Prospectus
PennRock
Financial Services Corp.
[LOGO]
Dividend
Reinvestment
Plan
PAGE 1
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PROSPECTUS
PENNROCK FINANCIAL SERVICES CORP.
1060 Main Street
P.O. Box 580
Blue Ball, Pennsylvania 17506
(717) 354-4541
587,419 Shares of Common Stock
$2.50 Par Value
This Prospectus relates to 587,419 shares of the $2.50 par
value common stock of PennRock Financial Services Corp. (the
"Company") to be issued under the PennRock Financial Services
Corp. Dividend Reinvestment Plan (the "Plan"), as adopted by the
Board of Directors of the Company on November 25, 1986 and as
subsequently amended. The Plan provides shareholders of the
Company with a simple and convenient method of investing cash
dividends and voluntary cash contributions in additional shares
of the common stock of the Company.
No person has been authorized to give any information or to
make any representation not contained in this Prospectus, and if
given or made, such information or representation should not be
relied upon as having been authorized. This Prospectus does not
constitute an offer to sell or the solicitation of an offer to
purchase any of the securities to which this Prospectus relates,
in any jurisdiction, to or from any person to whom it is unlawful
to make such an offer or solicitation in such jurisdiction.
Neither delivery of this Prospectus nor any distribution of the
securities to which this Prospectus relates shall, under any
circumstances, create any implication that the information
contained herein is correct at any time subsequent to the date
hereof.
THESE SECURITIES HAVE NOT BEEN APPROVED
OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION NOR HAS THE COMMISSION PASSED
UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS.
ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
1,019,334 shares of the $2.50 par value common stock of the
Company have been authorized for purchase under the Plan, as
adjusted to reflect stock dividends and stock splits. Of these
shares, 431,915 shares were purchased prior to the date of this
Prospectus. This Prospectus relates to the remaining 587,419
shares authorized for purchase under the Plan.
The date of this Prospectus is December 15, 1998.
PAGE 2
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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 periodic reports, proxy
statements and other documents with the Securities and Exchange
Commission (the "Commission"). Such periodic reports, proxy
statements and other information may be inspected and copied at
the public reference facilities maintained by the Commission at
450 Fifth Street, N.W., Washington, D.C. 20549 and also at the
Regional Offices of the Commission at 7 World Trade Center, New
York, New York 10048 and 500 West Madison Street, Chicago,
Illinois 60661. Copies of such material may also be obtained at
prescribed rates from the Public Reference Section of the
Commission at 450 Fifth Street, N.W., Washington, D.C. 20549 and
from the website that the Commission maintains at
http://www.sec.gov.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents previously filed by the Company with
the Commission are incorporated in this Prospectus by reference:
Annual Report on Form 10-K for the year ended
December 31, 1997.
Quarterly Reports on Form 10-Q for the quarters
ended March 31, 1998, June 30, 1998, and
September 30, 1998.
In addition, all documents filed by the Company pursuant to
Sections 13(a), 13(c), 14 and 15(d) of the Exchange Act after the
date of this Prospectus and prior to the termination of the
offering of the shares of Common Stock offered hereby shall be
deemed to be incorporated by reference in this Prospectus and to
be a part hereof from the date of filing of each such document.
Any statement contained herein or in a document all or a portion
of which is incorporated or deemed to be incorporated by
reference herein shall be deemed to be modified or superseded
for purposes of this Prospectus to the extent that a statement
contained herein or in any other subsequently filed document
which also is or is deemed to be incorporated by reference herein
modifies or supersedes such statement. Any such statement so
modified or superseded shall not be deemed, except as modified or
superseded, to constitute a part of this Prospectus.
