As filed with the Securities and Exchange Commission on March 16, 1994
Registration No. 33-_____
___________________________________________________________________________
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
____________________
FORM S-4
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
____________________
MERIDIAN BANCORP, INC.
(Exact name of registrant as specified in its charter)
Pennsylvania 6711 23-2237529
(State or other jurisdiction of (Primary Standard (I.R.S. Employer
incorporation or organization) Industrial Identification No.)
Classification
Code Number)
35 North Sixth Street
Reading, Pennsylvania 19601
(215) 655-2000
(Address, including zip code, and telephone number, including area
code, of registrant's principal executive offices)
David E. Sparks
Vice Chairman and Chief Financial Officer
Meridian Bancorp, Inc.
35 North Sixth Street
Reading, Pennsylvania 19601
(215) 655-2000
(Name, address, including zip code, and telephone number,
including area code, of agent for service)
________________________________________
Copies to:
Joseph M. Harenza, Esquire Charles J. Ferry, Esquire
David W. Swartz, Esquire Rhoads & Sinon
Stevens & Lee Dauphin Bank Building, 12th Floor
607 Washington Street One South Market Square
P.O. Box 679 P.O. Box 1146
Reading, Pennsylvania 19603 Harrisburg, Pennsylvania 17108-1146
________________________________________
Approximate date of commencement of proposed sale to the public: As soon
as practicable after this Registration Statement becomes effective.
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: [ ]
CALCULATION OF REGISTRATION FEE
___________________________________________________________________________
<TABLE>
<CAPTION>
Title of
each class of offering aggregate Amount of
securities to Amount to be price per offering registra-
be registered registered(1) unit price tion fee(2)
___________________________________________________________________________
<S> <C> <C> <C> <C>
Common Stock, 166,500 Not Not $1,033.53
par value shares applicable applicable
$5.00 per share (with Rights)
(and associated
stock purchase
rights)(3)
___________________________________________________________________________
<FN>
(1) Based on the maximum number of shares of the Registrant's common stock
which may be issued in connection with the proposed merger of The
Grange National Bank of Susquehanna County ("Grange") with and into
the Registrant.
(2) Computed, in accordance with Rule 457(f)(2), on the basis of the book
value of the common stock of Grange on December 31, 1993 of $119.89
per share and based on 25,000 shares of Grange common stock
outstanding.
(3) Prior to the occurrence of certain events, the stock purchase rights
will not be evidenced separately from the common stock.
</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 shall thereafter become effective in accordance
with Section 8(a) of the Securities Act of 1933 or until the Registration
Statement shall become effective on such date as the Commission, acting
pursuant to said Section 8(a), may determine.
___________________________________________________________________________
<PAGE>
MERIDIAN BANCORP, INC.
CROSS-REFERENCE SHEET
Pursuant to Item 501(b) of Regulation S-K showing the
location in the Proxy Statement/Prospectus of the
information required by Part I of Form S-4
Location in Proxy
Form S-4 Item No. Statement/Prospectus
A. Information About the Transaction.
1. Forepart of Registration
Statement and Outside Front
Cover Page of Prospectus ... Outside front cover page
2. Inside Front and Outside
Back Cover Pages of
Prospectus ................. Table of Contents;
Available Information;
Incorporation of Certain
Documents by Reference
3. Risk Factors, Ratio of
Earnings to Fixed Charges
and Other Information ...... Summary
4. Terms of the Transaction ... Introduction; The
Meetings; The Merger;
Interests of Certain
Persons in the Merger;
Certain Related
Transactions; Description
of Meridian Capital
Securities; Comparison of
Shareholder Rights
5. Pro Forma Financial
Information ................ Not Applicable
6. Material Contacts with the
Company Being Acquired ..... The Merger; Interests of
Certain Persons in the
Merger; Certain Related
Transactions
7. Additional Information
Required for Reoffering by
Persons and Parties Deemed
to be Underwriters ......... Not Applicable
8. Interests of Named Experts
and Counsel ................ Legal Matters
9. Disclosure of Commission
Position on Indemnifica-
tion for Securities Act
Liabilities ................ Not Applicable
B. Information About the Registrant.
10. Information with Respect to
S-3 Registrants ............ Summary; Description of
Meridian
11. Incorporation of Certain
Information by Reference ... Incorporation of Certain
Documents by Reference
12. Information with Respect to
S-2 or S-3 Registrants ..... Not Applicable
13. Incorporation of Certain
Information by Reference ... Not Applicable
14. Information with Respect
to Registrants Other Than
S-2 or S-3 Registrants ..... Not Applicable
C. Information About the Company
Being Acquired.
15. Information with Respect
to S-3 Companies ........... Not Applicable
16. Information with Respect
to S-2 or S-3 Companies .... Not Applicable
17. Information with Respect to
Companies Other Than S-2 or
S-3 Companies .............. Summary; Introduction;
Grange: Selected
Financial Data; Grange:
Management's Discussion
and Analysis of Financial
Condition and Results of
Operations; Description
of Grange; Index to
Grange Financial
Statements
D. Voting and Management Information.
18. Information if Proxies,
Consents or Authorizations
are to be Solicited ........ Incorporation of Certain
Documents by Reference;
Summary; The Meeting; The
Merger; The Merger --
Dissenters' Rights; The
Merger -- Management and
Operations After the
Merger; The Merger --
Interests of Certain
Persons in the Merger
19. Information if Proxies,
Consents or Authorizations
are not to be Solicited
or in an Exchange Offer .... Not Applicable
<PAGE>
[LETTERHEAD OF THE GRANGE NATIONAL BANK
OF SUSQUEHANNA COUNTY]
Dear Fellow Shareholder:
A Special Meeting of the shareholders of The Grange National
Bank of Susquehanna County ("Grange") will be held on Monday,
April 25, 1994, at 2:00 p.m., local time, at the Green Gables
Restaurant, Main Street, New Milford, Pennsylvania.
At the Special Meeting, you will be asked to consider and
vote upon the merger agreement, as amended, among Grange,
Meridian Bancorp and Meridian Bank, providing for the merger (the
"Merger") of Grange with and into Meridian Bank, a wholly owned
banking subsidiary of Meridian Bancorp. As you may know,
Meridian succeeded to all of the rights of Commonwealth
Bancshares Corporation and Commonwealth Bank to acquire Grange
when Commonwealth merged with Meridian on August 31, 1993.
Meridian is a bank and financial services holding company
headquartered in Reading, Pennsylvania. Through its subsidiary
banks, Meridian currently maintains 303 banking offices in
eastern and central Pennsylvania and in New Jersey and Delaware.
If the Merger is approved and completed prior to June 1,
1994, each outstanding share of Grange common stock will be
converted into 5.66 shares of Meridian common stock, subject to
upward adjustment to a maximum of 6.66 shares as provided in the
merger agreement which is more fully described in the attached
Proxy Statement/Prospectus.
The attached Proxy Statement/Prospectus contains important
information concerning the Merger. We urge you to give it your
careful attention.
The Board of Directors of Grange has carefully considered
the Merger Agreement and believes that the Merger is in the best
interests of Grange and its shareholders. ACCORDINGLY, YOUR
BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT YOU VOTE FOR
APPROVAL OF THE MERGER AGREEMENT.
Your participation in the Special Meeting, in person or by
proxy, is important. Please mark, sign, date and return as soon
as possible the enclosed proxy card in the accompanying return
envelope, whether or not you plan to attend the Special Meeting.
Returning the proxy card does not prejudice your right to vote
your shares in person at the Special Meeting if you choose to do
so.
Sincerely yours,
Agnes M. Jones,
President and
Chief Executive Officer
<PAGE>
THE GRANGE NATIONAL BANK OF SUSQUEHANNA COUNTY
220 Main Street
New Milford, Pennsylvania 18834
____________________
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
To Be Held on April 25, 1994
____________________
A Special Meeting of Shareholders of The Grange National
Bank of Susquehanna County ("Grange") will be held on Monday,
April 25, 1994, at 2:00 p.m., local time, at the Green Gables
Restaurant, Main Street, New Milford, Pennsylvania, to consider
the following matters:
1. The approval and adoption of the Joint Plan of Merger,
dated as of April 26, 1993, among The Grange National Bank of
Susquehanna County ("Grange"), Commonwealth Bank and Commonwealth
Bancshares Corporation ("Commonwealth"), as supplemented by a
Supplemental Agreement to Joint Plan of Merger, dated as of
April 26, 1993, among Grange, Commonwealth Bank, Commonwealth,
Meridian Bancorp, Inc. ("Meridian") and Meridian Bank, and a
Second Supplemental Agreement to Joint Plan of Merger, dated as
of February 17, 1994, among Grange, Meridian and Meridian Bank
(collectively, the "Merger Agreement"), attached as Annex A to
the accompanying Proxy Statement/Prospectus, providing for the
merger (the "Merger") of Grange with and into Meridian Bank,
pursuant to which each share of outstanding common stock of
Grange will be converted into 5.66 shares of common stock of
Meridian, subject to upward adjustment as provided in the Merger
Agreement, all as more fully described in the accompanying Proxy
Statement/Prospectus.
2. To vote on adjournment of the Special Meeting, if
necessary, to permit further solicitation of proxies in the event
there are not sufficient votes at the time of the Special Meeting
to constitute a quorum or to approve the Merger Agreement.
3. Such other matters as may properly be brought before
the Special Meeting or any adjournments thereof.
The Board of Directors of Grange has fixed the close of
business on March 18, 1994, as the record date for determining
shareholders entitled to notice of, and to vote at, the Special
Meeting and any adjournments thereof.
A Proxy Statement/Prospectus is set forth on the following
pages and a form of proxy is enclosed herewith. To ensure that
your vote is counted, please complete, sign, date and return the
proxy in the enclosed return envelope, whether or not you plan to
attend the Special Meeting in person. If you attend the Special
Meeting, you may revoke your proxy and vote your shares in
person.
BY ORDER OF THE BOARD OF DIRECTORS
/s/ William S. Kane
William S. Kane,
Secretary
New Milford, Pennsylvania
March 25, 1994
<PAGE>
_________________________________________________________________
THE GRANGE NATIONAL BANK OF SUSQUEHANNA COUNTY
PROXY STATEMENT
____________________
MERIDIAN BANCORP, INC.
PROSPECTUS
166,500 SHARES OF COMMON STOCK
_________________________________________________________________
This Proxy Statement/Prospectus ("Proxy
Statement/Prospectus") is being furnished to shareholders of The
Grange National Bank of Susquehanna County ("Grange") in
connection with the solicitation of proxies by the Board of
Directors of Grange for use at the Special Meeting of
Shareholders (including any adjournments or postponements
thereof) which is to be held on April 25, 1994 to consider and
take action upon the proposed merger (the "Merger") of Grange
with and into Meridian Bank ("Meridian Bank"), which is a wholly
owned subsidiary of Meridian Bancorp, Inc. ("Meridian"), pursuant
to the Joint Plan of Merger, dated as of April 26, 1993, among
Grange, Commonwealth Bancshares Corporation ("Commonwealth"), and
Commonwealth Bank, as supplemented by a Supplemental Agreement to
the Joint Plan of Merger, dated as of April 26, 1993 (the
"Supplemental Agreement"), among Grange, Commonwealth,
Commonwealth Bank, Meridian and Meridian Bank, and a Second
Supplemental Agreement to Joint Plan of Merger, dated as of
February 17, 1994, among Grange, Meridian and Meridian Bank
(collectively, the "Merger Agreement").
This Proxy Statement/Prospectus also constitutes a
prospectus of Meridian with respect to shares of Meridian common
stock, $5.00 par value (the "Meridian Common Stock"), issuable to
Grange shareholders in the Merger.
This Proxy Statement/Prospectus and the accompanying
form of proxy are first being mailed to shareholders of Grange on
or about March 25, 1994.
THE SHARES OF MERIDIAN COMMON STOCK OFFERED HEREBY 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 MERIDIAN COMMON STOCK OFFERED HEREBY ARE
NOT SAVINGS ACCOUNTS, DEPOSITS OR OTHER OBLIGATIONS OF A BANK OR
SAVINGS ASSOCIATION AND ARE NOT INSURED BY THE FEDERAL DEPOSIT
INSURANCE CORPORATION OR ANY OTHER GOVERNMENTAL AGENCY.
________________
The date of this Proxy Statement/Prospectus is
March 25, 1994.
<PAGE>
Table of Contents
Page
AVAILABLE INFORMATION. . . . . . . . . . . . . . . . . . . . . . . . . . . 1
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE. . . . . . . . . . . . . . 2
SUMMARY. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
The Companies. . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
The Special Meeting. . . . . . . . . . . . . . . . . . . . . . . . . 4
The Merger . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
Certain Related Transactions . . . . . . . . . . . . . . . . . . . . 9
Condensed Consolidated Financial and Other Data. . . . . . . . . . . 10
INTRODUCTION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
DESCRIPTION OF MERIDIAN. . . . . . . . . . . . . . . . . . . . . . . . . . 20
THE SPECIAL MEETING. . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
Matters to be Considered at the Special Meeting. . . . . . . . . . . 23
Votes Required; Quorum . . . . . . . . . . . . . . . . . . . . . . . 23
Voting of Proxies. . . . . . . . . . . . . . . . . . . . . . . . . . 23
Revocability of Proxies. . . . . . . . . . . . . . . . . . . . . . . 23
Record Date; Stock Entitled to Vote. . . . . . . . . . . . . . . . . 24
Grange Stock Owned by Principal Shareholders, Directors
and Executive Officers . . . . . . . . . . . . . . . . . . . . 24
Solicitation of Proxies. . . . . . . . . . . . . . . . . . . . . . . 25
THE MERGER . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
Background of and Reasons for the Merger;
Recommendation of Grange Board of Directors. . . . . . . . . . 26
Terms of the Merger. . . . . . . . . . . . . . . . . . . . . . . . . 29
Opinion of Grange Financial Advisor. . . . . . . . . . . . . . . . . 30
Effective Date of the Merger . . . . . . . . . . . . . . . . . . . . 34
Exchange of Grange Stock Certificates. . . . . . . . . . . . . . . . 34
Conditions to the Merger . . . . . . . . . . . . . . . . . . . . . . 35
Regulatory Approvals . . . . . . . . . . . . . . . . . . . . . . . . 36
Representations and Warranties . . . . . . . . . . . . . . . . . . . 36
Business Pending the Merger. . . . . . . . . . . . . . . . . . . . . 37
Dividends. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
Restrictions on Other Business Combinations or
Acquisitions . . . . . . . . . . . . . . . . . . . . . . . . . 38
Amendment; Waivers . . . . . . . . . . . . . . . . . . . . . . . . . 39
Termination; Effect of Termination . . . . . . . . . . . . . . . . . 39
Management and Operations after the Merger . . . . . . . . . . . . . 39
Interests of Certain Persons in the Merger . . . . . . . . . . . . . 40
Employee Benefits. . . . . . . . . . . . . . . . . . . . . . . . . . 40
Accounting Treatment . . . . . . . . . . . . . . . . . . . . . . . . 40
Certain Federal Income Tax Consequences. . . . . . . . . . . . . . . 41
Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
Resale of Meridian Common Stock. . . . . . . . . . . . . . . . . . . 42
Dividend Reinvestment Plan . . . . . . . . . . . . . . . . . . . . . 42
Dissenters' Rights . . . . . . . . . . . . . . . . . . . . . . . . . 43
GRANGE SELECTED FINANCIAL DATA . . . . . . . . . . . . . . . . . . . . . . 44
GRANGE: MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS. . . . . . 46
DESCRIPTION OF GRANGE. . . . . . . . . . . . . . . . . . . . . . . . . . . 48
Business . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48
Supervision and Regulation . . . . . . . . . . . . . . . . . . . . . 49
Legal Proceedings. . . . . . . . . . . . . . . . . . . . . . . . . . 51
Market Price of Grange Common Stock. . . . . . . . . . . . . . . . . 51
Dividends Per Share on Grange Common Stock . . . . . . . . . . . . . 52
DESCRIPTION OF MERIDIAN CAPITAL SECURITIES . . . . . . . . . . . . . . . . 53
Common Stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53
Preferred Stock. . . . . . . . . . . . . . . . . . . . . . . . . . . 54
Capital Notes. . . . . . . . . . . . . . . . . . . . . . . . . . . . 55
Shareholder Rights Plan. . . . . . . . . . . . . . . . . . . . . . . 55
Special Charter and Pennsylvania Corporate Law
Provisions . . . . . . . . . . . . . . . . . . . . . . . . . . 56
COMPARISON OF SHAREHOLDER RIGHTS . . . . . . . . . . . . . . . . . . . . . 57
Directors. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 57
Shareholders' Meetings . . . . . . . . . . . . . . . . . . . . . . . 59
Required Shareholder Vote. . . . . . . . . . . . . . . . . . . . . . 59
Shareholder Rights Plans . . . . . . . . . . . . . . . . . . . . . . 60
Amendment of Bylaws. . . . . . . . . . . . . . . . . . . . . . . . . 61
Mandatory Tender Offer Provision . . . . . . . . . . . . . . . . . . 61
ADJOURNMENT OF SPECIAL MEETING . . . . . . . . . . . . . . . . . . . . . . 61
EXPERTS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 62
LEGAL MATTERS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 62
INDEX TO GRANGE FINANCIAL STATEMENTS . . . . . . . . . . . . . . . . . . . F-1
ANNEXES
A. Plan of Merger, Supplemental Agreement and
Second Supplemental Agreement . . . . . . . . . . . . . .A-1
B. Opinion of McConnell, Budd & Downes, Inc. . . . . . . . .B-1
C. Excerpts from National Bank Act Relating to
Dissenters' Rights . . . . . . . . . . . . . . . . . . .C-1
<PAGE>
No persons have been authorized to give any information
or to make any representations other than those contained in this
Proxy Statement/Prospectus in connection with the solicitation of
proxies or the offering of securities made hereby and, if given
or made, such information or representation must not be relied
upon as having been authorized by Meridian or Grange. This Proxy
Statement/Prospectus does not constitute an offer to sell, or a
solicitation of an offer to buy, any securities, or the
solicitation of a proxy, in any jurisdiction to or from any
person to whom it is not lawful to make any such offer or
solicitation in such jurisdiction. Neither the delivery of this
Proxy Statement/Prospectus nor any distribution of securities
made hereunder shall, under any circumstances, create an
implication that there has been no change in the affairs of
Meridian or Grange since the date hereof or that the information
contained herein is correct as of any time subsequent to its
date.
All information concerning Meridian and its
subsidiaries contained herein, incorporated herein by reference
or supplied herewith has been furnished by Meridian, and all
information concerning Grange and its subsidiaries contained
herein or supplied herewith has been furnished by Grange.
AVAILABLE INFORMATION
Meridian is subject to the informational requirements
of the Securities Exchange Act of 1934, as amended (the "Exchange
Act"), and in accordance therewith files reports, proxy
statements and other information with the Securities and Exchange
Commission (the "Commission"). The reports, proxy statements and
other information filed by Meridian and Commonwealth with the
Commission can be inspected and copied at the public reference
facilities maintained by the Commission at Room 1024, 450 Fifth
Street, N.W., Washington, D.C. 20549, and should be available at
the Commission's Regional Offices at 7 World Trade Center, 13th
Floor, New York, New York 10048, and Northwestern Atrium Center,
500 West Madison Street, Suite 1400, Chicago, Illinois
60661-2511. Copies of such material also can be obtained from
the Public Reference Section of the Commission at 450 Fifth
Street, N.W., Washington, D.C. 20549, at prescribed rates.
Meridian has filed with the Commission a Registration
Statement on Form S-4 (together with any amendments thereto, the
"Registration Statement") under the Securities Act of 1933, as
amended (the "Securities Act"), with respect to the Meridian
Common Stock to be issued pursuant to the Merger Agreement. This
Proxy Statement/Prospectus does not contain all the information
set forth in the Registration Statement and the exhibits thereto.
Such additional information may be obtained from the Commission's
principal office in Washington, D.C. Statements contained in
this Proxy Statement/Prospectus or in any document incorporated
in this Proxy Statement/Prospectus by reference or supplied
herewith as to the contents of any contract or other document
referred to herein or therein are not necessarily complete, and,
in each instance, reference is made to the copy of such contract
or other document filed as an exhibit to the Registration
Statement or such other document, each such statement being
qualified in all respects by such reference.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents filed with the Commission by
Meridian (File No. 0-12364) pursuant to the Exchange Act are
incorporated by reference in this Proxy Statement/Prospectus:
1. Meridian's Annual Report on Form 10-K for the year
ended December 31, 1993 (including certain
information contained in Meridian's Proxy
Statement dated March 21, 1994 used in connection
with Meridian's 1994 Annual Meeting of
Shareholders and incorporated by reference in the
Form 10-K).
2. Meridian's Registration Statement on Form 8-A
dated August 14, 1989, with respect to Preferred
Stock Purchase Rights registered pursuant to
Section 12(g) of the Exchange Act.
All documents and reports filed by Meridian pursuant to
Section 13(a), 13(c), 14 or 15(d) of the Exchange Act after the
date of this Proxy Statement/Prospectus and prior to the date of
the special meeting of Grange's shareholders shall be deemed to
be incorporated by reference in this Proxy Statement/Prospectus
and to be a part hereof from the dates of filing of such
documents or reports. Any statement contained in a document
incorporated or deemed to be incorporated by reference herein
shall be 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 by reference herein
modifies or supersedes such statement. Any such statement so
modified or superseded shall not be deemed, except as so modified
or superseded, to constitute a part of this Proxy
Statement/Prospectus.
THIS PROXY STATEMENT/PROSPECTUS INCORPORATES DOCUMENTS
BY REFERENCE WHICH ARE NOT PRESENTED HEREIN OR DELIVERED
HEREWITH. SUCH DOCUMENTS (OTHER THAN EXHIBITS TO SUCH DOCUMENTS
UNLESS SUCH EXHIBITS ARE SPECIFICALLY INCORPORATED BY REFERENCE)
ARE AVAILABLE, WITHOUT CHARGE, TO ANY PERSON, INCLUDING ANY
BENEFICIAL OWNER, TO WHOM THIS PROXY STATEMENT/PROSPECTUS IS
DELIVERED, ON WRITTEN OR ORAL REQUEST. DOCUMENTS RELATING TO
MERIDIAN MAY BE REQUESTED FROM MERIDIAN BANCORP, INC., 35 NORTH
SIXTH STREET, READING, PENNSYLVANIA 19601 (TELEPHONE NUMBER (215)
655-2438), ATTENTION: INVESTOR RELATIONS. IN ORDER TO ENSURE
DELIVERY OF THE DOCUMENTS PRIOR TO THE SPECIAL MEETING OF
GRANGE'S SHAREHOLDERS, REQUESTS SHOULD BE RECEIVED BY APRIL 15,
1994.
<PAGE>
SUMMARY
The following is a summary of certain information
contained elsewhere in this Proxy Statement/Prospectus.
Reference is made to, and this summary is qualified in its
entirety by, the more detailed information contained or
incorporated by reference in this Proxy Statement/Prospectus and
the Annexes hereto.
The Companies
Meridian
Meridian is a Pennsylvania business corporation and is
a multi-bank holding company headquartered in Reading,
Pennsylvania. Its banking subsidiaries consist of Meridian Bank,
Delaware Trust Company and Meridian Bank, New Jersey. At
December 31, 1993, Meridian and its subsidiaries had total
consolidated assets, deposits and shareholders' equity of
approximately $14.1 billion, $11.3 billion and $1.2 billion,
respectively. For additional information on Meridian and its
subsidiaries, see "AVAILABLE INFORMATION," "INCORPORATION OF
CERTAIN DOCUMENTS BY REFERENCE," and "DESCRIPTION OF MERIDIAN."
The principal executive offices of Meridian are located
at 35 North Sixth Street, Reading, Pennsylvania 19601, and its
telephone number is (610) 655-2000. See "DESCRIPTION OF
MERIDIAN-General."
Grange
Grange is a nationally chartered bank engaged in
general commercial and retail banking. Grange is a member of the
Federal Reserve System. At December 31, 1993, Grange reported
total assets, deposits and shareholders' equity of $28.5 million,
$25.3 million and $3.0 million, respectively. For additional
information concerning Grange, its business, financial condition,
and results of operations, see "GRANGE SELECTED HISTORICAL
FINANCIAL DATA," "DESCRIPTION OF GRANGE" and "INDEX TO GRANGE
FINANCIAL STATEMENTS."
The principal executive offices of Grange are located
at 220 Main Street, New Milford, Pennsylvania 18834, and its
telephone number is (717) 465-3206. See "DESCRIPTION OF
GRANGE--Business."
The Special Meeting
General
A special meeting of the shareholders of Grange will be
held at the Green Gables Restaurant, Main Street, New Milford,
Pennsylvania, on Monday, April 25, 1994, at 2:00 p.m., local time
(the "Special Meeting"). See "THE SPECIAL MEETING."
Matters to be Considered at the Special Meeting
At the Special Meeting, holders of Grange common stock,
$8.00 par value per share (the "Grange Common Stock"), will
consider and vote upon the approval and adoption of the Joint
Plan of Merger, dated as of April 26, 1993 (the "Plan of
Merger"), among Grange, Commonwealth and Commonwealth Bank, as
amended by a Supplemental Agreement to Joint Plan of Merger,
dated as of April 26, 1993, among Grange, Commonwealth,
Commonwealth Bank, Meridian and Meridian Bank, and a Second
Supplemental Agreement, dated as of February 17, 1994, among
Grange, Meridian and Meridian Bank (the Plan of Merger as amended
is attached as Annex A to this Proxy Statement/Prospectus and is
hereinafter referred to as the "Merger Agreement"), providing for
the merger of Grange with and into Meridian Bank (the "Merger").
In addition to the Merger Agreement, shareholders of Grange are
being asked to approve a proposal to adjourn the Special
Meeting, if necessary, to permit further solicitation of proxies.
See "ADJOURNMENT OF SPECIAL MEETING." Shareholders will also
consider and vote upon any other matter that may properly come
before the Special Meeting. See "THE SPECIAL MEETING--Matters to
be Considered at the Special Meeting."
Vote and Quorum Requirements
The Merger will require the approval of the Merger
Agreement by the affirmative vote of 66-2/3% of the outstanding
shares of Grange Common Stock. See "THE SPECIAL MEETING--Votes
Required; Quorum."
Record Date
The record date for the Special Meeting is March 18,
1994. See "THE MEETING--Record Date; Stock Entitled to Vote."
The Merger
Effect of Merger
At the effective date of the Merger (the "Effective
Date"), each outstanding share of Grange Common Stock, except
shares, if any, held by shareholders who have duly exercised
dissenters' rights under federal law, will be automatically
converted into and become a right to receive 5.66 shares of
Meridian Common Stock, unless the market value of a share of
Meridian Common Stock is less than $32.685 per share in which
case each share of Grange Common Stock will be automatically
converted and become a right to receive the lesser of (a) such
number of shares of Meridian Common Stock as shall have a market
value of $185.00 or (b) 6.50 shares of Meridian Common Stock. If
the Effective Date occurs on or after June 1, 1994, however, each
share of Grange Common Stock, except shares, if any, held by
shareholders who have duly exercised dissenters' rights under
federal law, will be automatically converted and become a right
to receive 6.66 shares of Meridian Common Stock. Meridian will
pay cash to Grange shareholders in lieu of issuing fractions of a
whole share of Meridian Common Stock. See "THE MERGER--Terms of
the Merger."
