AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON APRIL 14, 1998
REGISTRATION NO. 333-
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM S-4
REGISTRATION STATEMENT
Under
THE SECURITIES ACT OF 1933
CHESTER VALLEY BANCORP INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
PENNSYLVANIA 6035 23-2598554
(State or Other (Primary Standard Industrial (I.R.S. Employer
Jurisdiction of Classification Code Number) Identification Number)
Incorporation or
Organization)
100 EAST LANCASTER AVENUE
DOWNINGTOWN, PENNSYLVANIA 19335
(610) 269-9700
(Address, including ZIP code, and telephone number, including area code, of
registrant's principal executive offices)
ANTHONY J. BIONDI
PRESIDENT AND CHIEF OPERATING OFFICER
CHESTER VALLEY BANCORP INC.
100 EAST LANCASTER AVENUE
DOWNINGTOWN, PENNSYLVANIA 19335
(610) 269-9700
(Name, address, including ZIP code, and telephone number, including area code,
of agent for service)
Copies to:
DAVID S. PETKUN, ESQ. PETER J. TUCCI, ESQ.
SCHNADER HARRISON SEGAL & LEWIS llp REED SMITH SHAW & MCCLAY llp
1600 MARKET STREET 2500 ONE LIBERTY PLACE
SUITE 3600 1650 MARKET STREET
PHILADELPHIA, PA 19103 PHILADELPHIA, PA 19103
(215) 751-2146 (215) 851-8130
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon
as practicable after the effective date of this Registration Statement and the
effective time of the merger of a wholly-owned subsidiary of the registrant with
and into Philadelphia Corporation for Investment Services as described in the
Agreement and Plan of Merger dated as of March 18, 1998.
<PAGE>
If the securities being registered on this Form are being offered in
connection with the formation of a holding company and there is compliance with
General Instruction G, check the following box. [_]
<TABLE>
CALCULATION OF REGISTRATION FEE
<CAPTION>
<S> <C> <C> <C> <C>
Proposed Proposed
Maximum Maximum Amount of
Title of Each Class of Amount to Be Offering Price Aggregate Offering Registration
Securities to Be Registered Registered(1) per Unit(2) Price(1)(2) Fee(2)
Proposed
- ------------------------------------------------------------------------------------------
Common Stock, par value $1.00
per share....... 134,102 $10.300 $1,381,267.92 $276.25
<FN>
(1) The number of shares of Common Stock ("CVAL Common Stock") of Chester
Valley Bancorp Inc. to be registered has been determined based on the
maximum number of shares of CVAL Common Stock expected to be issued in
connection with the proposed merger of Chester Valley Acquisition
Corporation into Philadelphia Corporation for Investment Services.
(2) Estimated pursuant to Rule 457(f)(2), solely for the purpose of calculating
the registration fee, based on the book value of shares of common stock,
par value $10.00 per share, of PCIS ($1,381,267.92), at March 27, 1998.
</FN>
</TABLE>
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
will 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>
[PCIS LETTERHEAD]
Dear Shareholder:
We invite you to attend the Special Meeting (the "Meeting") of
shareholders of Philadelphia Corporation for Investment Services ("PCIS"), a
Pennsylvania corporation, to be held at 1650 Market Street, Suite 3050,
Philadelphia, Pennsylvania 19103 on ___________, 1998 at 10:00 a.m. The Meeting
is being held in connection with the proposed acquisition of PCIS by Chester
Valley Bancorp Inc. ("CVAL"), a thrift holding company which owns First
Financial Bank, Downingtown, Pennsylvania.
The attached Notice of Special Meeting and Proxy Statement/Prospectus
describe the formal business to be transacted at the Meeting. Directors and
officers of PCIS will be present to respond to any questions that our
shareholders may have.
At the Meeting, the shareholders will be asked to consider and vote
upon a proposal to approve an Agreement and Plan of Merger dated March 18, 1998
(the "Merger Agreement") among PCIS, CVAL and Chester Valley Acquisition
Corporation ("Merger Subsidiary"), a corporate subsidiary of CVAL organized to
facilitate the acquisition of PCIS. Pursuant to the Merger Agreement: (i) Merger
Subsidiary will merge with and into PCIS (the "Merger"), and PCIS will become a
direct wholly-owned subsidiary of CVAL. Upon the consummation of the Merger, you
will receive in exchange for each share of PCIS common stock, par value $10.00
per share ("PCIS Common Stock") which you own, the number of shares of CVAL
common stock, par value $1.00 per share ("CVAL Common Stock"), determined by the
exchange ratio set forth in the Merger Agreement, together with a cash payment
in lieu of any fractional share of CVAL Common Stock which you would otherwise
be entitled to receive. Consummation of the Merger is subject to certain
conditions, including the approval of the Merger Agreement by the requisite vote
of PCIS shareholders.
The Board of Directors of PCIS has carefully considered the Merger
Agreement and has determined that the Merger is in the best interests of PCIS
and its shareholders. Accordingly, your Board of Directors recommends that you
vote "FOR" approval of the Merger Agreement.
Your participation in the Meeting, in person or by proxy, is
important. The affirmative vote of the holders of a majority of the outstanding
shares entitled to vote at the Meeting is required to approve the Merger
Agreement. An abstention or failure to vote has the same effect as voting
against the Merger Agreement. On behalf ofthe Board of Directors, I thank you
for your support and urge you to vote "FOR" approval of the Merger Agreement and
the transactions contemplated thereby.
Sincerely,
[signature]
PLEASE DO NOT SEND IN YOUR STOCK CERTIFICATES AT THIS TIME
<PAGE>
PHILADELPHIA CORPORATION FOR INVESTMENT SERVICES
1650 Market Street, Suite 3050
Philadelphia, PA 19103
NOTICE OF
MEETING OF SHAREHOLDERS
TO BE HELD [TIME], [DATE], 1998
NOTICE IS HEREBY GIVEN that a meeting of shareholders (the "Meeting")
of Philadelphia Corporation for Investment Services ("PCIS") will be held on
[day], [date], 1998, at 1650 Market Street, Suite 3050, Philadelphia,
Pennsylvania 19103, local time, at 10:00 a.m., Philadelphia time, for
consideration of and action by the holders of PCIS common stock upon the
following matters:
1. The approval of the proposed merger of Chester Valley Acquisition
Corporation ("Merger Subsidiary"), a wholly-owned subsidiary of
Chester Valley Bancorp Inc., with and into PCIS pursuant to an
Agreement and Plan of Merger, dated as of March 18, 1998 among Chester
Valley Bancorp Inc., PCIS and Merger Subsidiary (the "Merger") and any
other actions which may be required in furtherance of the Merger;
2. The transaction of such other business as may properly come before the
Meeting and any adjournment or postponement thereof, and matters
incident to the conduct of the Meeting.
The Board of Directors of PCIS has fixed the close of business on
______________, 1998, as the record date for the determination of holders of
PCIS common stock entitled to notice of, and to vote at, the Meeting or any
adjournment or postponement thereof. The Merger, the Merger Agreement and the
other matters enumerated above are more fully described in the accompanying
Proxy Statement/Prospectus.
SHAREHOLDERS (WHETHER THEY OWN ONE OR MANY SHARES AND WHETHER THEY EXPECT TO
ATTEND THE MEETING OR NOT) ARE REQUESTED TO VOTE, SIGN AND DATE THE ACCOMPANYING
PROXY.
By Order of the Board of Directors
_______________ __ , 1998 ____________________________, Secretary
<PAGE>
PROXY STATEMENT OF
PHILADELPHIA CORPORATION FOR INVESTMENT SERVICES
FOR SPECIAL MEETING OF SHAREHOLDERS
_____________________, 1998
-----------
PROSPECTUS OF CHESTER VALLEY BANCORP INC.
FOR
UP TO 134,102 SHARES OF COMMON STOCK (PAR VALUE $1.00 PER SHARE)
This Proxy Statement/Prospectus is being furnished to the shareholders
of Philadelphia Corporation for Investment Services, a Pennsylvania corporation
("PCIS"), in connection with the solicitation of proxies by its Board of
Directors for use at the special meeting of shareholders of PCIS (the "Meeting")
to be held on __________________, 1998, at 10:00 a.m., local time, at Suite
3050, 1650 Market Street, Philadelphia, Pennsylvania, and at any adjournment or
postponement thereof, for the purposes set forth herein and in the accompanying
notice of special meeting of shareholders of PCIS.
This Proxy Statement/Prospectus also constitutes the prospectus of
Chester Valley Bancorp Inc. ("CVAL") that is a part of the Registration
Statement of CVAL filed with the Securities and Exchange Commission with respect
to shares of common stock, par value $1.00 per share of CVAL ("CVAL Common
Stock") to be issued in connection with the Merger (the "Merger") of Chester
Valley Acquisition Corporation, a wholly-owned subsidiary of CVAL ("Merger
Subsidiary"), with and into PCIS pursuant to an Agreement and Plan of Merger,
dated as of March 18, 1998 (the "Merger Agreement"), among CVAL, PCIS and Merger
Subsidiary. Upon consummation of the Merger, (i) PCIS will become a direct
wholly-owned subsidiary of CVAL; and (ii) each issued and outstanding share of
common stock, par value $10.00 per share of PCIS ("PCIS Common Stock"), will be
converted into the right to receive the number of shares of CVAL Common Stock
determined by the exchange ratio set forth in the Merger Agreement together with
a cash payment in lieu of any fractional share of CVAL Common Stock which the
PCIS shareholder would otherwise be entitled to receive. See "The Merger
Agreement--Conversion of PCIS Shares; The Exchange Ratio." A copy of the Merger
Agreement is attached hereto as Appendix A and incorporated herein by reference.
Consummation of the proposed Merger is subject to various conditions,
including the approval of the holders of the requisite number of shares of PCIS
Common Stock, all as described in the Proxy Statement/Prospectus. The proposed
Merger will be consummated as soon as practical after such approval is obtained
and the other conditions to the Merger are satisfied or waived.
PCIS Common Stock is not traded in the over-the-counter market. CVAL
Common Stock currently is traded, and it is expected that the CVAL Common Stock
to be issued pursuant to the Merger Agreement will be traded, in the
over-the-counter market and authorized for quotation on the Nasdaq National
Market. The last known sales price per share of PCIS Common Stock was $215.05 on
October 22, 1997. The average of the last bid and asked prices of a share of
CVAL Common Stock as reported on the Nasdaq National Market on October 22, 1997
was $25.25. On December 9, 1997, the last full trading day prior to the public
announcement of the Merger, the average of the last bid and asked prices on the
Nasdaq National Market of CVAL Common Stock was $27.125. On _______________,
1998, the latest practicable trading day prior to the printing of this Proxy
Statement/Prospectus, the average of the last bid and asked prices of a share of
CVAL Common Stock on the Nasdaq National Market was $______.
The information contained or incorporated by reference herein with
respect to CVAL has been provided by CVAL, and the information contained or
incorporated herein by reference with respect to PCIS has been provided by PCIS.
This Proxy Statement/Prospectus and the accompanying forms of proxy
are first being mailed to shareholders of PCIS on or about _______ ____, 1998.
<PAGE>
SEE "CERTAIN RISK FACTORS" AT PAGE 19 FOR CERTAIN CONSIDERATIONS RELEVANT TO
AN INVESTMENT IN CVAL COMMON STOCK.
This Proxy Statement/Prospectus does not cover any resales of the CVAL
Common Stock issuable in the Merger by any shareholders deemed to be affiliates
of PCIS or CVAL. No person is authorized to make use of this Proxy
Statement/Prospectus in connection with such resales, although such stock may be
traded without use of this Proxy Statement/Prospectus by former shareholders of
PCIS who are not deemed to be affiliates of PCIS or CVAL.
THE PROPOSED MERGER IS A COMPLEX TRANSACTION. SHAREHOLDERS OF CVAL AND PCIS ARE
URGED TO READ AND CONSIDER CAREFULLY THIS PROXY STATEMENT/PROSPECTUS IN ITS
ENTIRETY.
THE SECURITIES TO BE ISSUED PURSUANT TO THIS PROSPECTUS 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 PROXY
STATEMENT/PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
THE SHARES OF CVAL COMMON STOCK ISSUABLE IN THE MERGER ARE NOT SAVINGS ACCOUNTS,
DEPOSITS OR OTHER OBLIGATIONS OF A BANK OR SAVINGS INSTITUTION AND ARE NOT
INSURED BY THE FEDERAL DEPOSIT INSURANCE CORPORATION OR ANY OTHER GOVERNMENTAL
AGENCY.
-----------
The date of this Proxy Statement/Prospectus is ________ __, 1998.
<PAGE>
TABLE OF CONTENTS
AVAILABLE INFORMATION. . . . . . . . . . . . . . . . . . . . . 4
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE. . . . . . . . 4
SUMMARY. . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
The Companies. . . . . . . . . . . . . . . . . . . . . . . . 6
The Meeting. . . . . . . . . . . . . . . . . . . . . . . . . 7
Share Ownership. . . . . . . . . . . . . . . . . . . . . . . 8
The Merger . . . . . . . . . . . . . . . . . . . . . . . . . 8
Recent Developments. . . . . . . . . . . . . . . . . . . . . 10
Market Prices and Dividends. . . . . . . . . . . . . . . . . 10
Unaudited Comparative Per Share Data . . . . . . . . . . . . 12
Selected Consolidated Financial Data . . . . . . . . . . . . 14
Unaudited Pro Forma Selected Financial Data. . . . . . . . . 17
CERTAIN RISK FACTORS . . . . . . . . . . . . . . . . . . . . . 19
Uncertain Future Results . . . . . . . . . . . . . . . . . . 19
Interest Rate Risk . . . . . . . . . . . . . . . . . . . . . 19
Adequacy of Allowance for Loan Losses. . . . . . . . . . . . 19
Local Economic Conditions. . . . . . . . . . . . . . . . . . 19
Competition. . . . . . . . . . . . . . . . . . . . . . . . . 19
Limited Adjustment to the Exchange Ratio in the Event of a
Drop in CVAL Stock Prices . . . . . . . . . . . . . . . . 20
THE MEETING. . . . . . . . . . . . . . . . . . . . . . . . . . 20
General; Matters to be Considered. . . . . . . . . . . . . . 20
Revocability of Proxies; Default Voting of Proxies . . . . . 20
Board of Directors' Recommendations. . . . . . . . . . . . . 21
Record Date; Quorum; Required Vote . . . . . . . . . . . . . 21
Share Ownership of Officers, Directors and Certain
Shareholders . . . . . . . . . . . . . . . . . . . . . . . 21
Solicitation of Proxies. . . . . . . . . . . . . . . . . . . 21
THE MERGER . . . . . . . . . . . . . . . . . . . . . . . . . . 21
General. . . . . . . . . . . . . . . . . . . . . . . . . . . 21
Background of the Merger . . . . . . . . . . . . . . . . . . 22
CVAL's Reasons for the Merger. . . . . . . . . . . . . . . . 22
PCIS's Reasons for the Merger; Recommendation of the PCIS
Board . . . . . . . . . . . . . . . . . . . . . . . . . . 23
Certain Federal Income Tax Consequences. . . . . . . . . . . 24
Interests of Certain Persons and Employee Matters. . . . . . 25
Accounting Treatment . . . . . . . . . . . . . . . . . . . . 26
Antitrust. . . . . . . . . . . . . . . . . . . . . . . . . . 26
Dissenters Rights. . . . . . . . . . . . . . . . . . . . . . 26
Nasdaq National Market . . . . . . . . . . . . . . . . . . . 28
DESCRIPTION OF CVAL CAPITAL STOCK. . . . . . . . . . . . . . . 28
Common Stock . . . . . . . . . . . . . . . . . . . . . . . . 28
Preferred Stock. . . . . . . . . . . . . . . . . . . . . . . 28
Anti-takeover Provisions of the Articles of Incorporation
and Bylaws of CVAL . . . . . . . . . . . . . . . . . . . . . 28
Pennsylvania Anti-Takeover Law Provisions. . . . . . . . . . 30
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<PAGE>
COMPARISON OF SHAREHOLDERS' RIGHTS . . . . . . . . . . . . . . 31
REGULATIONS AFFECTING DIVIDENDS ON CVAL CAPITAL STOCK. . . . . 33
Ability of CVAL's Subsidiary, First Financial Bank,
to Pay Dividends to CVAL . . . . . . . . . . . . . . . . . 33
General Corporate Law Restrictions Applicable to CVAL. . . . 34
RESALE RESTRICTIONS. . . . . . . . . . . . . . . . . . . . . . 34
THE MERGER AGREEMENT . . . . . . . . . . . . . . . . . . . . . 35
General. . . . . . . . . . . . . . . . . . . . . . . . . . . 35
Effective Time . . . . . . . . . . . . . . . . . . . . . . . 35
Corporate Matters. . . . . . . . . . . . . . . . . . . . . . 35
Conversion of PCIS Shares. . . . . . . . . . . . . . . . . . 35
The Exchange Ratio . . . . . . . . . . . . . . . . . . . . . 36
Conduct of PCIS Pending The Merger . . . . . . . . . . . . . 36
Conduct of CVAL Pending the Merger . . . . . . . . . . . . . 38
Appointment of Directors . . . . . . . . . . . . . . . . . . 38
No Solicitation of Other Acquisition Proposals . . . . . . . 39
Representations and Warranties . . . . . . . . . . . . . . . 39
Capitalization of PCIS . . . . . . . . . . . . . . . . . . . 39
Capitalization of CVAL . . . . . . . . . . . . . . . . . . . 40
General Conditions Precedent to the Merger . . . . . . . . . 40
Conditions Precedent to Obligations of CVAL. . . . . . . . . 41
Conditions Precedent to Obligations of PCIS. . . . . . . . . 41
Shareholder Indemnity . . . . . . . . . . . . . . . . . . . 42
Termination . . . . . . . . . . . . . . . . . . . . . . . . 43
Termination Fees and Expenses. . . . . . . . . . . . . . . . 43
PHILADELPHIA CORPORATION FOR INVESTMENT SERVICES . . . . . . . 44
SELECTED PCIS FINANCIAL DATA . . . . . . . . . . . . . . . . . 45
PCIS MANAGEMENT'S DISCUSSION AND ANALYSIS OF PCIS's
FINANCIAL CONDITION AND RESULTS OF OPERATIONS. . . . . . . . . 46
DIRECTORS AND EXECUTIVE OFFICERS OF PCIS . . . . . . . . . . . 47
Directors. . . . . . . . . . . . . . . . . . . . . . . . . . 48
Executive Officers . . . . . . . . . . . . . . . . . . . . . 47
Security Ownership of Certain Beneficial Holders and
Management . . . . . . . . . . . . . . . . . . . . . . . . . 48
PCIS EXECUTIVE COMPENSATION. . . . . . . . . . . . . . . . . . 50
Summary Compensation Table . . . . . . . . . . . . . . . . . 50
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS OF PCIS . . . . 51
UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL INFORMATION . . . . 51
EXPERTS. . . . . . . . . . . . . . . . . . . . . . . . . . . . 55
-ii-
<PAGE>
LEGAL MATTERS. . . . . . . . . . . . . . . . . . . . . . . . . 55
INDEX TO PCIS FINANCIAL STATEMENTS . . . . . . . . . . . . . .F-1
APPENDIX A MERGER AGREEMENT. . . . . . . . . . . . . . . . . .A-1
APPENDIX B DISSENTERS RIGHTS PROVISIONS. . . . . . . . . . . .B-1
-iii-
<PAGE>
AVAILABLE INFORMATION
CVAL is subject to the information and reporting requirements of the
Securities Exchange Act of 1934, as amended (the "1934 Act"), and in accordance
therewith files periodic reports, proxy statements and other information with
the Securities and Exchange Commission (the "Commission"). Such 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.,
Room 1024, Washington, D.C. 20549 and at the Commission's regional offices
located at 7 World Trade Center, Suite 1300, New York, New York 10048; and
Citicorp Center, 500 West Madison Street, Suite 1400, Chicago, Illinois 60661.
Copies of such reports, proxy statements and other information also can be
obtained at prescribed rates by writing to the Public Reference Section of the
Commission, 450 Fifth Street, N.W., Washington, D.C. 20549. In addition, CVAL is
required to file electronic versions of such material with the Commission
through the Commission's Electronic Data Gathering, Analysis and Retrieval
("EDGAR") system. The Commission maintains a World Wide Web site that contains
reports, proxy statements and other information regarding registrants that file
electronically with the Commission. Electronic filings are publicly available on
the Commission's World Wide Web site within 24 hours of acceptance. The address
of such site is http://www.sec.gov. CVAL Common Stock is quoted on the Nasdaq
National Market. Reports, proxy statements and other information filed by CVAL
with the Nasdaq National Market may also be inspected at the Offices of the
National Association of Securities Dealers, Inc. (the "NASD"), Market Listing
Section, 1735 K Street, N.W., Washington, D.C. 20006.
CVAL has filed with the Commission a registration statement on Form
S-4 (together with all amendments, supplements and exhibits thereto, the
"Registration Statement") under the Securities Act of 1933, as amended (the
"1933 Act") with respect to the securities of CVAL to be issued pursuant to the
Merger Agreement. As permitted under the 1933 Act and the 1934 Act, this Proxy
Statement/Prospectus does not contain all the information set forth in the
Registration Statement and the exhibits thereto. Such additional information can
be inspected and copied or obtained from the Commission in the manner described
above. Statements contained in this Proxy Statement/Prospectus, or in any
document incorporated in this Proxy Statement/Prospectus by reference, as to the
contents of any other document referred to herein or therein are not necessarily
complete, and each such statement is qualified in all respects by reference to
the copy of such other document filed as an exhibit to the Registration
Statement or such other document.
This Proxy Statement/Prospectus is accompanied by a copy of CVAL's
Form 10-KSB for the fiscal year ended June 30, 1997 and CVAL's Form 10-QSB for
the quarterly period ended December 31, 1997.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents which have been filed by CVAL pursuant to the
1934 Act are hereby incorporated by reference in this Proxy
Statement/Prospectus:
1. CVAL's Annual Report on Form 10-KSB for the fiscal year ended
June 30, 1997; and
2. CVAL's Quarterly Reports on Form 10-QSB for the fiscal
quarters ended September 30 and December 31, 1997.
The information relating to CVAL contained in this Joint Proxy
Statement-Prospectus does not purport to be comprehensive and should be read
together with the information in the documents incorporated by reference herein.
All documents filed by CVAL pursuant to Sections 13(a), 13(c), 14 or
15(d) of the 1934 Act subsequent to the date of this Proxy Statement/Prospectus
and prior to the date of the PCIS Special Meeting shall be deemed to be
incorporated by reference in this Proxy Statement/Prospectus and be a part
hereof from the dates of filing of such documents. Any statement contained in a
document incorporated or deemed to be incorporated by reference herein shall be
-4-
<PAGE>
deemed to be modified or superseded for purposes of this Proxy
Statement/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
herein, modifies or supersedes such statement. Any such statement so modified or
superseded will not be deemed, except as so modified or superseded, to
constitute a part of this Proxy Statement/Prospectus.
This Proxy Statement/Prospectus incorporates certain documents by
reference which are not presented herein or delivered herewith. These documents
(other than exhibits to such documents unless such exhibits are specifically
incorporated by reference) are available to any person, including any beneficial
owner, upon request directed to the Director of Shareholder Relations, Chester
Valley Bancorp Inc., 100 East Lancaster Avenue, Downingtown, Pennsylvania 19335,
telephone number (610) 269-9700. In order to ensure timely delivery of these
documents, any request should be made by _________________, 1998 [5 business
days before the Meeting].
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATIONS WITH RESPECT TO THE MATTERS DESCRIBED IN THIS PROXY
STATEMENT/PROSPECTUS OTHER THAN THOSE CONTAINED OR INCORPORATED BY REFERENCE
HEREIN, AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE
RELIED UPON AS HAVING BEEN AUTHORIZED BY EITHER CVAL OR PCIS. THIS PROXY
STATEMENT/PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL OR THE SOLICITATION OF
AN OFFER TO BUY ANY SECURITIES, NOR DOES IT CONSTITUTE THE SOLICITATION OF A
PROXY, IN ANY JURISDICTION IN WHICH OR FROM ANY PERSON TO WHOM IT IS UNLAWFUL TO
MAKE ANY SUCH SOLICITATION IN SUCH JURISDICTION. THE DELIVERY OF THIS JOINT
PROXY STATEMENT-PROSPECTUS WILL NOT, UNDER ANY CIRCUMSTANCES, CREATE ANY
IMPLICATION THAT THERE HAS BEEN NO CHANGE IN THE AFFAIRS OF CVAL OR PCIS SINCE
THE DATE HEREOF OR THAT THE INFORMATION CONTAINED HEREIN IS CORRECT AS OF ANY
TIME SUBSEQUENT TO ITS DATE.
-5-
<PAGE>
SUMMARY
The following is a summary of certain information contained elsewhere
in this Proxy Statement-Prospectus and does not purport to be complete. This
summary is subject to and qualified in its entirety by reference to the more
detailed information contained elsewhere in this Proxy Statement/Prospectus, the
Appendices hereto and the documents referred to herein and incorporated herein
by reference. Shareholders of CVAL and PCIS are urged to review carefully this
Proxy Statement-Prospectus, including the Merger Agreement attached hereto as
Appendix A and the other Appendices attached hereto, and the documents
incorporated herein by reference.
This Proxy Statement/Prospectus (including the documents incorporated
by reference herein) contains certain forward-looking statements (as such term
is defined in the Private Securities Litigation Reform Act of 1995) and
information relating to CVAL and PCIS that are based on the beliefs of the
management of CVAL or PCIS, as applicable, as well as assumptions made by and
information currently available to the management of CVAL or PCIS, as
applicable. When used in this Proxy Statement/Prospectus, the words
"anticipate," "believe," "estimate," "expect," "intend" and similar expressions,
as they relate to CVAL, PCIS or the management of either of them, identify
forward-looking statements. Such statements, which include, without limitation,
statements as to the benefits expected to be realized as a result of the Merger
and the matters set forth herein under "The Merger," reflect the current views
of CVAL or PCIS, as applicable, with respect to future events, the outcome of
which is subject to certain risks, including among others, those set forth in
"Certain Risk Factors." Should one or more of these risks or uncertainties
materialize, or should underlying assumptions prove incorrect, actual results or
outcomes may vary materially from those described herein as anticipated,
believed, estimated, expected or intended. Shareholders of PCIS are urged to
consider the foregoing in evaluating the information contained herein.
The Companies
Chester Valley Bancorp Inc.
CVAL, established in 1989, is a Pennsylvania chartered unitary thrift
holding company, headquartered in Downingtown, Pennsylvania. The business of
CVAL primarily consists of the ownership of 100% of the outstanding capital
stock of First Financial Bank, a Pennsylvania-chartered stock savings
association (the "Bank") founded in 1922, which conducts operations through
seven full-service offices located in Downingtown, Exton, Frazer, Thorndale,
Westtown, Airport Village in Coatesville, and Brandywine Square between
Downingtown and Exton, Pennsylvania. The Bank is primarily engaged in attracting
deposits from the general public and using such deposits, together with
borrowings and other sources of funds, to originate and purchase first mortgage
loans as well as construction loans secured by residential and commercial real
estate, consumer loans, and other non-mortgage loans.
The principal executive offices of CVAL are located at 100 East
Lancaster Avenue, Downingtown, PA 19335, and its telephone number is (610)
269-9700. As used in this Proxy Statement/Prospectus, the term "CVAL" refers to
Chester Valley Bancorp Inc. and its subsidiaries, unless the context otherwise
requires.
Philadelphia Corporation for Investment Services
PCIS is a securities broker/dealer and investment advisor. It is a
member of the National Association of Securities Dealers, Inc. ("NASD"), the
Securities Investor Protection Corporation ("SIPC"), the Municipal Securities
Rulemaking Board ("MSRB"), and the Securities Industry Association ("SIA"). It
is registered as a broker/dealer in all 50 states and the District of Columbia,
and as an investment advisor with the Commission. PCIS is subject to stringent
minimum capital and licensing requirements.
PCIS's clients are primarily individuals and smaller corporations,
including various retirement plans. PCIS offers investment advice to and
executes transactions for its customers. PCIS does not engage in commodity
transactions, nor does it maintain an investment account. Although registered as
-6-
<PAGE>
a self clearing firm, approximately 99% of PCIS's transactions are cleared
through another broker/dealer, which also executes nearly all PCIS directed
transactions except for certain other fixed income transactions. PCIS does not
trade for its own account except in limited circumstances; such principal
transactions as it executes are almost all done to satisfy customer orders.
PCIS is subject to the regulations of the Commission, the NASD, the
MSRB, SIPC, District of Columbia and each of the state jurisdictions within
which it is registered. PCIS is routinely examined as a broker/dealer by the
NASD and as an investment advisor by the Commission.
The principal executive offices of PCIS are located at 1650 Market
Street, Suite 3050, Philadelphia, Pennsylvania 19103, and its telephone number
is (215) 419-6400.
Chester Valley Acquisition Corporation
Chester Valley Acquisition Corporation ("Merger Subsidiary"), a
corporation organized under the laws of the Commonwealth of Pennsylvania, is a
direct wholly-owned subsidiary of CVAL, and was incorporated in December 1997.
Merger Subsidiary has no material assets and has not engaged in any activities
except in connection with the Merger. The principal executive offices of Merger
Subsidiary are located at 100 Lancaster Avenue, Downingtown, Pennsylvania 19335
and its telephone number is (610) 269-9700.
The Meeting
Time, Date, Place and Purpose
A special meeting of shareholders of PCIS (the "Meeting") will be held
at Suite 3050, 1650 Market Street, Philadelphia, Pennsylvania, on [DATE], 1998
at 10:00 a.m., Philadelphia time. See "The Meeting." The purpose of the Meeting
is to consider and vote upon the following matters: (i) the approval of the
proposed merger of Merger Subsidiary with and into PCIS pursuant to an Agreement
and Plan of Merger, dated as of March 18, 1998, among CVAL, PCIS and Merger
Subsidiary (the "Merger Agreement") and the approval of any other actions as may
be required in furtherance of the Merger; and (ii) the transaction of such other
business as may properly come before the Meeting and any adjournment or
postponement thereof, and matters incident to the conduct of the Meeting.
Record Date; Required Vote
Only holders of record of PCIS Common Stock at the close of business
on __________, 1998 (the "PCIS Record Date") are entitled to receive notice of
and to vote at the Meeting. At the close of business on the PCIS Record Date,
there were 5,725 shares of PCIS Common Stock outstanding, each of which entitles
the registered holder thereof to one vote. See "The Meeting--Record Date;
Quorum; Required Vote."
Under Pennsylvania law, approval of the Merger will require the
affirmative vote of a majority of the outstanding shares of capital stock of
PCIS entitled to vote thereon. Directors and executive officers are expected to
vote substantially all of the PCIS shares beneficially held by them as of April
6, 1998, representing approximately 59% of the PCIS Common Stock outstanding at
that date, "FOR" approval of the Merger Agreement and the transactions
contemplated thereby. See "The Meeting--Record Date; Quorum; Required Vote."
THE BOARD OF DIRECTORS OF PCIS (THE "PCIS BOARD") HAS UNANIMOUSLY APPROVED THE
MERGER AGREEMENT AND RECOMMENDS THAT PCIS SHAREHOLDERS VOTE "FOR" THE APPROVAL
OF THE MERGER AGREEMENT AND THE APPROVAL OF ANY OTHER ACTIONS AS MAY BE REQUIRED
IN FURTHERANCE OF THE MERGER. SEE "THE MERGER--PCIS'S REASONS FOR THE MERGER;
RECOMMENDATION OF THE PCIS BOARD."
-7-
<PAGE>
Share Ownership
Share Ownership of Officers, Directors and Certain Shareholders of PCIS
At the close of business on April 6, 1998, directors and executive
officers of PCIS and their affiliates were the beneficial owners of an aggregate
of 3,400 shares (59.39%) of the PCIS Common Stock then outstanding. See "The
Meeting--Share Ownership of Officers, Directors and Certain Shareholders" and
"Directors and Executive Officers of PCIS--Security Ownership of Certain
Beneficial Owners and Management."
Share Ownership of Officers, Directors and Certain Shareholders of CVAL
At the close of business on April 8, 1998 directors and executive
officers of CVAL and their respective affiliates were the beneficial owners of
an aggregate of approximately 387,303 shares (approximately 17.72%)of the CVAL
Common Stock then outstanding.
The Merger
At the effective time of the Merger ("Effective Time"), Merger
Subsidiary will merge into PCIS, with PCIS as the surviving corporation of the
Merger. As a result of the Merger, PCIS will become a wholly-owned subsidiary of
CVAL. The Effective Time of the Merger will be at 12:01 a.m. on the first
business day following the closing of the Merger (the "Closing"). The Closing
will occur on a date (the "Closing Date") which is to be no later than the 30th
business day after receipt of all shareholder approvals required by the Merger
agreement and all necessary governmental approvals (if any), the expiration of
any related waiting periods and the lifting of any stay of any such governmental
approval or of any injunction against the Merger.
The Merger Consideration
At the Effective Time of the Merger, each share of PCIS Common Stock
issued and outstanding immediately prior to the Effective Time (other than
shares the holders of which are exercising appraisal rights See "Dissenters
Rights," below) will by virtue of the Merger and without any action on the part
of the holder thereof be automatically converted into the right to receive a
number of shares of CVAL Common Stock determined in accordance with the exchange
ratio ("Exchange Ratio") set forth in the Merger Agreement. No fractional shares
of CVAL Common Stock will be issued in connection with the Merger. In lieu of
any fractional shares, CVAL will pay to each holder of PCIS Common Stock
otherwise entitled to receive a fractional share, an amount in cash. See
"The Merger Agreement--Conversion of PCIS Shares; The Exchange Ratio."
Termination
The Merger Agreement may be terminated before the Effective Time
notwithstanding approval by the shareholders of PCIS, under the circumstances
specified in the Merger Agreement, including by mutual written agreement of CVAL
and PCIS and termination by either party if the Merger is not consummated by
June 30, 1998. See "The Merger Agreement--Termination."
Termination Fees and Expenses
Under certain circumstances, PCIS may be required to pay a termination
fee if the Merger is not consummated. Under certain circumstances, either CVAL
or PCIS may be required to reimburse the other party for damages and for its
reasonable out-of-pocket expenses if the Merger is not consummated. See "The
Merger Agreement--Termination Fees and Expenses."
-8-
<PAGE>
Recommendation of the PCIS Board
The PCIS Board has approved the Merger Agreement and recommends that
the shareholders of PCIS vote "FOR" the adoption of the Merger Agreement and any
other actions as may be required in furtherance of the Merger. For a discussion
of the factors considered by the PCIS Board in reaching its conclusions, see
"The Merger--PCIS's Reasons for the Merger; Recommendation of the PCIS Board."
Interests of Certain Persons
In considering the recommendations of the PCIS Board with respect to
the Merger and the transactions contemplated thereby, holders of PCIS Common
Stock should be aware that certain members of PCIS's management and of the PCIS
Board have certain interests in the Merger that are in addition to the interests
of shareholders of PCIS generally, including, among other things, (i) the
continued membership of current members of the PCIS Board of Directors on the
Board of the surviving corporation; (ii) the possible appointment of certain
members of the PCIS Board to membership on the Board of Directors of CVAL; and
(iii) the employment agreements that PCIS has entered into with its Chairman,
President and all Vice Presidents in connection with the Merger. See "The
Merger--Interests of Certain Persons and Employee Matters."
