stock
purchased upon the exercise of Warrants prior to the date of the filing of the
Common Stock Registration Statement. Registrable Shares shall only be possible
in the event the Company fails to file and have declared effective the Common
Stock Registration Statement by the one year anniversary of the effective date
of Amendment Number 1 to the Agreement (May 31, 1996).
(f) "Registrable Warrants" shall mean the Warrants issued by the
Company to the Purchaser and designated on Schedule D to the Subscription
Agreement; provided, however, that any such Warrants shall cease to be
Registrable Warrants upon the sale or transfer thereof (other than as permitted
in Section 7 hereof).
(g) "Registration Date" shall mean shall mean the initial date of
effectiveness of the Registration Statement.
(h) "Registration Period" shall mean with respect to the Registrable
Warrants the period from and including the Registration Date to and including
the date that is the second anniversary of the Closing Date and with respect to
the Registrable Shares, if any, shall mean the period from and including the
date of initial effectiveness of the Common Stock Registration Statement to and
including the date that is the third anniversary of the Closing Date (or, in
each case, such shorter period as shall be required for all Purchasers to sell
or otherwise dispose of the Registrable Warrants and the Registrable Shares
covered by the Registration Statement and the Common Stock Registration
Statement, respectively; provided, however, that with respect to the shares of
Common Stock issuable upon the exercise of the Warrants, the Company shall use
its best efforts to (i) file the Common Stock Registration Statement within
seven (7) months of the effective date of Amendment Number 1 to the Agreement
[MAY 31, 1995], provided, further that the Common Stock Registration Statement
shall not be filed prior to the expiration of six (6) months from the effective
date of Amendment Number 1 to the Agreement and (ii) cause the Common Stock
Registration Statement to become effective and remain effective until the
earlier to occur of June 30, 1999 or the sale of all the Registrable Shares, if
any, and the exercise of all the Warrants.
(i) "Registration Statement" shall mean the Registration Statement
filed by the Company with the SEC under the Securities Act with respect to the
offering and resale of the Registrable Warrants by the Purchaser after the
Closing Date, including the Prospectus, any amendments (including post-effective
amendments) to the Registration Statement, and all exhibits to, and documents
incorporated by reference into, the Registration Statement.
(j) "SEC" shall mean the Securities and Exchange Commission or any
successor agency thereto.
(k) "Securities Act" shall mean the Securities Act of 1933, as
amended, and shall include any rules, regulations and forms promulgated by the
Securities and Exchange Commission thereunder.
(l) "Warrants" shall mean the Warrants to purchase shares of Common
Stock.
(m) "Common Stock Registration Statement" shall mean the registration
statement filed by the Company with the SEC under the Securities Act with
respect to the offering and sale of that number of shares of the Common Stock to
be issued pursuant to exercise of Warrants which remain unexercised as of the
date of the filing of the Common Stock Registration Statement and the offering
and the resale of the Registrable Shares after May 31, 1996, including the
Prospectus, any amendments (including post-effective amendments) to the Common
Stock Registration Statement, and all exhibits to, and documents incorporated by
reference into, the Common Stock Registration Statement.
2. Registration Rights. By March 31, 1995, the Company shall use its
best efforts to prepare and file with the SEC a Registration Statement with
respect to the Registrable Warrants. By the end of the seventh month after the
effective date of Amendment Number 1 to the Agreement [MAY 31, 1995] but not
earlier than the end of the sixth month after such date, the Company will use
its best efforts to file the Common Stock Registration Statement with respect to
the Common Stock issuable upon the exercise of the Warrants and with respect to
the Registrable Shares, if any.
