As filed with the Securities and Exchange Commission on April 20, 1998
Registration No. 333-50503
================================================================================
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
----------
Pre-Effective Amendment No. 1
to
Form S-2
Registration Statement under the Securities Act of 1933
----------
PROGRESS FINANCIAL CORPORATION
(Exact name of Registrant as specified in its charter)
Delaware 23-22413363
------------------------------- -------------------
(State or other Jurisdiction of (I.R.S. Employer
Incorporation or organization) Identification No.)
Four Sentry Parkway
Suite 230
Blue Bell, Pennsylvania 19422-0764
(610) 825-8800
- --------------------------------------------------------------------------------
(Address, including zip code, and telephone number,
including area code, of Registrants' principal executive offices)
W. Kirk Wycoff
President and Chief Executive Officer
Progress Financial Corporation
Four Sentry Parkway
Suite 230
Blue Bell, Pennsylvania 19422-0764
(610) 825-8800
- --------------------------------------------------------------------------------
(Name, address, including zip code, and telephone number,
including area code, of agents for service)
Copies to:
Raymond A. Tiernan, Esq. Robert C. Azarow, Esq.
Kenneth B. Tabach, Esq. Thacher Proffitt &Wood
Elias, Matz, Tiernan & Herrick L.L.P. Two World Trade Center
734 15th Street, N.W. 39th Floor
Washington, D.C. 20005 New York, New York 10048
(202) 347-0300 (212) 912-7400
Approximate Date of Commencement of Proposed Sale to the Public:
As soon as practicable after this Registration Statement becomes effective.
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, check the following box. /_/
If the registrant elects to deliver its latest annual report to
security holders, or a complete and legal facsimile thereof, pursuant to Item
11(a)(1) of this Form, check the following box. /X/
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, check the following box and
list the Securities Act registration statement number of the earlier effective
registration statement for the same offering. /_/
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(c) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. /_/
If this Form is a post-effective amendment filed pursuant to Rule
462(d) under the Securities Act, check the following box and list the Securities
Act registration statement number of the earlier effective registration
statement for the same offering. /_/
If delivery of the prospectus is expected to be made pursuant to Rule
434, please check the following box. /_/
<TABLE>
<CAPTION>
Calculation of Registration Fee
=================================================================================================================
Amount Proposed Maximum Proposed Maximum Amount of
Title of Each Class of Securities to be Offering Price Aggregate Registration
to be Registered Registered Per Share(1) Offering Price(1) Fee(1)
- -----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Common Stock, par value $1.00 per share 825,000 $18.50 $15,262,500 $4,503
- -----------------------------------------------------------------------------------------------------------------
Preferred Stock Purchase Rights(2)..... 825,000 -- -- --
=================================================================================================================
</TABLE>
(1) Estimated solely for the purpose of calculating the registration fee based
on the average of the high and low sales prices of the Common Stock as
reported by the Nasdaq Stock Market on April 13, 1998, pursuant to Rule
457(c).
(2) Each share of Common Stock has one Preferred Stock Purchase Right attached
thereto without charge.
----------
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 this registration statement shall become
effective on such date as the Commission, acting pursuant to said Section 8(a),
may determine.
================================================================================
<PAGE>
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 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 jurisdiction in which such offer, solicitation or sale would be unlawful
prior to the registration or qualification under the securities laws of any such
jurisdiction.
SUBJECT TO COMPLETION, DATED APRIL 28, 1998
PROSPECTUS
750,000 SHARES
PROGRESS FINANCIAL CORPORATION
COMMON STOCK
(Par Value $1.00 Per Share)
All of the 750,000 shares of the common stock, par value $1.00 per
share (the "Common Stock"), offered hereby (the "Offering") are being issued and
sold by Progress Financial Corporation, a Delaware corporation (the "Company")
at a price of $_____ per share.
The Common Stock is quoted on the Nasdaq Stock Market, National Market
System under the symbol "PFNC." The last reported sale price of the Common Stock
as quoted through the Nasdaq Stock Market on __________ ___, 1998 was $____ per
share.
SEE "RISK FACTORS" ON PAGE 13 OF THIS PROSPECTUS FOR INFORMATION THAT SHOULD BE
CONSIDERED BY PROSPECTIVE PURCHASERS OF THE COMMON STOCK OFFERED HEREBY.
THE SECURITIES OFFERED HEREBY ARE NOT SAVINGS ACCOUNTS OR DEPOSITS
AND ARE NOT INSURED BY THE FEDERAL DEPOSIT INSURANCE
CORPORATION OR ANY OTHER GOVERNMENT AGENCY.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS
PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY
IS A CRIMINAL OFFENSE.
<TABLE>
<CAPTION>
===================================================================================================================================
Underwriting
Price Discounts and Proceeds to the Company(2)
to Public Commissions(1)
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Per Share $______ $_______ $ ________
- -----------------------------------------------------------------------------------------------------------------------------------
Total $______ $_______ $_________
===================================================================================================================================
</TABLE>
(1) The Company has agreed to indemnify the Underwriters against certain
liabilities, including liabilities under the Securities Act of 1933, as
amended. See "Underwriting."
(2) Before deducting expenses payable by the Company, estimated at $200,000.
(3) The Company has granted the Underwriters an option, exercisable within 30
days of the date hereof, to purchase an additional 75,000 shares of Common
Stock, on the same terms and conditions set forth above, solely to cover
over-allotments, if any. If such option is exercised in full, the Price to
Public, Underwriting Discounts and Commissions and Proceeds to Company
will be $_______, $_______ and $_______, respectively.
The shares of Common Stock are offered by the Underwriters, as
specified herein, subject to receipt and acceptance by the Underwriters, and
subject to the right of the Underwriters to reject any order in whole or in
part. It is expected that delivery of the shares of Common Stock will be made on
or about ______ __, 1998 against payment therefor in immediately available
funds.
----------
SANDLER O'NEILL & PARTNERS, L.P.
----------
The date of this Prospectus is ______ __, 1998.
<PAGE>
[MAP]
IN CONNECTION WITH THE OFFERING, THE UNDERWRITERS MAY OVER-ALLOT OR
EFFECT TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE COMMON
STOCK OFFERED HEREBY AT A LEVEL ABOVE THAT WHICH MIGHT OTHERWISE PREVAIL IN THE
OPEN MARKET. SUCH STABILIZING, IF COMMENCED, MAY BE DISCONTINUED AT ANY TIME.
CERTAIN PERSONS PARTICIPATING IN THIS OFFERING MAY ENGAGE IN TRANSACTIONS THAT
STABILIZE, MAINTAIN OR OTHERWISE AFFECT THE PRICE OF THE COMMON STOCK OFFERED
HEREBY. SUCH TRANSACTIONS MAY INCLUDE STABILIZING THE MARKET PRICE OF THE COMMON
STOCK, THE PURCHASE OF COMMON STOCK TO COVER SYNDICATE SHORT POSITIONS AND THE
IMPOSITION OF PENALTY BIDS. FOR A DESCRIPTION OF THESE ACTIVITIES, SEE
"UNDERWRITING."
2
<PAGE>
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 Commission
maintains a World Wide Web site at http://www.sec.gov containing reports, proxy
and information statements and other information regarding registrants that file
electronically with the Commission, including the Company. The Common Stock is
listed on the Nasdaq Stock Market, and such reports, proxy statements and other
information concerning the Company also may be inspected at the offices of the
National Association of Securities Dealers, Inc. ("NASD"), 1735 K Street, N.W.,
Washington, D.C. 20006.
The Company has filed a Registration Statement on Form S-2 (herein
together with all amendments and exhibits thereto, called the "Registration
Statement") under the Securities Act of 1933, as amended (the "Securities Act"),
with respect to the Common Stock offered hereby. This Prospectus does not
contain all the information set forth in the Registration Statement. For further
information with respect to the Company and the Common Stock offered hereby,
reference is made to the Registration Statement. Statements contained in the
Prospectus concerning provisions of certain documents are not necessarily
complete and in each instance, reference is made to the copy of such document
filed as an exhibit to the Registration Statement or attached hereto, each such
statement being qualified in all respects by such references.
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, 1997, including the 1997 Annual Report to Stockholders
attached thereto as Exhibit 13; and
(ii) the Company's Current Report on Form 8-K filed April 28, 1998.
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
3
<PAGE>
Prospectus to the extent that a statement contained herein, in any supplement or
amendment hereof or in any document incorporated herein by reference modifies or
supersedes such statement. Any statement so modified or superseded shall not be
deemed, except as so modified or superseded, to constitute a part of this
Prospectus or any supplement or amendment hereof.
Neither the delivery of this Prospectus nor any sale of securities made
hereunder shall, under any circumstances, create any implication that there has
been no change in the affairs of the Company or its affiliates since the date
hereof or that the information contained herein is correct as of any time
subsequent to its date.
This Prospectus is accompanied by the Company's Annual Report on Form
10-K for the year ended December 31, 1997 and the 1997 Annual Report to
Stockholders. Copies of any other documents incorporated by reference herein are
available from the Company without charge (other than exhibits to such
documents, 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 Frederick E. Schea, Chief Financial Officer of the
Company, at the Company's principal executive offices located at Four Sentry
Parkway, Suite 230, Blue Bell, Pennsylvania 19422-0764. The Company's telephone
number is (610) 825-8800.
4
<PAGE>
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, in the Company's 1997 Annual Report to
Stockholders accompanying this Prospectus.
The Company
Progress Financial Corporation (the "Company") is a Delaware
corporation headquartered in Blue Bell, Pennsylvania. The Company is a unitary
thrift holding company and the sole stockholder of Progress Bank (the "Bank"), a
federally-chartered savings bank, which has been engaged in the thrift business
since 1878. The Bank conducts its business through eight banking offices located
in Montgomery County, one banking office in Delaware County, one banking office
in Chester County and one banking office in the Andorra section of Philadelphia,
in southeastern Pennsylvania. Unless the context otherwise requires, references
herein to the Company include the Bank. At December 31, 1997, the Company had
total consolidated assets of $493.4 million, total consolidated liabilities of
$453.3 million, including total consolidated deposits of $340.8 million, and
total consolidated stockholders' equity of $25.1 million.
The Company's current business strategy is to operate as a profitable,
diversified financial institution providing a full range of banking services
with an emphasis on commercial business and commercial real estate loans to
small and medium-sized businesses, as well as residential construction and
consumer lending, funded primarily by customer deposits. As a complement to this
core business, the Company has expanded its business activities to include
equipment leasing, commercial mortgage banking, asset management, managing a
fund which provides subordinated debt financing primarily to technology
companies in the Mid-Atlantic region, and communications and telemarketing,
which provide a steady source of fee income. As a result of increased
acquisitions of small to medium sized financial institutions by large bank
holding companies in southern Pennsylvania, the Company believes that there is a
significant market opportunity for the Bank to provide a full range of
commercial banking services to small to middle market commercial customers
seeking personalized service that is generally unavailable to such customers at
larger regional and national institutions. See "Business Overview of the
Company."
Historically, the principal business of the Company consisted of
attracting deposits from the general public through its branch office network
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 as well to originate construction loans
(which included land acquisition and development loans). Prior to 1996, such
lending activities comprised, in the aggregate, at least 80% of the Company's
total loan originations.
5
<PAGE>
Beginning in 1995, the Company started to change its focus and to
modify its operations to become more like a commercial bank. The Company's
emphasis shifted to commercial business, commercial real estate and construction
lending and equipment leasing, with a focus on providing such banking services
to small to medium sized businesses, including companies in the technology
sector. The Company's shift in focus to providing a full range of commercial
banking services also coincided with the recent acquisitions of small to medium
sized banking institutions by larger bank holding companies and the
consolidation in the banking industry which has limited the number of lenders
available to small commercial borrowers. Since 1995, the Company has not
emphasized residential lending and has only originated a limited amount of
single-family residential mortgage loans. As a consequence, single-family
residential loans declined from $100.0 million, or 48.1% of the Company's total
loan and lease portfolio, at December 31, 1994 to $56.6 million, or 17.2% of the
Company's total loan and lease portfolio, at December 31, 1997. During the same
time, commercial business and commercial real estate loans increased from $83.7
million, or 40.1% of the Company's total loan and lease portfolio, to $179.3
million, or 54.4% of the Company's total loan and lease portfolio. To assist the
Company's transition in business focus, several senior personnel have been
recruited with significant experience in specific areas of the Company's new
focus, including the technology sector. While this shift in focus has increased
the Company's operating expenses, it has also helped improve the Company's yield
on its average interest earning assets, which has increased from 7.97% in 1995
to 8.82% in 1997. This increase in yield has helped to offset the increase in
operating expense.
The Company also invests in mortgage-backed securities, including
securities which are insured or guaranteed by the U.S. Government and agencies
thereof, and other similar investments permitted by applicable laws and
regulations. In addition, the Bank is 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
deposits, 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, advances from the FHLB of Pittsburgh and other borrowings, provisions
for possible loan and lease losses and real estate owned, personnel, occupancy
and equipment, and other administrative expenses.
6
<PAGE>
The Company, as a registered thrift 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. All federal savings banks are subject to
the qualified thrift lender ("QTL") test that requires at least 65% of a savings
association's portfolio assets to be qualified thrift investments ("QTI"). QTI
generally have included an unlimited amount of housing-related loans and
investments. In 1996, legislation was enacted expanding the types of investments
qualifying as QTI to include, without limitation as to amount, loans for
education purposes, loans to small businesses and loans made through credit
cards or credit card accounts. These amendments to the QTL test allow the Bank
to pursue its strategy of providing a full range of banking services and
emphasizing commercial lending while continuing to comply with the QTL test. At
December 31, 1997, 71.4% of the Bank's portfolio assets were QTI. For more
information about the QTL test and the consequences of failure to comply with
it, see "Risk Factors - Regulation."
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 Four Sentry
Parkway, Suite 230, Blue Bell, Pennsylvania 19422-0764, and its telephone number
is (610) 825-8800.
7
<PAGE>
THE OFFERING
Common Stock Offered The Company is offering 750,000 shares of Common Stock
by the Company hereby. The Company has also granted the Underwriters an
option, exercisable within 30 days of the date hereof,
to purchase from the Company up to 75,000 additional
shares of Common Stock solely to cover over-allotments,
if any. See "Underwriting".
Purchase Price $____ per share of Common Stock ("Purchase Price").
Shares Outstanding
Prior to the Offering 4,063,778 shares
Shares Outstanding 4,813,778 shares (4,888,778 shares assuming the exercise
After the Offering of the Underwriters' over-allotment option).
Estimated Net Proceeds $___ million.
Use of Proceeds Net proceeds retained by the Company will be used by
the Company for general corporate purposes, including
contributions to its subsidiaries for growth and
expansion of its businesses both through internally
generated growth and possible future acquisitions. The
Company intends to invest approximately $6.0 million
of the net proceeds of the Offering in equity of the
Bank. The Bank intends to use such additional capital
to increase its regulatory capital levels in order to
support additional lending and an increase in its asset
base. See "Use of Proceeds."
Dividend Policy The Company is currently paying quarterly dividends of
$.03 per share on the Common Stock. The Company's
ability to pay dividends on the Common Stock depends
on the receipt of dividends from the Bank and the
Company's non-banking subsidiaries. In addition,
dividends will be subject to determination and
declaration by the Board of Directors in its discretion,
which will take into account the Company's
consolidated financial condition and results of
operations, tax considerations, industry standards,
economic conditions, statutory and regulatory
restrictions, general economic conditions and other
factors. While the Company expects to continue to pay
regular quarterly cash dividends, there can be no
assurance that dividends will not be reduced or
eliminated in future periods. See "Market Price for
Common Stock and Dividends - Dividends."
8
<PAGE>
Nasdaq National Market PFNC
System Symbol for
the Common Stock
Risk Factors
See "Risk Factors" on page 13 for a discussion of certain material
factors that should be considered in connection with an investment in the Common
Stock offered hereby.
9
<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 Company's 1997 Annual Report to Stockholders. See
"Available Information."