Certain Federal Income Tax Consequences
The Merger is intended to be a tax-free reorganization as a result of
which no income, gain or loss will be recognized by CVAL or PCIS and no income,
gain or loss will be recognized by PCIS shareholders upon exchange of their PCIS
Common Stock for CVAL Common Stock pursuant to the Merger Agreement, except in
respect of cash received by holders of PCIS Common Stock in lieu of fractional
shares of CVAL Common Stock. PCIS SHAREHOLDERS SHOULD CONSULT WITH THEIR OWN TAX
ADVISERS REGARDING THE TAX CONSEQUENCES OF THE MERGER WITH RESPECT TO THEIR OWN
PARTICULAR CIRCUMSTANCES. See "The Merger--Certain Federal Income Tax
Consequences."
Accounting Treatment
The Merger is intended to be accounted for as a pooling-of-interests.
See "The Merger--Accounting Treatment of the Merger."
Dissenters Rights
Pursuant to the Pennsylvania Business Corporation Law of 1988, as
amended ("BCL"), the holders of PCIS Common Stock will have the right to dissent
from approval of the Merger, and to demand and receive the "fair value" of their
shares of PCIS Common Stock. In order to assert such dissenters rights, a PCIS
shareholder must: (i) file a written notice of intent to dissent with PCIS prior
to the shareholder vote at the Meeting; (ii) refrain from voting in favor of the
Merger; (iii) file a written demand for payment and deposit the certificates
representing his or her shares in accordance with the terms of the notice to
demand payment that will be sent by PCIS; and (iv) comply with certain other
statutory procedures set forth in the BCL. Proxies which are returned but which
do not contain voting instructions will be voted in favor of the Merger
Agreement, which will result in a forfeiture of dissenters rights with respect
to the Merger. A copy of the applicable sections of the BCL is attached to this
Prospectus as Appendix B. Any deviation from the procedures set forth in such
statutory provisions may result in the forfeiture of dissenters rights with
respect to the Merger. Accordingly, shareholders wishing to assert dissenters
rights are urged to read carefully "The Merger Dissenters Rights" and Appendix B
to this Prospectus.
-9-
<PAGE>
Recent Developments
Year 2000 Compliance. As the year 2000 approaches, an important
business issue has emerged regarding how existing application software programs
and operating systems can accommodate this date value. Many existing application
software products were designed to accommodate only two-digits. For example,
"96" is stored on the system and represents 1996. The Bank has been identifying
potential problems associated with the "Year 2000" issue and has implemented a
plan designed to ensure that all software used in connection with CVAL's
business will manage and manipulate data involving the transition with data from
1999 to 2000 without functional or data abnormality and without inaccurate
results related to such data. The Bank has prepared a critical issues schedule
with a timeline and assigned responsibilities. In addition, the Bank recognizes
that its ability to be Year 2000 compliant is dependent upon the cooperation of
its vendors. The Bank is requiring its computer systems and software vendors to
represent that the products provided are or will be Year 2000 compliant and has
planned a program of testing for compliance. The Bank has received
representations from its primary third party vendors that they will have
resolved any Year 2000 problems in their software by December 31, 1998 and
anticipates that all of its vendors also will have resolved any Year 2000
problems in their software by that same date. All Year 2000 issues for the Bank,
including testing, are expected to be addressed by December 31, 1998 and any
problems would be remedied by March 31, 1999. The Bank will also prepare
contingency plans in the event there are any system interruptions. There can be
no assurances, however, that such plan or the performance by the Bank's vendors
will be effective to remedy all potential problems. To the extent CVAL's systems
are not fully Year 2000 compliant, there can be no assurance that potential
systems interruptions or the cost necessary to update software would not have a
materially adverse effect on CVAL's business, financial condition, results of
operations and business prospects. Further, any Year 2000 failure on the part of
the Bank's customers could result in additional expense or loss to the Bank.
The Bank plans also to work with its customers to address any potential
Year 2000 problems.
Opening New Branch. The Bank plans to open its eighth branch office at
414 Lancaster Avenue in Devon, Pennsylvania, site of the former Silk Road
Restaurant. The Bank has recently received approval from the Easttown Township
Zoning Board for the development and renovation of the property for an
anticipated opening in the Summer of 1998. The Bank's newest branch will provide
not only a full complement of experienced banking professionals, but also the
expertise of a commercial lending officer and access to a Trust and Investment
Officer. The office will provide three drive-up windows including a MAC drive-up
Automated Teller Machine. Extended weekday banking hours and Saturday hours will
also be offered at this location.
Market Prices and Dividends
CVAL Common Stock is in the over-the-counter market and quoted on the
Nasdaq National Market under the symbol "CVAL". The following table presents for
the periods indicated (rounded to the nearest cent and adjusted for all stock
splits and stock dividends) the high and low closing prices on the Nasdaq
National Market for CVAL Common Stock and the cash dividends paid per share on
CVAL Common Stock.
<TABLE>
<CAPTION>
CVAL Common Stock
__________________
Closing Prices
<S> <C> <C> <C>
Dividends
Period Ended Low High Per Share
- ------------ --- ---- ---------
CVAL's Fiscal Year Ended June 30, 1996 . . $ 13.24 $ 14.86 $ .27
Quarter Ended September 30, 1995 . . . $ 13.79 $ 14.86 $ .06
Quarter Ended December 31, 1995 . . . . $ 13.24 $ 14.51 $ .07
Quarter Ended March 31, 1996 . . . . . $ 13.24 $ 14.51 $ .07
Quarter Ended June 30, 1996 . . . . . . $ 13.24 $ 13.79 $ .07
-10-
<PAGE>
CVAL's Fiscal Year Ended June 30, 1997 . . $ 13.06 $ 20.71 $ .35
Quarter Ended September 30, 1996 . . $ 13.06 $ 15.24 $ .07
Quarter Ended December 31, 1996 . . . $ 13.90 $ 15.24 $ .08
Quarter Ended March 31, 1997 . . . . $ 15.71 $ 16.57 $ .10
Quarter Ended June 30, 1997 . . . . . $ 15.71 $ 20.71 $ .10
Six Months Ended December 31, 1997 . . . . $ 19.64 $ 29.25 $ 0.21
</TABLE>
There is no established public trading market for PCIS Common Stock,
and, accordingly, there are no published market quotations for such stock.
Transfer of PCIS Common Stock is restricted. Among other things, pursuant to a
shareholders' agreement, PCIS has the right to buy a PCIS shareholder's stock at
the then applicable book value in connection with a sale or upon termination of
employment. Subject to the foregoing, the sale price for PCIS Common Stock on
October 22, 1997, the most recent date preceding public announcement of the
Merger on which a sale occurred, was $215.05 per share.
The table below presents for October 22, 1997 and December 9, 1997,
the last trading days before the announcement of the Merger on which shares of
PCIS and CVAL, respectively, had been sold, and ___________, 1998, the latest
practicable trading day prior to the printing of this Proxy
Statement/Prospectus: (a) the average of the last bid and asked prices on the
Nasdaq National Market for CVAL Common Stock, (b) the price per share of PCIS
Common Stock and (c) the pro forma equivalent in CVAL Common Stock of a share of
PCIS Common Stock computed by multiplying the price of CVAL Common Stock
provided in the table for the corresponding date by a hypothetical Exchange
Ratio of 23.4239. Bid quotations in the table below relating to CVAL Common
Stock reflect interdealer prices, without markup, markdown or commission and may
not necessarily represent actual transactions.
<TABLE>
<CAPTION>
---------------------------------------
CVAL PCIS Common Pro Forma PCIS
Common Stock Common Stock
Stock Equivalent
---------------------------------------
<S> <C> <C> <C>
October 22, 1997 $25.250 $215.050 $591.454
December 9, 1997 . . . . . . . . $27.125 N/A $635.373
______, 1998 . . . . . . . . . . $----- N/A $-------
</TABLE>
The hypothetical Exchange Ratio of 23.4239 is based on the assumption
that the Average Price Per Share of CVAL Common Stock, as defined in the Merger
Agreement (see "The Merger Agreement--The Exchange Ratio"), will at the
Effective Time be greater than or equal to $27.50. However, shareholders are
urged to obtain current quotations for the market prices of CVAL Common Stock.
No assurance can be given as to the market price of CVAL Common Stock at the
Effective Time. The Exchange Ratio in the event the applicable Average Price Per
Share, as defined in the Merger Agreement (see "The Merger Agreement--The
Exchange Ratio"), of CVAL Common Stock is at or below $24.50 remains the same
regardless of the extent to which such price drops below $24.50, and a drop in
-11-
<PAGE>
the market price of CVAL Common Stock below such price will not prevent
consummation of the Merger. Accordingly, the market value of the shares of CVAL
Common Stock that holders of PCIS Common Stock will receive in the Merger may
vary significantly from the prices shown above, and the number of shares of CVAL
Common Stock holders of PCIS Common Stock will be entitled to receive in the
Merger will not be increased to reflect any drop in the applicable Average Price
Per Share of CVAL Common Stock below $24.50. See "Certain Risk Factors--Limited
Adjustment to the Exchange Ratio in the Event of a Drop in CVAL Stock Prices."
The following table presents for the periods indicated (rounded to
the nearest cent and adjusted for all stock splits and stock dividends) cash
distributions paid per share on PCIS Common Stock.
<TABLE>
<CAPTION>
PCIS Common Stock
-----------------
Period Ended Distributions
Per Share
---------
<S> <C>
PCIS's Fiscal Year Ended December 31, 1996 . . . $45.41
Quarter Ended March 29, 1996. . . . . . . . $32.14
Quarter Ended June 28, 1996 . . . . . . . . $ 4.74
Quarter Ended September 27, 1996. . . . . . $ 3.73
Quarter Ended December 31, 1996 . . . . . . $ 4.80
PCIS's Fiscal Year Ended December 31, 1997 . . . $53.18
Quarter Ended March 28, 1997. . . . . . . . $35.25
Quarter Ended June 27, 1997 . . . . . . . . $ 6.10
Quarter Ended September 26, 1997. . . . . . $ 3.28
Quarter Ended December 31, 1997 . . . . . . $ 8.55
</TABLE>
The payment of dividends on PCIS Common Stock is subject under the
Merger Agreement to certain limitations. See "The Merger Agreement--
Capitalization of PCIS."
Unaudited Comparative Per Share Data
The following table sets forth certain historical and pro forma per
share data for CVAL Common Stock for CVAL's fiscal year ended June 30, 1997 and
the three-month and six-month periods ended September 30 and December 31, 1997,
and certain historical and equivalent pro forma per share data for PCIS Common
Stock for PCIS's fiscal year ended December 31, 1997. The information presented
herein should be read in conjunction with the selected historical consolidated
financial data and unaudited pro forma consolidated financial information found
elsewhere in this Proxy Statement/Prospectus as well as the historical financial
information of CVAL incorporated herein by reference. Historical per share data
are derived from audited or unaudited financial statements of CVAL and PCIS, as
the case may be. Pro forma per share data for CVAL Common Stock are derived from
the unaudited pro forma consolidated financial information found elsewhere in
this Proxy Statement/Prospectus.
-12-
<PAGE>
<TABLE>
<CAPTION>
Six Months
Year Ended Ended
June 30, 1997 December 31, 1997
CVAL PCIS CVAL PCIS
Common Stock Common Stock Common Stock Common Stock
<S> <C> <C> <C> <C>
Net Income(1)
Historical - Basic $ .89 51.12 $ .78 37.83
Diluted .89 51.12 .77 37.83
Pro Forma - Basic .97 22.72 .83 19.44
Diluted .97 22.72 .82 19.21
Book Value (at end
of period)(2)
Historical $ 12.52 199.17 $ 13.24 223.97
Pro Forma $ 12.27 287.41 $ 13.02 304.98
<FN>
______________________________
(1) CVAL pro forma income from continuing per common share represents
historical net income from continuing operations for CVAL and PCIS combined
on the assumption that CVAL and PCIS have been combined for the periods
presented on a pooling-of-interests basis, divided by the sum of:
(i) weighted average CVAL Common Stock outstanding during the year ended
June 30, 1997 (2,152,613 for basic and 2,164,666 diluted) or for the
six months ended December 31, 1997 (2,163,109 for basic and 2,193,681
for diluted), respectively, plus
(ii) weighted average PCIS Common Stock outstanding during the year ended
June 30, 1997 (6,095 for both basic and diluted) or for the six months
ended December 31, 1997 (5,967 for both basic and diluted) multiplied
by the Exchange Ratio. PCIS equivalent pro forma income from
continuing operations per common share represents such amounts
multiplied by the Exchange Ratio.
(2) Pro forma book value per share of CVAL Common Stock was calculated by
dividing total pro forma combined shareholders' equity amounts as of the
applicable date by the sum of:
(i) the actual number of shares of CVAL Common Stock outstanding at June
30, 1997 (2,161,476 shares), and at December 31, 1997 (2,168,542
shares), respectively, and
(ii) the actual number of shares of PCIS Common Stock outstanding at June
30, 1997 (6,095 shares), and at December 31, 1997 (5,725), multiplied
by the Exchange Ratio, respectively.
Equivalent pro forma value per share of PCIS Common Stock represents the pro
forma book value per share of CVAL Common Stock multiplied by the Exchange
Ratio.
</FN>
</TABLE>
-13-
<PAGE>
Selected Historical Consolidated Financial Data
The following tables set forth certain selected consolidated
historical financial information for CVAL and PCIS. This data is derived from
and should be read in conjunction with, and is qualified in its entirety by, the
consolidated financial statements of CVAL and the financial statements of PCIS,
including the notes thereto, incorporated by reference or appearing elsewhere in
this Proxy Statement/Prospectus.
<TABLE>
CVAL
Selected Consolidated Financial Data
<CAPTION>
At or
Six Months
Ended At or Year Ended June 30,
December 31, -------------------------------------
1997 1997 1996 1995 1994 1993
--------------------------------------------------
(Dollars in thousands, except per share data)
<S> <C> <C> <C> <C> <C> <C>
Financial Position
Total assets $ 325,643 $ 323,673 $ 272,932 $ 262,360 244,071 222,227
Loans, gross 267,942 260,001 226,630 223,406 196,492 177,811
Allowance for loan loss 3,080 2,855 2,667 2,449 2,199 1,770
Investment securities
available for sale 24,411 27,566 6,159 -- -- --
held for maturity 17,352 19,469 24,593 26,285 32,087 29,454
Deposits 266,648 260,750 228,206 217,981 204,802 191,484
Borrowings 27,112 30,447 13,972 15,097 12,366 5,865
Shareholders' equity 28,706 27,065 25,564 23,784 21,870 19,158
Operations
Total interest income $ 12,655 $ 22,569 $ 20,566 $ 18,882 16,514 16,015
Total interest expense 6,621 11,503 10,875 9,830 8,275 8,265
Net interest income 6,034 11,066 9,691 9,052 8,239 7,750
Provision for loan losses 240 523 340 455 627 708
Net interest income after
provision of loan losses 5,794 10,543 9,351 8,597 7,612 7,042
Other income 833 1,324 1,123 1,045 1,327 1,215
Operating expenses 4,246 9,184 7,003 6,620 6,085 5,352
Income tax expense 697 757 1,032 869 933 1,091
Net income before change
in accounting for income
taxes 1,684 1,926 2,439 2,153 1,921 1,814
Cumulative effect of a change
in accounting for income
taxes -- -- -- -- 540 --
Net income after change
in accounting for income
taxes 1,684 1,926 2,439 2,153 2,461 1,814
Share Data: (1)
Earnings per common share
(2)
Basic 0.78 0.89 1.13 1.00 0.91 0.88
Diluted 0.77 0.89 1.12 0.99 0.90 0.86
-14-
<PAGE>
Book value per common
share at end of period 13.24 12.52 11.83 11.02 10.20 9.22
Dividends declared per
common share 0.21 0.35 0.27 0.22 0.20 0.16
(1) Adjusted to reflect 5% stock dividends paid in September 1997, 1996,
1995, 1994 and 1993, and the five-for-four stock splits effected in
the form of dividends in December 1993 and March 1997.
(2) EPS for 1994 is before the cumulative effect of a change in accounting
for income taxes.
</TABLE>
<TABLE>
PCIS
Selected Financialf Data
<CAPTION>
At or
Six Months
Ended At or Year Ended June 30,
December 31, ------------------------------------------------
1997 1997 1996 1995 1994 1993
-------------------------------------------------------------
(Dollars in thousands, except per share data)
<S> <C> <C> <C> <C> <C> <C>
Financial Position
Total assets $ 1,787 $ 1,528 $ 1,616 $ 1,502 $ 1,400 $ 888
Loans, gross -- -- -- -- -- --
Allowance for loan loss -- -- -- -- -- --
Investment securities
available for sale 787 252 343 240 299 136
held for maturity -- -- -- -- -- --
Deposits -- -- -- -- -- --
Borrowings 442 252 343 241 300 137
Shareholders' equity 1,281 1,214 1,202 1,180 1,057 713
Operations
Total interest income $ -- $ -- $ -- $ -- $ -- $ --
Total interest expense -- -- -- -- -- --
Net interest income -- -- -- -- -- --
Provision for loan
losses -- -- -- -- -- --
Net interest income
after provision of loan
losses -- -- -- -- -- --
Other income 1,487 2,676 2,590 2,322 2,442 2,284
Operating expenses 1,259 2,365 2,297 2,125 2,114 1,961
Income tax expense -- -- -- -- 105 105
Net income 228 311 293 197 223 218
Share Data: (1)
Earnings per common
share
Basic 37.83 51.12 48.23 28.46 39.31 41.03
Diluted 37.83 51.12 48.23 28.46 39.31 41.03
-15-
<PAGE>
Book value per
common share at end
of period 223.97 199.17 197.51 194.71 173.33 134.07
Cash distributions
declared per common
share 11.83 49.43 45.42 7.07 -- --
(1) Beginning with years beginning January 1, 1995, no provisions have
been made for income taxes since PCIS has elected to be taxed under
the provisions of Subchapter S of the Internal Revenue Code and
similar state provisions. Under these provisions, PCIS does not pay
income taxes on its taxable income. Instead, shareholders are liable
for individual income taxes based on their respective shares of PCIS's
taxable income.
</TABLE>
-16-
<PAGE>
Unaudited Pro Forma Selected Financial Data
The following table presents unaudited pro forma selected data for
CVAL restated to give effect to the Merger. The pro forma selected data is not
necessarily indicative of the results that would have been achieved had the
Merger been consummated on or before such dates and should not be construed as
representative of future operations. This presentation is subject to the
assumptions set forth in the notes to the unaudited pro forma financial
information appearing elsewhere in this Proxy Statement/Prospectus. See "
Unaudited Pro Forma Consolidated Financial Information." The information
presented should be read in conjunction with such pro forma financial
statements, and the notes thereto, and the historical financial statements,
including the notes thereto, of CVAL and PCIS incorporated by reference or
appearing elsewhere in this Proxy Statement/Prospectus.
<TABLE>
Pro Forma Combined
Selected Consolidated Financial Data
<CAPTION>
At or
Six Months
Ended At or Year Ended June 30,
December 31, ------------------------------------------------
1997 1997 1996 1995 1994 1993
-------------------------------------------------------------
(Dollars in thousands, except per share data)
<S> <C> <C> <C> <C> <C> <C>
Financial Position
Total assets $ 327,430 $ 325,201 $ 274,548 $ 263,862 $ 245,471 $ 223,115
Loans, gross 267,942 260,001 226,630 223,406 196,492 177,811
Allowance for loan
loss 3,080 2,855 2,667 2,449 2,199 1,770
Investment securities
available for sale 25,198 27,818 6,502 240 299 136
held for maturity 17,352 19,469 24,593 26,285 32,087 29,454
Deposits 266,648 260,750 228,206 217,981 204,802 191,484
Borrowings 27,554 30,699 14,315 15,338 12,666 6,002
Shareholders' equity 29,987 28,279 26,766 24,964 22,927 19,871
Operations
Total interest income $ 12,655 $ 22,569 $ 20,566 $ 18,882 $ 16,514 $ 16,015
Total interest expense 6,621 11,503 10,875 9,830 8,275 8,265
Net interest income 6,034 11,066 9,691 9,052 8,239 7,750
Provision for loan
losses 240 523 340 455 627 708
Net interest income
after provision of loan
losses 5,794 10,543 9,351 8,597 7,612 7,042
Other income 2,320 4,000 3,713 3,367 3,769 3,499
Operating expenses 5,505 11,549 9,300 8,745 8,199 7,313
Income tax expense 697 757 1,032 869 1,038 1,196
Net income before
change in accounting
for income taxes 1,912 2,237 2,732 2,350 2,144 2,032
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Cumulative effect of
a change in accounting
for income taxes -- -- -- -- 540 --
Net income after
change in accounting
for income taxes 1,912 2,237 2,732 2,350 2,684 2,032
Share Data: (1)
Dividends declared per
common share $ .23 $ .46 $ .37 $ .23 $ .19 .15
(1) Adjusted to reflect 5% CVAL stock dividends paid in September 1997, 1996,
1995, 1994, and 1993, and the five-for-four stock splits effected in the
form of dividends December 1993 and March 1997.
</TABLE>
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CERTAIN RISK FACTORS
Holders of PCIS Common Stock, in evaluating whether to approve the
Merger and thereby become holders of CVAL Common Stock should carefully consider
the following risk factors, in addition to the other information included and
incorporated by reference in this Proxy Statement/Prospectus.
Uncertain Future Results
The banking business is affected, directly and indirectly, by local,
domestic, and international economic and political conditions, and by government
monetary and fiscal policies. Conditions such as inflation, recession,
unemployment, volatile interest rates, tight money supply, real estate values,
international conflicts and other factors beyond the control of CVAL, may
adversely affect the potential profitability of CVAL. Management does not expect
any one particular factor to affect the results of operations. A downward trend
in several areas, however, including real estate, construction and consumer
spending, could have an adverse impact on the ability of CVAL to maintain or
increase profitability. Therefore, there is no assurance that CVAL will be able
to continue its current growth rates.
Interest Rate Risk
CVAL's earnings depend, to a large extent, upon net interest income,
which is primarily influenced by the relationship between its cost of funds
(deposits and borrowings) and the yield on its interest-earning assets (loans
and investments). This relationship, known as the net interest spread, is
subject to fluctuation and is affected by regulatory, economic and competitive
factors which influence interest rates, the volume, rate and mix of
interest-earning assets and interest-bearing liabilities, and the level of
nonperforming assets. As part of its interest rate risk management strategy,
management seeks to control its exposure to interest rate changes by managing
the maturity and repricing characteristics of interest-earning assets and
interest-bearing liabilities. However, there is no assurance that this risk
management strategy will be successful in the event of all possible interest
rate changes.
Adequacy of Allowance for Loan Losses
In originating loans, there is a likelihood that some credit losses
will occur. This risk of loss varies with, among other things, general economic
conditions, the type of loan being made, the creditworthiness and debt servicing
capacity of the borrower over the term of the loan and, in the case of a
collateralized loan, the value and marketability of the collateral securing the
loan. Management maintains an allowance for loan losses based on, among other
things, delinquency trends, the volume of non-performing loans, prior loss
experience of the portfolio, current economic conditions and other factors.
Management currently believes that the allowance for loan losses is adequate,
but that there can be no assurance that this allowance will not have to be
increased.
Local Economic Conditions
The success of CVAL is dependent, to a certain extent, upon the
general economic conditions in the geographic markets served by CVAL. Although
CVAL expects that economic conditions will continue to be favorable in these
markets, no assurance can be given that these economic conditions will continue.
Adverse changes in economic conditions in the geographic markets that CVAL serve
would likely impair CVAL's ability to collect loans and could otherwise have a
material adverse effect on the consolidated results of operations and financial
condition of CVAL.
Competition
CVAL faces significant competition from many other banks, savings
institutions and other financial institutions which have branch offices or
otherwise operate in CVAL's market area, as well as many other companies now
offering a variety of financial services. Many of these competitors have
substantially greater financial resources than CVAL including a larger capital
base that allows them to attract customers seeking larger loans than CVAL is
able to make. There is no assurance that CVAL will continue to compete
successfully in its market area.
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Limited Adjustment to the Exchange Ratio in the Event of a Drop in CVAL Stock
Prices
The Exchange Ratio is expressed in the Merger Agreement as a variable
ratio, which is designed to increase the number of shares of CVAL Common Stock
to be exchanged for PCIS Common Stock to reflect a decrease, within certain
limits, in the market price of CVAL Common Stock prevalent just before the
Effective Time or decrease such number of shares to reflect an increase, within
certain limits, in that market price. But the variable denominator in the
formula used to compute the Exchange Ratio, an average of last asked prices over
a specified period preceding the exchange (see "The Exchange Ratio"), will only
reflect averages ranging from $24.50 to $27.50. Any deviation in the applicable
average above $27.50 or below $24.50 will be treated as if the average were
$27.50 or $24.50, respectively. Accordingly, the Exchange Ratio will not be
adjusted in the event of any increase or decrease in the applicable average
price of CVAL Common Stock beyond these upper and lower limits of CVAL Common
Stock. In particular, even an extreme drop in the applicable average asked price
below $24.50 will not entitle holders of PCIS Common Stock to any corresponding
adjustment to the number of shares of CVAL Common Stock they will receive in the
Merger. Additionally, neither CVAL nor PCIS has the right to terminate the
Merger Agreement in the event of any increase or decrease in the market price of
CVAL Common Stock.
The market price of CVAL Common Stock at the Effective Time may vary
from the price at the date of this Proxy Statement/Prospectus and the date of
the Meeting, possibly by a material amount including a substantial decrease
below $24.50. Such variation may be the result of changes in the business,
operations or prospects of CVAL, regulatory considerations, general market and
economic conditions and other factors, many of which will be beyond the control
of CVAL. Because the Effective Time may occur at a date later than the date of
the Meeting, there can be no assurance that the market price of CVAL Common
Stock on the date of the meeting will be indicative of its market price at the
Effective Time. CVAL and PCIS have no intention of resoliciting shareholder
approval should the market price of CVAL Common Stock change materially after
the date of the Meeting. The Effective Time will occur no later than the 3lst
business day following receipt of all shareholder approvals required by the
Merger Agreement and the satisfaction of certain legal requirements. See "The
Merger Agreement--The Effective Time." The market value of the CVAL Common Stock
issued in the Merger, and the value of the PCIS Common Stock surrendered in the
Merger, may be higher or lower than the value of such shares at the time the
Merger was negotiated or approved by shareholders. See "Summary--Market Prices
and Dividends."
THE MEETING
General; Matters to be Considered
The Meeting will be held at 1650 Market Street, Suite 3050,
Philadelphia, Pennsylvania 19103 on [day], [date], 1998, at 10:00 a.m., local
time. The purpose of the Meeting is to consider and vote upon the following
matters: (i) the approval of the Merger Agreement and any other actions as may
be required in furtherance of the Merger; and (ii) the transaction of such other
business as may properly come before the Meeting and any adjournment or
postponement thereof, and matters incident to the conduct of the Meeting.
Revocability of Proxies; Default Voting of Proxies
Any person giving a proxy has the power, unless such proxy is coupled
with an interest, to revoke it at any time before its exercise by giving notice
of revocation to the Secretary of PCIS. In the absence of contrary instructions,
properly executed proxies, received and unrevoked, will be voted by the persons
named in the proxy: (i) for the approval of the Merger Agreement and any other
actions as may be required in furtherance of the Merger; and (ii) in their
discretion, on such other business as may properly come before the Meeting and
matters incident to the conduct of the Meeting.
Board of Directors' Recommendations
THE PCIS BOARD HAS UNANIMOUSLY APPROVED THE MERGER AGREEMENT AND
UNANIMOUSLY RECOMMENDS THAT PCIS SHAREHOLDERS VOTE "FOR" THE APPROVAL OF THE
MERGER
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AGREEMENT AND ANY OTHER ACTIONS AS MAY BE REQUIRED IN FURTHERANCE OF THE MERGER.
SEE "THE MERGER--PCIS'S REASONS FOR THE MERGER; RECOMMENDATION OF THE PCIS
BOARD."
Record Date; Quorum; Required Vote
Only holders of record of PCIS Common Stock at the close of business
on the PCIS Record Date (which is ___________, 1998) are entitled to receive
notice of and to vote at the Meeting. At the close of business on the PCIS
Record Date, there were shares of PCIS Common Stock outstanding. Each share of
PCIS Common Stock is entitled to one vote on all matters presented to the
Meeting with no right to vote cumulatively.
PCIS's bylaws provide that the presence, in person, by proxy or by
conference telephone or similar communications equipment, of a majority of the
issued and outstanding shares of PCIS Common Stock entitled to vote at the
Meeting will constitute a quorum. A quorum, once established, will not be broken
by the withdrawal from the Meeting of enough votes to leave less than a quorum,
and the votes present at the Meeting after the establishment of a quorum will be
sufficient to transact all business at the Meeting.
Under Pennsylvania law, approval of the Merger Agreement will require
the affirmative vote of a majority of the shares of PCIS Common Stock
outstanding as of the PCIS Record Date. Certain provisions of the Merger
Agreement may in effect impose the requirement of an affirmative vote of not
less than 90% of outstanding PCIS Common Stock. See "The Merger Agreement--
Conditions Precedent to Obligations of CVAL." Abstentions will be counted for
purposes of determining the presence or absence of a quorum for the transaction
of business at the meeting, and, with respect to voting on the Merger proposal,
have the same effect as a vote against the Merger.
Share Ownership of Officers, Directors and Certain Shareholders
At the close of business on the PCIS Record Date, directors and
executive officers of PCIS and their affiliates were the beneficial owners of an
aggregate of 3,400 shares (59.39%) of the PCIS Common Stock then outstanding.
See "Directors and Executive Officers of PCIS--Security Ownership of Certain
Beneficial Holders and Management."
Solicitation of Proxies
Proxies are being solicited hereby on behalf of the PCIS Board. In
addition to the use of the mails, solicitation may be made in person or by
telephone or otherwise by directors, officers and regular employees of PCIS.
Such directors, officers and regular employees will not be additionally
compensated for such solicitation, but may be reimbursed for out-of-pocket
expenses incurred in connection therewith. If undertaken, the expense of such
solicitation is expected to be nominal. PCIS may retain the services of third
parties to aid in the solicitation of proxies.
THE MERGER
General
The description of the Merger and the Merger Agreement contained in
this Proxy Statement/Prospectus does not purport to be complete and is qualified
in its entirety by reference to the Merger Agreement, a copy of which is
attached hereto as Appendix A and incorporated herein by reference.
At the Effective Time, Merger Subsidiary will merge with and into
PCIS, leaving PCIS as the surviving corporation in the Merger and a wholly-owned
subsidiary of CVAL. The Merger will become effective on 12:01 a.m. on the first
business day following the Closing, which is to take place no later than the
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30th business day following receipt of all shareholder approvals required by the
Merger agreement and all necessary governmental approvals (if any), the
expiration of any related waiting periods and the lifting of any stay of any
such governmental approval or of any injunction against the Merger. See "The
Merger Agreement--General Conditions Precedent to the Merger." The filing of the
certificate of merger will occur immediately following the Closing.
At the Effective Time, each share of PCIS Common Stock issued and
outstanding immediately prior to the Effective Time (other than shares the
holders of which are exercising appraisal rights See "Dissenters Rights," below)
will by virtue of the Merger and without any action on the part of the holder
thereof be automatically converted into the right to receive a number of shares
of CVAL Common Stock determined in accordance with the Exchange Ratio set forth
in the Merger Agreement. No fractional shares of CVAL Common Stock will be
issued in connection with the Merger. In lieu of any fractional shares, CVAL
will pay to each holder of PCIS Common Stock otherwise entitled to receive a
fractional share, an amount in cash. See the "Merger Agreement--Conversion of
PCIS Shares; The Exchange Ratio."
Background of the Merger
An officer and member of PCIS's Board of Directors has known members
of CVAL's senior management for several years and has been a member of the
Frazer Community Board of CVAL's bank subsidiary since 1994. Through this
employee, PCIS established a formal relationship with CVAL late in 1993, with
PCIS offering investment brokerage services at CVAL banking locations. Those
relationships continue to the present time. Various employees and officers of
PCIS have met with employees and officers of CVAL during this time.
In September, 1997, an informal meeting was held between members of
PCIS's management and their counterparts at CVAL to determine if there could be
a mutual benefit to establishing a closer alliance. No substantive talks were
held until early November, 1997, at which time CVAL management indicated an
offer would be made. There was no indication as to the terms of an offer, when
an offer might be made, or whether the offer would be satisfactory to PCIS.
Following the November meeting with CVAL, two members of PCIS's senior
management met with senior management of another financial institution which had
expressed a general interest in acquiring a brokerage firm. Two members of
PCIS's senior management had known the representative of the financial
institution for several years.
Following further discussions with this second financial institution,
a formal offer was delivered to PCIS management by such institution on December
2, 1997. A written indication of interest, dated December 3, 1997 and outlining
major terms of a proposed acquisition of PCIS by CVAL, was also delivered to
PCIS management.
On December 4, 1997, PCIS's Board of Directors met to consider whether
either offer should be accepted and, if so, which. PCIS's Board voted
unanimously to recommend to its shareholders that they accept the offer made by
CVAL. At a shareholders meeting held on December 9, 1997 called for the purpose,
PCIS's shareholders unanimously voted to accept the offer and authorized its
Chairman and President to do all things necessary to accomplish the merger on
terms no less favorable than those contained in CVAL's offer.
CVAL's Reasons for the Merger
In approving the Merger Agreement, CVAL's Board of Directors considered, in
addition to the terms and conditions of the Merger Agreement, the market price
of CVAL Common Stock and the historical financial information and future
prospects of PCIS, the following potential benefits of the Merger:
Opportunity to increase fee income allowing CVAL to rely less on
interest margins for core earnings.
Expand product lines for alternative investments and enhance
existing products offered the Bank.
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Create the opportunity to retain an all-inclusive relationship
with CVAL customers so that those customers whose investment
portfolios are diversified can still retain their entire
relationship under a single company umbrella.
Expand CVAL's market presence further east of Chester County.
PCIS's personalized customer service fits in well with the
service culture of a community bank such as the Bank and
creates a competitive advantage over larger banks offering
similar broker services.
The financial advisory services provided by PCIS will work well
with the trust services provided by the Bank.
The opportunity to associate with professionals with extensive
experience in a broker/dealer industry with a loyal and long term
client base.
The foregoing list of factors considered and given weight by the CVAL
Board is not intended to be exhaustive, but includes material factors considered
by the CVAL Board. In view of the variety of factors considered in connection
with its evaluation of the Merger, the CVAL Board did not find it practicable to
and did not attempt to rank or assign relative weights to the foregoing factors.
In addition, individual members of the CVAL Board may have given different
weights to different factors.
PCIS's Reasons for the Merger; Recommendation of the PCIS Board
On April 14, 1998, the PCIS Board, by unanimous vote, approved the
Merger Agreement and the transactions contemplated thereby (including the
Merger) and decided to recommend adoption of the Merger Agreement and the
transactions contemplated thereby to PCIS's shareholders. In reaching these
conclusions, the PCIS Board considered, among other things, the following
factors:
The terms and conditions of the Merger Agreement, including the
amount and form of consideration to be paid pursuant to the
Merger Agreement.
Historical market prices and trading information with respect to
CVAL Common Stock.
Historical results of operations, current financial condition and
future prospects of CVAL and PCIS.
Greater opportunities for representatives of PCIS through the
ability to offer a broader product line of financial services
which can be offered to clients.