3. Registration Procedures.
(a) Upon the filing of the Registration Statement and/or Common Stock
Registration Statement, the Company shall:
(i) use its best efforts to cause the Registration Statement
and/or Common Stock Registration Statement to become and remain effective during
the Registration Period and, in connection therewith, to prepare and file with
the SEC any amendments to the Registration Statement and/or Common Stock
Registration Statement and supplements to the Prospectus as may be required to
keep the Registration Statement and/or Common Stock Registration Statement
continuously effective during the Registration Period pursuant to the Securities
Act and other applicable law;
(ii) use its best efforts to cause the Registrable Warrants
and/or the Registrable Shares to be registered or qualified under the securities
or "Blue Sky" laws of each jurisdiction designated from time to time in writing
by the Purchaser; provided, however, that the Company shall not be obligated (A)
to take any action to qualify as a foreign corporation in any jurisdiction; (B)
to subject itself to taxation in any jurisdiction, (C) to file any general
consent to service of process in any jurisdiction, (D) to register as a
securities broker or dealer in any jurisdiction, or (E) to modify in any
material respect any business policy or practice of the Company or any of its
Subsidiaries;
(iii) otherwise use its best efforts to comply with the
Securities Act;
(iv) use every reasonable effort to prevent the issuance of any
stop order suspending the effectiveness of the Registration Statement and/or the
Common Stock Registration Statement and/or the Common Stock Registration
Statement or of any order preventing or suspending the use of the Prospectus or
suspending the qualification (or exemption from qualification) of any of the
Registrable Warrants and/or Registrable Shares for sale in any jurisdiction and,
if any such order is issued, to obtain the lifting thereof at the earliest
reasonable time;
(v) furnish to the Purchaser, without charge, as many copies of
the Registration Statement and/or the Common Stock Registration Statement and
the Prospectus (and any amendments or supplements thereto) as the Purchaser
shall reasonably request for the purposes contemplated by the Securities Act and
applicable state securities or "Blue Sky" laws (the Company hereby consenting to
the use of such copies for such purposes); and
(vi) if, at any time when a Prospectus is required to be
delivered in connection with sales of the Registrable Warrants and/or
Registrable Shares under the Securities Act, any event shall occur or condition
shall exist as a result of which it is necessary, in the opinion of the Company
after consultation with its counsel, to amend the Registration Statement and/or
the Common Stock Registration Statement or amend or supplement the Prospectus,
in order that the Prospectus will not include an untrue statement of a material
fact or omit to state a material fact necessary in order to make the statements
made therein, in light of the circumstances under which they were made, not
misleading or if it shall be necessary, in the opinion of the Company after
consultation with its counsel, at any such time to amend the Registration
Statement and/or the Common Stock Registration Statement or amend or supplement
the Prospectus in order to comply with the Securities Act, promptly prepare and
file with the SEC such amendment or supplement as may be necessary to correct
such untrue statement or omission or to cause the Registration Statement and/or
the Common Stock Registration Statement or the Prospectus to comply with such
requirements.
(b) The Company shall give the Purchaser written notice of the filing
of the Registration Statement and/or the Common Stock Registration Statement
with the SEC and the declaration of effectiveness of the Registration Statement
and/or the Common Stock Registration Statement by the SEC within five (5)
business days after the occurrence of each such event.
(c) During the Registration Period, the Company shall promptly (and,
in any event, within five (5) business days) give the Purchaser written notice
of the following:
(i) the filing of any amendment or supplement to the Prospectus
or any post-effective amendment to the Registration Statement and/or the Common
Stock Registration Statement;
(ii) the receipt by the Company of any request by the SEC or by
any securities or "Blue Sky" administrator in any jurisdiction in which the
Registrable Warrants and/or Registrable Shares shall have been qualified or
registered, or in which an exemption therefrom shall have been claimed, to amend
or supplement the Prospectus or to amend the Registration Statement and/or the
Common Stock Registration Statement;
(iii) the receipt by the Company of any stop order issued by
the SEC suspending the effectiveness of the Registration Statement and/or the
Common Stock Registration Statement, or of any order preventing or suspending
the use of the Prospectus, or the initiation of any proceeding for such
purposes;
(iv) the receipt by the Company of any notification with respect
to the suspension of the registration or qualification, or exemption therefrom,
of the Registration Statement and/or the Common Stock Registration Statement,
the Prospectus or any of the Registrable Warrants and/or Registrable Shares for
offer or sale in any jurisdiction, or the initiation of any proceeding for such
purposes;
(v) any event that requires the Registration Statement and/or
the Common Stock Registration Statement or the Prospectus or documents
referenced therein to be amended or supplemented so that such document will not
contain any untrue statement of a material fact or omit to state any material
fact required to be stated therein or necessary to make the statements therein,
in light of the circumstances in which they were made, not misleading; and
(vi) the receipt by the Company of any notice from the SEC, or
any other regulatory body or agency to which the Company is subject, requiring
suspension of offers and sales of the Registrable Warrants and/or the
Registrable Shares.