The Merger is intended to qualify as a pooling of
interests for financial accounting purposes and is expected to
constitute a tax-free reorganization for federal income tax
purposes. Qualification of the Merger for pooling of interests
accounting treatment is not a condition to Meridian's obligation
to complete the Merger. See "THE MERGER--Accounting Treatment"
and "THE MERGER--Certain Federal Income Tax Consequences."
In an effort to assure that Grange shareholders receive
a dividend for each calendar quarter during the pendency of the
Merger, the Merger Agreement, subject to certain restrictions,
permits Grange to pay its regular quarterly cash dividend of not
more than $.60 per share on the first day of each calendar
quarter. The Merger Agreement, as amended, permits Grange to pay
a cash dividend of $1.00 per share on April 1, 1994 and, if the
Effective Date has not occurred prior to May 15, 1994, permits
Grange to pay immediately prior to the Effective Date a cash
dividend equal to $.32 (Meridian's present quarterly dividend
rate) multiplied by the number of shares of Meridian Common Stock
into which each share of Grange Common Stock will be converted on
the Effective Date. See "THE MERGER--Dividends."
Recommendation of the Board of Directors and Reasons for the
Merger
The Board of Directors of Grange unanimously recommends
that its shareholders approve and adopt the Merger Agreement.
See "THE MERGER--Background of and Reasons for the Merger;
Recommendations of the Meridian and Grange Boards of Directors."
The Board of Directors of Grange believes that the
terms of the Merger are fair and in the best interests of Grange
shareholders and has unanimously approved the Merger Agreement.
The Board of Directors of Grange believes that the Merger will
result in a stronger and more effective competitor in the
Susquehanna County market served by Grange, while providing
Grange shareholders the opportunity to continue as equity
participants with a more liquid investment in a larger regional
bank. The Board of Directors of Grange also believes that the
Merger will result in a broader range of products and services
for Grange's customers than Grange presently offers as an
independent entity. For information on the matters considered by
Grange's Board of Directors in approving and recommending the
Merger, see "THE MERGER--Background of and Reasons for the
Merger; Recommendation of the Grange Board of Directors."
Opinion of Financial Advisor
McConnell, Budd & Downes, Inc. ("MB&D") has delivered
to the Board of Directors of Grange its opinion that, as of
January 25, 1994, the Exchange Ratio is fair from a financial
point of view to the shareholders of Grange. For information on
the assumptions made, matters considered and limitations on the
review undertaken by MB&D, see "THE MERGER--Opinion of Grange's
Financial Advisor." Shareholders are urged to read in its
entirety the opinion of MB&D, dated March 14, 1994, attached as
Annex B to this Proxy Statement/Prospectus.
Representations, Warranties, and Covenants
The Merger Agreement contains customary
representations, warranties, and covenants for transactions
similar to the Merger. In addition, Meridian has agreed to
operate former Grange branches as part of the Commonwealth
Division of Meridian Bank following completion of the Merger.
See "THE MERGER--Conditions to the Merger," "--Representations
and Warranties," "--Management and Operations after the Merger."
Conditions to the Merger
The obligations of Meridian and Grange to complete the
Merger are subject to various conditions, including, among other
things, obtaining required approval of shareholders of Grange,
obtaining required approvals from the Board of Governors of the
Federal Reserve System (the "Federal Reserve") and the Department
of Banking of the Commonwealth of Pennsylvania (the
"Department"), receipt of an opinion of counsel at the closing of
the Merger with respect to certain federal income tax
consequences of the Merger and other conditions precedent
customary in transactions such as the Merger. As of the date of
this Proxy Statement/Prospectus regulatory approvals of the
Federal Reserve and the Department have been obtained. No
assurance can be made that any of such other conditions will be
satisfied. See "THE MERGER--Conditions to the Merger."
Under Pennsylvania law and other applicable rules and
regulations, approval of the Merger Agreement by the shareholders
of Meridian is not required.
Termination; Effect of Termination
The Merger Agreement may be terminated at any time
prior to the Effective Date by (a) mutual written consent of
Meridian and Grange or (b) by either party if (i) at any time
prior to the Effective Date any event shall have occurred or any
state of facts shall exist that renders it impossible for such
party to fulfill any of the conditions or obligations under the
Merger Agreement, or (ii) the Effective Date has not occurred on
or before June 1, 1994 or such later date as determined by
Meridian and Grange. See "THE MERGER--Termination; Effect of
Termination."
Differences in Shareholder Rights
Upon completion of the Merger, shareholders of Grange
will become shareholders of Meridian and their rights as such
will be governed by Meridian's Articles of Incorporation and
Bylaws and will be governed by Pennsylvania law. The rights of
shareholders of Meridian are different in certain respects from
the rights of shareholders of Grange. See "COMPARISON OF
SHAREHOLDER RIGHTS."
Dissenters' Rights of Grange Shareholders
Any shareholder who objects to the Merger is entitled
to the rights and remedies of a dissenting shareholder as
provided in Section 214a of Title 12 of the United States Code,
as amended (the "U.S. Code"), but only on the condition that the
dissenting shareholder takes the necessary steps to perfect his
rights. The Merger Agreement provides that one of the conditions
to Meridian's obligation to consummate the Merger is that
shareholders holding 10% or more of the outstanding shares of
Grange Common Stock shall not have asserted and duly perfected
their dissenters' rights.
If the Merger is completed, any Grange shareholder who
follows the procedures set forth in the U.S. Code will be
entitled to receive from Meridian a cash payment equal to the
fair market value of his shares of Grange Common Stock determined
as described below, as of the Effective Date. The U.S. Code
provides that any shareholder of Grange who has voted against the
Merger at the Special Meeting, or who has given notice in writing
at or prior to the Special Meeting to the Chairman and Chief
Executive Officer of Grange that he dissents from the Merger and
does not thereafter vote in favor of the Merger, shall be
entitled to receive the fair value of the shares of Grange Common
Stock held by him when the Merger becomes effective, provided,
however, that such shareholder makes a written request to
Meridian at any time thirty days after the Effective Date,
accompanied by the surrender of his share certificate. A
description of the appraisal process is provided in "THE
MEETING--Dissenters' Rights."
The foregoing summary does not purport to be a complete
statement of the appraisal rights of dissenting shareholders, and
such summary is qualified in its entirety by reference to the
applicable provisions of the U.S. Code, which are reproduced in
full in Annex E to this Proxy Statement/Prospectus.
Management and Operations after the Merger
The Boards of Directors and executive officers of
Meridian and Meridian Bank in office immediately prior to
completion of the Merger will remain as Meridian's and Meridian
Bank's Boards and executive officers upon completion of the
Merger. Upon completion of the Merger, Meridian Bank intends to
operate former Grange branches as part of the Commonwealth
Division of Meridian Bank. See "THE MERGER--Management and
Operations After the Merger."
All persons who are employees of Grange immediately
prior to the Effective Date will become employed by Meridian
Bank, to the extent Meridian Bank in good faith deems
appropriate, on the terms and conditions, including titles,
salaries and benefits, comparable to those made available to
employees of Meridian Bank holding similar positions. See "THE
MERGER--Management and Operations After the Merger."
Certain Related Transactions
Restrictions on Other Business Combinations or Acquisitions
Grange has agreed in the Merger Agreement that it will
not enter into an agreement with any other party relating to a
business combination or other acquisition involving Grange or any
material portion of its assets, except under certain limited
circumstances. Grange has further agreed that it will not
authorize or permit any officer, director, employee or other
representative to solicit, encourage or negotiate any proposal
for a business combination or acquisition with a party other than
Meridian and Meridian Bank, unless the Board of Directors is
advised that in the opinion of counsel they are required to do so
by applicable principles of fiduciary duty. See "THE
MERGER--Restrictions on Other Business Combinations or
Acquisitions." In addition, the directors and executive officers
of Grange have agreed to vote their shares of Grange Common Stock
in favor of the Merger Agreement. See "THE MEETING--Matters to
be Considered at the Meeting."
The above described agreements of Grange and of such
directors and executive officers may have the effect of
precluding or discouraging persons who might now or prior to the
Effective Date be interested in acquiring all of or a significant
interest in Grange from considering or proposing such an
acquisition, even if such persons were willing to pay a higher
price per share for Grange Common Stock than the price per share
implicit in the Merger consideration at that time, or might
result in a potential acquiror proposing to pay a lower per share
price to acquire Grange than it might otherwise have proposed to
pay. See "THE MEETING--Matters to be Considered at the Meeting."
Interests of Certain Persons in the Merger
Agnes M. Jones, President and Chief Executive Officer
of Grange, has entered into an agreement with Meridian Bank which
provides, among other things, that Mrs. Jones will be employed by
Meridian Bank for two years following the Effective Date at an
annual salary of $57,000 per year (or, at the option of
Mrs. Jones during the second year of the Agreement, will be
engaged on a part-time basis for a salary of $28,500), will
receive payments equal to $50,000 in consideration of
cancellation of her existing employment contract, and will
receive certain severance payments equal to the then remaining
payments under the agreement in the event of termination of her
employment without cause prior to the end of the employment
period. See "THE MERGER--Interests of Certain Persons in the
Merger."
Condensed Consolidated Financial and Other Data
Meridian Selected Financial Data
The following table sets forth certain selected
historical consolidated financial data for Meridian. This
information is derived from, and should be read in conjunction
with, the consolidated financial statements of Meridian,
including the notes thereto, which are incorporated by reference
into this Proxy Statement/Prospectus. See "INCORPORATION OF
CERTAIN DOCUMENTS BY REFERENCE" and "AVAILABLE INFORMATION." The
data for the years ended December 31, 1989 through December 31,
1993 are derived from Meridian's consolidated financial
statements, which have been audited by Meridian's independent
auditors.
<PAGE>
<TABLE>
<CAPTION>
MERIDIAN SELECTED HISTORICAL FINANCIAL DATA
At or for the Year Ended December 31,
1993 1992 1991 1990 1989
(Dollars in thousands, except per share data)
<S> <C> <C> <C> <C> <C>
Results of Operations
Interest Income $961,690 $1,016,181 $1,123,711 $1,246,867 $1,120,165
Interest Expense 344,398 442,998 623,675 775,495 703,116
Net Interest Income 612,292 573,183 500,036 471,372 417,049
Provision for Possible
Loan Losses 56,101 68,827 106,750 140,746 30,517
Net Interest Income After
Provision for Possible
Loan Losses 561,191 504,356 393,286 330,626 386,532
Other Income 285,270 242,878 261,200 188,227 147,632
Other Expenses 636,853 561,850 486,427 432,380 383,528
Income from Continuing
Operations Before Income
Taxes and Cumulative
Effect of Change in
Accounting Principle 209,608 185,384 168,059 86,473 150,636
Provision for Income Taxes 59,068 48,679 43,873 23,806 33,671
Income from Continuing
Operations Before
Cumulative Effect of
Change in Accounting
Principle 150,540 136,705 124,186 62,667 116,965
Loss from Discontinued
Operations (Net of Taxes) -- -- (6,500) (25,983) (11,114)
Income before Cumulative
Effect of Change in
Accounting Principle 150,540 136,705 117,686 36,684 105,851
Cumulative Effect on Prior
Years of Change in Method
of Accounting for Income
Taxes 7,221 -- -- -- --
Net Income 157,761 136,705 117,686 36,684 105,851
Less: Preferred Dividends -- -- -- -- 1,885
Net Income Applicable to
Common Stock $157,761 $ 136,705 $ 117,686 $ 36,684 $ 103,966
Fully Diluted Earnings Per
Share:
Income from Continuing
Operations Before
Cumulative Effect of
Change in Accounting
Principle 2.61 2.44 2.35 1.22 2.30
Loss from Discontinued
Operations (Net of
Taxes) -- -- (.12) (.51) (.22)
Cumulative Effect on
Prior Years of Change
in Method of
Accounting for Income
Taxes .13 -- -- -- --
Net Income 2.74 2.44 2.23 .71 2.08
Dividends Declared
Per Common Share(2) 1.26 .90 1.20 1.20 1.13
Net Interest Margin
(Taxable Equivalent) 4.96% 4.77% 4.47% 4.16% 4.26%
Return on Average
Assets(1) 1.11% 1.00% .96% .47% 1.00%
Return on Average Common
Shareholders' Equity(1) 14.17% 13.63% 14.31% 7.46% 14.61%
Ratio of Dividends
Declared to Net Income(2) 43% 35% 48% 149% 48%
________________
<FN>
(1) Meridian adopted a new dividend schedule effective in 1992,
in which Meridian's Board of Directors will consider
declaring dividends at its meetings scheduled in January,
April, July and October for payment on March 1, June 1,
September 1 and December 1 of each year. In addition to the
dividend of $.30 per share paid on January 1, 1992 (declared
November 1991), Meridian's Board of Directors declared a
dividend of $.30 per share on April 20, 1992, which was paid
on June 1, 1992. Accordingly, a dividend was not declared
in the quarter ended March 31, 1992.
(2) Calculation is based on continuing operations.
</TABLE>
<PAGE>
<TABLE>
<CAPTION> MERIDIAN SELECTED HISTORICAL FINANCIAL DATA
At or for the Year Ended December 31,
1993 1992 1991 1990 1989
(Dollars in thousands, except per share data)
<S> <C> <C> <C> <C> <C>
At Year-End
Securities $ 3,060,147 $ 3,405,727 $ 2,853,581 $ 2,153,977 $ 2,233,674
Loans 8,988,044 8,551,597 8,498,050 9,440,894 8,976,844
Assets 14,084,787 14,290,325 13,205,391 13,444,753 13,411,530
Deposits 11,346,151 11,774,702 10,948,133 10,573,972 10,854,666
Total Shareholders'
Equity 1,185,633 1,059,319 947,733 817,413 829,682
Book Value Per Common 20.39 18.75 17.21 15.88 16.33
Share
Common Shares
Outstanding 58,154,486 56,491,396 55,064,521 51,475,965 50,808,962
Total Shareholders'
Equity 8.42% 7.41% 7.18% 6.08% 6.19%
to Assets
Total Risk-Based Capital
Ratio 13.67 11.61 10.37 8.23 8.72
Allowance for Possible
Loan Losses to Loans 1.93 1.94 2.11 1.67 1.09
Non-Performing Assets as
Percentage of Total
Period-End Loans and
Assets Acquired in
Foreclosures 1.98 2.48 2.87 1.96 1.04
Non-Performing Assets and
Loans Past Due 90 or more
Days as to Interest or
Principal as a Percentage
of Loan and Assets
Acquired in Foreclosures 2.25% 2.96% 3.51% 2.56% 1.58%
</TABLE>
Grange Selected Financial Data
Selected unaudited historical consolidated financial
data for Grange is set forth in this Proxy Statement/Prospectus
at "GRANGE SELECTED FINANCIAL DATA."
Comparative Per Common Share Data
The following table sets forth certain unaudited
comparative per share data relating to book value per common
share, cash dividends declared per common share, and income from
continuing operations per common share, (i) on an historical
basis for Meridian and Grange, (ii) on a pro forma basis per
share of Meridian Common Stock to reflect completion of the
Merger and (iii) on an equivalent pro forma basis per share of
Grange Common Stock to reflect completion of the Merger. The
following equivalent per share data assume an exchange ratio of
6.50 shares of Meridian Common Stock for each share of Grange
Common Stock outstanding. The exchange ratio is subject to
adjustment up to a maximum of 6.66 shares and a minimum of
5.66 shares of Meridian Common Stock. See "THE MERGER -- Terms
of the Merger. This information should be read in conjunction
with the consolidated financial statements of Meridian, including
the notes thereto, incorporated by reference in this Proxy
Statement/Prospectus, the consolidated financial statements of
Grange, including the notes thereto, of Grange appearing
elsewhere in this Proxy Statement/Prospectus and the other
financial data appearing elsewhere in this Proxy
Statement/Prospectus. See "INCORPORATION OF CERTAIN DOCUMENTS BY
REFERENCE," "AVAILABLE INFORMATION" and "INDEX TO GRANGE
FINANCIAL STATEMENTS."
<PAGE>
<TABLE>
<CAPTION>
SUMMARY
At or for the Year Ended December 31,
1993 1992 1991 1990 1989
<S> <C> <C> <C> <C> <C>
Book Value Per Common
Share:
Historical:
Meridian $ 20.39 $ 18.75 $ 17.21 $ 15.88 $ 16.33
Grange 119.90 109.80 101.51 94.06 87.99
Pro Forma(1):
Pro Forma Per Share of
Meridian Common Stock 20.38 18.75 17.21 15.88 16.32
Equivalent Pro Forma
Per Share of Grange
Common Stock 132.47 121.88 111.87 103.22 106.08
Cash Dividends Declared
Per Common Share:
Historical:
Meridian $ 1.26 $ .90(2) $ 1.20 $ 1.20 $ 1.13
Grange 2.40 2.40 2.40 2.90 2.40
Pro Forma(1):
Pro Forma Per Share of
Meridian Common Stock 1.26 .90 1.20 1.20 1.13
Equivalent Pro Forma
Per Share of Grange
Common Stock(3) 8.19 5.85(2) 7.80 7.80 7.35
Income from Continuing Operations
Per Common Share(4):
Historical:
Meridian
Primary $ 2.61 $ 2.45 $ 2.36 $ 1.22 $ 2.35
Fully Diluted 2.61 2.44 2.35 1.22 2.30
Grange
Primary 12.49 10.69 9.85 8.97 10.30
Fully Diluted 12.49 10.69 9.85 8.97 10.30
Pro Forma(1):
Per Share of Meridian
Common Stock
Primary 2.61 2.45 2.36 1.22 2.35
Fully Diluted 2.61 2.44 2.35 1.22 2.30
Equivalent Pro Forma
Per Share of Grange
Common Stock
Primary 16.97 15.93 15.34 7.93 15.28
Fully Diluted 16.97 15.86 15.28 7.93 14.95
<FN>
(1) The Grange pro forma equivalent amounts reflect Meridian pro
forma amounts multiplied by the exchange ratio of 6.50
shares of Meridian Common Stock for each share of Grange
Common Stock. The exchange ratio is subject to adjustment
up to a maximum of 6.66 shares and a minimum of 5.66 shares
of Meridian Common Stock. See "THE MERGER -- Terms of the
Merger."
(2) Meridian adopted a new dividend schedule effective in 1992,
in which Meridian's Board of Directors will consider
declaring dividends at its meetings scheduled in January,
April, July and October for payment on March 1, June 1,
September 1, and December 1 of each year. Meridian's Board
of Directors declared a dividend of $.30 per share on
April 20, 1992, which was paid on June 1, 1992. On June 1,
September 1 and December 1, 1993, Meridian paid a quarterly
cash dividend of $.32 per share to shareholders of record on
May 15, August 15 and November 15, 1993, respectively. This
represents an increase from the prior $.30 per share
quarterly dividend amount.
(3) Meridian pro forma dividends per share represent historical
dividends paid by Meridian. Grange pro forma equivalent
dividends per share represent 6.50 multiplied by such
amounts. The exchange ratio is subject to adjustment up to
a maximum of 6.66 shares and a minimum of 5.66 shares of
Meridian Common Stock. See "THE MERGER -- Terms of the
Merger." See "DESCRIPTION OF MERIDIAN--Market Price of and
Dividends on Meridian Common Stock"; "THE MERGER--Terms of
the Merger--Management and Operations After the Merger;
Post-Merger Dividend Policy."
(4) The effect of Meridian Common Stock which may be issued in
connection with Meridian's Floating Rate Subordinated
Capital Notes (the "Notes") has not been included in the
computation of earnings per share. At their maturity date
of December 1, 1996, the Notes must be exchanged for capital
securities having a market value equal to the principal
amount of the Notes. Since December 1, 1988, Meridian has
had the option to exchange the Notes for capital securities
or, under certain circumstances, cash, prior to the
December 1, 1996 maturity date. In December 1993, Meridian
received approval from the Federal Reserve Bank to revoke
its obligation to exchange the Notes for capital securities
at maturity. If Meridian Common Stock had been issued in
exchange for the Notes at the beginning of the respective
periods below, fully diluted earnings per share would have
been as follows:
</TABLE>
<TABLE>
<CAPTION> For the Year
Ended
December 31,
1993
<S> <C>
Meridian historical fully
diluted earnings per share,
assuming exchange of the
Notes 2.54
Meridian pro forma fully
diluted earnings per share,
assuming exchange of the
Notes 2.54
Grange equivalent pro forma
fully diluted earnings per
share, assuming exchange
of the Notes 16.51
</TABLE>
Market Value of Securities
The following table sets forth the market value per
share of Meridian Common Stock and Grange Common Stock and the
equivalent market value per share of Grange Common Stock on
April 23, 1993, the last business day preceding public
announcement of the Merger. The equivalent market value per
share of Grange Common Stock shown in the table is based upon the
an exchange ratio of 6.04 shares of Meridian Common Stock for
each share of Grange Common Stock. Under the Merger Agreement,
if the market value of a share of Meridian Common Stock is less
than $32.685, each share of Grange Common Stock will be converted
into the lesser of such number of shares of Meridian Common Stock
as shall have a market value of $185.00 or 6.50 shares of
Meridian Common Stock. The exchange ratio is subject to further
adjustment up to a maximum of 6.66 shares of Meridian Common
Stock if the Merger is not completed prior to June 1, 1994. See
"THE MERGER -- Terms of the Merger." The historical market value
per share of Meridian Common Stock is the last per share sales
price on April 23, 1993, as reported on the National Association
of Securities Dealers, Inc. Automated Quotations ("NASDAQ")
National Market System. Grange Common Stock is not traded on any
national securities exchange or in the over-the-counter market.
Formal bid and asked quotations for Grange do not exist. The
historical market value per share of Grange Common Stock set
forth in the following table is based upon the last sale of such
Common Stock known to management prior to April 26, 1993.
<TABLE>
<CAPTION>
Grange
Meridian
Historical Historical Equivalent
<S> <C> <C> <C>
April 23, 1993 $30.625 $100.00 $185.00
</TABLE>
[END OF SUMMARY]
<PAGE>
INTRODUCTION
This Proxy Statement/Prospectus is being furnished to
shareholders of The Grange National Bank of Susquehanna County
("Grange") in connection with the solicitation of proxies by the
Board of Directors of Grange for use at the Special Meeting of
shareholders of Grange (the "Special Meeting") to be held at the
Green Gables Restaurant, Main Street, New Milford, Pennsylvania,
on April 25, 1994, at 2:00 p.m., local time, and at any
adjournments thereof.
At the Special Meeting, shareholders of Grange will be
asked to approve the Joint Plan of Merger, dated as of April 26,
1993 (the "Plan of Merger"), among Grange, Commonwealth
Bancshares Corporation ("Commonwealth") and Commonwealth Bank, as
supplemented by a Supplemental Agreement to the Joint Plan of
Merger, dated as of April 26, 1993 (the "Supplemental
Agreement"), among Grange, Commonwealth, Commonwealth Bank,
Meridian and Meridian Bank, and a Second Supplemental Agreement
to Joint Plan of Merger, dated as of February 17, 1994, among
Grange, Meridian and Meridian Bank (collectively, the "Merger
Agreement"), providing for the merger of Grange with and into
Meridian Bank (the "Merger"). The Merger Agreement is
incorporated by reference and more fully described herein. In
addition to the Merger Agreement, shareholders of Grange will
also be asked to approve a proposal to adjourn the Special
Meeting, if necessary, to permit further solicitation of proxies
in the event there are not sufficient votes at the time of the
Special Meeting to constitute a quorum or to approve the Merger
Agreement. The description of the Merger Agreement set forth
herein is qualified in its entirety by reference to the Merger
Agreement.
The approximate date on which this Proxy
Statement/Prospectus is first being sent to shareholders of
Grange is on or about March 25, 1994.
<PAGE>
DESCRIPTION OF MERIDIAN
General
Meridian
Meridian is a Pennsylvania multi-bank holding company
headquartered in Reading, Pennsylvania. At December 31, 1993,
Meridian and its subsidiaries had total consolidated assets,
deposits, and shareholders' equity of approximately $14.1
billion, $11.3 billion and $1.2 billion, respectively.
The principal executive offices of Meridian are located
at 35 North Sixth Street, Reading, Pennsylvania 19601, and its
telephone number is (610) 655-2000.
Meridian is a legal entity separate and distinct from
its subsidiary banks and direct and indirect nonbanking
subsidiaries. Accordingly, the right of Meridian, and
consequently the right of creditors and shareholders of Meridian,
to participate in any distribution of the assets or earnings of
any affiliated bank is necessarily subject to the prior claims of
creditors of the affiliated bank, except to the extent that
claims of Meridian in its capacity as a creditor may be
recognized. The principal source of Meridian's revenue and cash
flow is dividends from its affiliated banks and other
subsidiaries.
Banking
As of December 31, 1993, Meridian's banking
subsidiaries consist of Meridian Bank (with total assets,
deposits and shareholders' equity of $12.3 billion, $10.1 billion
and $1.0 billion, respectively, at December 31, 1993), Delaware
Trust Company (with total assets, deposits and shareholders'
equity of $1.4 billion, $1.2 billion and $133 million,
respectively, at December 31, 1993), and Meridian Bank, New
Jersey (with total assets, deposits and shareholders' equity of
$196 million, $176 million and $15 million, respectively, at
December 31, 1993). As of December 31, 1993, Meridian's banking
subsidiaries operated 303 branches in eastern and central
Pennsylvania and the States of Delaware and New Jersey.
Financial Services
Meridian's financial services subsidiaries offer
mortgage banking, asset management and securities services.
Meridian Mortgage Corporation, a subsidiary of Meridian Bank, is
engaged primarily in the origination and servicing of residential
(1-4 family) mortgages, and also sells mortgages and loan
servicing in the secondary markets. Meridian Asset Management,
Inc., a subsidiary of Meridian, Delaware Trust Capital
Management, Inc., a subsidiary of Delaware Trust Company and
Meridian Trust of New Jersey, a subsidiary of Meridian Bank, New
Jersey, provide corporate trust, asset management, fiduciary and
related services, as well as investment advisory services.
Meridian Capital Markets, Inc., a division of Meridian Bank,
securitizes assets, buys and sells, as principal and agent,
mortgages, mortgage related product, securities and loan
servicing and interest rate products, underwrites municipal
obligations and mortgage-backed securities, and engages in
various related activities.
Other
Meridian regularly explores opportunities for possible
acquisitions of financial institutions and related businesses,
including failed institutions operated by the Federal Deposit
Insurance Corporation and the Resolution Trust Corporation, as
well as, independent agencies.
At the date hereof, Meridian has not entered into any
agreements or understandings with respect to any significant
acquisitions or similar transactions. For additional information
concerning Meridian, its business, financial condition, and
results of operations, and the foregoing transactions, reference
should be made to the Meridian documents incorporated herein by
reference. See "INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE"
and "AVAILABLE INFORMATION."
Market Price of and Dividends on Meridian Common Stock
Meridian Common Stock is traded in the over-the-counter
market and is quoted on the NASDAQ/NMS, under the symbol MRDN.
As of February 15, 1994, there were approximately 27,500
shareholders of record, which does not include the number of
persons or entities whose stock is held in street name through
various brokerage firms or banks.
The table below sets forth the quarterly ranges of high
and low bid prices for Meridian Common Stock as reported by the
NASDAQ/NMS and does not necessarily reflect mark-ups, mark-downs
or commissions. The table also reflects dividends paid during
the periods indicated.