Greater opportunity for other employees through potential
advancement in a larger organization.
A belief that combined financial services organizations will
enjoy a competitive advantage over independent broker/dealers
which offer a much more restricted array of services.
The fact that CVAL, as a larger organization, has greater depth
of management than PCIS.
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The desirability of enhancing the liquidity of shareholders'
investments in PCIS. Shareholders of PCIS have been subject to
restrictive covenants if they wish to sell shares; the sale
price, based on a formula, is believed to be below that which
would be received for shares in a publicly owned brokerage firm.
In addition, in certain circumstances a shareholder who wishes to
sell may not be able to, due to regulatory constraints on paying
out of capital from a brokerage firm. Due to PCIS's small size
and lack of need for additional capital, it would not be
practical, in the view of PCIS management, to make a public
offering of shares. The PCIS Board believes that an exchange of
PCIS shares for CVAL shares on the basis of the terms of the
Merger Agreement would afford PCIS shareholders both greater
marketability and a significantly higher market value than they
would have achieved were PCIS to remain an independent and
privately owned organization.
The foregoing list of factors considered and given weight by the PCIS
Board is not intended to be exhaustive, but includes material factors considered
by the PCIS Board. In reaching its determination to approve the Merger Agreement
and the transactions contemplated thereby, the PCIS Board did not assign any
relative or specific weights to the various factors considered by it nor did it
specifically characterize any factor as positive or negative (except as
described above), and individual directors may have given different weights to
different factors and may have viewed certain factors more positively or
negatively than others.
FOR THE REASONS DESCRIBED ABOVE, THE PCIS BOARD UNANIMOUSLY RECOMMENDS
THAT THE HOLDERS OF PCIS COMMON STOCK VOTE "FOR" APPROVAL OF THE MERGER
AGREEMENT AND THE APPROVAL OF ANY OTHER ACTIONS REQUIRED IN FURTHERANCE OF THE
MERGER.
Certain Federal Income Tax Consequences
Following is a summary of the anticipated federal income tax
consequences of the Merger based on current law. Neither CVAL nor PCIS has
requested or will request any ruling from the IRS as to the United States
federal income tax consequences of the Merger. Future legislative, judicial or
administrative changes or interpretations, which may be retroactive, could alter
or modify the statements set forth herein. This summary may not apply to certain
classes of taxpayers, including, without limitation, dealers in securities,
insurance companies, tax-exempt organizations, financial institutions,
nonresident aliens, foreign corporations, persons who acquired shares of PCIS
Common Stock pursuant to the exercise of employee stock options or rights or
otherwise as compensation, and persons who hold shares of PCIS Common Stock in a
hedging transaction or as part of a straddle or conversion transaction. Also,
this summary does not address state, local or foreign tax consequences of the
Merger. Consequently, each holder of PCIS Common Stock (a "Holder") should
consult such Holder's own tax advisor as to the specific tax consequences of the
Merger to such Holder.
The Merger is intended to be treated as a "reorganization" within the
meaning of Section 368(a) of the Code and CVAL, and it is intended that CVAL and
PCIS will each be a "party to a reorganization" within the meaning of Section
368(b) of the Code. Accordingly, for federal income tax purposes, no income,
gain or loss will be recognized by either CVAL or PCIS as a result of the
Merger, and Holders who exchange shares of PCIS Common Stock for shares of CVAL
Common Stock pursuant to the Merger will generally be treated as follows: (i)
except for cash received in lieu of fractional shares, no income, gain or loss
generally will be recognized by PCIS shareholders on the exchange of their
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shares of PCIS Common Stock for shares of PCIS Common stock; (ii) the basis of
the CVAL Common Stock to be received by the PCIS shareholders will be, in each
instance, the same as the basis of the PCIS Common Stock surrendered in exchange
therefor; (iii) the holding period of the CVAL Common Stock to be received by
the shareholders of PCIS will include the period during which the PCIS Common
Stock surrendered in exchange therefor has been held, provided that the PCIS
Common Stock surrendered is held as a capital asset on the date of the exchange
pursuant to the Merger; and (iv) the payment of cash to the PCIS shareholders in
lieu of their fractional share interests of CVAL Common Stock will be treated as
having been received as a distribution in full payment in exchange for the
fractional share interest of CVAL Common Stock which such shareholders would
otherwise be entitled to receive and will qualify as capital gain or loss.
It is a condition precedent to the obligations of CVAL and PCIS to
consummate the Merger that CVAL and PCIS receive an opinion of Schnader Harrison
Segal & Lewis LLP, counsel to CVAL, to the effect that (i) the Merger will
qualify as a reorganization within the meaning of Section 368(a) of the Code and
PCIS and CVAL will each be a "party to a reorganization" within the meaning of
Section 368(b) of the Code; (ii) no gain or loss will be recognized by PCIS or
CVAL by reason of the Merger; (iii) except for cash received in lieu of
fractional shares, no gain or loss will be recognized by the shareholders of
PCIS who receive solely CVAL Common Stock upon the exchange of their shares of
PCIS Common Stock for shares of CVAL Common Stock; (iv) the basis of the CVAL
Common Stock to be received by PCIS shareholders will be, in each instance, the
same as the basis of the PCIS Common Stock surrendered in exchange therefor; (v)
the holding period of the CVAL Common Stock received by a PCIS shareholder
receiving CVAL Common Stock will include the period during which the PCIS Common
Stock surrendered in exchange therefore was held; and (vi) cash received by a
PCIS shareholder in lieu of a fractional share interest of CVAL Common Stock
will be treated as having been received as a distribution in full payment in
exchange for the fractional share interest of CVAL Common Stock which he would
otherwise be entitled to receive and will qualify as capital gain or loss. The
opinion referred to in this paragraph will be based upon certain facts,
assumptions and representations and/or covenants, including those contained in
certificates of officers of CVAL, PCIS and, possibly, others. If such opinion is
not received, the Merger will not be consummated unless the condition requiring
its receipt is waived. CVAL and PCIS currently anticipate that such opinion will
be delivered and that CVAL and PCIS will not waive the condition requiring
receipt of such opinion. Such opinion will not be binding upon the IRS and no
assurance can be given that the IRS will not take a contrary position.
THE FOREGOING CONSTITUTES ONLY A GENERAL DESCRIPTION OF THE FEDERAL
INCOME TAX CONSEQUENCES OF THE MERGER, WITHOUT CONSIDERATION OF THE PARTICULAR
FACTS AND CIRCUMSTANCES OF EACH PCIS SHAREHOLDER'S SITUATION. EACH PCIS
SHAREHOLDER IS ENCOURAGED TO CONSULT HIS OR HER OWN TAX ADVISORS AS TO
PARTICULAR FACTS AND CIRCUMSTANCES WHICH MAY BE UNIQUE TO SUCH SHAREHOLDER AND
NOT COMMON TO SHAREHOLDERS AS A WHOLE AND ALSO AS TO ANY ESTATE, GIFT, STATE,
LOCAL OR FOREIGN TAX CONSEQUENCES ARISING OUT OF THE MERGER AND/OR ANY SALE OF
CVAL COMMON STOCK RECEIVED IN THE MERGER.
Interests of Certain Persons and Employee Matters
In considering the recommendation of the CVAL Board and the PCIS Board
with respect to the Merger, shareholders of PCIS should be aware that certain
members of the management of PCIS have certain interests in the Merger that are
in addition to the interests of shareholders of PCIS generally.
Directorships. CVAL has indicated a desire to invite Edward T. Borer,
Chairman of PCIS, to become a director of CVAL following the Merger.
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Employment Agreements. In connection with the Merger, PCIS has entered
into employment agreements, which become effective upon consummation of the
Merger, with Edward T. Borer, PCIS's Chairman, A. Louis Denton, PCIS's
President, and each Vice President (registered representative) of PCIS. The term
of the employment agreement is one year in the case of Mr. Borer, and five years
in the case of each other individual. Mr. Borer's annual base salary under his
agreement will be $35,339 and he will be entitled to receive a bonus for 1998 in
an amount not less than the bonus he received for 1997 ($15,187) if the gross
revenues of PCIS in 1998 are at least as much as they were in 1997. Mr. Denton's
annual base salary under his agreement will be $9,930, and he will be entitled
to receive a bonus in an amount not less than the bonus he received for 1997
($11,390) for any year, 1998 through 2002, inclusive, for which the gross
revenues of PCIS are at least as much as they were in 1997. Messrs. Borer and
Denton also may receive commissions on their sales of securities. The
compensation for each of the Vice Presidents of PCIS under their agreements is
comprised solely of commissions. The commission rates provided for Messrs.
Borer, Denton and all of the Vice Presidents are the same as the commission
rates currently in effect at PCIS and as had been in effect at PCIS prior to
commencement of merger negotiations between PCIS and CVAL. The Board of
Directors of PCIS believes that the grant of the employment agreements to each
of these individuals is appropriate in view of the fact that the Merger
Agreement requires each such person, as a shareholder of PCIS, to sign a
non-compete agreement having a term of five years as a condition precedent to
consummation of the Merger.
Accounting Treatment
The Merger is intended to be treated as a pooling-of-interests for
accounting purposes in accordance with generally accepted accounting principles
and under the accounting rules of the Commission. In order to preserve the
intended accounting treatment of the Merger as a pooling-of-interests, the
Merger Agreement also requires as a condition to the obligations of CVAL and
Merger Subsidiary under the Merger Agreement that each person deemed to be an
"affiliate" of PCIS enter into an agreement not to sell shares of CVAL Common
Stock acquired in the Merger until financial results covering at least 30 days
of post-Merger combined operations have been published.
Antitrust
No filing in respect of the Merger is required under the
Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended.
Dissenters Rights
General. Pursuant to the BCL, any holder of PCIS Common Stock has the
right to dissent from the Merger and to obtain payment of the "fair value" of
such holder's PCIS Common Stock, in the event that the Merger is consummated.
Any shareholder of PCIS who contemplates exercising a holder's right
to dissent is urged to read carefully the provisions of Subchapter D of Chapter
15 of the BCL attached to this Proxy Statement/Prospectus as Appendix B. The
following is a summary of the steps to be taken if the right to dissent is to be
exercised, and should be read in connection with the full text of Subchapter D
of Chapter 15 of the BCL. Each step must be taken in the indicated order and in
strict compliance with the applicable provisions of the statute in order to
perfect dissenter's rights. The failure of any holder of PCIS Common Stock to
comply with the aforesaid steps will result in the holder receiving the
consideration contemplated by the Merger Agreement in the event that the Merger
is consummated. See "The Merger--Conversion of PCIS Shares."
Any written notice or demand which is required in connection with the
exercise of dissenters rights, whether before or after the Effective Time, must
be sent to Philadelphia Corporation for Investment Services, 1650 Market Street,
Suite 3050, Philadelphia, Pennsylvania 19103, Attention: Edward T. Borer.
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Fair Value. The term "fair value" means the value of a share of PCIS
Common Stock immediately before consummation of the Merger taking into account
all relevant factors, but excluding any appreciation or depreciation in
anticipation of the Merger.
Notice of Intention to Dissent. A PCIS shareholder who wishes to
dissent must file with PCIS, prior to the vote of shareholders on the Merger at
the Meeting, a written notice of intention to demand payment of the fair value
of such holder's share of PCIS Common Stock if the Merger is effected, must
effect no change in the beneficial ownership of his or her PCIS Common Stock
from the date of such notice through the Effective Time, and must refrain from
voting his or her PCIS Common Stock for approval of the Merger Agreement.
Neither a proxy nor a vote against approval of the Merger will constitute the
necessary written notice of intention to dissent.
Notice to Demand Payment. If the Merger Agreement is approved by the
required vote of holders of PCIS Common Stock, PCIS will mail a notice to all
dissenters who gave due notice of intention to demand payment and who refrained
from voting for approval of the Merger Agreement. The notice will state where
and when a written demand for payment must be sent and certificates for PCIS
Common Stock must be deposited in order to obtain payment, and will include a
form for demanding payment and a copy of Subchapter D of Chapter 15 of the BCL.
The time set for receipt of the demand for payment and deposit of stock
certificates will be not less than 30 days from the date of mailing of the
notice.
Failure to Comply with Notice to Demand Payment, etc. A holder of PCIS
Common Stock who fails to timely demand payment or fails to timely deposit his
or her PCIS share certificates, as required by PCIS notice, will forfeit his or
her dissenters rights and such holder will receive share of CVAL Common Stock
determined in conformity with the Exchange Ratio.
Payment of Fair Value of Shares. Promptly after the Effective Time, or
upon timely receipt of demand for payment if the Merger already has been
consummated, PCIS will either remit to dissenters who have made demand and have
deposited their stock certificates the amount that PCIS estimates to be the fair
value of the PCIS Common Stock or give written notice that no such remittance is
being made. The remittance or notice will be accompanied by: (i) a closing
balance sheet and statement of income of PCIS for a fiscal year ending not more
than 16 months before the date of remittance or notice together with the latest
available interim financial statements; (ii) a statement of PCIS' estimate of
the fair value of the PCIS Common Stock; and (iii) a notice of the right of the
dissenter to demand supplemental payment under the BCL accompanied by a copy of
Subchapter D of Chapter 15 of the BCL.
Estimate by Dissenter of Fair Value of Shares. If a dissenter believes
that the amount stated or remitted by PCIS is less than the fair value of the
PCIS Common Stock, a dissenter may send to PCIS his or her own estimate of the
fair value of the PCIS Common Stock, which shall be deemed to be a demand for
payment of the amount of the deficiency. If PCIS remits payment of its estimated
value of a dissenter's PCIS Common Stock and the dissenter does not file his or
her own estimate within 30 days after the mailing by PCIS of its remittance, the
dissenter will be entitled to no more than the amount remitted to him or her by
PCIS.
Valuation Proceedings. If any demands for payment remain unsettled
within 60 days after the latest to occur of: (i) the Effective Time; (ii) timely
receipt by PCIS of any demands for payment; or (iii) timely receipt by PCIS of
any estimates by dissenters of the fair value, PCIS may file in the Court of
Common Pleas of Philadelphia County (the "Court") an application requesting that
the fair value of the PCIS Common Stock be determined by the Court. In such
case, all dissenters, wherever residing, whose demands have not been settled,
shall be made parties to the proceeding as in an action against their shares,
and a copy of the application shall be served on each such dissenter.
If PCIS were to fail to file such an application, then any dissenter,
on behalf of all dissenters who have made a demand and who have not settled
their claim against PCIS, may file an application in the name of PCIS at any
time within the 30-day period after the expiration of the 60-day period and
request that the fair value be determined by the Court. The fair value
determined by the Court may, but need not, equal the dissenters' estimates of
fair value. If no dissenter files such an application, then each dissenter
entitled to do so shall be paid PCIS' estimates of the fair value of the PCIS
Common Stock and no more, and may bring an action to recover any amount not
previously remitted, plus interest at a rate the Court finds fair and equitable.
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PCIS intends to negotiate in good faith with any dissenting
shareholders. If after negotiation a claim cannot be settled, then PCIS intends
to file an application requesting that the fair value of the PCIS Common Stock
be determined by the Court.
Costs and Expenses. The costs and expenses of any valuation
proceedings in the Court, including a reasonable compensation and expenses of
any appraiser appointed by the Court to recommend a decision on the issue of
fair value, will be determined by the Court and assessed against PCIS except
that any part of the costs and expenses may be apportioned and assessed by the
Court against all and any of the dissenters who are parties and whose action in
demanding supplemental payment the Court finds to be dilatory, obdurate,
arbitrary, vexatious or in bad faith.
Nasdaq National Market
CVAL will use its best efforts to cause the shares of CVAL Common
Stock to be issued in connection with the Merger to be approved for listing on
the Nasdaq National Market at or prior to the Effective Time.
DESCRIPTION OF CVAL CAPITAL STOCK
The authorized capital stock of CVAL consists of 10 million shares of
common stock, $1.00 par value per share, and five million shares of preferred
stock.
Common Stock
Holders of shares of CVAL Common Stock are entitled to one vote per
share, without cumulative voting, on all matters to be voted upon by
shareholders. Subject to preferences that may be applicable to any outstanding
preferred stock, holders of CVAL Common Stock are entitled to receive ratably
such dividends as may be declared by the CVAL board of directors (the "Board")
out of funds legally available therefor after consideration of certain
regulatory and tax restrictions. See "Regulations Affecting Dividends on CVAL
Capital Stock," below. In the event of a liquidation or dissolution of CVAL,
holders of CVAL's Common Stock are entitled to share ratably in all assets
remaining after payment of liabilities and the liquidation preference of any
outstanding preferred stock. CVAL Common Stock has no preemptive or other
subscription rights, and there are no conversion rights or redemption or sinking
fund provisions with respect to shares of CVAL Common Stock.
CVAL's articles of incorporation and bylaws contain certain
provisions, including a classified board provision, which may operate, either
alone, or in combination with other provisions, as anti-takeover devices. See
"Anti-takeover Provisions of the Articles of Incorporation and Bylaws of CVAL,"
below.
Preferred Stock
The preferred stock may be issued by resolution of the Board from time
to time in one or more series, with or without par value, in such amounts and
with such voting rights, designations, preferences, qualifications, privileges,
limitations, options, conversion rights, restrictions and other special or
relative rights as the Board may determine. The issuance of preferred stock does
not require approval of shareholders except as may be required by law or
regulatory authorities, as would be the case, for example, if shares were to be
issued in a merger requiring shareholder approval under Pennsylvania law.
Anti-takeover Provisions of the Articles of Incorporation and
Bylaws of CVAL
"Classified" Board of Directors; Removal of Directors. The articles of
incorporation of CVAL provide for a "classified" board, divided into three
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classes, serving for successive terms of three years each, with one class to be
elected at each annual meeting. The number of directors which constitutes the
entire board of directors of CVAL is to be fixed by the Board from time to time.
The number may not be less than 3, but no maximum number is prescribed. The
Board presently consists of nine persons. Neither CVAL's articles of
incorporation nor its bylaws permit shareholders to cumulate their votes in an
election of directors.
All vacancies in the Board, including those resulting from an increase
in the size of the Board, will be filled by the vote of a majority of the Board
then in office, even if less than a quorum. A director elected to fill a
directorship resulting other than from an increase in the size of the Board
(e.g., resulting from resignation or death of a director) serves for the
unexpired term of his or her predecessor in office. In the case of a
corporation, such as CVAL, having a classified board of directors, any director
chosen to fill a vacancy (including a vacancy resulting from an increase in the
number of directors) would hold office until the next election of the class for
which such director has been chosen.
Generally, under the provisions of the Pennsylvania Business
Corporation Law of 1988, as amended ("BCL"), which apply to CVAL, a director may
be removed by action of shareholders with or without cause. However, the BCL
provides that directors such as those of CVAL, who have been classified into
staggered terms by action of the shareholders, may be removed only for cause.
Accordingly, the directors of CVAL will be removable by vote of shareholders
only for cause. Cause for removal exists only if the director whose removal is
proposed has been either judicially declared of unsound mind or convicted of an
offense punishable by imprisonment for a term of more than one year, or if the
director has breached or failed to perform his or her fiduciary duty to CVAL and
such breach or failure to perform constitutes self-dealing, willful misconduct
or recklessness, or if within 60 days after the director has been notified of
his or her election, the director does not accept the office either in writing
or by attending a meeting of the Board.
The election of directors for staggered terms significantly extends
the time required to make any change in control of the Board and may tend to
discourage any surprise or non-negotiated takeover bid for control of CVAL.
Under CVAL's bylaws, it will take at least two annual meetings for the holders
of a majority of CVAL's voting securities to make a change in control of the
Board because only a minority (approximately one-third) of the directors will be
elected at each meeting. Furthermore, because CVAL's articles of incorporation
do not provide for cumulative voting in the election of directors, a minority
shareholders cannot, solely by voting its shares, gain representation on CVAL's
classified Board. Therefore, the holders of a majority of CVAL's outstanding
shares can and will elect all directors.
These provisions may tend to perpetuate management because of the
additional time required to change the composition of the Board. Because the
provisions will increase the time required for a takeover bidder to obtain
control of CVAL without the cooperation of the Board, even if the takeover
bidder were to acquire a majority of CVAL's outstanding stock, they may tend to
discourage not only hostile attempts to gain control but any attempt not
approved by the Board, perhaps including some tender offers that CVAL's
shareholders may believe would be in their best interests. The classified board
provision will apply to all elections of directors and, accordingly, it will
make it more difficult for CVAL's shareholders to change the composition of the
Board if the shareholders believe such a change would be desirable, even in the
absence of any third person's acquisition of voting control of CVAL.
The Board believes that these provisions will be in the best interests
of CVAL and its shareholders. In the Board's judgment, it is prudent to reduce
the vulnerability of CVAL to takeover attempts that are not negotiated with, and
approved by, the Board. In the Board's judgment, it will be in the best position
to determine the true value of CVAL and to negotiate more effectively for what
may be in the best interests of its shareholders. In the Board's view, these
provisions should not discourage persons from proposing a merger or other
transaction at prices reflective of the true value of CVAL and where the
transaction is in the best interests of all shareholders. Outside of the
takeover context, these provisions are, in the Board's view, desirable in order
to promote continuity of policies and stability of management.
Shareholder Nominations and Proposals; Special Meetings of
Shareholders; Shareholders' Action Without a Meeting. CVAL's bylaws set forth
certain procedures by which shareholders may propose business to be considered
at an annual meeting and may nominate persons to serve on the Board. Any
shareholder proposal with respect to business to be considered at the meeting,
including a proposal to amend the bylaws, or to change any action of the board
with respect thereto must be submitted in writing to the Secretary of CVAL 60
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days before the meeting, together with the shareholder's name and address, the
number of CVAL's shares owned by the shareholder and a description of any
financial interest which the shareholder has in such transaction. Nominations of
individuals for election to the Board may be made by any shareholder of CVAL by
delivering a written notice to the Secretary of CVAL not less than 30 days prior
to an annual meeting, setting forth certain information required by Section 3.8
of CVAL's bylaws. Solely those persons nominated by the Board, acting as the
nominating committee, or by shareholders in accordance with Section 3.8 of its
bylaws, may be voted upon at an annual meeting unless the Board fails to act at
least 30 days prior to the meeting, in which case nominations for directors may
be made at the annual meeting by any shareholder entitled to vote at such
meeting.
The Board believes that these procedures afford shareholders an
adequate opportunity to propose matters to be voted upon and to nominate
directors, and permit annual meetings to be conducted in an orderly manner. They
may have the effect, however, of deterring nominations or proposals other than
those made by the Board.
Although the BCL permits a public corporation's bylaws to provide that
a special meeting of shareholders may be called by the Secretary upon the
written request of the holders of 20% of the shares entitled to vote at the
meeting, the bylaws of CVAL contain no such provision. Therefore, shareholders
of CVAL are not entitled to call a special meeting of shareholders.
Under the BCL, any action which may be taken at any annual or special
meeting may be taken without a meeting if a consent in writing, setting forth
the action so taken, is signed by the holders of all outstanding shares entitled
to vote, unless the articles of incorporation or bylaws prohibit such action.
The bylaws of CVAL do not preclude such action. Nevertheless, the unanimous
written consent procedure is not feasible for corporations having a large number
of shareholders. This practical consideration effectively requires prior notice
and a shareholders' meeting for CVAL's shareholders to take any action.
The foregoing provisions provide CVAL's Board and shareholders with
the opportunity to review any proposed action, express their views and take any
action deemed appropriate to protect the interest of the shareholders and CVAL
before the action is taken. The provisions preclude a takeover bidder from
completing a merger or other business combination with CVAL without granting
CVAL's management and its shareholders an opportunity to make their views known
and to vote at a shareholders' meeting. The delay caused by requiring a
shareholders' meeting to be called by the Board provides management with
additional time to take preventive actions.
Amendment of Articles of Incorporation and Bylaws. Under the BCL, an
amendment of the articles of incorporation of CVAL must be proposed by the
Board; CVAL shareholders are not entitled by statute to propose amendments to
the articles of incorporation. The BCL requires only a majority of the votes
cast at a meeting at which a quorum is present to approve amendments to the
articles, unless the articles of incorporation require a greater vote. CVAL's
articles of incorporation provide that the provisions of the bylaws with respect
to the qualifications, classification and terms of office of the Board may not
be amended, altered or repealed and no provision of the articles or the bylaws
may be adopted inconsistent with those Bylaw provisions without the affirmative
vote of the holders of two-thirds of CVAL's Common Stock. The CVAL bylaws may be
amended by a majority vote of the Board, except that an amendment to the bylaw
provisions with respect to the qualifications, classification or terms of office
of the directors requires the affirmative vote of the holders of two-thirds of
the common stock of CVAL.
Pennsylvania Anti-Takeover Law Provisions
CVAL is subject to various statutory "anti-takeover provisions" of the
BCL, including Subchapters 25E, F, G and H of the BCL. PCIS is not presently
subject to such provisions because it does not have a class of shares registered
under the 1934 Act.
Subchapter 25E (relating to control transactions) provides that if any
person or group acquires 20% or more of the voting power of a covered
corporation, the remaining shareholders may demand from such person or group the
fair value of their shares, including a proportionate amount of any control
premium.
Subchapter 25F (relating to business combinations) delays for five
years and imposes conditions upon "business combinations" between an "interested
shareholder" and the corporation. The term "business combination" is defined
broadly to include various transactions utilizing a corporation's assets for
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purchase price amortization or refinancing purposes. An "interested shareholder"
is defined generally as the beneficial owner of at least 20% of a corporation's
voting shares. Another somewhat similar provision contained in Section 2538 of
the BCL requires transactions with an interested shareholder to be approved by a
majority of the corporation's directors who are unaffiliated with such
shareholders.
Subchapter 25G (relating to control-share acquisitions) prevents a
person who has acquired 20% or more of the voting power of a covered corporation
from voting such shares unless the "disinterested" shareholders approve such
voting rights. Failure to obtain such approval exposes the owner to the risk of
a forced sale of the shares to the issuer. If shareholder approval is obtained,
the corporation is also subject to Subchapters 25I and J of the BCL. Subchapter
25I provides for a minimum severance payment to certain employees terminated
within two years of the approval. Subchapter 25J prohibits the abrogation of
certain labor contracts prior to their stated date of expiration.
Subchapter 25H (relating to disgorgement) applies in the event that:
(i) any person or group publicly discloses that the person or group may acquire
control of the corporation; or (ii) a person or group acquires (or publicly
discloses an offer or intent to acquire) 20% or more of the voting power of the
corporation and, in either case, sells shares within 18 months thereafter. Any
profits from sales of equity securities of the corporation by the person or
group during the 18-month period belong to the corporation if the securities
that were sold were acquired during the 18-month period or within 24 months
prior thereto.
Subchapters 25E, F, G and H contain a wide variety of transactional
and status exemptions, exclusions and safe harbors.
In addition, the BCL permits an amendment of the corporation's
articles or other corporate action, if approved by shareholders generally, to
provide mandatory special treatment for specified groups of nonconsenting
shareholders of the same class by providing, for example, that shares of common
stock held only by designated shareholders of record, and no other shares of
common stock, shall be cashed out at a price determined by the corporation,
subject to applicable dissenters rights.
The BCL also provides that directors may, in discharging their duties,
consider the interests of a number of different constituencies, including
shareholders, employees, suppliers, customers, creditors and the communities in
which the corporation is located. Directors are not required to consider the
interests of shareholders to a greater degree than other constituencies'
interests. The BCL expressly provides that directors do not violate their
fiduciary duties solely by relying on poison pills or the anti-takeover
provisions of the BCL.
COMPARISON OF SHAREHOLDERS' RIGHTS
Upon the consummation of the Merger, holders of PCIS Common Stock will
become shareholders of CVAL. The BCL, PCIS' articles of incorporation and PCIS
bylaws presently govern PCIS shareholders' rights. After the Merger, the BCL,
the CVAL articles of incorporation and the CVAL bylaws will govern their rights.
Certain differences in such rights will arise from differences between such
articles of incorporation and bylaws. Set forth below is a table comparing the
rights of holders of CVAL Common Stock with the rights of holders of PCIS Common
Stock. This table is not intended to provide a complete statement of all
differences affecting the rights of shareholders, but to summarize certain
material differences. One material difference not summarized in the table below
relates to the anti-takeover provisions that CVAL is subject to by law and
pursuant to its articles of incorporation and bylaws. See "Anti-Takeover
Provisions of the Articles of Incorporation and Bylaws of CVAL; Pennsylvania
Anti-Takeover Law," above.
<TABLE>
<CAPTION>
CVAL PCIS
---- ----
<S> <C> <C>
Authorized Stock 10 million shares of common stock, 50,000 shares of
par value $1.00 per share; five common stock, par
million shares of preferred stock value $10.00 per
with par value to be fixed by the share
Board
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<PAGE>
Preemptive Rights None None
Issuance of additional Issuance of shares may be Same as CVAL
shares of authorized approved by simple majority
common stock vote of Board
Number of Directors As determined by the Board, but 3 to 15 in number,
not less than 3 as determined by
the Board
Cumulative Voting None None
Voting: Election of Classified Board (1/3 of the Board No classified Board
Directors elected each year)
Voting One vote for each share of common Same as CVAL
stock owned of record
Removal of Directors Only for cause upon the affirmative With or without cause upon
vote of majority of shareholder votes the affirmative vote of
cast majority of shareholder
votes cast
Shareholder Action: Amendment may not be proposed An amendment requires the
Amendment of Articles proposed by shareholders. An affirmative vote of the
of Incorporation amendment requires the affirmative holders of a majority of outstanding
vote of the holders of a majority shares
of outstanding shares, except that
any amendment to the provisions with
respect to the qualifications,
classification or terms of office of
the directors requires the affirmative
vote of the holders of 2/3 of the out-
standing shares
Shareholder Action: Affirmative vote of majority of Affirmative vote of majority of
Amendment of Bylaws shareholder votes cast, except outstanding shares having voting
that amendments with respect to the power or (except with respect
bylaw provisions fixing the quali- to provisions relating to director
fication, classification or terms of liability and indemnification of
office of directors require the directors, officers, employees
affirmative vote of holders of 2/3 and agents) by a majority vote
outstanding shares of the PCIS Board
Shareholder Action: Yes, if 100% of holders of Same as CVAL
Action by Written outstanding shares consent
Consent
Dissenters Rights Such dissenters rights as are Same as CVAL
granted in the circumstances under
Pennsylvania law. See "The Merger--
Dissenters Rights."
Dividends When declared by the Board from Same as CVAL
legally available funds
Shareholder Action: Affirmative vote of the holders of a Same as CVAL
Merger or consolidation majority of outstanding shares
of CVAL with another
business corporation
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Shareholder Action: Affirmative vote of holders of a Same as CVAL
All other action majority of shares voting at a
meeting at which a quorum (50% of
outstanding shares plus one share)
is present
Right of Shareholders Meeting may not be called by Meeting may be called at request
to Call Shareholders' shareholders of holders of 20% of the
Meeting outstanding shares
Shareholder Derivative Permitted, except that a director Same as CVAL
or Non-Derivative Action shall not be personally liable for
Against Director for monetary damages unless the act
Director Misconduct or omission constituted self-dealing,
recklessness or willful misconduct
Indemnification of Required if the person met the statu- Same as CVAL, except that
Directors, Officers, tory standard of conduct, including indemnification is optional
Employees and Agents when the person serves as director, at PCIS's discretion in the
officer, employee or agent of a case of agents and employees
subsidiary or other entity at the who are not directors or
request of CVAL officers, and PCIS has no
provision for indemnification
of persons serving a subsidiary
of PCIS
Right of Shareholder Nominations must be filed with the PCIS has no procedural requirements
to Nominate Directors Holding Company's Secretary at regarding shareholder nomination of
for Election at Annual least 30 days before meeting; directors
Meeting of Shareholders nominations must include, among other
things, the name, age, address,
occupation and certain share ownership
information regarding nominees
</TABLE>
REGULATIONS AFFECTING DIVIDENDS ON CVAL CAPITAL STOCK
Ability of CVAL's Subsidiary, First Financial Bank, to Pay Dividends to
CVAL
Thrift Regulation. CVAL's ability to pay dividends is primarily
dependent upon receipt of dividends from its savings association subsidiary,
First Financial Bank (the "Bank") which is a Pennsylvania state-chartered
savings association, the deposits of which are insured by the Savings
Association Insurance Fund ("SAIF") of the Federal Deposit Insurance Corporation
("FDIC"). Federal law imposes restrictions on the ability of savings
associations to pay dividends. As a state-chartered savings association, the
Bank is subject to regulation by the Pennsylvania Department of Banking, the
Office of Thrift Supervision ("OTS") and the FDIC. Savings associations which
are subsidiaries of holding companies are required to give the OTS 30 days'
prior notice of any proposed declaration of dividends to the holding company.
Federal regulations impose additional limitations on the payments of
dividends and other capital distributions by savings associations. Under these
regulations, a savings association that, immediately prior to, and on a pro
forma basis after giving effect to, a proposed capital distribution, has capital
(as defined by OTS regulation) that is equal to or greater than the amount of
its fully phased-in capital requirements (a "Tier 1 Institution") generally is
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permitted without OTS approval to make capital distributions during a calendar
year in an aggregate amount equal to the greater of: (i) up to 100% of its net
income to date during the calendar year plus an amount that would reduce by
one-half the amount by which its total capital exceeded its fully phased-in
risk-based capital requirements at the beginning of the calendar year; or (ii)
up to 75% of its net income for the previous four quarters. A savings
association with total capital in excess of current minimum capital requirements
but not in excess of the fully phased-in requirements (a "Tier 2 Institution")
is permitted to make capital distributions without OTS approval of up to between
25% and 75% of its net income for the previous four quarters, less dividends
already paid for such period, depending upon the savings association's level of
risk-based capital. A savings association which fails to meet current minimum
capital requirements (a "Tier 3 Institution") is prohibited from making any
capital distributions without the prior approval of OTS. A Tier 1 Institution
that has been notified by the OTS that it is in need of more than normal
supervision will be treated as either a Tier 2 or Tier 3 Institution. Though
CVAL expects that the Bank will continue to meet its fully phased-in capital
requirements and continue to be authorized to pay dividends in accordance with
the provisions of the OTS regulations discussed above as a Tier 1 Institution,
there can be no assurance of this.
Savings associations are further prohibited from making any capital
distributions if, after making the distribution, a savings association would
fail to satisfy the applicable risk-based capital standards or have a leverage
ratio of less than 4%.
In accordance with the above regulatory restrictions, the Bank has the
ability to pay dividends, and at December 31, 1997, $5,036,000 was available for
the payment of dividends to CVAL.
Federal Tax. To the extent that the Bank makes certain dividend
distributions to CVAL that are considered as made from earnings appropriated to
bad debt reserves and deducted for federal income tax purposes, then an amount
based on the amount distributed will be included in the Bank's taxable income.
The amount of additional taxable income created from this type of distribution
is an amount that, when reduced by the tax attributable to the income, is equal
to the amount of the distribution. A distribution will generally be considered
to be deemed out of the bad debt reserves only if it exceeds the sum of the
current and accumulated earnings and profits of the Bank, as calculated for
federal income tax purposes.