The Company will provide without charge to each person to
whom this Prospectus is delivered, on the written or oral request
of such person, a copy of any and all of the documents
incorporated by reference in this Prospectus (other than exhibits
to such documents, unless such exhibits are specifically
incorporated by reference into the documents that this Prospectus
incorporates). Written or oral requests should be directed to:
Glenn H. Weaver, President, PennRock Financial Services Corp.,
1060 Main Street, P.O. Box 580, Blue Ball, Pennsylvania 17506;
telephone (717) 354-4541. PAGE 3
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TABLE OF CONTENTS
THE COMPANY. . . . . . . . . . . . . . . . . . . . . . . . . 4
PENNROCK FINANCIAL SERVICES CORP.
DIVIDEND REINVESTMENT PLAN . . . . . . . . . . . . . . . . . 4
PURPOSE . . . . . . . . . . . . . . . . . . . . . . . . . 4
ADVANTAGES. . . . . . . . . . . . . . . . . . . . . . . . 4
ADMINISTRATION. . . . . . . . . . . . . . . . . . . . . . 5
PARTICIPATION . . . . . . . . . . . . . . . . . . . . . . 5
VOLUNTARY CASH CONTRIBUTIONS. . . . . . . . . . . . . . . 6
PURCHASES . . . . . . . . . . . . . . . . . . . . . . . . 7
DIVIDENDS . . . . . . . . . . . . . . . . . . . . . . . . 8
COSTS . . . . . . . . . . . . . . . . . . . . . . . . . . 8
REPORTS TO PARTICIPANTS . . . . . . . . . . . . . . . . . 9
CERTIFICATES FOR SHARES . . . . . . . . . . . . . . . . . 9
VOTING RIGHTS . . . . . . . . . . . . . . . . . . . . . . 9
STOCK DIVIDENDS; STOCK SPLITS; RIGHTS OFFERINGS . . . . . 10
WITHDRAWAL FROM PLAN. . . . . . . . . . . . . . . . . . . 10
AMENDMENT AND TERMINATION OF PLAN . . . . . . . . . . . . 10
INQUIRIES CONCERNING THE PLAN . . . . . . . . . . . . . . 11
INTERPRETATION OF THE PLAN. . . . . . . . . . . . . . . . 11
RESPONSIBILITY OF THE COMPANY AND THE PLAN AGENT. . . . . 11
FEDERAL INCOME TAX INFORMATION . . . . . . . . . . . . . . . . 11
DESCRIPTION OF COMMON STOCK. . . . . . . . . . . . . . . . . . 13
GENERAL . . . . . . . . . . . . . . . . . . . . . . . . . 13
DIVIDENDS . . . . . . . . . . . . . . . . . . . . . . . . 13
ANTITAKEOVER PROVISIONS . . . . . . . . . . . . . . . . . 14
USE OF PROCEEDS. . . . . . . . . . . . . . . . . . . . . . . . 15
LEGAL MATTERS. . . . . . . . . . . . . . . . . . . . . . . . . 15
INDEMNIFICATION OF DIRECTORS AND OFFICERS. . . . . . . . . . . 15
EXPERTS. . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
ADDITIONAL INFORMATION . . . . . . . . . . . . . . . . . . . . 16
PAGE 4
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THE COMPANY
The Company is a Pennsylvania business corporation organized
in 1986 and a registered bank holding company with headquarters
in Blue Ball, Pennsylvania. The principal asset of the Company
is its wholly-owned bank subsidiary, Blue Ball National Bank. As
a bank holding company, the Company engages in the general
commercial and retail banking business through the activities of
Blue Ball National Bank, which operates 14 banking offices in
Lancaster, Berks and Chester Counties, Pennsylvania. As of
September 30, 1998, the Company had consolidated total assets of
approximately $700,000,000.
The principal executive offices of the Company are located
at 1060 Main Street, P.0. Box 580, Blue Ball, Pennsylvania 17506.
The telephone number of the Company is (717) 354-4541.
PENNROCK FINANCIAL SERVICES CORP.
DIVIDEND REINVESTMENT PLAN
The following is a question and answer statement of the
provisions of the PennRock Financial Services Corp. Dividend
Reinvestment Plan (the "Plan").