Quarterly
Quarter Ended Dividend(1) High Low
March 31, 1994(2) $.32 $______ $______
December 31, 1993 .32 33-1/8 27-3/4
September 30, 1993 .32 34-5/8 30-1/4
June 30, 1993 .32 34 26-3/4
March 31, 1993 .30 35-3/4 29-3/4
December 31, 1992 .30 32 26-1/8
September 30, 1992 .30 29-3/8 24-5/8
June 30, 1992 .30 28 23
March 31, 1992 __ 26-5/8 22-1/8
December 31, 1991 .30 24-1/8 19-1/8
September 30, 1991 .30 20-1/2 16
June 30, 1991 .30 17-5/8 15-3/8
_________________________
(1) Meridian adopted a new dividend schedule effective in 1992,
in which Meridian's Board of Directors will consider
declaring dividends at its meetings scheduled in January,
April, July and October for payment on March 1, June 1,
September 1 and December 1 of each year. In addition to the
dividend of $.30 per share paid on January 1, 1992 (declared
November 1991), Meridian's Board of Directors declared a
dividend of $.30 Per share on April 20, 1992, which was paid
on June 1, 1992. Accordingly, a dividend was not declared
in the quarter ended March 31, 1992. No assurance can be
given as to the timing or amount of any future dividends.
(2) Through March 21, 1994.
For certain limitations on the ability of Meridian Bank
to pay dividends to Meridian, see Note 7 to Notes to Consolidated
Financial Statements set forth in Meridian's 1993 Annual Report
to Shareholders, which financial statements are incorporated
herein by reference to Meridian's Annual Report on Form 10-K for
the year ended December 31, 1993. See "INCORPORATION OF CERTAIN
DOCUMENTS BY REFERENCE."
<PAGE>
THE SPECIAL MEETING
Matters to be Considered at the Special Meeting
At the Special Meeting, shareholders of Grange will
consider and vote upon the approval and adoption of the Merger
Agreement. In addition to the Merger Agreement, shareholders of
Grange will be asked to approve a proposal to adjourn the Special
Meeting, if necessary, to permit further solicitation of proxies
in the event there are not sufficient votes at the time of the
Special Meeting to constitute a quorum or to approve the Merger
Agreement. Shareholders will also consider and vote upon such
other matters, if any, as may be properly brought before the
Special Meeting.
The Board of Directors of Grange has unanimously
approved the Merger Agreement and recommends a vote FOR approval
and adoption of the Merger Agreement and FOR the proposal to
adjourn the Special Meeting, if necessary, to solicit additional
proxies.
Votes Required; Quorum
The affirmative vote of the holders of at least 66-2/3%
of the outstanding shares of Grange Common Stock is required to
approve the Merger Agreement. Each share of Grange Common Stock
is entitled to one vote.
Voting of Proxies
Shares of Grange Common Stock represented by all
properly executed proxies received in time for the Special
Meeting will be voted at such meeting in the manner specified by
the holders thereof. Shares represented by proxies which do not
contain voting instructions will be voted in favor of approval
and adoption of the Merger Agreement and in favor of the proposal
to adjourn the Meeting, if necessary, to solicit additional
proxies. Abstentions and broker nonvotes will not constitute or
be counted as "votes" cast for purposes of the Special Meeting.
It is not expected that any matter other than those
referred to herein will be brought before the Special Meeting.
If, however, other matters are properly presented, the persons
named as proxies will vote in accordance with their judgment with
respect to such matters.
Revocability of Proxies
The grant of a proxy on the enclosed Grange proxy card
does not preclude a shareholder from voting in person. A
shareholder may revoke a proxy at any time prior to its exercise
by filing with the Secretary of Grange a duly executed revocation
or a proxy bearing a later date or by voting in person at the
Special Meeting. Attendance at the Special Meeting will not of
itself constitute revocation of a proxy.
Record Date; Stock Entitled to Vote
Only shareholders of record of Grange at the close of
business on March 18, 1994, will be entitled to receive notice of
the Special Meeting, and only shareholders of record of Grange
Common Stock at that time will be entitled to vote at the Special
Meeting. At February 4, 1994, Grange had outstanding 25,000
shares of Grange Common Stock. A majority of the outstanding
shares of Grange Common Stock must be represented in person or by
proxy at the Special Meeting in order for a quorum to be present.
Grange Stock Owned by Principal Shareholders, Directors and
Executive Officers
The following table sets forth as of March 1, 1994,
information concerning each person known by Grange to
beneficially own more than 5% of the outstanding shares of Grange
Common Stock and the beneficial ownership of Grange Common Stock
for each director of Grange and for all directors and officers of
Grange as a group. Except as otherwise specified, the named
beneficial owner has sole voting and investment power with
respect to the shares listed.
Amount and
Nature of
Name and Address Beneficial Percent
of Beneficial Owner Ownership of Class
Ann B. Robinson(1) 2,950 11.8%
424 Northern Pike
Monroeville, PA 15146
Doris B. Robinson(1) 4,550 18.2
P.O. Box 928
New Milford, PA 18834
G. Gilmour Robinson, Jr. 2,100 8.4
P.O. Box 568
New Milford, PA 18834
Directors
Henry T. Butler, Jr. 50 0.2
P.O. Box 173
Harford, PA 18823
Thomas F. Chamberlain 125 0.5
P.O. Box 431
New Milford, PA 18834
Donald E. Doran 25 0.1
RR 2, Box 242A
New Milford, PA 18834
Lynn D. Joines 50 0.2
RR 1, Box 113A
Susquehanna, PA 18847
Agnes M. Jones 1,000 4.0
338 Main Street
New Milford, PA 18834
LeRoy W. Morgan 100 0.4
P.O. Box 103
Montrose, PA 18801
G. Gilmour Robinson, Jr. 2,100 8.4
P.O. Box 568
New Milford, PA 18834
Mary E. Snyder 450 1.8
Riverside Drive
Susquehanna, PA 18847
Carlton W. Whitehead 50 0.2
RD 2, Box 157
New Milford, PA 18834
All Directors and Officers 3,950 15.8
__________________________
(1) Sister-in-law of G. Gilmour Robinson, Jr., a director of
Grange.
Solicitation of Proxies
Grange will bear the cost of the solicitation of
proxies from its shareholders, except that Meridian and Grange
will each pay one-half of the first $15,000 of costs incurred in
connection with printing this Proxy Statement/Prospectus and
Meridian will pay any printing costs in excess of $15,000. In
addition to solicitations by mail, the directors, officers and
employees of Grange may solicit proxies from Grange shareholders
by telephone or telegram or in person. None of such persons will
be specially engaged for such purpose or will receive any
compensation for assisting in the solicitation of proxies.
Arrangements will also be made with brokerage houses and other
custodians, nominees and fiduciaries for the forwarding of
solicitation material to the beneficial owners of stock held of
record by such persons, and Grange will reimburse such
custodians, nominees and fiduciaries for their reasonable
out-of-pocket expenses in connection therewith.
SHAREHOLDERS SHOULD NOT SEND STOCK CERTIFICATES WITH
THEIR PROXY CARDS.
THE MERGER
Background of and Reasons for the Merger; Recommendation of
Grange Board of Directors
This section of the Proxy Statement/Prospectus
describes certain important aspects of the proposed Merger.
Other important aspects of the Merger are described under
"SUMMARY--The Merger" which should be read in conjunction with
this section. The description of the Merger Agreement in this
Proxy Statement/Prospectus does not purport to be complete and is
qualified in its entirety by reference to the Merger Agreement
which is annexed hereto. All Grange Shareholders are urged to
read the Merger Agreement in its entirety.
Background of the Merger
The Board of Directors of Grange has reviewed and
evaluated the various options and alternatives available to
Grange as part of its long-range planning, including various
capital-raising options and alternatives. Grange has been
substantially dependent on Agnes Jones, its President and CEO and
the Board of Directors has been concerned with management
succession upon her eventual retirement. In addition, whether or
not Agnes Jones retired, if Grange were to remain independent the
Board of Grange had been advised that the hiring of at least two
additional experienced management personnel may be necessary. As
a result and in response to the many recent changes in federal
and state banking laws and their impact upon the financial
services industry, in October 1992, Grange engaged a financial
advisor to assist it in an evaluation of strategic options. As a
result of this review, the Board of Directors determined to
explore the possible sale of Grange. See "THE MERGER--Opinion of
Grange Financial Advisor." On February 9, 1993, Commonwealth
submitted a letter of interest to Grange's financial advisor
regarding a possible acquisition of Grange by Commonwealth.
Subsequently, Grange entered into negotiations with
Commonwealth concerning such a transaction. On March 30, 1993,
Commonwealth entered into a definitive merger agreement with
Meridian. As a result, Grange entered into negotiations with
both Commonwealth and Meridian with respect to the timing of the
respective mergers and the consideration to be paid to Grange
shareholders.
Upon approval of its Board of Directors on April 26,
1993, Grange entered into the Plan of Merger and the First
Supplemental Agreement. The Plan of Merger provides for, among
other things, the merger of Grange with and into either
(i) Commonwealth Bank, with Commonwealth Bank surviving the
merger, or (ii) Meridian Bank, with Meridian Bank surviving the
merger, in the event a merger of Commonwealth Bank and Meridian
Bank was completed prior to the completion of a merger of Grange
and Commonwealth Bank. Under the First Supplemental Agreement,
(i) Meridian agreed, among other things, to acquire all rights
and assume all obligations of Commonwealth under the Plan of
Merger in the event a merger of Meridian and Commonwealth was
completed, and (ii) Meridian Bank agreed, among other things, to
acquire all rights and assume all obligations of Commonwealth
Bank under the Plan of Merger in the event a merger of Meridian
Bank and Commonwealth Bank was completed.
On August 31, 1993, Meridian completed a merger with
Commonwealth, with Meridian surviving the merger, and Meridian
Bank completed a merger with Commonwealth Bank, with Meridian
Bank surviving the merger (collectively, the "Commonwealth
Merger"). Upon the completion of the Commonwealth Merger,
Meridian and Meridian Bank acquired all rights and assumed all
obligations of Commonwealth and Commonwealth Bank, respectively,
under the Merger Agreement.
Reasons for the Merger
At its meeting on April 26, 1993, the Board of
Directors of Grange unanimously determined that the terms of the
Merger Agreement were fair to and in the best interests of Grange
and the shareholders of Grange, and approved the Merger
Agreement. In making its determination, the Board concluded,
among other things, that the Merger Agreement was superior to the
other alternatives available to Grange shareholders and to the
possibility of continuing to operate Grange as an independent
entity.
In the course of reaching its decision to approve the
Merger Agreement, the Grange Board of Directors consulted with
its legal and financial advisors, as well as Grange's management,
and considered, among other things, the factors described above
and the following:
(i) the opinion of Grange's financial advisors
that the consideration to be received by Grange shareholders
was fair from a financial point of view;
(ii) the Board's familiarity with and review of
Grange's business, prospects and financial condition,
including its capital position and future prospects were it
to remain independent;
(iii) the increasing level of competition in the
markets served by Grange;
(iv) a determination by Grange's management that
a business combination with Meridian would expand Grange's
lending capabilities and significantly increase the range of
financial products and services available to Grange's
customers;
(v) the Board's concerns with management
succession if Grange were to remain independent, upon the
retirement of Agnes M. Jones, Grange's President and Chief
Executive Officer, and the potential need to hire two
additional experienced management personnel;
(vi) the historical prices at which shares of
Grange Common Stock have traded, and the historical, current
and projected price to earnings and price to book value
multiples at which shares of Grange Common Stock have traded
and may trade in the future;
(vii) the prices, multiples of earnings per share
and premiums over book value and market value paid in recent
acquisitions of banks;
(viii) the earnings and financial condition of
Meridian;
(ix) the historical market prices for shares of
Meridian Common Stock, and historical price to earnings and
price to book value trading multiples for such shares;
(x) the liquidity of Meridian Common Stock, which
is publicly-traded, compared to the relatively illiquid
market for Grange Common Stock;
(xi) Meridian's agreement to, in good faith,
endeavor to employ employees of Grange immediately prior to
the Effective Date on terms and conditions, including
salaries and benefits, comparable to those made available to
employees of Meridian holding similar positions; and
(xii) Meridian's agreement that the directors of
Grange in office immediately prior to the Merger would
become members of the advisory board of the Grange Office of
Meridian and, in addition, five members of the Grange Board,
elected by a majority of that Board, would become members of
the successor to the Commonwealth County Bank Regional
Board.
Recommendations of Grange Board of Directors
The Board of Directors of Grange believes that the
terms of the Merger are fair and in the best interests of the
Grange shareholders and have unanimously approved the Merger
Agreement. The Board of Directors of Grange unanimously
recommends that Grange shareholders approve and adopt the Merger
Agreement.
Meridian
Meridian has undertaken the Merger as part of its
ongoing acquisition strategy. Meridian's strategy focuses on
fill-in acquisitions within Meridian's existing marketplace and
market extension acquisitions.
Terms of the Merger
Upon completion of the Merger, the separate existence
of Grange will cease. All property, rights, powers, duties,
obligations and liabilities of Grange will automatically be
transferred to Meridian Bank, in accordance with federal and
Pennsylvania law. Meridian Bank, as the surviving corporation,
will be governed by the articles of incorporation and bylaws of
Meridian Bank in effect immediately prior to consummation of the
Merger. The directors and executive officers of Meridian Bank
prior to the Merger will continue, in their respective
capacities, as the directors and executive officers of Meridian
Bank after the Merger.
Upon completion of the Merger, each outstanding share
of Meridian Common Stock will continue to be outstanding as an
identical share of Meridian Common Stock. Under the Merger
Agreement, each outstanding share of Grange Common Stock, except
shares, if any, held by shareholders who have duly exercised
dissenters' rights under Federal law, will be converted
automatically into and become a right to receive 5.66 shares of
Meridian Common Stock, unless the market value of a share of
Meridian Common Stock is less than $32.685 per share in which
case each share of Grange Common Stock will be automatically
converted into and become a right to receive the lesser of
(a) such number of shares of Meridian Common Stock as shall have
a market value of $185.00 or (b) 6.50 shares of Meridian Common
Stock. If the Effective Date occurs on or after June 1, 1994,
however, each outstanding share of Grange Common Stock, except
shares, if any, held by shareholders who have duly exercised
dissenters' rights under federal law, will be converted
automatically into and become a right to receive, 6.66 shares of
Meridian Common Stock. The market value of a share of Meridian
Common Stock will be deemed to be the average of the last quoted
per share sales price for Meridian Common Stock for the twenty
trading days immediately preceding the Effective Date. The
adjusted final exchange ratio is referred to herein as the
"Exchange Ratio." Grange shareholders will receive cash in lieu
of fractional shares of Meridian Common Stock. See "Exchange of
Grange Stock Certificates" herein.
If Meridian, at any time before completion of the
Merger, pays or effects a stock dividend, stock split, reverse
stock split or reclassification of the Meridian Common Stock, the
Exchange Ratio will be adjusted so that each Grange shareholder
will be entitled to receive such number of shares of Meridian
Common Stock as he would have been entitled to receive if the
Merger had been completed prior to the happening of such event.
Opinion of Grange Financial Advisor
Grange engaged McConnell, Budd & Downes, Inc. ("MB&D")
to assist it in connection with Grange's review of strategic
planning alternatives, including the possibility of entering into
a merger with another financial institution. Representatives of
MB&D attended several meetings of the Grange Board of Directors
in connection with this process to enumerate and analyze Grange's
options. MB&D was retained based on its qualifications and
experience in the financial analysis of financial institutions
and merger and acquisition transactions involving financial
institutions. MB&D of Morristown, New Jersey, is a financial
consulting and investment banking firm specializing in the
banking and financial services industry. MB&D is also a NASDAQ
broker-dealer and produces equity research for investors in the
securities of financial institutions.
MB&D has delivered its oral and written opinions to the
Board of Directors of Grange that subject to the limitations set
forth in the opinion, as of April 26, 1993 and as of the date of
this Joint Proxy Statement and Prospectus, the Exchange Ratio
(including the maximum and minimum ratios permitted) provided for
in the Merger Agreement is fair to the holders of Grange Common
Stock from a financial point of view.
The full text of the opinion of MB&D dated March 14,
1994 which sets forth assumptions made, matters considered and
limits on the review undertaken is attached hereto as Annex B.
Grange's shareholders are urged to read this opinion in its
entirety. MB&D's opinion is directed to the possible range of
Exchange Ratios which may be obtained in the Merger and does not
constitute a recommendation to any holder of Grange Common Stock
as to how such holder should vote at the Grange Special Meeting.
The summary of the opinion of MB&D set forth in this Proxy
Statement/Prospectus is qualified in its entirety by reference to
the full text of the opinion itself. The conclusion of the oral
opinion of April 26, 1993 is substantially the same as the
conclusion of the opinion which appears in Annex B.
In arriving at its opinion, MB&D reviewed publicly
available business and financial information related to Meridian
and Grange. MB&D also reviewed the Merger Agreement as well as
the Registration Statement on Form S-4 of Meridian, which
includes the Proxy Statement/Prospectus. MB&D also reviewed
certain other information including internal reports and
documents of Grange and other internal, management prepared
financial forecasts and projections provided to it by Grange.
Due to Meridian's corporate policy, MB&D was not provided with
requested non-public information concerning the company nor were
copies of management prepared financial forecasts or projections
concerning Meridian's future performance made available. MB&D
met with and had discussions with members of the senior
management of Grange and Meridian regarding their respective past
and current business operations including recent acquisitions,
financial condition and future prospects in general. The
discussions also encompassed asset quality trends and problem
asset resolution and the relative state of the local economy for
both institutions.
In addition, MB&D considered certain financial and
stock market data of Meridian, compared that information with
similar information for other publicly held bank holding
companies, and reviewed other similar transactions which have
recently been completed. MB&D's opinion also takes into account
its assessment of general economic, market and financial
conditions, its experience in other transactions, as well as its
experience in securities valuation and its knowledge of the
banking industry generally. In the process of its review, MB&D
relied upon and assumed, without independent verification, the
accuracy and completeness of the financial and other information
provided to it by the management of both Grange and Meridian.
In connection with rendering its opinion to the Board
of Directors of Grange, MB&D informed Grange that it performed a
number of financial analyses which are summarized below. MB&D
has indicated that the various analyses summarized below should
be considered as a whole and cautioned against a selective
reliance on any single portion of the analyses. MB&D also stated
that (i) the preparation of a fairness opinion is an involved
process employing both objective and subjective judgments, the
evaluation of many factors and varies as to the steps involved
based on the form of the specific transaction and the identities
and historical performances of the parties to the transaction;
(ii) estimates which comprise a part of MB&D's analysis are not
necessarily indicative of future results or values; and
(iii) estimates of values referenced in any such analysis are not
intended to be appraisals and may not reflect the price at which
the companies or their securities may actually be sold.
The following is a summary of the analyses completed by
MB&D in connection with rendering and reaffirming its opinion:
(a) Analysis of the Anticipated Transaction. MB&D
described the terms of the proposed transaction as reflected in
the proposed Merger Agreement. Since the proposed transaction is
a pooling of interest, MB&D analyzed the anticipated impact of
the transaction on the projected future results of Meridian and
on its projected consolidated pro forma balance sheet. Due to
the relative size of the interested parties, the proposed merger
would have virtually no effect on Meridian's future results.
MB&D explained that the consideration to be received per share of
Grange Common Stock would be the number of shares of Meridian
Common Stock with a market value of $185.00 constrained by a
minimum (5.66 shares of Meridian Common Stock) and a maximum (6.5
shares of Meridian Common Stock). The Merger Agreement contains
a provision which allows the maximum number of shares of Meridian
Common Stock to increase to 6.66 shares if the transaction closes
after June 1, 1994. MB&D believes the transaction will close
prior to June 1, 1994 and that this provision will not be
relevant. At a value of $185.00, Meridian's offer represents a
price to book value multiple of 1.64 based of Grange's book value
as of the quarter ended just prior to the announcement date. As
of December 31, 1993, Meridian's offer represents a price to book
value multiple of 1.54 and a price to 1993 earnings of 14.81
times.
(b) Exchange Analysis. MB&D considered the effect of
the Exchange Ratio collar contained in the Merger Agreement. The
effect of collar is that shareholders of Grange could receive
Meridian common stock valued at less than $185.00 per share of
Grange if the Closing Value of Meridian common stock is less than
$28.463. The Exchange Ratio at this price level is 6.5 shares of
Meridian for every share of Grange. Contractually (provided the
transaction closes prior to June 1, 1994) this is the greatest
number of shares of Meridian Common Stock that a share of Grange
Common Stock will be exchanged for. If the closing value of
Meridian Common Stock is $28.462 or less the Exchange Ratio
becomes fixed at 6.5 shares of Meridian Common Stock. Grange
shareholders are subject to price risk below this closing value
level. Conversely, a shareholder of Grange could receive
Meridian common stock valued at greater than $185.00 per share of
Grange if the Closing Value of Meridian is greater than $32.685.
The exchange ratio at this price level is 5.66 shares of Meridian
Common Stock for every share of Grange Common Stock. This is the
minimum number of Meridian shares of Common Stock that each share
of Grange Common Stock will be exchanged for. If the closing
value of Meridian Common Stock is $32.685 or greater the exchange
ratio becomes fixed at 5.66 shares of Meridian Common Stock for
each share of Grange Common Stock. If the closing value of
Meridian is greater than $32.685, then the value of the 5.66
shares of Meridian to be exchanged for each Grange share will be
greater than $185.00.
(c) Discounted Cash Flow Analysis. MB&D analyzed a
projected five-year period assuming an annual growth rate in
assets of 4.8% and an average return on assets of 0.72%. The
assumptions employed are based on an analysis of Grange's
historic trends, MB&D's assessment of the current banking
environment and extensive discussions with Grange's management.
Using these assumptions, a range of possible terminal values
based on price earnings multiples of from 10x to 14x applied to
projected earnings for the twelve months ended December 31, 1997
and annual dividends based on an average dividend payout ratio of
27.3% applied to the projected income stream. The discount rates
applied to the resulting cash flows ranged from 10x to 14x and
incorporated both concepts of the time value of money and risk.
The analysis resulted in a range of present discounted values
with a high of $152.42 per share and a low of $106.78 per share.
MB&D cautioned that the results produced in this analysis do not
purport to be indicative of the actual values of the securities
of Grange.
(d) Analysis of Other Comparable Transactions. MB&D
indicated that it reviewed a selection of other publicly
announced acquisitions of financial institutions which can be
compared to Grange. MB&D stated that it does not place undue
reliance on comparables analysis as a methodology due to what is
perceived as the inherent limitations of the practice adding that
comparables analysis often fails to adequately take into
consideration such factors as differences in the underlying
capitalization of the acquiror or the acquired institution, the
historic earnings patterns recorded by the two institutions,
differences in the form or forms of consideration used to
complete the transaction and differences between the planned
method of accounting for the completed transaction.
Nevertheless, in April 1993 MB&D reviewed the publicly available
information concerning ten transactions, which had occurred in
the past twelve months, where Pennsylvania commercial banks were
acquired by other banking entities. The average announced
transaction value for the ten transactions reviewed was
$126 million. The Grange transaction consequently was smaller
than nine of the transactions reviewed. The median multiple of
book value (unadjusted for intangibles) represented by the
announced transaction price in the ten examples considered was
1.93 times the most recent quarter end unadjusted book value of
the acquired entity. MB&D stated that the transaction price of
$185.00 per share of Grange Common Stock represents approximately
1.64 times the unadjusted book value of Grange Common Stock as of
March 31, 1993 and 1.54 times the unadjusted book value of Grange
Common Stock as of December 31, 1993. Based on publicly reported
information, the median multiple of the earnings reported for the
twelve months prior to the public announcements for the ten
example transactions reviewed was 17.20 times. Based on the
assumed transaction price of $185.00 per share of Grange Common
Stock, the multiple of 1993 budgeted earnings was 15.70 times.
Based on 1992 full year earnings (which was the most recently
reported full year earnings at the time of the announcement), a
transaction price of $185.00 represented 17.31 times.
Pursuant to a letter agreement with Grange dated
October 30, 1992, MB&D received a fee of $10,000 to perform an
evaluation study and present the results to the Board of Grange.
A subsequent letter agreement dated December 8, 1992 between
Grange and MB&D provided for MB&D to receive a fee of $75,000 for
its services in connection with the Merger and for rendering its
opinion, such fee payable one-third at the time the Merger
Agreement was signed by Grange and Meridian (a $10,000 credit for
the original evaluation study was applied to this payment
resulting in a net payment of $15,000), one-third on the date of
Meridian's mailing of the Proxy Statement/Prospectus, and one-
third at the Effective Date. In addition, Grange is to reimburse
MB&D for its reasonable out-of-pocket expenses incurred in
connection with the Merger. Grange has agreed to indemnify MB&D
and its directors, officers and employees against certain losses,
claims, damages and liabilities relating to or arising out of
MB&D's engagement, including liabilities under the federal
securities laws.
MB&D's opinion does not constitute a recommendation to
any Grange stockholder as to how such stockholder should vote on
the Merger proposal.
Effective Date of the Merger
The Merger will become effective upon the filing of
Articles of Merger between Meridian Bank and Grange with the
Pennsylvania Department of State (the "Effective Date") or such
later date as is specified in such Articles of Merger. The
Merger Agreement may be terminated by either party if the Merger
shall not have been completed on or before June 1, 1994 or such
later date as determined by Meridian and Grange. The Merger
Agreement may be terminated by Meridian or Grange prior thereto
under certain limited circumstances. See "THE
MERGER--Termination; Effect of Termination."
Exchange of Grange Stock Certificates
The conversion of Grange Common Stock into Meridian
Common Stock (other than shares as to which dissenters' rights
are properly exercised) will occur automatically at the Effective
Date.
As soon as practicable after the Effective Date,
Meridian, or a bank or trust company designated by Meridian, in
the capacity of exchange agent (the "Exchange Agent"), will send
a transmittal form to each Grange shareholder. The transmittal
form will contain instructions with respect to the surrender of
certificates representing Grange Common Stock to be exchanged for
Meridian Common Stock.
GRANGE SHAREHOLDERS SHOULD NOT FORWARD GRANGE STOCK
CERTIFICATES TO THE EXCHANGE AGENT UNTIL THEY HAVE RECEIVED
TRANSMITTAL FORMS. GRANGE SHAREHOLDERS SHOULD NOT RETURN STOCK
CERTIFICATES WITH THE ENCLOSED PROXY.
Until the certificates representing shares of Grange
Common Stock are surrendered for exchange after completion of the
Merger, holders of such certificates will not be paid dividends
on the Meridian Common Stock into which such shares have been
converted. When such certificates are surrendered, any unpaid
dividends will be paid without interest. For all other purposes,
however, each certificate which represents shares of Grange
Common Stock outstanding at the Effective Date will be deemed to
evidence ownership of the shares of Meridian Common Stock into
which those shares have been converted by virtue of the Merger.
All shares of Meridian Common Stock issued upon
conversion of shares of Grange Common Stock shall be deemed to
have been issued in full satisfaction of all rights pertaining to
such shares of Grange Common Stock, subject, however, to
Meridian's obligation to pay any dividends or make any other
distributions with a record date prior to the Effective Date
which may have been declared or made by Grange on such shares of
Grange Common Stock in accordance with the Merger Agreement on or
prior to the Effective Date and which remain unpaid at the
Effective Date.
No fractional shares of Meridian Common Stock will be
issued to any Grange shareholder upon completion of the Merger.
For each fractional share that would otherwise be issued,
Meridian will pay by check an amount equal to the product
obtained by multiplying the fractional share interest to which
such holder would otherwise be entitled by the value of a share
of Meridian Common Stock, such value being determined as provided
in the Merger Agreement.