(d) During the Registration Period, following any notice given
pursuant to Section 3(c), the Company shall promptly (and, in any event, within
five (5) business days) give to the Purchaser written notice of the lifting of
any stop order, or the curing of any such other action or event set forth in
Section 3(c) requiring the suspension of offers and sales of the Registrable
Warrants and/or the Registrable Shares pursuant to the Prospectus, so as to
permit offers and sales of the Registrable Warrants and/or the Registrable
Shares to take place. Such notice shall state the date upon which offers and
sales of the Registrable Warrants and/or Registrable Shares pursuant to the
Prospectus may be resumed and shall be accompanied by a current copy of the
Prospectus, including any supplement or amendment thereto required as a result
of such action or event.
(e) Except as set forth in this Schedule C [APPENDIX B], the Company
shall have no obligation to register any Registrable Warrants and/or Registrable
Shares or other securities. Upon the expiration of the Registration Period, the
Company shall terminate distribution of the Prospectus for the purposes set
forth herein and shall have no further obligation to the Purchaser under the
terms of this Schedule C [APPENDIX B] or otherwise to amend or maintain the
effectiveness of the Registration Statement and/or the Common Stock Registration
Statement or to supplement, amend or update the Prospectus.
4. Representations, Warranties and Covenants of the Purchaser.
(a) The Purchaser represents and warrants to the Company that the
Purchaser Registration Information set forth on Schedule D to the Subscription
Agreement is true and correct as of the date hereof and agrees to notify the
Company promptly in writing (and in any event within five (5) business days) of
any change in any such Purchaser Registration Information during the
Registration Period.
(b) As a condition to the Company's obligation under Sections 2 and 3
hereof to cause a Registration Statement and/or the Common Stock Registration
Statement or any amendment thereto to be filed, the Purchaser agrees promptly
(and in any event within five (5) business days) after receipt of a written
request from the Company to furnish the Company with all such information about
or pertaining to the Purchaser as is deemed necessary or appropriate by the
Company and its counsel with respect to the preparation of the Registration
Statement and/or the Common Stock Registration Statement or the Prospectus, and
the Purchaser shall execute all affidavits, and shall provide all letters,
documents and undertakings, relating thereto as are deemed necessary or
appropriate by the Company and its counsel or are required by the SEC or other
regulatory or self-regulatory body or agency in connection with the Registration
Statement or the Prospectus and any related filings.
(c) Upon receipt of any notice by the Company given pursuant to
Section 3(c), the Purchaser shall, immediately and without any further action on
the part of the Company, cease making any offers or sales of any of the
Registrable Warrants and/or the Registrable Shares pursuant to the Prospectus
until the Purchaser receives notice from the Company pursuant to Section 3(d)
that offers and sales of the Registrable Warrants and/or the Registrable Shares
pursuant to the Prospectus are permissible under applicable law.
5. Expenses of Registration.
(a) Except as provided in Section 5(b), or as required by the
securities or "Blue Sky" laws of any jurisdiction in which the Registrable
Warrants or Registrable Shares are qualified or registered for sale, or in which
an exemption therefrom shall have been claimed, the Company shall pay all costs
and expenses incident to the registration of the Registrable Warrants and the
Registrable Shares including, without limitation:
(i) all registration and filing fees related to the Registration
Statement and/or the Common Stock Registration Statement;
(ii) all costs and expenses relating to the preparation and
duplication or printing of the Registration Statement and/or the Common Stock
Registration Statement and the Prospectus (including all amendments or
supplements thereto);
(iii) the fees and expenses of any legal counsel for the
Company (but not of legal counsel for the Purchaser);
(iv) the expenses associated with the qualification or the
registration of the Registrable Warrants and/or the Registrable Shares under the
securities or "Blue Sky" laws of any applicable jurisdiction or any claim for an
exemption therefrom.