PURPOSE
1. What is the purpose of the Plan?
The purpose of the Plan is to provide the shareholders
of the Company with a simple and convenient method of
investing cash dividends and voluntary cash
contributions in additional shares of the $2.50 par
value common stock of the Company (the "Common Stock").
ADVANTAGES
2. What are the advantages of the Plan?
The Plan allows a participant to acquire additional shares
of Common Stock at no or reduced brokerage commission costs
by having the cash dividends payable on all or a portion of
the shares of Common Stock registered in his name
automatically reinvested. In addition, a participant may
increase the amount of his quarterly investment by making
voluntary cash contributions of up to $250 per quarter.
Under the Plan, participants pay no fees for reinvestment
services and record keeping is simplified by the issuance,
after each quarterly investment, of a detailed statement of
each participant's account, including the cost basis of the
whole and fractional shares purchased.
ADMINISTRATION
3. Who administers the Plan?
The Plan is administered by American Stock Transfer & Trust
<PAGE 5>
Company (the "Plan Agent") as the agent for Plan
participants.
PARTICIPATION
4. Who is eligible to participate in the Plan?
All holders of record of 100 or more shares of Common Stock
are eligible to participate in the Plan. A beneficial owner
of Common Stock whose shares are held by a bank, broker or
other nominee and who wishes to participate in the Plan must
first transfer at least 100 of such shares to his own name
in order to become a shareholder of record of 100 or more
shares and, thus, eligible to participate in the Plan.
An otherwise eligible shareholder may participate in the
Plan only if shares of Common Stock may lawfully be offered
and sold under the Plan to residents of the state in which
that shareholder resides. As of the date of this
Prospectus, shares of Common Stock may be offered and sold
under the Plan to residents of any state, other than the
following: Arkansas, California, Maine, Minnesota, Utah and
Wisconsin. A shareholder who resides in one of these states
who wishes to participate in the Plan should contact
Glenn H. Weaver, President, PennRock Financial Services
Corp., 1060 Main Street, P.O. Box 580, Blue Ball,
Pennsylvania 17506; telephone (717) 354-4541.
The Company shall use its reasonable best efforts to take
all steps necessary to permit shares to be legally offered
and sold under the Plan in all states in which shareholders
wishing to participate in the Plan reside; provided,
however, that the Company shall not be required to take such
steps in any state if it determines in its sole discretion
and in light of the number of shareholders residing in that
state who wish to participate in the Plan, that to do so
would be burdensome or impracticable for reasons of cost or
otherwise.
5. How does an eligible shareholder enroll in the Plan?
Any eligible shareholder of the Company may enroll in the
Plan by completing and signing the authorization card
accompanying this Prospectus and returning it to the Plan
Agent. Additional authorization cards may be obtained at
any time by written or oral request to the Plan Agent.
6. When may an eligible shareholder enroll in the Plan?
An eligible shareholder of the Company may enroll in the
Plan at any time. If the shareholder's authorization card
is received by the Plan Agent on or before the record date
established for a particular dividend, reinvestment will
commence with that dividend. If an authorization card is
received from a shareholder after the record date <PAGE 6>
established for a particular dividend, the reinvestment of
dividends will begin on the Investment Date following the
next record date if the shareholder is still a holder of
record.
7. What investment options are available under the Plan?
The following investment options are available under the
Plan:
Full Dividend Reinvestment: A participant may in his
authorization card elect to reinvest all dividends paid on
all shares of Common Stock now or hereafter registered in
his name. A participant who elects the full dividend
reinvestment option may also make voluntary cash
contributions which will be applied toward the purchase of
additional shares of Common Stock.
Partial Dividend Reinvestment: A participant may in his
authorization card elect to reinvest cash dividends paid on
a specified number of whole shares registered in his name.
A participant who elects the partial dividend reinvestment
option may also make voluntary cash contributions which will
be applied toward the purchase of additional shares of
Common Stock.
Voluntary Cash Contributions Only: A participant may in his
authorization card elect to make voluntary cash
contributions only, in which case such voluntary cash
contributions will be applied toward the purchase of
additional shares of Common Stock.