Conditions to the Merger
The obligations of Meridian and Grange to effect the
Merger are subject to various conditions which include, in
addition to other customary closing conditions, the following:
(a) approval of the Merger Agreement by the
holders of Grange Common Stock;
(b) receipt of all necessary governmental
approvals for the Merger and expiration of all waiting periods
required by law or imposed by any governmental authority with
respect to the Merger;
(c) the absence of any order, decree, or
injunction in effect preventing the completion of the Merger;
(d) delivery of an opinion of counsel that, among
other things, the Merger will be treated for Federal income tax
purposes as a "reorganization" within the meaning of
Section 368(a) of the Internal Revenue Code of 1986, as amended
(see "THE MERGER--Certain Federal Income Tax Consequences"); and
(e) the absence of any material adverse change in
the consolidated assets, business, financial condition or results
of operations of the other since December 31, 1992.
In addition, Meridian's obligation to effect the Merger
is subject to, among others, the following additional conditions:
(i) the absence in any governmental approval for
the Merger of any term or condition that would have a material
adverse effect on Meridian Bank taken as a whole upon completion
of the Merger; and
(ii) dissenters' rights under federal law with
respect to the Merger shall not have been perfected by Grange
shareholders owning more than 10% of the outstanding shares of
Grange.
Except for closing conditions described above at
subparagraphs (a) through (c), each of the conditions described
above may be waived in the manner and to the extent described
herein at "THE MERGER--Amendment; Waivers."
Under Pennsylvania law and applicable rules and
regulations, the shareholders of Meridian are not required to
approve the Merger Agreement.
In the event that the delivery of the opinion of
counsel described at subparagraph (d) above is waived, or such
opinion would otherwise set forth tax consequences materially
different to a shareholder than those described above, Grange
intends to resolicit proxies as required in accordance with the
rules and regulations of the Securities and Exchange Commission.
Regulatory Approvals
The Merger is subject to approval of the Board of
Governors of the Federal Reserve System (the "Federal Reserve")
and the Department of Banking of the Commonwealth of Pennsylvania
(the "Department"). In addition, the Merger requires
notification to the Office of the Comptroller of the Currency
(the "OCC").
The Merger is subject to approval by the Federal
Reserve under Section 18(c) of the Federal Deposit Insurance Act
(the "Bank Merger Act"). An application for such approval was
filed by Meridian with the Federal Reserve on October 19, 1993
and approved on December 24, 1994.
The Merger is subject to approval by the Department.
An application for such approval was filed by Meridian Bank with
the Department on December 4, 1993 and approved on February 25,
1994.
On December 21, 1993, Grange gave notice to the OCC of
the Merger. OCC approval is not required to complete the Merger.
Representations and Warranties
The Merger Agreement contains customary representations
and warranties relating to, among other things, (a) the corporate
organization and capital structure of Meridian, Meridian Bank and
Grange; (b) the due authorization, execution, delivery,
performance and enforceability of the Merger Agreement;
(c) consents or approvals of regulatory authorities or third
parties necessary to complete the Merger; (d) the consistency of
financial statements with generally accepted accounting
principles; (e) the absence of any material adverse change in
Meridian's consolidated business, financial condition, property,
operations or prospects, since December 31, 1992, or the absence
of any material adverse change in Grange's business, financial
condition, loan portfolio, properties, operations, prospects or
relations with regulatory authorities, since December 31, 1992;
(f) the absence of undisclosed material pending or threatened
litigation; (g) compliance with applicable laws and regulations;
(h) the accuracy of information supplied by Meridian and Grange
in connection with the Registration Statement on Form S-4 filed
with the Commission in connection with the issuance of Meridian
Common Stock in the Merger, this Proxy Statement/Prospectus and
all applications filed with regulatory authorities for approval
of the Merger; and (i) documents filed with the Commission and
the accuracy of information contained therein.
The Merger Agreement also contains other
representations and warranties by Grange relating to, among other
things, (i) the filing of tax returns and consents and the
payment of taxes; (ii) retirement, pension and other employee
plans and matters relating to the Employee Retirement Income
Security Act of 1974; (iii) the absence of material environmental
violations, actions or liabilities; (iv) the adequacy of Grange's
allowance for loan losses in accordance with generally accepted
accounting principles and all applicable regulatory criteria;
(v) certain contracts relating to employment, consulting and
benefits matters or to certain indebtedness of Grange; (vi) the
quality of title to assets and properties; (vii) the absence of
outstanding options (and commitments to grant options) to acquire
Grange Common Stock; and (viii) transactions between Grange and
its affiliates.
Business Pending the Merger
Pursuant to the Merger Agreement, Grange has agreed to
use its best efforts to preserve its business organizations
intact, to retain the services of its officers and key employees
and to maintain and preserve its advantageous business
relationships. In addition, Grange has agreed that Grange will
conduct its business only in the ordinary course of business,
consistent with past practice, except as otherwise required by
the Merger Agreement or with the written consent of Meridian.
In addition, Grange has agreed that it will not,
without the written consent of Meridian, among other things,
(i) change any provision of its articles of association or
bylaws; (ii) change the number of authorized or issued shares of
its capital stock; (iii) grant options or similar rights with
respect to its capital stock or any securities convertible into
Grange Common Stock; (iv) declare, set aside or pay any dividend
or other distribution in respect of its capital stock except as
specifically approved by Meridian in the Merger Agreement (see
"THE MERGER--Dividends"); (v) grant any severance pay or increase
the compensation of any employee, officer or director of Grange,
with specified exceptions, or enter into or amend any employment
agreements; (vi) engage in any merger, acquisition or similar
transaction; (vii) dispose of any of its material assets or
discontinue any of its material businesses; (viii) implement any
new employee benefit or welfare plan, or amend any such plan; and
(ix) except as consistent with past practice, make, enter into,
compromise, renew, extend or modify any loan or credit facility
available to, or any other transaction with, any of its
affiliates.
Meridian and Grange jointly agreed (i) to use their
best efforts to obtain the regulatory approvals necessary to
complete the Merger, which have been obtained; (ii) to use their
best efforts in good faith to take or cause to be taken all
actions necessary or desirable to permit the completion of the
Merger; (iii) subject to the exception regarding Grange's
response to unsolicited inquiries from and discussions with third
parties discussed below in "THE MERGER--Restrictions on Other
Business Combinations or Acquisitions," to submit the Merger
Agreement to its shareholders for approval at a meeting at which
the Board of Directors of Grange shall recommend approval of the
Merger Agreement to its shareholders; (iv) to cooperate with
Meridian and use its best efforts to identify those persons who
may be deemed to be affiliates of Grange; and (v) to refrain
from issuing any press release regarding the Merger Agreement or
the Merger unless such press release has been approved by the
other.
Dividends
The Merger Agreement permits Grange, consistent with
past practice as to dividend and payment dates, to pay a regular
quarterly cash dividend, not to exceed $.60 per share of Grange
Common Stock outstanding, on the first day of each calendar
quarter, prior to the Effective Date. The Merger Agreement, as
amended, permits Grange to pay a cash dividend of $1.00 per share
on April 1, 1994 and, if the Effective Date has not occurred
prior to May 15, 1994, permits Grange to pay immediately prior to
the Effective Date a cash dividend equal to $.32 (Meridian's
present quarterly dividend rate) multiplied by the number of
shares of Meridian Common Stock into which each share of Grange
Common Stock will be converted on the Effective Date.
Declaration of any dividend by Grange is also subject
to regulatory requirements.
Restrictions on Other Business Combinations or Acquisitions
The Merger Agreement provides that, except as described
below, Grange will not enter into an agreement with any other
party for a business combination or other acquisition involving
Grange or any material portion of its assets or authorize or
permit any of its officers, directors, employees or other
representatives to solicit, encourage or negotiate any proposal
for such a combination or acquisition. The Board of Directors of
Grange may, however, respond to any unsolicited proposal from a
third party regarding the acquisition of all of the capital stock
or assets of Grange, furnish information regarding Grange to such
third party, negotiate the terms of the acquisition of such
capital stock or assets and submit the transaction to Grange
shareholders for their approval if, in each case, the Board of
Directors of Grange is advised that in the opinion of counsel the
Board is required by principles of fiduciary duty to take such
action. Further, the Merger Agreement requires Grange to notify
Meridian immediately of any offer, solicitation or proposal from
any person other than Meridian concerning a possible merger,
acquisition or similar transaction involving Grange or any of its
assets.
Amendment; Waivers
Subject to applicable law, (i) the Merger Agreement may
be amended at any time by written action taken by duly authorized
officers of Meridian and Grange, and (ii) Meridian or Grange, by
written action taken by a duly authorized officer, may extend the
time for performance of the obligations of the other under the
Merger Agreement and may waive conditions for their respective
benefit contained in the Merger Agreement.
Termination; Effect of Termination
The Merger Agreement may be terminated at any time
prior to the Effective Date by (a) mutual consent of Meridian and
Grange or (b) by either party if (i) at any time prior to the
Effective Date any event shall have occurred or any state of
facts shall exist that renders it impossible for such party to
fulfill any of the conditions or obligations under the Merger
Agreement, or (ii) the Effective Date shall not have occurred on
or before June 1, 1994 or such later date as determined by
Meridian and Grange.
If the Merger Agreement is terminated pursuant to its
terms, it shall become void. Meridian's or Grange's termination
of the Merger Agreement shall not relieve the other party of any
liability for any breach of the Merger Agreement.
Management and Operations after the Merger
Upon completion of the Merger, Meridian will operate
the former branches of Grange as part of the Commonwealth
Division of Meridian Bank. The Merger will have no effect on the
composition of the Boards of Directors and executive officers of
Meridian and Meridian Bank. The directors of Grange in office
immediately prior to the Merger will cease to be directors of
Grange on the Effective Date and will thereafter serve for at
least one year as a newly constituted advisory board of the
Grange Office of Meridian Bank (the "Advisory Board"). In
addition, five members of Grange's Board of Directors, elected by
a majority of the Board, will, on the Effective Date, become
members of the successor to the County Bank Regional Board of
Commonwealth Bank (the "Regional Board"). Members of the
Advisory Board and the Regional Board will serve at the
discretion of the Board of Directors of Meridian Bank and will
receive compensation from Meridian Bank.
All persons who are employees of Grange immediately
prior to the Effective Date will be placed as "employees-at-will"
of Meridian Bank, to the extent Meridian Bank in good faith deems
appropriate, on the terms and conditions, including titles,
salaries and benefits, comparable to those made available to
employees of Meridian Bank holding similar positions.
Interests of Certain Persons in the Merger
The directors and executive officers of Grange own
approximately 3,950 shares of Grange Common Stock or
approximately 15.8% of the outstanding shares of Grange Common
Stock which are entitled to be voted at the Special Meeting.
Meridian has entered into an agreement with Agnes M.
Jones, Chief Executive Officer of Grange, pursuant to which she
will continue to be employed by Meridian Bank as a vice president
for up to two years after the Effective Date at an annual salary
of $57,000 per year (or, at the option of Ms. Jones during the
second year of the Agreement, will be engaged on a part-time
basis at a salary of $28,500), will receive payments equal to
$50,000 in consideration of cancellation of her existing
employment contract, and will receive certain severance payments,
equal to the then remaining payments under the agreement, in the
event of termination of her employment without cause prior to the
end of the employment period.
Employee Benefits
To the extent permitted under applicable law, each
employee of Grange who will be employed with Meridian will
receive full credit for each year of service with Grange for
purposes of determining eligibility for participation and
vesting, but not benefit accrual, in Meridian's employee benefit
plans. The employee benefits provided by Meridian, after
completion of the Merger, to former employees of Grange will be
no less favorable, in the aggregate, than are such benefits
provided to employees of Meridian and its subsidiaries. Subject
to the foregoing, Meridian may discontinue or amend the employee
benefit plans of Grange after completion of the Merger.
Accounting Treatment
The Merger is expected to qualify as a "pooling of
interests" for accounting and financial reporting purposes.
Under this method of accounting, the recorded assets and
liabilities of Meridian and Grange will be carried forward to the
combined corporation at their recorded amounts and income of the
combined corporation will include income of both Meridian and
Grange for the entire fiscal year in which the Merger occurs.
Qualification of the Merger for pooling of interests accounting
treatment, however, is not a condition to Meridian's obligation
to complete the Merger. See "THE MERGER--Conditions to the
Merger."
Certain Federal Income Tax Consequences
Completion of the Merger is conditioned upon there
being delivered to both Meridian and Grange the opinion of
Stevens & Lee, counsel to Meridian, substantially to the effect
that for federal income tax purposes, under current law, assuming
that the Merger and related transactions will take place as
described in the Merger Agreement, among other things, the Merger
will constitute a reorganization within the meaning of
Section 368(a) of the Internal Revenue Code of 1986, as amended
(the "Code), and Meridian and Grange will each be a party to the
reorganization within the meaning of Section 368(b) of the Code.
In that case, in the opinion of Stevens & Lee, the
following would be material federal income tax consequences of
the Merger:
(i) no gain or loss will be recognized by
Meridian or Grange in the Merger;
(ii) no gain or loss will be recognized by the
shareholders of Grange upon their receipt of Meridian Common
Stock in exchange for their Grange Common Stock, except that
shareholders who receive cash proceeds for fractional interests
in Meridian Common Stock will recognize gain or loss equal to the
difference between such proceeds and the tax basis allocated to
their fractional share interests, and such gain or loss will
constitute capital gain or loss if their Grange Common Stock is
held as a capital asset at the Effective Date;
(iii) the tax basis of the shares of Meridian
Common Stock (including fractional share interests) received by
the shareholders of Grange will be the same as the tax basis of
their Grange Common Stock exchanged therefor; and
(iv) the holding period of the Meridian Common
Stock in the hands of the Grange shareholders will include the
holding period of their Grange Common Stock exchanged therefor,
provided such Grange Common Stock is held as a capital asset at
the Effective Date.
Under the Merger Agreement, the condition that
Stevens & Lee deliver the opinion described above can be waived
by Meridian and Grange. However, in the event that the delivery
of such opinion of counsel is waived, or such opinion would
otherwise set forth tax consequences materially different to a
shareholder than those described above, Grange intends to
resolicit proxies as required in accordance with the rules and
regulations of the Securities and Exchange Commission.
THE DISCUSSION SET FORTH ABOVE DOES NOT ADDRESS THE
STATE, LOCAL OR FOREIGN TAX ASPECTS OF THE MERGER. THE
DISCUSSION IS BASED ON CURRENTLY EXISTING PROVISIONS OF THE CODE,
EXISTING AND PROPOSED TREASURY REGULATIONS THEREUNDER AND CURRENT
ADMINISTRATIVE RULINGS AND COURT DECISIONS. ALL OF THE FOREGOING
ARE SUBJECT TO CHANGE AND ANY SUCH CHANGE COULD AFFECT THE
CONTINUING VALIDITY OF THIS DISCUSSION. EACH GRANGE SHAREHOLDER
SHOULD CONSULT HIS OR HER OWN TAX ADVISOR WITH RESPECT TO THE
SPECIFIC TAX CONSEQUENCES OF THE MERGER TO HIM OR HER, INCLUDING
THE APPLICATION AND EFFECT OF STATE, LOCAL AND FOREIGN TAX LAWS.
Expenses
Meridian and Grange will each pay all costs and
expenses incurred by it in connection with the transactions
contemplated hereby, including fees and expenses of financial
consultants, accountants and legal counsel, except that
(i) Meridian will pay all application fees in connection with
obtaining regulatory approvals for the Merger, and (ii) Meridian
and Grange will each pay half the fees for filings with
Commission and state securities authorities, and (iii) Meridian
and Grange will each pay one-half of the first $15,000 of costs
incurred in connection with printing this Proxy
Statement/Prospectus and Meridian will pay any printing costs in
excess of $15,000.
Resale of Meridian Common Stock
The Meridian Common Stock issued pursuant to the Merger
will be freely transferable under the Securities Act except for
shares issued to any Grange shareholder who may be deemed to be
an "affiliate" of Grange or Meridian for purposes of Rule 145
under the Securities Act. Each such affiliate will enter into an
agreement with Meridian providing that such affiliate will not
transfer any Meridian Common Stock received in the Merger except
in compliance with the Securities Act and will make no
dispositions of any Meridian Common Stock or Grange Common Stock
(or any interest therein) during the period commencing 30 days
prior to the Effective Date through the date on which financial
results covering at least 30 days of combined operations of
Meridian and Grange after the Merger have been published. This
Proxy Statement/Prospectus does not cover resales of Meridian
Common Stock received by any person who may be deemed an
affiliate of Grange or Meridian.
Dividend Reinvestment Plan
Meridian currently maintains a Dividend Reinvestment
and Stock Purchase Plan. This plan provides shareholders of
Meridian with a method of investing cash dividends, as well as
voluntary cash payments, in additional shares of Meridian Common
Stock, without payment of any brokerage commission or service
charge. It is anticipated that, after the Effective Date,
Meridian will continue to offer this plan and shareholders of
Grange who become shareholders of Meridian will be eligible to
participate therein.
Dissenters' Rights
Pursuant to the provisions of Section 214a of Title 12
of the United States Code, as amended (the "U.S. Code"), any
shareholder of Grange has the right to dissent from the Merger
and to obtain payment of the "value" (as defined therein) of his
Grange Common Stock if the Merger is consummated.
Any shareholder of Grange who contemplates exercising
the right to dissent is urged to read carefully the provisions of
Section 214a of Title 12 of the U.S. Code.
The following summary of the steps to be taken if the
right to dissent is to be exercised is qualified in its entirety
by the full text of Section 214a of Title 12 of the U.S. Code,
which is attached as Annex E to this Proxy Statement/Prospectus.
Each step must be taken in the indicated order and in
strict compliance with the applicable provisions of the statute
in order to perfect dissenters' rights. The failure of any
shareholder to comply with the aforesaid steps will result in the
shareholder receiving the consideration contemplated by the
Merger Agreement. See "THE MERGER--Terms of the Merger."
If the Merger is consummated, any Grange shareholder
who follows the procedures set forth in the U.S. Code will be
entitled to receive from Meridian a cash payment equal to the
"value" of his shares of Grange Common Stock determined as
described below, as of the Effective Date. The U.S. Code
provides that any shareholder of Grange who has voted against the
Merger at the Special Meeting, or who has given notice in writing
at or prior to the Special Meeting to Grange that he dissents
from the Merger and does not thereafter vote in favor of the
Merger, shall be entitled to receive the "value" of the shares of
Grange Common Stock held by him when the Merger becomes
effective, provided, however, that such shareholder makes a
written request to Meridian at any time thirty days after the
Effective Date, accompanied by the surrender of his or her share
certificate.
The number of shares represented by proxies that are
returned signed but unmarked as to voting instructions will be
voted in favor of the Merger, and therefore will have waived
their rights to dissent.
Any shareholder of Grange who votes against the Merger
at the Special Meeting, or who gives a notice in writing to
Grange at or prior to the Special Meeting that he dissents and
does not thereafter vote in favor of the Merger, will be notified
in writing of the Effective Date of the Merger. The Merger
Agreement provides that one of the conditions to Meridian's
obligation to consummate the Merger is that shareholders holding
more than 10% of the outstanding shares of Grange Common Stock
shall not have asserted and duly perfected their dissenters'
rights.
In accordance with the U.S. Code, the "value" of the
shares of any dissenting shareholder shall be ascertained, as of
the Effective Date of the Merger, by an appraisal made by a
committee of three persons composed of (i) one person selected by
the vote of the holders of a majority of the shares whose owners
are entitled to payment in cash (by reason of such requests for
appraisal), (ii) one person selected by the Board of Directors of
Meridian and (iii) one person selected by the two so selected.
The valuation agreed upon by any two of the three appraisers will
govern. If the value so fixed is not satisfactory to any
dissenting shareholder who has requested payment, that
shareholder may, within five days after being notified of the
appraised value of his shares, appeal to the Comptroller of the
Currency, who is required to cause a reappraisal to be made. The
Comptroller's appraisal will be final and binding as to the value
of the dissenters' shares. If for any reason one or more of the
appraisers is not selected as above provided within ninety days
from the Effective Date, or of the appraisers fail to determine
the value of such shares, the Comptroller is required, upon
written request of any interested party, to cause an appraisal to
be made which shall be final and binding on all parties. The
expenses of the Comptroller in making the reappraisal or the
appraisal, as the case may be, will be paid by Meridian.
The value of the shares ascertained is required to be
paid by Meridian promptly to dissenting shareholders.
The foregoing summary does not purport to be a complete
statement of the appraisal rights of dissenting shareholders, and
such summary is qualified in its entirety by reference to the
applicable provisions of the U.S. Code, which are reproduced in
full in Annex E to this Proxy Statement/Prospectus.
GRANGE SELECTED FINANCIAL DATA
The following selected financial data for Grange for
the years ended December 31, 1993, 1992, 1991, 1990 and 1989 have
been derived from the financial statements of Grange included
elsewhere herein, which statements have been audited by Davidson,
Fox & Co., independent certified public accountants. The
following information should be read in conjunction with the
financial statements and notes thereto appearing elsewhere in
this Proxy Statement/Prospectus. See "GRANGE: MANAGEMENT'S
DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS" and "INDEX TO GRANGE FINANCIAL STATEMENTS."
<TABLE>
<CAPTION>
Grange Selected Financial Information
Year Ended December 31,
1993 1992 1991 1990 1989
<S> <C> <C> <C> <C> <C>
SUMMARY OF INCOME
Net interest income $ 1,249,456 $ 1,166,062 $ 952,304 $ 869,202 $ 871,768
Loan loss provision 2,649 59,000 25,000 4,500 ---
Non-interest income 111,443 117,728 145,024 91,916 135,790
Non-interest expense 902,146 950,056 794,884 681,797 672,396
Gain (Loss) on sale of
securities --- (20,066) 2,000 --- (266)
Applicable income tax
expense 156,689 66,535 56,099 55,095 77,663
Net income 312,286 267,199 246,345 224,226 257,499
PER SHARE DATA
Net income 12.49 10.69 9.85 8.97 10.30
Cash dividends declared 2.40 2.40 2.40 2.90 2.40
Book value 119.89 109.80 101.51 94.06 87.99
Average number of shares
outstanding 25,000 25,000 25,000 25,000 25,000
STATEMENT OF CONDITION
(End of Period)
Total assets $28,519,368 $30,400,651 $27,282,032 $24,424,063 $22,659,689
Net loans 15,234,316 16,434,142 14,675,516 14,415,202 12,889,936
Deposits 25,259,995 27,401,447 24,384,767 21,706,739 20,053,422
Investment securities 7,425,930 7,548,703 6,789,210 6,095,832 4,237,916
Stockholders' equity 2,997,271 2,744,985 2,537,786 2,351,441 2,199,715
Reserve for loan losses 135,000 142,617 102,516 95,118 90,222
Long-term debt --- --- --- --- ---
Capital lease obligations --- --- 5,343 18,166 30,988
Number of shares
outstanding 25,000 25,000 25,000 25,000 25,000
SIGNIFICANT RATIOS
Return on average equity 10.42 9.73 9.71 9.54 11.71
Return on average assets 1.11 .91 .96 .91 1.14
Net loans as a percentage
of deposits 60.31 59.97 60.18 66.41 64.28
Tier 1 risk-based capital 25.74 21.39 19.73 18.21 19.0
Total risk-based capital 25.74 21.39 19.73 18.21 19.0
Leverage capital 10.46 9.07 9.47
Equity to assets 10.51 9.03 9.31 9.63 9.71
Cash dividends paid as a
percentage of net income 19.21 22.47 24.10 32.33 23.30
Reserve for loan losses
to net loans .89 .86 .70 .66 .70
AVERAGE ASSETS $28,030,000 $29,336,000 $25,659,000 $24,527,000 $22,557,000
</TABLE>
<PAGE>
GRANGE: MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The purpose of the following discussion is to provide
additional information concerning Grange's financial condition
and results of operations. For a clear understanding of this
discussion, reference should be made to the financial statements
of Grange and the selected financial data presented elsewhere in
this Proxy Statement/Prospectus. See "GRANGE SELECTED FINANCIAL
DATA" and "INDEX TO GRANGE FINANCIAL STATEMENTS."
1993 Compared to 1992
Financial Highlights
Net income was $312,286 ($12.49 per share) in 1993
compared to $267,199 ($10.69 per share) in 1992, for an increase
of $45,087 or 16.9%, of which $10,222 ($.41 per share) was the
result of a one-time cumulative effect adjustment for the
Company's adoption of FAS No. 109 "Accounting for Income Taxes."
Other factors contributing to the increase were as follows:
Net interest income was $1,249,456 in 1993 and
$1,166,062 in 1992. The increase of $83,394 resulted from an
increase in the net interest margin from 4.18% in 1992 to 4.59%
in 1993. The increase in the net interest margin was a result of
a decrease in the cost of funds due to the general level of
interest rates and a shift in deposits from certificates of
deposit to savings accounts. During 1993, average earning assets
declined by $467,520 or 1.66% as a result of decreased deposit
levels. The following table provides additional information:
<TABLE>
<CAPTION>
1993 1992
<S> <C> <C>
Yield on Interest-Earning Assets
(tax-equivalent basis) 8.17% 8.17%
Cost of Funds 4.17% 5.19%
Net Interest Spread 4.00% 3.52%
Effect of Non-Interest Bearing Funds 0.59% 0.66%
Net Interest Margin 4.59% 4.18%
Average Earning Assets $27,699,372 $28,166,892
</TABLE>
Other income was comparable in the periods and aggregated
$111,443 in 1993 and $117,728 in 1992.
Other expenses were $902,146 in 1993 and $950,056 in
1992. The decrease of $47,910 reflects decreases in salaries,
benefits, and other operating expenses, as a result of reduced
staff levels in 1993. Also, 1992 expenses include approximately
$150,000 related to the opening of the Harford branch.
The provision for loan losses was $2,649 in 1993 and
$59,000 in 1992. The allowance for loan losses, which is an
estimate made by management of loans believed uncollectible, was
$135,000 at December 31, 1993 and $142,617 at the end of 1992.
Nonaccrual loans were $0 and $12,751 in 1993 and 1992,
respectively.
Income tax expense increased by $90,154 between the
years as a result of: (i) the increase in pre-tax income of
$125,019, and (ii) an increase in the effective tax rate (34% in
1993, 20% in 1992) as a result of permanent differences
(consisting of a decrease in tax-exempt income and increases in
non-tax deductible expenses) increasing taxable income in 1993.
Capital Adequacy
Total equity to total assets was 10.51% at December 31,
1993 and 9.03% at December 31, 1992. The increase resulted from
1993 earnings retained, net of dividend payments, and a decline
in assets. The total risk-based capital ratio was 25.74% at
December 31, 1993, compared to 21.39% at the end of 1992. These
capital ratios exceed regulatory requirements.
Liquidity
Liquidity is the bank's ability to meet the needs of
deposit withdrawals, maturing liabilities, and asset growth.