General Corporate Law Restrictions Applicable to CVAL
CVAL itself will be limited only by certain restrictions generally
imposed on Pennsylvania corporations by the BCL. Under the BCL, a distribution
may not be made if, after giving effect thereto: (1) the corporation would be
unable to pay its debts as they become due in the usual course of its business;
or (2) the total assets of the corporation would be less than the sum of its
total liabilities plus (unless otherwise provided in its articles of
incorporation) the amount that would be needed, if the corporation were to be
dissolved at the time as of which the distribution is measured, to satisfy the
preferential rights upon dissolution of shareholders whose preferential rights
are superior to those receiving the distribution. For purposes of restriction
(2), total assets and liabilities are to be determined by the board of
directors, which may base its determination on such factors as it considers
relevant, including, without limitation, the book values of the assets and
liabilities of the corporation, as reflected on its books and records, and
unrealized appreciation and depreciation of the assets and liabilities of the
corporation.
RESALE RESTRICTIONS
All shares of CVAL Common Stock issued pursuant to the Merger will be
freely transferable, except that shares of CVAL Common Stock received by any
person who may be deemed to be an "affiliate" of PCIS prior to the Merger (for
purposes of Rule 145 promulgated under the 1933 Act) may not be resold except in
transactions permitted by Rule 145 or as otherwise permitted under the 1933 Act.
Persons deemed to be affiliates of PCIS are those individuals or entities that
control, are controlled by, or are under common control with, such party and
generally include executive officers and directors of such party as well as
certain principal shareholders of such party.
PCIS has agreed to deliver to CVAL a letter identifying all persons
who are, at the time of the PCIS Meeting, deemed to be "affiliates" (as defined
in the preceding paragraph) of PCIS, and to use its best efforts to cause each
person so identified to deliver to CVAL at or before the Closing, a written
agreement providing that such person will not sell, pledge, transfer or
otherwise dispose of any CVAL Common Stock received by such person in exchange
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for shares of PCIS Common Stock pursuant to the Merger, except (i) pursuant to
an effective registration statement or in compliance with such Rule 145 or
another exemption from the registration requirements of the 1933 Act and (ii)
after such time as financial results covering at least thirty (30) days of
post-merger combined operations have been published within the meaning of
Section 201.01 of the SEC's Codification of Financial Reporting Policies. CVAL
will be entitled to issue appropriate stop transfer instructions to the transfer
agent for the CVAL Common Stock to be issued to such affiliates pursuant to the
Merger, consistent with the terms of the Affiliated Letter. This Proxy
Statement/Prospectus does not cover any resale of CVAL Common Stock received by
affiliates of PCIS in connection with the Merger. CVAL is under no obligation to
register any shares acquired by affiliates of PCIS in connection with the
Merger.
THE MERGER AGREEMENT
The following summary of the Merger Agreement contained in this Proxy
Statement/Prospectus is not intended to be a complete description of the terms
and conditions thereof and is qualified in its entirety by reference to the full
text thereof, which is incorporated herein by reference and a copy of which is
attached hereto as Appendix A.
General
The Merger Agreement provides that, subject to the terms and
conditions thereof and in accordance with Pennsylvania law, at the Effective
Time, CVAL and PCIS will consummate the Merger pursuant to which (i) Merger
Subsidiary will be merged with and into PCIS and the separate corporate
existence of Merger Subsidiary will thereupon cease, and (ii) PCIS, the
surviving corporation, will become a direct wholly-owned subsidiary of CVAL and
will continue to be governed by the laws of the Commonwealth of Pennsylvania.
Effective Time
The Effective Time of the Merger will be at 12:01 a.m. on the first
business day following the Closing Date, which date is to be no later than the
30th business day after receipt of all shareholder approvals required by the
Merger agreement and all necessary governmental approvals (if any), the
expiration of any related waiting periods and the lifting of any stay of any
such governmental approval or of any injunction against the Merger. See "The
Merger Agreement--General Conditions Precedent to the Merger." CVAL and PCIS
currently anticipate that the Effective Time will occur before June 30, 1998.
However, there can be no assurance that the conditions to the Merger will be
satisfied by such date or at all, or that the Merger Agreement will not be
terminated.
Corporate Matters
The certificate of incorporation of Merger Subsidiary will be the
certificate of incorporation of the surviving corporation (except that, at the
Effective Time, the name of the surviving corporation will be changed to "PCIS")
until thereafter amended in accordance with applicable law and such certificate
of incorporation.
The bylaws of Merger Subsidiary in effect at the Effective Time will
be the bylaws of the surviving corporation, until thereafter amended in
accordance with applicable law, the certificate of incorporation of the
surviving corporation and such bylaws.
Conversion of PCIS Shares
The Merger Agreement provides that each share of PCIS Common Stock
issued and outstanding immediately prior to the Effective Time (other than
shares the holders of which are exercising appraisal rights) will, at the
Effective Time, by virtue of the Merger and without any action on the part of
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the holder thereof, be converted into the right to receive a number of shares of
CVAL Common Stock determined in accordance with the Exchange Ratio set forth in
the Merger Agreement. See "The Exchange Ratio", below.
In lieu of any fractional share of CVAL Common Stock to which a holder
of PCIS Common Stock would be entitled, CVAL will pay to each former shareholder
of PCIS Common Stock who otherwise would be entitled to receive a fractional
share of CVAL Common Stock an amount in cash determined by multiplying (i) such
fraction by (ii) the arithmetic mean of the last asked prices for the CVAL
Common Stock reported on the Nasdaq National Market on each business day over
the period of ten consecutive business days ending on the second business day
preceding the Closing.
The Merger Agreement provides that, on and after the Effective Time,
holders of certificates which immediately prior to the Effective Time
represented outstanding shares of PCIS Common Stock (the "Certificates") will
cease to have any rights as shareholders of PCIS, except the right to receive
the consideration set forth in the Merger Agreement for each share of PCIS
Common Stock held by them.
BEFORE THE EFFECTIVE TIME, CVAL WILL APPOINT AN AGENT FOR THE PURPOSE
OF EXCHANGING CERTIFICATES REPRESENTING PCIS COMMON STOCK FOR THE MERGER
CONSIDERATION (THE "EXCHANGE AGENT"). WITHIN FIVE BUSINESS DAYS AFTER THE
EFFECTIVE TIME, CVAL OR THE EXCHANGE AGENT WILL MAIL TO EACH HOLDER OF RECORD OF
A CERTIFICATE WHOSE SHARES OF PCIS COMMON STOCK WERE CONVERTED IN THE MERGER
INTO THE RIGHT TO RECEIVE CVAL COMMON STOCK A LETTER OF TRANSMITTAL AND
INSTRUCTIONS FOR USE IN EFFECTING THE SURRENDER OF SUCH CERTIFICATES IN EXCHANGE
FOR CVAL COMMON STOCK.
PCIS SHAREHOLDERS SHOULD NOT FORWARD PCIS STOCK CERTIFICATES TO THE
EXCHANGE AGENT UNTIL THEY HAVE RECEIVED SUCH TRANSMITTAL LETTERS. PCIS
SHAREHOLDERS SHOULD NOT RETURN STOCK CERTIFICATES WITH THE ENCLOSED PROXY.
The Exchange Ratio
The Exchange Ratio is the quotient of (A) the product of (i) the book
value of PCIS as of January 30, 1998 minus the aggregate amount (if any) paid,
accrued or agreed to be paid by PCIS after January 30, 1998 for the purchase or
redemption of any shares of PCIS Common Stock, times (ii) 2.75, divided by (B)
the Average Price Per Share of CVAL Common Stock. The Average Price Per Share of
CVAL Common Stock will be the arithmetic mean of the last asked prices for the
CVAL Common Stock reported on the Nasdaq National Market on each business day
over the period of ten consecutive business days ending on the second business
day preceding the Closing, unless such Average Price Per Share is greater than
$27.50, in which case it will be fixed at $27.50, or if the Average Price Per
Share is less than $24.50, in which case it will be fixed at $24.50.
Conduct of PCIS Pending The Merger
In the Merger Agreement, PCIS has agreed that, until the Effective
Time, except as expressly provided in the Merger Agreement or with the prior
written consent of CVAL:
(a) PCIS will carry on its business in, and only in, the usual,
regular and ordinary course in substantially the same manner as
heretofore conducted and, to the extent consistent with such
business, use all reasonable efforts to preserve intact its
present business organizations, keep available the services of
its present officers and employees and preserve its relationships
with customers, suppliers and others having business dealings
with it to the end that its goodwill and on-going business will
be unimpaired at the Effective Time;
(b) PCIS will not declare any dividends on or make other
distributions in respect of its capital stock or amend or permit
the amendment of its articles or certificate of incorporation or
bylaws; provided, however, that PCIS may pay a cash dividend to
its shareholders in an amount up to 35% of its earnings for the
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year ended December 31, 1997 (unless it has already done so) and
for the subsequent periods up to the Closing Date, if, both after
giving effect to such dividend and as determined as of the
Closing Date, PCIS's total assets shall exceed $1.5 million, its
cash and marketable securities exceed $913,000 and its
shareholders' equity exceed the greater of $1.2 million or the
amount of its shareholders' equity as at January 30, 1998;
(c) PCIS will not issue, authorize or agree to the issuance of, or
purchase or agree to the purchase of, any shares of its capital
stock of any class or securities convertible into, or rights,
warrants or options to acquire, any such shares or other
convertible securities, except that PCIS may purchase and agree
to purchase PCIS Common Stock if (i) both after giving effect to
such purchase and as determined as of the Closing Date, PCIS's
total assets exceed $1.5 million, its cash and marketable
securities exceed $913,000, and its shareholders' equity exceed
$1.2 million, and (ii) PCIS has received written advice from CVAL
that such purchase will not adversely affect the applicability of
pooling-of-interests accounting treatment for the Merger;
(d) PCIS will use its best efforts to comply with all requirements
and conditions which federal, state or foreign law may impose on
PCIS with respect to the Merger and will promptly cooperate with
and, upon receipt of the request of CVAL given to PCIS in writing
reasonably in advance and requesting specific information, will
use its best efforts to furnish information to CVAL in connection
with any such requirements or conditions imposed upon CVAL or on
any of its subsidiaries or affiliates in connection with the
Merger. To the extent permitted by law, CVAL will request
confidential treatment of any or all confidential information
supplied by PCIS and used by CVAL in any filing with any
governmental body;
(e) PCIS will use its best efforts to obtain (and to cooperate with
CVAL and its subsidiaries and Affiliates in obtaining) any
consent, authorization or approval of, or any exemption by, any
governmental authority or agency, or other third party, required
to be obtained or made by PCIS or any of its Affiliates (or by
CVAL or its subsidiaries or Affiliates) in connection with the
Merger;
(f) PCIS will not (i) acquire or agree to acquire, by merging or
consolidating with, purchasing substantially all of the assets of
or otherwise, any business or any corporation, partnership,
association or other business organization or division thereof or
(ii) commence any new business activity without the prior
approval of CVAL;
(g) PCIS will not sell, lease or otherwise dispose of any assets
which are material, individually or in the aggregate, to the
business or financial condition of PCIS, except in each case in
the ordinary course of business;
(h) PCIS will not incur any indebtedness for money borrowed or issue
or sell any debt securities issued by it, other than borrowings
in the ordinary course of business consistent with prior
practice;
(i) PCIS will not grant or agree to any increase in compensation for
any officer or employee, or any severance or termination pay,
except as may be required under employment or termination
agreements in effect on the date hereof and except for
compensation increases in the ordinary course of business
consistent with prior practice;
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(j) PCIS will not adopt or amend in any material respect any employee
pension, profit-sharing, retirement, insurance, incentive
compensation, severance, vacation or other plan, agreement,
trust, fund or arrangement for the benefit of any employees
(whether or not legally binding);
(k) PCIS will promptly advise CVAL orally and in writing of any
change in the condition (financial or otherwise), properties,
assets, liabilities, operations, business or prospects of PCIS
which is, or in the judgment of PCIS is likely to be, materially
adverse to PCIS;
(l) PCIS will cooperate with CVAL in the preparation of all filings
which are required to be made with the Commission and any state
or other securities regulators to effect the Merger. PCIS will
furnish CVAL with all information concerning PCIS and its
shareholders as CVAL may reasonably request;
(m) PCIS will use its best efforts to ensure application of
pooling-of-interests accounting treatment to the Merger.
Conduct of CVAL Pending the Merger
In the Merger Agreement, CVAL has agreed that, until the Effective
Time, except as expressly provided in the Merger Agreement or with the prior
written consent of PCIS:
(a) CVAL and Merger Subsidiary will use their respective best efforts
to comply promptly with all requirements and conditions which
federal or state law may impose on them or any of their
subsidiaries or Affiliates with respect to the Merger and will
promptly cooperate with and, upon receipt of the request of PCIS
given to CVAL in writing reasonably in advance, and requesting
specific information, CVAL will use its best efforts to furnish
information to PCIS in connection with any such requirements or
conditions imposed upon PCIS or any of its affiliates in
connection with the Merger. To the extent permitted by law, PCIS
will request confidential treatment of all confidential
information supplied by CVAL and used by PCIS in any filing with
any governmental body;
(b) CVAL will use its best efforts to obtain (and to cooperate with
PCIS and its Affiliates in obtaining) any consent, authorization
or approval of, or exemption by, any governmental authority or
agency, or other third party, required to be obtained or made by
CVAL or any of its subsidiaries or Affiliates (or PCIS or its
Affiliates) in connection with the Merger;
(c) CVAL will use its best efforts to ensure application of
pooling-of-interests accounting treatment to the Merger.
Appointment of Directors
CVAL may invite Edward T. Borer to become a member of the Board of
Directors of CVAL immediately following the Effective Time and would then
increase the size of the CVAL Board to ten members.
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No Solicitation of Other Acquisition Proposals
PCIS has agreed that it and its officers and directors will not
initiate, solicit or encourage, directly or indirectly, any inquiries or the
making of any proposal or offer (including any proposal or offer to its
shareholders) with respect to a merger, consolidation or similar transaction
involving, or any purchase, sale or other disposition of all or any significant
portion of the assets or any equity securities of, PCIS (any such proposal or
offer being hereinafter referred to as an "Acquisition Proposal"). Also, except
to the extent legally required for the discharge by its board of directors of
its fiduciary duties as determined upon consultation with counsel, PCIS has
agreed not to engage in any negotiations concerning, or provide any confidential
information or data to, or have any discussion with, any person relating to an
Acquisition Proposal, or otherwise facilitate any effort or attempt to make or
implement an Acquisition Proposal. PCIS has agreed that it will immediately
cease and cause to be terminated any existing activities, discussions or
negotiations with, any parties conducted prior to entering into the Merger
Agreement with respect to any of the foregoing. PCIS will not solicit or
encourage (including by way of furnishing information) any inquiries or the
making of any proposal which may reasonably be expected to lead to any proposal
for a merger or other business combination involving PCIS and not involving CVAL
or any of CVAL's subsidiaries or for the acquisition of a substantial equity
interest in PCIS or a substantial portion of the assets of PCIS by any
individual or entity other than CVAL or any of CVAL's subsidiaries.
Representations and Warranties
In the Merger Agreement, PCIS has made customary representations and
warranties to CVAL with respect to, among other things, its organization,
capitalization, corporate authorization, financial statements, public filings,
employee benefit plans, compliance with laws, the capitalization of PCIS,
transactions with affiliates and employees, litigation, absence of defaults,
contracts, tax matters, labor matters, assets, real property, consents and
approvals, information provided by it for inclusion in the Proxy
Statement/Prospectus, agreements with third party payors, undisclosed
liabilities and the absence of any material adverse change in PCIS since
December 31, 1997.
In addition, PCIS has represented to CVAL that no investment bank,
broker, finder, or other intermediary or other individual, entity or
organization, is entitled to any fee or commission from PCIS or any subsidiary
of PCIS upon consummation of the transactions contemplated by the Merger
Agreement. PCIS has also made certain representations to CVAL relating to its
status as an investment advisor and as a broker-dealer, as well as to the status
of its employees working as broker-dealers.
In the Merger Agreement, CVAL has made customary representations and
warranties to PCIS with respect to, among other things, its organization,
capitalization, corporate authorization, financial statements, public filings,
employee benefit plans, compliance with laws, the capitalization of CVAL,
transactions with affiliates, litigation, absence of defaults, contracts, tax
matters, labor matters, assets, real property, consents and approvals,
information provided by it for inclusion in this Proxy Statement/Prospectus,
agreements with third party payors, undisclosed liabilities and the absence of
any material adverse change in CVAL since December 31, 1997.
In addition, CVAL has represented to PCIS that no investment bank,
broker, finder, or other intermediary or other individual, entity or
organization, is entitled to any fee or commission from CVAL or any subsidiary
of CVAL upon consummation of the transactions contemplated by the Merger
Agreement. CVAL has also represented to PCIS that CVAL owns directly all of the
issued and outstanding shares of capital stock of First Financial Bank, a
Pennsylvania savings and loan association, and that CVAL and First Financial
Bank were, as of December 31, 1997, in compliance with the minimum capital
requirements applicable to them under state and federal laws.
Capitalization of PCIS
The authorized capital stock of PCIS consists of 50,000 shares of PCIS
Common Stock. As of the close of business on March 31, 1998, 5,725 shares of
PCIS Common Stock were issued and outstanding, no shares of PCIS Common Stock
were issued and held in the treasury of PCIS, and no shares of PCIS Common Stock
were reserved for issuance. As of the same date there were no outstanding
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subscriptions, options, warrants, rights, convertible securities or other
agreements or commitments of any character relating to the issued or unissued
capital stock or other securities of PCIS.
PCIS has agreed not to declare any dividends on or make other
distributions in respect of its capital stock or amend or permit the amendment
of its articles or certificate of incorporation or bylaws; except that it may
pay a cash dividend to its shareholders in an amount up to 35% of its earnings
for the year ended December 31, 1997 and for the subsequent periods up to the
Closing Date, if, both after giving effect to such dividend and as determined as
of the Closing Date, PCIS's total assets exceed $1.5 million, its cash and
marketable securities exceed $913,000 and its shareholders' equity exceeds the
greater of $1.2 million or the amount of its shareholders' equity as at January
30, 1998.
Capitalization of CVAL
The currently authorized capital stock of CVAL consists of ten million
shares of CVAL Common Stock and five million shares of preferred stock. As of
the close of business on March 31, 1998, 2,184,753 shares of CVAL Common Stock
were issued and outstanding, [no] shares of CVAL Common Stock were issued and
held in the treasury of CVAL, and no shares of preferred stock were outstanding.
As of the same date options to purchase 62,149 shares of CVAL Common Stock were
granted and outstanding of which 33,375 are vested.
General Conditions Precedent to the Merger
The respective obligations of CVAL, on the one hand, and PCIS, on the
other hand, to consummate the Merger are subject to the satisfaction (or waiver
by the party for whose benefit such conditions exist) of the following
conditions: (a) the Merger must have been approved by the requisite vote of the
shareholders of PCIS in accordance with applicable law; (b) all required
approvals, consents or waivers of governmental authorities with respect to the
Merger must have been obtained and remain in full force and effect, and all
applicable statutory waiting periods must have expired; and the parties to the
Merger Agreement must have procured all other regulatory approvals, consents or
waivers of governmental authorities that are necessary or appropriate to the
consummation of the Merger except those approvals, consents or waivers, if any,
for which failure to obtain would not, individually or in the aggregate, have a
material adverse effect on PCIS or CVAL (after giving effect to the transactions
contemplated by the Merger Agreement); (c) all other requirements prescribed by
law which are necessary to the consummation of the Merger must have been
satisfied; (d) no party to the Merger Agreement may be subject to any order,
decree or injunction of a court or agency of competent jurisdiction which
enjoins or prohibits the consummation of the Merger, and no litigation or
proceeding may be pending against any of the parties to the Merger brought by
any governmental agency seeking to prevent consummation of the Merger; (e) no
statute, rule, regulation, order, injunction or decree may have been enacted,
entered, promulgated or enforced by any governmental authority which prohibits,
restricts or makes illegal consummation of the Merger; (f) the Merger must as of
the date of the Closing meet the requirements for pooling-of-interests
accounting treatment under generally accepted accounting principles and under
the accounting rules of the Commission; (g) the Registration Statement of which
this Proxy Statement/Prospectus is a part must have been filed (the date of
which is referred to herein as the "Filing Date") by CVAL with the Commission
under the 1933 Act, and must have been declared effective prior to the time this
Proxy Statement/Prospectus is first mailed to the shareholders of PCIS, and no
stop order with respect to the effectiveness of the Registration Statement shall
have been issued; and the CVAL Common Stock to be issued pursuant to the Merger
must be duly registered or qualified under the securities or "blue sky" laws of
all states in which such action is required for purposes of the initial issuance
of such shares and the distribution thereof to the shareholders of PCIS entitled
to receive such shares; (h) CVAL and PCIS must have received an opinion of
Schnader Harrison Segal & Lewis LLP, counsel to CVAL and Merger Subsidiary, to
the effect that: (i) the Merger will constitute a reorganization within the
meaning of Section 368(a) of the Code and PCIS and CVAL will each be a "party to
a reorganization" within the meaning of Section 368(b) of the Code; (ii) no gain
or loss will be recognized by PCIS or CVAL by reason of the Merger; (iii) except
for cash received in lieu of fractional shares, no gain or loss will be
recognized by the shareholders of PCIS who receive solely CVAL Common Stock upon
the exchange of their shares of PCIS's Common Stock for shares of CVAL Common
Stock; (iv) the basis of the CVAL Common Stock to be received by PCIS's
shareholders will be, in each instance, the same as the basis of PCIS's Common
Stock surrendered in exchange therefor; (v) the holding period of the CVAL
Common Stock received by a PCIS shareholder receiving CVAL Common Stock will
include the period during which PCIS Common Stock surrendered in exchange
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therefore was held; and (vi) cash received by a PCIS shareholder in lieu of a
fractional share interest of CVAL Common Stock will be treated as having been
received as a distribution in full payment in exchange for the fractional share
interest of CVAL Common Stock which he would otherwise be entitled to receive
and will qualify as capital gain or loss.
Conditions Precedent to Obligations of CVAL
The obligations of CVAL to consummate the Merger are subject to the
satisfaction of the following conditions, among others: (a) the representations
and warranties of PCIS contained in the Merger Agreement must be true and
correct in all material respects on and as of the Closing Date with the same
effect as though made on and as of such date; PCIS must have performed in all
material respects all of its obligations and agreements under the Merger
Agreement to be performed by it at or before the Closing; (b) the Merger
Agreement must have been approved by the affirmative vote (in person or by
proxy) or written consent of the holders of at least 90% of the outstanding
shares of capital stock of PCIS entitled to vote thereon; (c) PCIS must have
executed with specified officers and employees an employment agreement (see "The
Merger--Interests of Certain Persons and Employee Matters"); (d) there must not
have occurred and be continuing (i) any general suspension of, or limitation on
prices for, trading in securities on Nasdaq, (ii) a declaration of a banking
moratorium or any general suspension of payments in respect of banks in the
United States or any general limitation by federal or state authorities on the
extension of credit by lending institutions, or (iii) in the case of any of the
foregoing existing at the date of the Merger Agreement, a material acceleration
or worsening thereof, and, in any such case, CVAL must have determined that it
is commercially inadvisable to proceed with the Merger; (e) each person required
to enter into an employment agreement referred to above under (c) shall have
executed a non-compete agreement (see "The Merger--Interests of Certain Persons
and Employee Matters"); (f) any litigation pending against PCIS which,
individually or in the aggregate, would have a material adverse effect on PCIS's
consolidated operations, must have been settled or otherwise resolved on terms
satisfactory to CVAL and PCIS; (g) each of the shareholders of PCIS must have
executed a shareholder indemnity (see "Shareholder Indemnity," below); (h) there
may not have occurred any change in the financial condition, properties, assets,
liabilities (including contingent liabilities), business or results of operation
of PCIS which, individually or in the aggregate, has had or might reasonably be
expected to result in an material adverse effect on PCIS other than such changes
resulting from (i) changes in securities laws or regulations or (ii) changes in
generally accepted accounting principles, or interpretations thereof, that
affect the securities industry; (i) CVAL must have received from all PCIS
affiliates an executed affiliate's agreement (see "Resales of CVAL Common
Stock"); (j) all issued and outstanding options, warrants or rights to acquire
PCIS Common Stock or any capital stock of PCIS must have been canceled; (k) CVAL
must have received the audited financial statements of PCIS for the fiscal year
ended December 31, 1997, unaudited interim financial statements of PCIS as of
the close of the fiscal month ended most recently before the Closing and for the
fiscal year to date then ended, and unaudited financial statements of PCIS for
the 12-month period ended as of the close of the last full fiscal month
immediately preceding the Closing, which statements must evidence that: (i) the
total assets of PCIS at the dates thereof exceeded $1.5 million, and cash and
marketable securities of PCIS at the dates thereof exceeded $913,000; (ii) the
shareholders' equity of PCIS at the dates thereof exceeded $1.2 million; (iii)
annual revenue for 1997, and for the 12 months ended as of the close of the last
full fiscal month immediately preceding the Closing, exceeded $2.75 million; and
(iv) annual net income for 1997, and for the 12 months ended as of the close of
the last full fiscal month immediately preceding the Closing, exceeded $350,000,
excluding the impact of any expenses incurred by reason of the Merger Agreement.
Conditions Precedent to Obligations of PCIS
The obligations of PCIS to consummate the Merger are subject to the
satisfaction of the following conditions, among others: (a) each of the
representations and warranties of CVAL contained in the Merger Agreement must be
true and correct in all material respects as of the Closing Date with the same
effect as though made as of such date; CVAL and Merger Subsidiary must have
performed in all material respects all of their obligations under the Merger
Agreement to be performed by them at or before the Closing; and PCIS must have
received certificates to that effect; (b) there may not have occurred any change
in the financial condition, properties, assets, liabilities (including
contingent liabilities), business or results of operation of CVAL which,
individually or in the aggregate, has had or might reasonably be expected to
result in a material adverse effect on CVAL other than such changes resulting
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from (i) change in banking or thrift laws or regulations or (ii) changes in
generally accepted accounting principles, or interpretations thereof, that
affect the banking or thrift industries; (c) the shares of CVAL Common Stock to
be issued in the Merger must have been authorized to be listed for quotation on
the Nasdaq National Market; (d) no transaction or event involving CVAL or any
subsidiary of CVAL may have occurred or be pending which would result in a
change in the nature of the securities as the same are described in CVAL's
articles of incorporation or in the issuer of the securities to be issued in the
Merger to holders of PCIS Common Stock or which would result in CVAL's ceasing
to own the Bank.
Shareholder Indemnity
Pursuant to the Merger Agreement, each Shareholder of CVAL entered
into a Shareholder Indemnity, dated as of March 18, 1998, pursuant to which such
shareholder joined with PCIS in making representations and warranties to CVAL
under the Merger Agreement, except that those representations and warranties
that were made to the knowledge of PCIS are deemed to be modified so as to be
made by each shareholder to the best of his or her knowledge. Each shareholder
further joined with PCIS in making the various covenants of PCIS set forth in
the Merger Agreement. If the Merger occurs, the Shareholder Indemnity requires
each shareholder to indemnify, defend and hold harmless CVAL, its successors and
assigns, from any and all liabilities, losses, costs or damages (collectively,
"Loss") and reasonable attorneys' and accountants' fees and expenses, court
costs and other reasonable out of pocket expenses (collectively "Expense")
suffered or incurred by CVAL (directly, or indirectly through PCIS as the
corporation surviving the Merger) resulting from, arising out of or relating to
a breach of the foregoing representations, warranties or covenants, or any
claim, action, suit or proceeding made or instituted by any former shareholder
of PCIS relating to PCIS's purchase of such person's shares in PCIS. If the
Merger occurs, PCIS shareholders will not have any right to contribution from
PCIS with regard to the indemnification obligations of the shareholders.
The indemnification obligations of PCIS's shareholders under the
Shareholder Indemnity are limited as follows: First, no action or proceeding
seeking damages for relief for breach of a representation, warranty or covenant
may be commenced against a shareholder more than one year after the Effective
Time of the Merger with respect to all claims which have not previously been
asserted during such one-year period, with reasonable specificity, by written
notice to Edward T. Borer, as agent for all PCIS shareholders. Second, no
shareholder of PCIS will be liable with regard to any of PCIS's representations,
warranties or covenants contained in the Merger Agreement unless the aggregate
Loss and Expense directly or indirectly suffered or incurred by CVAL, exceeds
$50,000, but once such aggregate Loss and Expense exceeds $50,000, the
shareholders will be liable for the full amount thereof including the $50,000
threshold amount. Third, except for a shareholder's liability under the
Shareholder Indemnity resulting from a breach of a representation or warranty
made by PCIS which is known by a shareholder to be untrue when made, and except
for any liability under the Shareholder Indemnity resulting directly or
indirectly from PCIS' willful misconduct, (i) each shareholder would be liable
only for his or her proportionate share of the aggregate Loss and Expense,
determined by the percentage stock interest of such shareholder in PCIS as of
the date of Merger Agreement, and (ii) the maximum liability of each shareholder
under the Shareholder Indemnity would equal the product of $3.4 million times
such shareholder's percentage stock interest in PCIS as of the date of the
Merger Agreement.
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Termination
The Merger Agreement may be terminated and the transactions
contemplated thereby may be abandoned at any time prior to the Effective Time
either before or after approval by the holders of PCIS Common Stock: (a) by the
mutual, written consent of CVAL and PCIS if the board of directors of each so
determines by a vote of a majority of the members of the entire board; (b) by
either CVAL or PCIS (i) by written notice to the other party if there has been a
material breach by the other party of any representation, warranty, covenant or
agreement contained in the Merger Agreement and such breach is not cured or not
curable within thirty days after written notice of such breach is given to the
breaching party by the terminating party, (ii) by written notice to the other
party if any condition precedent to the other party's obligations under the
Merger Agreement (see "The Merger Agreement--General Conditions Precedent to the
Merger; Conditions Precedent to Obligations of CVAL; Conditions Precedent to
Obligations of PCIS") has not been met or waived by the terminating party at
such time as such condition can no longer be satisfied; (c) by PCIS (i) if the
board of directors of PCIS fails to make, withdraws or modifies or changes its
favorable recommendation of the Merger Agreement and the Merger to PCIS's
shareholders, or (ii) if the board of directors of PCIS recommends to the
shareholders of PCIS that an alternative acquisition proposal is likely to be
more favorable, from a financial point of view, to the shareholders of PCIS than
the Merger; (d) by CVAL or PCIS by written notice to the other, in the event
that the Merger is not consummated by June 30, 1998, unless the failure to
consummate is due to the breach of any representation, warranty or covenant
contained in the Merger Agreement by the party seeking to terminate; provided,
however, that such date may be extended by the written agreement of CVAL, PCIS
and Merger Subsidiary.
Termination Fees and Expenses
So long as CVAL has not breached any of its obligations under the
Merger Agreement, PCIS must pay to CVAL a termination fee of $250,000 if (i) the
Merger Agreement is terminated because the board of directors of PCIS recommends
to the shareholders of PCIS that an alternative acquisition proposal is likely
to be more favorable, from a financial point of view, to the shareholders of
PCIS than the Merger; or (ii) the Merger Agreement is terminated because the
board of directors of PCIS fails to make, withdraws or modifies or changes its
favorable recommendation of the Merger to PCIS's shareholders other than as a
result of a material adverse change in CVAL's financial condition, properties,
assets, liabilities (including contingent liabilities), business or results of
operations. The non-terminating party will be obligated to pay to the other
damages and out-of-pocket expenses incurred in connection with its entering into
the Merger Agreement and carrying out the acts contemplated thereunder in the
event that (A) the terminating party terminates the Merger Agreement because (i)
there has been a material breach by the other party of any representation,
warranty, covenant or agreement contained in the Merger Agreement, or (ii)
because a condition precedent to the other party's obligations under the Merger
Agreement has not been met or waived, and (B) the relevant breach of
representation or warranty or covenant is caused by willful conduct or gross
negligence.
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PHILADELPHIA CORPORATION FOR INVESTMENT SERVICES
PCIS is a securities broker/dealer and investment advisor. It is a
member of the National Association of Securities Dealers, Inc. ("NASD"), the
Securities Investor Protection Corporation ("SIPC"), the Municipal Securities
Rulemaking Board ("MSRB"), and the Securities Industry Association ("SIA"). It
is registered as a broker/dealer in all 50 states and the District of Columbia,
and as an investment advisor with the Commission. PCIS is subject to stringent
minimum capital and licensing requirements.
PCIS's clients are primarily individuals and smaller corporations,
including various retirement plans. PCIS offers investment advice to and
executes transactions for its customers. PCIS does not engage in commodity
transactions, nor does it maintain an investment account. Although registered as
a self clearing firm, approximately 99% of PCIS's transactions are cleared
through another broker/dealer, which also executes nearly all PCIS directed
transactions except for certain other fixed income transactions. PCIS does not
trade for its own account except in limited circumstances; such principal
transactions as it executes are almost all done to satisfy customer orders.
PCIS is subject to the regulations of the Commission, the NASD, the
MSRB, SIPC, and each of the state jurisdictions within which it is registered.
PCIS is routinely examined as a broker/dealer by the NASD and as an investment
advisor by the Commission.
PCIS's principal executive offices are located at 1650 Market Street,
Suite 3050, Philadelphia, PA 19103, and its telephone number at that address is
(215) 419-6400.
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<PAGE>
<TABLE>
SELECTED PCIS FINANCIAL DATA
<CAPTION>
At or For the Year Ended
December 31
-------------------------------------------------------------------
1997 1996 1995 1994 1993
-------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Revenues:
Commissions $ 1,708,112 $ 1,549,568 $ 1,557,175 $ 1,307,238 $ 1,541,569
Principal transactions 478,775 511,825 443,754 624,371 468,807
Gains on firm securities 12,728 12,926 13,839 12,291 14,102
Investment advisory fees 311,799 277,179 200,776 131,037 103,153
Money market fund fees 207,983 184,204 149,932 116,429 86,915
Underwriting fees 0 0 0 0 85,151
Interest income 68,543 68,993 79,010 54,720 33,283
Other income 78,522 48,118 36,316 45,286 38,095
----------- ----------- ----------- ----------- -----------
Total revenue $ 2,866,462 $ 2,652,813 $ 2,480,802 $ 2,291.372 $ 2,371,075
----------- ----------- ----------- ----------- -----------
Expenses:
Compensation and
benefits $ 1,611,558 $ 1,533,529 $ 1,417,923 $ 1,327,306 $ 1,301,513
Commissions and clearance
charges 324,245 285,257 275,514 251,702 276,566
Communications 247,096 233,011 228,177 208,323 177,469
Occupancy and equipment
costs 110,133 131,851 131,523 154,219 120,112
Promotional expenses 33,916 30,836 12,741 4,998 5,055
Other expenses 147,778 143,069 145,647 138,613 133,391
----------- ----------- ----------- ----------- -----------
Total expense $ 2,474,726 $ 2,357,553 $ 2,211,525 $ 2,085,161 $ 2,014,106
----------- ----------- ----------- ----------- -----------
Net Income before taxes
on income $ 391,736 $ 295,260 $ 259,277 $ 206,211 $ 356,969
Provision for income
taxes (1) (1) (1) 55,438 117,440
----------- ----------- ----------- ----------- -----------
Net Income $ 391,736 $ 295,260 $ 269,277 $ 150,773 $ 239,529
=========== =========== =========== =========== ===========
Earnings per share (1) 64.63 48.52 44.80 24.88 44.87
Weighted average shares 6,061 6,085 6,011 6,060 5,338
Total Assets $ 1,787,389 $ 1,833,749 $ 1,731,985 $ 1,426,042 $ 1,144,666
Total Liabilities 506,296 532,571 455,488 319,156 213,990
Total Stockholders'
equity 1,281,093 1,301,178 1,276,497 1,106,886 930,676
Book Value per share $ 223.77 $ 213.31 $ 210.30 $ 181.46 $ 156.68
Cash distributions paid
per share 53.18 45.41 11.88 0.00 0.00
<FN>
(1) Beginning with years beginning January 1, 1995, no provisions have been
made for income taxes since PCIS has elected to be taxed under the
provisions of Subchapter S of the Internal Revenue Code and similar state
provisions. Under these provisions, PCIS does not pay income taxes on its
taxable income. Instead, shareholders are liable for individual income
taxes based on their respective shares of PCIS's taxable income.