Regardless of the option selected by a participant,
dividends paid on shares of Common Stock held by the Plan
Agent for a participant's account under the Plan will be
invested in additional shares of Common Stock.
VOLUNTARY CASH CONTRIBUTIONS
8. How may voluntary cash contributions to the Plan be made?
Each participant may make optional cash contributions to the
Plan of not less than $25 nor more than $250 per quarter.
The same amount need not be invested in each quarter.
Participants are under no obligation to make any voluntary
cash contributions. A voluntary cash contribution may be
made by forwarding a check or money order payable to the
Plan Agent with a completed authorization card at the time
of enrollment in the Plan or thereafter with the payment
form attached to each quarterly statement of account.
9. How will voluntary cash contributions be used?
The Plan Agent will apply each voluntary cash contribution
received from a participant before an Investment Date to the
purchase of shares of Common Stock for the account of that
participant. A voluntary cash contribution will not be
<PAGE 7>
deemed to have been made by a participant or received by the
Plan Agent until the funds so contributed are actually
collected. Interest will not be paid on voluntary cash
contributions and the Plan Agent will return any cash
contribution received later than the last business day
before the next Investment Date and more than 30 days before
the next Investment Date. For this reason, it is to the
participant's benefit to mail payments so that they are
received by the Plan Agent immediately before the next
Investment Date.
10. May a participant request the return of a voluntary cash
contribution?
Yes. A voluntary cash contribution will be returned to a
participant upon written request to the Plan Agent, provided
that the request is received no later than the last business
day before the next Investment Date.
PURCHASES
11. What is the source of the shares of Common Stock purchased
under the Plan?
At the direction of the Company, the Plan Agent will
purchase shares of Common Stock directly from the Company,
in which event the shares purchased will be either
authorized but unissued shares or shares held in the
treasury of the Company, or on the open market, or by a
combination of the foregoing.
12. How will the price of shares purchased under the Plan be
determined?
The price of the shares purchased from the Company will be
the fair market value of the shares as of the Investment
Date. As defined in the Plan, "fair market value" means the
value so designated, in accordance with the guidelines set
forth in the Plan, by the Pricing Committee appointed by the
Board of Directors of the Company. No shares will be sold
at less than par value.
The price of shares purchased on the open market will be the
average cost (including brokerage fees and commissions) to
the Plan Agent of such purchases.
13. What is an Investment Date?
"Investment Date" means each of the quarterly dividend
payment dates of the Company, which have historically fallen
early in the months of January, April, July and October of
each year.
14. How many shares of Common Stock will be purchased by the
<PAGE 8>
Plan Agent for a participant?
The number of shares purchased for a participant will depend
upon the amount of the participant's dividend and voluntary
cash payment, if any, and the price of the shares on the
relevant Investment Date. Each participant's account will
be credited with the number of whole and fractional shares
equal to the amount to be invested, divided by the
applicable purchase price. Fractional shares will be
calculated to three (3) decimal places.
15. When will shares be purchased under the Plan?
Shares acquired from the Company will be purchased as of the
close of business on the applicable Investment Date. Shares
of common stock acquired on the open market will be
purchased promptly on or after each Investment Date by the
Plan Agent and in no event later than 30 days after the
Investment Date. Dividend and voting rights will commence
upon settlement. For the purpose of making purchases, the
Plan Agent will commingle each participant's funds with
those of all other participants.
DIVIDENDS
16. How will dividends be paid on shares held by the Plan Agent?
As record holder of the shares held in participants'
accounts under the Plan, the Plan Agent will receive
dividends on all such shares held on each dividend record
date, will credit such dividends to participants' accounts
on the basis of the number of whole and fractional shares
held in each account and will automatically reinvest these
dividends in shares of Common Stock of the Company.