<TABLE>
<CAPTION>
December 31,
--------------------------------------------------------------------------------
1997 1996 1995 1994 1993
------------- ------------- ------------ ---------- ----------
(Dollars in Thousands)
<S> <C> <C> <C> <C> <C>
Financial Condition Data:
Total assets $493,406 $383,649 $345,394 $348,189 $333,209
Loans and leases, net 325,544 251,562 221,650 205,771 158,268
Loans held for sale(1) 373 599 3,153 351 16,744
Investment securities:
Available for sale(1) 6,395 3,462 5,504 4,627 --
Held to maturity 4,051 1,937 2,149 12,867 4,632
Mortgage-backed securities:
Available for sale(1) 44,518 42,738 36,842 9,103 8,893
Held to maturity 49,421 47,334 52,833 93,673 117,054
Deposits 340,761 306,248 297,260 283,958 273,583
Borrowings 71,172 50,270 28,400 47,052 40,536
Capital securities 15,000 -- -- -- --
Stockholders' equity 25,115 19,954 16,407 13,020 14,788
</TABLE>
<TABLE>
<CAPTION>
Year Ended December 31,
--------------------------------------------------------------------
1997 1996 1995 1994 1993
---------- -------- --------- --------- ----------
(Dollars in Thousands, except per share data)
<S> <C> <C> <C> <C> <C>
Operations Data:
Interest income $34,448 $28,121 $26,569 $22,830 $20,824
Interest expense 16,609 14,682 15,335 12,505 11,465
------- ------- ------ ------- -------
Net interest income 17,839 13,439 11,234 10,325 9,359
Provision for possible loan and lease losses 1,121 687 625 521 368
------- ------- ------ ------- -------
Net interest income after provision
for possible loan and lease losses 16,718 12,752 10,609 9,804 8,991
Other income(2) 6,478 4,859 2,265 1,545 2,226
Other expense 17,014 15,596 12,071 12,065 11,568
------- ------- ------ ------- -------
Income (loss) before income taxes (benefit) 6,182 2,015 803 (716) (351)
Income tax expense (benefit) 2,310 762 (1,868) -- (1,034)
------- ------- ------ ------- -------
Net income (loss) $ 3,872 $ 1,253 $2,671 $ (716) $ 683
======= ======= ====== ======= =======
Per Share Data:
Net income (loss) per share(3) $ .97 $ .32 $ .77 $ (.21) $ .27
======= ======= ====== ======= =======
Net income (loss) per share,
assuming dilution(3) $ .90 $ .31 $ .75 $ (.20) $ .26
======= ======= ====== ======= =======
Cash dividends per share $ .10 $ .04 $ -- $ -- $ --
======= ======= ====== ======= =======
Book value per share(4) $ 6.18 $ 5.02 $ 4.76 $ 3.79 $ 4.30
======= ======= ====== ======= =======
Common shares outstanding
at end of period 4,064 3,974 3,444 3,439 3,439
Average common shares outstanding,
assuming dilution 4,324 4,071 3,581 3,555 2,435
</TABLE>
10
<PAGE>
<TABLE>
<CAPTION>
At or For the Year Ended December 31,
----------------------------------------------------------------
1997 1996 1995 1994 1993
-------- ------- ---------- --------- --------
(Dollars in Thousands)
<S> <C> <C> <C> <C> <C>
Other Data(5):
Operating Data:
Return (loss) on average assets .92% .35% .76% (.21)% .21%
Return (loss) on average equity 17.50 6.59 18.62 (5.24) 6.25
Average equity to average assets 5.27 5.29 4.08 4.01 3.42
Dividend payout ratio 10.31 12.50 -- -- --
Net interest margin(6) 4.57 3.99 3.37 3.23 3.25
Interest rate spread(6) 3.99 3.60 3.07 3.04 3.26
Efficiency ratio (7) 70.11 80.35 83.44 85.60 87.28
Asset Quality Data:
Non-performing assets(8) $5,190 $7,555 $4,607 $9,085 $17,628
Allowance for possible loan and lease losses 3,287 3,177 1,720 1,503 2,113
Non-performing assets as a percent of total
assets at end of period(8) .50% .91% 1.33% 2.61% 5.29%
Non-performing loans as a percent of total
loans and leases at end of period(8) 1.48 2.15 1.74 2.19 3.42
Allowance for possible loan and lease
losses as a percent of non-performing
loans and leases at end of period 68.34 58.78 44.34 33.03 34.92
Allowance for possible loan and lease
losses as a percent of total
loans and leases at end of period 1.00 1.25 .76 .72 1.19
Net charge-offs as a percent of
average loans and leases .35 .03 .19 .60 .64
Capital Ratios of the Bank(9):
Tangible 6.50 4.93 4.91 4.57 4.14
Core 6.50 4.93 4.91 4.57 4.14
Risk-based 10.00 8.51 8.68 9.47 9.39
Branch Data:
Full service banking offices 10 10 9 8 8
</TABLE>
(Footnotes on following page)
11
<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
securities classified as available for sale are carried at fair value.
(2) Includes gain on sale of mortgage servicing rights of $978,000 and
$924,000 during the year ended December 31, 1997 and 1996, respectively.
(3) In 1997, the Company implemented SFAS 128 which requires the Company to
present basic earnings per share amounts for income from continuing
operations. All prior period per share amounts have been presented in
accordance with SFAS 128.
(4) Book value per share represents stockholders' equity divided by the number
of shares of Common Stock issued and outstanding, net of unallocated
shares held by the Company's Employee Stock Ownership Plan ("ESOP").
(5) With the exception of end of period ratios, all ratios are based on
average daily balances during the indicated periods.
(6) 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.
(7) Reflects adjusted operating expenses (net of amortization of intangibles
and the special SAIF assessment) as a percent of the aggregate of net
interest income and adjusted non-interest income (excluding gains and
losses on the sales of loans and securities).
(8) 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, net of related reserves.
(9) For additional information concerning the Bank's compliance with its
regulatory capital requirements, see "Regulatory Capital."
12
<PAGE>
RISK FACTORS
An investment in the Common Stock involves certain investment risks. In
determining whether or not to make an investment in the Common Stock,
prospective purchasers should carefully consider the matters set forth below, as
well as the other information included or incorporated by reference in this
Prospectus.
Increased Emphasis on Commercial Business, Construction, Commercial Real Estate
and Consumer Lending and Lease Financing
The Company's commercial business loans, construction loans, commercial
real estate loans (including multi-family residential loans), consumer loans and
lease financings amounted to $69.3 million or 21.1%, $26.7 million or 8.1%,
$109.9 million or 33.4%, $25.6 million or 7.8% and $41.1 million or 12.5% of the
Company's total loan portfolio (including loans classified as held for sale),
respectively, at December 31, 1997, and $30.4 million or 11.9%, $20.7 or 8.1%,
$90.4 million or 35.4%, $23.8 million or 9.3% and $25.9 million or 10.1%,
respectively, at December 31, 1996.
Since 1995, the Company has increased its emphasis on commercial
business, residential construction, commercial real estate (primarily
multi-family residential), consumer lending and lease financing. See "Business
Overview of the Company." 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. 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. Lease
financing is also considered to involve a higher degree of credit risk than
single-family residential lending due primarily to the relatively rapid
depreciation of assets securing leases such as equipment, phone systems,
computers, automobiles and furniture. In addition, the Company is subject to
increased risk of loss on the disposition of the residual value of the equipment
underlying its leases. A majority of the Company's leases are operating leases
whereby the Company retains the residual value of the leased property upon
expiration of the lease. In the event that the residual value is less than
provided for in the lease, the Company may have a loss related to the
disposition of such property. However, because residual values
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on the Company's leases generally have not been materially below the equipment
value at lease end and a majority of the Company's leases are bought out or
extended at the end of their terms, the Company has not experienced any material
losses in this area to date. At December 31, 1997, the total residual value of
the Company's lease portfolio was $4.6 million.
A portion of the Company's growth in its business activities is due to
the acquisition or start-up of several companies over the last several years
including the Equipment Leasing Company, PAM Financial Corporation and Procall
Teleservices. The Company plans to continue to add to the variety of its
business lines through both the strategic hiring of talented individuals and the
acquisition of whole businesses. The success of past and future acquisitions
will depend on a variety of factors, including the ability of the Company to
integrate such businesses into its current operations, its ability to control
incremental expenses from such acquisitions, its ability to evaluate the assets
generated by such business for purposes of asset/liability management and credit
quality and its ability to retain the personnel to operate such lines of
business. Although the Company believes based on past experience that it will be
able to manage its growth from acquisitions effectively, there can be no
assurance that the Company will be able to achieve results in the future similar
to those achieved by its existing operations. In addition, because the Company
has only recently expanded to commercial lending lines of business, particularly
in the areas of equipment lease financing and lending to the technology sector,
the historical performance of the Company's loan portfolio should not be viewed
as an indication of future trends in the Company's current loan portfolio.
Increased Emphasis on Lending to the Technology Sector
The Bank's specialty lending division provides customized financial
services to Pennsylvania-based companies in the greater Philadelphia area,
primarily to companies in the technology, healthcare and insurance industries.
The specialty lending division focuses on lending to companies within the
technology sector. While the Company seeks relationships with companies that
have already received initial venture capital and have reported annual revenues
of at least $1.0 million, many of these companies are still in the initial phase
of operations and have limited operating histories. Accordingly, because these
companies do not have a history of profitable operations and because there is no
assurance that such companies will be successful in the long term, such lending
involves a higher degree of risk than residential or traditional commercial
business lending. However, the Company attempts to minimize its risk by
primarily emphasizing depository relationships with such companies in their
initial start-up phase. The initial lending relationship by the Bank requires a
pledge of deposits or qualifying accounts receivable as collateral for the loan.
The Bank generally will not make unsecured loans to such companies and intends
to limit the aggregate amount of loans to companies in the technology sector to
15% of the Company's total loans outstanding. In addition, the Company has also
committed to invest up to $3.3 million in Progress Capital Fund, L.P., a $8.8
million fund managed by a subsidiary of the Company, which commenced operations
in late 1997 and provides subordinated debt financing to early-stage
Mid-Atlantic based technology companies. See "Business Overview of the
Company - Other Activities." Because of the start-up and
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speculative nature of the companies that the fund targets, such investment
involves a higher degree of risk than traditional equity investments.
Dependence on Key Personnel
W. Kirk Wycoff, President and Chief Executive Officer of the Company,
maintains a significant role in the development and management of the Company's
business. In addition, the Company has assembled senior management personnel
primarily with commercial banking experience to run the Company's separate
business operations, including Robert J. Bifolco, Senior Vice President of
Commercial Banking, Steven Hobman, Senior Vice President for Specialized
Lending, Eric J. Morgan, Senior Vice President for Credit and Administration,
Frederick E. Schea, Senior Vice President and Chief Financial Officer and Donald
M. DeMaio, Senior Vice President of Retail Division as well as H. Wayne Griest,
Chairman and Chief Executive Officer of Progress Realty Advisors, Inc., the
Company's mortgage banking subsidiary, and George R. Mark, Executive Vice
President of the Company, whose responsibilities include oversight of equipment
leasing, telemarketing and development of new business services. While the
Company and Mr. Wycoff have entered into an employment agreement, the Company
does not have employment agreements with its other executive officers, however,
such officers have been granted stock options to purchase Common Stock of the
Company. The loss of services of Mr. Wycoff or other senior executives could
have an adverse effect on the Company.
Increased Operating Expenses and High Efficiency Ratios
The Company's operating expenses have been increasing in recent years
due primarily to the Company's determination to expand its different business
activities. Many of the Company's current activities are relatively new and have
incurred in recent periods, and will continue to incur, start up costs and
expenses. As a consequence, the Company's efficiency ratio, which was 70.11% for
fiscal 1997, is higher than many other financial institutions and its peer
group. Although the Company has made progress in improving its efficiency, the
Company expects that its efficiency ratio will continue to exceed that of its
peer group until its various business activities are more developed. The Company
believes that it can attract and retain highly qualified personnel to run its
businesses activities because a portion of each of the Company's senior
executive officer's compensation is based upon the results of the specific
business activity that such executive is involved in. The Company believes that
this compensation structure allows it to attract highly motivated
entrepreneurial people experienced in each field that would not otherwise be
available to the Company.
Regulation
The Company, as a unitary thrift 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
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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.
All federal savings banks are subject to the qualified thrift lender
("QTL") test that requires at least 65% of a savings association's portfolio
assets to be qualified thrift investments ("QTI"). QTI generally have included
an unlimited amount of housing-related loans and investments. In 1996,
legislation was enacted expanding the types of investments qualifying as QTI to
include, without limitation as to amount, loans for education purposes, loans to
small businesses and loans made through credit cards or credit card accounts.
These amendments to the QTL test allow the Bank to pursue its strategy of
providing a full range of banking services and emphasizing commercial lending
while continuing to comply with the QTL test. At December 31, 1997, 71.4% of the
Bank's portfolio assets were QTI. The Bank also met the QTL test in each of the
prior 12 months and, therefore, met the QTL test.
In the event that the Bank fails to comply with the QTL test due to its
increased emphasis on commercial lending, or any other reason, the Bank could be
required to convert to a bank charter and the Company could be required to
register as a bank holding company. Under the Home Owners Loan Act, as amended
("HOLA"), a federal savings bank that does not meet the QTL test must either
convert to a bank charter or comply with the following restrictions on its
operations: (i) the association may not engage in any new activity or make any
new investment, directly or indirectly, unless such activity or investment is
permissible for a national bank; (ii) the branching powers of the association
shall be restricted to those of a national bank; (iii) the association shall not
be eligible to obtain any new advances from its FHLB; and (iv) payment of
dividends by the association shall be subject to the rules regarding payment of
dividends by a national bank. Upon the expiration of three years from the date
the association ceases to be a QTL, it must cease any activity and not retain
any investment not permissible for a national bank and immediately repay any
outstanding FHLB advances (subject to safety and soundness considerations). In
addition, the HOLA would require the Company to register as a bank holding
company within one year of the failure of the QTL test by the Bank. Under such
circumstances or if the Bank were to convert to a bank charter, the Company
would become subject to all of the provisions of the Bank Holding Company Act of
1956, as amended, and other statutes applicable to bank holding companies, in
the same manner and to the same extent as if the Company were a bank holding
company. As a bank holding company, the Company would be subject to restrictions
on its activities as well as restrictions on the activities of its non-bank
subsidiaries. In such case the Company would be also be required to maintain
certain minimum capital requirements. The Company does not believe that the Bank
will not be able to satisfy the QTL test or that it will be required to register
as a bank holding company in the foreseeable future. However, in the event that
the Company were required to register as a bank holding company, it does not
believe that the activities restrictions or the applicable capital requirements
would have a material effect on its business and operations.
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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 its interest-earning assets and the interest expense paid on its
interest-bearing liabilities. Like most financial institutions, the Company's
earnings are affected by changes in market interest rates and other economic
factors beyond its control. If an institution's interest earning assets have
shorter effective maturities than its interest bearing liabilities, the yield on
the institution's interest earning assets generally will adjust more rapidly
than the cost of its interest bearing liabilities and as a result, the
institution's net interest income generally would be adversely affected by
material and prolonged decreases in interest rates and positively affected by
comparable increases in interest rates. At December 31, 1997, the Company's
interest earning assets which were estimated to mature or reprice within one
year exceeded the Company's interest bearing liabilities with the same
characteristics by $66.0 million or 13.4% of the Company's total assets. For the
year ended December 31, 1997, the Company's interest rate spread and net
interest margin increased to 3.99% and 4.57%, respectively.The Company's
interest rate spread and net interest margin amounted to 3.04% and 3.23%,
respectively, for fiscal 1994, increased to 3.07% and 3.37%, respectively, for
fiscal 1995 and further increased to 3.60% and 3.99%, respectively, for fiscal
1996.
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 December 31, 1997, the Company had
$4.1 million of investment securities and $49.4 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. 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 $104.4
million and $104.1 million, respectively, at December 31, 1997.
Changes in interest rates also can affect the average life of loans and
mortgage-related securities. Decreases in interest rates generally result in
increased prepayments of loans and mortgage-backed securities, as borrowers
refinance 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.
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Year 2000 Compliance
A critical issue facing the financial institution industry is concerns
over computer systems ability to process year-date data in the year 2000. Many
of the Company's computer systems were originally designed to recognize calendar
years by their last two digits. Calculations performed using these truncated
fields will not work properly with dates from the year 2000 and beyond. Unless
corrected, this situation is expected to cause widespread problems on January 1,
2000, when computer systems could process data incorrectly or stop processing
altogether. This issue could effect a variety of the Company's systems. The
Company has formed a project committee that meets monthly to review the status
of the Company's compliance. A comprehensive review to identify the systems
affected by this issue was completed and an implementation plan is currently
being executed. The Company's primary loan, deposit and general ledger systems
are provided by a third party service provider. While such service provider has
provided the Company continued updates and assurances that the year 2000
compliance issues will be resolved on a timely basis, there is no certainty that
this will be the case. Many of the Company's other systems, such as payroll and
lease accounting are vendor-supplied and most vendors have provided the Company
with certification or a delivery commitment letter. Related costs of compliance
include additional training and testing of third party systems providers,
consultants and educational sessions for loan customers. In addition, the
Company is also subject to some degree of risk that its borrowers will have
problems with year 2000 issues which will effect their ability to remain viable
and repay outstanding loans. Management currently estimates that the year 2000
compliance issues will not have a material impact on the Company's operations.
However, there can be no assurance that, if not properly addressed, such issues
could result in interruptions in the Company's business and materially affect
results of operations.
Competition Within the Bank's Market Area
Competition in the banking and financial services industry is intense.
In its market area, the Company competes with commercial banks, savings
institutions, mortgage brokerage firms, credit unions, finance companies, mutual
funds, insurance companies, and brokerage and investment banking firms operating
locally and elsewhere. Many of these competitors have substantially greater
resources and lending limits than the Company and may offer certain services
that the Company does not or cannot provide. The profitability of the Company
depends upon its continued ability to successfully compete in its market area.
However, in order to maintain its competitive position, the Company may be
required to reduce rates charged on its various lending products while
maintaining its rate paid on its deposit liabilities (its principal source of
funds), which could result in a reduction in the Company's interest rate spread
and interest rate margin, which would adversely affect its profitability.
Dilution
Upon completion of the Offering, there will be an immediate dilution of
the net tangible book value per share of Common Stock purchased in the Offering
from the Price to Public. This
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dilution primarily results from the sale by the Company of Common Stock in the
Offering at a price above the current book value per share. Without taking into
account any changes in net tangible book value after December 31, 1997, other
than those resulting from the sale by the Company of the Common Stock offered
hereby (after deduction of underwriting discounts and commissions and estimated
Offering expenses), the pro forma net tangible book value at December 31, 1997
would have been $_______ per share (excluding any value of tax benefits),
representing an immediate dilution of $_______ per share to persons purchasing
the Common Stock offered hereby at the Price to Public.
Dividends
The Company suspended dividend payments on the Common Stock after the
second quarter of 1990 in order to conserve its capital resources in light of
operating losses and the inability of the Bank to meet its risk-based capital
requirement at the time. However, due to an improvement in the Company's results
of operations and net proceeds from the Company's offering in 1996, the Company
initiated a quarterly cash dividend policy of $.02 per share beginning with the
third quarter of 1996, which was increased to $.03 per share in the third
quarter of 1997. Dividends are subject to determination and declaration by the
Board of Directors in its discretion, which will take into account the Company's
consolidated financial condition and results of operations, tax considerations,
industry standards, economic conditions, statutory and regulatory restrictions,
general economic conditions and other factors. There can be no assurance that
dividends will not be reduced or eliminated in future periods. The Company's
ability to pay dividends on the Common Stock depends on the receipt of dividends
from the Bank. See "Market Price for Common Stock and Dividends."
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."
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BUSINESS OVERVIEW OF THE COMPANY
Set forth below is a brief overview of the business of the Company,
which should be read in conjunction with, and is qualified in its entirety by
reference to, the more detailed financial and other information contained in the
Company's Annual Report on Form 10-K for the year ended December 31, 1997,
including without limitation "Business," which is included as Item 1 thereof,
"Management's Discussion and Analysis of Financial Condition and Results of
Operation" included in Item 7 thereof and is incorporated by reference to the
Company's 1997 Annual Report to Stockholders, and the Consolidated Financial
Statements of the Company, including the related Notes, included in Item 8
thereof and are incorporated by reference to the Company's 1997 Annual Report to
Stockholders. See "Incorporation of Certain Documents by Reference."