(b) The Purchaser shall pay the following fees, costs and expenses:
(i) the fees and expenses of any legal counsel or other adviser
retained by the Purchaser;
(ii) all costs and expenses incident to the delivery of the
Registrable Warrants and the Registrable Shares to be sold by the Purchaser,
including any stock transfer taxes, if any, payable upon the sale of the
Registrable Warrants or Registrable Shares to the purchaser thereof;
(iii) all fees and expenses of any underwriter or placement agent
retained by the Purchaser in connection with any sale of the Registrable
Warrants or Registrable Shares after the Closing Date, including any
underwriting commissions or discounts; and
(iv) all broker's fees or commissions incurred by the Purchaser
in connection with any sale of the Registrable Warrants or Registrable Shares
after the Closing Date.
6. Indemnification.
(a) The Company shall indemnify and hold harmless the Purchaser and
each person, if any, who controls the Purchaser within the meaning of either the
Securities Act or the Securities Exchange Act of 1934 (the "Exchange Act") as
follows:
(i) against any and all loss, liability, claim, damage and
expense whatsoever arising out of any untrue statement or alleged untrue
statement of a material fact contained in the Prospectus, or the omission or
alleged omission therefrom of a material fact necessary in order to make the
statements therein, in the light of the circumstances under which they were
made, not misleading;
(ii) against any and all loss, liability, claim, damage and
expense whatsoever to the extent of the aggregate amount paid in settlement of
any litigation, or any investigation or proceeding by any governmental agency or
body, commenced or threatened, or of any claim whatsoever based upon any such
untrue statement or omission, or any such alleged untrue statement or omission,
if such settlement is effected with the written consent of the Company; and
(iii) against any and all expense whatsoever reasonably incurred
in investigating, preparing or defending against any litigation, or any
investigation or proceeding by any governmental agency or body, commenced or
threatened, or any claim whatsoever based upon any such untrue statement or
omission, or any such alleged untrue statement or omission, to the extent that
any such expense is not paid under clause (i) or (ii) above;
provided, however, that this indemnity agreement shall not apply to any loss,
liability, claim, damage or expense (i) to the extent such loss, liability,
claim, damage or expense arises out of any untrue statement or omission or
alleged untrue statement or omission made in reliance upon and in conformity
with the Purchaser Registration Information, which is furnished to the Company
by the Purchaser in writing expressly for use in the Prospectus; (ii) if the
person asserting any such loss, liability, claim, damage or expense purchased
Registrable Warrants and/or Registrable Shares but was not delivered a copy of
the Prospectus (as amended or supplemented) in any case where such delivery of
the Prospectus (as amended or supplemented) is required by the Securities Act,
unless such failure to deliver the Prospectus was the result of noncompliance by
the Company with Section 3(a); or (iii) if any such loss, liability, claim,
damage or expense arises out of any offer or sale of any of the Registrable
Warrants and/or Registrable Shares by the Purchaser during any period in which
such offers and sales have been suspended or terminated pursuant to Section
3(c), if the Company shall have provided such Purchaser before such offer or
sale with the notice required pursuant to Section 3(c), and the Company shall
not have thereafter notified the Purchaser pursuant to Section 3(d) that offers
and sales of the Registrable Warrants and the Registrable Shares may be resumed.