</FN>
The selected financial data and related footnotes set forth above
should be read in connection with "PCIS Management's Discussion and Analysis of
PCIS's Financial Condition and Results of Operations" set forth below and
"Consolidated Financial Statements of Philadelphia Corporation for Investment
Services" included in this Proxy Statement/Prospectus.
</TABLE>
-45-
<PAGE>
PCIS MANAGEMENT'S DISCUSSION AND ANALYSIS OF PCIS's
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
General
Results of Operations 1997 Compared to 1996
Earnings
As a Subchapter "S" corporation, PCIS pays no taxes on its income;
shareholders are individually responsible for taxes on their proportionate share
of PCIS's profit. Net Income for 1997 was a record $391,736, which represents a
32.7% increase over the $295,260 Net Income for 1996. The 1997 increase was due
primarily to greater margins resulting from growth in transaction and investment
advisory revenues in combination with cost containment. Profit margin increased
from 11.1% to 13.7%.
Revenues
Revenues were $2,866,462 in 1997, compared to $2,652,813 in 1996, an
increase of 8.1%. The increase resulted primarily from increased transaction
revenues, investment advisory fees, and money market fund fees, which rose 6.0%,
12.5% and 12.9%, respectively. Transactions executed rose to 11,592 from 10,920,
an increase of 6.2%.
Expenses
Expenses increased $117,173, or 5.0%, to $2,474,726 in 1997.
Approximately 30% of PCIS's costs are relatively fixed in nature and do not rise
or fall in proportion to revenue changes. Outsourcing of certain functions
during 1997 helped contain expenses.
Results of Operations 1996 Compared to 1995
Earnings
Net Income for 1996 was $295,260, which represented a 9.6% increase
over the $269,277 Net Income for 1995. The 1996 increase was due primarily to
higher margins resulting from growth in fee income, including investment
advisory revenues. Profit margin increased to 11.1% from 10.9% in the prior
year.
Revenues
Revenues were $2,652,813 in 1997, compared to $2,480,802 in 1996, an
increase of 6.9%. The increase resulted primarily from increased fee income,
including investment advisory revenues, which rose 28.6% and 41.0%,
respectively. Transactions executed rose to 10,920 from 10,287, an increase of
6.1%.
Expenses
Expenses increased $146,028, or 6.60%, to $2,357,553 in 1996. Nearly
80% of the increase was attributable to compensation increases resulting from
revenue and business mix changes. Approximately 30% of PCIS's costs are
relatively fixed in nature and do not rise or fall in proportion to revenue
changes.
Capital Resources and Liquidity
PCIS is subject to the Net Capital provisions of the Securities and
Exchange Commission, and is required to maintain minimum Net Capital as defined
under such provisions. Net capital and the related Net Capital Ratio may
-46-
<PAGE>
fluctuate on a daily basis. At December 31, 1997, PCIS had Net Capital of
$1,151,594 which was $901,594 in excess of its required Net Capital of $250,000.
PCIS's Net Capital Ratio was .03 to 1, compared to a maximum permitted of 15 to
1.
PCIS's capital expenditure requirements are not significant. At
December 31, 1997, cash, cash equivalents, inventory, and refundable deposits
exceeded all liabilities by $1,115,859. PCIS's capitalization consists of common
stock equity only. Since PCIS has been profitable in each month since February,
1991, it believes its current capital resources and liquidity are adequate to
meet its foreseeable needs.
Year 2000 Issue
PCIS is aware of the "Year 2000" issue and is in the process of
modifying its internal computer systems to eliminate such problems as existed;
no material costs have been or are anticipated to be incurred. PCIS's clearing
broker has assured PCIS that its systems will be compliant by September, 1998;
user testing is scheduled to begin on September 22, 1998.
Management believes that PCIS has taken all reasonable precautions to
ensure a smooth transition. However, like all securities firms, PCIS's brokerage
business is highly dependent on outside providers and, as such, any problems
encountered could potentially have a material adverse effect on PCIS's
activities and, accordingly, its results of operations, financial condition and
cash flows.
DIRECTORS AND EXECUTIVE OFFICERS OF PCIS
The following sets forth the name and age of each director and
executive officer of PCIS, his positions and offices with PCIS, his period of
service with PCIS, and his business experience for at least the past five years,
and with respect to directors, their present principal occupation and other
directorships held in public companies.
Directors
Directors are elected to serve for a one-year term and until their
successors are elected and qualified. The bylaws of PCIS provide that the number
of directors will be determined from time to time by the Board of Directors or
the shareholders of PCIS, but that there will be no more than 15 and no less
than three directors, except in cases where there is only one or two
shareholders. Directors of PCIS are as follows:
Name Age Director Since
Edward T. Borer, Chairman 59 1989
Philip J. Baldassari 42 1989
Frederick A. Bluefeld 44 1989
A. Louis Denton 40 1989
R. Wayne Raffety 57 1989
Vernon C. Walker 55 1989
Spencer D. Wright, III 77 1989
Edward T. Borer. Mr. Borer is Chairman and Chief Financial Officer of PCIS. From
1989 until 1995 he was President and from 1989 until 1996 he was Chief Executive
Officer; he has been Chief Financial Officer since 1990 and Chairman since 1995.
He has been employed by PCIS since 1989. Since 1982 he has been Chairman of
EnergyNorth, Inc., a New York Stock Exchange listed company, and serves on the
Boards of various of that company's subsidiaries.
-47-
<PAGE>
Philip J. Baldassari. Mr. Baldassari has been a Senior Vice President of PCIS
since 1997. From 1989 until 1997 he was a Vice President of PCIS. He has been
employed by PCIS since 1989.
Frederick A. Bluefeld. Mr. Bluefeld is a Vice President of PCIS, a position he
has held since 1989. He has been employed by PCIS since 1989.
A. Louis Denton. Mr. Denton is President and Chief Executive Officer of PCIS.
From 1989 until 1993 he was Vice President; from 1993 until 1994 he was Senior
Vice President, from 1994 until 1995 he was Executive Vice President; since 1995
he has been President. From 1994 until 1995 he was Chief Operating Officer, and
since 1996 he has been Chief Executive Officer. He has been employed by PCIS
since 1989. He is a Director of First Commercial Bank of Philadelphia, a NASDAQ
traded company, and of London Life Reinsurance Company, an indirect subsidiary
of Great West Lifeco, a Toronto Stock Exchange traded company.
R. Wayne Raffety. Mr. Raffety has been a Senior Vice President of PCIS since
1993. He has been employed by PCIS since 1989. From 1989 until he was a Vice
President of the Company.
Vernon C. Walker. Mr. Walker has been a Senior Vice President of PCIS since
1993. He has been employed by PCIS since 1989. From 1989 until 1993 he was a
Vice President of the Company.
Spencer D. Wright, III. Mr. Wright has been Chairman Emeritus of PCIS since
1995. He has been employed by PCIS since 1989. From 1989 until 1995 he was
Chairman of the Company.
Executive Officers
Executive officers are elected by the PCIS Board and serve until they
resign or are removed by the PCIS Board. PCIS's executive officers are as
follows:
Name Age Positions and Offices
Edward T. Borer 59 Chairman, Chief Financial Officer, Director
A. Louis Denton 40 President, Chief Executive Officer, Director
The business experience of Messrs. Borer and Denton is set forth under
the listing of directors of PCIS.
Security Ownership of Certain Beneficial Holders and Management
The following table sets forth certain information regarding beneficial
ownership of the outstanding PCIS Common Stock at April 6, 1998 by (i) each
person known by PCIS to own beneficially more than 5% of the outstanding PCIS
Common Stock; (ii) each of the directors of PCIS; (iii) the executive officers
named in the Summary Compensation Table, "Executive Compensation" and (iv) all
directors and executive officers as a group. Except as otherwise indicated in
the footnotes, PCIS believes that the beneficial owners of PCIS Common Stock
listed below, based on information furnished by such owners, have sole
investment and voting power with respect to the shares of PCIS Common Stock
shown as beneficially owned by them.
-48-
<PAGE>
<TABLE>
Security Ownership of Certain Beneficial Holders and Management
<CAPTION>
Name and Address Number of Shares Percertage of Class
of Beneficial Owner of Common Stock
<S> <C> <C>
Eugene Arnold, Jr. (3) 500 8.7%
485 Devon Park Drive, Suite 109
Wayne, PA 19087
Frederick J. Arnold (3) 500 8.7%
1650 Market St., Suite 3050
Philadelphia, PA 19103
Philip J. Baldassari (1)(3) 500 8.7%
1650 Market St., Suite 3050
Philadelphia, PA 19103
Frederick A. Bluefeld (1)(3) 400 7.0%
485 Devon Park Drive, Suite 109
Wayne, PA 19087
Edward T. Borer (1)(2)(3) 500 8.7%
1650 Market St., Suite 3050
Philadelphia, PA 19103
A. Louis Denton (1)(2)(3) 500 8.7%
1650 Market St., Suite 3050
Philadelphia, PA 19103
R. Wayne Raffety (1)(3) 500 8.7%
485 Devon Park Drive, Suite 109
Wayne, PA 19087
Vernon C. Walker (1)(3) 500 8.7%
485 Devon Park Drive, Suite 109
Wayne, PA 19087
Robert S. Woodcock (3) 350 6.1%
1650 Market St., Suite 3050
Philadelphia, PA 19103
Spencer D. Wright, III (1)(3) 500 8.7%
1650 Market St., Suite 3050
Philadelphia, PA 19103
All Directors and Executive Officers 3,400 59.4%
as a Group
(7 persons)
(1) Director of PCIS.
(2) Executive officers of PCIS.
(3) Owner of 5% or greater of PCIS shares.
</TABLE>
-49-
<PAGE>
PCIS EXECUTIVE COMPENSATION
This section contains information about compensation, stock options grants and
employment arrangements and other information concerning certain of the
executive officers of PCIS.
Summary Compensation Table
The following table sets forth the compensation PCIS paid for services rendered
during the fiscal years ended December 31, 1997, December 31, 1996 and December
31, 1995 by the Chief Executive Officer. No other executive officer received
annual compensation in excess of $100,000 in 1997, 1996 or 1995.
-50-
<PAGE>
<TABLE>
Annual Compensation
--------------------------
<CAPTION>
Other
Annual
Name and Principal Fiscal Salary* Bonus Compensation(1)
Position Year ($) ($) ($)
<S> <C> <C> <C> <C>
A. Louis Denton 1997 169,351 11,752 0
President and CEO 1996 138,428 8,858 0
1995 135,389 8,078 0
- ---------------------
<FN>
* Includes commissions. PCIS has never granted stock options.
</FN>
</TABLE>
Directors' Compensation
Directors of PCIS serve without compensation.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS OF PCIS
PCIS does not engage in any transactions with its directors, officers or
their affiliates.
UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL INFORMATION
THE UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL INFORMATION IS PRESENTED
FOR INFORMATIONAL PURPOSES ONLY AND IS NOT NECESSARILY INDICATIVE OF THE
OPERATING RESULTS OR FINANCIAL POSITION THAT WOULD HAVE OCCURRED, NOR IS IT
NECESSARILY INDICATIVE OF THE FUTURE OPERATING RESULTS OR FINANCIAL POSITION OF
CVAL FOLLOWING THE MERGER.
-51-
<PAGE>
<TABLE>
Pro Forma Unaudited Combined Condensed Balance Sheet
as of June 30, 1997 (in thousands)
<CAPTION>
PCIS Merger
Pro Forma CVAL & PCIS
CVAL PCIS Adjustments Combined
-----------------------------------------------
<S> <C> <C> <C> <C>
Cash and amounts due from
depository institutions 9,455 752 --- 10,207
Investment securities
available for sale 27,566 252 --- 27,818
Investment securities 19,469 --- --- 19,469
Loans, gross (1) 260,001 --- --- 260,001
Allowance for possible
loan losses (2,855) --- --- (2,855)
Other assets 10,037 524 --- 10,561
-------------------------------------------------
Total Assets 323,673 1,528 --- 325,201
=================================================
Deposits 260,750 --- --- 260,750
Borrowings 30,447 252 --- 30,699
Other liabilities 5,411 62 --- 5,473
---------------------------------------------------
Total Liabilities 296,608 314 --- 296,922
---------------------------------------------------
Common stock (2) 1,739 --- --- 1,739
Additional paid-in capital 12,773 --- --- 12,773
Retained earnings 12,749 1,214 --- 13,963
Treasury stock (199) --- --- (199)
Net unrealized gain on
securities available
for sale 3 --- --- 3
--------------------------------------------------
Total shareholders' equity 27,065 1,214 --- 28,279
--------------------------------------------------
Total liabilities and
shareholders' equity 323,673 1,528 --- 325,201
===================================================
(1) Loans include loans held for sale.
(2) Common stock is net of common stock acquired by ESOP.
</TABLE>
-52-
<PAGE>
<TABLE>
Pro Forma Unaudited Combined Condensed Balance Sheet
as of December 31, 1997 (in thousands)
<CAPTION>
PCIS Merger
Pro Forma CVAL & PCIS
CVAL PCIS Adjustments Combined
-----------------------------------------------
<S> <C> <C> <C> <C>
Cash and amounts due from
depository institutions 9,295 835 --- 10,130
Investment securities
available for sale 24,411 787 --- 25,198
Investment securities 17,352 --- --- 17,352
Loans (1) 267,942 --- --- 267,942
Allowance for possible
loan losses (3,080) --- --- (3,080)
Other assets 9,723 165 --- 9,888
--------------------------------------------------
Total assets 325,643 1,787 --- 327,430
==================================================
Deposits 266,648 --- --- 266,648
Borrowings 27,112 442 --- 27,554
Other liabilities 3,177 64 --- 3,241
--------------------------------------------------
Total Liabilities 296,937 506 --- 297,443
---------------------------------------------------
Common stock (2) 1,934 57 --- 1,991
Additional paid-in capital 14,890 292 --- 15,182
Retained earnings 11,699 932 --- 12,631
Treasury stock (115) --- --- (115)
--------------------------------------------------
Net unrealized gain on
securities available
for sale 298 298
--------------------------------------------------
Total shareholders' equity 28,706 1,281 --- 29,987
--------------------------------------------------
Total liabilities and
shareholders' equity 325,643 1,787 --- 327,430
===================================================
(1) Loans include loans held for sale.
(2) Common stock is net of common stock acquired by ESOP.
</TABLE>
-53-
<PAGE>
<TABLE>
Pro Forma Unaudited Combined Condensed Income Statement
for the Year Ended June 30, 1997
(in thousands, except per share data)
<CAPTION>
PCIS Merger
Pro Forma CVAL & PCIS
CVAL PCIS Adjustments Combined
-----------------------------------------------
<S> <C> <C> <C> <C>
Interest income 22,569 --- --- 22,569
Interest expense 11,503 --- --- 11,503
----------------------------------------------
Net interest income 11,066 --- --- 11,066
Provision for possible
loan losses 523 --- --- 523
----------------------------------------------
Net interest income after
provision for possible loan
losses 10,543 --- --- 10,543
Other non-interest income 1,324 2,676 --- 4,000
Non-interest expense 9,184 2,365 --- 11,549
-----------------------------------------------
Income before taxes 2,683 311 --- 2,994
-----------------------------------------------
Income taxes 757 --- --- 757
Net income 1,926 311 --- 2,237
===============================================
Earnings per share (1)
Basic $ 0.89 51.12 --- 0.97
Diluted $ 0.89 51.12 --- 0.96
(1) Combined earnings per share are calculated based on combined net income
divided by the sum of (i) the weighted average CVAL Common Stock
outstanding during the year ended June 30, 1997 (2,152,613 for basic and
2,164,666 for diluted) plus (ii) the weighted average PCIS Common Stock
outstanding during the year ended June 30, 1997 (6,095 for both basic and
diluted) multiplied by the Exchange Ratio.
</TABLE>
-54-
<PAGE>
<TABLE>
Pro Forma Unaudited Combined Condensed Income Statement
for the Six Months Ended December 31, 1997
(in thousands, except per share data)
<CAPTION>
PCIS Merger
Pro Forma CVAL & PCIS
CVAL PCIS Adjustments Combined
-----------------------------------------------
<S> <C> <C> <C> <C>
Interest income 12,569 --- --- 12,655
Interest expense 6,621 --- --- 6,621
----------------------------------------------
Net interest income 6,034 --- --- 6,034
Provision for possible
loan losses 240 --- --- 240
----------------------------------------------
Net interest income after
provision for possible loan
losses 5,794 --- --- 5,794
Other non-interest income 833 1,487 --- 2,320
Non-interest expense 4,246 1,259 --- 5,505
-----------------------------------------------
Income before taxes 2,381 228 --- 2,609
-----------------------------------------------
Income taxes 697 --- --- 697
Net income 1,684 228 --- 1,912
===============================================
Earnings per share
Basic $ 0.78 37.83 --- 0.83(1)
Diluted $ 0.77 37.83 --- 0.82(1)
(1) Combined earnings per share are calculated based on combined net income
divided by the sum of (i) the weighted average CVAL Common Stock
outstanding during the six months ended December 31, 1997 (2,162,436 for
basic and 2,193,681 for diluted) plus (ii) the weighted average PCIS
Common Stock outstanding during the six months ended December 31, 1997
(5,967 for both basic and diluted) multiplied by the Exchange Ratio.
</TABLE>
EXPERTS
The consolidated financial statements of Chester Valley Bancorp Inc. and
subsidiaries as of June 30, 1997 and 1996 and the related consolidated
statements of operations, changes in stockholders' equity, and cash flows for
each of the years in the three-year period ended June 30, 1997, included in
Chester Valley Bancorp Inc.'s Annual Report on Form 10-KSB for the year ended
June 30, 1997, have been incorporated by reference herein in reliance upon the
report of KPMG Peat Marwick, LLP, independent public accountants, and upon the
authority of such firm as experts in accounting and auditing.
-55-
<PAGE>
The financial statements of Philadelphia Corporation for Investment
Services as of December 31, 1997 and 1996, and the related statements of income,
changes in stockholders' equity and cash flows for the years ended December 31,
1997, 1996 and 1995, included in this Proxy Statement/Prospectus, have been
audited by Sanville & Company, independent auditors, as stated in their report,
and have been included in reliance upon the report of such firm given upon their
authority as experts in accounting and auditing.
LEGAL MATTERS
The validity of the CVAL Common Stock to be issued pursuant to the Merger
will be passed upon for CVAL by Schnader Harrison Segal & Lewis LLP. It is a
condition precedent to the obligations of PCIS to consummate the Merger
Agreement that PCIS receive an opinion of Schnader Harrison Segal & Lewis LLP to
the effect that neither PCIS nor any of its shareholders will recognize gain or
loss for United States federal income tax purposes as a result of the Merger
(other than in respect of any cash paid in lieu of fractional shares). John J.
Cunningham, III, a senior partner in the Schnader firm, is a director of CVAL.
-56-
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 20. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
CVAL's bylaws provide that CVAL will indemnify any person who was or
is a party or is threatened to be made a party to any threatened, pending or
completed action, suit or proceeding, including actions by or in the right of
CVAL, whether civil, criminal, administrative or investigative, by reason of the
fact that such person is or was a director, officer, employee or agent of CVAL,
or is or was serving at the request of CVAL as a director, officer, employee or
agent of another corporation, partnership, joint venture, trust or other
enterprise, against expenses (including attorneys' fees), judgments, fines,
excise taxes and amounts paid in settlement actually and reasonably incurred by
such person in connection with such action, suit or proceeding to the full
extent permissible under Pennsylvania law. Statutory authority for such
indemnification is contained in Subchapter D of the Pennsylvania Business
Corporation Law of 1988, as amended.
Reasonable expenses incurred by an officer, director, employee or
agent of CVAL in defending a civil or criminal action, suit or proceeding
described above may be paid by CVAL in advance of the final disposition of such
action, suit or proceeding upon receipt of any undertaking by or on behalf of
such person to repay such amount if it shall ultimately be determined that the
person is not entitled to be indemnified by CVAL.
The duties of CVAL to indemnify and to advance expenses to any person
shall be in the nature of a contract between CVAL and each such person, and no
amendment or repeal of any provision of the bylaws of CVAL shall alter to the
detriment of such person the right of such person to the advancement of expenses
or indemnification related to a claim based on an act or failure to act which
took place prior to such amendment or repeal.
CVAL shall not indemnify a director, officer, employee or agent for
any liability incurred in an action, suit or proceeding initiated (which shall
not be deemed to include counter-claims or affirmative defenses) or participated
in as an intervenor or amicus curiae by the person seeking indemnification
unless such initiation of or participation in the action, suit or proceeding is
authorized, either before or after its commencement, by the affirmative vote of
a majority of the directors in office.
ITEM 21. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.
(a) The exhibits to this registration statement on Form S-4 (together
with all amendments, supplements and exhibits thereto, the "Registration
Statement") are listed in the Exhibit Index hereto and are incorporated herein
by reference.
(b) All financial statement schedules have been omitted because they
are not required or the information required to be set forth therein is included
in the financial statements included in CVAL's Annual Report on Form 10-KSB for
the fiscal year ended June 30, 1997, which is incorporated herein by reference.
ITEM 22. UNDERTAKINGS.
(a) The undersigned Registrant hereby undertakes as follows:
(i) To file, during any period in which offers or sales are being
made, a post-effective amendment to this Registration Statement:
A. to include any prospectus required by Section 10(a)(3) of
the Securities Act of 1933 (the "Securities Act");
B. to reflect in the prospectus any facts or events arising
after the effective date of this 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 this Registration Statement; and
II-1
<PAGE>
C. to include any material information with respect to the
plan of distribution not previously disclosed in this
Registration Statement or any material change to such information
in this Registration Statement.
(ii) that, for the purpose of determining any liability under the
Securities Act, 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; and
(iii) to remove from registration by means of a post-effective
amendment any of the securities being registered which remain unsold at the
termination of the offering.
(b) The undersigned Registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act, each filing of the
Registrant's annual report pursuant to Section 13(a) or Section 15(d) of the
1934 Act that is incorporated by reference in this Registration Statement shall
be deemed to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed to be
the initial bona fide offering thereof.
(c) The undersigned Registrant hereby undertakes that, prior to any
public reoffering of the securities registered hereunder through the use of a
prospectus which is a part of this Registration Statement, by any person or
party who is deemed to be an underwriter within the meaning of Rule 145(c), the
issuer undertakes that such reoffering prospectus shall contain the information
called for by the applicable registration form with respect to reofferings by
persons who may be deemed underwriters, in addition to the information called
for by the other items of the applicable form.
(d) The undersigned Registrant hereby undertakes that every
prospectus: (i) that is filed pursuant to the immediately preceding paragraph
(c), or (ii) that purports to meet the requirements of Section 10(a)(3) of the
Securities Act and is used in connection with an offering of securities subject
to Rule 415, will be filed as a part of an amendment to the Registration
Statement and will not be used until such amendment is effective, and that, for
purposes of determining any liability under the Securities Act, 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.
(e) Insofar as indemnification for liabilities arising under the
Securities Act may be permitted to directors, officers and controlling persons
of the Registrant pursuant to Item 20 of this Registration Statement, or
otherwise, the Registrant has been advised that in the opinion of the Securities
and Exchange Commission such indemnification is against public policy as
expressed in the Securities 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 shall, 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
Securities Act and shall be governed by the final adjudication of such issue.
(f) The undersigned Registrant hereby undertakes to respond to
requests for information that is incorporated by reference into the Proxy
Statement/Prospectus pursuant to Items 4, 10(b), 11 or 13 of this Form, within
one business day of receipt of such request, and to send the incorporated
documents by first-class mail or other equally prompt means. This includes
information contained in documents filed subsequent to the effective date of the
Registration Statement through the date of responding to the request.
(g) The undersigned Registrant hereby undertakes to supply by means of
a post-effective amendment all information concerning a transaction, and the
company being acquired involved therein, that was not the subject of and
included in the Registration Statement when it became effective.
II-2
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act, the registrant has
duly caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the County of Chester, state of
Pennsylvania, on April 13, 1998.
CHESTER VALLEY BANCORP INC.
By: /s/ Ellen Ann Roberts
Ellen Ann Roberts
Chairman of the Board
II-3
<PAGE>
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 date indicated.
Signature Title
/s/Anthony J. Biondi Director, President, and Chief Operating
- -------------------------------- Officer
Anthony J. Biondi
Date:April 8, 1998
- -------------------------------- Director
Robert J. Bradbury
Date:
/s/John Cunningham, III, Esquire Director
- --------------------------------
John Cunningham, III, Esquire
Date:April 8, 1998
/s/Christine N. Dullinger Chief Financial Officer and Treasurer
- -------------------------------- (Principal Financial and Accounting
Christine N. Dullinger Officer)
Date:April 9, 1998
/s/Gerard F. Griesser Director
- --------------------------------
Gerard F. Griesser
Date: April 8, 1998
/s/James E. McErlane, Esquire Director
- ---------------------------------
James E. McErlane, Esquire
Date: April 8, 1998
- --------------------------------- Director
Richard L. Radcliff
Date:
/s/Ellen Ann Roberts Director, Chairman, and Chief
- --------------------------------- Executive Officer
Ellen Ann Roberts
Date: April 8, 1998
- --------------------------------- Director
Emory S. Todd
Date:
/s/William M. Wright Director
- ---------------------------------
William M. Wright
Date:April 8, 1998
II-4
<PAGE>
<TABLE>
EXHIBIT INDEX
<CAPTION>
<S> <C>
Exhibit
Number Description
- --------- --------------
2.1 Agreement and Plan of Merger dated as of March 18,
1998 among the Registrant, Philadelphia Corporation
for Investment Services and Chester Valley
Acquisition Corporation (incorporated by reference to
Appendix A to the Proxy Statement/Prospectus included
as part of this Registration Statement)*
3.1 Restated Articles of Incorporation of the Registrant,
as amended (incorporated by reference to the
Registrant's Annual Report on Form 10-K for the year
ended June 30, 1990)
3.2 Bylaws of the Registrant, as amended (incorporated by
reference to the Registrant's Annual Report on Form 10-K
for the year ended June 30, 1991)
4.1 Specimen Common Stock Certificate of the Registrant
(incorporated by reference to the Registrant's Registration
Statement on Form S-4 dated August 10, 1989, File No.
33-30433)
5.1 Opinion of Schnader Harrison Segal & Lewis LLP as to the
legality of the securities being registered by this
Registration Statement**
8.1 Opinion of Schnader Harrison Segal & Lewis LLP as to certain
tax matters relating to the Merger**
10.1 Key Employee Stock Compensation Program, as amended
(incorporated by reference from the Registrant's
Annual Report on Form 10-K for the year ended June
30, 1990)
10.2 Employee Stock Ownership Plan (incorporated by reference to
the Registrant's Annual Report on Form 10-K for the year
ended June 30, 1990)
10.3 Employment Agreement By and Between the the Registrant and
Ellen Ann Roberts (incorporated by reference to the
Registrant's Annual Report on Form 10-K for the year ended
June 30, 1990)
10.4 Employment Agreement By and Between the Registrant and
Colin N. Maropis (incorporated by reference to the
Registrant's Registration Statement on Form S-4 dated
August 10, 1989, File No. 33-30433)
10.5 Employment Agreement By and Between the Registrant and
Anthony J. Biondi (incorporated herein by reference from
the Registrant's Annual Report on Form 10-K for the year
ended June 30, 1990)
10.6 Amendment No. 1 to the Employment Agreement By and Between
the Registrant and Ellen Ann Roberts (incorporated by
reference to the Registrant's Annual Report on Form 10-K for
the year ended June 30, 1992)
- --------
<FN>
* Pursuant to Item 601(b)(2) of Regulation S-K, certain of the schedules and
similar attachments to this exhibit have been omitted. The Registrant agrees to
furnish supplementally such schedules and attachments to the Commission upon
request.
** To be filed by amendment.
</FN>
</TABLE>
II-5
<PAGE>
<TABLE>
<S> <C>
10.7 Amendment No. 1 to the Employment Agreement By and Between
the Registrant and Edward H. Plank (incorporated by
reference to the Registrant's Annual Report on Form 10-K for
the year ended June 30, 1992)
10.8 Amendment No. 1 to the Employment Agreement By and Between
the Registrant and Colin N. Maropis (incorporated by
reference to the Registrant's Annual Report on Form 10-K for
the year ended June 30, 1992.)
10.9 Amendment No. 1 to the Employment Agreement By and Between
the Registrant and Anthony J. Biondi (incorporated by
reference to the Registrant's Annual Report on Form 10- K
for the year ended June 30, 1992)
10.10 1997 Stock Option Plan (incorporated by reference to the
Registrant's Registration Statement on Form S-8 dated
December 12, 1997, File No. 333-42099)
10.11 1993 Stock Option Plan, as amended **
13.1 Registrant's Annual Report on Form 10-KSB for the fiscal
year ended June 30, 1997
13.2 Registrant's Quarterly Reports on Form 10-QSB for the fiscal
quarters ended September 30 and December 31, 1997
23.1 Consent of KPMG Peat Marwick LLP with respect to the
Registrant's financial statements
23.2 Consent of Sanville & Company with respect to the financial
statements of Philadelphia Corporation For Investment
Services
23.3 Consent of Schnader Harrison Segal & Lewis LLP (included in
Exhibit 5.1 above)
23.4 Consent of Schnader Harrison Segal & Lewis LLP (included in
Exhibit 8.1 above)
99.1 Form of Proxy Card of Philadelphia Corporation For
Investment Services
- ----------------
<FN>
** To be filed by amendment.
</FN>
</TABLE>
II-6
<PAGE>
INDEX TO PCIS FINANCIAL STATEMENTS
Page
Independent Auditor's Report . . . . . . . . . . . . . . . . . . . F-2
Statements of Financial Condition December 31, 1997 and 1996 . . . F-3
Statements of Income for the Years Ended
December 31, 1997, 1996 and 1995. . . . . . . . . . . . . . . F-4
Statements of Changes in Stockholders' Equity for
the Years Ended December 31, 1997, 1996 and 1995. . . . . . . F-5
Statements of Cash Flows for the Years Ended
December 31, 1997, 1996 and 1995. . . . . . . . . . . . . . . F-6
Notes to Financial Statements. . . . . . . . . . . . . . . . . . . F-8
F-1
<PAGE>
INDEPENDENT AUDITOR'S REPORT
Board of Directors
Philadelphia Corporation For Investment Services
We have audited the accompanying statements of financial condition of the
Philadelphia Corporation for Investment Services as of December 31, 1997 and
1996, and the related statements of income, changes in stockholders' equity and
cash flows for the years ended December 31, 1997, 1996 and 1995. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audits to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Philadelphia Corporation for
Investment Services at December 31, 1997 and 1996, and the results of its
operations and its cash flows for the years ended December 31, 1997, 1996 and
1995 in conformity with generally accepted accounting principles.
Abington, Pennsylvania Sanville & Company
January 13, 1998 Certified Public Accountants
F-2
<PAGE>
<TABLE>
PHILADELPHIA CORPORATION FOR INVESTMENT SERVICES
Statements of Financial Condition
December 31, 1997 and 1996
<CAPTION>
1997 1996
____ ____
<S> <C> <C>
ASSETS
Cash $ 833,560 $ 862,690
Cash segregated under SEC Rule 15c3-3 1,944 2,079
Receivable from clearing broker 77,261 68,119
Deposit with clearing broker (Note 3) 345,000 345,000
Securities owned, at market value (Note 2):
State and municipal obligations 441,651 470,997
Furniture and office equipment at cost,
net of accumulated depreciation: 1997 -
$167,790; 1996 - $154,135 24,343 35,118
Interest receivable 2,719 1,981
Prepaid expenses, deposits and other assets 60,911 47,762
------ ------
Total assets $1,787,389 $1,833,746
========== ==========
LIABILITIES AND STOCKHOLDERS'
EQUITY
Payable to clearing broker (Note 3) $ 441,655 ($ 471,799)
Accounts payable and accrued expenses 37,764 38,120
Distributions to stockholders 26,877 22,652
----------- -----------
Total liabilities 506,296 532,571
----------- -----------
Commitments and contingent liabilities (Note 5)
Stockholders' equity (Note 8):
Common stock, $10 par value,
authorized 1,000,000 shares;
issued and outstanding 5,725 shares - 1997,
6,100 shares - 1996 57,250 61,000
Additional paid-in capital 374,250 370,459
Retained earnings 849,593 869,716
Total stockholders' equity 1,281,093 1,301,175
--------- ---------
Total liabilities and stockholders' equity $ 1,787,389 $ 1,833,746
=========== ===========
</TABLE>
See notes to financial statements.
F-3
<PAGE>
<TABLE>
PHILADELPHIA CORPORATION FOR INVESTMENT SERVICES
Statements of Income
December 31, 1997 and 1996
<CAPTION>
1997 1996 1995
---- ---- ----
<S> <C> <C> <C>
REVENUES:
Commissions $1,708,112 $1,549,568 $1,557,175
Principal transactions 400,807 434,646 382,300
Gains on firm securities 12,728 12,926 13,839
Revenue from sale of investment
company shares 77,968 77,179 61,454
Investment advisory fees 311,799 277,179 200,776
Money market fund fees 207,983 184,204 149,932
Interest income 68,543 68,993 79,010
Other income 78,522 48,118 36,316
------ ------ ------
2,866,462 2,652,813 2,480,802
--------- --------- ---------
EXPENSES:
Registered representatives'
compensation 1,282,312 1,190,974 1,096,393
Clerical and administrative
salaries 329,246 342,555 321,530
Commissions and clearance
charges 324,245 285,257 275,514
Communications 247,096 233,011 228,177
Occupancy and equipment costs 110,133 131,851 131,523
Promotional costs 33,916 30,836 12,741
Interest expense 7,272 14,285 14,511
Losses in error account 1,626 3,132 5,198
Regulatory fees and expense 26,940 22,541 22,237
Other expenses 111,940 103,111 103,701
------- ------- --------
2,474,726 2,357,553 2,211,525
--------- --------- ---------
Net income $ 391,736 $ 295,260 $ 269,277
=========== ========== ==========
</TABLE>
See notes to financial statements.