General
The Company is a Delaware corporation headquartered in Blue Bell,
Pennsylvania. The Company is a unitary thrift holding company and the sole
stockholder of the Bank, a federally-chartered savings bank, which has been
engaged in the thrift business since 1878. The Bank conducts its business
through eight banking offices located in Montgomery County, one banking office
in Delaware County, one banking office in Chester County and one banking office
in the Andorra section of Philadelphia, in southeastern Pennsylvania. At
December 31, 1997, the Company had total consolidated assets of $493.4 million,
total consolidated liabilities of $453.3 million, including total consolidated
deposits of $340.8 million, and total consolidated stockholders' equity of $25.1
million.
The Company's current business strategy is to operate as a profitable,
diversified financial institution providing a full range of banking services
with an emphasis on commercial business and commercial real estate loans to
small and medium-sized businesses, as well as residential construction and
consumer lending, funded primarily by customer deposits. As a complement to this
core business, the Company has expanded its business activities, to include
equipment leasing, commercial mortgage banking, asset management, managing a
fund which provides subordinated debt financing primarily to technology
companies in the Mid-Atlantic region, and communications and tele-marketing,
which provide a steady source of fee income. As a result of increased
acquisitions of small to medium sized financial institutions by large bank
holding companies in southern Pennsylvania, the Company believes that there is a
significant market opportunity for the Bank to provide a full range of
commercial banking services to small to middle market commercial customers
seeking personalized service that is generally unavailable to such customers at
larger regional and national institutions.
Historically, the principal business of the Company consisted of
attracting deposits from the general public through its branch office network
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 as well to originate construction loans
(which included land acquisition and development loans). Prior to 1996, such
lending activities comprised, in the aggregate, at least 80% of the Company's
total loan originations.
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Beginning in 1995, the Company started to change its focus and to
modify its operations to become more like a commercial bank. The Company's
emphasis shifted to commercial business, commercial real estate and construction
lending and equipment leasing, with a focus on providing such banking services
to small to medium sized businesses, including companies in the technology
sector. Such decline by the Company in traditional thrift lending activities and
the increased emphasis on commercial lending reflects the change in the
direction of the Company to providing a full range of commercial banking
services in connection with developing relationship banking. The Company's shift
in focus to providing a full range of commercial banking services also coincided
with the recent acquisitions of small to medium sized banking institutions by
larger bank holding companies and the consolidation in the banking industry
which has limited the number of lenders available to small commercial borrowers.
Since 1995, the Company has not emphasized residential lending and has only
originated a limited amount of single-family residential mortgage loans. As a
consequence, single-family residential loans declined from $100.0 million, or
48.1% of the Company's total loan and lease portfolio, at December 31, 1994 to
$56.6 million, or 17.2% of the Company's total loan and lease portfolio, at
December 31, 1997. During the same time, commercial business and commercial real
estate loans increased from $83.7 million, or 40.1% of the Company's total loan
and lease portfolio, to $179.3 million, or 54.4% of the Company's total loan and
lease portfolio. To assist the Company's transition in business focus, several
senior personnel have been recruited with significant experience in specific
areas of the Company's new focus, including the technology sector.
Commercial Business Lending. The Bank's commercial banking division
provides customized loan, deposit and investment products, as well as cash
management services to small and middle-market businesses. Through the Bank, the
Company originates secured or unsecured loans for commercial, corporate,
business and agricultural purposes, which include the issuance of letters of
credit. At December 31, 1997, $69.3 million or 21.1% of the Company's total loan
and lease portfolio (including loans classified as held for sale) consisted of
commercial business loans.
As a result of increased acquisitions of small to medium sized
financial institutions by large bank holding companies in southern Pennsylvania,
the Company believes that there is a large amount of small to middle market
commercial customers seeking the full range of commercial banking services that
the Bank offers combined with personalized service that is generally unavailable
to such customers at larger regional and national institutions. Due to this
consolidation, the Company believes it has an opportunity to expand its
commercial lending relationships and thereby continue to grow the Bank's
interest earning assets, as well as increase its commercial deposits. In
addition, this consolidation has resulted in the availability of experienced
commercial lenders who do not remain with an institution after it is acquired.
The Company in the past has hired, and will look to hire in the future, high
quality experienced commercial lending officers who become available as a result
of such industry consolidation.
The commercial banking division provides a full range of banking
services targeted to businesses with annual revenues of $1 million to $25
million located primarily in Bucks, Chester, Montgomery, Philadelphia and
Delaware Counties of Pennsylvania. The Company's commercial business loans
consist primarily of loans secured by various equipment, machinery and other
corporate assets, including accounts receivable. Commercial business loans also
are made to
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provide working capital to businesses in the form of lines of credit which may
be secured by inventory or other assets or unsecured, as well as for various
other miscellaneous purposes.
The Bank has established a specialized lending division which provides
customized financial services to companies in the technology, healthcare and
insurance industries. The specialized lending division primarily focuses on
lending to technology-based companies in the greater Philadelphia geographic
area from Princeton, New Jersey to Wilmington, Delaware and west to Harrisburg,
Pennsylvania. The division seeks relationships with emerging technology- based
companies which have already received initial venture capital and have annual
revenues of at least $1.0 million. In addition to providing financing, the
Company often obtains a small equity position in the borrower in the form of
warrants to purchase common stock of the borrower. In December 1997, the Bank
and the Eastern Technology Council of Greater Philadelphia, a non-profit
technology-oriented trade group, entered into a three year agreement with the
Bank to serve as the Council's preferred lender program. Through the "TechBanc"
program, the Bank now has access to the over-600 member organizations of the
council to provide lending and banking services.
At December 31, 1997, the Company's commercial business loan portfolio
consisted of approximately 355 loans with an average principal balance of
$188,900 and the Company's largest commercial loan had an outstanding balance of
$2.9 million. At December 31, 1997, the Company's commercial loan portfolio
included 50 loans with an average outstanding principal balance of $400,000
originated by the Bank's specialty lending division, with the largest loan
having an outstanding balance of $2.6 million. Commercial business loans
generally have terms of five years or less and interest rates which adjust in
accordance with a designated prime lending rate in order to increase the
Company's interest rate sensitivity of its assets. The Company generally obtains
personal guarantees of its commercial business loans from the principals of the
borrower.
At December 31, 1997, commitments under unused lines and standby and
commercial letters of credit amounted to $102.1 million.
Commercial Real Estate Activities. The Company originates commercial
real estate loans through the Bank and conducts commercial mortgage banking
activities through Progress Realty Advisors, Inc. ("PRA"), a subsidiary of the
Company. In evaluating whether a lending opportunity is originated for the
Bank's portfolio or placed with third parties through PRA, the Company considers
the following four factors: loan size, recourse provisions, geographic location
and business banking relationships.
Commercial Real Estate Lending. The Company originates mortgage loans
secured by multi-family residential and commercial real estate. At December 31,
1997, $109.9 million or 33.4% of the Company's total loan and lease portfolio
(including loans classified as held for sale) consisted of such loans.
Commercial real estate loans originated by the Company are primarily
secured by office buildings, retail stores, warehouses and general purpose
industrial space. Commercial real estate loans also include multi-family
residential loans, substantially all of which are
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secured by apartment buildings. A significant portion of such loans are secured
by owner-occupied properties and relate to borrowers which have an existing
banking relationship with the Company through maintenance of commercial checking
and other deposit accounts as well as frequently having existing commercial
business loans. At December 31, 1997, $19.0 million or 17.3% of the Company's
total commercial real estate loans were comprised of multi-family residential
loans.
At December 31, 1997, the Company's commercial real estate loan
portfolio consisted of approximately 222 loans with an average principal balance
of approximately $488,100 and the Company's largest commercial real estate loan
had an outstanding balance of $3.0 million. Although terms vary, commercial real
estate loans secured by existing properties generally have maturities of ten
years or less and interest rates which adjust every one, three or five years in
accordance with a designated index.
At December 31, 1997, substantially all of the Company's commercial
real estate loan portfolio was secured by properties located within its primary
market area. Loan-to-value ratios on the Company's commercial real estate loans
are limited to 80% or lower, except in certain limited circumstances. In
addition, as part of the criteria for underwriting permanent commercial real
estate loans, the Company generally imposes a debt service coverage ratio (the
ratio of net cash from operations before payment of debt service to debt
service) of at least 1.2x. It is also the Company's general policy to obtain
personal guarantees of its commercial real estate loans from the principals of
the borrower.
Commercial real estate lending is generally considered to involve a
higher degree of risk than single-family residential lending. Such lending
typically involves large loan balances concentrated in a single borrower or
groups of related borrowers. In addition, the payment experience on loans
secured by income-producing properties is typically dependent on the successful
operation of the related real estate project and thus may be subject to a
greater extent to adverse conditions in the real estate market or in the economy
generally. The Company generally attempts to offset the risks associated with
commercial real estate lending by, among other things, lending primarily in its
market area, periodically inspecting each property, using conservative
loan-to-value ratios in the underwriting process and obtaining financial
statements and rent rolls from all commercial and multi-family borrowers on at
least an annual basis.
Commercial Mortgage Banking. The Company conducts commercial mortgage
banking and brokerage services through PRA and its divisions. PRA was formed as
a complement to the Company's commercial lending activities in order to provide
lending services for borrowers where borrowing needs are not consistent with the
Company's lending operations due to, among other things, the amount of financing
required, the location of the borrower and recourse provisions. PRA specializes
in originating, underwriting and closing commercial real estate financing for
residential, multi-family and commercial properties for other financial
institutions, insurance and finance companies for a brokerage fee.
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During the year ended December 31, 1997, the Company placed
approximately $123.8 million of loans and earned brokerage and advisory fees of
$842,000 compared to placing approximately $93.1 million of loans and earning
fees of $645,000 in 1996.
During 1997, PRA significantly expanded its loan origination network
through the acquisition of two commercial mortgage banking firms. PRA now
maintains origination offices in Blue Bell, Pennsylvania, Woodbridge, New
Jersey, Richmond, Virginia and Chesapeake, Virginia, allowing it to serve a
market area extending from southern
Connecticut to southern Virginia.
Construction Lending. Through the Bank, the Company also offers both
residential construction loans and, to a lesser extent, commercial construction
loans. At December 31, 1997, construction loans amounted to $26.7 million or
8.1% of the Company's total loan and lease portfolio (including loans classified
as held for sale), all of which consisted of loans for the construction of
residential property. At December 31, 1997, the Company's construction loan
portfolio consisted of approximately 53 loans with an average principal balance
of approximately $453,000 and the Company's largest construction loan had an
outstanding balance of $1.1 million.
Construction loans generally offer higher yields and afford the Company
the opportunity to increase the interest rate sensitivity of its loan portfolio.
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 in large part upon the accuracy
of the initial estimate of the property's value at completion of construction or
development, the estimated cost (including interest) of construction and the
financial strength of the borrower. During the construction phase, a number of
factors could result in delays and cost overruns. If the estimate of
construction costs proves to be inaccurate, the Company may be required to
advance funds beyond the amount originally committed to permit completion of the
development. 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 having a
value which is insufficient to assure full repayment, in which case the Company
would have to rely upon the borrower's financial ability.
The Company generally attempts to address the additional risks
associated with construction lending by, among other things, lending primarily
in its market area, periodically inspecting each property during the
construction period, using conservative loan-to-value ratios in the underwriting
process and generally requiring personal guarantees. At December 31, 1997, all
of the Company's construction loans were secured by properties located within
the Company's primary market area. In addition, residential construction loans
are generally made for 80% or less of the appraised value of the property upon
completion (75% in the case of land loans). Moreover, the Company does not
originate loans for the construction of speculative (or unsold) residential
properties. Prior to making a commitment to fund a construction loan, the
Company requires both an appraisal of the property by independent appraisers
approved by the Board of Directors and a study of the feasibility of the
proposed project.
24
<PAGE>
Construction loans, including land loans, generally have maturities of
12 to 24 months (up to three years in the case of land loans). Interest rates on
construction loans generally adjust in accordance with a designated index.
Advances are generally made to cover actual construction costs, and generally
include a reserve for paying the stated interest due on the loan during the life
of the loan. Loan proceeds are disbursed as inspections of construction progress
warrants and as pre-construction sale and leasing requirements generally imposed
by the Company are met.
Equipment Leasing. As part of the strategy to be a full-service
commercial lender, the Company acquired an equipment leasing company in 1996 in
order to provide diversified equipment leasing services to small to middle
market business companies. At December 31, 1997, $41.1 million or 12.5% of the
Company's total loan and lease portfolio (including loans classified as held for
sale) consisted of lease financings. In January 1998, the Company further
expanded its leasing capacity through the acquisition of an additional leasing
company.
Equipment lease financing is provided through the Bank's subsidiaries,
the Equipment Leasing Company ("ELC"), located in Baltimore, Maryland, Quaker
State Leasing Company ("QSLC"), a division of ELC located in Blue Bell,
Pennsylvania, and PAM Financial Corporation ("PAM"), located in Bethlehem,
Pennsylvania. Through this network, the Company provides lease financing
throughout the mid-Atlantic region with a current concentration on Pennsylvania,
New York, New Jersey, Maryland and Virginia. The Company provides leasing either
directly to the business customer or through regional vendor sponsored programs.
The Company provides lease financing for a wide variety of business
equipment, including computer systems, telephone systems, furniture, landscaping
and construction equipment, medical equipment, dry cleaning equipment and
graphic systems equipment.
During 1997, the first full year of leasing operations, the Company
originated $31.4 million of lease contracts with QLSC's portfolio increasing
from 149 contracts and $6.0 million in receivables at December 31, 1996 to 850
contracts and $22.0 million in receivables at December 31, 1997. During the same
period, ELC's portfolio remained constant at $19.7 million in receivables. The
average lease transaction during 1997 was approximately $27,000 for QSLC and
approximately $19,000 for ELC. Such contracts are generally for two to three
year terms with options for the lessee to purchase the equipment at lease end,
which options are frequently exercised.
The majority of the Company's leases are operating leases whereby the
Company retains the residual value of the leased property upon expiration of the
lease. In the event that the residual value is less than provided for in the
lease, the Company may have a loss related to the disposition of such property.
However, because a majority of the Company's leases are bought out or extended
at the end of their terms, the Company has not experienced any material losses
in this area to date. At December 31, 1997, the total residual value of the
Company's lease portfolio was $4.6 million.
25
<PAGE>
For the year ended December 31, 1997, the Company's leasing segment had
net income of $927,000 and revenues of $5.5 million.
Consumer Lending. Subject to restrictions contained in applicable
federal laws and regulations, the Bank is authorized to make loans for a wide
variety of personal or consumer purposes. At December 31, 1997, $25.6 million or
7.8% of the Company's total loan and lease portfolio (including loans classified
as held for sale) consisted of consumer loans, consisting primarily of home
equity loans.
The Bank has been emphasizing a variety of consumer loans in recent
years in order to provide a full range of financial services to its customers
and because such loans generally have shorter terms and higher interest rates
than traditional first mortgage loans. The consumer loans offered by the Bank
include home equity loans and lines of credit, deposit account secured loans and
loans that are secured by personal property, including automobiles.
Home equity loans are originated by the Bank for up to 80% of the
appraised value, less the amount of any existing prior liens on the property.
The Bank also offers home equity lines of credit in amounts up to 80% of the
appraised value, less the amount of any existing prior liens. Home equity loans
have a maximum term of 15 years, and the interest rate is dependent upon the
term of the loan. The Bank secures the loan with a mortgage on the property
(generally a second mortgage) and will originate the loan even if another
institution holds the first mortgage. At December 31, 1997, home equity loans
and lines of credit totalled $23.1 million.
Consumer loans generally have shorter terms and higher interest rates
than mortgage loans but generally involve more credit risk than mortgage loans
because of the type and nature of the collateral and, in certain cases, the
absence of collateral. In addition, consumer lending collections are dependent
on the borrower's continuing financial stability, and thus are more likely to be
adversely effected by job loss, divorce, illness and personal bankruptcy. In
most cases, any repossessed collateral for a defaulted consumer loan will not
provide an adequate source of repayment of the outstanding loan balance. The
Company believes that the generally higher yields earned on consumer loans
compensate for the increased credit risk associated with such loans and that
consumer loans are important to its efforts to increase rate sensitivity,
shorten the average maturity of its loan portfolio and provide a full range of
services to its customers.
Other Activities. Progress Capital, Inc. ("PCI"), s subsidiary of the
Company, is the corporate general partner of the Ben Franklin/Progress Capital
Fund, L.P., a $8.8 million fund managed by Progress Capital Management, Inc.,
also a subsidiary of the Company, which commenced operations in late 1997 and
provides subordinated debt financing to early-stage Mid-Atlantic based
technology companies with proven, innovative products and an existing revenue
stream. In addition, the fund generally receives warrants to purchase equity of
the borrowers in connection with such lending. The Company earns a fee for
managing the fund as well as maintaining an equity interest. PCI also invests in
middle market
26
<PAGE>
companies that are prospects or customers of the Company and companies who have
demonstrated a superior track record in their area of expertise.
Procall Teleservices, Inc., a subsidiary of the Company, is an
interactive communications and marketing firm, which provides a full range of
business-to-business teleservices, including customer service, market research
and telesales. Procall, which began operations in the second quarter of 1997,
provides marketing support to a variety of businesses, from start up companies
to Fortune 500 companies as well as the subsidiaries of the Company. Procall
also manages the call center for the Bank.
In February 1998, the Company formed a joint venture partnership,
Progress Development LP, which acquired an interest in NewSeasons Assisted
Living Communities. NewSeasons owns, acquires, develops and operates assisted
living residences for the elderly. NewSeasons will have seven projects
operational by the second quarter of 1998 and has plans for a total of 21
projects within the next three years. In addition to owning an equity interest
in NewSeasons, Progress Development will provide fee based development,
construction management and financial services to NewSeasons.