COSTS
17. What are the costs to a participant in the Plan?
No brokerage fees will be charged to participants in
connection with the purchase of shares of Common Stock from
the Company. Participants will be charged their pro rata
share of the actual cost (including brokerage fees and
commissions) of shares purchased in the open market. All
other costs of administration of the Plan will be borne by
the Company; however, the Company has the right to deduct a
$1.00 service charge from a participant's account at the
time of his withdrawal from the Plan or at any time a share
certificate is requested by a participant.
REPORTS TO PARTICIPANTS
18. What reports will be sent to participants in the Plan?
As soon as practicable after completion of each investment
<PAGE 9>
on behalf of a participant, the Plan Agent will mail to such
participant a statement showing: (i) the amount of the
dividend and the voluntary cash contribution, if any,
applied toward such investment, (ii) the taxes withheld, if
any, (iii) the net amount invested, (iv) the number of
shares purchased, (v) the average cost per share, and (vi)
the total number of shares held for the participant's
account under the Plan computed to three (3) decimal places.
Each participant will receive annually Internal Revenue
Service Form 1099 reporting dividend income received.
CERTIFICATES FOR SHARES
19. Will certificates be issued for shares purchased under the
Plan?
All shares purchased under the Plan will be registered in
the name of the Plan Agent or its nominee, as agent for the
participants. Certificates for such shares will not be
issued to participants unless requested in writing.
Certificates for any number of whole shares will be issued
to a participant within 15 days of a written request to the
Plan Agent signed by the participant. A $1.00 service
charge may be assessed each time a stock certificate is
requested by a Participant. Any remaining whole or
fractional shares will continue to be held by the Plan Agent
as agent for the participant. Certificates for fractional
shares will not be issued under any circumstances.
VOTING RIGHTS
20. How will shares held by the Plan Agent be voted?
For each meeting of shareholders, the Plan Agent will
forward a proxy to each participant and will vote the shares
held for a participant's account in accordance with the
instructions received from the participant. Shares held for
the account of a participant who does not return a proxy
will not be voted.
STOCK DIVIDENDS; STOCK SPLITS; RIGHTS OFFERINGS
21. What happens if the Company declares a stock dividend or a
stock split?
Any shares issued as a result of a stock dividend or stock
split on shares held by the Plan Agent for the account of a
participant will be credited to the participant's account
under the Plan and dividends paid on such shares will be
subject to reinvestment under the Plan.
:\ What happens if the Company makes a rights offering?
In the event of a rights offering by the Company, the Plan
<PAGE 10>
Agent will sell rights received on shares held of record by
it and will on the next Investment Date invest the proceeds
of sale in additional shares of Common Stock, which will be
retained by the Plan Agent and credited proportionately to
the accounts of Plan participants. A participant who wishes
to exercise such rights individually must request the
issuance of a stock certificate for the whole number of
shares held by the Plan Agent for his account under the
Plan. (See Question 19 above). Such request must be made
prior to the date for exercising such rights. Rights on
shares of Common Stock registered in the name of a
participant will be mailed directly to the participant.
WITHDRAWAL FROM PLAN
23. How and when may a participant withdraw from the Plan?
Participation in the Plan may be terminated by a participant
at any time by giving written notice to the Plan Agent.
Within 15 days after the date on which such notice is
received by the Plan Agent, the Plan Agent will deliver to
the participant (i) a certificate for the number of whole
shares held for his account under the Plan, together with
(ii) a check representing any uninvested dividends and
voluntary cash contributions and the value of any fractional
share, based upon the fair market value per share of the
Common Stock on the effective date of termination, less the
$1.00 service charge for the issuance of a stock certificate
as described in Question 19 above.
AMENDMENT AND TERMINATION OF PLAN
24. May the Plan be amended or terminated?
Yes. The Company may amend, supplement, suspend, modify or
terminate the Plan at any time without the approval of the
participants. Thirty (30) days' notice of any suspension or
material amendment will be sent to all participants, who
shall in all events have the right to withdraw from the
Plan.