F-4
<PAGE>
<TABLE>
PHILADELPHIA CORPORATION FOR INVESTMENT SERVICES
Statements of Changes in Stockholders' Equity
For the years ended December 31, 1997, 1996 and 1995
<CAPTION>
<S> <C> <C> <C> <C> <C>
Common Stock
$10 par value Additional Total
Paid in Retained Stockholders'
Shares Amount Capital Earnings Equity
------ ------ -------- -------- ------------
BALANCE-
DECEMBER 31, 1994 6,100 $61,000 $325,422 $720,464 $1,106,886
Issuance of common 110 1,100 19,117 - 20,217
Repurchase of common (140) (1,400) (13,862) (10,374) (25,636)
Adjustment to paid-in
capital due to 1994
merger - - 34,328 (34,328) -
Net income for the year - - - 269,277 269,277
Distribution to - - - (94,247) (94,247)
------- ------- ------- ---------- --------
BALANCE-
DECEMBER 31, 1995 6,070 60,700 365,055 850,792 1,276,497
Issuance of common 30 300 5,454 - 5,754
Net income for the year - - - 295,260 295,260
Distribution to - - - (276,336) (276,336)
-------- ------ ------- -------- --------
BALANCE -
DECEMBER 31, 1996 6,100 61,000 370,459 869,716 1,301,175
Issuance of common 150 1,500 28,520 - 30,020
Repurchase of common (525) (5,250) (24,729) (82,596) (112,575)
Net income for the year - - - 391,736 391,736
Distribution to - - - (329,263) (329,263)
-------- ------- ------- -------- ---------
BALANCE -
DECEMBER 31, 1997 5,725 57,250 $374,250 $849,593 $1,281,093
====== ======= ======== ======== ==========
</TABLE>
See notes to financial statements.
F-5
<PAGE>
<TABLE>
PHILADELPHIA CORPORATION FOR INVESTMENT SERVICES
Statements of Cash Flows
For the years ended December 31, 1997, 1996 and 1995
<CAPTION>
1997 1996 1995
---- ---- ----
<S> <C> <C> <C>
Cash flows from operating activities:
Net income $391,736 $295,260 $269,277
Adjustments to reconcile net income to
net cash provided by operating activities
Depreciation 13,655 19,758 25,337
(Increase) decrease
Receivable from clearing broker (9,142) 14,827 25,073
Securities owned, at market value 29,346 (82,496) (126,361)
Interest receivable (738) 6,393 (5,165)
Other assets (13,149) (2,692) 1,531
Increase (decrease)
Payable to clearing broker (30,144) 83,153 128,899
Accounts payable and accrued
expenses (356) (6,626) (3,577)
Income taxes payable - - (11,086)
Distribution to stockholders 4,225 556 22,096
----- --- ------
Net cash provided by operating
activities: 385,433 328,133 326,024
------- ------- -------
Cash flow from investing activities
Proceeds from sale of fixed assets - - 1,425
Purchase of fixed assets (2,880) (10,357) (15,896)
Net cash expended in investing
activities: (2,880) (10,357) (14,471)
Cash flows from financing activities:
Proceeds from issuance of common
stock 30,020 5,754 20,217
Repurchase of common stock (112,575) - (25,636)
Distribution to stockholders (329,263) (276,336) (94,247)
-------- -------- -------
Net cash expended in financing
activities: (411,818) (270,582) (99,666)
Net (decrease) increase in cash (29,265) 47,194 211,887
Cash and cash equivalents* at
beginning of year 864,769 817,575 605,688
------- ------- -------
Cash and cash equivalents* at
end of year $835,504 $864,769 $817,575
======== ======== ========
</TABLE>
See notes to financial statements
F-6
<PAGE>
<TABLE>
PHILADELPHIA CORPORATION FOR INVESTMENT SERVICES
Statements of Cash Flows (Continued)
For the years ended December 31, 1997, 1996 and 1995
<CAPTION>
1997 1996 1995
---- ---- ----
<S> <C> <C> <C>
Supplemental disclosures of cash flow
information
Cash paid (received)during the
year for:
Interest paid (received) - net($60,533) ($57,899) ($68,069)
Income taxes $0 $0 $11,086
*Cash and cash equivalents includes
amounts segregated under S.E.C. Rule 15c3-3
and amounts in money market funds.
</TABLE>
See notes to financial statements.
F-7
<PAGE>
PHILADELPHIA CORPORATION FOR INVESTMENT SERVICES
Notes To Financial Statements
December 31, 1997, 1996 and 1995
1. ORGANIZATION
Philadelphia Corporation For Investment Services (the "Company") is a
registered investment advisor and registered broker dealer with the
Securities and Exchange Commission ("SEC") and is incorporated under the
laws of the Commonwealth of Pennsylvania. The Company, like other
investment advisors and registered broker dealers, is directly affected by
general economic and market conditions, including fluctuations in volume
and price level of securities, changes in interest rates and securities
brokerage services, all of which have an impact on the Company's liquidity.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Revenue - Securities transactions (and related commission revenue and
expense, if applicable) are recorded on a settlement date basis, which is
not materially different from trade date.
Fair Value of Securities - Securities owned and sold, but not yet
purchased, are valued at market value and the resulting difference between
cost and market is included in income.
The market value of securities owned, consisting of state and municipal
obligations, is determined by the Company utilizing quoted market prices,
dealer quotes and prices obtained from independent third parties.
Substantially all of the Company's financial assets and liabilities are
carried at market value or at amounts which because of short-term nature of
the financial instruments, approximate current fair value.
Concentration of Credit Risks - The Company maintains its cash in bank
deposit accounts which, at times, may exceed federally insured limits. The
Company has not experienced any losses in such accounts. Management
believes the Company is not exposed to any significant credit risk related
to cash.
Depreciation - Fixed asset purchases are classified as five or seven-year
property for depreciation purposes under the Modified Accelerated Cost
Recovery System of 1986.
Income Taxes - No provisions have been made for income taxes since the
Company has elected to be taxed under the provisions of Subchapter S of the
Internal Revenue Code and similar state provisions. Under these provisions,
the Company does not pay income taxes on its taxable income. Instead, the
stockholders are liable for individual income taxes based on their
respective shares of the Company's taxable income.
Use of Estimates - The financial statements are prepared using the accrual
basis of accounting. Generally accepted accounting principles require
management under certain circumstances to use accounting estimates. Actual
results could differ from these estimates. PHILADELPHIA CORPORATION FOR
INVESTMENT SERVICES Notes to Financial Statements (Continued) December 31,
1997, 1996 and 1995
3. DEPOSIT WITH AND PAYABLE TO CLEARING BROKER
The Company maintains a clearing agreement with BHC Securities Inc. ("BHC")
(See Note 4). Under the agreement the Company maintains a clearing deposit
of $35,000 and a $310,000 inventory deposit whereby the Company can carry
equity, corporate debt and municipal inventory up to $950,000. Any
inventory in excess of $310,000 is financed by BHC. The Company earns
interest on the clearing deposit and any unused portion of the $310,000 at
a rate based upon the three month U.S. Treasury Bill rate at the beginning
of each month. The Company pays interest on any payable to BHC at brokers
call rate. For the years ended December 31, 1997, 1996 and 1995 the Company
earned $9,400, $8,577 and $12,028 and paid $2,433, $11,059 and $10,941,
respectively.
F-8
<PAGE>
4. COMPUTATION FOR DETERMINATION OF RESERVE REQUIREMENTS
The Company will principally operate in accordance with the exemptive
provisions of paragraph (K)(2)(B) of SEC Rule 15c3-3. Substantially all
customer transactions are cleared through BHC on a fully disclosed basis.
From time to time the Company self clears customer transactions not
eligible to be cleared through BHC. For such transactions the Company
maintains a special reserve account for the exclusive benefit of the
customers of the Company, in which all customer funds are deposited and
withdrawn under the exemptive provisions of paragraph (K)(2)(A) of SEC Rule
15c3-3.
5. COMMITMENTS AND CONTINGENT LIABILITIES
The Company leases its main office, a branch office and certain equipment
under leases expiring in 1998 through 2002. The aggregate office rental and
equipment rental for the years ended December 31, 1997, 1996 and 1995 were
as follows:
<TABLE>
<CAPTION>
1997 1996 1995
---- ---- ----
<S> <C> <C> <C>
Office rental $ 95,502 $ 92,029 $ 92,029
Equipment rental 40,334 37,965 15,736
The approximate minimum future rental payments through 2002 are:
</TABLE>
<TABLE>
<CAPTION>
Office Equipment
Fiscal Year Leases Leases
----------- ------- ---------
<S> <C> <C> <C>
1998 $112,208 $20,226
1999 76,237 8,084
2000 51,231 4,762
2001 51,962 -
2002 48,246 -
</TABLE>
F-9
<PAGE>
PHILADELPHIA CORPORATION FOR INVESTMENT SERVICES
Notes to Financial Statements (Continued)
December 31, 1997, 1996 and 1995
5. COMMITMENTS AND CONTINGENT LIABILITIES (Continued)
In the normal course of business, the Company enters into when-issued and
underwriting commitments. The transactions relating to such commitments
that were open as of December 31, 1997, 1996 and 1995 had no material
effect on the financial condition of the Company as of these dates.
6. NET CAPITAL REQUIREMENTS
Pursuant to the net capital provisions of the Securities and Exchange
Commission, the Company is required to maintain a minimum net capital as
defined under such provisions. Net capital and the related net capital
ratio may fluctuate on a daily basis. At December 31, 1997, the Company had
net capital of $1,151,594 which was $901,594 in excess of its required net
capital of $250,000. The Company's net capital ratio was .03 to 1. At
December 31, 1996, the Company had net capital of $1,173,216 which was
$923,216 in excess of its required net capital of $250,000. The Company's
net capital ratio was .03 to 1. At December 31, 1995, the Company had net
capital of $1,146,834 which was $896,834 in excess of its required net
capital of $250,000. The Company's net capital ratio as .04 to 1.
7. 401(K) SAVINGS PLAN
Employees of the Company may participate in a 401(K) savings plan, whereby
the employees may elect to make contributions pursuant to a salary
reduction agreement upon meeting age and length-of-service requirements.
The Company made no matching or elective contributions to the plan for the
years ended December 31, 1997, 1996 and 1995.
8. ACQUISITION AGREEMENT
In December, 1997 the Board of Directors and the shareholders of the
Company approved, in principle, an offer by Chester Valley Bancorp Inc., or
one of its subsidiaries, to acquire all the issued and outstanding stock of
the Company. Consummation of the merger is expected to occur during the
first half of 1998, and is subject to various conditions and regulatory
approvals.
F-10
<PAGE>
APPENDIX A
MERGER AGREEMENT
dated as of March 18, 1998
Among
Chester Valley Bancorp Inc.,
Chester Valley Acquisition Corporation,
and
Philadelphia Corporation for Investment Services
<PAGE>
AGREEMENT AND PLAN OF MERGER
THIS AGREEMENT AND PLAN OF MERGER, dated as of March 18, 1998, among
Chester Valley Bancorp Inc., a Pennsylvania corporation ("CVAL"), Chester Valley
Acquisition Corporation, a Pennsylvania corporation ("CVAC"), and Philadelphia
Corporation for Investment Services, a Pennsylvania corporation (the "Company"),
WITNESSETH THAT:
WHEREAS, CVAL is a unitary thrift holding company; and
WHEREAS, CVAC is a wholly-owned subsidiary of CVAL created solely for
the purpose of facilitating the transactions described in this Agreement; and
WHEREAS, the boards of directors of CVAL and the Company have each
determined that it is in the best interest of their respective shareholders for
CVAL to acquire the Company by means of a merger of CVAC with and into the
Company (the "Merger") as a result of which the Company will become a
wholly-owned subsidiary of CVAL, all upon the terms and subject to the
conditions set forth herein; and
WHEREAS, the parties desire to make certain representations,
warranties, covenants and agreements in connection with this Agreement and to
set forth the conditions to the Merger; and
WHEREAS, the parties hereto desire to adopt this Agreement as a plan
of reorganization and to consummate such plan in accordance with the provisions
of Sections 368(a)(1)(A) and 368(a)(2)(E) of the Internal Revenue Code of 1986,
as amended (the "Code");
NOW, THEREFORE, in consideration of the premises and the mutual
promises hereinafter set forth, the parties hereto, intending to be legally
bound hereby, agree as follows:
ARTICLE I
The Merger
Section 1.01 Merger. (a) Subject to the terms and conditions of this
Agreement and in accordance with the applicable laws of the Commonwealth of
Pennsylvania, at the Effective Time (as defined in Section 1.01(d)), CVAC shall
be merged with and into the Company, the separate existence of CVAC shall cease
and the Company shall be the surviving corporation in the Merger (the "Surviving
Corporation"), in accordance with the Pennsylvania Business Corporation Law of
1988, as amended (the "BCL"). The Merger shall have the effects specified in the
BCL.
(b) At the Effective Time, the Articles of Incorporation and
Bylaws of CVAC in effect immediately before the Effective Time shall be the
Articles of Incorporation and Bylaws of the Surviving Corporation, until amended
in accordance with the provisions thereof and the BCL; provided, however, that
the name of the Surviving Corporation shall be "Philadelphia Corporation for
Investment Services." At the Effective Time: the directors of the Company
immediately before the Effective Time shall be the directors of the Surviving
Corporation with such additions or deletions as CVAL, in its sole discretion,
may determine; and the officers of the Company immediately before the effective
time shall be the officers of the Surviving Corporation until their successors
are elected and qualified or until their earlier resignation or removal.
(c) The closing of the Merger (the "Closing") shall take place at
such place and time and on such date (the "Closing Date") as shall be agreed
upon by all parties, which date shall not be later than the 30th business day
after (i) the last approval of required governmental authorities (if any) is
granted and any related waiting periods expire, (ii) the lifting, discharge or
dismissal of any stay of any such governmental approval or of any injunction
against the Merger and (iii) all shareholder approvals required by the parties
hereunder are received.
(d) Immediately following the Closing, and provided that this
Agreement has not been terminated or abandoned pursuant to Section 5.06, CVAL
and CVAC will cause articles of merger effectuating the Merger (the "Articles of
Merger") to be delivered and properly filed with the Pennsylvania Department of
State (the "Department of State"). The Merger shall become effective at the time
A-1
<PAGE>
specified in the Articles of Merger, which shall be at 12:01 a.m. on the first
business day following the Closing (the "Effective Time"). The "Effective Date"
when used herein means the day on which the Effective Time for the Merger
occurs.
Section 1.02 Conversion of Shares. (a) At the Effective Time, by
virtue of the Merger, automatically and without any action on the part of the
holder thereof, subject to the provisions of Section 1.03 hereof with respect to
payment of fractional shares in cash and Section 1.04 hereof with respect to
dissenters rights, if any, each share of common stock, par value $10.00 per
share, of the Company ("Company Common Stock") issued and outstanding at the
Effective Time (other than shares the holders of which (each a "Dissenting
Shareholder") are exercising appraisal rights pursuant to the BCL (the
"Dissenters Shares"), if any) shall become and be converted into the right to
receive shares of common stock, par value $1.00 per share, of CVAL ("CVAL Common
Stock") determined in conformity with the Exchange Ratio set forth in Schedule
1.02 hereof.
(b) The shares of common stock of CVAC issued and outstanding
immediately prior to the Effective Time, by virtue of and after the Merger,
shall be converted into and thereafter constitute the outstanding shares of the
capital stock of the Surviving Corporation.
(c) If prior to the Effective Time, the number of outstanding
shares of CVAL common stock shall have been increased or decreased through a
reclassification, stock dividend, stock split or reverse stock split, or other
similar change, appropriate adjustment shall be made to the Exchange Ratio.
Section 1.03 Surrender and Exchange of Company Certificates
(a) Within five business days after the Effective Date, the
Company shall cause to be sent to each Person who, immediately prior to the
Effective Time, was a holder of record of Company Common Stock transmittal
materials and instructions for surrendering certificates for Company Common
Stock ("Old Certificates") in exchange for a certificate for the number of whole
shares of CVAL Common Stock to which such Person is entitled under Section 1.02.
(b) No certificates for fractional shares of CVAL Common Stock
shall be issued in connection with the Merger. In lieu thereof, CVAL shall issue
to any holder of Company Common Stock certificates otherwise entitled to a
fractional share, upon surrender of such certificates in accordance with the
instructions furnished by CVAL, a check for an amount of cash equal to the
fraction of a share of CVAL Common Stock represented by the certificates so
surrendered multiplied by the Average Price Per Share of CVAL Common Stock as
determined in conformity with this Section 1.03(b), provided, however, that if
such Average Price Per Share is more than $27.50 the amount of the check to be
issued for fractional shares shall be the same as though the Average Price Per
Share had been $27.50, and if the Average Price Per Share is less than $24.50
the amount of the check to be issued for fractional shares shall be the same as
though the Average Price Per Share had been $24.50. The "Average Price Per
Share" of CVAL Common Stock shall be determined by adding the last asked price
of a share of CVAL Common Stock, as reported on the principal securities
exchange on which shares of CVAL Common Stock are then listed or admitted to
trading or as reported on the National Association of Securities Dealers
Automated Quotation System, on each business day over the period of ten business
days ending on the second business day preceding the date set for the Closing
and dividing such total by ten (or, if such asked prices were not available for
all business days during such ten-day period, then the number of business days
in such ten-day period for which such asked prices were available).
(c) If the record date of any dividend on CVAL Common Stock
occurs after the Effective Time, the declaration shall include dividends on all
whole shares of CVAL Common Stock into which shares of Company Common Stock have
been converted under this Agreement, but no former holder of Company Common
Stock shall be entitled to receive payment of any such dividend until surrender
of the shareholder's Old Certificates shall have been effected in accordance
with the instructions furnished by CVAL. Upon surrender for exchange of a
shareholder's Old Certificates, such shareholder shall be entitled to receive
from CVAL an amount equal to all such dividends (without interest thereon and
less the amount of any taxes, if any, which may have been imposed or paid
thereon) declared, and for which the payment date has occurred, on the whole
shares of CVAL Common Stock into which the shares represented by such Old
Certificates have been converted.
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(d) After the Effective Time, there shall be no transfer on the
stock transfer books of the Company of shares of Company Common Stock. If Old
Certificates are presented for transfer after the Effective Time, they shall be
canceled and certificates representing whole shares of CVAL Common Stock (and a
check in lieu of any fractional share) shall be issued in exchange therefor as
provided herein.
(e) In the event that any Old Certificates have not been
surrendered for exchange in accordance with this Section on or before the second
anniversary of the Effective Date, CVAL may at any time thereafter, with or
without notice to the holders of record of such Old Certificates, sell for the
accounts of any or all of such holders any or all of the shares of CVAL Common
Stock which such holders are entitled to receive under Section 1.02 hereof (the
"Unclaimed Shares"). Any such sale may be made by public or private sale in such
manner and at such times as CVAL shall determine. If, in the opinion of counsel
for CVAL, it is necessary or desirable, any Unclaimed Shares may be registered
for sale under the Securities Act of 1933, as amended (the "Securities Act") and
applicable state laws. CVAL shall not be obligated to make any sale of Unclaimed
Shares if it shall determine not to do so, even if notice of sale of the
Unclaimed Shares has been given. The net proceeds of any such sale of Unclaimed
Shares shall be held for holders of the unsurrendered Old Certificates whose
Unclaimed Shares have been sold, to be paid to them upon surrender of the Old
Certificates. From and after any such sale, the sole right of the holders of the
unsurrendered Old Certificates whose unclaimed Shares have been sold shall be
the right to collect the net sale proceeds held by CVAL for their respective
accounts, and such holders shall not be entitled to receive any interest on such
net sale proceeds held by CVAL.
(f) If outstanding certificates for shares of Company Common
Stock are not surrendered prior to the date on which such certificates would
otherwise escheat to or become the property of any governmental unit or agency,
the unclaimed items shall, to the extent permitted by abandoned property and any
other applicable law, become the property of CVAL (and to the extent not in its
possession shall be paid over to it), free and clear of all claims or interest
of any Person previously entitled to such claims. Notwithstanding the foregoing,
neither CVAL nor its agents or any other Person shall be liable to any former
holder of Company Common Stock for any property delivered to a public official
pursuant to applicable abandoned property, escheat or similar laws.
(g) In the event any Old Certificate shall have been lost, stolen
or destroyed, upon the making of an affidavit of that fact by the Person
claiming such Old Certificate to be lost, stolen or destroyed and, if required
by CVAL, the posting by such Person of a bond in such amount as CVAL may direct
as indemnity against any claim that may be made against it with respect to such
Certificate, CVAL will issue in exchange for such lost, stolen or destroyed Old
Certificate, the shares of CVAL Common Stock into which such Old Certificates
have been converted pursuant to this Agreement.
Section 1.04 Dissenters Rights. In accordance with the provisions of
Section 1571 of the BCL, the Company's shareholders are entitled to exercise
dissenters rights.
ARTICLE II
Representations and Warranties
Section 2.01 Representations and Warranties of the Company. The
Company represents and warrants to CVAL that, except as set forth in a letter
from the Company to CVAL delivered concurrently with this Agreement (the
"Company Disclosure Letter"):
(a) Organization and Good Standing; Business. The Company is a
corporation duly organized and validly existing under the laws of the
Commonwealth of Pennsylvania, with all requisite corporate power and authority
to own its properties and conduct its business as now being conducted, and is
duly qualified to do business as a foreign corporation in each jurisdiction
where the ownership of its properties or the conduct of its business makes such
qualification necessary and where failure to qualify would have a material
adverse effect on the assets, business or financial condition of the Company.
Except as set forth in the Company Disclosure Letter by reference to this
subsection, the Company does not have any subsidiaries and does not own or
control (as "control" is defined in Section 2.01(c) below), directly or
indirectly, any shares of capital stock of or other equity interest in any
corporation, limited liability company, business trust, partnership or other
entity or Person. In this Agreement, a "Person" means an individual, a sole
proprietorship, a corporation, a partnership, a joint venture, an association, a
trust, or any other entity or organization, including a government or political
subdivision, agency or instrumentality thereof.
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(b) Capitalization. The authorized capital stock of the Company
consists solely of (i) 50,000 shares of Company Common Stock, of which 5,725
shares are issued and outstanding and no shares are held in treasury. Each
issued and outstanding share of Company Common Stock is duly and validly
authorized and issued and is fully paid and nonassessable. The Company does not
have any shares of capital stock reserved for issuance and does not have any
outstanding bonds, debentures, notes or other obligations the holders of which
have the right to vote (or convertible into or exercisable for securities having
the right to vote) with shareholders on any matter. The outstanding shares of
capital stock of the Company have not been issued in violation of any preemptive
rights. There are no outstanding subscriptions, options, warrants, rights,
convertible securities or other agreements or commitments of any character
relating to the issued or unissued capital stock or other securities of the
Company. The Company is not a party to and does not know of the existence of any
agreement, understanding or arrangement among any Persons relating to the voting
of any shares of capital stock of the Company other than as described in the
Company Disclosure Letter by reference to this subsection.
(c) Loans to Employees, Shareholders, Etc. Except as set forth in
the Company Disclosure Letter by reference to this subsection, the Company has
not made any loans or extended credit to any Company employees, officers,
directors, shareholders or any Affiliates thereof within the past three (3)
years. None of the Company's employees, officers, directors, shareholders or any
Affiliates thereof are indebted to the Company as of the date of this Agreement,
except as set forth in the Company Disclosure Letter with reference to this
subsection. For purposes of this Agreement, an "Affiliate" of a Person shall
mean any other Person who or which directly or indirectly controls, is
controlled by, or is under common control with such Person. The term "control"
(including, with correlative meaning, the terms "controlled by" and "under
common control with"), as used with respect to any Person, shall mean the
possession, directly or indirectly, of power to elect a majority of the board of
directors (or other governing body) or to direct or cause the direction of the
management and policies of such Person, whether through the ownership of voting
securities, by contract or otherwise, and, in any event and without limiting the
generality of the foregoing, any Person owning 10% or more of the voting
securities of another entity shall be deemed to control that Person.
(d) Transactions with Employees, Shareholders, Etc. Except as
described in the Company Disclosure Letter by reference to this subsection,
neither any director, officer, shareholder or employee of the Company, nor any
Affiliate of any such Person has, during the past three years: (i) received or
earned, or (ii) had an ownership interest (whether direct or indirect) in any
business, corporate or otherwise (except ownership of one percent or less of
publicly owned companies), which has or had any business arrangement or
relationship of any kind under which he, she or it has received or earned,
payments from or to the Company in excess of $20,000.00 in any year (other than
salaries, wages, commissions or bonuses as employees of the Company). There are
no contracts or arrangements, whether written or oral, between the Company and
any director, officer, shareholder or employee, or any Affiliate of any such
Person, except for those described in the Company Disclosure Letter by reference
to this subsection, a true and complete copy of each of which (including,
without limitation, all amendments or modifications thereto) has been delivered
to CVAL. All transactions required to be described in said portions of the
Company Disclosure Letter have been recorded in the books and records of the
Company at their full value, the same as if they were rendered in arms length
transactions.
(e) Disciplinary Actions. Except as set forth in the Company
Disclosure Letter by reference to this subsection, no governmental agency,
self-regulatory body or other securities regulator has initiated any
disciplinary proceeding, or enforcement action, imposed any fine or sanction or
taken other disciplinary action against the Company or any officer, director or
employee of the Company since January 1, 1992, and, to the best of the Company's
knowledge, no investigation by any such agency, body or regulator has been
initiated with respect to the Company or any officer, director or employee of
the Company since January 1, 1992.
(f) Corporate Documents. The Company has previously delivered to
CVAL true and complete copies of (i) the articles of incorporation and by-laws
of the Company, and neither the Board of Directors nor the stockholders of the
Company have taken any action for the purpose of effecting the amendment or
modification of any of such documents, and (ii) all of the documents disclosed
in the Company Disclosure Letter and the Schedules thereto.
(g) Corporate Authority. The Company has all necessary corporate
power and authority to enter into and perform this Agreement in accordance with
its terms. This Agreement has been duly authorized, executed and delivered by
the Company and represents a valid and legally binding agreement of the Company,
enforceable against the Company in accordance with its terms, except as
enforcement of remedies may be limited by bankruptcy, insolvency or similar laws
affecting creditors' rights generally and by principles of equity.
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(h) No Violation. The execution, delivery and performance of this
Agreement by the Company does not and will not (i) violate or conflict with any
provision of the articles of incorporation or by-laws of the Company or any
statute, code, ordinance, rule, regulation, judgment, order, writ, decree or
injunction applicable to the Company or any of its properties or assets, or (ii)
violate, conflict with, result in a breach of any provisions of, constitute a
default (or an event which, with or without notice or lapse of time, or both,
would constitute a default) under, result in the termination of, accelerate the
performance required by, or result in the creation of any lien, security
interest, charge or other encumbrance upon any of the properties or assets of
the Company under, any of the terms, conditions or provisions of any note, bond,
mortgage, indenture, deed of trust, license, lease agreement, loan agreement or
other agreement, instrument or obligation to which the Company is a party, or by
which it or any of its properties may be bound, except as set forth in the
Company Disclosure Letter by reference to this subsection.
(i) Consents. Except as expressly set forth in the Company
Disclosure Letter by reference to this subsection, no consent, approval, permit
or license from or filing with any governmental authority, self-regulatory body,
creditor, landlord or other Person is required to be obtained or made by the
Company in connection with the execution, delivery and performance by the
Company of this Agreement other than (i) the approval of this Agreement by the
Board of Directors of the Company, which approval has already been obtained,
(ii) the approval of the Merger by holders of a majority of the issued and
outstanding shares of Company Common Stock and (iii) the filing of the Articles
of Merger with the Pennsylvania Department of State.
(j) Financial Statements. The Company has furnished to CVAL true
and complete copies of the audited balance sheets of the Company as of December
31, 1995, 1996 and 1997, and the related statements of income and stockholders'
equity and cash flows for each of the years ended December 31, 1995, 1996, and
1997, all such financial statements having been certified by Sanville & Company,
certified public accountants. The financial statements referred to above fairly
present the financial position of the Company and the results of its operations
and changes in its financial position at the dates thereof and for the periods
covered thereby in conformity with generally accepted accounting principles
applied on a consistent basis throughout the periods involved. Except as
expressly set forth in the Company Disclosure Letter by reference to this
subsection, the Company did not have, as of December 31, 1997 any material
liabilities or obligations (contingent or otherwise) not fully reflected or
reserved against in such December 31, 1997 balance sheet.
(k) Absence of Certain Changes or Events.
(i) Except as specifically disclosed to CVAL in the Company
Disclosure Letter by reference to this subsection, since December 31, 1997, the
Company has conducted its business in the ordinary course and in the manner
consistent with its past practices, and there has not been:
(A) any material adverse change in the prospects,
business, operations, properties, assets or financial condition of the Company,
or any event which has had or reasonably could have a material adverse effect on
the foregoing;
(B) any loss, damage, destruction or other casualty
materially and adversely affecting the properties, assets or business of the
Company (whether or not covered by insurance);
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(C) any change in any method of accounting or
accounting practice of the Company; or
(D) any claim, demand, complaint, suit, action,
proceeding or notice by any Person alleging actual or potential liability on the
part of the Company, or on the part of any director, officer or employee of the
Company, relating to the Company or its business (a "Claim"), or alleging any
default, breach or violation by the Company, or by any director, officer, or
employee of the Company relating to the Company or its business, of any statute,
code, ordinance, rule, regulation, order, decree, writ, license, permit,
instrument, agreement or other obligation (a "Default").
(ii) Except as specifically disclosed to CVAL in the Company
Disclosure Letter by reference to this subsection or as contemplated or
permitted by this Agreement, since December 31, 1997 the Company has not:
(A) conducted its business in any material respect
other than in its usual manner or incurred any material liabilities or
obligations other than in the ordinary course of business;
(B) issued or sold any shares of the capital stock of
the Company or any options, warrants or other rights to purchase or otherwise
acquire any shares of capital stock, or obligations or securities convertible
into shares of capital stock of the Company;
(C) discharged or satisfied any lien or encumbrance or
paid or satisfied any obligation or liability (whether absolute, accrued,
contingent or otherwise and whether due or to become due) in an amount greater
than $10,000 as to each such lien, encumbrance, obligation or liability other
than liabilities shown on the latest balance sheet referred to in Section
2.01(j) and other than liabilities incurred since December 31, 1997 in the
ordinary course of business and consistent with past practice;
(D) declared, paid or set aside for payment any
dividend or other distribution (whether in cash, stock or property) in respect
of its capital stock;
(E) split, combined or reclassified any shares of its
capital stock, or redeemed, repurchased or otherwise acquired any shares of
capital stock or other securities of the Company;
(F) sold, assigned or transferred a material amount of
its assets (real, personal or mixed, tangible or intangible), canceled any
material amount of debts or claims or waived any rights of substantial value,
except, in each case, in the ordinary course of business and consistent with
past practice;
(G) entered into any other material transaction other
than in the ordinary course of business and consistent with past practice; or
(H) entered into any agreement to do any of the
foregoing.
(l) Taxes. The Company has duly and properly filed all tax
returns (including franchise tax returns) which were required to be filed by it
and all such returns were true, correct and complete in all material respects
when filed. Except as set forth in the Company Disclosure Letter by reference to
this subsection, the Company has paid, or has set up reserves on its financial
statements which are adequate for the payment of all federal, state, local,
foreign and other income, franchise and other taxes (together with applicable
interest, penalties and other additions to tax, if any) whether or not disputed,
payable by it in respect of all periods covered by such returns, and will pay,
reflect or set up on its books for all relevant subsequent periods reserves
which are adequate for the payment of all such taxes (together with applicable
interest, penalties and other additions to tax, if any). Except as specifically
set forth in the Company Disclosure Letter by reference to this subsection or
reflected or reserved against in the financial statements referred to in Section
2.01(j) or in the notes thereto, to the best of the Company's knowledge there
are no deficiencies, assessments, charges or other claims for any federal,
state, local, foreign or other income, franchise or other taxes which have been
proposed, asserted or assessed against the Company in respect of any period
covered by any returns for fiscal years commencing after 1991 or any period
since the periods covered by such returns, and no waivers or requests for
waivers of the time to assert a deficiency, assessment, charge or other claim
with respect to any such taxes are outstanding or pending.
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(m) No Defaults. The Company is not in default under or in
violation of any provision of its articles of incorporation or bylaws or any
note, bond, mortgage, indenture, deed of trust, license agreement, loan
agreement or any other agreement, instrument or obligation to which it is a
party or by which it is bound or to which any of its properties is subject which
could reasonably be expected to have a material adverse effect on the business
or financial condition of the Company, and the Company is not in violation of
any statute, code, ordinance, rule, regulation, order, writ, decree or
injunction of any court or federal, state or other governmental agency or
authority or self-regulatory body having jurisdiction over it or any of its
properties which if enforced could reasonably be expected to have a material
adverse effect on the business or financial condition of the Company.
(n) Litigation. Except as set forth in the Company Disclosure
Letter by reference to this subsection, there are no actions, suits, proceedings
or claims (governmental or other) pending, or to the best knowledge of the
Company, threatened against the Company or the business, properties, assets or
good will of the Company, which individually or in the aggregate would, if
decided adversely to the interests of the Company, have a material adverse
effect on the prospects, business, condition (financial or other) or results of
operations, present or prospective, of the Company or on the transactions
contemplated by this Agreement.
(o) Contracts and Commitments. Except as set forth in the Company
Disclosure Letter with specific reference to this Section and except as
contemplated by this Agreement, the Company is not a party to or bound by any
written or oral, express or implied:
(i) employment, bonus, profit-sharing, percentage
compensation, deferred compensation, pension, welfare, retirement, stock
purchase or stock option plan, contract, agreement, commitment, arrangement,
practice, or understanding with any directors, officers or employees, or
consulting agreement, excluding (A) agreements, commitments, arrangements,
practices, or understandings terminable by the Company on not more than 30 days
notice without liability or penalty and (B) commitments, arrangements,
practices, and understandings (1) with employees who are not officers or
directors of the Company which are, in the aggregate, not material to the
Company and (2) as to officers and directors which are routine business
practices (in both scope and amount) in the financial services industry;
(ii) note, mortgage, contract, agreement, commitment,
arrangement or understanding for the repayment or borrowing of money by the
Company, or for any guarantee by the Company of any obligation of any other
Person;
(iii) contract, agreement, commitment, arrangement or
understanding relating to any joint venture, partnership or sharing of profits
or losses with any Person or permitting any Person to utilize any technology,
know-how or proprietary information of the Company;
(iv) contract, agreement, commitment, arrangement or
understanding which would require the consent of any party thereto to the
consummation of the transactions contemplated hereby;
(v) contract, agreement, commitment, arrangement or
understanding containing covenants purporting to limit the freedom of the
Company to compete in any line of business or in any geographic area;
(vi) contract, agreement, commitment, arrangement or
understanding to which any present or former directors, officers, Affiliates or
"associates" (as such term is defined in the rules and regulations promulgated
under the Securities Act) of the Company are parties in excess of $5,000 in the
aggregate as to any one Person, each of which contracts or agreements is valid
and binding in accordance with its terms;
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(vii) contract, agreement, commitment, arrangement or
understanding, not elsewhere specifically disclosed pursuant to this Agreement,
involving the payment or receipt by the Company of more than $5,000 per year or
$10,000 over the term thereof other than for transactions in the ordinary course
of the Company's business; or
(viii) any other material contract or agreement not made in
the ordinary course of business.
(p) Operations. Except as set forth in the Company Disclosure
Letter by reference to this subsection, the present operational systems,
procedures and capacity are sufficient to support current and reasonably
anticipated volume of trading and other activity of the Company.
(q) Disclosure. To the best of the Company's knowledge no
representation or warranty made by the Company contained in this Agreement and
no statement contained in any schedule or certificate delivered or to be
delivered by the Company pursuant to this Agreement, contains or will contain
any untrue statement of a material fact or omits or will omit to state a
material fact necessary to make the statements contained therein not misleading
in the light of the circumstances under which they were made.