27
<PAGE>
Lending Activities
At December 31, 1997, the Company's net loan and lease portfolio
(including loans classified as held for sale) totalled $325.9 million,
representing approximately 66.1% of its $493.4 million of total assets at that
date. The principal categories of loans in the Company's portfolio are
residential real estate loans, which are secured by single-family (one-to-four
units) residences; commercial real estate loans, which are secured by
multi-family (over five units) residential and commercial real estate; loans for
the construction of single-family properties, including land loans; commercial
business loans; and consumer loans. The following table sets forth information
concerning the Company's loan and lease portfolio by type of loan at the dates
indicated.
<TABLE>
<CAPTION>
December 31,
------------------------------------------------------------------------
1997 1996 1995
------------------ ------------------- --------------------
Amount Percent Amount Percent Amount Percent
-------- ------- -------- ------- -------- -------
(Dollars in thousands)
<S> <C> <C> <C> <C> <C> <C>
Real estate loans:
Single family
residential(1) $56,565 17.18% $64,259 25.17% $91,091 40.21%
Commercial
real estate 109,938 33.40 90,350 35.38 81,535 36.00
Construction 26,695 8.11 20,692 8.10 14,230 6.28
-------- ------ -------- ----- -------- -----
Total real estate
loans 193,198 58.69 175,301 68.65 186,856 82.49
-------- ------ -------- ----- -------- -----
Commercial business 69,312 21.05 30,384 11.90 17,244 7.61
-------- ------ -------- ----- -------- -----
Lease financing 41,137 12.50 25,870 10.13 -- --
-------- ------ -------- ----- -------- -----
Consumer loans:
Consumer 24,639 7.48 22,898 8.97 21,666 9.57
Credit card receivables 918 .28 885 .35 757 .33
-------- ------ -------- ----- -------- -----
Total consumer loans 25,557 7.76 23,783 9.32 22,423 9.90
-------- ---- -------- ----- -------- -----
Total loans and leases $329,204 100.00% $255,338 100.0% $226,523 100.0%
======== ====== ======== ===== ======== =====
Allowance for possible
loan and lease losses (3,287) (3,177) (1,720)
-------- -------- --------
Net loans and leases $325,917 $252,161 $224,803
======== ======== ========
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
December 31,
-----------------------------------------------
1994 1993
--------------------- ------------------
Amount Percent Amount Percent
---------- ------- -------- -------
(Dollars in thousands)
<S> <C> <C> <C> <C>
Real estate loans:
Single family
residential(1) $99,917 48.12% $80,196 45.25%
Commercial
real estate 71,273 34.33 68,530 38.69
Construction 5,379 2.59 3,922 2.22
-------- ----- -------- ------
Total real estate
loans 176,569 85.04 152,648 86.17
-------- ----- -------- ------
Commercial business 12,005 5.78 9,250 5.22
-------- ----- -------- ------
Lease financing -- -- -- --
-------- ----- -------- ------
Consumer loans:
Consumer 19,027 9.17 15,257 8.61
Credit card receivables 24 .01 -- --
-------- ----- -------- -----
Total consumer loans 19,051 9.18 15,257 8.61
-------- ----- -------- ------
Total loans and leases $207,625 100.0% $177,155 100.00%
======== ===== ======== ======
Allowance for possible
loan and lease losses (1,503) (2,113)
-------- --------
Net loans and leases $206,122 $175,042
======== ========
</TABLE>
- ----------
(1) Includes $373,000, $599,000, $3.2 million, $351,000 and $16.8 million of
loans classified as held for sale at December 31, 1997, 1996, 1995, 1994
and 1993, respectively.
28
<PAGE>
The following table shows total loans and leases originated, purchased,
sold and repaid during the period ended December 31 for the years indicated.
<TABLE>
<CAPTION>
December 31,
--------------------------------------------------
1997 1996 1995
------------- ------------- --------------
(Dollars in Thousands)
<S> <C> <C> <C>
Loan originations:
Single family residential $3,692 $17,018 $18,404
Commercial real estate(2) 42,155 25,503 23,773
Construction 35,300 25,711 21,798
Lease financing 31,381 9,059 --
Commercial business 52,390 33,024 11,201
Consumer 7,168 11,643 9,398
-------- -------- -------
Total loans and leases originated 172,086 121,958 84,574
-------
Leases acquired through the purchase of The Equipment Leasing Company -- 20,025 --
Purchases -- -- 447
-------- -------- -------
Total loans and leases originated and purchased $172,086 $141,983 $85,021
======== ======== =======
Sales and loan/lease principal reductions:
Loans and leases sold(1) 3,347 30,787 16,230
Loan and lease principal reductions 89,665 80,640 49,205
-------- -------- -------
Total loans/leases sold and principal reductions $93,012 $111,427 $65,435
======== ======== =======
Net change due to other items (5,208) (1,741) (688)
-------- -------- -------
Net increase (decrease) in loan and leases, net of unearned income $ 73,866 $ 28,815 $18,898
======== ======== =======
</TABLE>
- ----------
(1) For the years ended December 31, 1996 and 1995, $10.0 million, and
$241,000, of loans, respectively, were converted into mortgage-backed
securities and subsequently sold.
(2) Does not include loans placed by PRA.
29
<PAGE>
USE OF PROCEEDS
Net proceeds retained by the Company will be used by the Company for
general corporate purposes, including contributions to its subsidiaries for
growth and expansion of its businesses both through internally generated growth
and possible future acquisitions. Initially, the net proceeds from the Offering
will be invested in short-term investment grade securities. The Company intends
to invest approximately $6.0 million of the net proceeds of the Offering in
equity of the Bank. The Bank intends to use such additional capital to increase
its regulatory capital levels in order to support additional lending and an
increase in its asset base.
The estimated net proceeds to be raised in the Offering depends on the
amount of the actual expenses incurred in the Offering, which may differ from
the estimates thereof.
The following table shows estimated gross and net proceeds based upon
the sale of 750,000 shares of Common Stock in the Offering. In determining net
proceeds, the estimated expenses of the Offering (which are currently estimated
to amount to $________ in the aggregate) have been subtracted from gross
proceeds.
Issuance of
750,000 Shares
------------------------
Gross proceeds $________
Less: estimated expenses ________
Total net proceeds (1) $========
- ----------
(1) Does not include the exercise of the option for 75,000 additional shares
granted to the Underwriters to cover over-allotments. If the option is
exercised in full, total net proceeds are estimated to be $______.
30
<PAGE>
CAPITALIZATION
The following table sets forth the consolidated capitalization of the
Company at December 31, 1997, and the pro forma consolidated capitalization of
the Company at such date after giving effect to the Company's receipt of all of
the estimated net proceeds from the sale of the Common Stock offered hereby,
based on the assumptions set forth in "Use of Proceeds" and in the notes below.
For a tabular presentation of the estimated pro forma effects of the Offering on
the regulatory capital ratios of the Bank, see "Regulatory Capital."
December 31, 1997
-----------------------------
Actual As Adjusted
----------- ---------------
(Dollars in Thousands, Except
Per Share Amounts)
Deposits $340,761 $340,761
Advances from the FHLB of Pittsburgh 33,450 33,450
Other borrowings(3) 37,722 37,722
-------- --------
Total deposits and borrowed funds $411,933 $411,933
======== ========
Company-obligated mandatorily redeemable
capital securities of subsidiary trust
holding solely junior subordinated
debentures of the Company $15,000 $15,000
======== ========
Stockholders' equity:
Serial Preferred Stock (authorized: 1,000,000
shares, par value $.01; outstanding: none) $ -- $ --
Common Stock
(authorized: 6,000,000 shares, par value
$1.00; issued: 4,063,778 shares and 4,813,778
shares, as adjusted)(1) 4,064 4,814
Capital surplus 20,511
Unearned ESOP shares (164)
Retained earnings 244
Unrealized gain on securities available for
sale, net of deferred income taxes 460
-------- --------
Total stockholders' equity $ 25,115 $
======== ========
Book value per share of Common Stock(2) $ 6.18 $
======== ========
- ----------
(1) Does not reflect 75,000 shares which may be issued upon exercise of the
over-allotment option granted to the Underwriters in connection with the
Offering. See "Underwriting."
31
<PAGE>
(2) Book value per share of Common Stock is determined by dividing the
Company's actual and as adjusted consolidated total stockholders' equity at
December 31, 1997 by 4,063,778 shares of issued and outstanding Common
Stock and 4,813,778 shares of Common Stock, as adjusted, respectively, in
each case net of unallocated shares held by the Company's ESOP.
(3) Includes $3.0 million of Subordinated Notes due 2004.
REGULATORY CAPITAL
Under regulations adopted by the OTS, each savings institution is currently
required to maintain tangible and core capital equal to at least 1.5% and 3.0%,
respectively, of its adjusted total assets, and total capital equal to at least
8.0% of its risk-weighted assets.
The following table sets forth the actual regulatory capital ratios of the
Bank at December 31, 1997 and as adjusted to give effect to the receipt of the
estimated net proceeds from the sale of the Common Stock offered hereby, based
on the Company's contribution of approximately $6.0 million of the net proceeds
to the Bank.
<TABLE>
<CAPTION>
As Adjusted
Historical Pro Forma
at December 31, 1997 at December 31, 1997
---------------------------------------------------- ----------------------------------------------
Capital Excess Capital Excess
Capital Requirement Capital Capital Requirement Capital
------------ --------------- ------------ ------------ --------------- ----------
<S> <C> <C> <C> <C> <C> <C>
Dollar basis:
Tangible $31,433 $ 7,252 $24,181 $37,433 $ 7,342 $30,091
Core(1) 31,433 14,503 16,930 37,433 14,683 22,750
Risk-based(2)(3) 34,719 27,791 6,929 40,720 27,870 12,849
Percentage basis:
Tangible 6.50% 1.50% 5.00% 7.65% 1.50% 6.15%
Core(1) 6.50 3.00 3.50 7.65 3.00 4.65
Risk-based(2)(3) 10.00 8.00 2.00 11.69 8.00 3.69
</TABLE>
- ----------
(1) Does not reflect the 4.0% requirement to be met in order for an
institution to be deemed "adequately capitalized" under applicable laws
and regulations.
(2) Does not reflect proposed amendments to the risk-based capital
requirement.
(3) Assumes the net proceeds are initially invested in 20% risk-weighted
assets.
32
<PAGE>
MARKET PRICE FOR COMMON STOCK AND DIVIDENDS
Market Price for Common Stock
The Common Stock is traded on the Nasdaq Stock Market, National Market
System under the symbol "PFNC." The following table sets forth the high and low
sales prices of the Common Stock as reported by the Nasdaq National Market
System and the cash dividends declared per share of Common Stock during the
periods indicated.
<TABLE>
<CAPTION>
Sales Price
---------------------------------------------
Dividends
High Low Per Share
------------------ ---------------- ---------------------
<S> <C> <C> <C>
1996
- --------------------------
First Quarter $7.250 $5.250 $ --
Second Quarter 7.250 6.250 --
Third Quarter 6.375 5.375 .02
Fourth Quarter 8.750 6.375 .02
1997
- --------------------------
First Quarter 8.688 7.859 .02
Second Quarter 10.000 7.672 .02
Third Quarter 15.125 9.766 .03
Fourth Quarter 16.500 13.875 .03
1998
- --------------------------
First Quarter 22.750 17.750 .03
Second Quarter
(through April 24,
1998)
</TABLE>
On ______ ___, 1998, the last trading day before the commencement of
the Offering, the closing sale price of a share of Common Stock on the Nasdaq
Stock Market was $___.
As of December 31, 1997, there were 4,063,778 shares of Common Stock
outstanding, which were held by approximately 1,500 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.
33
<PAGE>
Dividends
The Company suspended dividend payments on the Common Stock after the
second quarter of 1990, in order to conserve its capital resources in light of
operating losses and the inability of the Bank to meet its risk-based capital
requirement at the time. However, due to an improvement in the Company's results
of operations and net proceeds from the Company's offering in 1996, the Company
initiated a quarterly cash dividend policy of $.02 per share beginning with the
third quarter of 1996, which was increased to $.03 per share in the third
quarter of 1997. 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 June 1994 as well as dividends on its $15.0 million of 10.50%
Junior Subordinated Debentures due 2027 issued in connection with the issuance
of 10.50% Capital Securities of Progress Capital Trust I in June 1997. Interest
expense on the Notes amounts to approximately $248,000 per year and interest
expenses on the Junior Subordinated Debentures amounts to approximately $1.6
million 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. The OTS has proposed to amend its capital distribution
regulations. Under the proposal, the "tiered" approach described above would be
replaced and savings institutions would be permitted to make capital
distributions that would not result in their capital being reduced below the
level required to remain "adequately capitalized," as defined by OTS
regulations. Irrespective of compliance with minimum capital requirements, OTS
approval would be required for a distribution that would, when aggregated with
all distributions in the current year, exceed the saving association's net
income for the current year and the retained net income for the prior two years.
Under the proposal, savings associations which are held by a savings and loan
holding company would continue to be required to provide advance notice of the
capital distribution to the OTS. The Company does not believe that the proposal
will adversely affect the Bank's ability to make capital distributions if it is
adopted substantially as proposed.
As a Delaware corporation, the Company is subject to the Delaware
General Corporation Law which generally provides that, subject to any
restrictions in the corporation's Certificate of Incorporation, dividends may be
declared from the corporation's surplus or, if there is no surplus,
34
<PAGE>
from its net profits for the fiscal year in which the dividend is declared and
the preceding fiscal year. However, if the corporation's capital has been
diminished to an amount less than the aggregate amount of the capital
represented by the issued and outstanding stock of all classes having a
preference upon the distribution of assets, dividends may not be declared and
paid out of such net profits until the deficiency is such capital has been
repaired.
MANAGEMENT AND PRINCIPAL STOCKHOLDERS
Board of Directors
The following table sets forth certain information regarding each
director 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 March 6, 1998. 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.
<TABLE>
<CAPTION>
Amount and Percentage of
Year of Shares Beneficially Owned
Director Expiration as of
Name Age Since of Term March 6, 1998
- ------------------------------- ---------- ----------- --------------- ------------------------------------
Amount Percentage
------------ -----------
<S> <C> <C> <C> <C> <C>
John E. F. Corson 57 1991 1999 13,798(1) *
William O. Daggett, Jr. 57 1990 1998 98,653(2) 2.4%
Donald F. U. Goebert 61 1987 1999 202,516(3) 4.8
H. Wayne Griest 49 1996 1998 20,075(4) *
Joseph R. Klinger 55 1992 1998 9,298(1) *
Paul M. LaNoce 38 1991 1999 35,348(1) *
A. John May, III 42 1993 2000 15,280(5) *
William L. Mueller 46 1990 1998 91,774(6) 2.1
Janet E. Paroo 43 1996 1999 24,687(7) *
Charles J. Tornetta 67 1991 2000 67,056(8) 1.6
W. Kirk Wycoff 40 1991 2000 354,337(9) 8.1
</TABLE>
- ----------
* Represents less than 1% of the issued and outstanding Common Stock of the
Company.
(1) Includes 6,298 shares subject to stock options which are exercisable
within 60 days of March 6, 1998.
35
<PAGE>
(2) Includes 79,230 shares owned by companies of which Mr. Daggett is a
director, officer and 10% stockholder and 13,125 common stock warrants and
6,298 shares subject to stock options, in each case which are exercisable
within 60 days of March 6, 1998.
(3) Includes 143,718 shares owned by companies of which Mr. Goebert is a
director, officer and 10% stockholder and 52,500 common stock warrants and
6,298 shares subject to stock options, in each case which are exercisable
within 60 days of March 6, 1998.
(4) Includes 4,411 shares subject to stock options which are exercisable
within 60 days of March 6, 1998.
(5) Includes 2,000 shares which are held jointly by Mr. May with or for the
benefit of certain family members and 2,887 shares subject to stock
options which are exercisable within 60 days of March 6, 1998.
(6) Includes 60,226 shares held jointly by Mr. Mueller with or for the benefit
of certain family members and 25,250 common stock warrants and 6,298
shares subject to stock options, in each case which are exercisable within
60 days of March 6, 1998.
(7) Includes 2,887 shares subject to stock options which are exercisable
within 60 days of March 6, 1998.
(8) Includes 26,250 common stock warrants and 6,298 shares subject to stock
options, in each case which are exercisable within 60 days of March 6,
1998.
(9) Includes 12,600 shares which are held jointly by Mr. Wycoff with or for
the benefit of certain family members and 13,125 common stock warrants and
237,300 shares subject to stock options, in each case which are
exercisable within 60 days of March 6, 1998.
36
<PAGE>
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 March 6, 1998, 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 March 6, 1998 Common Stock
- ------------------- ------------------- ------------
Wellington Management 269,250 6.09%
Company, LLP
75 State Street
Boston, Massachusetts 02109
Directors and executive
officers of the Company
as a group (14 persons) 958,063(1) 18.7
- ----------
(1) Includes 12,600 shares which are held jointly by Mr. Wycoff with or for
the benefit of certain family members, 79,230 shares which are owned by
companies of which Mr. Daggett is a director, officer or 10% stockholder,
143,718 shares owned by companies of which Mr. Goebert is a director,
officer or 10% stockholder and 60,226 shares held jointly by Mr. Mueller
with or for the benefit of certain family members. Also includes 314,469
shares subject to stock options and 130,250 common stock warrants held by
the group, in each case which are exercisable within 60 days of March 6,
1998.
37
<PAGE>
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 brief description of certain provisions of the
Certificate of Incorporation and Bylaws of the Company, the DGCL and applicable
federal laws and regulations 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 4,063,778 shares were issued and
outstanding as of December 31, 1997. The Company has adopted an amendment to its
Certificate of Incorporation, subject to approval by stockholders at the Annual
Meeting of Stockholders to be held on May 6, 1998, to increase the number of
authorized shares of Common Stock to 12,000,000 shares. 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, or 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."
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In addition to the authorized but unissued shares of Common Stock and
Preferred Stock, the Company has adopted a shareholder rights plan which
generally would cause substantial dilution to a person or group that acquires
20% or more of the outstanding shares of Common Stock. See "Description of
Capital Stock - Preferred Stock Purchase Rights."