INQUIRIES CONCERNING THE PLAN
25. Who should be contacted with questions concerning the Plan?
All inquiries concerning the Plan should be directed to the
administrative processor engaged by the Plan Agent, as
follows:
American Stock Transfer & Trust Company
Dividend Reinvestment Department
40 Wall Street
New York, NY 10005
(800) 937-5449
<PAGE 11>
INTERPRETATION OF THE PLAN
26. Who will interpret the provisions of the Plan?
Any question of interpretation arising under the Plan will
be determined by the Board of Directors of the Company
pursuant to applicable federal and state law and the rules
and regulations of all regulatory authorities, which
determination shall be final and binding on all
participants.
RESPONSIBILITY OF THE COMPANY AND THE PLAN AGENT
27. What are the responsibilities of the Company and the Plan
Agent with respect to the Plan?
Neither the Company nor the Plan Agent will be liable for
any act done in good faith or for any good faith omission to
act, including, without limitation, any claim or liability
arising out of failure to terminate a participant's account
upon such participant's death, the prices at which shares of
Common Stock are purchased, the times when purchases or
sales are made or fluctuations in the market value of the
Common Stock. The participants must realize that neither
the Company nor the Plan Agent can provide any assurance of
a profit or protection against loss on shares purchased
under the Plan.
FEDERAL INCOME TAX INFORMATION
The following is a general summary of the federal income tax
consequences of participating in the Plan:
Reinvested Dividends. In the case of reinvested dividends,
when shares are acquired for a participant's account directly
from the Company, the participant must include in gross income a
dividend equal to the number of shares purchased for the
participant's account with reinvested dividends multiplied by the
per share fair market value of the Common Stock on the relevant
Investment Date, plus the amount of any federal income tax
withheld in the case of a participant who is subject to federal
income tax withholding on dividend income. The participant's
basis in such shares will be equal to the fair market value of
the shares purchased for the participant's account on the
relevant Investment Date.
Alternatively, when shares are purchased for a participant's
account on the open market with reinvested dividends, a
participant must include in gross income a dividend equal to the
purchase price of the shares purchased for his account, plus the
amount of any federal income tax withheld in the case of a
participant who is subject to federal income tax withholding on
dividend income. The participant's basis in such shares will be
equal to the purchase price of the shares. For purposes of this
paragraph, the term "purchase price" will include a participant's
pro rata share of any brokerage fees, commissions, and other
costs and expenses of purchase. <PAGE 12>
Voluntary Cash Contributions. In the case of shares
purchased directly from the Company with voluntary cash
contributions, a participant will be treated as having received a
dividend equal to the excess, if any, of the fair market value of
the purchased shares on the Investment Date over the amount of
the voluntary cash contribution. A participant's basis in such
shares will be the amount of such excess, if any, plus the amount
of the voluntary cash payment.
Alternatively, when shares are purchased on the open market
with voluntary cash contributions, the participant's basis in
such shares will be equal to the purchase price of the shares.
For purposes of this paragraph, the term "purchase price" will
include a participant's pro rata share of any brokerage fees,
commissions, and other costs and expenses of purchase.
Additional Information. The foregoing discussion assumes
that the Company will, from time to time, have earnings and
profits for federal tax purposes in excess of its distributions
to shareholders, which is expected to be the case. A prospective
participant should also note that the Internal Revenue Service
could take the position that the fair market value of a share of
Common Stock on any relevant Investment Date may not necessarily
be equal to the fair market value per share (as defined in
Section 2(c) of the Plan). The holding period for shares of
Common Stock acquired pursuant to the Plan will begin the day
after the date the shares are credited to a participant's
account. In the case of any participant as to whom federal
income tax withholding on dividends is required and in the case
of a foreign shareholder whose taxable income under the Plan is
subject to federal income tax withholding, the Company will
reinvest dividends net of the amount of tax withheld.
A participant will not realize taxable income upon the
issuance of a certificate for a whole number of shares held for
his account under the Plan. However, a participant who receives
a cash payment in lieu of the issuance of a fractional share will
realize gain or loss with respect to such fractional share. Gain
or loss will also be realized upon the sale or exchange of shares
of Common Stock acquired under the Plan. The amount of such gain
or loss will be the difference between the amount received upon
disposition and the tax basis of such shares or fractional share.