(r) Compliance with Laws. The Company (i) is in compliance, in
all material respects, with all laws, regulations, reporting and licensing
requirements, and orders applicable to its business or to employees conducting
its business the breach or violation of which could, either individually or in
the aggregate, reasonably be expected to have a materially adverse effect on the
Company; and (ii) has received no notification or communication from any agency
or department of federal, state, or local government or the staff thereof or
from any self-regulatory body (A) asserting that, or commencing an investigation
as to whether, the Company is not in compliance with any of the statutes,
regulations, or ordinances which such governmental authority or self-regulatory
body enforces, or (B) threatening to revoke any license, franchise, permit, or
governmental authorization. The Company has and its employees and officers have
all permits, licenses and registrations required for the conduct of the
Company's businesses as now conducted, whether issued or issuable by, or filed
or to be filed with, any governmental authority or self-regulatory body, all of
which are specified in the Company Disclosure Letter with specific reference to
this subsection.
(s) Employee Benefit Plans.
(i) The Company has delivered or made available to CVAL,
prior to the execution of this Agreement, copies (or with respect to unwritten
plans, written descriptions) of (A) each pension, retirement, deferred
compensation, stock option, stock purchase, savings, employee stock ownership,
restricted stock, phantom stock, stock ownership or other similar plan as in
effect on the date of this Agreement, including, without limitation, any
"employee pension benefit plan", as that term is defined in Section 3(2) of the
Employment Retirement Income Security Act of 1974, as amended, ("ERISA"), in
respect of any of the present or former employees of, or dependents, spouses, or
other beneficiaries of any of such employees of the Company, (B) each employment
or consulting agreement, severance, bonus, profit-sharing, incentive, deferred
compensation, supplemental or excess retirement, life insurance, health, or
other plan, policy, contract, or arrangement as in effect on the date of this
Agreement which provides benefits or perquisites to or in respect of any of the
present or former directors or officers, or dependents, spouses or other
beneficiaries of any such directors or officers of the Company and (C) each
severance, bonus, profit-sharing, incentive, deferred compensation, supplemental
or excess retirement, life insurance, health, vacation, tuition assistance or
reimbursement, legal services, salary continuation, travel or accident insurance
or benefits, disability insurance or benefits or unemployment benefits, plans,
policies, contracts or arrangements, including, without limitation, each
"employee welfare benefit plan" within the meaning of Section 3(1) of ERISA as
in effect on the date of this Agreement which provides benefits or perquisites
to or in respect of present or former employees, or dependents, spouses, or
other beneficiaries of, any of such employees of the Company (the "Company
Welfare Plans") (all of the foregoing being collectively, the "Company Benefit
Plans"). All such Company Benefit Plans are listed on the Company Disclosure
Letter. The Company has not participated in or been a member of, and no Company
Benefit Plan is or has been, a "multiemployer plan" within the meaning of
Section 3(37) of ERISA.
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(ii) Except as disclosed in the Company Disclosure Letter,
all Company Benefit Plans conform to, and their administration is in compliance
in all material respects with, the applicable provisions of ERISA and the
Internal Revenue Code, and any other applicable laws, rules, and regulations the
breach or violation of which would have a material adverse effect on the
Company. With respect to the Company Benefit Plans, no event has occurred and,
to the best knowledge of the Company, there exists no condition or set of
circumstances, in connection with which the Company would be subject to any
liability, lien or encumbrance or loss of tax deduction under ERISA or the
Internal Revenue Code.
(iii) Except as disclosed in the Company's Disclosure
Letter, the consummation of the transactions contemplated by this Agreement will
not obligate the Company to provide any current or former officer, director or
employee of the Company with severance pay, unemployment compensation or any
other payment.
(t) Reports. Since January 1, 1992, the Company has filed all
reports and statements, together with any amendments required to be made with
respect thereto, that it has been required to file (i) with the Securities and
Exchange Commission ("SEC"), (ii) any other applicable federal or state
securities, insurance or other regulatory authorities and (iii) any
self-regulatory body. To the best of the Company's knowledge, as of their
respective dates, each of such reports and documents, including the financial
statements, exhibits, and schedules thereto, complied in all materials respects
with all applicable statutes, rules and regulations and did not contain any
untrue statement of a material fact or omit to state any material fact necessary
in order to make the statements made therein in light of the circumstances under
which they were not misleading.
(u) Broker-Dealer and Investment Advisory Businesses.
(i) The Company, as a registered investment adviser, has $64
million in assets under management, as of December 31, 1997.
(ii) The Company is registered and in good standing as a
broker/dealer with the SEC and in each state of the United States and the
District of Columbia, and is a member in good standing of the NASD. The Company
is an SEC-registered investment adviser.
(iii) Each individual acting under authorization from the
Company or with its consent in effecting or attempting to effect sales of
securities is duly licensed as an agent or salesman under the securities laws of
each jurisdiction in which such licensing is so required. The Company has no
knowledge that any Person has effected or attempted to effect sales of
securities on behalf of the Company without the Company's authorization or
consent.
(iv) The Company is not a party to any contract with any
third-party provider in relation to its broker-dealer or investment advisory
business, except as set forth in the Company Disclosure Letter with reference to
this subsection.
(v) Certain Actions. Except as disclosed in the Company
Disclosure Letter with reference to this subsection, to the best of the
Company's knowledge, neither the Company, any director, officer or employee of
the Company nor any Affiliate of any such Person:
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(i) has ever been convicted of a felony or a misdemeanor or
been held liable in a civil action by final judgment of a court, wherein such
felony, misdemeanor or civil action (A) involved the purchase or sale of any
security, or any other aspect of the securities business, (B) arose out of
conduct with respect to a security or transaction in violation of any securities
registration requirement under any federal or state securities law, or (C)
involved any embezzlement, fraudulent conversion or misappropriation of
property, funds or securities;
(ii) is permanently or temporarily enjoined, or has ever
been permanently or temporarily enjoined, by any court of competent jurisdiction
from engaging in or continuing any conduct or practice involving any aspect of
the securities business or involving fraudulent conduct in the banking or
insurance business;
(iii) is or has ever been subject to any order of the SEC or
the securities administrator of any state denying registration to or revoking or
suspending the registration of any securities issued by such Person or the
registration of such Person as a broker or dealer in securities, an agent or
salesman in securities or investment advisor, or is or has ever been subject to
any order of any national securities association or national securities exchange
suspending or expelling such Person from membership in such association or
exchange, or is or has ever been the subject of a United States Postal Service
fraud order; or
(iv) has been found, by any administrative agency or any
court in a civil or criminal proceeding, to have violated any provision of the
Securities Act, the Securities Exchange Act of 1934, the Trust Indenture Act of
1939, the Investment Advisers Act of 1940, the Investment Company Act of 1940,
or the securities or blue sky laws of any state or the District of Columbia, or
any rule or regulation under any such laws, or has been found, in any proceeding
before or by any court or administrative agency, to have willfully aided,
abetted, counseled, induced or procured the violation by any other Person of any
such laws, rules or regulations.
(w) There is no pending order, notice, claim, litigation,
proceeding or, to the best of the Company's knowledge, investigation against or
affecting the Company, any director, officer, or employee of the Company or, to
the best of the Company's knowledge, any Affiliate of any such Person, with
respect to any matter described in Section 2.01(v).
(x) Proxy Statement/Prospectus, Etc. Except for information
relating to CVAL and its subsidiaries and pro forma financial information
reflecting the combined operations of CVAL and the Company, neither (i) the
Proxy Statement/Prospectus referred to in Section 3.05 or any amendment or
supplement thereto, at the time it is filed with the SEC, at the time the
Registration Statement (as defined hereinafter at Section 3.05) is declared
effective, at the time the Proxy Statement/Prospectus is mailed to the
shareholders of the Company or at the date of the Company's shareholders'
meeting to consider this Agreement nor (ii) any other documents to be filed by
the Company with any regulatory agency in connection with this Agreement or the
transactions contemplated hereby will contain any untrue statement of material
fact or omit to state any material fact required to be stated therein or
necessary to make the statements therein, in light of the circumstances under
which they are made, not misleading.
(y) Fees. Neither the Company nor any of its respective
Affiliates, officers, directors, employees or agents, has employed any broker or
finder or incurred any liability for any financial advisory fees, brokerage
fees, commissions, or finder's fees, and no broker or finder has acted directly
or indirectly for it in connection with this Agreement or the transactions
contemplated hereby.
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Section 2.02 Representations and Warranties of CVAL. CVAL represents
and warrants to the Company as follows:
(a) Organization. Each of CVAL and CVAC is a corporation duly
organized and validly existing under the laws of the Commonwealth of
Pennsylvania, with all requisite corporate power and authority to own its
properties and conduct its business as now being conducted, and is duly
qualified to do business as a foreign corporation in each jurisdiction where the
ownership of its properties or the conduct of its business makes such
qualification necessary and where failure to qualify would have a material
adverse effect on its assets, business or financial condition. CVAL is a unitary
thrift holding company registered with the Office of Thrift Supervision ("OTS").
(b) Consents. No consent, approval, permit or license from or
filing with any governmental authority or other Person is required to be
obtained or made by CVAL or CVAC in connection with the execution, delivery and
performance by them of this Agreement, except (i) the filing of the Articles of
Merger with the Pennsylvania Department of State and (ii) filings with the SEC
and OTS in connection with the Registration Statement.
(c) Corporate Authority. Each of CVAL and CVAC has all necessary
corporate power and authority to execute, deliver and perform this Agreement in
accordance with its terms. This Agreement has been duly authorized, executed and
delivered by CVAL and CVAC and represents the valid and binding obligation of
CVAL and CVAC, enforceable against them in accordance with its terms, except as
enforcement of remedies may be limited by bankruptcy, insolvency, and other
similar laws affecting creditors' rights generally and by principles of equity.
(d) No Violation. The execution, delivery and performance of this
Agreement by CVAL and CVAL does not and will not (i) violate or conflict with
any provision of the articles of incorporation or bylaws of CVAL or CVAC or any
statute, code, ordinance, rule, regulation, judgment, order, writ, decree or
injunction applicable to CVAL or CVAC or any of their respective properties or
assets, or (ii) violate, conflict with, result in a breach of any provisions of,
constitute a default (or an event, which, with or without due notice or lapse of
time, or both, would constitute a default) under, result in the termination of,
accelerate the performance required by or result in the creation of any lien,
security interest, charge or other encumbrance upon any of the properties or
assets of CVAL or CVAC under, any of the terms, conditions or provisions of any
note, bond, mortgage, indenture, deed of trust, license, lease agreement or loan
agreement or other agreement, instrument or obligation to which CVAL or CVAC is
a party, or by which CVAL or CVAC or any of their respective properties may be
bound.
(e) Financial Statements. CVAL has furnished to the Company true
and complete copies of the audited consolidated balance sheets of CVAL and its
subsidiaries as of June 30, 1995, 1996 and 1997, and the related statements of
income and retained earnings and changes in financial position for each of the
years ended June 30, 1995, 1996, and 1997, all such financial statements having
been certified by KPMG Peat Marwick LLP, certified public accountants, and its
unaudited financial statements for the quarter ended September 30, 1997. The
financial statements referred to above fairly present the consolidated financial
position of CVAL and its subsidiaries and the results of their operations and
changes in their financial position at the dates thereof and for the periods
covered thereby in conformity with generally accepted accounting principles
applied on a consistent basis throughout the periods involved.
(f) Absence of Certain Changes or Events. Since December 31,
1997, there has not been any material adverse change in the prospects, business,
operations, properties, assets or financial condition of CVAL and its
subsidiaries taken as a whole, or any event which has had or reasonably may be
expected to have a material adverse effect on any of the foregoing.
(g) Litigation. There are no actions, suits, proceedings or
claims (governmental or other) pending, or to the best knowledge of CVAL,
threatened against CVAL or any of its subsidiaries or the business, properties,
assets or goodwill of any of them which individually or in the aggregate would,
if decided adversely to the interest of CVAL or its subsidiaries, have a
material adverse effect on the prospects, business, condition (financial or
other), or results of operations, present or prospective, of CVAL and its
subsidiaries, taken as a whole or on the transactions contemplated by this
Agreement.
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(h) Disclosure. To the best of CVAL's knowledge, no
representation or warranty made by CVAL in this Agreement and no statement
contained in any schedule or certificate delivered or to be delivered by CVAL or
any of its subsidiaries pursuant to this Agreement, contains or will contain any
untrue statement of a material fact and omits or will omit to state any material
fact necessary to make the statements contained therein not misleading in the
light of the circumstances under which they were made.
(i) Capitalization of CVAC. The authorized capital stock of CVAC
consists of 1,000 shares of common stock, all of which are or, at the Closing
will be, issued and outstanding and owned of record and beneficially by CVAL.
CVAL, as the sole shareholder of CVAC, will vote to approve this Agreement and
the Merger. CVAC will not engage in any activities other than in connection with
the consummation of the Merger.
(j) Capitalization. The authorized capital stock of CVAL consists
as of the date of this Agreement of 10,000,000 shares of CVAL Common Stock, of
which 2,168,542 shares were issued and outstanding as of December 31, 1997 (and
no shares are held as treasury stock) and 5,000,000 shares of Preferred Stock of
which none are outstanding. Since December 31, 1997, CVAL has not issued any
shares of CVAL Common Stock except pursuant to exercise of employee stock
options and/or pursuant to CVAL's Dividend Reinvestment and Stock Purchase Plan.
Sufficient shares of authorized, but unissued, shares of CVAL Common Stock to
effect the transactions herein contemplated will be reserved by CVAL. Except as
disclosed in CVAL's Proxy Statement for its 1997 Annual Meeting, and except for
stock options for not more than 5,644 shares of CVAL Common Stock granted after
August 1, 1997 to employees of the Bank (as defined in Section 2.02(k) below),
there are no outstanding subscriptions, options, warrants, rights, convertible
securities or other agreements or commitments of any character (excluding CVAL's
Dividend Reinvestment and Stock Purchase Plan) relating to the issued or
unissued capital stock or other securities of CVAL.
(k) Bank Subsidiary. CVAL owns, directly, all of the issued and
outstanding shares of capital stock of First Financial Bank (the "Bank"), a
savings and loan association organized under the laws of the Commonwealth of
Pennsylvania. The Bank is duly organized, validly existing and in good standing
under the laws of the Commonwealth of Pennsylvania and is duly authorized to
engage in the savings and loan business under the Pennsylvania Savings
Association Code of 1967, as amended. The Bank has the corporate power and legal
authority and governmental authorizations which are material to its operations
and to transact the businesses in which it is presently engaged.
(l) CVAL Reports. CVAL has furnished to the Company true and
complete copies of (i) all of its annual reports on Form 10-KSB filed with the
SEC since June 30, 1994 and its annual reports to shareholders for each of the
three years ended June 30, 1997, 1996 and 1995, respectively; (ii) all of its
quarterly reports on Form 10-QSB and current reports, if any, on Form 8-K filed
with the SEC since June 30, 1997; and (iii) each definitive proxy statement
distributed by CVAL to it shareholders since June 30, 1995. All such reports
comply in all material respects with the requirements of the Securities Exchange
Act of 1934, as amended (the "Exchange Act") and the rules and regulations of
the SEC thereunder, do not contain any untrue statement of a material fact, and
do not omit to state a material fact required to be stated therein or necessary
to make the statements therein, in light of the circumstances under which they
were made, not misleading.
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(m) Financial Reports. Each of CVAL and the Bank has timely filed
all material reports, registrations and statements, together with any amendments
required to be made with respect thereto, that it was required to file since
June 30, 1995 with the SEC, the OTS, the Federal Deposit Insurance Corporation
("FDIC") or the Pennsylvania Department of Banking (collectively, the "CVAL
Regulatory Agencies") and all other material reports and statements required to
be filed by it since June 30, 1995, including, without limitation, any report or
statement required to be filed pursuant to the laws, rules or regulations of the
United States or any regulatory agency and has paid all fees and assessments due
and payable in connection therewith, and no such report, registration or
statement contains any material misstatement or omission or is otherwise in
material noncompliance with any law, regulation or requirement.
(n) Fees. Neither CVAL nor any of its Affiliates, officers,
directors, employees or agents, has employed any broker or finder or incurred
any liability for any financial advisory fees, brokerage fees, commissions, or
finder's fees, and no broker or finder has acted directly or indirectly for it
in connection with the Agreement or the transactions contemplated hereby.
(o) Registration Statement, Etc. Except for information relating
to the Company, neither (i) the Registration Statement, the Proxy
Statement/Prospectus or any amendment or supplement thereto, or any other
registration statement filed with the SEC during the term of this Agreement, at
the time it is filed with the SEC, at the time it is declared effective, at the
time the Proxy Statement/Prospectus is mailed to the shareholders of the Company
or at the date of the Company's Shareholders' Meeting to consider the approval
of this Agreement nor (ii) any other documents to be filed by CVAL with the SEC
or any regulatory agency in connection with this Agreement or the transactions
contemplated thereby will contain any untrue statement of material fact or omit
to state any material fact required to be stated therein or necessary to make
the statements therein, in light of the circumstances under which they are made,
not misleading. All documents which CVAL is responsible for filing with the SEC
or any regulatory agency in connection with the Merger will comply as to form in
all material respects with the requirements of applicable law.
(p) Compliance with Laws. Each of CVAL, CVAC and the Bank has
the permits, licenses, certificates of authority, orders and approvals of, and
has made all filings, applications and registrations with, federal, state, local
and foreign governmental authorities, including regulatory agencies that are
required in order to permit it to carry on its business as it is presently
conducted and the absence of which would, individually or in the aggregate, have
a material adverse effect on CVAL, on a consolidated basis; all such permits,
licenses, certificates of authority, orders and approvals are in full force and
effect, and no suspension or cancellation of any of them is threatened.
(q) Absence of Regulatory Actions. Neither CVAL, CVAC nor the
Bank is a party to any cease and desist order, written agreement or memorandum
of understanding with, or a party to any commitment letter or similar
undertaking to, or is subject to any order or directive by, or is a recipient of
any extraordinary supervisory letter from, or has adopted any board resolutions
at the request of, federal or state governmental authorities, including, without
limitation, any of the CVAL Regulatory Agencies, charged with the supervision or
regulation of savings and loan holding companies or engaged in the insurance of
savings and loan deposits, nor has it been advised by any CVAL Regulatory Agency
that it is contemplating issuing or requesting (or is considering the
appropriateness of issuing or requesting) any such order, directive, written
agreement, memorandum of understanding, extraordinary supervisory letter,
commitment letter, board resolutions or similar undertaking.
(r) No Defaults. Neither CVAL, CVAC nor the Bank is in default
under or in violation of any provision of any note, bond, indenture, mortgage,
deed of trust, loan agreement, lease or other agreement to which it is a party
or by which it is bound or to which any of its respective properties or assets
is subject, other than such defaults or violations as could not reasonably be
expected, individually or in the aggregate, to have a material adverse effect on
CVAL and its subsidiaries, taken as a whole.
(s) Regulatory Compliance. CVAL and the Bank are in compliance in
all material respects with the applicable rules and regulations of the CVAL
Regulatory Agencies, except where the failure to comply would not have a
material adverse effect on CVAL and its subsidiaries, taken as a whole.
(t) Capital Compliance. As of December 31, 1997, CVAL and the
Bank were in compliance with the minimum capital requirements applicable to them
under state and federal laws, including as to leverage ratio requirements,
tangible capital requirements and risk-based capital requirements. The Bank
continues to satisfy applicable requirements as a Qualified Thrift Lender.
(u) Assessments Fully Paid. All payments, fees and charges
assessed by appropriate state and federal agencies against CVAL and the Bank,
and due on or prior to the date of this Agreement, have been paid in full.
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ARTICLE III
Additional Agreements
Section 3.01 Conduct of Business. During the period commencing on the
date hereof and continuing until the Effective Time, the Company agrees (except
as expressly contemplated by this Agreement or to the extent that CVAL shall
otherwise consent in writing) that:
(a) The Company will carry on its business in, and only in, the
usual, regular and ordinary course in substantially the same manner as
heretofore conducted and, to the extent consistent with such business, use all
reasonable efforts to preserve intact its present business organizations, keep
available the services of its present officers and employees and preserve its
relationships with customers, suppliers and others having business dealings with
it to the end that its goodwill and on-going business shall be unimpaired at the
Effective Time.
(b) The Company will not declare any dividends on or make other
distributions in respect of its capital stock or amend or permit the amendment
of the articles or certificate of incorporation or bylaws of the Company;
provided, however, that the Company may pay a cash dividend to its shareholders
in an amount up to 35% of its earnings for the year ended December 31, 1997
(unless it has already done so) and for the subsequent periods up to the Closing
Date, if, both after giving effect to such dividend and as determined as of the
Closing Date, the Company's total assets shall exceed $1.5 million, its cash and
marketable securities shall exceed $913,000 and its shareholders' equity shall
exceed the greater of $1.2 million or the amount of its shareholders' equity as
at January 30, 1998.
(c) The Company will not issue, authorize or agree to the
issuance of, or purchase or agree to the purchase of, any shares of its capital
stock of any class or securities convertible into, or rights, warrants or
options to acquire, any such shares or other convertible securities, except that
the Company may purchase and agree to purchase Company Common Stock if (i) both
after giving effect to such purchase and as determined as of the Closing Date,
the Company's total assets shall exceed $1.5 million, its cash and marketable
securities shall exceed $913,000, and its shareholders' equity shall exceed $1.2
million, and (ii) the Company shall have received written advice from CVAL that
such purchase will not adversely affect the applicability of
pooling-of-interests accounting treatment for the Merger.
(d) The Company will use its best efforts to comply with all
requirements and conditions which federal, state or foreign law may impose on
the Company with respect to the Merger and will promptly cooperate with and,
upon receipt of the request of CVAL given to the Company in writing reasonably
in advance and requesting specific information, will use its best efforts to
furnish information to CVAL in connection with any such requirements or
conditions imposed upon CVAL or on any of its subsidiaries or affiliates in
connection with the Merger. To the extent permitted by law, CVAL will request
confidential treatment of any or all confidential information supplied by the
Company and used by CVAL in any filing with any governmental body.
(e) The Company will use its best efforts to obtain (and to
cooperate with CVAL and its subsidiaries and Affiliates in obtaining) any
consent, authorization or approval of, or any exemption by, any governmental
authority or agency, or other third party, required to be obtained or made by
the Company or any of its Affiliates (or by CVAL or its subsidiaries or
Affiliates) in connection with the Merger.
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(f) The Company agrees that it and its officers and directors
shall not, and that it shall direct and use its best efforts to cause its
shareholders, employees, agents and representatives (including, without
limitation, any investment banker, attorney or accountant retained by it) not to
initiate, solicit or encourage, directly or indirectly, any inquiries or the
making of any proposal or offer (including, without limitation, any proposal or
offer to its shareholders) with respect to a merger, consolidation or similar
transaction involving, or any purchase, sale or other disposition of all or any
significant portion of the assets or any equity securities of, the Company (any
such proposal or offer being hereinafter referred to as an "Acquisition
Proposal") or, except to the extent legally required for the discharge by its
board of directors of its fiduciary duties as determined upon consultation with
counsel, engage in any negotiations concerning, or provide any confidential
information or data to, or have any discussion with, any person relating to an
Acquisition Proposal, or otherwise facilitate any effort or attempt to make or
implement an Acquisition Proposal. The Company agrees that it will immediately
cease and cause to be terminated any existing activities, discussions or
negotiations with, any parties conducted heretofore with respect to any of the
foregoing. The Company agrees that it will take the necessary steps to inform
the appropriate individuals or entities referred to in the first sentence hereof
of the obligations undertaken by each of them in this Section. The Company
agrees that it will notify CVAL immediately if any such inquiries or proposals
are received by, any such information is requested from, or any such
negotiations, or discussions are sought to be initiated or continued with it.
The Company will not, and will not authorize or permit any of its directors,
officers or employees, any investment banker, attorney, accountant or other
representative of the Company to, solicit or encourage (including by way of
furnishing information) any inquiries or the making of any proposal which may
reasonably be expected to lead to any proposal for a merger or other business
combination involving the Company and not involving CVAL or any of CVAL's
subsidiaries or for the acquisition of a substantial equity interest in the
Company or a substantial portion of the assets of the Company by any Person
other than CVAL or any of CVAL's subsidiaries. The Company will promptly advise
CVAL orally and in writing of any such inquiries or proposals.
(g) The Company will not (i) acquire or agree to acquire, by
merging or consolidating with, purchasing substantially all of the assets of or
otherwise, any business or any corporation, partnership, association or other
business organization or division thereof or (ii) commence any new business
activity without the prior approval of CVAL.
(h) The Company will not sell, lease or otherwise dispose of any
assets which are material, individually or in the aggregate, to the business or
financial condition of the Company, except in each case in the ordinary course
of business.
(i) The Company will not incur any indebtedness for money
borrowed or issue or sell any debt securities issued by it, other than
borrowings in the ordinary course of business consistent with prior practice.
(j) The Company will not grant or agree to any increase in
compensation for any officer or employee, or any severance or termination pay,
except as may be required under employment or termination agreements in effect
on the date hereof and except for compensation increases in the ordinary course
of business consistent with prior practice.
(k) The Company will not adopt or amend in any material respect
any employee pension, profit-sharing, retirement, insurance, incentive
compensation, severance, vacation or other plan, agreement, trust, fund or
arrangement for the benefit of any employees (whether or not legally binding).
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(l) The Company will promptly advise CVAL orally and in writing
of any change in the condition (financial or otherwise), properties, assets,
liabilities, operations, business or prospects of the Company which is, or in
the judgment of the Company is likely to be, materially adverse to the Company.
(m) The Company shall cooperate with CVAL in the preparation of
all filings which are required to be made with the SEC and any state or other
securities regulators to effect the Merger. The Company shall furnish CVAL with
all information concerning the Company and its shareholders as CVAL may
reasonably request.
(n) The Company will use its best efforts to ensure application
of pooling-of-interests accounting treatment to the Merger.
Section 3.02 Actions by CVAL and CVAC. During the period commencing on
the date hereof and continuing until the Effective Time, CVAL and CVAC agree
(except as expressly contemplated by this Agreement or to the extent that the
Company shall otherwise consent in writing) that:
(a) CVAL and CVAC will use their respective best efforts to
comply promptly with all requirements and conditions which federal or state law
may impose on them or any of their subsidiaries or Affiliates with respect to
the Merger and will promptly cooperate with and, upon receipt of the request of
the Company given to CVAL in writing reasonably in advance, and requesting
specific information, CVAL will use its best efforts to furnish information to
the Company in connection with any such requirements or conditions imposed upon
the Company or any of its affiliates in connection with the Merger. To the
extent permitted by law, the Company will request confidential treatment of all
confidential information supplied by CVAL and used by the Company in any filing
with any governmental body.
(b) CVAL will use its best efforts to obtain (and to cooperate
with the Company and its Affiliates in obtaining) any consent, authorization or
approval of, or exemption by, any governmental authority or agency, or other
third party, required to be obtained or made by CVAL or any of its subsidiaries
or Affiliates (or the Company or its Affiliates) in connection with the Merger.
(c) CVAL will use its best efforts to ensure application of
pooling-of-interests accounting treatment to the Merger.
Section 3.03 Completion of Transactions. Subject to the terms and
conditions herein provided, each of the parties hereto agrees to use all
reasonable efforts to take, or cause to be taken, all actions, and to do, or
cause to be done, all things necessary, proper or advisable under applicable
laws and regulations to satisfy any conditions set forth in, and to consummate
and make effective the transactions contemplated by, this Agreement and other
agreement referred to herein.
Section 3.04 Further Developments. At all times prior to the Effective
Time, each party shall promptly notify the other in writing of the occurrence of
any event which will or in the judgment of each party may result in the failure
to satisfy the conditions specified in Section 4.01, 4.02 or 4.03.
Section 3.05 Securities Registration and Disclosure.
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(a) The Company shall cooperate with CVAL in the preparation, in
accordance with the requirements of the proxy rules under the Exchange Act, and
the rules and regulations of the SEC, of the Proxy Statement/Prospectus and the
filing thereof as part of the Registration Statement. Following the date hereof,
CVAL will prepare and file with the SEC under the Securities Act a registration
statement for the registration of the shares of CVAL Common Stock to be issued
pursuant hereto (the "Registration Statement"), and each party shall be
responsible for providing all information concerning itself and its subsidiaries
required to be included therein. CVAL shall take any action required to be taken
under any applicable state securities or "blue sky" laws in connection with the
issuance of shares of CVAL Common Stock pursuant to this Agreement and the
Company shall furnish CVAL all information concerning the Company and its
shareholders as CVAL may reasonably request in connection with any such action.
(b) At least ten (10) days prior to its filing with the SEC, CVAL
shall provide a copy of the Registration Statement to the Company and its
counsel for review. Each party will promptly provide the other with copies of
all correspondence, comment letters, notices or other communications to or from
the SEC relating to the Registration Statement, the Proxy Statement/Prospectus
or any amendment or supplement thereto, and CVAL will advise the Company
promptly after it receives notice thereof, of the effectiveness of the
Registration Statement, of the issuance of any stop order with respect to the
effectiveness thereof, of the suspension of the qualification of the CVAL Common
Stock issuable in connection herewith for offering or sale in any jurisdiction,
or the initiation or threat of any proceeding for any such purpose.
(c) The Company will take appropriate action to call a meeting of
its shareholders (the "Company Shareholders' Meeting") to be held not more than
twenty-five (25) days following the effective date of the Registration
Statement, to consider approval of this Agreement and, except to the extent
legally required for the discharge by the Company's board of directors of its
fiduciary duties, will use its best efforts to secure such approval. In
connection with the Company Shareholders' Meeting, the Company will duly solicit
the vote of its shareholders by mailing or delivering to each such shareholder,
as soon as practicable after the effectiveness of the Registration Statement,
the Proxy Statement/ Prospectus, and as soon as practicable thereafter, any
amendments or supplements thereto as may be necessary to assure that at the date
of the Company Shareholders' Meeting the Proxy Statement/Prospectus shall
conform to the requirements of Sections 2.01(x) and 2.02(o) hereof.
(d) The Company will furnish to CVAL a list of all persons known
to the Company who at the date of Shareholders' Meeting may be deemed to be
"affiliates" of the Company within the meaning of Rule 145 under the Securities
Act. The Company will use its best efforts to cause each such person identified
in its list to deliver at or prior to the Closing a written agreement providing
that such person will not sell, pledge, transfer or otherwise dispose of the
shares of CVAL Common Stock to be received by such person hereunder except (i)
in compliance with the applicable provisions of the Securities Act and the rules
and regulations thereunder and (ii) after such time as financial results
covering at leastthirty (30) days of post-merger combined operations have
been published within the meaning of Section 201.01 of the SEC's Codification
of Financial Reporting Policies.
ARTICLE IV
Conditions to Closing
Section 4.01 Conditions to Each Party's Obligations. The respective
obligations of the parties to effect the Merger shall be subject to the
satisfaction or waiver prior to the Effective Time of the following conditions:
(a) The Agreement and the transactions contemplated hereby shall
have been approved by the requisite vote of the shareholders of the Company in
accordance with applicable law.
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(b) All required approvals, consents or waivers of governmental
authorities with respect to this Agreement (including the Merger) and the
transactions contemplated hereby shall have been obtained and shall remain in
full force and effect, and all applicable statutory waiting periods (including
without limitation all applicable statutory waiting periods relating to the
Merger) shall have expired; and the parties shall have procured all other
regulatory approvals, consents or waivers of governmental authorities that are
necessary or appropriate to the consummation of the transactions contemplated by
this Agreement except those approvals, consents or waivers, if any, for which
failure to obtain would not, individually or in the aggregate, have a material
adverse effect on the Company or CVAL (after giving effect to the transaction
contemplated hereby); provided, however, that no approval, consent or waiver
referred to in this Section 4.01(b) shall be deemed to have been received if it
shall include any condition or requirement that reasonably would result in a
material adverse effect on CVAL or the Company.
(c) All other requirements prescribed by law which are necessary
to the consummation of the transaction contemplated by this Agreement shall have
been satisfied.
(d) No party hereto shall be subject to any order, decree or
injunction of a court or agency of competent jurisdiction which enjoins or
prohibits the consummation of the Merger, or any other transaction contemplated
by this Agreement, and no litigation or proceeding shall be pending against any
of the parties herein or any of their subsidiaries brought by any governmental
agency seeking to prevent consummation of the transactions contemplated hereby.
(e) No statute, rule, regulation, order, injunction or decree
shall have been enacted, entered, promulgated or enforced by any governmental
authority which prohibits, restricts or makes illegal consummation of the
Merger, or any other transaction contemplated by this Agreement.
(f) The Merger shall as of the date of the Closing meet the
requirements for pooling-of-interests accounting treatment under generally
accepted accounted principles and under the accounting rules of the SEC.
(g) The Registration Statement shall have been filed (the date of
which is referred to herein as the "Filing Date") by CVAL with the SEC under the
Securities Act, and shall have been declared effective prior to the time the
Proxy Statement/Prospectus is first mailed to the shareholders of the Company,
and no stop order with respect to the effectiveness of the Registration
Statement shall have been issued; and the CVAL Common Stock to be issued
pursuant to this Agreement shall be duly registered or qualified under the
securities or "blue sky" laws of all states in which such action is required for
purposes of the initial issuance of such shares and the distribution thereof to
the shareholders of the Company entitled to receive such shares.
(h) CVAL and the Company shall have received an opinion of
Schnader Harrison Segal & Lewis LLP, counsel to CVAL and CVAC, to the effect
that:
(i) The Merger will constitute a reorganization within the
meaning of Section 368(a) of the Code and the Company and CVAL will each be a
"party to a reorganization" within the meaning of Section 368(b) of the Code;
(ii) No gain or loss will be recognized by the Company or
CVAL by reason of the Merger;
(iii) Except for cash received in lieu of fractional shares,
no gain or loss will be recognized by the shareholders of the Company who
receive solely CVAL Common Stock upon the exchange of their shares of Company
Common Stock for shares of CVAL Common Stock;
(iv) The basis of the CVAL Common Stock to be received by
the Company's shareholders will be, in each instance, the same as the basis of
the Company Common Stock surrendered in exchange therefor;
(v) The holding period of the CVAL Common Stock received by
a Company shareholder receiving CVAL Common Stock will include the period during
which the Company Common Stock surrendered in exchange therefore was held; and
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(vi) Cash received by a Company shareholder in lieu of a
fractional share interest of CVAL Common Stock will be treated as having been
received as a distribution in full payment in exchange for the fractional share
interest of CVAL Common Stock which he would otherwise be entitled to receive
and will qualify as capital gain or loss.
Section 4.02 Conditions to Obligations of CVAL and CVAC. The
obligations of CVAL and CVAC to complete the Merger shall be subject to
satisfaction or waiver of each of the following conditions precedent:
(a) Continuing Warranties; Performance; Certificate. Each of the
representations and warranties of the Company contained in this Agreement shall
be true and correct in all material respects on and as of the Closing Date with
the same effect as though made on and as of such date; the Company shall have
performed in all material respects all of its obligations and agreements
hereunder to be performed by it at or before the Closing; and CVAL shall have
received certificates to the foregoing effect dated the Closing Date and
executed on behalf of the Company by its Chief Executive Officer.
(b) Vote by the Company's Shareholders. This Agreement shall have
been approved by the affirmative vote (in person or by proxy) or written consent
of the holders of at least 90% of the outstanding shares of capital stock of the
Company entitled to vote thereon.
(c) Employment Agreements. The Company and each of the following
employees of the Company shall have executed and delivered, simultaneously with
the execution and delivery of this Agreement (but to be effective upon Closing),
an Employment Agreement in the form attached as Exhibit A hereto (with such
variations from such form as are specified as to each on Exhibit B hereto):
Messrs. A.L. Denton, S.D. Wright, III, P.J. Baldassari, R.W. Raffety, V.C.