Board of Directors. The Certificate of Incorporation provides that the
Board of Directors of the Company shall be divided into three classes as nearly
equal in number as the then total number of directors permits, with one class to
be elected annually for a term of three years and until their successors are
elected and qualified. See "Management and Principal Stockholders - Board of
Directors and Executive Officers." 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
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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.
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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)
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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. The Company has adopted an amendment to its
Certificate of Incorporation, subject to approval by stockholders at the Annual
Meeting of Stockholders to be held on May 6, 1998, to increase the number of
authorized shares of Common Stock to 12,000,000 shares. At December 31, 1997,
the Company had 4,063,778 shares of Common Stock issued and outstanding and no
shares of Preferred Stock issued or outstanding. The capital stock of the
Company does not represent or constitute a savings account or deposit of the
Company or the Bank and is not insured by the FDIC or any other governmental
agency.
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."
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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.
Warrants to Purchase Common Stock
As of December 31, 1997, the Company had warrants to purchase 315,000
shares of Common Stock ("Warrants") outstanding (as adjusted for subsequent
stock dividends). The following is a summary of the material provisions of the
Warrants. The Warrants are not savings accounts or deposits of the Company or
the Bank and are not insured by the FDIC or any other governmental agency.
The Company issued 12 units consisting of subordinated debt and
Warrants in a private placement on June 30, 1994, with each unit consisting of
$250,000 of subordinated debt and Warrants to purchase 26,250 shares of Common
Stock (as adjusted for subsequent stock dividends). Because fractional units
were issued, there are currently 13 holders of the Warrants. Five of the
directors and executive officers of the Company own 131,250 Warrants. The
remaining 183,750 Warrants are held by eight individuals or entities.
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Each Warrant entitles the holder thereof to purchase one share of the
Common Stock at an exercise price (the "Exercise Price") of $5.71 (as adjusted
for subsequent stock dividends). The Warrants may be exercised, in whole or in
part, 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.
The Company has filed a registration statement with the Commission with
respect to the shares of Common Stock underlying the Warrants and has agreed to
use its best efforts to maintain the effectiveness of such registration
statement until the earlier to occur of the exercise of all the Warrants or June
30, 1999. 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, 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 shall not exceed 90 days during any 12
month period.
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 (including subsequently issued shares such as
those proposed to be issued in connection with the Offering). 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
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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,
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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 preferential liquidation payment equal to the greater of $100 per
share or 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 Common Stock is American Stock
Transfer & Trust Company, New York, New York.
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UNDERWRITING
Subject to the terms and conditions set forth in an Underwriting
Agreement among the Company, the Bank and Sandler O'Neill & Partners, L.P.
("Sandler O'Neill"), as Representative of the underwriters named herein (the
"Underwriters"), the Company has agreed to sell to the Underwriters, and the
Underwriters have severally agreed to purchase from the Company the number of
shares of Common Stock set forth opposite their names below:
Number of
Name Shares
- ---- ------
Sandler O/Neill & Partners, L.P.
-------
Total 750,000
- ----- =======
Under the terms and conditions of the Underwriting Agreement, the
Underwriters are committed to take and pay for all the shares of Common Stock
offered hereby, if any are taken.
The Underwriters propose initially to offer the Common Stock directly
at the initial public offering price set forth on the cover page of this
Prospectus, and to certain securities dealers at such price less a concession of
$___ per share. The Underwriters may allow, and such dealers may reallow, a
concession not in excess of $___ per share to certain brokers and dealers. After
the Common Stock is released for sale to the public, the offering price and
other selling terms may from time to time be varied by the Representative.
The Company has granted the Underwriters an option, exercisable for 30
days after the date of this Prospectus to purchase up to an aggregate of 75,000
additional shares of Common Stock solely to cover over-allotments, if any.
The Company and the Bank have agreed to indemnify the Underwriters
against certain liabilities, including liabilities under the Securities Act.
Sandler O'Neill has advised the Company that the Underwriters do not
intend to confirm sales to any account over which they exercise discretionary
authority.
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In connection with the Offering, the Underwriters may purchase and sell
shares of Common Stock in the open market. These transactions may include
over-allotment and stabilizing transactions and purchases to cover syndicate
short positions created in connection with the Offering. Stabilizing
transactions consist of certain bids or purchases for the purpose of preventing
or retarding a decline in the market price of the shares of Common Stock; and
syndicate short positions involve the sale by the Underwriters of a greater
number of shares of Common Stock than they are required to purchase from the
Company in the Offering. The Underwriters also may impose a penalty bid, whereby
selling concessions allowed to syndicate members or other broker-dealers in
respect of the securities sold in the Offering for their account may be
reclaimed by the syndicate if such shares of Common Stock are repurchased by the
syndicate in stabilizing or covering transactions. These activities may
stabilize, maintain or otherwise affect the market price of the shares of Common
Stock, which may be higher than the price that might otherwise prevail in the
open market; and these activities, if commenced, may be discontinued at any
time. These transactions may be effected in the over-the-counter market or
otherwise.
Neither the Company nor the Underwiters makes any representation or
prediction as to the direction or magnitude of any effect that the transactions
described above may have on the price of the Common Stock. In addition, neither
the Company nor the Underwriters makes any representation that the Underwriters
will engage in such transactions or that such transactions, once commenced, will
not be discontinued without notice.
The Underwriters may reserve the for sale shares of Common Stock which
may be sold at the initial public offering price to directors, officers and
employees of the Company. The number of shares of Common Stock available for
sale to the general public will be reduced to the extent such persons purchase
such reserved shares. Any reserved shares of Common Stock not to be purchased
will be offered by the Underwriters on the same basis as the other shares of
Common Stock offered in the Offering.
Sandler O'Neill has provided from time to time, and expects to provide
in the future, investment banking services to the Company and its affiliates for
which the Representative has received or will receive customary fees and
commissions. The principals of Sandler O'Neill beneficially own an aggregate of
187,515 shares of Common Stock, or 4.6% of the Common Stock outstanding prior to
the Offering, and warrants to purchase an additional 50,000 shares of Common
Stock. In addition, Sandler O'Neill Asset Management LLC, which may be deemed to
be an affiliate of Sandler O'Neill, owns an aggregate of 168,075 shares of
Common Stock, or 4.1% of the Common Stock outstanding prior to the Offering.
The Company has agreed in the Underwriting Agreement and its executive
officers and directors have otherwise agreed not to sell, contract to sell or
otherwise dispose of any equity securities of the Company (or any securities
exercisable for or convertible into such equity securities) for a period of 120
days after the consummation of the Offering without the prior written consent of
the Representative.
EXPERTS
The consolidated balance sheets as of December 31, 1997 and 1996 and
the consolidated statements of income, stockholders' equity, and cash flows for
each of the three years in the period ended December 31, 1997, incorporated by
reference in this prospectus, have been incorporated herein in reliance on the
report of Coopers & Lybrand, L.L.P., independent accountants, given on the
authority of that firm as experts in accounting and auditing.
LEGAL MATTERS
Certain legal matters relating to the Common Stock will be passed upon
for the Company by Elias, Matz, Tiernan & Herrick L.L.P., 734 15th Street, N.W.,
12th Floor, Washington, D.C. and for the Underwriter by Thacher Proffitt & Wood,
New York, New York.
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No person has been authorized to give any information or make any
representations other than those contained in this Prospectus and, if given or
made, such information or representations must not be relied upon as having been
authorized. This Prospectus does not constitute an offer to sell or a
solicitation of an offer to buy any securities other than the securities to
which it relates or an offer to sell or a solicitation of any offer to buy such
securities in any circumstances in which such offer or solicitation is 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 or that information contained
herein is correct as of any time subsequent to its date.
-------------------------
Table of Contents
-------------------------
Page
----
Available Information........................................... 3
Incorporation of Certain Documents
by Reference................................................... 3
Summary......................................................... 5
Selected Consolidated Financial
and Other Data................................................ 10
Risk Factors.................................................... 13
Business Overview of the Company
Use of Proceeds................................................. 30
Capitalization.................................................. 31
Regulatory Capital.............................................. 32
Market Price for Common Stock
and Dividends................................................. 33
Management and Principal
Stockholders.................................................. 35
Restrictions on Acquisition
of the Company................................................ 38
Description of Capital Stock.................................... 42
Underwriting.................................................... 47
Experts......................................................... 49
Legal Matters................................................... 49
Through and including _______ __, 1998 (the 25th day after the date of
this Prospectus), all dealers effecting transactions in the registered
securities, whether or not participating in this distribution, may be required
to deliver a prospectus. This is in addition to the obligation of dealers to
deliver a prospectus when acting as underwriters and with respect to their
unsold allotments or subscriptions.
750,000 SHARES
PROGRESS
FINANCIAL
CORPORATION
COMMON STOCK
--------------------
PROSPECTUS
--------------------
______ __, 1998
Sandler O'Neill &
Partners, L.P.
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PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 14. Other Expenses of Issuance and Distribution.
The following table sets forth the estimated expenses (other than
underwriting discounts and commissions to be incurred) 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 registration fee....... $ 4,503
Nasdaq Stock Market listing fee........................... 16,500
NASD fee.................................................. 2,026
Accounting fees and expenses.............................. 20,000
Legal fees and expenses................................... 60,000
Printing and mailing expenses............................. 65,000
Miscellaneous............................................. 31,971
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$200,000
========
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 under 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.
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Item 16. Exhibits and Financial Statement Schedules.
The exhibits and financial statement schedules filed as a part of this
Registration Statement are as follows:
(a) List of Exhibits:
<TABLE>
<CAPTION>
Exhibit No. Exhibit Location
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<S> <C> <C>
1 Form of Underwriting Agreement *
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)
5 Opinion of Elias, Matz, Tiernan &
Herrick L.L.P. regarding legality of
securities being registered *
10(a) Key Employee Stock Compensation Plan (3)
10(b) Amendment, dated December 15, 1987,
to Key Employee Stock Compensation
Plan (5)
10(c) Amended and Restated 1993 Stock
Incentive Plan (6)
10(d) Amended and Restated 1993 Directors'
Stock Option Plan (6)
10(e) Stockholders Rights Agreement, dated
April 25, 1990, between the
Registrant and American Stock
Transfer and Trust Company, as
Rights Agent (4)
</TABLE>
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<TABLE>
<S> <C> <C>
10(f) Employment Agreement between
Progress Financial Corporation,
Progress Bank and W. Kirk Wycoff
dated March 1, 1997 (7)
13 Annual Report to Stockholders for the
year ended December 31, 1997 (7)
21 Subsidiaries of the Company (7)
23(a) Consent of Elias, Matz, Tiernan &
Herrick L.L.P. (contained in the
opinion included as Exhibit 5)
23(b) Consent of Independent Public Accountants *
24 Power of Attorney (included in the
signature page to the original
Registration Statement)
</TABLE>
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* Filed with this amendment.
(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) 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.
(6) Exhibit is incorporated by reference to the Registrant's definitive proxy
statement filed with the Commission on April 7, 1997.
(7) Incorporated by reference to the Registrant's Annual Report on Form 10-K
for the year ended December 31, 1997 filed with the Commission on March
31, 1998.
(b) Financial Statement Schedules.
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<PAGE>
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.
(4) That, for purposes of determining any liability under the Securities
Act of 1933, each filing of the Registrant's annual report pursuant to Section
13(a) or Section 15(d) of the Securities Exchange Act of 1934 that is
incorporated by reference in the Registration Statement shall be deemed to be a
new registration statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial bona
fide offering thereof.
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<PAGE>
(5) To deliver or cause to be delivered with the prospectus, to each
person to whom the prospectus is sent or given, the latest annual report to
security holders that is incorporated by reference in the prospectus and
furnished pursuant to and meeting the requirements of Rule 14a-3 or Rule 14c-3
under the Securities Exchange Act of 1934; and, where interim financial
information required to be presented by Article 3 of Regulation S-X are not set
forth in the prospectus, to deliver, or cause to be delivered to each person to
whom the prospectus is sent or given, the latest quarterly report that is
specifically incorporated by reference in the prospectus to provide such interim
financial information.
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.
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<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the
Registrant certifies that it has reasonable grounds to believe that it meets all
of the requirements for filing on Form S-2 and has duly caused this Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of Blue Bell, Commonwealth of Pennsylvania on the 28th
day of April 1998.
PROGRESS FINANCIAL CORPORATION
By: /s/ W. Kirk Wycoff Date: April 28, 1998
-------------------------------
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 of the directors and/or officers of
Progress Financial Corporation whose signature appears below hereby appoints W.
Kirk Wycoff, as his or her attorney-in-fact to sign in his or her name and
behalf, in any and all capacities stated below and to file with the Securities
and Exchange Commission any and all amendments, including post-effective
amendments, to this Registration Statement on Form S-2, making such changes in
the Registration Statement as appropriate, and generally to do all such things
in their behalf in their capacities as directors and/or officers to enable
Progress Financial Corporation to comply with the provisions of the Securities
Act of 1933, and all requirements of the Securities and Exchange Commission.
/s/ W. Kirk Wycoff Date: April 28, 1998
- -----------------------------------
W. Kirk Wycoff
Director, President and
Chief Executive Officer
(principal executive officer)
/s/ Frederick E. Schea Date: April 28, 1998
- -----------------------------------
Frederick E. Schea
Senior Vice President and
Chief Financial Officer
(principal accounting officer)
/s/ William O. Daggett, Jr.* Date: April 28, 1998
- ----------------------------------
William O. Daggett, Jr.
Director
<PAGE>
/s/ Joseph R. Klinger* Date: April 28, 1998
- ------------------------------------
Joseph R. Klinger
Director
/s/ John E. F. Corson* Date: April 28, 1998
- -----------------------------------
John E. F. Corson
Director
/s/ H. Wayne Griest* Date: April 28, 1998
- -----------------------------------
H. Wayne Griest
Director
/s/ Donald F. U. Goebert* Date: April 28, 1998
- -----------------------------------
Donald F. U. Goebert
Director
/s/ Paul M. LaNoce* Date: April 28, 1998
- ----------------------------------
Paul M. LaNoce
Director
/s/ A. John May, III* Date: April 28, 1998
- ----------------------------------
A. John May, III
Director
/s/ William L. Mueller* Date: April 28, 1998
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William L. Mueller
Director
/s/ Janet E. Paroo* Date: April 28, 1998
- ----------------------------------
Janet E. Paroo
Director
/s/ Charles J. Tornetta* Date: April 28, 1998
- ----------------------------------
Charles J. Tornetta
Director
- ------------------------------------
*By W. Kirk Wycoff, attorney-in-fact
EXHIBIT 1
800,000 Shares
Progress Financial Corporation
Common Stock
(par value $1.00 per share)
UNDERWRITING AGREEMENT
May __, 1998
SANDLER O'NEILL & PARTNERS, L.P.
As Representative of the several Underwriters
named in Schedule I attached hereto
2 World Trade Center
New York, New York 10048
Ladies and Gentlemen:
Progress Financial Corporation, a Delaware corporation (the "Company"),
proposes, subject to the terms and conditions stated herein, to issue and sell
to the several underwriters named in Schedule I hereto (the "Underwriters"), for
whom you are acting as the representative (the "Representative"), an aggregate
of 800,000 shares (the "Firm Shares") and, at the election of the Underwriter,
up to 80,000 additional shares (the "Optional Shares") of common stock, par
value $1.00 per share (the "Common Stock"), of the Company (the Firm Shares and
the Optional Shares which the Underwriters elect to purchase pursuant to Section
2 hereof being collectively called the "Shares").