Any such gain or loss will be a capital gain or loss if the
shares sold were held as a capital asset. Such capital gain or
loss will be long-term if the shares sold were held by the
participant for the applicable holding period and otherwise will
be short-term.
The foregoing is only a brief summary of certain federal
income tax consequences of participating in the Plan and does not
constitute tax advice. The summary appearing above does not
discuss all of the tax consequences of participating in the Plan
and may not address the tax consequences to any given participant
in view of his individual circumstances. Participants should
consult their own tax advisors as to the federal, state and local
tax consequences of Plan transactions. <PAGE 13>
DESCRIPTION OF COMMON STOCK
GENERAL
The authorized capital of the Company consists exclusively
of 20,000,000 shares of common stock of $2.50 par value per
share. As of September 30, 1998, there were issued and
outstanding 6,077,299 shares of the Company's Common Stock, which
shares were held by approximately 3,486 owners of record. The
Common Stock of the Company is traded in the over the counter
market.
The holders of Common Stock are entitled to one vote per
share on all matters submitted to a vote of the shareholders and
may not cumulate their votes for the election of directors. Each
share of Common Stock is entitled to share pro rata in dividends
and other distributions. The holders of the Common Stock of the
Company do not have preemptive rights to subscribe to purchase
additional stock and no share is entitled in any manner to any
preference over any other share. The shares of Common Stock to
be issued under the Plan will be fully paid and nonassessable and
the holders thereof will not be subject to call or assessment
under state law. American Stock Transfer & Trust Company serves
as the transfer agent for the Company.
DIVIDENDS
The holders of Common Stock are entitled to receive
dividends when, as and if declared by the Board of Directors out
of funds legally available therefor. The Company has
historically paid cash dividends early in the months of January,
April, July and October of each year. However, the timing and
amount of future dividends will depend upon earnings, capital
requirements, federal and state laws, regulations and policies,
and other factors deemed relevant by the Board of Directors.
The ability of the Company to pay dividends to its
shareholders is primarily dependent upon the earnings and
financial condition of its wholly owned subsidiary, Blue Ball
National Bank. Funds for the payment of such dividends are
expected for the foreseeable future to be obtained exclusively
from dividends paid to the Company by Blue Ball National Bank.
Under applicable state and federal laws, the dividends that
may by paid by Blue Ball National Bank without prior regulatory
approval are subject to prescribed limitations. State and
federal regulatory authorities have adopted standards for the
maintenance of adequate levels of capital by banks. Adherence to
such standards further limits the ability of a bank to pay
dividends. The payment of dividends by a bank may also be
affected by other regulatory requirements and policies. If, in
the opinion of the relevant regulatory authority, a bank under
its jurisdiction is engaged in, or is about to engage in, an
unsafe or unsound practice, the authority may require that the
bank cease and desist from that practice. The payment of a
dividend by a bank could, depending upon the financial condition
of the bank involved and other factors, be deemed to be such an
<PAGE 14>
unsafe or unsound practice.
ANTITAKEOVER PROVISIONS
The Articles of Incorporation and bylaws of the Company
include certain provisions that may be considered to be
antitakeover in nature, in that they may have the effect of
discouraging or making more difficult the acquisition of control
of the Company by means of an unsolicited tender or exchange
offer, proxy contest or similar transaction. These provisions
are intended to protect the shareholders of the Company by
providing a measure of assurance that the shareholders will be
treated fairly in the event of an unsolicited takeover bid and by
preventing a successful takeover bidder from exercising its
control to the detriment of the shareholders.