(b) The Purchaser shall indemnify and hold harmless the Company,
its directors, each of its officers who signed the Registration Statement and/or
the Common Stock Registration Statement and each person, if any, who controls
the Company within the meaning of either the Securities Act or the Exchange Act
as follows:
(i) against any and all loss, liability, claim, damage and
expense whatsoever arising out of any untrue statement or alleged untrue
statement of a material fact contained in the Prospectus, or the omission or
alleged omission therefrom of a material fact necessary in order to make the
statements therein, in the light of the circumstances under which they were
made, not misleading;
(ii) against any and all loss, liability, claim, damage and
expense whatsoever to the extent of the aggregate amount paid in settlement of
any litigation, or any investigation or proceeding by any governmental agency or
body, commenced or threatened, or of any claim whatsoever based upon any such
untrue statement or omission, or any such alleged untrue statement or omission,
if such settlement is effected with the written consent of the Purchaser; and
(iii) against any and all expense whatsoever reasonably incurred
in investigating, preparing or defending against any litigation, or any
investigation or proceeding by any governmental agency or body, commenced or
threatened, or any claim whatsoever based upon any such untrue statement or
omission, or any such alleged untrue statement or omission, to the extent that
any such expense is not paid under clause (i) or (ii) above;
provided, however, that this indemnity agreement shall only apply to any loss,
liability, claim, damage or expense (i) to the extent such loss, liability,
claim, damage or expense arises out of any untrue statement or omission or
alleged untrue statement or omission made in reliance upon and in conformity
with the Purchaser Registration Information, which is furnished to the Company
by the Purchaser in writing expressly for use in the Prospectus; (ii) if the
person asserting any such loss, liability, claim, damage or expense purchased
Registrable Warrants and/or Registrable Shares but was not delivered a copy of
the Prospectus (as amended or supplemented) in any case where such delivery of
the Prospectus (as amended or supplemented) is required by the Securities Act,
unless such failure to deliver the Prospectus was the result of noncompliance by
the Company with Section 3(a); or (iii) if any such loss, liability, claim,
damage or expense arises out of any offer or sale of any of the Registrable
Warrants and/or Registrable Shares by the Purchaser during any period in which
such offers and sales have been suspended or terminated pursuant to Section
3(c), if the Company shall have provided such Purchaser before such offer or
sale with the notice required pursuant to Section 3(c), and the Company shall
not have thereafter notified the Purchaser pursuant to Section 3(d) that offers
and sales of the Registrable Warrants and the Registrable Shares may be resumed.
(c) Each indemnified party shall give prompt notice to the indemnifying
party of any action commenced against it with respect to which indemnity may be
sought under this Section 6, but failure so to notify the indemnifying party
shall not relieve it from any liability which it may have on account of this
indemnity agreement other than to the extent that the indemnifying party is
materially prejudiced by the indemnified party's failure to provide such notice.
The indemnifying party may participate at its own expense in the defense of such
action. If it so elects within a reasonable time after receipt of such notice,
the indemnifying party, jointly with any other indemnifying parties under other
Subscription Agreements receiving such notice, may assume the defense of such
action with counsel chosen by it and reasonably satisfactory to the indemnified
parties defendant in such action, unless such indemnified parties reasonably
object to such assumption on the ground that there may be legal defenses
available to them that are different from or in addition to those available to
such indemnifying party. Except as set forth herein, if an indemnifying party
assumes the defense of such action, the indemnifying parties shall not be liable
for any fees and expenses of counsel for the indemnified parties incurred
thereafter in connection with such action, proceeding or claim, other than
reasonable costs of investigation. The fees, expenses and other charges of
counsel for the indemnified parties will be at the expense of such indemnified
party unless (1) the employment of counsel by the indemnified party has been
authorized in writing by the indemnifying party, (2) the indemnified party has
reasonably concluded (based on advice of counsel) that there may be legal
defenses available to it or other indemnified parties that are different from or
in addition to those available to the indemnifying party, (3) a conflict or
potential conflict exists (based on advice of counsel to the indemnified party)
between the indemnified party and the indemnifying party (in which case the
indemnifying party will not have the right to direct the defense of such action
on behalf of the indemnified party) or (4) the indemnifying party has not in
fact employed counsel to assume the defense of such action within a reasonable
time after receiving notice of the commencement of the action, in each of which
cases the reasonable fees, disbursements and other charges of counsel will be at
the expense of the indemnifying party.
7. Transfer of Registration Rights. The rights granted to the Purchaser
in this Schedule C [APPENDIX B] relating to the registration of the Registrable
Warrants and the Registrable Shares are personal to the Purchaser and shall
terminate and expire, with respect to any Registrable Warrant or Registrable
Share, upon the sale or transfer thereof, other than (i) a transfer thereof upon
the death of the Purchaser in accordance with the Purchaser's will or, if the
Purchaser dies intestate, the laws of descent and distribution applicable in the
jurisdiction in which the Purchaser resides at the time of the Purchaser's
death, (ii) a transfer thereof by an individual to the Purchaser's spouse or any
of the Purchaser's children or to a trust for the principal benefit of the
Purchaser, or the Purchaser's spouse, or any of the Purchaser's children; or
(iii) with respect only to registration rights related to Registrable Shares, if
any, a transfer of Warrants by a Purchaser prior to the effectiveness of the
Common Stock Registration Statement in the event the Company fails to file the
Common Stock Registration Statement prior to the expiration of one year after
the date of the amendment of the Agreement.