1. The Company represents and warrants to, and agrees with, each
Underwriter that:
a. A registration statement on Form S-2 (File No. 333-50503)
in respect of the Shares has been filed with the Securities and Exchange
Commission (the "Commission"); such registration statement and any
post-effective amendment thereto, each in the form heretofore delivered or to be
delivered to the Representative, excluding exhibits to such registration
statement, but including all documents incorporated by reference in the
prospectus contained therein have been declared effective by the Commission in
such form; no other document with respect to such registration statement or
document incorporated by reference therein has heretofore been filed or
transmitted for filing with the Commission; and no stop order suspending the
effectiveness of such registration statement has been issued and no proceeding
for that purpose has been initiated or threatened by the Commission (any
preliminary prospectus included in such registration statement or filed with the
Commission pursuant to Rule 424(a) of the rules and regulations of the
Commission under the Securities Act of 1933, as amended (the "Act"), being
hereinafter called a "Preliminary Prospectus"; the various parts of such
registration statement, including all exhibits thereto and the
<PAGE>
documents incorporated by reference in the prospectus contained in the
registration statement at the time such part of the registration statement
becomes effective, each as amended at the time such part of the registration
statement becomes effective, being hereinafter collectively called the
"Registration Statement"; the prospectus relating to the Shares, in the form in
which it has most recently been filed, or transmitted for filing, with the
Commission on or prior to the date of this Agreement, being hereinafter called
the "Prospectus"; any reference herein to any Preliminary Prospectus or the
Prospectus shall be deemed to refer to and include the documents incorporated by
reference therein pursuant to Item 12 of Form S-2 under the Act, as of the date
of such Preliminary Prospectus or Prospectus, as the case may be; any reference
to any amendment or supplement to any Preliminary Prospectus or the Prospectus
shall be deemed to refer to and include any documents filed after the date of
such Preliminary Prospectus or Prospectus, as the case may be, under the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), and
incorporated by reference in such Preliminary Prospectus or Prospectus, as the
case may be; any reference to any amendment to the Registration Statement shall
be deemed to refer to and include any annual report of the Company filed
pursuant to Section 13(a) or 15(d) of the Exchange Act after the effective date
of the Registration Statement that is incorporated by reference in the
Registration Statement; and any reference to the Prospectus as amended or
supplemented shall be deemed to refer to the Prospectus as amended or
supplemented in relation to the applicable Shares in the form in which it is
filed with the Commission pursuant to Rule 424(b) under the Act in accordance
with Section 5(a) hereof, including any documents incorporated by reference
therein as of the date of such filing);
b. No order preventing or suspending the use of any
Preliminary Prospectus has been issued by the Commission, and each Preliminary
Prospectus, at the time of filing thereof, conformed in all material respects to
the requirements of the Act and the rules and regulations of the Commission
thereunder, and did not contain an untrue statement of a material fact or omit
to state a material fact required to be stated therein or necessary to make the
statements therein, in the light of the circumstances under which they were
made, not misleading; provided, however, that this representation and warranty
shall not apply to any statements or omissions made in reliance upon and in
conformity with information furnished in writing to the Company by any
Underwriter through the Representative expressly for use therein, it being
acknowledged that the only information so furnished by the Representative is as
described in Section 8(b) hereof;
c. The documents incorporated by reference in the Prospectus,
when they became effective or were filed with the Commission, as the case may
be, conformed in all material respects to the requirements of the Act or the
Exchange Act, as applicable, and the rules and regulations of the Commission
thereunder, and none of such documents contained an untrue statement of a
material fact or omitted to state a material fact required to be stated therein
or necessary to make the statements therein not misleading; and any further
documents so filed and incorporated by reference in the Prospectus or any
further amendment or supplement thereto, when such documents become effective or
are filed with the Commission, as the case may be, will conform in all material
respects to the requirements of the Act or the Exchange Act, as applicable, and
the rules and regulations of the Commission thereunder and will not contain an
untrue statement of a
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<PAGE>
material fact or omit to state a material fact required to be stated therein or
necessary to make the statements therein not misleading in light of the
circumstances in which they are made;
d. The Registration Statement and the Prospectus conform, and
any further amendments or supplements to the Registration Statement or the
Prospectus will conform, in all material respects to the requirements of the Act
and the rules and regulations of the Commission thereunder including, without
limitation, compliance with the safe harbor provisions of Rule 175 under the Act
pertaining to forward-looking statements, and do not and will not, as of the
applicable effective date as to the Registration Statement and any amendment
thereto and as of the applicable filing date and at such Time of Delivery (as
hereinafter defined) as to the Prospectus and any amendment or supplement
thereto, contain an untrue statement of a material fact or omit to state a
material fact required to be stated therein or necessary to make the statements
therein not misleading; provided, however, that this representation and warranty
shall not apply to any statements or omissions made in reliance upon and in
conformity with information furnished in writing to the Company by any
Underwriter through the Representative expressly for use therein, it being
acknowledged that the only information so furnished by the Representative is as
described in Section 8(b) hereof;
e. Since the respective dates as of which information is given
in the Registration Statement and the Prospectus, except as otherwise stated
therein, (i) there has been no material adverse change, or any development which
might reasonably be expected to result in a material adverse change, in or
affecting the condition, financial or otherwise, business, management,
stockholders' equity, results of operations or prospects of the Company and its
consolidated subsidiaries considered as one enterprise, (ii) there have been no
material transactions entered into by the Company or any of its consolidated
subsidiaries other than those in the ordinary course of business and consistent
with past practice, (iii) neither the Company nor any of its consolidated
subsidiaries has sustained since the date of the last audited financial
statements included or incorporated by reference in the Prospectus any material
loss or interference with its business from fire, explosion, flood or other
calamity, whether or not covered by insurance, or from any labor dispute or
court or governmental action, order or decree, otherwise than as set forth or
contemplated in the Prospectus, and (iv) except for regular quarterly dividends
on the Common Stock, there has been no dividend or distribution of any kind
declared, paid or made by the Company on any class of its capital stock;
f. Each of (i) the Company, (ii) its significant subsidiaries
as such term is defined in Rule 1-02 of Regulation S-X of the rules and
regulations of the Commission thereunder and (iii) its subsidiary that is a
depository institution (each of (ii) and (iii), a "Significant Subsidiary") has
been duly incorporated and is an existing corporation in good standing under the
laws of its jurisdiction of incorporation, with power and authority (corporate
and other) to own, lease and operate its properties and conduct its business as
described in the Prospectus; and is duly qualified as a foreign corporation to
transact business and is in good standing in each jurisdiction in which its
ownership or leasing of properties or the conduct of its business requires such
qualification, except where the failure to be so qualified, considering all such
cases in the aggregate, does not involve a
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<PAGE>
material risk to the condition, financial or otherwise, business, management,
stockholders' equity, results of operations or prospects of the Company and its
consolidated subsidiaries considered as one enterprise;
g. The authorized, issued and outstanding Common Stock of the
Company is as set forth in the Prospectus, except for subsequent issuances, if
any, pursuant to reservations or agreements referred to therein; and the shares
of issued and outstanding Common Stock set forth therein have been duly and
validly authorized and issued and are fully paid and non-assessable and conform
in all material respects to the description of the Common Stock contained in the
Prospectus; and all of the issued shares of capital stock of each of the
Company's Significant Subsidiaries have been duly and validly authorized and
issued and are fully paid and non-assessable and are owned directly or
indirectly by the Company, free and clear of all liens, encumbrances, equities
or claims;
h. The Shares have been duly and validly authorized and, when
issued and delivered against payment therefor as provided herein, will be duly
and validly issued and fully paid and non-assessable and will conform in all
material respects to the description of the Common Stock contained in the
Prospectus; and the holders of outstanding capital stock of the Company are not
entitled to preemptive or other rights afforded by the Company to subscribe for
the Shares;
i. Neither the Company nor any of its consolidated
subsidiaries is in violation of its charter or by-laws or in default in the
performance or observance of any obligation, agreement, covenant or condition
contained in any material contract, indenture, mortgage, loan agreement, note,
lease or other instrument to which it is a party or by which it or any of them
may be bound; and the execution and delivery of this Agreement and the
consummation of the transactions herein and therein contemplated, will not
conflict with or constitute a breach of, or default under, the Certificate of
Incorporation or By-laws of the Company or any material bond, debenture, note or
other evidence of indebtedness or any material contract, indenture, mortgage,
loan agreement, lease or other instrument to which the Company or any of its
consolidated subsidiaries is a party or by which it or any of them may be bound,
or any law, administrative regulation or court decree; and no consent, approval,
authorization, order, registration or qualification of or with any such court or
governmental agency or body is required for the issuance and sale of the Shares
or the consummation by the Company of the transactions contemplated by this
Agreement, except the registration under the Act of the Shares and such
consents, approvals, authorizations, registrations or qualifications as may be
required under state securities or Blue Sky laws in connection with the purchase
and distribution of the Shares by the Representative;
j. There is no action, suit or proceeding before or by any
court or governmental agency or body, domestic or foreign, now pending, or, to
the knowledge of the Company, threatened against or affecting the Company or any
of its consolidated subsidiaries, which is required to be disclosed in the
Registration Statement and is not so disclosed or which might reasonably be
expected to result in any material adverse change in or affecting the condition,
financial or otherwise, business, management, stockholders' equity, results of
operations or prospects of the Company and its consolidated subsidiaries
considered as one enterprise, or might reasonably be expected to
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<PAGE>
materially adversely affect the properties or assets thereof or might materially
and adversely affect the consummation of transactions contemplated by this
Agreement; all pending legal or governmental proceedings to which the Company or
any consolidated subsidiary is a party or of which any of their property is the
subject which are not described in the Registration Statement, including
ordinary routine litigation incidental to the business, are, considered in the
aggregate, not material; and there are no contracts or documents of the Company
or any of its consolidated subsidiaries which would be required to be filed as
exhibits to the Registration Statement by the Act or by the rules and
regulations of the Commission thereunder which have not been filed as exhibits
to the Registration Statement;
k. The financial statements of the Company and its
subsidiaries set forth or incorporated by reference in the Registration
Statement and Prospectus fairly present the financial condition of the Company
and its subsidiaries as of the dates indicated and the results of operations,
changes in shareholders' equity and cash flows for the periods therein specified
in conformity with generally accepted accounting principles consistently applied
throughout the periods involved (except as otherwise stated therein);
l. The Company is a savings and loan holding company
registered under the Home Owner's Loan Act of 1933, as amended; and the Company
and its subsidiaries are in compliance with, and conduct their respective
businesses in conformity with, all applicable laws and governmental regulations
in all material respects;
m. There are no contracts, agreements or understandings
between the Company and any person granting such person the right to require the
Company to file a registration statement under the Act with respect to any
securities of the Company owned or to be owned by such person or to require the
Company to include such securities in the securities registered pursuant to the
Registration Statement or in any securities being registered pursuant to any
other registration statement filed by the Company under the Act;
n. The deposit accounts of each of the Company's subsidiaries
that are depository institutions are insured by the Federal Deposit Insurance
Corporation to the fullest extent provided by law;
o. To the knowledge of the Company, neither the Company nor
any of its subsidiaries has made any payment of funds prohibited by law, and no
funds have been set aside to be used for any payment prohibited by law;
p. The Company and its subsidiaries are in compliance in all
material respects with the applicable financial recordkeeping and reporting
requirements of the Currency and Foreign Reporting Act of 1970, as amended, and
the rules and regulations thereunder;
q. The Common Stock of the Company is quoted on the NASDAQ
Stock Market, National Market System ("NASDAQ");
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<PAGE>
r. Coopers & Lybrand L.L.P., who have certified certain
financial statements of the Company and its subsidiaries, are independent public
accountants as required by the Act and the rules and regulations of the
Commission thereunder;
s. The execution, delivery and performance of this Agreement
and the consummation of the transactions contemplated herein do not and will not
trigger any action under the Rights Agreement, dated as of ____________, 19___,
between the Company and ________________, as Rights Agent; and
t. [Neither the Company nor any of its subsidiaries does
business with the government of Cuba or with any person or affiliate located in
Cuba within the meaning of Section 517.075, Florida Statutes.]
2. Subject to the terms and conditions herein set forth, (a) the
Company agrees to sell to each Underwriter, and each Underwriter agrees, to
purchase from the Company, at a purchase price per share of $_____, the number
of Firm Shares set forth opposite such Underwriter's name in Schedule I hereto
(b) in the event and to the extent that Underwriter, acting severally and not
jointly, shall exercise the election to purchase Optional Shares as provided
below, the Company agrees to issue and sell to the Underwriters, and the
Underwriters agree, to purchase from the Company, at the purchase price per
share set forth in clause (a) of this Section 2, the Optional Shares as to which
such election shall have been exercised
The Company hereby grants to the several Underwriters the right to
purchase, severally and not jointly, at their election up to 80,000 Optional
Shares, at the purchase price per share set forth in the paragraph above, for
the sole purpose of covering overallotments in the sale of the Firm Shares. Any
such election to purchase Optional Shares may be exercised only by written
notice from the Representative to the Company, given within a period of 30
calendar days after the date of this Agreement, setting forth the aggregate
number of Optional Shares to be purchased and the date on which such Optional
Shares are to be delivered, as determined by the Representative but in no event
earlier than the First Time of Delivery (as defined in Section 4 hereof) or,
unless the Representative and the Company otherwise agree in writing, earlier
than two or later than ten business days after the date of such notice.
3. Upon authorization by the Representative of the release of the Firm
Shares, the several Underwriters propose to offer the Firm Shares for sale upon
the terms and conditions set forth in the Prospectus.
4. (a) Certificates in definitive form for the Shares, to be purchased
by the Underwriters hereunder, and in such denominations and registered in such
names as the Representative shall designate, which the Representative may
request upon at least forty-eight hours' prior notice to the Company, shall be
delivered by or on behalf of the Company to the Representative [either in
certificated form or] through the facilities of the Depository Trust Company
("DTC") for the respective accounts of the several Underwriters, against payment
by the several Underwriters
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<PAGE>
through the Representative, delivered to the Representative for the accounts of
the purchasers thereof and made available for checking and packaging at the
office of the Representative at least 24 hours prior to the First Time of
Delivery, in either case against payment by the several Underwriters through the
Representative of the purchase price therefor by certified or official bank
check or checks, payable to the order of the Company in next day New York
Clearing House funds, all at the offices of Thacher Proffitt & Wood, 2 World
Trade Center, New York, New York 10048 or at such other location as may be
mutually agreed. The time and date of such delivery and payment shall be, with
respect to the Firm Shares, [______], New York time, on May __, 1998, or at such
other time and date as the Representative and the Company may agree upon in
writing, and, with respect to the Optional Shares, [______], New York time, on
the date specified in the written notice given by the Representative on behalf
of the several Underwriters' election to purchase such Optional Shares, or at
such other time and date as the Representative and the Company may agree upon in
writing. Such time and date for delivery of the Firm Shares is herein called the
"First Time of Delivery," such time and date for delivery of the Optional
Shares, if not the First Time of Delivery, is herein called the "Second Time of
Delivery," and each such time and date for delivery is herein called a "Time of
Delivery." Such certificates will be made available for checking and packaging
at least twenty-four hours prior to each Time of Delivery at the office of DTC
or its designated custodian Sandler O'Neill & Partners, L.P., 2 World Trade
Center, New York, New York 10048 (the "Designated Office").
b. The documents to be delivered at each Time of Delivery by
or on behalf of the parties hereto pursuant to Section 7 hereof, including the
cross-receipt for the Shares and any additional documents reasonably requested
by the Representative pursuant to Section 7(i) hereof, will be delivered at the
offices of Thacher Proffitt & Wood, 2 World Trade Center, New York, New York
10048 (the "Closing Location"), and the Shares will be delivered at the
Designated Office, all at the Time of Delivery. A meeting will be held at the
Closing Location at [____________________________], New York City time, on the
New York Business Day next preceding such Time of Delivery, at which meeting the
final drafts of the documents to be delivered pursuant to the preceding sentence
will be available for review by the parties hereto. For the purposes of this
Section 4, "New York Business Day" shall mean each Monday, Tuesday, Wednesday,
Thursday and Friday which is not a day on which banking institutions in New York
are generally authorized or obligated by law or executive order to close.
5. The Company agrees with the Underwriters:
a. To prepare the Prospectus as amended and supplemented in
relation to the applicable Shares in a form reasonably approved by the
Representative and to file such Prospectus pursuant to Rule 424(b) under the Act
not later than the Commission's close of business on the second business day
following the execution and delivery of this Agreement or, if applicable, such
earlier time as may be required by Rule 430A(a)(3); to make no further amendment
or supplement to the Registration Statement or the Prospectus as amended or
supplemented after the date of this Agreement and prior to the last Time of
Delivery which shall be approved by the Representative promptly after reasonable
notice thereof; to advise the Representative promptly of any such amendment or
supplement after such Time of Delivery and furnish the Representative with
copies
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thereof; to file promptly all reports and any definitive proxy or
information statements required to be filed by the Company with the Commission
pursuant to Section 13(a), 13(c), 14 or 15(d) of the Exchange Act for so long as
the delivery of a prospectus is required in connection with the offering or sale
of the Shares, and during such same period to advise the Representative,
promptly after it receives notice thereof, of the time when any amendment to the
Registration Statement has been filed or becomes effective or any supplement to
the Prospectus or any amended Prospectus has been filed with the Commission, of
the issuance by the Commission of any stop order or of any order preventing or
suspending the use of any prospectus relating to the Shares, of the suspension
of the qualification of such Shares for offering or sale in any jurisdiction, of
the initiation or threatening of any proceeding for any such purpose, or of any
request by the Commission for the amending or supplementing of the Registration
Statement or Prospectus or for additional information; and, in the event of the
issuance of any such stop order or of any such order preventing or suspending
the use of any prospectus relating to the Shares or suspending any such
qualification, to use promptly its best efforts to obtain its withdrawal;
b. Promptly from time to time to take such action as the
Representative may reasonably request to qualify the Shares for offering and
sale under the securities laws of such jurisdictions (other than foreign
countries) as the Representative may request and to comply with such laws so as
to permit the continuance of sales and dealings therein in such jurisdictions
for as long as may be necessary to complete the distribution of the Shares,
provided that in connection therewith the Company shall not be required to
qualify as a foreign corporation or dealer in securities, to subject itself to
taxation as doing business in any jurisdiction or to file a general consent to
service of process in any jurisdiction;
c. Prior to 10:00 a.m., New York City time, on the New York
Business Day next succeeding the date of this Agreement and otherwise from time
to time to furnish the Representative and, upon request, to each of the several
Underwriters, without charge, copies of the Prospectus as amended or
supplemented in such quantities as the Representative or such Underwriters may
reasonably request, and, if the delivery of a prospectus is required at any time
prior to the expiration of nine months after the time of issue of the Prospectus
as amended and supplemented, in connection with the offering or sale of the
Shares and if at such time any event shall have occurred as a result of which
the Prospectus as then amended or supplemented would include an untrue statement
of a material fact or omit to state any material fact necessary in order to make
the statements therein, in the light of the circumstances under which they were
made when such Prospectus is delivered, not misleading, or, if for any other
reason it shall be necessary during such same period to amend or supplement the
Prospectus or to file under the Exchange Act any document incorporated by
reference in the Prospectus in order to comply with the Act or the Exchange Act,
to notify the Representative and upon their request to file such document and to
prepare and furnish without charge to each of the several Underwriters and to
any dealer in securities as many copies as such Underwriter may from time to
time reasonably request of an amended Prospectus or a supplement to the
Prospectus which will correct such statement or omission or effect such
compliance and in any case any of the several Underwriters are required to
deliver a prospectus in connection with sales of any of the Shares at any time
nine months or more after the time of issue of the Prospectus, upon request but
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at the expense of such Underwriter, to prepare and deliver to such Underwriter
as many copies as they may request of an amended or supplemented Prospectus
complying with Section 10(a)(3) of the Act;
d. To make generally available to its securityholders as soon
as practicable, but in any event not later than eighteen months after the
effective date of the Registration Statement (as defined in Rule 158(e)), an
earnings statement of the Company and its subsidiaries (which need not be
audited) complying with Section 11(a) of the Act and the rules and regulations
of the Commission thereunder (including at the option of the Company Rule 158);
e. During a period of five years from the effective date of
the Registration Statement, the Company will furnish to the Representative and,
upon request, to each of the several Underwriters copies of (i) all reports to
its shareholders, and (ii) all reports, financial statements and proxy or
information statements filed by the Company with the commission or any national
securities exchange.
f. During the period commencing on the date hereof and ending
on the 120th day following the date hereof, without the prior written consent of
the Representative, not to, and not to allow its directors and executive
officers to, offer, sell, contract to sell or otherwise dispose of any shares of
Common Stock or any rights to purchase or other securities convertible into or
any securities of the Company substantially similar to any such shares, except
for (i) the shares of Common Stock offered in connection with the offering and
(ii) shares of Common Stock issued pursuant to existing employee and dividend
reinvestment and stock option plans; and
g. To use the net proceeds received by it from the sale of the
Shares pursuant to this Agreement substantially in the manner specified in the
Prospectus under the caption "Use of Proceeds".