Management believes its liquidity levels are sufficient
to meet the ongoing operations needs of the business. Cash and
due from banks, interest bearing deposits at banks, investment
securities due in one year, and federal funds sold were
$8,044,473, or 31.5% of total liabilities, at December 31, 1993
and $8,194,901, or 29.6% of total liabilities, at December 31,
1992
1992 Compared to 1991
Financial Highlights
Net income was $267,199 ($10.69 per share) in 1992
compared to $246,345 ($9.85 per share) in 1991, for an increase
of $20,854 or 8.5%. Factors contributing to this increase were
as follows:
Net increase income was $1,166,062 in 1992 and $952,304
in 1991. The increase of $213,758 resulted from an increase in
the net interest margin from 3.56% in 1991 to 4.18% in 1992. The
increase in the net interest margin was the result of a decrease
in the cost of funds due to the general level of interest rates
and a shift in deposits from certificates of deposit to savings
accounts. Also during 1992, average earning assets increased by
$1,672,665 as a result of increased deposit levels. The
following table provides additional information.
<TABLE>
<CAPTION>
1992 1991
<S> <C> <C>
Yield on Interest-Earning Assets
(tax-equivalent basis) 8.71% 8.94%
Cost of Funds 5.19% 6.36%
Net Interest Spread 3.52% 2.58%
Effect of Non-Interest Bearing Funds 0.66% 0.98%
Net Interest Margin 4.18% 3.56%
Average Earning Assets $28,166,892 $26,494,227
</TABLE>
Other income was $117,728, in 1992, and $145,024 in
1991. The decrease of $27,296 was primarily the result of losses
incurred on securities sold and called in 1992, and income
received on other real estate in 1991 which was not received in
1992.
Operating expenses were $950,056 in 1992 and $794,884
in 1991. The increase of $155,172 was a result of expenses
incurred for the previously noted opening of the Harford Branch.
The effective tax rates in 1992 and 1991 were 20% and
19%, respectively.
DESCRIPTION OF GRANGE
Business
Grange was formed as a national bank on April 25, 1907.
Grange's main office is located in the building Grange owns in
New Milford, Pennsylvania. In 1992, Grange opened its only
branch office in Harford, Pennsylvania, which it operates at a
leased location. At December 31, 1993, Grange had total assets,
deposits and shareholders' equity of approximately $28.5 million,
$25.3 million and $3.0 million, respectively.
Except for trust services for which it lacks
authorization, Grange is engaged in general commercial and retail
banking business. It offers commercial loans of all types, real
estate loans, including home equity loans, personal, auto and
home modernization loans, safe deposit boxes and night
depository.
Grange, as a national bank, is a member of the Federal
Reserve System and the Federal Deposit Insurance Corporation (the
"FDIC") and as such, its deposits are insured up to applicable
limits. Its deposit services include business and individual
demand and time deposit accounts, N.O.W. accounts, money market
accounts, Individual Retirement Accounts and Christmas Clubs.
The local banking environment in the area served by
Grange is competitive, with active involvement by "Regional" and
"Super Regional" banks. Competitors include the Commonwealth
Division of Meridian Bank; Meridian Bank; Community Bank and
Trust Company, Forest City, Pennsylvania; Peoples National Bank
of Susquehanna County and BSB Bancorp, Inc., Binghamton, New
York, as well as other financial institutions, finance companies,
mortgage banking companies and brokerage companies operating in
the area.
The principal executive offices of Grange are located
at 220 Main Street, New Milford, Pennsylvania 18834, and its
telephone number is (717) 465-3206.
Supervision and Regulation
Grange, as a national bank, is subject to the National
Bank Act. Grange is also subject to the supervision of, and is
regularly examined by, the Comptroller of the Currency (the
"Comptroller") and is required to furnish quarterly reports to
the Comptroller. The approval of the Comptroller is required for
the establishment of additional branch offices by any national
bank, subject to applicable state law restrictions.
Grange is a member of the FDIC and a member of the
Federal Reserve System and, therefore, is subject to additional
regulation by these agencies. Some of the aspects of the lending
and deposit business of Grange which are regulated by these
agencies include personal lending, mortgage lending, interest
rates both as they relate to lending and interest paid on
deposits, and reserve requirements.
In addition, the National Bank Act and regulations of
the Comptroller impose restrictions on the payment of dividends
to Grange's shareholders.
The operations of Grange are also subject to numerous
federal, state and local laws and regulations which set forth
specific restrictions and procedural requirements with respect to
the extension of credit, credit practices, the disclosure of
credit terms and discrimination in credit transactions.
As a consequence of the extensive regulation of
commercial banking activities in the United States, Grange's
business is particularly susceptible to being affected by Federal
and state legislation and regulations which may have the effect
of increasing the costs of doing business.
The Federal Deposit Insurance Corporation Improvement
Act of 1991 (the "Improvement Act") was entered to provide for
the recapitalization of the FDIC's Bank Insurance Fund, which had
fallen to undesirably low levels as a result of increased bank
failures during the late 1980's and the early 1990's. The
Improvement Act increased the FDIC's authority to borrow from the
U.S. Treasury from $5 billion to $30 billion, and designated this
credit line as the FDIC's primary funding source. The
Improvement Act also gave the FDIC unlimited authority to assess
insured institutions in amounts necessary to repay its borrowings
from the Treasury, and thus removed the existing cap on the
amount the FDIC may charge as premiums for insuring an
institution's deposits. The Improvement Act also authorized the
FDIC to adopt variable risk based assessment (premium) rates in
lieu of the prior flat rate applicable to the deposits of all
institutions and beginning on January 1, 1993, the FDIC started
to phase in a schedule of such rates.
The Improvement Act also mandates improved financial
management and reporting by insured institutions, and more
frequent and more rigorous FDIC examinations of most such
institutions. The Act makes significant changes in the methods
to be utilized by the FDIC in resolving failed institutions, and
authorizes the FDIC to set substantive standards for the
operation of insured institutions.
In addition, as required by the Improvement Act,
federal banking agencies have revised their risk-based capital
standards for insured institutions. Finally, the Improvement Act
provides for "Truth in Savings" disclosures and advertising so
that consumers may have a better understanding of the interest
payable on deposit accounts and fees which may be charged.
It is not clear at this point whether the Improvement
Act has or will have a material effect on the operations of
Grange.
The Community Reinvestment Act of 1977 ("CRA") mandates
that the Comptroller review the extent to which each national
bank serves all neighborhoods in the community in which it is
located. Grange has not received a rating under the CRA by the
Comptroller.
As with other types of companies, Grange is subject to
additional regulation of federal, state and local authorities in
the areas of workplace safety, discrimination in employment
practices and public accommodation (whether by race, sex,
religion or disability) and environmental protection, among other
areas. Grange believes that it is in compliance with such
regulation in all material respects.
In addition to being affected by general economic
conditions, the earnings and growth of Grange is and will be
affected by the policies of regulatory authorities, including the
Comptroller, the Federal Reserve Board and the FDIC. An
important function of the Federal Reserve Board is to regulate
the money supply, credit conditions and interest rates. Among
the instruments used to implement these objectives are open
market operations in United States Government securities, changes
in reserve requirements against bank deposits and limitations on
interest rates that member banks may pay on time and savings
deposits. These instruments are used in varying combinations to
influence overall growth and distribution of credit, bank loans,
investments and deposits, and their use may also affect interest
rates charged on loans or paid on deposits.
The monetary policies and regulations of the Federal
Reserve Board have had a significant effect on the operating
results of commercial banks in the past and are expected to
continue to do so in the future.
Legal Proceedings
Other than routine litigation incidental to its
business, neither Grange nor any of its properties is subject to
any material legal proceedings, nor are any such proceedings
known to be contemplated by any governmental authorities.
Market Price of Grange Common Stock
Grange Common Stock is not traded on any exchange,
organized market or in the over-the-counter market. Sales and
purchase of the shares of Grange Common Stock are infrequent and
isolated and generally are effected in private transactions
between buyer and seller. Grange may not have been advised as to
the purchase price involved in each transaction, and therefore
the information set forth below is based on transactions known to
management. The price information is obtained from data about
actual trades. To the best of Grange's knowledge, the following
table sets forth the high and low prices for Grange's shares for
each quarter since the beginning of 1992.
<TABLE>
<CAPTION>
1992 High Low
<S> <C> <C>
First Quarter $100.00 $100.00
Second Quarter -- --
Third Quarter 100.00 100.00
Fourth Quarter 100.00 100.00
1993(1)
First Quarter $ -- $ --
Second Quarter -- --
Third Quarter -- --
Fourth Quarter -- --
1994(1)
First Quarter $ -- $ --
_________________________
<FN>
(1) There were no sales of Grange Common Stock reported during
1993 or through March 25, 1994.
</TABLE>
As of March, 1994, there were 100 record holders of
shares of Grange Common Stock.
The declaration and payment of dividends is in the sole
discretion of the Board of Directors and the amount, if any,
depends upon the earnings, financial condition and capital needs
of Grange and certain other factors, including restrictions
arising from federal banking laws and regulations to which Grange
is subject.
Grange, through the Effective Date, is subject to
certain limitations in the payment of dividends by the terms of
the Merger Agreement. See "THE MERGER--Dividends.
Grange is subject to certain limitations on the amount
of cash dividends that it can pay. The prior approval of the
Comptroller is required if the total of all cash dividends
declared by a national bank, such as Grange, in any calendar year
will exceed the sum of such bank's net profits (as defined by
statute) for that year combined with the retained net profits for
the preceding two calendar years, less any required transfers to
surplus. Under this formula, as of December 31, 1993,
$__________ of accumulated earnings of Grange were available for
distribution as dividends without prior regulatory approval. In
addition, the Comptroller is authorized to determine under
certain circumstances relating to the financial condition of a
national bank that the payment of dividends would be an unsafe or
unsound practice and to prohibit payment thereof.
The following table sets forth the cash dividends
declared by Grange during each quarter since the beginning of
1991.
Dividends Per Share on Grange Common Stock
1992
First Quarter $ .60
Second Quarter .60
Third Quarter .60
Fourth Quarter .60
Total $2.40
1993
First Quarter $ .60
Second Quarter .60
Third Quarter .60
Fourth Quarter .60
Total $2.40
1994
First Quarter $1.00
_______________________
(1) Grange, through the Effective Date, is subject to certain
limitations in the payment of dividends by the terms of the
Merger Agreement. See "THE MERGER--Dividends."
DESCRIPTION OF MERIDIAN CAPITAL SECURITIES
The authorized capital stock of Meridian consists of
100,000,000 shares of common stock, par value $5.00 per share
("Meridian Common Stock"), and 25,000,000 shares of preferred
stock, par value $25.00 per share ("Meridian Preferred Stock").
As of February 15, 1994, there were 58,162,266 shares of Meridian
Common Stock and no shares of Meridian Preferred Stock issued and
outstanding. There are no other shares of capital stock of
Meridian authorized, issued or outstanding. Meridian has no
options, warrants, or other rights authorized, issued or
outstanding, other than as described herein under "Capital Notes"
and "Shareholder Rights Plan" and options granted under the
Meridian Bancorp, Inc. Stock Option Plan.
Common Stock
The holders of Meridian Common Stock are entitled to
share ratably in dividends when and if declared by the Meridian
Board of Directors from funds legally available therefor.
Each holder of Meridian Common Stock has one vote for
each share held of record on each matter presented for
consideration by Meridian shareholders. Meridian shareholders
are not entitled to cumulate votes in the election of directors.
The Meridian Board of Directors is divided into three
classes, each serving three-year terms, so that approximately
one-third of the directors of Meridian are elected at each annual
meeting of shareholders of Meridian. Classification of the
Meridian Board of Directors has the effect of decreasing the
number of directors that could be elected in a single year by any
person who seeks to elect its designees to a majority of the
seats on the Meridian Board of Directors and thereby could impede
a change of control of Meridian.
The holders of Meridian Common Stock have no preemptive
rights to acquire any additional shares of Meridian.
Meridian's articles of incorporation authorize the
Meridian Board of Directors to issue authorized shares of
Meridian Common Stock and Meridian Preferred Stock without
shareholder approval. Meridian Common Stock is included for
quotation on the NASDAQ National Market System. As a result, in
order to maintain such inclusion, approval of Meridian's
shareholders is required for the issuance of additional shares of
Meridian Common Stock or securities convertible into Meridian
Common Stock if the issuance of such securities (1) is in
connection with the acquisition of a company, is not in
connection with a public offering for cash, and the securities
issued have or will have voting power equal to or in excess of
20% of the voting power outstanding before such issuance; (2) is
in connection with the acquisition of a company in which a
director, officer or substantial shareholder of Meridian has a 5%
or greater interest and the issuance of the securities could
result in an increase in outstanding common stock or voting power
of 5% or more; (3) is in connection with a transaction other than
a public offering at a price less than the greater of book or
market value, and will equal 20% or more of the common stock or
20% or more of the voting power outstanding before issuance; or
(4) would result in a change in control of Meridian. Under
NASDAQ National Market System rules, shareholder approval is also
required for the establishment of a stock option or purchase plan
in which stock may be acquired by officers and directors other
than a broadly-based plan in which other security holders of
Meridian or employees of Meridian participate. Under applicable
NASDAQ National Market System rules, approval of Meridian
shareholders is not required for issuance of the shares of
Meridian Common Stock issuable to Grange shareholders in the
Merger.
In the event of liquidation, dissolution or winding-up
of Meridian, whether voluntary or involuntary, holders of
Meridian Common Stock will be entitled to share ratably in any of
its assets or funds that are available for distribution to its
shareholders after the satisfaction of its liabilities (or after
adequate provision is made therefor) and after payment of any
liquidation preferences of any outstanding Meridian Preferred
Stock.
Preferred Stock
Meridian Preferred Stock may be issued from time to
time as a class, without series or in one or more series, by
resolution of the Meridian Board of Directors. Each series or
class will have such dividend rate, payment dates and dates from
which dividends cumulate, and such general voting, redemption,
liquidation, conversion and sinking fund rights as the Meridian
Board of Directors may determine. All shares of one series must
be identical, and all series will rank equally except with
respect to the rights particular to each series fixed by the
Board. Each series is entitled to receive, when and as declared
by the Board of Directors and before any dividends (other than
dividends payable in Meridian Common Stock) are paid on Meridian
Common Stock, dividends at the rate fixed by the Board for such
series.
Capital Notes
In December 1984, Meridian issued $75 million in
principal amount of Floating Rate Subordinated Capital Notes due
December 1, 1996 (the "Notes") pursuant to an indenture dated as
of December 1, 1984, between Meridian and Morgan Guaranty Trust
Company of New York, as trustee. The Notes bear interest at a
rate of 1/8 of 1% above the arithmetic mean of London interbank
offering quotations for three-month Eurodollar deposits, adjusted
quarterly. The Notes mature on December 1, 1996, and are
subordinate and junior in right of payment to senior indebtedness
of Meridian. Since December 1, 1988, Meridian has had the option
to exchange the Notes for capital securities or, under certain
circumstances, for cash. In December 1993, Meridian received
approval from the Federal Reserve Bank to revoke its obligation
to exchange the Notes for capital securities at maturity.
Holders of Notes have none of the rights or privileges of
shareholders of Meridian until the Notes are exchanged for
capital stock.
Shareholder Rights Plan
Each share of Meridian Common Stock has attached to it
one right (a "Meridian Right") issued pursuant to a Rights
Agreement dated July 25, 1989 (the "Meridian Rights Agreement").
One Meridian Right will be issued with each share of Meridian
Common Stock issued in connection with the Merger. Each Meridian
Right will initially entitle a holder to buy one unit of a newly
authorized series of junior participating preferred stock at an
exercise price of $85.00. The Meridian Rights become exercisable
if a person, group or other entity acquires or announces a tender
offer for 19.9% or more of either the Meridian Common Stock
outstanding or voting securities representing a minimum of 19.9%
of Meridian's total voting power. They can also be exercised if
a person or group who has become a beneficial owner of at least
4.9% (with certain exceptions) of the Meridian Common Stock
outstanding or total voting power is declared by Meridian's Board
of Directors to be an "adverse person" (as defined in the
Meridian Rights Agreement). After the Meridian Rights become
exercisable, the Meridian Rights (other than rights held by a
19.9% beneficial owner or an "adverse person") will entitle the
holders to purchase, under certain circumstances, either Meridian
Common Stock or common stock of the potential acquiror at a
substantially reduced price. Meridian is generally entitled to
redeem the Meridian Rights at $.001 per Meridian Right at any
time until the tenth business day following public announcement
that a 19.9% position has been acquired. The Meridian Rights can
also be redeemed by shareholder action under certain
circumstances. The Meridian Rights are not redeemable following
an "adverse person" determination. The Meridian Rights expire on
July 25, 1994.
The Meridian Rights Agreement is incorporated herein by
reference. See "INCORPORATION OF CERTAIN DOCUMENTS BY
REFERENCE." The foregoing description of the Meridian Rights
does not purport to be complete and is qualified in its entirety
by reference to the Meridian Rights Agreement.
Special Charter and Pennsylvania Corporate Law Provisions
Meridian's Articles of Incorporation and Bylaws contain
certain provisions which may have the effect of deterring or
discouraging, among other things, a nonnegotiated tender or
exchange offer for Meridian stock, a proxy contest for control of
Meridian, the assumption of control of Meridian by a holder of a
large block of Meridian's stock and the removal of Meridian's
management. These provisions: (1) empower the Meridian Board of
Directors, without shareholder approval, to issue preferred stock
the terms of which, including voting power, are set by the
Meridian Board; (2) divide the Meridian Board of Directors into
three classes serving staggered three-year terms; (3) restrict
the ability of shareholders to remove directors; (4) require that
shares with at least 80% of total voting power approve mergers
and other similar transactions with a person or entity holding
stock with more than 5% of Meridian's voting power, if the
transaction is not approved, in advance, by the Meridian Board of
Directors; (5) prohibit shareholders' actions without a meeting;
(6) require that shares with at least 80%, or in certain
instances two-thirds, of total voting power approve repeal or
amendment of certain provisions of Meridian's Articles of
Incorporation; (7) require any person who acquires stock of
Meridian with voting power of 25% or more to offer to purchase
for cash all remaining shares of Meridian's voting stock at the
highest price paid by such person for shares of Meridian's voting
stock during the preceding year; (8) eliminate cumulative voting
in elections of directors; (9) require that shares with at least
two-thirds of total voting power approve repeal or amendment of
Meridian's bylaws; and (10) require advance notice of nominations
for the election of directors and the presentation of shareholder
proposals at meetings of shareholders.
The Pennsylvania Business Corporation Law of 1988, as
amended (the "BCL"), contains certain provisions applicable to
Meridian which may have similar effects. These provisions, among
other things: (1) require that, following any acquisition by any
person or group of 20% of a public corporation's voting power,
the remaining shareholders have the right to receive payment for
their shares, in cash, from such person or group in an amount
equal to the "fair value" of the shares, including an increment
representing a proportion of any value payable for control of the
corporation; and (2) prohibit for five years, subject to certain
exceptions, a "business combination" (which includes a merger or
consolidation of the corporation or a sale, lease or exchange of
assets) with a shareholder or group of shareholders beneficially
owning 20% or more of a public corporation's voting power.
In April 1990, Pennsylvania adopted legislation further
amending the BCL. To the extent applicable to Meridian at the
present time, this legislation generally (1) expands the factors
and groups (including shareholders) which the Meridian Board of
Directors can consider in determining whether a certain action is
in the best interests of the corporation; (2) provides that the
Meridian Board of Directors need not consider the interests of
any particular group as dominant or controlling; (3) provides
that Meridian's directors, in order to satisfy the presumption
that they have acted in the best interests of the corporation,
need not satisfy any greater obligation or higher burden of proof
with respect to actions relating to an acquisition or potential
acquisition of control; (4) provides that actions relating to
acquisitions of control that are approved by a majority of
"disinterested directors" are presumed to satisfy the directors'
standard, unless it is proven by clear and convincing evidence
that the directors did not assent to such action in good faith
after reasonable investigation; and (5) provides that the
fiduciary duty of Meridian's directors is solely to the
corporation and may be enforced by the corporation or by a
shareholder in a derivative action, but not by a shareholder
directly. One of the effects of the April 1990 fiduciary duty
statutory provisions may be to make it more difficult for a
shareholder to successfully challenge the actions of the Meridian
Board of Directors in a potential change in control context.
Meridian opted out of coverage by the "disgorgement" and
"control-share acquisition" statutes included in the April 1990
legislation, pursuant to a Bylaw amendment as permitted by the
legislation; Meridian can reverse this action under certain
circumstances.
COMPARISON OF SHAREHOLDER RIGHTS
The following is a summary of material differences
between the rights of holders of Meridian Common Stock and the
rights of holders of Grange Common Stock. The differences in
shareholder rights arise not only from the different statutes
under which Meridian and Grange are chartered, but also from
various provisions of the articles of incorporation and bylaws of
Meridian and Grange and the Meridian Shareholder Rights Plan (as
discussed below).
Directors
Under the National Bank Act and Grange's articles of
association, Grange's directors must also be shareholders of
Grange. No shareholder requirement applies to Meridian
directors.
Shareholders of Meridian are required to submit, in
writing and in advance, any nomination of a candidate for
election as a director. Meridian's bylaws provide that such
nominations generally must be submitted not more than 50 days,
and not less than 30 days, prior to a scheduled meeting for the
election of directors. Grange's bylaws require that the
credentials for nominees for director must be submitted in
writing to the President of Grange and the OCC not more than
50 days, and not less than 14 days, prior to the meeting
scheduled for election of directors; provided, however, that if
less than 21 days notice of such meeting is given to Grange
shareholders, nominations must be submitted to the President of
Grange and the OCC not later than the close of business on the
seventh day following the day on which notice of the meeting was
mailed.
Pursuant to Meridian's articles of incorporation,
Meridian directors may be removed from office without cause by
the affirmative vote of a majority of outstanding voting shares.
Neither Grange's articles of association nor Grange's bylaws
provide for the removal of directors.
The Meridian Board of Directors is divided into three
classes, each serving three-year terms, so that approximately
one-third of the directors of Meridian are elected at each annual
meeting of shareholders of Meridian. Classification of the
Meridian Board of Directors has the effect of decreasing the
number of directors that could be elected in a single year by any
person who seeks to elect its designees to a majority of the
seats on the Meridian Board of Directors and thereby could impede
a change in control of Meridian. Grange's Board of Directors is
not classified. All directors of Grange are elected at each
annual meeting of shareholders of Grange. Therefore, any person
who seeks to elect its designees to a majority of the seats on
the Grange Board of Directors could do so at any annual meeting.
The shareholders of Meridian are not permitted to
cumulate their votes in the election of directors. The
shareholders of Grange are permitted to cumulate their votes in
the election of directors. This means that each shareholder of
Grange is entitled to as many votes as shall equal the number of
shares he or she owns multiplied by the number of directors to be
elected, and may cast all of such votes for a single nominee, or
any two or more nominees for election to the board of directors.
The bylaws of Meridian and Grange each provide for
indemnification of directors, officers and agents for certain
litigation-related liabilities and expenses. Meridian's and
Grange's bylaws each require specifically that the individual's
conduct not have been determined by a court to have constituted
willful misconduct or reckless conduct. In addition, Grange's
bylaws provide that an individual can be indemnified when a
determination (the "Determination") has been made, with the
advice of counsel, by disinterested members of Grange's Board of
Directors or other specified persons, in a written opinion to the
effect that (i) the individual acted or failed to act in good
faith and in a manner he believed to be in, or not opposed to,
the best interest of Grange, and with respect to any criminal
action or proceeding, had no reasonable cause to believe his
conduct was unlawful, (ii) the amount of the proposed
indemnification is reasonable, (iii) the proposed indemnification
is just and proper and can be legally made by Grange under then
existing law, and (iv) the indemnification shall be made by
Grange in an amount stated in the Determination.
Directors of both Grange and Meridian are not
personally liable for any action taken or any failure to take any
action unless the director breached or failed to perform the
duties of his or her office and such breach or failure
constitutes self-dealing, willful misconduct or recklessness;
provided, however, that there is no such elimination of liability
arising under any criminal statute or with respect to the payment
of taxes pursuant to local, state or federal law.
Shareholders' Meetings
Under Meridian's bylaws, no action of shareholders may
be taken without a meeting of shareholders. Similarly, Grange's
shareholders may only take action at a meeting.
Shareholders of Meridian are required to submit to
Meridian, in writing and in advance, any matter desired to be
placed on the agenda of an annual meeting of shareholders. Such
proposal generally must be submitted not more than 50 days, and
not less than 30 days, prior to the meeting. Grange's bylaws do
not contain any comparable requirement.
Special meetings of Meridian shareholders may be called
at any time by any of the following: (1) the Chief Executive
Officer, Chairman or President of Meridian, (2) the Board of
Directors of Meridian or the Executive Committee thereof, or
(3) Meridian shareholders entitled to cast at least 20% of the
votes which all shareholders are entitled to cast at the meeting.
A special meeting of Grange's shareholders may be called by the
Board of Directors or by any three shareholders owning, in the
aggregate, not less than 10% of Grange Common Stock.
Required Shareholder Vote
General
For general corporate action of the shareholders of
Meridian and Grange, the affirmative vote of the majority of
shares present in person or by proxy at the shareholders'
meeting, and entitled to vote on the subject matter, is required
for approval. For fundamental corporate changes of Meridian,
however, such as an amendment of its articles of incorporation, a
merger or consolidation, the sale of all or substantially all of
its assets, or its dissolution, the affirmative vote of
shareholders entitled to cast at least a majority of the votes
which all shareholders are entitled to cast is required to
approve any such transaction. Under Grange's articles of
association, a vote of a majority of Grange's outstanding shares
is required to amend Grange's articles of association under all
circumstances. The National Bank Act requires the affirmative
vote of shareholders entitled to cast at least two-thirds of the
votes all shareholders are entitled to cast to approve any merger
or similar transaction involving Grange.
Supermajority Voting for Certain Mergers
In the absence of prior approval by Meridian's Board of
Directors, Meridian's articles of incorporation requires a vote
of shareholders with at least 80% of Meridian's total voting
power to approve mergers and similar transactions involving a
shareholder holding 5% or more of Meridian's voting power. The
National Bank Act provides that any matter involving the merger
or consolidation of Grange with or into any other business entity
shall require the affirmative vote of the holder of two-thirds of
the outstanding shares of Grange.
Amendment of Articles of Incorporation
Meridian's articles of incorporation contain various
provisions that require a supermajority vote of shareholders to
amend or repeal particular sections of such articles. Amendment
or repeal of the provisions of Meridian's articles of
incorporation relating to noncumulative voting, the
classification of directors, the requirement of holding meetings
for shareholder action, the amendment of bylaws generally, and
the consideration of non-economic factors by Meridian's Board of
Directors if evaluating a tender offer, all require an
affirmative vote of two-thirds of Meridian shareholders, absent
prior Meridian Board approval. In the case of certain other
provisions, including the supermajority vote requirement on a
merger or similar transaction with a 5% or greater Meridian
shareholder, amendment or repeal requires a vote of shareholders
owning 80% of Meridian's outstanding shares or a two-thirds vote
of both Meridian's Board of Directors and its shareholders.
Under Grange's articles of incorporation, a vote of a
majority of Grange's outstanding shares is required to amend
Grange's articles of association in all cases.
Shareholder Rights Plans
Meridian has adopted a shareholder rights plan pursuant
to which holders of Meridian Common Stock are entitled, under
certain circumstances generally involving an accumulation of
Meridian Common Stock, to purchase Meridian Common Stock or
common stock of the potential acquiror at a substantially reduced
price. See "DESCRIPTION OF MERIDIAN CAPITAL
SECURITIES--Shareholder Rights Plan."
Grange does not have a shareholder rights plan.