8. Notices. All notices and requests required or permitted by this
Schedule C [APPENDIX B] shall be given in writing and shall be effective for all
purposes if hand-delivered or sent by (i) certified or registered United States
mail, postage prepaid, (ii) expedited prepaid delivery service, either
commercial or United States Postal Service, with proof of delivery or (iii)
telecopier (with answerback acknowledged), addressed as provided below (or to
such other address as the applicable party shall specify in writing to the other
party hereto): (i) if to the Purchaser, to the Purchaser's address as it is set
forth in the Subscription Agreement, and (ii) if to the Company, to Plymouth
Meeting Executive Campus, 600 West Germantown Pike, Plymouth Meeting,
Pennsylvania 19462, Attention Gerald P. Plush, Senior Vice President. A notice
shall be deemed to have been given, in the case of hand delivery, at the time of
delivery; in the case of registered or certified mail, when delivered or upon
the first attempted delivery on a business day; or in the case of expedited
prepaid delivery and telecopy, upon the first attempted delivery on a business
day. A party receiving a notice which does not comply with the technical
requirements for notice under this Section 8 may elect to waive any deficiencies
and treat the notice as having been properly given.
9. Conditions Relating to Registration and Offer of Registrable Warrants
and Registrable Shares.
(a) Subject to the provisions of Section 9(b), the registration
rights of the holders of Registrable Warrants or Registrable Shares, if
any, provided for hereunder and the ability to offer and sell Registrable
Warrants or Registrable Shares pursuant to the Registration Statement
and/or the Common Stock Registration Statement are subject to the following
conditions and limitations, and the Purchaser agrees with the Company that
in the event that the Company plans to repurchase or bid for Common Stock
of the Company in the open market, on a private solicited basis or
otherwise, and the Board of Directors of the Company determines, in its
reasonable good faith judgment and based upon the advice of counsel to the
Company, that any such repurchase or bid may not, under Rule 10b-6 under
the Securities Exchange Act of 1934 ("Exchange Act"), or any successor or
similar rule ("Rule 10b-6"), be commenced or consummated due to the
existence or the possible commencement of a "distribution" (within the
meaning of Rule 10b-6) as a result of any offers or sales by holders of
Registrable Warrants or Registrable Shares under the Registration Statement
and/or the Common Stock Registration Statement filed pursuant hereto, the
Company shall be entitled, for a period of forty-five (45) days or more,
to request that holders of Registrable Warrants or Registrable Shares
suspend or postpone such distribution plans pursuant to the Registration
Statement and/or the Common Stock Registration Statement (a "10b-6
Election"). The Company shall, as promptly as practicable, give such
holders of Registrable Warrants or Registrable Shares written notice of
such 10b-6 Election, stating the basis for the Board's determination. As
promptly as practicable following the determination by the Board of
Directors that the holders of Registrable Warrants or Registrable Shares
may commence or recommence their distribution pursuant to the Registration
Statement and/or the Common Stock Registration Statement without causing
the Company to be in violation of Rule 10b-6, the Company shall give such
holder of Registrable Warrants or Registrable Shares written notice of such
determination.
(b) Notwithstanding the provisions of Section 9(a) above, the
aggregate number of days (whether or not consecutive) during which the
Company may delay the effectiveness of the Registration Statement and/or
the Common Stock Registration Statement or prevent offerings, sales or
distributions by the holders of Registrable Warrants or Registrable Shares
thereunder pursuant to Section 9(a) shall in no event exceed ninety (90)
days during any twelve (12) month period.