6. The Company covenants and agrees with the Representative that the
Company will pay or cause to be paid the following, except as otherwise provided
in Section 5(c): (i) the fees, disbursements and expenses of the Company's
counsel and accountants in connection with the registration of the Shares under
the Act and all other expenses in connection with the preparation, printing and
filing of the Registration Statement, any Preliminary Prospectus and the
Prospectus and amendments and supplements thereto and the mailing and delivering
of copies thereof to the Representative; (ii) the cost of printing or producing
this Agreement, any Blue Sky Memorandum, closing documents (including any
compilations thereof) and any other documents in connection with the offering,
purchase, sale and delivery of the Shares; (iii) all reasonable expenses in
connection with the qualification of the Shares for offering and sale under
state securities laws as provided in Section 5(b) hereof, including the
reasonable fees and disbursements of counsel for the Underwriters in connection
with such qualification and in connection with the Blue Sky survey; (iv) any
filing fees incident to any required review by the National Association of
Securities Dealers, Inc. of the terms of the sale of the Shares; (v) the cost of
preparing stock certificates for the Shares; (vi) the cost and charges of any
transfer agent or registrar; and (vii) all other costs and expenses incident to
the
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performance of its obligations hereunder which are not otherwise specifically
provided for in this Section. It is understood, however, that, except (i) as
provided in this Section, Section 8 and Section 11 hereof and (ii) the payment
by the Company of up to a maximum of $______ of the reasonable out-of-pocket
expenses of Sandler O'Neill & Partners, L.P. incurred in connection herewith,
including, without limitation, fees of counsel, advertising, promotional,
syndication, and travel expenses, the Representative will pay all other of its
own costs and expenses, including the fees of its counsel, stock transfer taxes
on resale of any of the Shares by it, and any advertising expenses connected
with any offers it may make.
7. The obligations of the Underwriters hereunder as to the Shares to be
delivered at each Time of Delivery shall be subject, in the discretion of the
Underwriters, to the condition that all representations and warranties and other
statements of the Company herein are as of the date hereof and, at and as of
such Time of Delivery, true and correct, the condition that the Company shall
have performed all of its obligations hereunder theretofore to be performed, and
the following additional conditions:
a. The Prospectus as amended or supplemented in relation to
the applicable Shares shall have been filed with the Commission pursuant to Rule
424(b) within the applicable time period prescribed for such filing by the rules
and regulations under the Act and in accordance with Section 5(a) hereof; no
stop order suspending the effectiveness of the Registration Statement or any
part thereof shall have been issued and no proceeding for that purpose shall
have been initiated or threatened by the Commission; and all requests for
additional information on the part of the Commission shall have been complied
with to the Underwriters' reasonable satisfaction;
b. Thacher Proffitt & Wood, counsel for the Underwriters,
shall have furnished to the Representative, on behalf of the Underwriters such
opinion or opinions, dated such Time of Delivery, with respect to the
incorporation of the Company, the validity of the Shares, the Registration
Statement, the Prospectus as amended or supplemented and other related matters
as the Underwriters may reasonably request, and such counsel shall have received
such papers and information as they may reasonably request to enable them to
pass upon such matters;
c. Elias, Matz, Tiernan & Herrick, L.L.P., counsel for the
Company, shall have furnished to the Representative, on behalf of the
Underwriters, their written opinion, dated such Time of Delivery, in form and
substance reasonably satisfactory to the Representative, to the effect that:
i. The Company has been duly incorporated and is an
existing corporation in good standing under the laws of the State of
Delaware and is duly registered as a bank holding company under the
Bank Holding Company Act of 1956, as amended, with corporate power and
authority to own its properties and conduct its business as it is now
being conducted;
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ii. The Company has been duly qualified as a foreign
corporation for the transaction of business and is in good standing
under the laws of each other jurisdiction in which it owns or leases
properties or conducts any business so as to require such qualification
or is subject to no material liability or disability by reason of
failure to be so qualified in any such jurisdiction;
iii. Each Significant Subsidiary of the Company has
been duly incorporated and is an existing corporation or trust company
in good standing under the laws of its jurisdiction of incorporation;
and all of the issued shares of capital stock of each such Significant
Subsidiary have been duly and validly authorized and issued, and are
fully paid and non-assessable and are owned directly or indirectly by
the Company, free and clear of all liens, encumbrances, equities or
claims;
iv. The Company has an authorized capitalization as
set forth in the Prospectus as amended or supplemented and all of the
issued shares of capital stock of the Company have been duly and
validly authorized and issued and are fully paid and non-assessable;
the Shares have been duly and validly authorized and, when issued and
delivered against payment therefor as provided herein, will be duly and
validly issued and fully paid and non-assessable and will conform in
all material respects to the description thereof contained in the
Prospectus as amended or supplemented; and the holders of outstanding
capital stock of the Company are not entitled to preemptive or other
rights afforded by the Company to subscribe for the Shares;
v. Other than as set forth in the Prospectus, there
are no legal or governmental proceedings pending or, to the best
knowledge of such counsel, threatened to which the Company or any of
its subsidiaries is a party or of which any property of the Company or
any of its subsidiaries is the subject which, individually or in the
aggregate, might reasonably be expected to have a material adverse
effect on the condition, financial or otherwise, business, management,
stockholders' equity, results of operations or prospects of the Company
and its consolidated subsidiaries considered as one enterprise; and, to
the best of such counsel's knowledge, no such proceedings are
threatened or contemplated by governmental authorities or threatened by
others;
vi. The execution and delivery of this Agreement and
the consummation of the transactions contemplated hereby have been duly
authorized by all necessary action on the part of the Company and this
Agreement constitutes the legal, valid and binding agreement of the
Company, enforceable in accordance with its terms, except as rights to
indemnity, contribution and limitations of liability hereunder may be
limited under applicable law (it being understood that such counsel may
avail itself of customary exceptions concerning the effect of
bankruptcy, insolvency or similar laws and the availability of
equitable remedies);
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<PAGE>
vii. The issuance and sale of the Shares being
delivered at such Time of Delivery by the Company and the compliance by
the Company with all of the provisions of this Agreement and the
consummation of the transactions herein contemplated will not conflict
with or result in a breach or violation of, or constitute a default
under, any indenture, mortgage, deed of trust, loan agreement or other
agreement or instrument known to such counsel to which the Company or
any of its subsidiaries is a party or by which the Company or any of
its subsidiaries is bound or to which any of the property or assets of
the Company or any of its subsidiaries is subject (except for such
conflicts, breaches, violations and defaults that would not have a
material adverse effect on the financial condition or operations of the
Company and its consolidated subsidiaries considered as one enterprise,
and that would not affect the validity of the Shares), nor will such
action result in any violation of the provisions of the Certificate of
Incorporation or By-laws of the Company as in effect at such Time of
Delivery or any existing order known to such counsel, or any statute,
rule or regulation of any court or governmental agency or body having
jurisdiction over the Company or any of its subsidiaries or any of
their properties;
viii. No consent, approval, authorization, order,
registration or qualification of or with any such court or governmental
agency or body is required for the issuance and sale of the Shares or
the consummation by the Company of the transactions contemplated by
this Agreement, except registration under the Act of the Shares, and
such consents, approvals, authorizations, registrations or
qualifications as may be required under state securities or Blue Sky
laws in connection with the purchase and distribution of the Shares by
the Underwriters;
ix. The documents incorporated by reference in the
Prospectus as amended or supplemented or any further amendment or
supplement thereto made by the Company prior to such Time of Delivery
(other than the financial statements and related schedules and other
financial data therein, as to which such counsel need express no
opinion), when they became effective or were filed with the Commission,
as the case may be, complied as to form in all material respects with
the requirements of the Act or the Exchange Act, as applicable, and the
rules and regulations of the Commission thereunder; and such counsel
has no reason to believe that any of such documents, when it became
effective or was so filed, as the case may be, contained, in the case
of a registration statement which became effective under the Act, an
untrue statement of a material fact or omitted to state a material fact
required to be stated therein or necessary to make the statements
therein not misleading, or, in the case of other documents which were
filed under the Act or the Exchange Act with the Commission, an untrue
statement of a material fact or omitted to state a material fact
necessary in order to make the statements therein, in the light of the
circumstances under which they were made when such documents were so
filed, not misleading; and
x. The Registration Statement and the Prospectus as
amended or supplemented and any further amendments and supplements
thereto made by the Company
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<PAGE>
prior to such Time of Delivery (other than the financial statements and
related schedules and other financial data therein, as to which such
counsel need express no opinion) comply as to form in all material
respects with the requirements of the Act and the rules and regulations
thereunder; such counsel has no reason to believe that, as of its
effective date, the Registration Statement or any further amendment
thereto made by the Company prior to such Time of Delivery (other than
the financial statements and related schedules and other financial data
therein, as to which such counsel need express no opinion) contained an
untrue statement of a material fact or omitted to state a material fact
required to be stated therein or necessary to make the statements
therein not misleading or that, as of its date, the Prospectus as
amended or supplemented or any further amendment or supplement thereto
made by the Company prior to such Time of Delivery (other than the
financial statements and related schedules and other financial data
therein, as to which such counsel need express no opinion) contained an
untrue statement of a material fact or omitted to state a material fact
necessary to make the statements therein, in light of the circumstances
in which they were made, not misleading or that, as of such Time of
Delivery, either the Registration Statement or the Prospectus as
amended or supplemented or any further amendment or supplement thereto
made by the Company prior to such Time of Delivery (other than the
financial statements and related schedules and other financial data
therein, as to which such counsel need express no opinion) contains an
untrue statement of a material fact or omits to state a material fact
necessary to make the statements therein, in light of the circumstances
in which they were made, not misleading; the statements in the
Prospectus as amended or supplemented or any further amendment or
supplement thereto made by the Company prior to such Time of Delivery
with respect to statutes, administrative orders and regulations and
legal and governmental proceedings fairly and accurately present in all
material respects the information required to be set forth therein and
there are no statutes, administrative orders or regulations required to
be described in the Prospectus or any further amendment or supplement
thereto made by the Company prior to such Time of Delivery which are
not described as required, and such counsel does not know of any
amendment to the Registration Statement required to be filed or any
contracts or other documents of a character required to be filed as an
exhibit to the Registration Statement or required to be incorporated by
reference into the Prospectus as amended or supplemented or any further
amendment or supplement thereto made by the Company prior to such Time
of Delivery or required to be described in the Registration Statement
or the Prospectus as amended or supplemented which are not filed or
incorporated by reference or described as required.
d. On the date of this Agreement and at the Time of Delivery,
the Representative shall have received from Coopers & Lybrand L.L.C. a letter,
dated the date of this Agreement and at the Time of Delivery, respectively, in
form and substance satisfactory to the Representative, confirming that they are
independent certified public accountants with respect to the Company, within the
meaning of the Act, and stating in effect that:
(i) [ In their opinion, the consolidated financial
statements and schedules of the Company audited by them and included or
incorporated in the Registration Statement
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<PAGE>
comply in all material respects with the applicable accounting
requirements of the Act and the Exchange Act.
(ii) On the basis of the procedures consisting of a
reading of the latest available unaudited interim consolidated
financial statements of the Company, and its subsidiaries, the minutes
of meetings and consents of the shareholders and boards of directors of
the Company and its subsidiaries, and the committees of such boards,
inquiries of officials of the Company responsible for financial and
accounting matters, and such other inquiries and procedures as may be
specified in such letter, nothing came to their attention that caused
them to believe that the unaudited interim consolidated financial
statements and schedules of the Company included in the Registration
Statement and Prospectus do not comply in all material respects with
the applicable accounting requirements of the Act or the Exchange Act,
or are not in conformity with U.S. generally accepted accounting
principles applied on a basis substantially consistent, except as noted
in the Registration Statement and Prospectus, with the basis for the
audited consolidated financial statements of the Company included or
incorporated in the Registration Statement and Prospectus.
(iii) On the basis of limited procedures, consisting
of a reading of the unaudited interim financial statements and other
information referred to below, a reading of the latest available
unaudited consolidated financial statements of the Company, inspection
of the minute books of the Company since the date of the latest audited
financial statements of the Company included in the Registration
Statement and Prospectus, inquiries of officials of the Company
responsible for financial and accounting matters and such other
inquiries and procedures as may be specified in such letter, nothing
came to their attention that caused them to believe that:
(A) as of a specified date not more than five
business days prior to the date of such letter, there have been
any changes in the consolidated capital stock of the Company, any
increase in the consolidated debt of the Company, any decreases
in consolidated total assets or shareholders equity of the
Company, or any changes, decreases or increases in other items
specified by the Representative, in each case as compared with
amounts shown in the latest unaudited interim consolidated
statements of financial condition of the Company included in the
Registration Statement and Prospectus except in each case for
changes, increases or decreases which the Registration Statement
and Prospectus specifically discloses, have occurred or may occur
or which are described in such letter; and
(B) for the period from the date of the latest
unaudited interim consolidated financial statements included in
the Registration Statement and Prospectus to the specified date
referred to in Clause (iii)(A), there were any decreases in the
consolidated interest income, net interest income, or net income
of the Company or in the per share amount of net income of the
Company, in each case as compared with the comparable period of
the preceding year and with any other
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period of corresponding length specified by the Representative,
except in each case for increases or decreases which the
Registration Statement and Prospectus discloses have occurred or
may occur, or which are described in such letter.
(iv) In addition to the audit referred to in their
report included or incorporated in the Registration Statement and
Prospectus and the limited procedures, inspection of minute books,
inquiries and other procedures referred to in paragraphs (ii) and (iii)
above, they have carried out certain specified procedures, in
accordance with U.S. generally accepted auditing standards, with
respect to certain amounts, percentages and financial information
specified by the Representative which are derived from the general
accounting records and consolidated financial statements of the Company
which appear in the Registration Statement and Prospectus specified by
the Representative in the Registration Statement and Prospectus and
have compared such amounts, percentages and financial information with
the accounting records and the material derived from such records and
consolidated financial statements of the Company have found them to be
in agreement.]
In the event that the letters to be delivered
referred to above set forth any such changes, decreases or increases as
specified in Clauses (iii)(A) or (iii)(B) above, or any exceptions from such
agreement specified in Clause (iv) above, it shall be a further condition to the
obligations of the Underwriters that the Representative, on behalf of the
Underwriters, shall have determined, after discussions with officers of the
Company responsible for financial and accounting matters, that such changes,
decreases, increases or exceptions are set forth in such letters do not (x)
reflect a material adverse change in the items specified in Clause (iii)(A)
above as compared with the amounts shown in the latest unaudited consolidated
statement of financial condition of the Company included in the Registration
Statement and Prospectus, (y) reflect a material adverse change in the items
specified in Clause (iii)(B) above as compared with the corresponding periods of
the prior year or other period specified by the Representative, or (z) reflect a
material change in items specified in Clause (iv) above from the amounts shown
in the Preliminary Prospectus distributed by the Representative in connection
with the offering contemplated hereby or from the amounts shown in the
Registration Statement and Prospectus. At the time of the execution and delivery
of this Agreement and also at each Time of Delivery, Coopers & Lybrand L.L.C.
shall have furnished to the Representative a letter or letters, dated the
respective date of delivery thereof in form and substance reasonably
satisfactory to the Representative;
e. On or after the date hereof, (i) there shall not have been
any material adverse change, or any development which might be reasonably be
expected to result in a material adverse change, in or affecting the condition,
financial or otherwise, business, management, stockholders' equity, results of
operations or prospects of the Company and its consolidated subsidiaries
considered as one enterprise, the effect of which is, in the reasonable judgment
of the Representative, so material and adverse as to make it impractical or
inadvisable to proceed with the public offering or the delivery of the Shares
being delivered at such Time of Delivery on the terms and in the manner
contemplated in the Prospectus as amended or supplemented, (ii) there shall not
have been any material transactions entered into by the Company or any of its
consolidated subsidiaries other than
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<PAGE>
those in the ordinary course of business and consistent with past practice,
(iii) neither the Company nor any of its consolidated subsidiaries shall have
sustained since the date of the last audited financial statements included or
incorporated by reference in the Prospectus any material loss or interference
with its business from fire, explosion, flood or other calamity, whether or not
covered by insurance, or from any labor dispute or court or governmental action,
order or decree, otherwise than as set forth or contemplated in the Prospectus,
and (iv) except for regular quarterly dividends on the Common Stock, there shall
not have been any dividend or distribution of any kind declared, paid or made by
the Company on any class of its capital stock;
f. On or after the date hereof there shall not have occurred
any of the following: (i) trading in the Company's Common Stock shall have been
suspended by the Commission or Nasdaq or trading in securities generally on the
New York Stock Exchange or the Nasdaq Stock Market shall have been suspended or
materially limited or minimum prices shall have been established on such
Exchanges; (ii) a general moratorium on commercial banking activities in
Pennsylvania or New York declared by Federal or Pennsylvania or New York State
authorities; or (iii) any material outbreak or material escalation of
hostilities or other calamity or crisis the effect of which on the financial
markets in the United States is such as to make it, in the Representative's
reasonable judgment, impracticable to proceed with the public offering or the
delivery of the Shares being delivered at such Time of Delivery on the terms and
in the manner contemplated by the Prospectus as amended or supplemented;
g. The Company shall have obtained and delivered to the
Representative executed copies of an agreement from the directors and executive
officers of the Company, substantially to the effect set forth in Subsection
5(f) hereof in form and substance satisfactory to the Representative;
h. The Company shall have complied with the provisions of
Section 5(c) hereof with respect to the furnishing of prospectuses on the New
York Business Day next succeeding the date of this Agreement; and
i. The Company shall have furnished or caused to be furnished
to the Representative at such Time of Delivery certificates of officers of the
Company satisfactory to the Representative as to the accuracy of the
representations and warranties of the Company herein at and as of such Time of
Delivery, as to the performance by the Company of all of its obligations
hereunder to be performed at or prior to such Time of Delivery, as to the
matters set forth in subsections (a) and (e) of this Section and as to such
other matters as the Representative may reasonably request.