Walker, J.R. Carr, W.Z. Suplee, III, R.S. Woodcock, E. Arnold, Jr., F.A.
Bluefeld, C.F. Case, O. Bailey, V.C. Gorman, Jr., and E.T. Borer.
(d) Certain Events. There shall not have occurred and be
continuing (i) any general suspension of, or limitation on prices for, trading
in securities on the National Association of Securities Dealers Automated
Quotation System, (ii) a declaration of a banking moratorium or any general
suspension of payments in respect of banks in the United States or any general
limitation by federal or state authorities on the extension of credit by lending
institutions, or (iii) in the case of any of the foregoing existing at the date
hereof, a material acceleration or worsening thereof, and, in any such case,
CVAL shall have determined that it is commercially inadvisable to proceed with
the Merger.
(e) Non-Compete Agreement. All of the individuals identified in
Section 4.02(c) above shall have executed and delivered, simultaneously with the
execution and delivery of this Agreement (but to be effective upon the Closing),
a Non-Compete Agreement in the form attached hereto as Exhibit C.
(f) Litigation. All litigation pending against the Company which,
individually or in the aggregate, would have a material adverse effect on the
Company's consolidated operations, shall have been settled or otherwise resolved
on terms satisfactory to CVAL and the Company.
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(g) Shareholder Indemnity. Each of the shareholders of the
Company shall have executed and delivered to CVAL, concurrently with the
execution and delivery of this Agreement, the Shareholder Indemnity in the form
of Exhibit D.
(h) [Intentionally omitted.]
(i) CVAL shall have received an opinion or opinions dated as of
the Closing Date, from Reed Smith Shaw & McClay LLP, counsel to the Company,
substantially in the form attached hereto as Exhibit E.
(j) There shall not have occurred any change in the financial
condition, properties, assets, liabilities (including contingent liabilities),
business or results of operation of the Company which, individually or in the
aggregate, has had or might reasonably be expected to result in an material
adverse effect on the Company other than such changes resulting from (i) changes
in securities laws or regulations or (ii) changes in generally accepted
accounting principles, or interpretations thereof, that affect the securities
industry.
(k) CVAL shall have received from each of the Persons identified
by the Company pursuant to Section 3.05(d) hereof an executed counterpart of an
affiliate's agreement as contemplated by such Section.
(l) All issued and outstanding options, warrants or rights to
acquire Company Common Stock or any capital stock of the Company shall have been
canceled. No compensation or other rights will be payable or exchangeable in the
Merger in respect of any such rights which remain unexercised at the Effective
Time.
(m) CVAL shall have received the audited financial statements of
the Company for the fiscal year ended December 31, 1997, unaudited interim
financial statements of the Company as of the close of the fiscal month ended
most recently before the Closing and forthe fiscal year to date then ended, and
unaudited financial statements of the Company for the 12-month period
ended As of the close of the last full fiscal month immediately preceding the
Closing, all prepared in accordance with generally accepted accounting
principles consistently applied by the Company, which statements evidence
that:
(i) the total assets of the Company at the dates thereof
exceeded $1.5 million, and cash and marketable securities of the Company at the
dates thereof exceeded $913,000;
(ii) the shareholders' equity of the Company at the dates
thereof exceeded $1.2 million;
(iii) annual revenue for 1997, and for the 12 months ended
as of the close of the last full fiscal month immediately preceding the Closing,
exceeded $2.75 million; and
(iv) annual net income for 1997, and for the 12 months ended
as of the close of the last full fiscal month immediately preceeding the
Closing, exceeded $350,000, excluding the impact of any expenses incurred by
reason of this Agreement.
Section 4.03 Conditions to Obligations of the Company. The Company's
obligations to complete the Merger are subject to satisfaction or waiver of each
of the following conditions precedent:
(a) Continuing Warranties; Performance; Certificate. Each of the
representations and warranties of CVAL contained in this Agreement shall be true
and correct in all material respects on and as of the Closing Date with the same
effect as though made on and as of such date; CVAL and CVAC shall have performed
in all material respects all of their obligations and agreements hereunder to be
performed by them at or before the Closing; and the Company shall have received
certificates to the foregoing effect dated such date and executed on behalf of
CVAL by a senior executive officer thereof.
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<PAGE>
(b) The Company shall have received an opinion dated as of the
Closing Date, from Schnader Harrison Segal & Lewis llp, counsel to CVAL and
CVAC, substantially in the form attached hereto as Exhibit F.
(c) There shall not have occurred any change in the financial
condition, properties, assets, liabilities (including contingent liabilities),
business or results of operation of CVAL which, individually or in the
aggregate, has had or might reasonably be expected to result in a material
adverse effect on CVAL other than such changes resulting from (i) change in
banking or thrift laws or regulations or (ii) changes in generally accepted
accounting principles, or interpretations thereof, that affect the banking or
thrift industries.
(d) The shares of CVAL Common Stock to be issued in the Merger
shall have been authorized to be listed for quotation on the NASDAQ National
Market Issues System.
(e) No transaction or event involving CVAL or any subsidiary of
CVAL shall have occurred or be pending which would result in a change in the
nature of the securities as the same are described in CVAL's Articles of
Incorporation as in effect on the date of this Agreement or in the issuer of the
securities to be issued in the Merger to holders of Company Common Stock or
which would result in CVAL's ceasing to own the Bank.
ARTICLE V
Other Matters
Section 5.01 Information and Cooperation. At all times prior to the
Effective Time, the Company will give CVAL and its representatives full access
to its books, records, reports, notifications and applications to regulatory
authorities, offices and other facilities, and to its employees, agents and
independent accountants, and the Company will comply with all reasonable
requests for the furnishing of information and documents to CVAL, subject to the
terms of the confidentiality agreement between the Company and CVAL (the
"Confidentiality Agreement"). Each party hereto will cooperate with the other in
every way in carrying out the transactions contemplated herein and in delivering
all documents and instruments deemed reasonably necessary or useful by counsel
for any party hereto. The Company and CVAL will coordinate all publicity
relating to the transactions contemplated hereby and neither party will issue
any press release, publicity statement or other public notice relating to this
Agreement or the transactions contemplated hereby without prior consultation
with the other.
Section 5.02 Survival. Except as provided in the Shareholder Indemnity
to be signed by each shareholder of the Company, the representations, warranties
and agreements of the parties set forth in this Agreement shall not survive the
Effective Time, and shall be terminated and extinguished at the Effective Time,
and from and after the Effective Time none of the parties hereto shall have any
liability to the other on account of any breach or failure of any of those
representations, warranties and agreements; provided, however, that the
foregoing clause shall not (i) apply to agreements of the parties which by their
terms are intended to be performed either in whole or in part after the
Effective Time, and (ii) shall not relieve any Person of liability for fraud,
deception or intentional misrepresentation.
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Section 5.03 Parties in Interest. This Agreement shall be binding upon
and inure solely to the benefit of each party hereto and their respective
successors and assigns (including but not limited to any entity with which CVAL
shall merge)(it being understood and agreed that each party shall remain bound
hereby following any change in control of such party), and, other than the right
to receive the consideration payable in the Merger pursuant to Article I hereof,
is not intended to and shall not confer upon any other Person any rights,
benefits or remedies of any nature whatsoever under or by reason of this
Agreement.
Section 5.04 Notices. All notices and other communications hereunder
shall be in writing and shall be deemed to have been duly given, if delivered
personally or mailed by registered mail, postage prepaid, as follows:
(a) If to CVAL or CVAC, to:
Chester Valley Bancorp Inc.
100 E. Lancaster Avenue
Downingtown, PA 19335-2923
Attn: Anthony J. Biondi, President
with a copy to:
David S. Petkun, Esquire
Schnader Harrison Segal & Lewis llp
1600 Market Street, Suite 3600
Philadelphia, PA 19103
(b) If to the Company, to:
Philadelphia Corporation for Investment Services
1650 Market Street, Suite 3050
Philadelphia, PA 19103
Attn: Edward T. Borer
with a copy to:
Peter J. Tucci, Esquire
Reed Smith Shaw & McClay LLP
2500 One Liberty Place
1650 Market Street
Philadelphia, PA 19103-7301
Section 5.05 Entire Agreement; Amendment; Waiver. This Agreement, the
Company Disclosure Letter including all Schedules thereto and the
Confidentiality Agreement contain the entire agreement between the parties
hereto with respect to the transactions contemplated by this Agreement,
superseding all prior agreements and understandings, written or oral, with
respect thereto. Prior to the Effective Time, any provision of this Agreement
may be: (i) waived by the party benefited by the provision; or (ii) amended or
modified at any time (including the structure of the transaction) by an
agreement in writing between the parties hereto approved by their respective
boards of directors, except that no amendment or waiver may be made that would
change the form or the amount of the Merger consideration or otherwise have the
effect of prejudicing the Company's shareholders' interest in the Merger
consideration following the Company Shareholders' Meeting.
Section 5.06 Termination. This Agreement may be terminated, and the
Merger abandoned, prior to the Effective Date, either before or after its
approval by the shareholders of the Company:
(a) by the mutual, written consent of CVAL and the Company if the
board of directors of each so determines by a vote of a majority of the members
of the entire board;
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(b) by the Company (i) by written notice to CVAL if there has
been a material breach by CVAL of any representation, warranty, covenant or
agreement contained herein and such breach is not cured or not curable within
thirty (30) days after written notice of such breach is given to CVAL by the
Company, (ii) by written notice to CVAL if any condition precedent to the
Company's obligations as set forth in Section 4.01 or 4.03 of this Agreement has
not been met or waived by the Company at such time as such condition can no
longer be satisfied, (iii) if the board of directors of the Company fails to
make, withdraws or modifies or changes its favorable recommendation of this
Agreement and the Merger to the Company's shareholders, or (iv) if the board of
directors of the Company recommends to the shareholders of the Company that an
Acquisition Proposal is likely to be more favorable, from a financial point of
view, to the shareholders of the Company than the Merger;
(c) by CVAL by written notice to the other parties, in the event
(i) of a material breach by the Company of any representation, warranty,
covenant or agreement contained herein and such breach is not cured or not
curable within thirty (30) days after written notice of such breach is given to
the Company by CVAL or (ii) any condition precedent to CVAL's obligations as set
forth in Section 4.01 or 4.02 of this Agreement has not been met or waived by
CVAL at such time as such condition can no longer be satisfied;
(d) by CVAL or the Company by written notice to the other, in the
event that the Merger is not consummated by June 30, 1998, unless the failure to
so consummate by such time is due to the breach of any representation, warranty
or covenant contained in this Agreement by the party seeking to terminate;
provided, however, that such date may be extended by the written agreement of
the parties hereto.
In the event of the termination of this Agreement, as provided above,
this Agreement shall thereafter become void and have no effect, except that the
provision of Section 2.01(y) and 2.02(n) (Fees), and 5.07 (Expenses) of this
Agreement shall survive any such termination and abandonment.
Section 5.07 Expenses. Any termination of this Agreement pursuant to
Section 5.06(a) or (d) hereof shall be without cost, expense or liability on the
part of any party to the others. Any termination of this Agreement pursuant to
clause (iii) of Section 5.06(b) shall be without cost, expense or liability on
the part of the Company to any other party, if the board of directors of the
Company failed to make, withdrew, modified or changed its favorable
recommendation described therein as a result of a material adverse change in
CVAL's financial condition, properties, assets, liabilities (including
contingent liabilities), business or results of operations. Any termination of
this Agreement pursuant to Section 5.06(b)(i) or (ii) or 5.06(c) hereof shall
also be without cost, liability or expense on the part of any party to the
others, unless the breach of a representation or warranty or covenant is caused
by the willful conduct or gross negligence of a party, in which event said party
shall be fully liable to the other parties for all damages and for all
out-of-pocket costs and expenses, including without limitation, reasonable legal
and accounting and fees and expenses, incurred by such other party in connection
with their entering into this Agreement and their carrying out of any and all
acts contemplated hereunder ("Expenses").
So long as CVAL shall not have breached its obligations hereunder, if
this Agreement is terminated by the Company pursuant to clause (iv) of Section
5.06(b) hereof, or pursuant to clause (iii) of Section 5.06(b) other than as a
result of a material adverse change in CVAL's financial condition, properties,
assets, liabilities (including contingent liabilities), business or results of
operations, the Company shall promptly, but in no event later than two (2)
business days after such termination, pay CVAL a fee of $250,000 which amount
shall be payable by wire transfer of same day funds. If the Company fails to
promptly pay the amount due pursuant to this Section 5.07, and, in order to
obtain such payment, CVAL commences a suit which result in a judgment against
the Company for all or a substantial portion of the fee set forth in this
Section 5.07, the Company shall pay to CVAL all costs and expenses (including
reasonable attorneys' fees) incurred by CVAL in connection with such suit.
Section 5.08 Cumulative Rights and No Waiver. Each and every right
granted to either party hereunder or under any other document delivered
hereunder or in connection herewith, or allowed it by law or equity, shall be
cumulative and may be exercised from time to time. No failure on the part of
either party to exercise, and no delay in exercising, any right shall operate as
a waiver thereof, nor shall any single or partial exercise by either party of
any right preclude any other or future exercise thereof or the exercise of any
other right. No investigation, review or audit by CVAL of the Company prior to
or after the date hereof shall stop or prevent CVAL from exercising any right
hereunder or be deemed to be a waiver of any such right.
Section 5.09 Counterparts. This Agreement may be executed in one or
more counterparts each of which shall be deemed to constitute an original and
shall become effective when one or more counterparts have been signed by each
party hereto and delivered to each other party.
Section 5.10 Governing Law. This Agreement shall be governed by, and
interpreted in accordance with, the laws of the Commonwealth of Pennsylvania and
applicable provisions of federal law.
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Section 5.11 Definitions. Reference is made to Exhibit G attached
hereto for a listing of each term defined herein and the cross-reference to the
various Sections in this Agreement containing the applicable definitions.
IN WITNESS WHEREOF, this Agreement has been executed on behalf of the
Company, CVAL and CVAC by their respective officers, all on the date first above
written.
CHESTER VALLEY BANCORP INC. PHILADELPHIA CORPORATION FOR
INVESTMENT SERVICES
By /s/ Anthony J. Biondi By /s/ A. Louis Denton
____________________________ __________________________________
Anthony J. Biondi, President A. Louis Denton, President and CEO
CHESTER VALLEY ACQUISITION CORPORATION
By /s/ Anthony J. Biondi
___________________________
Anthony J. Biondi, President
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<PAGE>
Schedule 1.02
Exchange Ratio
All outstanding shares of the Company (except shares held by persons exercising
dissenters rights) will be exchanged for shares of CVAL Common Stock in
conformity with the following:
1. If the Average Price Per Share (as defined in Section 1.03(b) of
the Agreement and Plan of Merger) for the period of ten business days ending two
business days immediately before the scheduled Closing is at least $24.50 but
not more than $27.50, the number of shares of CVAL Common Stock which will be
exchanged for all of the outstanding shares of the Company will be the quotient
of (A) the product of (i) the book value of the Company as of January 30, 1998
minus the aggregate amount (if any) paid, accrued or agreed to be paid by the
Company after January 30, 1998 for the purchase or redemption of any shares of
Company Common Stock, times (ii) 2.75, divided by (B) the Average Price Per
Share for the aforesaid period.
2. If the Average Price Per Share for the aforesaid period is less
than $24.50, the number of shares of CVAL Common Stock to be issued in exchange
for all of the outstanding shares of the Company will be the same as though the
Average Price Per Share had been $24.50; and if the Average Price Per Share for
such period is greater than $27.50, the number of shares of CVAL Common Stock to
be issued in exchange for all of the outstanding shares of the Company will be
the same as though the Average Price Per Share had been $27.50.
3. The Exchange Ratio of CVAL shares for each share of Company Common
Stock will be the total number of shares of CVAL Common Stock to be issued
pursuant to paragraph 1 or 2 above, divided by the number of shares of Company
Common Stock issued and outstanding at the Effective Time.
4. No fractional shares of CVAL Common Stock will be issued. If
fractional shares result from the above calculations, cash will be paid in lieu
thereof in accordance with Section 1.03(b) of the Agreement and Plan of Merger.
<PAGE>
EXHIBIT A
Form of Employment Agreement
<PAGE>
EXHIBIT B
Individual Variations in Employment Agreements
<PAGE>
EXHIBIT C
Form of Non-Compete Agreement
<PAGE>
EXHIBIT D
Form of Shareholder Indemnity
<PAGE>
EXHIBIT E
Form of Opinion of Company Counsel
<PAGE>
EXHIBIT F
Form of Opinion of Counsel for CVAL and CVAC
<PAGE>
EXHIBIT G
Definitions
Each of the following terms is defined in the section specified below:
Defined Term Section Reference
Acquisition Proposal 3.01(f)
Articles of Merger 1.01(d)
Average Price Per Share 1.03(b)
Bank 2.02(k)
BCL 1.01(a)
Claim 2.01(k)
Closing 1.01(c)
Closing Date 1.01(c)
Code Recitals
Company Recitals
Company Benefit Plans 2.01(s)
Company Common Stock 1.02(a)
Company Shareholders' Meeting 3.05(c)
Company Welfare Plans 2.01(s)
Confidentiality Agreement 5.01
Control 2.01(c)
CVAC Recitals
CVAL Recitals
CVAL Common Stock 1.02(a)
Default 2.01(k)
Department of State 1.01(d)
Dissenters' Shares 1.02(a)
Dissenting Shareholder 1.02(a)
Effective Date 1.01(d)
Effective Time 1.01(d)
ERISA 2.01(s)
Exchange Act 2.02(l)
Expenses 5.07
FDIC 2.01(m)
Filing Date 4.01(g)
Merger Recitals
Old Certificates 1.03(a)
OTS 2.02(a)
Person 2.01(b)
Registration Statement 3.05(a)
Securities Act 1.03(e)
SEC 2.01(t)
Surviving Corporation 1.01(a)
Unclaimed Shares 1.03(e)
<PAGE>
APPENDIX B
DISSENTERS RIGHTS PROVISIONS
<PAGE>
APPENDIX B
PROVISIONS OF
PENNSYLVANIA BUSINESS CORPORATION LAW RELATING TO
DISSENTERS RIGHTS OF SHAREHOLDERS
15 Pa. C.S.A. Sections 1571 through 1580, inclusive.
Section 1571. Application and effect of subchapter
(a) General rule. Except as otherwise provided in subsection (b), any
shareholder of a business corporation shall have the right to dissent from, and
to obtain payment of the fair value of his shares in the event of, any corporate
action, or to otherwise obtain fair value for his shares, where this part
expressly provides that a shareholder shall have the rights and remedies
provided in this subchapter. See:
Section 1906(c) (relating to dissenters rights upon special
treatment). Section 1930 (relating to dissenters rights). Section
1931(d) (relating to dissenters rights in share exchanges). Section
1932(c) (relating to dissenters rights in asset transfers). Section
1952(c) (relating to dissenters rights in division). Section 1962(c)
(relating to dissenters rights in conversion).
Section 2104(b) (relating to procedure).
Section 2324 (relating to corporation option where a restriction on
transfer of a security is held invalid). Section 2325(b) (relating to
minimum vote requirement). Section 2704(c) (relating to dissenters
rights upon election). Section 2705(d) (relating to dissenters rights
upon renewal of election). Section 2907(a) (relating to proceedings to
terminate breach of qualifying conditions). Section 7104(b)(3)
(relating to procedures).
(b) Exceptions.
(1) Except as otherwise provided in paragraph (2), the holders of the
shares that, at the record date fixed to determine the shareholders entitled to
notice of and to vote at the meeting at which a plan specified in any of section
1930, 1931(d), 1932(c) or 1952(d) is to be voted on, are either:
(i) listed on a national securities exchange; or
(ii) held of record by more than 2,000 shareholders;
shall not have the right to obtain payment of the fair value of any such shares
under this subchapter.
(2) Paragraph (1) shall not apply to and dissenters rights shall be
available without regard to the exception provided in that paragraph in the case
of:
(i) Shares converted by a plan if the shares are not converted
solely into shares of the acquiring, surviving, new or other
corporation or solely into such shares and money in lieu of fractional
shares.
(ii) Shares of any preferred or special class unless the
articles, the plan or the terms of the transaction entitle all
shareholders of the class to vote thereon and require for the adoption
of the plan or the effectuation of the transaction the affirmative
vote of a majority of the votes cast by all shareholders of the class.
(iii) Shares entitled to dissenters rights under section 1906(c)
(relating to dissenters rights upon special treatment).
(3) The shareholders of a corporation that acquires by purchase,
lease, exchange or other disposition all or substantially all of the shares,
property or assets of another corporation by the issuance of shares, obligations
or otherwise, with or without the intervention of another corporation or other
person, shall not be entitled to the rights and remedies of dissenting
shareholders provided in this subchapter regardless of the fact, if it be the
case, that the acquisition was accomplished by the issuance of voting shares of
the corporation to be outstanding immediately after the acquisition sufficient
to elect a majority or more of the directors of the corporation.
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<PAGE>
(c) Grant of optional dissenters rights. The bylaws or a resolution of the
board of directors may direct that all or part of the shareholders shall have
dissenters rights in connection with any corporate action or other transaction
that would otherwise not entitle such shareholders to dissenters rights.
(d) Notice of dissenters rights. Unless otherwise provided by statute, if a
proposed corporate action that would give rise to dissenters rights under this
subpart is submitted to a vote at a meeting of shareholders, there shall be
included in or enclosed with the notice of meeting:
(1) a statement of the proposed action and a statement that the
shareholders have a right to dissent and obtain payment of the fair value of
their shares by complying with the terms of this subchapter; and
(2) a copy of this subchapter.
(e) Other statutes. The procedures of this subchapter shall also be
applicable to any transaction described in any statute other than this part that
makes reference to this subchapter for the purpose of granting dissenters
rights.
(f) Certain provisions of articles ineffective. This subchapter may not be
relaxed by any provision of the articles.
(g) Cross references. See sections 1105 (relating to restriction on
equitable relief), 1904 (relating to de facto transaction doctrine abolished)
and 2512 (relating to dissenters rights procedure).
Section 1572. Definitions
The following words and phrases when used in this subchapter shall
have the meanings given to them in this section unless the context clearly
indicates otherwise:
"Corporation." The issuer of the shares held or owned by the dissenter
before the corporate action or the successor by merger, consolidation, division,
conversion or otherwise of that issuer. A plan of division may designate which
of the resulting corporations is the successor corporation for the purposes of
this subchapter. The successor corporation in a division shall have sole
responsibility for payments to dissenters and other liabilities under this
subchapter except as otherwise provided in the plan of division.
"Dissenter." A shareholder or beneficial owner who is entitled to and
does assert dissenters rights under this subchapter and who has performed every
act required up to the time involved for the assertion of those rights.
"Fair value." The fair value of shares immediately before the
effectuation of the corporate action to which the dissenter objects, taking into
account all relevant factors, but excluding any appreciation or depreciation in
anticipation of the corporate action.
"Interest." Interest from the effective date of the corporate action
until the date of payment at such rate as is fair and equitable under all the
circumstances, taking into account all relevant factors, including the average
rate currently paid by the corporation on its principal bank loans.
Section 1573. Record and beneficial holders and owners
(a) Record holders of shares. A record holder of shares of a business
corporation may assert dissenters rights as to fewer than all of the shares
registered in his name only if he dissents with respect to all the shares of the
same class or series beneficially owned by any one person and discloses the name
and address of the person or persons on whose behalf he dissents. In that event,
his rights shall be determined as if the shares as to which he has dissented and
his other shares were registered in the names of different shareholders.
(b) Beneficial owners of shares. A beneficial owner of shares of a business
corporation who is not the record holder may assert dissenters rights with
respect to shares held on his behalf and shall be treated as a dissenting
shareholder under the terms of this subchapter if he submits to the corporation
not later than the time of the assertion of dissenters rights a written consent
of the record holder. A beneficial owner may not dissent with respect to some
but less than all shares of the same class or series owned by the owner, whether
or not the shares so owned by him are registered in his name.
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<PAGE>
Section 1574. Notice of intention to dissent
If the proposed corporate action is submitted to a vote at a meeting of
shareholders of a business corporation, any person who wishes to dissent and
obtain payment of the fair value of his shares must file with the corporation,
prior to the vote, a written notice of intention to demand that he be paid the
fair value for his shares if the proposed action is effectuated, must effect no
change in the beneficial ownership of his shares from the date of such filing
continuously through the effective date of the proposed action and must refrain
from voting his shares in approval of such action. A dissenter who fails in any
respect shall not acquire any right to payment of the fair value of his shares
under this subchapter. Neither a proxy nor a vote against the proposed corporate
action shall constitute the written notice required by this section.
Section 1575. Notice to demand payment
(a) General rule. If the proposed corporate action is approved by the
required vote at a meeting of shareholders of a business corporation, the
corporation shall mail a further notice to all dissenters who gave due notice of
intention to demand payment of the fair value of their shares and who refrained
from voting in favor of the proposed action. If the proposed corporate action is
to be taken without a vote of shareholders, the corporation shall send to all
shareholders who are entitled to dissent and demand payment of the fair value of
their shares a notice of the adoption of the plan or other corporate action. In
either case, the notice shall:
(1) State where and when a demand for payment must be sent and
certificates for certificated shares must be deposited in order to obtain
payment.
(2) Inform holders of uncertificated shares to what extent
transfer of shares will be restricted from the time that demand for payment is
received.
(3) Supply a form for demanding payment that includes a request
for certification of the date on which the shareholder, or the person on whose
behalf the shareholder dissents, acquired beneficial ownership of the shares.
(4) Be accompanied by a copy of this subchapter.
(b) Time for receipt of demand for payment. The time set for receipt
of the demand and deposit of certificated shares shall be not less than 30 days
from the mailing of the notice.
Section 1576. Failure to comply with notice to demand payment, etc.
(a) Effect of failure of shareholder to act.-A shareholder who fails to
timely demand payment, or fails (in the case of certificated shares) to timely
deposit certificates, as required by a notice pursuant to section 1575 (relating
to notice to demand payment) shall not have any right under this subchapter to
receive payment of the fair value of his shares.
(b) Restriction on uncertificated shares. If the shares are not represented
by certificates, the business corporation may restrict their transfer from the
time of receipt of demand for payment until effectuation of the proposed
corporate action or the release of restrictions under the terms of section
1577(a) (relating to failure to effectuate corporate action).
(c) Rights retained by shareholder. The dissenter shall retain all
other rights of a shareholder until those rights are modified by effectuation of
the proposed corporate action.
Section 1577. Release of restrictions or payment for shares
(a) Failure to effectuate corporate action. Within 60 days after the date
set for demanding payment and depositing certificates, if the business
corporation has not effectuated the proposed corporate action, it shall return
any certificates that have been deposited and release uncertificated shares from
any transfer restrictions imposed by reason of the demand for payment.
(b) Renewal of notice of demand payment. When uncertificated shares
have been released from transfer restrictions and deposited certificates have
been returned, the corporation may at any later time send a new notice
conforming to the requirements of section 1575 (relating to notice to demand
payment), with like effect.
B-3
<PAGE>
(c) Payment of fair value of shares. Promptly after effectuation of the
proposed corporate action, or upon timely receipt of demand for payment if the
corporate action has already been effectuated, the corporation shall either
remit to dissenters who have made demand and (if their shares are certificated)
have deposited their certificates the amount that the corporation estimates to
be the fair value of the shares, or give written notice that no remittance under
this section will be made. The remittance or notice shall be accompanied by:
(1) The closing balance sheet and statement of income of the
issuer of the shares held or owned by the dissenter for a fiscal year ending not
more than 16 months before the date of remittance or notice together with the
latest available interim financial statements.
(2) A statement of the corporation's estimate of the fair value
of the shares.
(3) A notice of the right of the dissenter to demand payment or
supplemental payment, as the case may be, accompanied by a copy of this
subchapter.
(d) Failure to make payment. If the corporation does not remit the amount
of its estimate of the fair value of the shares as provided by subsection (c),
it shall return any certificates that have been deposited and release
uncertificated shares from any transfer restrictions imposed by reason of the
demand for payment. The corporation may make a notation on any such certificate
or on the records of the corporation relating to any such uncertificated shares
that such demand has been made. If shares with respect to which notation has
been made shall be transferred, each new certificate issued therefor or the
records relating to any transferred uncertificated shares shall bear a similar
notation, together with the name of the original dissenting holder or owner of
such shares. A transferee of such shares shall not acquire by such transfer any
rights in the corporation other than those that the original dissenter had after
making demand for payment of their fair value.
Section 1578. Estimate by dissenter of fair value of shares
(a) General rule. If the business corporation gives notice of its estimate
of the fair value of the shares, without remitting such amount, or remits
payment of its estimate of the fair value of a dissenter's shares as permitted
by section 1577(c) (relating to payment of fair value of shares) and the
dissenter believes that the amount stated or remitted is less than the fair
value of his shares, he may send to the corporation his own estimate of the fair
value of the shares, which shall be deemed a demand for payment of the amount or
the deficiency.
(b) Effect or failure to file estimate. Where the dissenter does not file
his own estimate under subsection (a) within 30 days after the mailing by the
corporation of its remittance or notice, the dissenter shall be entitled to no
more than the amount stated in the notice or remitted to him by the corporation.
Section 1579. Valuation proceedings generally
(a) General rule. Within 60 days after the latest of:
(1) effectuation of the proposed corporate action;
(2) timely receipt of any demands for payment under section 1575
relating to notice to demand payment); or
(3) timely receipt of any estimates pursuant to section 1578
(relating to estimate by dissenter of fair value of shares);
if any demands for payment remain unsettled, the business corporation may file
in court an application for relief requesting that the fair value of the shares
be determined by the court.
(b) Mandatory joinder of dissenters. All dissenters, wherever residing,
whose demands have not been settled shall be made parties to the proceeding as
in an action against their shares. A copy of the application shall be served on
each such dissenter. If a dissenter is a nonresident, the copy may be served on
him in the manner provided or prescribed by or pursuant to 42 Pa.C.S. Ch. 53
(relating to bases of jurisdiction and interstate and international procedure).
B-4
<PAGE>
(c) Jurisdiction of the court. The jurisdiction of the court shall be
plenary and exclusive. The court may appoint an appraiser to receive evidence
and recommend a decision on the issue of fair value. The appraiser shall have
such power and authority as may be specified in the order of appointment or in
any amendment thereof.
(d) Measure of recovery. Each dissenter who is made a party shall be
entitled to recover the amount by which the fair value of his shares is found to
exceed the amount, if any, previously remitted, plus interest.
(e) Effect of corporation's failure to file application. If the corporation
fails to file an application as provided in subsection (a), any dissenter who
made a demand and who has not already settled his claim against the corporation
may do so in the name of the corporation at any time within 30 days after the
expiration of the 60-day period. If a dissenter does not file an application
within the 30-&y period, each dissenter entitled to file an application shall be
paid the corporation's estimate of the fair value of the shares and no more, and
may bring an action to recover any amount not previously remitted.
Section 1580. Costs and expenses of valuation proceedings
(a) General rule.-The costs and expenses of any proceeding under section
1579 (relating to valuation proceedings generally), including the reasonable
compensation and expenses of the appraiser appointed by the court, shall be
determined by the court and assessed against the business corporation except
that any part of the costs and expenses may be apportioned and assessed as the
court deems appropriate against all or some of the dissenters who are parties
and whose action in demanding supplemental payment under section 1578 (relating
to estimate by dissenter of fair value of shares) the court finds to be
dilatory, obdurate, arbitrary, vexatious or in bad faith.
(b) Assessment of counsel fees and expert fees where lack of good faith
appears. Fees and expenses of counsel and of experts for the respective parties
may be assessed as the court deems appropriate against the corporation and in
favor of any or all dissenters if the corporation failed to comply substantially
with the requirements of this subchapter and may be assessed against either the
corporation or a dissenter, in favor of any other party, if the court finds that
the party against whom the fees and expenses are assessed acted in bad faith or
in a dilatory, obdurate, arbitrary or vexatious manner in respect to the rights
provided in this subchapter.
(c) Award of fees for benefits to other dissenters. If the court finds that
the services of counsel for any dissenter were of substantial benefit to other
dissenters similarly situated and should not be assessed against the
corporation, it may award to those counsel reasonable fees to be paid out of the
amounts awarded to the dissenters who were benefited.
B-5
Exhibit 23.1
CONSENT OF INDEPENDENT AUDITORS
The Board of Directors
Chester Valley Bancorp, Inc:
We consent to the use of our reports incorporated herein by reference and to the
reference to our firm under the heading "Experts" in the registration statement.
/s/ KPMG Peat Marwick, LLP
Philadelphia, Pennsylvania
April 13, 1998
Exhibit 23.2
INDEPENDENT AUDITORS' CONSENT
We consent to the use in this Registration Statement of Chester Valley Bancorp
Inc. on Form S-4 of our report on the financial statements of the Philadelphia
Corporation For Investment Services as of December 31, 1997 and 1996, and the
related statements of income, changes in stockholders' equity and cash flows for
the years ended December 31, 1997, 1996 and 1995 appearing in the Proxy
Statement/Prospectus, which is a part of this Registration Statement.
We also consent to the reference to us under the heading "Experts" in such Proxy
Statement/Prospectus.
/s/ Sanville & Company
Abington, Pennsylvania
April 13, 1998
Exhibit 99.1
[Form of Proxy]
REVOCABLE PROXY
PHILADELPHIA CORPORATION FOR INVESTMENT SERVICES
PROXY SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
OF PHILADELPHIA CORPORATION FOR INVESTMENT SERVICES
The undersigned, hereby revoking any proxies heretofore given, hereby appoints
A. Louis Denton and Edward T. Borer, or any of them with full power of
substitution, as proxies to attend the special meeting of shareholders of
Philadelphia Corporation for Investment Services ("PCIS") to be held on
__________, [Date], 1998 at 10:00 a.m., local time at Suite 3050, 1650 Market
Street, Philadelphia, Pennsylvania and at any adjournment or adjournments
thereof, and to vote all shares of common stock of PCIS held or owned by the
undersigned as directed herein, and in their discretion upon such other matters
as may come before the meeting. This proxy may be revoked at any time before its
exercise.
[X] Please mark your
votes as in this
example
1. Approval of the proposed merger of Chester Valley Acquisition Corporation,
a wholly-owned subsidiary of Chester Valley Bancorp Inc. ("Merger
Subsidiary") with and into PCIS pursuant to an Agreement and Plan of
Merger, dated as of March 18, 1998, among Chester Valley Bancorp Inc., PCIS
and Merger Subsidiary (the "Merger") and any other actions as may be
required in furtherance of the Merger.
[ ] [ ] [ ]
FOR AGAINST ABSTAIN
IF NO DIRECTION IS MADE, THIS PROXY WILL BE VOTED FOR PROPOSAL 1. THIS PROXY
WILL ALSO BE VOTED AS SAID PROXIES DEEM ADVISABLE ON SUCH OTHER MATTERS AS MAY
PROPERLY COME BEFORE THE MEETING.
PLEASE VOTE, SIGN AND DATE THIS PROXY PROMPTLY.
SIGNATURE_____________________________________ DATE_______________
SIGNATURE_____________________________________ DATE_______________
NOTE: Please sign exactly as name appears hereon. Joint owners should each
sign. When signing as attorney, executor, administrator, trustee or guardian,
please give full title as such.