Amendment of Bylaws
The authority to amend or repeal Meridian's bylaws is
vested in Meridian's Board of Directors, subject always to the
power of the shareholders of Meridian to change such action by
the affirmative vote of shareholders holding at least two-thirds
of the voting power (except that any amendment to the
indemnification provisions set forth in the bylaws requires the
affirmative vote of two-thirds of the Board of Directors or
shareholders holding 80% of the voting power).
The Grange bylaws may be amended or repealed by a
majority vote of the Grange Board of Directors.
Mandatory Tender Offer Provision
Meridian's articles of incorporation provide that any
person or entity acquiring Meridian capital stock with 25% or
more of Meridian's total voting power is required to offer to
purchase, for cash, all shares of Meridian's voting stock, at a
price per share equal to the highest price paid by such person
for each respective class of Meridian's voting stock within the
preceding twelve months. Grange's articles of association
contain no equivalent provision. The Pennsylvania BCL also
provides that following any acquisition by a person or group of
more than 20% of a publicly-held corporation's voting stock, the
remaining shareholders have the right to receive payment, in
cash, for their shares from such person or group of an amount
equal to the "fair value" of their shares.
ADJOURNMENT OF SPECIAL MEETING
In the event there are not sufficient votes to
constitute a quorum or approve the adoption of the Merger
Agreement at the time of the Special Meeting, such proposal could
not be approved unless the Special Meeting is adjourned in order
to permit further solicitation of proxies. In order to allow
proxies that have been received by Grange at the time of the
Special Meeting to be voted for such adjournment, if necessary,
Grange has submitted the question of adjournment under such
circumstances to its shareholders as a separate matter for their
consideration. A majority of the shares represented and voting
at the Special Meeting is required in order to approve any such
adjournment. The Board of Directors of Grange recommends that
shareholders vote their proxies in favor of such adjournment so
that their proxies may be used for such purposes in the event it
should become necessary. Properly executed proxies will be voted
in favor of any such adjournment unless otherwise indicated
thereon. If it is necessary to adjourn the Special Meeting, no
notice of the time and place of the adjourned meeting is required
to be given to shareholders other than an announcement of such
time and place at the Special Meeting.
EXPERTS
The consolidated financial statements of Meridian
incorporated herein by reference to the Annual Report on
Form 10-K of Meridian for the year ended December 31, 1993 and
for each of the years in the three-year period ended December 31,
1993 have been examined by KPMG Peat Marwick, independent
certified public accountants, and have been so incorporated in
reliance on the report of KPMG Peat Marwick also incorporated
herein by reference, given on the authority of such firm as
experts in accounting and auditing.
The consolidated financial statements of Grange as of
December 31, 1993 and for each of the years in the three-year
period ended December 31, 1993 set forth in this Proxy
Statement/Prospectus have been audited by Davidson, Fox & Co.,
independent certified public accountants, as set forth in its
report appearing elsewhere herein, and are included in reliance
upon such report given upon the authority of such firm as experts
in accounting and auditing.
LEGAL MATTERS
The validity of the Meridian Common Stock to be issued
in the Merger, certain federal income tax consequences of the
Merger, and certain other legal matters relating to the Merger
are being passed upon for Meridian by the law firm of Stevens &
Lee, Reading, Pennsylvania, special counsel to Meridian.
Sidney D. Kline, Jr., a director of Meridian, is a principal of
the firm of Stevens & Lee. Certain attorneys at Stevens & Lee
and members of their immediate families own or have investment
discretion with respect to an aggregate of less than 50,000
shares of Meridian Common Stock.
Certain legal matters in connection with the Merger are
being passed upon for Grange by the law firm of Rhoads & Sinon,
Harrisburg, Pennsylvania, special counsel to Grange.
<PAGE>
INDEX TO GRANGE FINANCIAL STATEMENTS
Page No.
Independent Auditor's Report . . . . . . . . . . . . . . . F-2
Balance Sheets, December 31, 1993 and 1992 . . . . . . . . F-3
Statements of Income for the Years Ended
December 31, 1993, 1992 and 1991 . . . . . . . . . . . . F-5
Statements of Shareholders' Equity for the Years
Ended December 31, 1993, 1992 and 1991 . . . . . . . . . F-6
Statements of Cash Flows for the Years Ended
December 31, 1993, 1992 and 1991 . . . . . . . . . . . . F-7
Notes to Financial Statements . . . . . . . . . . . . . . F-9
<PAGE>
INDEPENDENT AUDITOR'S REPORT
To the Board of Directors of
The Grange National Bank of Susquehanna County
New Milford, Pennsylvania
We have audited the accompanying balance sheets of The
Grange National Bank of Susquehanna County as of December 31,
1993 and 1992, and the related statements of income, changes in
shareholders' equity, and cash flows for the years ended
December 31, 1993, 1992 and 1991. These financial statements are
the responsibility of the Bank'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 The Grange National Bank as of December 31, 1993 and 1992, and
the results of its operations and its cash flows for the years
ended December 31, 1993, 1992 and 1991 in conformity with
generally accepted accounting principles.
Binghamton, New York /s/Davidson, Fox & Company
January 31, 1994<PAGE>
THE GRANGE NATIONAL BANK OF SUSQUEHANNA COUNTY
BALANCE SHEETS
DECEMBER 31, 1993 AND 1992
<TABLE>
<CAPTION> ASSETS
1993 1992
<S> <C> <C>
Cash and due from banks (NOTE 2) $ 1,015,344 $ 926,116
Interest-bearing deposits in banks 3,204,252 3,461,717
Investment securities (approximate
market value of $7,504,386 and
$7,632,573) (NOTES 1 and 3) 7,425,930 7,548,703
Federal funds sold 1,150,000 1,350,000
Loans, less allowance for loan losses
of $135,000 and $142,617 (NOTES 1,
4, 8 and 11) 15,234,316 16,434,142
Property and equipment, net
(NOTES 1 and 5) 242,204 285,472
Accrued interest receivable 195,749 233,203
Deferred income taxes (NOTES 1
and 6) -- 12,873
Other real estate -- 121,106
Prepaid pension costs (NOTE 7) 26,577 --
Other assets 24,996 27,319
$28,519,368 $30,400,651
<CAPTION>
LIABILITIES AND SHAREHOLDERS' EQUITY
<S> <C> <C>
LIABILITIES:
Deposits
Demand $ 6,134,518 $ 6,424,481
Savings 7,482,257 7,091,795
Time (including approximately
$1,916,000 and $3,713,000 of
accounts exceeding $100,000) 11,643,220 13,885,171
Total deposits 25,259,995 27,401,447
Accrued interest payable 133,715 180,108
Accounts payable 25,535 52,648
Dividends payable 15,000 15,000
Accrued income taxes 68,666 --
Deferred income taxes (NOTES 1
and 6) 4,465 --
Deferred origination fees 1,476 4,016
Other liabilities 13,245 2,447
Total liabilities 25,522,097 27,655,666
SHAREHOLDERS' EQUITY:
Common stock, $8.00 par value
shares authorized, issued and
outstanding 200,000 200,000
Surplus 150,000 150,000
Undivided profits (NOTES 1
and 9) 2,647,271 2,394,985
Total shareholders' equity 2,997,271 2,744,985
$28,519,368 $30,400,651
</TABLE>
See accompanying notes
<PAGE>
THE GRANGE NATIONAL BANK OF SUSQUEHANNA COUNTY
STATEMENTS OF INCOME
YEARS ENDED DECEMBER 31, 1993, 1992 AND 1991
<TABLE>
<CAPTION>
1993 1992 1991
<S> <C> <C> <C>
INTEREST INCOME:
Interest and fees on loans $1,644,843 $1,716,714 $1,624,654
Interest on investment
securities:
U.S. Treasury and government
agencies 249,388 239,951 160,946
Obligations of states and
political subdivisions 89,931 114,602 132,452
Corporate debt securities 49,086 128,856 212,434
Interest on federal funds sold 21,675 27,096 51,395
Interest on deposits in banks 180,579 226,737 182,416
2,235,502 2,453,956 2,364,297
Interest expense on deposits 986,046 1,287,894 1,411,993
Net interest income 1,249,456 1,166,062 952,304
OTHER INCOME:
Gain (loss) from securities
sold and called -- (20,066) 2,000
Gain on sale of fixed asset -- 2,500 --
Service fees 92,183 131,765 111,808
Insurance premium rebates 3,660 3,529 3,232
Other real estate 15,600 -- 27,984
Total other income 111,443 117,728 145,024
1,360,899 1,283,790 1,097,328
OTHER EXPENSES:
Salaries 299,164 314,927 280,310
Pension and other employee
benefits (NOTE 7) 26,818 50,481 53,882
Other operating expenses 576,164 584,648 460,692
Total other expenses 902,146 950,056 794,884
Income before income taxes 458,753 333,734 302,444
INCOME TAXES (NOTES 1 AND 6) 156,689 66,535 56,099
INCOME BEFORE CHANGE
IN ACCOUNTING PRINCIPLE 302,064 267,199 246,345
CHANGE IN ACCOUNTING PRINCIPLE
Cumulative effect to
December 31, 1992
of application of Financial
Accounting Standards No. 109
"Accounting for Income Taxes"
(NOTE 12) 10,222 -- --
NET INCOME $ 312,286 $ 267,199 $ 246,345
Earnings per share (NOTE 1) $ 12.49 $ 10.69 $ 9.85
</TABLE>
See accompanying notes
<PAGE>
THE GRANGE NATIONAL BANK OF SUSQUEHANNA COUNTY
STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
YEARS ENDED DECEMBER 31, 1993, 1992 AND 1991
<TABLE>
<CAPTION>
Common Undivided
Stock Surplus Profits Total
<S> <C> <C> <C> <C>
December 31, 1990 $ 25,000 $150,000 $2,176,441 $2,351,441
Net income for the year 246,345 246,345
Allocation of retained
earnings to increase
par value of common
stock 175,000 (175,000)
Cash Dividends
(2.40 per share) ________ ________ (60,000) (60,000)
BALANCE AT
DECEMBER 31, 1991 $200,000 $150,000 $2,187,786 $2,537,786
Net income for the year -- -- 267,199 267,199
Cash dividends ($2.40
per share) -- -- (60,000) (60,000)
BALANCE AT
DECEMBER 31, 1992 200,000 150,000 2,394,985 2,744,985
Net income for the year -- -- 312,286 312,286
Cash dividends ($2.40
per share) -- -- (60,000) (60,000)
BALANCE AT
DECEMBER 31, 1993 $200,000 $150,000 $2,647,271 $2,997,271
/TABLE
<PAGE>
THE GRANGE NATIONAL BANK OF SUSQUEHANNA COUNTY
STATEMENTS OF CASH FLOWS
YEARS ENDED DECEMBER 31, 1993 AND 1992
<TABLE>
<CAPTION>
1993 1992 1991
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 312,286 $ 267,199 $ 246,345
Noncash items included in
net income:
Depreciation 45,519 40,362 36,939
Amortization of premiums less
accretion of discounts of
Investment Securities 24,748 21,350 8,894
Deferred income taxes 27,560 17,466 (966)
Provision for loan losses 2,649 59,000 25,000
Decrease in deferred origination fees ( 2,540) ( 15,165) (17,868)
(Gain) loss from securities sold and called -- 20,066 (2,000)
(Gain) on sale of fixed assets -- ( 2,500) --
(Increase) decrease in interest receivables 37,454 ( 2,956) (6,691)
(Gain) on sale of other real estate ( 15,600) -- (27,984)
(Decrease) in interest payable ( 46,393) ( 49,095) 11,529
Decrease in other assets 2,323 1,012 52,393
(Decrease) in other liabilities ( 16,315) ( 35,657) 12,758
Increase in accrued taxes 68,666 -- --
(Increase) in prepaid pension costs ( 26,577) -- --
Cumulative effect of change in accounting
principle ( 10,222) -- --
NET CASH PROVIDED BY
OPERATING ACTIVITIES 403,558 321,082 338,349
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from sales, maturities and
principal payments on
Investment securities
and interest bearing
deposits in banks 4,473,912 5,620,435 5,261,624
Purchases:
Purchases on Investment
Securities and interest bearing
deposits in banks 4,118,422 (6,867,175) (6,906,782)
Net (Increase) decrease in short term loans ( 3,300) 5,692 5,393
Net (Increase) decrease in federal funds
sold 200,000 ( 175,000) (850,000)
Net (Increase) decrease in loans
originated (NOTE 1) 1,200,476 (1,823,318) (290,707)
(Recorded increase to) or decrease in
proceeds from sale of other
real estate 136,707 ( 121,106) 71,329
Purchase of fixed assets ( 2,251) ( 48,844) (17,627)
Proceeds from sale of fixed assets -- 2,500 --
NET CASH PROVIDED (USED) BY
INVESTING ACTIVITIES 1,887,122 (3,406,816) (2,726,770)
</TABLE>
See accompanying notes
<PAGE>
THE GRANGE NATIONAL BANK OF SUSQUEHANNA COUNTY
STATEMENTS OF CASH FLOW
YEARS ENDED DECEMBER 31, 1993, 1992 AND 1991
<TABLE>
<CAPTION>
1993 1992 1991
<S> <C> <C> <C>
CASH FLOWS FROM FINANCING ACTIVITIES:
Net increase in demand deposits and
savings accounts 100,499 4,383,759 1,462,291
Net increase (decrease) in
certificates of deposit (2,241,951) (1,367,079) 1,215,737
Reduction in capital lease obligation -- ( 5,343) (12,823)
Cash dividends ( 60,000) ( 60,000) (60,000)
NET CASH PROVIDED (USED) BY
FINANCING ACTIVITIES (2,201,452) 2,951,337 2,605,205
NET INCREASE (DECREASE) IN CASH AND
CASH EQUIVALENTS 89,228 ( 134,397) 216,784
CASH AND CASH EQUIVALENTS, beginning 926,116 1,060,513 843,729
CASH AND CASH EQUIVALENTS, ending $ 1,015,344 $ 926,116 $1,060,513
SUPPLEMENTAL DISCLOSURES:
</TABLE>
Cash received and paid; interest and income taxes for 1993, 1992
and 1991 were as follows:
<TABLE>
<CAPTION>
1993 1992 1991
<S> <C> <C> <C>
Interest received $2,272,683 $2,461,153 $2,360,949
Interest paid $1,032,439 $1,336,988 $1,400,464
Income taxes paid
(received) $ 83,693 $ 98,218 $ (2,849)
/TABLE
<PAGE>
THE GRANGE NATIONAL BANK OF SUSQUEHANNA COUNTY
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1993, 1992 AND 1991
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Business Activity
The Bank is chartered as a national bank and was
incorporated in 1907. The Bank provides a full range of banking
services for businesses and individuals.
Investment Securities
Investment securities are stated at cost, adjusted for
amortization of premiums and accretion of discounts which are
recognized as adjustments to interest income. Gains or losses on
disposition are based on the net proceeds and the adjusted
carrying amount of the securities sold using the specific
identification method. All securities are held for investment
purposes. Purchases and sales are recorded as of the settlement
date.
Loans and allowance for loan losses
Loans are stated at the amount of unpaid principal, reduced
by unearned discount and an allowance for loan losses. Unearned
discount on installment loans is recognized as income over the
terms of the loans by the sum-of-the-years digits and simple
interest methods. Interest on other loans is calculated by using
the simple interest method on daily balances of the principal
amount outstanding. The allowance for loan losses is established
through a provision for loan losses charged to expenses. Loans
are charged against the allowance for loan losses when management
believes that the collectibility of the principal is unlikely.
The allowance is an amount that management believes will be
adequate to absorb possible losses on existing evaluation of
collectibility of loans and consideration of prior loan loss
experience. The evaluations take into consideration such factors
as changes in the nature and volume of the loan portfolio,
overall portfolio quality, review of specific problem loans, and
current economic conditions that may affect the borrowers'
ability to pay. Accrual of interest is discontinued on a loan
when management believes, after considering economic and business
conditions and collection efforts, that the borrowers' financial
condition is such that collection of interest is doubtful.
Property and equipment
Property and equipment are carried at cost. Depreciation of
property and equipment is provided using the straight-line and
accelerated methods over the following estimated useful lives:
Years
Buildings and improvements 10 - 31.5
Furniture, fixtures and equipment 5 - 12
Vehicles 5
Expenditures for major renewals and betterments that extend
the useful lives of property and equipment are capitalized.
Expenditures for maintenance and repairs are charged to expenses
as incurred.
Income taxes
Deferred income taxes are provided for based upon the
difference in earnings determined for tax and financial reporting
purposes. These differences result primarily from:
(a) Income reported on the cash basis for tax purposes and
on the accrual basis for accounting purposes.
(b) Accretion of discount on bonds and U.S. Treasury bills
recorded currently for accounting purposes but
recognized for tax purposes upon maturity or sale.
Common stock/undivided profits
During 1991, the Bank initiated a plan to open a branch in
the Town of Harford, Pennsylvania. In order to obtain regulatory
approval, the Bank was required by the Office of the Comptroller
of the Currency (OCC) to increase the par value of its common
stock from $1.00 per share to $8.00 per share. Accordingly, the
Bank reallocated a portion of undivided profits to common stock
in the amount of $175,000.
Earnings per share
Earnings per share are calculated on the basis of the
weighted average number of shares outstanding.
Fair value of financial instruments
Cash and short-term investments are reflected at their book
values which approximate fair value due to the short maturity of
those instruments. The fair values of long-term investments are
estimated based on quoted market prices for those or similar
investments. For other investments for which there are no quoted
prices, a reasonable estimate of fair value could not be made
without incurring excessive costs. These investments are shown
at amortized cost.
NOTE 2 - CASH AND DUE FROM BANKS
Cash and due from banks includes balances reserve to meet
regulatory requirements of the Federal Reserve Board. Account
balances maintained with the Federal Reserve Bank and with other
correspondent banks amounted to $830,723 and $743,050 at
December 31, 1993 and 1992, respectively.
NOTE 3 - INVESTMENT SECURITIES
The amortized cost and estimated market values of investment
in securities are as follows:
<TABLE>
<CAPTION>
December 31, 1993
Gross Gross Estimated
Amortized Unrealized Unrealized Market
Cost Gains Losses Value
<S> <C> <C> <C> <C>
U.S. Treasury
securities and
obligations of U.S.
government corporations
and agencies $4,867,158 $ 54,387 $ -- $4,921,545
Obligations of states and
political subdivisions 1,856,175 12,038 -- 1,868,213
Corporate debt securities 692,097 12,031 -- 704,128
Totals for debt securities 7,415,430 78,456 -- 7,493,886
Federal Reserve Bank stock 10,500 -- -- 10,500
$7,425,930 $ 78,456 $ -- $7,504,386
/TABLE
<PAGE>
<TABLE>
<CAPTION>
December 31, 1992
Gross Gross Estimated
Amortized Unrealized Unrealized Market
Cost Gains Losses Value
<S> <C> <C> <C> <C>
U.S. Treasury
securities and
obligations of U.S.
government corporations
and agencies $4,707,861 $ 64,367 $ -- $4,772,228
Obligations of states and
political subdivisions 1,528,176 11,196 -- 1,539,372
Corporate debt securities 1,302,166 8,307 -- 1,310,473
Totals for debt securities 7,538,203 83,870 -- 7,622,073
Federal Reserve Bank stock 10,500 -- -- 10,500
$7,548,703 $ 83,870 $ -- $7,632,573
</TABLE>
The amortized cost and estimated market value of debt
securities for the year ended December 31, 1993, by contractual
maturity, are shown below. Expected maturities will differ from
contractual maturities because borrowers may have the right to
call or prepay obligations with or without call or prepayment
penalties.
<TABLE>
<CAPTION>
December 31, 1993
Amortized Estimated
Cost Market Value
<S> <C> <C>
Due in one year or less $2,674,877 $2,701,707
Due after one year through
five years 4,145,970 4,188,597
Due after five years through
ten years 300,000 300,000
Due after ten years 294,583 303,582
$7,415,430 $7,493,886
</TABLE>
Investment securities with a carrying amount of $1,289,840
at December 31, 1993 are pledged to secure public deposits.
<PAGE>
NOTE 4 - LOANS
Major classifications of loans are as follows:
<TABLE>
<CAPTION>
1993 1992
<S> <C> <C>
Commercial $ 3,364,360 $ 2,696,491
Mortgage 10,380,096 12,007,291
Installment 1,662,358 1,986,827
Redi Reserve 76,431 73,131
15,483,245 16,763,740
Unearned discount ( 113,929) ( 186,981)
15,369,316 16,576,759
Allowance for loan
losses ( 135,000) ( 142,617)
Loans, net $15,234,316 $16,434,142
</TABLE>
There were no loans on which the accrual of interest has
been discontinued or reduced for 1993, 1992 or 1991.
Changes in the allowance for loan losses are as follows:
<TABLE>
<CAPTION>
1993 1992
<S> <C> <C>
Balance, beginning of year $ 142,617 $ 102,516
Loans charged off ( 15,470) ( 26,500)
Recoveries 5,204 7,601
Provision for loan
losses 2,649 59,000
Balance, end of year $ 135,000 $ 142,617
</TABLE>
NOTE 5 - PROPERTY AND EQUIPMENT
Major classes of property and equipment consisted of the
following:
<TABLE>
<CAPTION>
1993 1992
<S> <C> <C>
Land $ 13,500 $ 13,500
Buildings and improvements 528,111 528,111
Furniture, fixtures and
equipment 240,009 237,759
Land improvements 21,670 21,670
Vehicles 8,029 8,029
811,319 809,069
Less accumulated depreciation 569,115 523,597
$ 242,204 $ 285,472
</TABLE>
Depreciation expense amounted to $45,519 in 1993, $40,362 in
1992, and $36,939 in 1991.
<PAGE>
NOTE 6 - INCOME TAXES
The effective tax rate on income before taxes was different
than the federal statutory tax rates. The following summary
reconciles taxes at the federal statutory rates with the actual
taxes on income:
<TABLE>
<CAPTION>
1993 1992 1991
<S> <C> <C> <C>
Income taxes at statutory rates $ 155,976 $ 113,406 $ 101,203
Increase (decrease) in taxes
resulting from:
Tax exempt investment income ( 30,270) ( 45,909) ( 53,050)
Non-deductible interest income 3,985 6,708 7,946
Non-deductible legal expense 23,748 -- --
Other 3,250 ( 7,670) --
Total taxes on income $ 156,689 $ 66,535 $ 56,099
</TABLE>
Deferred taxes result from temporary differences in the
recognition of income and expense for tax and financial reporting
purposes. Income is reported on the cash basis for tax purposes
and on the accrual basis for financial reporting purposes.
Deferred tax adjustments resulting from this difference amounted
to $27,560 in 1993, $(17,466) in 1992, and $966 in 1991 (See
Note 12).
NOTE 7 - EMPLOYEE BENEFIT PLAN
The Bank sponsors a non-contributory defined benefit pension
plan.
The Plan covers substantially all full-time employees who
have attained age 21 and have completed 12 months of service.
Benefits vest after 5 years of service and are based upon average
compensation and years of credited service.
The Plan is normally funded on a current basis.
Contributions were made for 1993, 1992 and 1991 in the amounts of
$62,025 and $30,578 and $32,726, respectively.
Plan assets consist primarily of equity securities, bonds,
governmental securities and cash equivalents.
The following table sets forth the Plan's funded status and
amounts recognized in the Bank's financial statements at
December 31, 1993, 1992 and 1991:
<TABLE>
<CAPTION>
1993 1992 1991
<S> <C> <C> <C>
Fair value of plan assets $ 523,408 $ 417,692 $ 378,520
Actuarial present value of benefit
obligations:
Vested 432,873 367,730 334,602
Nonvested 2,777 293 910
Accumulated benefit
obligation 435,650 368,023 335,512
Additional benefits based
on estimated future
compensation increases 124,926 121,813 105,014
Projected benefit
obligation (estimated) 560,576 489,836 440,526
Projected benefit obligation in
excess of plan assets ( 37,168) ( 72,144) ( 62,006)
Unrecognized net asset at date
of adoption being recognized
over 15 years 34,762 36,935 39,108
Unrecognized gain 28,983 35,209 22,898
Prepaid pension cost $ 26,577 $ -- $ --
<CAPTION>
1993 1992 1991
<S> <C> <C> <C>
Net pension expense for 1993 and 1992
included the following components:
Service cost of benefits
earned during the year $ 28,354 $ 22,998 $ 25,286
Interest cost on projected
benefit obligation 39,770 34,858 28,823
Actual return on plan assets (79,733) (79,733) (88,799)
Gain (Loss) deferred 14,851 (15,065) 65,917
Amortization of transition
asset and gain 2,206 2,173 2,773
Net pension expense $ 5,448 $ 26,578 $ 34,000
</TABLE>
The assumptions used in the determination of net pension income
and funded status were:
Projected benefit obligation discount rate 7.50%
Future compensation increases 6.00%
Expected long-term rate of return 7.50%
Inflation 5.00%
NOTE 8 - RELATED PARTY TRANSACTIONS
Directors, executive officers and their affiliated companies
were customers of and had transactions with the Bank in the
ordinary course of business during 1993 and 1992. All loans and
commitments included in such transactions were made on
substantially the same terms, including interest rate and
collateral, as those prevailing at the same time for comparable
transactions with non-related persons and did not involve more
than normal risk of collectibility or present other unfavorable
features. as of December 31, 1993 and 1992, loans to related
parties amounted to approximately $514,000 and $531,000,
respectively.
NOTE 9 - COMMITMENTS, CONTINGENT LIABILITIES AND RESTRICTIONS
Litigation
During 1992, the Bank settled a pending loan collateral
lawsuit in full for $6,300.
In another case, unrelated to the above matter, the Bank has
been named as a defendant in a suit filed by a former employee.
The complaint alleges discriminatory termination and damages in
excess of $50,000. The Bank has successfully defended its
position through two appeals by the complainant.
Credit
In the normal course of business, there are various
commitments to extend credit which are properly not recorded on
the balance sheet. These commitments represent contractual
agreements to make loans and revolving credits available.
Substantially all of these commitments are dependent upon
customers maintaining specific credit standards. These
commitments amounted to approximately $395,000 and $498,000 in
1993 and 1992, respectively.
Dividend restrictions
The Bank is subject to legal limitations on the amount of
dividends that can be paid to its stockholders. Undivided
profits in the amount of approximately $629,000 are free of this
limitation as of December 31, 1993.
Service contract
The Bank entered into a contract with BISYS, Inc. in 1990
for data processing services. The contract term was for 3 years
and expired December 31, 1993. The contract called for minimum
payments in the amount of $2,250 per month. The Bank currently
has a contract with BISYS, Inc. on a month by month basis.
Employment contract
The Bank has a contract with an officer, extending through
1994, which provides the payment of deferred compensation based
on past employment service. The contract provides that dismissal
other than for cause would terminate the agreement. In addition,
the contract includes a provision that a change in ownership of
more than 40% of the Bank's shares could, at the option of the
employee, terminate the contract. If the contract were
terminated under either of the preceding provisions, the employee
would be entitled to cash severance payments.
NOTE 10 - OPERATING LEASES
The Bank rents various equipment under leases, with terms
ranging from two to three years. The Bank is responsible for
insurance and maintenance expenses related to the leased
property. It is expected that these agreements will be renewed
or replaced in the norma course of business. Rent expense
relating to these leases was $5,744, $4,766 and $4,566 for 1993,
1992 and 1991, respectively. Rent expense relating to the
Harford branch is included in Harford branch expenses rather than
equipment rental.