<PAGE>
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
Risk Factors . . . . . . . 8
Recent Developments . . . . 14
Use of Proceeds . . . . . . 15
Selling Warrant Holders . 15
Plan of Distribution . . . 17
Market Price for Common Stock
and Dividends . . . . . . 17
Regulatory Capital . . . . 20
Management and Principal
Stockholders . . . . . . 21
Description of the Warrants 23
Certain Federal Income Tax
Consequences Relating to
the Warrants . . . . . . 25
Restrictions on Acquisition
of the Company . . . . . 27
Description of Capital
Stock . . . . . . . . . . 32
Experts . . . . . . . . . . 36
Legal Matters . . . . . . . 36
Appendix A . . . . . . . A-1
Appendix B . . . . . . . B-1
PROGRESS
FINANCIAL
CORPORATION
300,000 WARRANTS
PROSPECTUS
August , 1995
<PAGE>
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 . . . . . . . . . . . . . . . . . . . 25,000.00
Printing . . . . . . . . . . . . . . . . . . . . . . . . . . 1,000.00
Blue Sky qualification fees and expenses . . . . . . . . . . 1,000.00
Miscellaneous . . . . . . . . . . . . . . . . . . . . . . . . 379.31
$36,000.00
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:
Exhibit No. Exhibit Location
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)
4(d) Registration Rights (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 *
25 Power of Attorney (included in the
signature page to this Registration
Statement)
(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.
* Previously filed.
(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. Notwithstanding the foregoing, any increase or
decrease in volume of securities offered (if the total dollar value of
securities offered would not exceed that which was registered) and any
deviation from the low or high end of the estimated maximum offering range
may be reflected in the form of prospectus filed with the Commission
pursuant to Rule 424(b) if, in the aggregate, the changes in volume and
price represent no more than a 20% change in the maximum aggregate offering
price set forth in the "Calculation of Registration Fee" table in the
effective registration statement;
(iii) To include any material information with respect to the
plan of distribution not previously disclosed in the Registration Statement
or any material change to such information in the Registration Statement.
(2) That, for the purpose of determining any liability under the
Securities Act of 1933, each such post-effective amendment shall be deemed
to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed
to be the initial bona fide offering thereof.
(3) To remove from registration by means of a post-effective
amendment any of the securities being registered which remain unsold at the
termination of the offering.
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.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this Amendment No. 1 to the 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 4th day of August 1995.
PROGRESS FINANCIAL CORPORATION
By: /s/ W. KIRK WYCOFF Date: August 4, 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: August 4, 1995
W. Kirk Wycoff
Director, President and
Chief Executive Officer
(principal executive officer)
/s/ PETER J. MEIER Date: August 4, 1995
Peter J. Meier
Vice President and Corporate
Controller (principal accounting
officer)
/s/ WILLIAM O. DAGGETT, JR.* Date: August 4, 1995
William O. Daggett, Jr.
Director
/s/ JOSEPH R. KLINGER* Date: August 4, 1995
Joseph R. Klinger
Director
/s/ JOHN E. F. CORSON * Date: August 4, 1995
John E. F. Corson
Director
/s/ DONALD F. U. GOEBERT * Date: August 4, 1995
Donald F. U. Goebert
Director
/s/ JOSEPH R. KLINGER * Date: August 4, 1995
Joseph R. Klinger
/s/ PAUL M. LANOCE * Date: August 4, 1995
Paul M. LaNoce
Director
/s/ A. JOHN MAY, III * Date: August 4, 1995
A. John May, III
Director
/s/ WILLIAM L. MUELLER * Date: August 4, 1995
William L. Mueller
Director
/s/ CHARLES J. TORNETTA * Date: August 4, 1995
Charles J. Tornetta
Director
EXHIBIT 5
Opinion of Elias, Matz, Tiernan & Herrick L.L.P.
regarding legality of securities being registered
LAW OFFICES
ELIAS, MATZ, TIERNAN & HERRICK L.L.P.
12TH FLOOR
734 15TH STREET, N.W.
WASHINGTON, D.C. 20005
TELEPHONE: (202) 347-0300
FACSIMILE: (202) 347-2172
August 4, 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-3 ("Registration Statement"), relating to
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. 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 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.
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:/s/ PHILIP ROSS BEVAN
Philip Ross Bevan, a Partner