The provisions in the Articles of Incorporation of the
Company that may be so considered include the following: (i) a
provision that provides for substantial authorized but unissued
shares of Common Stock, (ii) a provision that denies the
shareholders the right to cumulate their votes for the election
of directors, (iii) a provision that requires a greater than
majority shareholder vote in order to approve certain business
combinations and other extraordinary corporate transactions, (iv)
a provision that establishes criteria to be applied by the Board
of Directors in evaluating an acquisition proposal, (v) a
provision that requires a greater than majority shareholder vote
in order for the shareholders to remove a director from office
without cause, (vi) a provision that prohibits the taking of any
action by the shareholders without a meeting and eliminates the
right of the shareholders to call a special meeting, (vii) a
provision that limits the right of the shareholders to amend the
bylaws, and (viii) a provision that requires under certain
circumstances a greater than majority shareholder vote in order
to amend the Articles of Incorporation. The provisions of the
bylaws of the Company that may be so considered include the
following: (i) a provision that limits the permissible number of
directors, (ii) a provision that establishes a classified Board
of Directors, and (iii) a provision that requires advanced
written notice as a precondition to the nomination of any person
for election to the Board of Directors, other than in the case of
nominations made by existing management. As a Pennsylvania
business corporation, the Company is also subject to the
Pennsylvania Business Corporation Law, which includes provisions
applicable to the Company that may have similar effects.
USE OF PROCEEDS
The Company is unable to predict the number of shares of
Common Stock that will be purchased from the Company under the
Plan or the prices at which such shares will be purchased. The
net proceeds to the Company from the sale of Common Stock offered
hereby will provide additional equity capital to the Company to
support its growth and the growth of its wholly-owned subsidiary,
Blue Ball National Bank. <PAGE 15>
LEGAL MATTERS
Legal matters relating to the shares of Common Stock offered
hereby will be passed upon for the Company by Stevens & Lee, One
Penn Square, Lancaster, Pennsylvania 17602.
INDEMNIFICATION OF DIRECTORS AND OFFICERS
Pennsylvania law provides that a Pennsylvania corporation
such as the Company may indemnify its directors, officers,
employees and agents against liabilities they may incur in such
capacities for any action taken or failure to act, whether or not
the corporation would have the power to indemnify the person
under any provision of law, unless such action or failure to act
is determined by a court to have constituted recklessness or
willful misconduct. Pennsylvania law also permits the adoption
of a bylaw amendment, with the approval of the shareholders,
providing for the elimination of a director's liability for
monetary damages for any action taken or failure to take any
action unless the director has breached or failed to perform the
duties of his office and that breach or failure to perform
constitutes self dealing, willful misconduct or recklessness.
The bylaws of the Company provide for the indemnification of
the directors and officers of the Company and of its subsidiaries
and for the elimination of a director's liability for monetary
damages to the fullest extent permitted under Pennsylvania law.
The directors and officers of the Company and its
subsidiaries are also insured against certain liabilities for
their actions, as such, by an insurance policy obtained by the
Company.
Insofar as indemnification for liabilities arising under the
Securities Act of 1933 may be permitted to directors, officers or
persons controlling the Company pursuant to the foregoing
provisions, the Company has been informed that, in the opinion of
the Securities and Exchange Commission, such indemnification is
against public policy as expressed in the Act and is therefore
unenforceable.
EXPERTS
The consolidated financial statements of the Company and its
subsidiaries incorporated by reference herein have been audited
by Simon Lever & Company, independent public accountants, as
indicated in their report with respect thereto and are included
herein in reliance upon the authority of that firm as experts in
accounting and auditing.
ADDITIONAL INFORMATION
The Company has filed with the Commission a Registration
Statement under the Securities Act of 1933, as amended, with
respect to the shares of Common Stock offered pursuant to this
Prospectus. This Prospectus does not contain all of the
information set forth in the Registration Statement, certain
<PAGE 16>
portions of which have been omitted as permitted by the rules and
regulations of the Commission. In addition, certain documents
filed by the Company with the Commission have been incorporated
in this Prospectus by reference. For further information with
respect to the Company and the shares of Common Stock offered
hereby, reference is made to the Registration Statement,
including the exhibits thereto, and to the documents incorporated
herein by reference.
<PAGE 17>