The Bank also rents operating facilities in Harford,
Pennsylvania under a ground lease and a temporary mini-bank
lease. The ground lease expired in September 1993 with the Bank
renewing the lease for an additional two years. Rent expense on
the ground lease amounted to $2,400 in 1993 and 1992, and $600 in
1991. The temporary mini-bank is leased on a month to month
basis with the Bank having the option to cancel the lease upon
prior written notice of thirty days. Rent expense on the mini-
bank amounted to $14,400 in 1993 and 1992, and $3,600 in 1991.
These rentals are included in Harford branch expenses.
Minimum future rental payments for the next five years are
as follows:
Year Ended
December 31
1994 $2,810
1995 3,000
Thereafter --
$5,810
NOTE 11 - OFF-BALANCE-SHEET RISK
The Bank grants commercial, residential, and personal loans
to customers from Northeastern Pennsylvania and the Southern Tier
of New York. This area, however, is experiencing minimal, if
any, growth. Although the Bank has a diversified loan portfolio,
a substantial portion of its debtors' ability to honor their
loans is dependent upon the economic condition of the businesses
in the region. The major businesses of this area are defense
related, which continues to be exposed to cuts in the federal
budget.
Unsecured loans amounted to approximately $487,000 and
$602,000 in 1993 and 1992, respectively. The Bank has a
significant residential mortgage loan portfolio including loans
secured by second homes. The outstanding balances of such loans
amounts to approximately $2,335,000 and $2,500,000 in 1993 and
1992, respectively. The Bank also has a significant commercial
mortgage portfolio including loans secured by second homes. The
outstanding balances of such amounted to approximately $2,381,000
and $1,737,000 in 1993 and 1992, respectively. The regional real
estate market has declined in activity and generally values have
remained relatively constant.
NOTE 12 - CHANGE IN ACCOUNTING PRINCIPLE
Effective January 1, 1993, The Grange National Bank adopted
States of Financing Accounting Standards No. 109, Accounting for
Income Taxes. The cumulative effect of the change in accounting
principle is included in determining net income for 1993.
Financial statements for prior years have not been restated.
The following schedule summarizes the Bank's deferred tax
assets and liabilities as of December 31, 1993.
<PAGE>
Deferred tax assets have been recorded as follows (no
valuation reserve has been provided):
Accounts payable not recognized for tax purposes $ 8,682
Accrued interest receivable not recognized for tax
purposes 45,487
Deferred origination fees recognized for tax purposes 501
Book reserve for loan losses in excess tax reserve 19,443
Gross deferred tax assets $74,113
Deferred tax liabilities have been recorded for the
following items:
Interest receivable not recognized for tax purposes $53,738
Prepaid expenditures deducted for tax purposes 8,259
Accumulated depreciation for tax purposes in excess
of amount for accounting purposes 4,530
Accretion of bond discounts 3,015
Prepaid pension costs 9,036
Gross deferred tax liabilities $78,578
NOTE 13 - PENDING MERGER
In calendar year 1994 the Bank is expected to merge with
Meridian Bank. The Bank had initially intended to merge with
Commonwealth Bank, which was subsequently acquired by Meridian.
The Board of Director of The Grange National Bank has approved
the merger. A special shareholders' meeting is expected to be
held early in 1994 in order to vote on the proposed merger.
<PAGE>
INDEPENDENT AUDITOR'S REPORT
ON SUPPLEMENTARY INFORMATION
Our examinations of the basic financial statements were made
primarily to form an opinion on such financial statements taken
as a whole. The schedule of operating expenses is presented for
the purpose of additional analysis and, although not required for
a fair presentation of financial position, results of operations,
and cash flows, was subjected to the audit procedures applied in
the examinations of the basic financial statements. In our
opinion, the supplementary information is fairly presented in all
material respects in relation to the basic financial statements
taken as a whole.
Binghamton, New York /s/Davidson, Fox & Company
January 31, 1994<PAGE>
THE GRANGE NATIONAL BANK OF SUSQUEHANNA COUNTY
OPERATING EXPENSES
YEARS ENDED DECEMBER 31, 1993, 1992 AND 1991
<TABLE>
<CAPTION>
1993 1992 1991
<S> <C> <C> <C>
OPERATING EXPENSES:
Computer and courier services $ 83,732 $ 87,171 $ 61,722
Payroll taxes 29,920 25,125 23,446
Depreciation 45,519 40,362 36,939
Bank examination and accountant
fees 53,269 38,882 34,840
Repairs and maintenance 12,345 13,323 11,318
Office expenses 33,487 31,121 34,157
PA shares tax 25,754 17,675 28,630
Sales tax expense 864 792 --
Insurance 78,851 74,476 64,535
Dues and subscriptions 4,262 4,043 2,897
Utilities 11,465 10,836 8,392
Real estate taxes 6,223 5,933 5,550
Advertising 5,754 5,586 5,231
Telephone 4,442 5,827 3,980
Legal fees 86,601 45,145 19,532
Postage and shipping 8,771 9,186 8,127
Directors' fees 11,325 10,850 10,835
Other real estate expense 5,064 7,862 11,454
Equipment rental 5,744 4,766 4,966
Education and meetings 7,046 9,020 8,898
Other interest 13 2,047 4,820
Provision for loan losses 2,649 59,000 25,000
Auto expense 685 2,577 1,174
Maintenance contracts 17,347 24,499 14,251
Harford branch expenses 16,288 21,869 11,732
Other 18,744 26,675 18,266
Total operating expenses $576,164 $584,648 $460,692
</TABLE>
<PAGE>
ANNEX A
JOINT PLAN OF MERGER,
DATED AS OF APRIL 26, 1993,
AS AMENDED
<PAGE>
JOINT PLAN OF MERGER
Between
GRANGE NATIONAL BANK OF SUSQUEHANNA COUNTY
and
COMMONWEALTH BANK
Joined in By
COMMONWEALTH BANCSHARES CORPORATION
Dated as of
April 26, 1993
<PAGE>
TABLE OF CONTENTS
RECITALS
1. The Merger
1.1 Merger of GNB
1.2 Articles and Bylaws
1.3 Directors and Officers
1.4 Conversion of GNB Shares
1.5 Surrender of Certificates
1.6 Failure to Surrender Certificates
1.7 Treasury Stock
1.8 Transfer After Effective Date
1.9 Surviving Bank Shares
1.10 Closing and Effective Date
2. Conditions to Obligations of the Surviving Bank and its
Parent
2.1 Corporate Action
2.2 Governmental Approvals
2.3 Proxy/Prospectus
2.4 State Securities Laws
2.5 Proceedings
2.6 Tax Treatment
2.7 Dissenting Shares
2.8 Representations and Warranties
2.9 Performance of Obligations
2.10 Officer's Certificate
2.11 Legal Opinion
2.12 Accounting Treatment
2.13 Affiliates' Letters
2.14 Employment Agreement
3. Conditions to Obligations of GNB
3.1 Conditions Specified Above
3.2 Representations and Warranties
3.3 Performance of Obligations
3.4 Officers' Certificate
3.5 Legal Opinion
3.6 Financial Adviser's Opinion
3.7 Tax Treatment
4. Certain Covenants
4.1 Applications with Government Agencies
4.2 GNB Meeting
4.3 Proxy/Prospectus
4.4 Affiliates
4.5 Press Releases
4.6 Best Efforts to Complete Merger
4.7 Filings
5. Conduct of Business Prior to Effective Date
5.1 Ordinary Course
5.2 Notice of Solicitations
5.3 Negative Covenants
5.4 Access to Information
5.5 Disclosure Letter
6. Representations and Warranties of GNB
6.1 Recitals
6.2 Operations
6.3 Execution and Delivery of Plan
6.4 Absence of Violation
6.5 Compliance with Laws
6.6 Financial Statements
6.7 Absence of Certain Events
6.8 Proceedings
6.9 Commitments and Arrangements
6.10 Proxy/Prospectus
6.11 Other Reports and Returns
6.12 Related Party Transactions
6.13 Properties
6.14 Employee Benefit Plans
6.15 Representations Concerning Tax-Free Reorganization
6.16 Full Disclosure
7. Representations and Warranties of Surviving Bank
7.1 Recitals
7.2 Operations
7.3 Exchange Common Shares
7.4 Execution and Delivery of Plan
7.5 Absence of Violation
7.6 Compliance with Laws
7.7 SEC Reports
7.8 Adverse Change
7.9 Proceedings
7.10 Proxy/Prospectus
8. Abandonment and Termination
8.1 Failure to Satisfy Conditions
8.2 Other Termination
8.3 Liability
9. Expenses
10. Brokerage Commissions
11. Miscellaneous
11.1 Amendment and Waiver
11.2 Survival
11.3 Notices
11.4 Entire Agreement
11.5 Confidentiality
11.6 Headings
11.7 Governing Law
11.8 Counterparts<PAGE>
JOINT PLAN OF MERGER
BETWEEN
THE GRANGE NATIONAL BANK OF SUSQUEHANNA COUNTY
AND
COMMONWEALTH BANK
JOINED IN BY
COMMONWEALTH BANCSHARES CORPORATION
Dated as of April 26, 1993
JOINT PLAN OF MERGER (the "Plan") dated as of April 26,
1993, adopted and made by and between THE GRANGE NATIONAL BANK OF
SUSQUEHANNA COUNTY ("GNB") and COMMONWEALTH BANK ("Commonwealth
Bank") and joined in by COMMONWEALTH BANCSHARES CORPORATION
("Commonwealth").
RECITALS
GNB is a national banking association duly organized,
validly existing and in good standing under the laws of the
United States with its principal place of business at 220 Main
Street, New Milford, Pennsylvania. The entire authorized capital
stock of GNB consists of 25,000 shares of common stock of the par
value of $8.00 each. Twenty-five thousand common shares of GNB
are currently issued and outstanding, all of which have been duly
authorized and validly issued and are fully paid and non-
assessable, and no shares of which are held by GNB in its
treasury. GNB has no commitments to issue or sell any of its
shares or any securities or obligations convertible into or
exchangeable for, or giving any person any right to subscribe for
or acquire from GNB, any of its shares and no securities or
obligations representing such rights are outstanding.
Commonwealth Bank is a bank duly organized, validly
existing and in good standing under the laws of the Commonwealth
of Pennsylvania with its principal office at 101 West Third
Street, Williamsport, Pennsylvania. The entire authorized
capital stock of Commonwealth Bank consists of 1,500,000 common
shares of the par value of $10 each. All issued and outstanding
common shares of Commonwealth Bank are owned by Commonwealth.
Commonwealth is a corporation duly organized, validly
existing and in good standing under the laws of the Commonwealth
of Pennsylvania and is a bank holding company within the meaning
of the Bank Holding Company Act of 1956. Commonwealth has its
principal office at 101 West Third Street, Williamsport,
Pennsylvania. The entire authorized capital stock of
Commonwealth consists of 10,000,000 shares of common stock of the
par value of $3.50 each and 2,500,000 of series preferred shares
of the par value of $.10 each. Commonwealth has outstanding one
preferred share purchase right for each common share outstanding.
Such purchase rights are also exercisable, under certain
circumstances, for common shares of Commonwealth.
Commonwealth and Meridian Bancorp, Inc., a Pennsylvania
corporation, having its principal place of business at 35 North
Sixth Street, Reading, Pennsylvania 19603 ("Meridian"), and
Commonwealth Bank and Meridian Bank, a Pennsylvania banking
corporation and a wholly.owned subsidiary of Meridian, having its
principal place of business at 35 North Sixth Street, Reading,
Pennsylvania 19603 ("Meridian Bank"), are parties to an Agreement
and Plan of Merger dated as of March 30, 1993 (the
"Meridian/Commonwealth Agreement") pursuant to which it is
proposed that Commonwealth would merge with and into Meridian,
with Meridian surviving such merger (the "Meridian/Commonwealth
Merger"), and Commonwealth Bank would merge with and into
Meridian Bank, with Meridian Bank surviving such merger (the
"Meridian Bank/Commonwealth Bank Merger") and to an Option
Agreement pursuant to which Commonwealth has agreed under certain
circumstances to issue to Meridian up to 19.9% of the then issued
and outstanding common stock of Commonwealth.
In a separate Supplemental Agreement to this Plan dated as
of the date hereof, by and among Meridian, Meridian Bank,
Commonwealth, Commonwealth Bank and GNB (the "Supplemental
Agreement"), the parties hereto have supplemented their agreement
set forth herein whereby (a) upon the effectiveness of the
Meridian/Commonwealth Merger, Meridian shall acquire all rights
and assume all obligations of Commonwealth under this Plan upon
the terms set forth herein and in the Supplemental Agreement, and
(b) upon the effectiveness of the Meridian Bank/Commonwealth Bank
Merger, Meridian Bank shall acquire all rights and assume all
obligations of Commonwealth Bank under this Plan upon the terms
set forth herein and in the Supplemental Agreement.
This Plan provides for the merger (the "Merger") either
(a) of GNB with and into Commonwealth Bank or, if the Meridian
Bank/Commonwealth Bank Merger is consummated before the Effective
Date (as defined below), (b) of GNB with and into Meridian Bank,
with Commonwealth Bank or Meridian Bank, as the case may be,
being the surviving bank. As used herein, the term "Surviving
Bank" shall refer to Commonwealth Bank until such time as the
Meridian Bank/Commonwealth Bank Merger has become effective and,
thereafter, to Meridian Bank and the term "parent of the
Surviving Bank" shall refer to Commonwealth until the
Meridian/Commonwealth Merger has become effective and,
thereafter, to Meridian.
Meridian is authorized, by its Articles of Incorporation, to
issue (a) 100,000,000 shares of common stock, par value $5 per
share, of which, at March 30, 1993, no shares were issued and
held by Meridian as treasury stock and 45,691,550 shares were
issued and outstanding, and (b) 25,000,000 shares of preferred
stock, par value $25 per share, none of which were issued and
outstanding at March 30, 1993. Meridian owns all of the
outstanding capital stock of Meridian Bank.
The Boards of Directors of GNB, Commonwealth Bank and
Commonwealth have approved this Plan and have authorized its
execution and delivery.
In consideration of the premises and of the mutual
agreements herein contained and intending to be legally bound
hereby, the parties hereto adopt and make this Plan as follows:
1. The Merger.
1.1 Merger of GNB. On the Effective Date (as defined
below), GNB shall be merged with and into the Surviving Bank
pursuant to the provisions of, and with the effect provided in,
the Pennsylvania Banking Code of 1965, as amended (the "Banking
Code"). Upon completion of the Merger, the corporate existence
of GNB and the Surviving Bank shall be merged into and continued
in the Surviving Bank, which shall continue as the surviving
entity under its present name. The separate existence of GNB
shall cease upon consummation of the Merger and: (a) all of the
powers, privileges, franchises, property and assets of GNB and
the Surviving Bank, including all of the funds, property and
investments held by each of them as trustee, guardian, executor,
administrator, or other fiduciary, shall be transferred to and
vested in the Surviving Bank without further act or deed or any
order or decree of any court or other tribunal; (b) all of the
liabilities and obligations of GNB and the Surviving Bank shall
become the liabilities and obligations of the Surviving Bank
without further act or deed or any order or decree of any court
or other tribunal.
1.2 Articles and Bylaws. The Articles of
Incorporation and Bylaws of the Surviving Bank in effect
immediately prior to the Effective Date shall continue thereafter
as the Articles of Incorporation and Bylaws, respectively, of the
Surviving Bank until amended as provided by law.
1.3 Directors and Officers.
(a) On the Effective Date of the Merger, the
Board of Directors of the Surviving Bank in office immediately
prior to the Effective Date shall be and remain the directors of
the Surviving Bank and shall hold their offices in accordance
with the provisions of that bank's Articles of Incorporation and
Bylaws.
(b) The directors of GNB in office immediately
prior to the Effective Date shall cease to be directors of GNA on
the Effective Date, and shall thereafter serve as a newly
constituted advisory board of the Grange Office of the Surviving
Bank (the "New Advisory Board"). The New Advisory Board shall be
continued in existence by the Surviving Bank for one year or such
longer period as the Board of Directors of the Surviving Bank may
determine, and shall meet quarterly or more often as established
by the Surviving Bank. In addition, five members of the GNB
board of directors, elected by a majority of that board, shall,
on the Effective Date, become members of the existing County Bank
Regional Board of Commonwealth Bank (or, in the event that
Commonwealth Bank shall have merged with Meridian Bank, the
successor to such County Bank Regional Board). In each case,
members of the New Advisory Board and the County Regional Board
(or its successor) shall serve at the discretion of the Board of
Directors of the Surviving Bank, and shall receive compensation
according to the Surviving Bank's fee schedule from time to time
for such boards.
(c) The Surviving Bank shall, in good faith,
endeavor to place as "employees-at-will" all persons who are
employees of GNB immediately prior to the Effective Date on terms
and conditions, including salaries and benefits, comparable to
those made available to employees of branch offices of the
Surviving Bank holding similar positions. Such persons as are so
employed after the Effective Date shall have such titles as are
appropriate and consistent with the Surviving Bank's then
existing personnel structure.
(d) Immediately after the Effective Date, former
employees of GNB who continue as employees of the Surviving Bank
shall be entitled to participate in the Surviving Bank's employee
benefit plans, subject, however, to the terms and conditions of
those plans and further subject to any limitations and/or
qualification conditions imposed on the Surviving Bank's employee
benefit plans by the Internal Revenue Code of 1986, as amended,
or other applicable laws. To the extent permitted under
applicable law, such employees shall be given credit for prior
service with GNB for purposes of eligibility to participate and
vesting under the Surviving Bank's benefit plans.
1.4 Conversion of GNB Shares.
(a) Subject to the other provisions of this
Section 1.4 and to the provisions of the Supplemental Agreement,
on the Effective Date each common share of GNB issued and
outstanding immediately prior thereto shall, by virtue of the
Merger, automatically and without need for any other act, be
converted into and become: (i) if, but only if, the
Meridian/Commonwealth Merger has been consummated before the
Effective Date and the Effective Date occurs on or before May 31,
1994, 5.66 common shares of Meridian unless the Closing Value (as
defined below) of one Meridian common share is less than $32.685,
and, then, into the lesser of such number of Meridian common
shares as have a Closing Value of $185.00 or 6.50 Meridian common
shares or if the Effective Date occurs after June 1, 1994,
6.66 Meridian common shares; provided, that, (ii) if, but only
if, neither the Meridian/Commonwealth Merger is consummated nor
the Meridian/Commonwealth Agreement is terminated on or before
May 31, 1994, GNB may, at its sole option, by written notice to
Meridian Bank and Commonwealth Bank given on June 1, 1994, elect
either (A) to terminate this Plan as provided in Section 8.2(b)
below or (B) to extend such termination date for up to forty-five
(45) days and to require Commonwealth Bank to consummate the
Merger, as provided in the next sentence, in which case each
share of GNB Common Stock issued and outstanding immediately
prior to the Merger shall be converted, by virtue of the Merger,
automatically and without need for any other act, into
4.71 shares of Commonwealth Common Stock; provided further,
however, that (iii) if the Merger occurs (whether before or after
June 1, 1994) after the Meridian/Commonwealth Agreement has been
terminated by the parties thereto, each share of GNB issued and
outstanding immediately prior to the Merger shall be converted
into five (5) common shares of Commonwealth common stock unless
the Closing Value of one share of Commonwealth common stock is
less than $34.00 and, then, into such number of Commonwealth
common shares as have a Closing Value of $170.00. If GNB elects,
to require Commonwealth Bank to effect the Merger with GNB
pursuant to Section 1.4(a)(ii)(B) above, each of GNB and
Commonwealth Bank agree to use their best efforts to cause the
Merger to occur, subject to the satisfaction of the appropriate
conditions precedent set forth in Articles 2 and 3, as promptly
as practicable and within the forty-five day extension period
provided for above. Notwithstanding the foregoing, in the event
that the Meridian/Commonwealth Merger is reasonably expected by
Meridian and Commonwealth to close within such forty-five day
period, Meridian and Commonwealth shall give written notice to
GNB of such expectation, and, GNB may, at its sole option, elect
to extend the term of this Plan to any date on or before
December 31, 1994, in which case, if the Meridian/Commonwealth
Merger is consummated before the Effective Date, each share of
GNB issued and outstanding immediately prior to the Merger shall
be converted, by virtue of the Merger, automatically and without
need for any other act, into 6.66 shares of Meridian common stock
or, as the case may be, if the Meridian/Commonwealth Merger has
not occurred prior to the Effective Date into the same number of
Commonwealth common shares as would be issuable pursuant to
clause 1.4(a)(ii)(B) or clause 1.4(a)(iii) above, as appropriate.
GNB understands and agrees that the share exchange
rates set forth in this Section 1.4(a) are not subject to any
further adjustment regardless of whether the
Meridian/Commonwealth Merger is or is not consummated, or the
date of such consummation, if it occurs; that there is no
assurance that the Meridian/Commonwealth Merger will be
consummated; and that neither Commonwealth, Commonwealth Bank,
Meridian or Meridian Bank has made any commitment of any kind to
GNB to consummate the Meridian/Commonwealth Merger. As used
herein the term "Exchange Common Shares" shall mean the common
shares of the parent of the Surviving Bank into which the GNB
common shares are to be converted, or which are otherwise issued,
pursuant to this Section 1.4(a) and the Supplemental Agreement.
(b) All Exchange Common Shares shall be, upon
issuance, duly authorized, fully paid and non-assessable.
(c) The "Closing Value" shall be the average of
the last quoted per share sales price for the Exchange Common
Shares for the twenty Trading Days (as herein defined)
immediately preceding the Effective Date, as reported by the
national securities exchange, if any, on which such shares are
then listed for sale or on the NASDAQ, as the case may be, or if
not so quoted, the average of the high bid and low asked prices
in the over-the-counter market, as reported by the NASDAQ or such
other system then in use for such period. Notwithstanding the
preceding sentence, the "Closing Value" for purposes of
Section 1.4(a)(iii) shall be the average of the last reported per
share sales price as so reported for the Exchange Common Shares
for the twenty Trading Days immediately following the thirtieth
Trading Day after the date on which the Meridian/Commonwealth
Agreement is terminated by the parties thereto. If on any Trading
Day during any such period such Exchange Common Shares are not
quoted by any such organization, the Closing Value shall be equal
to the average for such period of the closing bid and asked
prices per common share as furnished by a professional market
maker making a market in such common shares selected by the Board
of Directors of the Surviving Bank or its parent. The term
"Trading Day" shall mean a day on which the principal national
securities exchange or quotation system on which the Exchange
Common Shares are listed or admitted to trading is open for the
transaction of business.
(d) No conversion shall be made in respect of any
common share of GNB as to which dissenter's rights have been
properly perfected under the National Bank Act ("Dissenting
Shares"). All Dissenting Shares shall, by operation of the
Merger and without need for any other act, be converted into and
become the right to receive payment for such shares as and to the
extent provided by law.
(e) No fractional shares shall be issued in the
Merger. Each shareholder of GNB receiving Exchange Common Shares
will receive cash in lieu of any fractional Exchange Common Share
in an amount equal to the product of such fractional share
otherwise issuable hereunder and the Closing Value (as defined
above). For this purpose, to the extent practicable, the
fractional share interests of each shareholder of GNB will be
aggregated so that a shareholder of GNB will not receive cash in
an amount equal to or greater than the Closing Value of one full
Exchange Common Share.
(f) If subsequent to the date of this Plan but
prior to the Effective Date or the date for determination of the
number of additional shares to be issued pursuant to
Section 1.4(a)(iii), the outstanding common shares of
Commonwealth or Meridian shall have been increased, decreased or
changed into or exchanged for a different number or kind of
shares or securities by reorganization, recapitalization,
reclassification, stock dividend or stock split or other similar
event (including by an exchange of common shares for preferred
share purchase rights) or the Commonwealth preferred share
purchase rights have become exercisable and are trading
separately from the Commonwealth common shares or Commonwealth or
Meridian issues rights to holders of its common shares entitling
holders to purchase or subscribe for such shares at less than
market price and holders of GNB common shares shall not also
receive such rights upon conversion, such appropriate and
equitable adjustments, if any, shall be made in the number and
kind of shares or other securities into which the GNB common
shares are to be converted pursuant hereto and in the calculation
of the Closing Values and in the "floor" Closing Values of
Commonwealth and Meridian common shares or by the issuance of
comparable rights to GNB shareholders, as are appropriate to
provide GNB common shareholders with the substantially the same
consideration as they would have received had such event not
occurred; provided, however, that no adjustment shall be made
hereunder as a result of any increase in the number of Meridian
or Commonwealth common shares outstanding resulting from the
issuance of common shares in connection with any acquisition
(including, without limitation, in the case of Meridian, the
Meridian/Commonwealth Merger and, in the case of Commonwealth,
the merger of Commonwealth Bank and Valley Community Bank),
the issuance of common shares pursuant to stock option and
employee benefit plans or the issuance of common shares for
financing purposes.
1.5 Surrender of Certificates. On and after the
Effective Date, a holder of common shares of GNB that were
outstanding immediately prior to the Effective Date shall cease
to be, and shall have no rights as, a shareholder of GNB. Any
certificate for common shares of GNB shall, on and after the
Effective Date, be deemed for all purposes to evidence solely the
Exchange Common Shares into which such shares shall have been
converted in the Merger (and the right to receive cash in lieu of
fractional common shares) or, where applicable, any right of
appraisal that the holder may have by law. Each holder of common
shares of GNB whose certificate(s) are not in the Surviving
Bank's possession as of the Effective Date shall be instructed to
surrender such certificate(s) to the Surviving Bank or its parent
in a form and manner reasonably specified by the Surviving Bank.
Upon their proper surrender, certificates representing common
shares of GNB shall, on or after the Effective Date, be canceled
and exchanged for certificates representing the Exchange Common
Shares issuable to the holder thereof (and cash in lieu of
fractional shares). If, with respect to any common share of GNB,
Exchange Common Shares are to be issued, or payment is to be
made, to a person other than the one in whose name the
certificate representing such common share is registered, it
shall be a condition of such issuance or payment that the
certificate be properly endorsed or otherwise in proper form for
transfer and that the person requesting such issuance or payment
shall have paid any transfer and other taxes required by reason
of such issuance or payment. No shareholder of GNB shall be
entitled to receive any dividend or distribution payable with
respect to the Exchange Common Shares to be issued in respect of
the holder's common shares of GNB except upon surrender of the
certificate(s) representing his (or her) GNB shares as described.
If a certificate for common shares of GNB is surrendered within
two years of the Effective Date, any dividends that have
accumulated since the Effective Date on the Exchange Common
Shares to be delivered in exchange for such certificate shall be
paid at the time of surrender, as well as any other distributions
to which the holders of shares delivered pursuant to this Plan
may have become entitled. No interest shall accrue or otherwise
be payable to any person in respect of shares into which his (or
her) shares have been converted upon the Merger or in respect of
the dividends or distributions payable on such shares as
described above.
1.6 Failure to Surrender Certificates. All
certificates representing common shares of GNB must be
surrendered for exchange within two years from the Effective
Date. If any such certificate is not surrendered for exchange
within such two year period, any Exchange Common Shares that
would otherwise have been issued in exchange for such
unsurrendered certificate may be sold in which event the net
proceeds of such sale shall be held for the holder of the
unsurrendered certificate. From and after any such sale, the
sole right of the holder of any such unsurrendered certificate
shall be the right, upon surrender of such certificate to the
Surviving Bank, to collect the net sale proceeds and any
dividends and distributions accumulated to the date of sale that
are held for the holder's account, which right shall be subject
to escheat and similar laws as then in effect. No interest shall
accrue or be payable in respect of such sale proceeds or any
dividends or distributions accumulated to the date of sale. No
person shall be liable to any holder of common shares of GNB for
any amount paid in good faith to a public official or agency
pursuant to any escheat or similar law.