8. (a) The Company will indemnify and hold harmless each of the several
Underwriters, each of their directors, partners, officers and agents, and each
person, if any, who controls the several Underwriters within the meaning of the
Regulations against any losses, claims, damages, liabilities or expenses
(including reasonable costs of investigation and reasonable attorneys fees and
expenses) joint or several, to which each of the Underwriters may become
subject, under
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the Act or otherwise, insofar as such losses, claims, damages or liabilities (or
actions in respect thereof) arise out of or are based upon an untrue statement
or alleged untrue statement of a material fact contained in any Preliminary
Prospectus, any preliminary prospectus supplement, the Registration Statement,
the Prospectus as amended or supplemented, or any amendment or supplement
thereto, or arise out of or are based upon the omission or alleged omission to
state therein a material fact required to be stated therein or necessary to make
the statements therein not misleading, and will reimburse any such Underwriter
for any legal or other expenses reasonably incurred by such Underwriter in
connection with investigating or defending or appearing as a third-party witness
in connection with any such action or claim as such expenses are incurred, but
in no event less frequently than 30 days after each invoice is submitted,
notwithstanding, the possibility that payments for such expenses might later be
held to be improper, in which case such payments shall be promptly refunded;
provided, however, that (i) the Company shall not be liable in any such case to
the extent that any such loss, claim, damage or liability arises out of or is
based upon an untrue statement or alleged untrue statement or omission or
alleged omission made therein in reliance upon and in conformity with written
information furnished to the Company by any Underwriter through the
Representative expressly for use therein, it being acknowledged that the only
information so furnished by such Underwriter is as described in Section 8(b)
hereof, and (ii) such indemnity with respect to any Preliminary Prospectus or
preliminary prospectus supplement shall not inure to the benefit of any
Underwriter (or any person controlling such Underwriter) from whom the person
asserting such loss, claim, damage or liability purchased the Shares which are
the subject thereof if such person was not sent or given a copy of the
Prospectus (or the Prospectus as amended or supplemented), excluding documents
incorporated therein by reference, at or prior to the confirmation of the sale
of such Shares to such person in any case where such delivery is required by the
Act and the untrue statement or omission of a material fact contained in such
related Preliminary Prospectus or preliminary prospectus supplement was
corrected in the Prospectus (or the Prospectus as amended or supplemented).
b. Each Underwriter severally agrees to indemnify and hold
harmless the Company against any losses, claims, damages or liabilities to which
the Company may become subject, under the Act or otherwise, insofar as such
losses, claims, damages or liabilities (or actions in respect thereof) arise out
of or are based upon an untrue statement or alleged untrue statement of a
material fact contained in any Preliminary Prospectus, any preliminary
prospectus supplement, the Registration Statement, the Prospectus as amended or
supplemented, or any amendment or supplement thereto, or arise out of or are
based upon the omission or alleged omission to state therein a material fact
required to be stated therein or necessary to make the statements therein not
misleading, in each case to the extent, but only to the extent, that such untrue
statement or alleged untrue statement or omission or alleged omission was made
in any Preliminary Prospectus, any preliminary prospectus supplement, the
Registration Statement, the Prospectus as amended or supplemented, or any such
amendment or supplement, in reliance upon and in conformity with written
information furnished to the Company by the Representative expressly for use
therein; and will reimburse the Company for any legal or other expenses
reasonably incurred by the Company in connection with investigating or defending
any such action or claim as such expenses are incurred. The Company acknowledges
for all purposes of this Agreement that the statements set forth in the
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first sentence of the last paragraph of text on the cover page of the Prospectus
concerning the terms of the offering by the Representative, on behalf of the
Underwriters and in the paragraphs under the caption "Underwriting" in the
Prospectus concerning the terms of the offering by the Underwriters constitute
the only information that is to be furnished in writing by or behalf of the
Underwriters for inclusion in any Preliminary Prospectus, the Registration
Statement, the Prospectus, each as amended or supplemented or any amendment or
supplement thereto.
c. Promptly after receipt by an indemnified party under
subsection (a) or (b) above of notice of the commencement of any action, such
indemnified party shall, if a claim in respect thereof is to be made against the
indemnifying party under such subsection, notify the indemnifying party in
writing of the commencement thereof; but the omission so to notify the
indemnifying party shall not relieve it from any liability which it may have to
any indemnified party otherwise than under such subsection. In case any such
action shall be brought against any indemnified party and it shall notify the
indemnifying party of the commencement thereof, the indemnifying party shall be
entitled to participate therein and, to the extent that it shall wish, jointly
with any other indemnifying party similarly notified, to assume the defense
thereof, with counsel reasonably satisfactory to such indemnified party (who
shall not, except with the consent of the indemnified party, be counsel to the
indemnifying party), and, after notice from the indemnifying party to such
indemnified party of its election so to assume the defense thereof, the
indemnifying party shall not be liable to such indemnified party under such
subsection for any legal expenses of other counsel or any other expenses, in
each case subsequently incurred by such indemnified party, in connection with
the defense thereof other than reasonable costs of investigation. Any
indemnified party shall have the right to employ separate counsel in any such
action and to participate in the defense thereof, but the fees and expenses of
such counsel shall be at the expense of such indemnified party unless (i) the
employment thereof has been specifically authorized by the indemnifying party in
writing, (ii) the indemnifying party has failed to assume the defense or to
employ counsel reasonably satisfactory to the indemnified party or (iii) the
named parties to any such action (including any impleaded parties) include both
such indemnified party or such controlling person and the indemnifying party and
such indemnified party shall have been advised by counsel that there may be one
or more legal defenses available to it that are different from or in addition to
those available to the indemnifying party (in which case, if such indemnified
party notifies the indemnifying party in writing that it elects to employ
separate counsel at the expense of the indemnifying party, the indemnifying
party shall not have the right to assume the defense of such action on behalf of
such indemnified party); it being understood, however, that the indemnifying
party shall not, in connection with any one such action or separate but
substantially similar or related actions in the same jurisdiction arising out of
the same general allegations or circumstances, be liable for the reasonable fees
and expenses of more than one separate firm of attorneys (in addition to any
local counsel) separate from their own counsel at any time and for all such
indemnified parties, which firm shall be designated in writing by the
indemnified party. Each indemnified party, as a condition of such indemnity,
shall use reasonable efforts to cooperate with the indemnifying party in the
defense of any such action or claim. No indemnifying party shall, without the
written consent of the indemnified party, effect the settlement or compromise
of, or consent to the entry of any judgment with respect to, any pending or
threatened action or claim in respect of which
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indemnification or contribution may be sought hereunder (whether or not the
indemnified party is an actual or potential party to such action or claim)
unless such settlement, compromise or judgment (i) includes an unconditional
release of the indemnified party from all liability arising out of such action
or claim and (ii) does not include a statement as to or an admission of fault,
culpability or a failure to act, by or on behalf of any indemnified party. No
indemnifying party shall, without the written consent of the indemnified party,
effect the settlement or compromise of, or consent to the entry of any judgment
with respect to, any pending or threatened action or claim in respect of which
indemnification or contribution may be sought hereunder (whether or not the
indemnified party is an actual or potential party to such action or claim)
unless such settlement, compromise or judgment (i) includes an unconditional
release of the indemnified party from all liability arising out of such action
or claim and (ii) does not include a statement as to or an admission of fault,
culpability or a failure to act, by or on behalf of any indemnified party.
d. If the indemnification provided for in this Section 8 is
unavailable to or insufficient to hold harmless an indemnified party under
subsection (a) or (b) above in respect of any losses, claims, damages or
liabilities (or actions in respect thereof) referred to therein, then each
indemnifying party shall contribute to the amount paid or payable by such
indemnified party as a result of such losses, claims, damages or liabilities (or
actions in respect thereof) in such proportion as is appropriate to reflect the
relative benefits received by the Company on the one hand and the Underwriters
on the other. If, however, the allocation provided by the immediately preceding
sentence is not permitted by applicable law or if the indemnified party failed
to give the notice required under subsection (c) above, then each indemnifying
party shall contribute to such amount paid or payable by such indemnified party
in such proportion as is appropriate to reflect not only such relative benefits
but also the relative fault of the Company on the one hand and the Underwriters
on the other in connection with the statements or omissions which resulted in
such losses, claims, damages or liabilities (or actions in respect thereof), as
well as any other relevant equitable considerations. The relative benefits
received by the Company on the one hand and the Underwriters on the other shall
be deemed to be in the same proportion as the total net proceeds from such
offering (before deducting expenses) received by the Company to the total gross
underwriting discounts (before deducting expenses) and commissions received by
the Underwriters with respect to the Shares purchased under this Agreement, in
each case as set forth in the table on the cover page of the Prospectus as
amended or supplemented. The relative fault shall be determined by reference to,
among other things, whether the untrue or alleged untrue statement of a material
fact or the omission or alleged omission to state a material fact relates to
information supplied by the Company on the one hand or the Representative, on
behalf of the Underwriters on the other and the parties' relative intent,
knowledge, access to information and opportunity to correct or prevent such
statement or omission. The Company and the Underwriters agree that it would not
be just and equitable if contribution pursuant to this subsection (d) were
determined by pro rata allocation (even if the Underwriters were treated as one
entity for such purpose) or by any other method of allocation which does not
take account the equitable considerations referred to above in this subsection
(d). The amount paid or payable by an indemnified party as a result of the
losses, claims, damages or liabilities (or actions in respect thereof) referred
to above in this subsection (d) shall be deemed to include any legal or other
expenses reasonably incurred by such indemnified party in connection with
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<PAGE>
investigating or defending any such action or claim. Notwithstanding the
provisions of this subsection (d), the Underwriters shall be required to
contribute any amount in excess of the amount by which the total price at which
the Shares underwritten by it and distributed to the public were offered to the
public exceeds the amount of any damages which such Underwriters has otherwise
been required to pay by reason of such untrue or alleged untrue statement or
omission or alleged omission. No person guilty of fraudulent misrepresentation
(within the meaning of Section 11(f) of the Act) shall be entitled to
contribution from any person who was not guilty of such fraudulent
misrepresentation. For purposes of this subsection (d), each person who controls
the several Underwriters within the meaning of Section 15 of the Act shall have
the same rights to contribution as such Underwriter.
e. The obligations of the Company under this Section 8 shall
be in addition to any liability which the Company may otherwise have and shall
extend, upon the same terms and conditions, to each person, if any, who controls
any such Underwriter within the meaning of the Act; and the obligations of the
several Underwriters under this Section 8 shall be in addition to any liability
which any such Underwriter may otherwise have and shall extend, upon the same
terms and conditions, to each officer and director of the Company and to each
person, if any, who controls the Company within the meaning of the Act.
9. The Representative may terminate this Agreement, by notice to the
Company, at any time prior to the Time of Delivery (i) if there has been, since
the time of execution of this Agreement or since the respective dates as of
which information is given in the Prospectus, any material adverse change in the
condition, financial or otherwise, or in the earnings, business affairs or
business prospects of the Company, whether or not arising in the ordinary course
of business, or (ii) trading in securities generally on the New York Stock
Exchange or the Nasdaq Stock Market shall have been suspended or materially
limited or minimum prices shall have been established on such Exchanges; (iii) a
general moratorium or commercial banking activities in Pennsylvania or New York
has been declared by Federal, Pennsylvania or New York State authorities; or
(iv) any material outbreak or material escalation of hostilities or other
calamity or crises the effect of which on the financial markets in the United
States is such as to make it, in the Representative's reasonable judgment,
impracticable to proceed with the public offering contemplated by the Prospectus
as amended or supplemented.
10. The respective indemnities, agreements, representations, warranties
and other statements of the Company and the Underwriters, as set forth in this
Agreement or made by or on behalf of them, respectively, pursuant to this
Agreement, shall remain in full force and effect, regardless of any
investigation (or any statement as to the results thereof) made by or on behalf
of any of the Underwriters or any controlling person of any Underwriter, or the
Company, or any officer or director or controlling person of the Company, and
shall survive delivery of and payment for the Shares.
11. If this Agreement shall be terminated pursuant to Section 9 hereof,
the Company shall not then be under any liability to any of the Underwriters,
except as provided in Section 6 and
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Section 8 hereof; but, if for any other reason, any Shares are not delivered by
or on behalf of the Company as provided herein, the Company will reimburse such
Underwriter for all reasonable out-of-pocket expenses, including reasonable fees
and disbursements of counsel, reasonably incurred by such Underwriter in making
preparations for the purchase, sale and delivery of the Shares not so delivered,
but the Company shall then be under no further liability to such Underwriter
with respect to such Shares except as provided, or referred to, in Section 6 and
Section 8 hereof.
12. All statements, requests, notices and agreements hereunder shall be
in writing, and if to the Representative shall be delivered or sent by mail,
telex or facsimile transmission to the Representative at its address set forth
in this Agreement (Attention: Catherine A. Lawton (Fax: 212-466-7711), and if to
the Company shall be delivered or sent by mail, telex or facsimile transmission
to the address of the Company set forth in the Registration Statement,
Attention: W. Kirk Wycoff (Fax: 610-825-4460). Any such statements, requests,
notices or agreements shall take effect upon receipt thereof.
13. This Agreement shall be binding upon, and inure solely to the
benefit of, the Underwriters, the Company and, to the extent provided in Section
8 and Section 10 hereof, the officers and directors of the Company and each
person who controls the Company or the Underwriters, and their respective heirs,
executors, administrators, successors and assigns, and no other person shall
acquire or have any right under or by virtue of this Agreement. No purchaser of
any of the Shares from the Underwriters shall be deemed a successor or assign by
reason merely of such purchase.
14. Time shall be of the essence of this Agreement. As used herein,
"business day" shall mean each Monday, Tuesday, Wednesday, Thursday and Friday
which is not a day on which banking institutions in New York are generally
authorized or obligated by law or executive order to close.
15. This Agreement shall be governed by and construed in accordance
with the laws of the State of New York.
16. This Agreement may be executed by any one or more of the parties
hereto and thereto in any number of counterparts, each of which shall be deemed
to be an original, but all such respective counterparts shall together
constitute one and the same instrument.
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<PAGE>
If the foregoing is in accordance with your understanding, please sign
and return to us five counterparts hereof, and upon the acceptance hereof by you
this letter and such acceptance hereof shall constitute a binding agreement
between the several Underwriters and the Company.
Very truly yours,
PROGRESS FINANCIAL CORPORATION
By: _________________________________
Name: _________________________________
Title: _________________________________
Accepted as of the date hereof:
SANDLER O'NEILL & PARTNERS, L.P.
By: SANDLER O'NEILL & PARTNERS CORP.
the sole general partner
By: /s/ Catherine A. Lawton
----------------------------
Name: Catherine A. Lawton
Title: Vice President
On behalf of themselves and the other Underwriters
named in Schedule I hereto.
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EXHIBIT 5
Law Offices
ELIAS, MATZ, TIERNAN & HERRICK L.L.P.
12th Floor
734 15th Street, N.W.
Washington, D.C. 20005
Telephone (202) 347-0300
April 28, 1998
Board of Directors
Progress Financial Corporation
Four Sentry Parkway
Suite 230
Blue Bell, Pennsylvania 19422
Re: Registration Statement on Form S-2;
File No. 333-50503
Ladies and Gentlemen:
We have acted as special counsel to Progress Financial Corporation (the
"Company") in connection with the preparation and filing with the Securities and
Exchange Commission of a Registration Statement on Form S-2 (No. 333-50503)(the
"Registration Statement") relating to the registration under the Securities Act
of 1933, as amended (the "Act"), of up to 825,000 shares of common stock, par
value $1.00 per share ("Common Stock"), of the Company to be issued and sold in
an underwritten public offering (including up to 75,000 shares of Common Stock
which the Underwriters have the option to purchase to cover any over-allotments)
(the "Offering"). Capitalized terms defined in the Registration Statement and
not otherwise defined herein are used herein with the meanings as so defined.
In so acting, we have examined originals or copies, certified or
otherwise identified to our satisfaction, of the Registration Statement and such
corporate records, agreements, documents and other instruments, including the
form of the Underwriting Agreement and such certificates or comparable documents
of public officials, of officers and representatives of the Company as we have
deemed relevant or necessary as a basis for the opinions hereinafter set forth.
In such examination, we have assumed without independent verification the
genuineness of all signatures, the authenticity of all documents submitted to us
as originals, the conformity to original documents of documents submitted to us
as certified or photostatic copies and the authenticity of the originals of such
latter documents. As to all questions of fact material to this opinion that have
not been independently established, we have relied upon certificates or
comparable documents of officers of the Company, and we
<PAGE>
Board of Directors
April 28, 1998
Page 2
have examined the representations and warranties of the Company contained in the
Underwriting Agreement and have relied upon the accuracy and completeness of the
relevant facts stated therein without independent verification.
Based on the foregoing, and subject to the qualifications stated herein,
we are of the opinion that the up to 825,000 shares of Common Stock to be issued
in the Offering have been duly authorized and, when issued and sold pursuant to
the provisions of the Underwriting Agreement and the Prospectus and upon receipt
of the consideration required thereby, will be validly issued and fully paid and
non-assessable shares of Common Stock of the Company.
We hereby consent to the filing of this opinion as an exhibit to the
Registration Statement and to the references to us under the heading "Legal
Matters" in the Prospectus. In giving such consent, we do not thereby admit that
we are in the category of persons whose consent is required under Section 7 of
the Act.
ELIAS, MATZ, TIERNAN & HERRICK L.L.P.
By: /s/ Kenneth B. Tabach
----------------------------
Kenneth B. Tabach, a Partner
EXHIBIT 23(b)
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the incorporation by reference in the registration statement of
Progress Financial Corporation on Amendment No. 1 to Form S-2 of our report
dated January 22, 1998, on our audits of the consolidated financial statements
of Progress Financial Corporations as of December 31, 1997 and 1996, and for
the years ended December 31, 1997, 1996, and 1995, which report is incorporated
by reference in the Annual Report on Form 10-K. We also consent to the reference
to our firm under the caption "Experts".
/s/ Coopers & Lybrand L.L.P.
COOPERS & LYBRAND L.L.P.
Philadelphia, Pennsylvania
April 27, 1998