1.7 Treasury Stock. On the Effective Date, all common
shares of GNB, if any, held by it as treasury stock shall be
canceled and no Exchange Common Shares shall be issued therefor.
1.8 Transfer After Effective Date. On and after the
Effective Date, the stock transfer books of GNB shall be
permanently closed and there shall be no registration or transfer
on the stock transfer books of the Surviving Bank or its parent
of common shares of GNB that were outstanding prior to the
Effective Date.
1.9 Surviving Bank Shares. The shares of the capital
stock of the Surviving Bank and its parent issued and outstanding
immediately prior to the Effective Date shall, on and after the
Effective Date, continue to be issued and outstanding.
1.10 Closing and Effective Date. The closing of the
transactions contemplated herein (the "Closing") shall be held at
such location as the parties may agree within fifteen business
days after the latest of the several events listed in
clauses (a)-(c) of the following sentence. Subject to the prior
satisfaction or waiver of all of the conditions set forth in this
Plan, the Merger shall become effective on such date (the
"Effective Date") as is specified by the Pennsylvania Department
of Banking in filing with the Pennsylvania Department of State
the articles of merger to be prepared by the Surviving Bank and
GNB and delivered by them to the Pennsylvania Department of
Banking in compliance with the requirements of the Banking Code;
provided that the Effective Date shall be no earlier than the
latest of:
(a) Thirty-one days after the approval of the
Merger and the acquisition of GNB by the parent of the Surviving
Bank ("Acquisition") by the Board of Governors of the Federal
Reserve System (the "Federal Reserve Board"); or
(b) Immediately following the approval of the
Merger and the Acquisition by the Pennsylvania Department of
Banking; or
(c) The day after the later of as many of the
following as may be applicable has been lifted, discharged or
dismissed: (i) any stay of the Federal Reserve Board's or the
Pennsylvania Department of Banking's approval of the Merger, or
(ii) any injunction against the consummation of the Merger.
2. Conditions to Obligations of the Surviving Bank and its
Parent.
The Surviving Bank and its parent shall not be
obligated to cause the consummation of the Merger at the Closing
unless the following conditions shall have then been satisfied:
2.1 Corporate Action. All additional corporate
actions required of the parties to authorize the execution,
delivery and performance of this Plan and the Supplemental
Agreement and the transactions contemplated herein and therein
shall have been duly and validly taken, including, without
limitation, the approval of this Plan and the Supplemental
Agreement by the shareholders of GNB.
2.2 Governmental Approvals. The parties shall have
received all governmental approvals required for the consummation
of the transactions contemplated herein and in the Supplemental
Agreement, and all notice and waiting periods required after the
granting of such approvals shall have been completed. Such
approvals and consents shall not have been conditioned or
restricted in a manner which, in the sole judgment of the
Surviving Bank, materially adversely affects the value of the
transactions contemplated herein and in the Supplemental
Agreement so as to render inadvisable the consummation of the
Merger.
2.3 Proxy/Prospectus. The registration statement
(including any amendments thereto) containing the Proxy/
Prospectus (as defined in Section 4.3 below) shall have become
effective and no stop order with respect thereto shall have been
issued by the Securities and Exchange Commission (the "SEC") and
no other proceeding shall then be pending or threatened to
suspend the effectiveness of such registration statement.
2.M State Securities Laws. The parties shall have
received all permits and other authorizations necessary under
state securities laws to consummate the transactions contemplated
herein and in the Supplemental Agreement.
2.5 Proceedings. No suit, action, investigation or
legal or administrative proceeding shall then be pending or
threatened that could prevent or materially interfere with the
consummation of the Merger.
2.6 Tax Treatment. The Surviving Bank shall have
received an opinion of its counsel, dated the date of Closing,
substantially to the effect that, provided there is, at the time
of the Merger, no plan or intention on the part of the
shareholders of GNB to dispose in the aggregate of such number of
Exchange Common Shares received in the Merger which would result
in their not continuing to hold Exchange Common Shares which are,
in the aggregate, equal in value as of the time of the Merger to
at least 50 percent of the value of all of the formerly
outstanding shares of GNB (including any Dissenting Shares):
(a) the Merger will constitute a reorganization within the
meaning of section 368(a)(1)(A) and (a)(2)(D) of the Internal
Revenue Code of 1986, as amended (the "Code"); (b) the Surviving
Bank and its parent and GNB will be parties to such
reorganization; and (c) the conversion of shares of GNB into
Exchange Common Shares will (except for the receipt of cash in
lieu of fractional shares) constitute a nontaxable exchange with
respect to the shareholders of GNB for federal income tax
purposes. In issuing such opinion, counsel may rely upon
representations of the officers or representatives of GNB and the
Surviving Bank and its parent.
2.7 Dissenting Shares. The number of Dissenting
Shares shall not exceed 10% of the number of common shares of GNB
that are outstanding immediately prior to the Effective Date.
2.8 Representations and Warranties. The
representations and warranties of GNB set forth herein and in
this Supplemental Agreement shall be true and correct in all
material respects as of the date hereof and as of the Effective
Date as though made on and as of the Effective Date.
2.9 Performance of Obligations. GNB shall have
performed and complied with all of its obligations under this
Plan and the Supplemental Agreement in all material respects.
2.10 Officer's Certificate. GNB shall have delivered
to the Surviving Bank and its parent a certificate, dated the
date of Closing, signed by its Chief Executive Officer and
confirming the satisfaction as of such date of the conditions
specified in each of the preceding Sections of this Article 2
(except insofar as the same relate to corporate actions by, or
governmental approvals relating to, the Surviving Bank and its
parent).
2.11 Legal Opinion. The Surviving Bank and its parent
shall have received an opinion, dated the date of Closing, of
Rhoads & Sinon, legal counsel to GNB, in form and substance
satisfactory to the Surviving Bank and its parent to the effect
that:
(a) GNB is a banking institution duly organized,
validly subsisting and in good standing under the laws of the
United States and has the corporate power to carry on its
business as now being conducted;
(b) all of the issued and outstanding common
shares of GNB have been duly authorized and validly issued and
are fully paid and non-assessable; and
(c) as to the matters referred to in
Sections 6.1, 6.2, 6.3, 6.4 and 6.9 hereof.
2.12 Accounting Treatment. The acquisition of GNB by
the Surviving Bank in the Merger shall, in the opinion of the
Surviving Bank's independent accountants, qualify for pooling of
interests accounting treatment.
2.13 Affiliates' Letters. The Surviving Bank and its
parent shall have received from each "affiliate" of GNB (as
defined under Rule 145 under the Securities Act of 1933, as
amended (the "1933 Act")) an agreement in form reasonably
satisfactory to it and its counsel, pertaining to matters
required by said Rule, and to the effect that such affiliate will
not take any action which could disqualify the Merger for pooling
of interests accounting treatment.
2.14 Employment Agreement. Agnes Jones shall have
executed and delivered to Commonwealth Bank a "Change in Control
Employment Agreement" in substantially the form previously
delivered to her by Commonwealth Bank, which agreement provides,
in part, for the automatic termination of her employment contract
dated July 20, 1989 with GNB and for her employment for up to two
years in accordance with such agreement. Agnes Jones shall have
also terminated, to the satisfaction of the Surviving Bank, any
and all other agreements between herself and GNB in existence on
the date hereof, and shall have irrevocably waived and
relinquished any and all past, present and future claims to any
compensation or payments (except as otherwise provided for in the
Change in Control Employment Agreement referred to above)
whatsoever resulting from or related to the change of control of
GNB in the Merger.
3. Conditions to Obligations of GNB.
GNB shall not be obligated to consummate the Merger at
the Closing unless the following conditions shall have then been
satisfied:
3.1 Conditions Specified Above. The conditions
specified in Sections 2.1, 2.3, 2.4, 2.5, and the first sentence
of Section 2.2 shall have been satisfied.
3.2 Representations and Warranties. The
representations and warranties of the Surviving Bank and its
parent set forth herein and in the Supplemental Agreement shall
be true and correct in all material respects as of the date
hereof and as of the Effective Date, as though made on and as of
the Effective Date, except as otherwise contemplated by this Plan
and by the Meridian/Commonwealth Agreement.
3.3 Performance of Obligations. The Surviving Bank
and its parent shall have performed and complied with all of
their obligations under this Plan and the Supplemental Agreement
in all material respects.
3.4 Officers' Certificate. The Surviving Bank and its
parent each shall have delivered to GNB a certificate, dated the
date of Closing, signed by their respective Chief Executive
Officers, and confirming the satisfaction as of such date of the
conditions specified in each of the preceding Sections of this
Article 3 (except insofar as the same relate to corporate actions
of, or governmental approvals relating to, GNB).
3.5 Legal Opinion. GNB shall have received an
opinion, dated the date of Closing, of counsel to the Surviving
Bank, in form and substance satisfactory to GNB to the effect
that:
(a) The parent of the Surviving Bank is a
corporation validly subsisting and in good standing under the
laws of the Commonwealth of Pennsylvania and has all corporate
power to carry on its business as now being conducted;
(b) The Surviving Bank is a banking institution
validly subsisting and in good standing under the laws of the
Commonwealth of Pennsylvania and has all corporate power to carry
on its business as now being conducted; and
(c) as to the matters referred to in
Sections 7.1, 7.2, 7.3, 7.4 and 7.5.
3.6 Financial Adviser's Opinion. GNB shall have
received an opinion of McConnell, Budd & Downes, Inc. dated as of
the date of the Proxy/Prospectus to the effect that the terms
upon which the Merger is to be effected are fair to the
shareholders of GNB from a financial point of view.
3.7 Tax Treatment. GNB shall have received an
opinion, dated the date of Closing, of counsel to the Surviving
Bank to the effect set forth in Section 2.6 above.
4. Certain Covenants. The parties each respectively
covenant that:
4.1 Applications with Government Agencies. The
parties shall use their best efforts to obtain the approvals of
the Board of Governors of the Federal Reserve System and the
Pennsylvania Department of Banking and any other government
agencies with jurisdiction for approval of the transactions
contemplated herein.
4.2 GNB Meeting. GNB shall submit this Plan and the
Supplemental Agreement to its shareholders for approval at a
meeting (the "GNB Meeting") in accordance with applicable law and
in connection therewith GNB's Board of Directors shall recommend
to the shareholders of GNB that the Merger be approved and,
subject only to the proviso to Section 5.2 below, use its best
efforts to secure shareholder approval of this Plan.
4.3 Proxy/Prospectus. The parties shall jointly
prepare a proxy statement (the "Proxy/Prospectus") to be
distributed to the shareholders of GNB in connection with the
transactions contemplated herein, and to be filed with the SEC by
the issuer of the Exchange Common Shares as a part of a
registration statement registering the Exchange Common Shares to
be issued in the Merger (the "Registration Statement"). Each
party shall be responsible for the description of its respective
businesses contained therein.
4.4 Affiliates. GNB shall cooperate and use its best
efforts to identify those persons who may be deemed to be
"affiliates" under Rule 145 promulgated under the Securities Act
of 1933, and shall use its best efforts to obtain from each of
its affiliates the agreement called for by Section 2.13 above.
4.5 Press Releases. Unless approved by the other
party in advance, each party shall refrain from issuing any press
release (or written statement for general circulation) regarding
this Plan or the transactions contemplated herein unless such
party believes, on the advice of counsel, that it may become
subject to liability for the failure to issue such press release.
4.6 Best Efforts to Complete Merger. Each party shall
(a) use its best efforts in good faith to take or cause to be
taken all action necessary or desirable on its part to permit the
consummation of the transactions contemplated herein and shall
cooperate fully with the other parties hereto to that end and
(b) furnish such information relating to it as is necessary or
appropriate for inclusion in the applications and the proxy
solicitation materials referred to in Sections 4.1 and 4.3. This
Plan contemplates that the Meridian/Commonwealth Merger shall be
consummated prior to the Effective Date, unless GNB shall have
exercised its right pursuant to Section 1.4(a)(ii)(B) to require
Commonwealth Bank to consummate the Merger with GNB, and, except
pursuant to Section 1.4(a)(ii)(B), GNB shall not have the right
hereunder to require the Merger to be consummated prior to the
consummation of the Meridian/Commonwealth Merger or the
termination of the Meridian/Commonwealth Merger Agreement.
Furthermore, in the event that GNB exercises its right pursuant
to Section 1.4(a)(ii)(B) and the Merger cannot be consummated
with Commonwealth Bank because a requisite regulatory approval
has not been obtained or because an applicable regulatory waiting
period has not yet expired, the Meridian/Commonwealth Merger may
be consummated prior to the Merger, provided, however, that, in
such event, upon the consummation of the Merger, each share of
GNB issued and outstanding immediately prior to the Merger shall
be converted, by virtue of the Merger, automatically and without
need for any other act, into 6.66 shares of Meridian common
stock.
4.7 Filings. Each of GNB, the Surviving Bank and its
parent will use its best reasonable efforts, subject to the
satisfaction of the conditions precedent set forth in Sections 2
and 3, to cause the Merger to be consummated as promptly as
practicable and, thus, to cause the applications for required
federal and state banking approvals referred to in Section 4.1 to
be filed as promptly as practicable and to cause the
Proxy/Prospectus to be filed with the SEC (a) (as nearly as
practicable) contemporaneously with the filing, if any, of the
joint proxy statement/prospectus seeking approval of the
Meridian/Commonwealth Merger, or (b) as promptly as practicable
thereafter, but, in any event, (c) on or before June 30, 1993;
provided, however, that no party shall have any liability to any
other party or person hereunder if any such filing cannot be made
pursuant to applicable federal or state banking or securities
laws, the rules and regulations promulgated thereunder or the
interpretations thereof by the appropriate agencies or because of
the failure, refusal or inability of any third party to cooperate
in the making of any such filing, and, provided, further, that
any party shall have the right to postpone the making of any such
filing for a period of up to thirty (30) days if, in its business
judgment, there are valid business reasons (other than the
avoidance of its obligations under this Plan or the Supplemental
Agreement) for such postponement. If at any time prior to the
meeting of the GNB shareholders to vote on this Plan, the
Supplemental Agreement and the Merger, or thereafter during the
period in which the Registration Statement is effective, there
occurs any material development which requires the making of
changes in the Proxy/Prospectus or the Registration Statement so
that such documents will not contain any untrue statement of a
material fact or omit to state any material fact required to be
stated therein, or necessary to make the statements therein, in
light of the circumstances under which they were made, not
misleading, then GNB agrees that it shall postpone any meeting of
its shareholders which has been scheduled until the
Proxy/Prospectus and the Registration Statement of which it is a
part have been amended or supplemented as necessary, or at the
request of the Surviving Bank, re-circulate the Proxy/Prospectus,
as so amended or supplemented, and reconvene the meeting of GNB
shareholders to consider such amendment or supplement.
5. Conduct of Business Prior to Effective Date.
5.1 Ordinary Course. From the date hereof until the
Effective Date, GNB shall operate its business solely in the
usual, regular and ordinary course consistent with past practice
and shall use its best efforts to preserve intact its business
organization, maintain and preserve its advantageous business
relationships and retain the services of its officers and key
employees.
5.2 Notice of Solicitations. During the period prior
to the Effective Date, GNB shall give immediate notice, confirmed
in writing, to the other parties of any offer, solicitation or
proposal by or on behalf of any person, entity or group with
respect to any possible merger, acquisition or similar
transaction involving GNB or any of its assets. Until the
Effective Date or termination of this Plan in accordance with its
terms, GNB will not enter into an agreement with any other party
for a business combination or other acquisition involving GNB or
any material portion of its assets or authorize or permit any
officer, director, employee or other representative to solicit,
encourage or negotiate any proposal for such a combination or
acquisition; provided, however, that if the Board of Directors of
GNB is advised that in the opinion of counsel they are required
to do so by applicable principles of fiduciary duty, the Board of
Directors of GNB may respond to any unsolicited proposal from a
third party regarding the acquisition of all of the capital stock
or assets of GNB by a third party, furnish information regarding
GNB to such third party, negotiate the terms of the acquisition
of all of the capital stock or assets of GNB by such third party
and submit such transaction to the GNB shareholders for their
approval; provided, further, however, that the Directors of GNB
shall not be relieved hereunder of their obligations under this
Plan and the Supplemental Agreement to present this Plan, the
Supplemental Agreement and the Merger to the GNB shareholders for
approval and to vote the shares of GNB common stock held by them
in favor of this Plan, the Supplemental Agreement and the Merger,
and, unless in the opinion of counsel to do so would violate
applicable legal principles of fiduciary duty, to recommend that
the GNB shareholders approve this Plan, the Supplemental
Agreement and the Merger.
5.3 Negative Covenants. Without the prior written
consent of the Surviving Bank, GNB shall not, prior to the
Effective Date, willfully or intentionally cause or permit to
occur any action or event that would cause any of its
representations or warranties contained in this Plan to be untrue
had such representation or warranty been made as of immediately
after such action or event.
5.4 Access to Information. In connection with this
Plan, GNB shall provide the other parties reasonable access to
its books, records, reports and facilities and to its employees,
accountants and counsel, and shall furnish promptly to the other
parties all other information concerning its business as the
other parties may reasonably request. GNB shall provide the
other parties with copies of all financial statements distributed
to its shareholders or board of directors on or after the date
hereof and prior to the Effective Date, and all reports, returns
and other documents filed by it with any federal or state
regulatory or taxing authority during such period. The parent
corporation of the Surviving Bank shall deliver to GNB copies of
all reports and other documents filed by it pursuant to
Section 13(a), 13(c), 14 or 15(d) or the Exchange Act and
available to the public after January 1, 1993 and prior to the
earlier to occur of the Effective Date or the termination of this
Agreement or, during any period in which the parent of the
Surviving Bank is not subject to Section 13 or 15(d) of the
Exchange Act, the information required pursuant to
Rule 144A(d)(iv) under the Securities Act of 1933.
5.5 Disclosure Letter. On or before the 15th day
after the date hereof, GNB shall deliver to the Surviving Bank a
letter (the "Disclosure Letter") signed by the President and
principal financial officer of GNB and including the information
called for in Sections 6.4, 6.7, 6.8, 6.9, 6.11, 6.12, 6.13 and
6.14 of this Plan. The Surviving Bank shall have five business
days from and after its receipt of the Disclosure Letter to
accept or reject the Disclosure Letter, and, if the Disclosure
Letter is rejected, to terminate this Agreement without further
obligation or liability on the part of the Surviving Bank and its
parent either hereunder or under the Supplemental Agreement.
Notwithstanding the foregoing, no acceptance of the Disclosure
Letter by the Surviving Bank shall in any way limit the rights of
the Surviving Bank and its parent to terminate this Agreement
pursuant to Article 8 hereof.
6. Representations and Warranties of GNB.
GNB hereby represents and warrants to Commonwealth and
Commonwealth Bank as follows:
6.1 Recitals. The facts set forth in the recitals to
this Plan with respect to GNB are true and correct.
6.2 Operations. GNB has the corporate power and
authority, and all necessary governmental licenses, approvals and
permits, to own its assets and to carry on its business as it as
now being conducted. GNB has no subsidiaries and one branch
office in Harford, Pennsylvania.
6.3 Execution and Delivery of Plan. Subject to any
necessary receipt of approval by its shareholders, the execution
and delivery of this Plan and the Supplemental Agreement and the
consummation of the transactions contemplated herein and therein
by GNB have been duly and validly authorized by all necessary
corporate action, and this Plan and the Supplemental Agreement
each is a valid and binding agreement of GNB enforceable against
in accordance with its terms.
6.4 Absence of Violation. Except as set forth in the
Disclosure Letter, neither the execution or delivery of this Plan
and the Supplemental Agreement, the consummation of the
transactions contemplated herein or therein nor the compliance by
GNB with any of the provisions of this Plan or the Supplemental
Agreement shall breach or violate any provision of the Articles
of Incorporation or Bylaws of GNB or conflict with or result in a
breach of or default under any material agreement, obligation or
instrument to which GNB is a party or by which it is bound, or
violate, conflict with or result in a breach of or, default
under, any judgment, order or decree of any court or governmental
agency, under any law, statute, rule or regulation, or under any
governmental permit or license applicable to GNB or its assets.
The consummation by GNB of the transactions contemplated by this
Plan and the Supplemental Agreement will not require any consent
or approval under any such agreement, obligation or instrument,
or any such law, statute, rule, regulation, judgment, decree,
order, or governmental permit or license, other than the approval
of the shareholders of GNB and the governmental authorities named
in Section 4.1 and such approvals, if any, as may be required
under applicable federal and state securities laws.
6.5 Compliance with Laws. GNB has conducted its
business in compliance in all material respects with all
applicable laws and regulations, including without limitation,
applicable banking laws and regulations, and all applicable
employment, discrimination, tax and environmental laws and
regulations and it is not subject to any memorandum of
understanding, agreement or similar arrangement with any
regulatory agency.
6.6 Financial Statements.
(a) GNB has previously delivered to Commonwealth
and Commonwealth Bank: (i) its balance sheets as at December 31
in each of the years 1991 and 1992, and the related statements of
income, changes in stockholders' equity and cash flow for each of
the fiscal years then ended, including all notes thereto,
together with the report thereon of Davidson, Buccasio and
Updyke, independent accountants (the "Audited Financial
Statements"); and (ii) an unaudited balance sheet of GNB as at
March 31, 1993 (the "Interim Balance Sheet") and the related
unaudited statements of income, and changes in stockholders'
equity and cash flow for the three (3) months then ended.
GNB's books and records accurately and fairly reflect its
business and the results of its operations, and such financial
statements and notes fairly present the financial condition,
assets and liabilities, cash flow and results of operations of
GNB as at the respective dates thereof and for the periods
therein referred to, all in accordance with generally accepted
United States accounting principles applicable to banking
institutions ("GAAP") consistently applied, subject, in the case
of the interim financial statements, to normal recurring year-end
audit adjustments (which will not be material in amount or
effect) and the absence of notes (which, if presented, would not
differ materially from those included in the Audited Financial
Statements).
(b) The Interim Balance Sheet reflects all
liabilities of GNB, whether absolute, accrued or contingent, as
of the date thereof of the type required to be reflected or
disclosed in a balance sheet prepared in accordance with GAAP
(without reference to any notes thereto). GNB does not have any
liabilities or obligations of any nature that are not reflected
on the Interim Balance Sheet, other than liabilities incurred
since the date thereof in the ordinary course of business
consistent in nature and amount with past practice and which are
neither inconsistent with any of the representations and
warranties contained herein nor material in amount. Except as
previously disclosed to Commonwealth Bank in writing, to the best
knowledge of GNB there is no basis for the assertion against GNB
of any material liability not fully reflected or reserved against
in the Interim Balance Sheet.
(c) The Interim Balance Sheet reflects reserves
or other appropriate provisions at least equal to reasonably
anticipated liabilities, losses and expenses of GNB as of the
date thereof whether or not required to be disclosed by GAAP or
applicable laws and regulations or by accepted banking practice,
including without limitation those with respect to possible
nonpayment of outstanding loans, income and other taxes
(including alternative minimum tax), salaries, vacation pay, and
plans and programs (including medical and other benefit programs)
for the benefit of present and former employees.
(d) All financial statements delivered by GNB
after the date hereof and prior to the Merger shall be prepared
on a basis consistent with the financial statements referred to
in Section 6.6(a) and shall fairly present the financial
condition, assets and liabilities, cash flow and results of
operations at the respective dates and for the respective periods
reflected therein (subject in the case of interim statements to
normal recurring year-end audit adjustments which will not be
material in amount or effect).
6.7 Absence of Certain Events. Except as set forth in
the Disclosure Letter, since December 31, 1992 GNB has not:
(a) declared or paid any dividend or distribution to any of its
shareholders or combined, purchased, redeemed or otherwise
acquired any shares of its capital stock (other than in a
fiduciary capacity), except for regular, cash dividends payable
on the first day of each calendar quarter to shareholders of
record on the fifteenth day of the last month of the immediately
preceding calendar quarter in an amount not exceeding $0.60 per
common share; (b) authorized the creation or issuance of or
issued or sold any additional shares of its capital stock, or any
warrants, options, calls or commitments relating to its capital
stock or any securities or obligations convertible into or
exchangeable for, or giving any person any right to subscribe for
or acquire from GNB, shares of its capital stock; (c) entered
into or, except as contemplated by Section 2.14 hereof, modified
any employment contract with, increased the rate of compensation
of, or paid or agreed to pay any bonus to any of its directors,
officers or employees; (d) entered into, or substantially
modified or increased its contributions to, any pension,
retirement, insurance, profit sharing or other benefit plan or
arrangement in respect of any of its present or former directors,
officers or employees; (e) amended its Articles of Incorporation
or Bylaws; (f) disposed of or discontinued any of its material
businesses or properties or acquired any material assets (other
than cash received in connection with deposits obtained by GNB);
(g) conducted its business in any respect otherwise than in the
ordinary course of business consistent with past practice; or
(h) experienced any material adverse change in its business,
financial condition, loan portfolio, properties, operations,
prospects, or relations with regulatory authorities.
Notwithstanding Section 6.7(b), if during the fiscal quarter in
which the Effective Date occurs, the Effective Date occurs on or
before the record date for the payment of a quarterly dividend by
the parent of the Surviving Bank with the result that GNB
shareholders whose shares of GNB common stock are converted into
shares of the common stock of the parent of the Surviving Bank
are entitled to receive the dividend declared by the parent of
the Surviving Bank to its shareholders as of such record date,
then, no dividend shall be declared or paid by GNB for the fiscal
period with respect to which such dividend is declared by the
parent of Surviving Bank. GNB may make such adjustments, if any,
to its record date as are necessary to comply with this covenant;
provided that the effective rate of the GNB dividend permitted
under Section 6.7(b) is not thereby increased.
6.8 Proceedings. Except as set forth in the
Disclosure Letter, no material litigation, proceeding or
controversy before any court or governmental agency is pending
against GNB, and, to the best of its knowledge, no such
litigation, proceeding or controversy has been threatened or is
contemplated. There are no pending tax examinations involving
GNB.
6.9 Commitments and Arrangements. Except as set forth
in the Disclosure Letter, GNB is not a party or subject to any
material commitment or arrangement of any kind (including,
without limitation, any severance or change-in-control
agreements) which cannot be terminated without cost or penalty to
GNB.
6.10 Proxy/Prospectus. None of the information
relating to and furnished by or on behalf of GNB to be included
in the Proxy/Prospectus or in the applications to be filed with
governmental agencies as described in Section 4.1 shall contain
any untrue statement of a material fact or omit to state any
material fact required to be stated therein or necessary to make
the statements therein, in light of the circumstances in which
they are made, not misleading at the time the Proxy/Prospectus is
distributed to shareholders of GNB (and at the time of the GNB
Meeting) or at the time said applications are submitted, as
applicable.
6.11 Other Reports and Returns. Attached as exhibits
to the Disclosure Letter are accurate and complete copies of all
periodic and annual reports, returns and other filings required
to be filed by it with federal and state regulatory authorities
since January 1, 1990 and taxing authorities since January 1,
1986. Such reports, returns and filings were filed in compliance
with all applicable requirements and the information contained in
such reports, returns and other filings was, as of the dates of
filing thereof, true, accurate and complete in all material
respects.
6.12 Related Party Transactions.
(a) Except as set forth in the Disclosure Letter,
there are no transactions, loans, agreements or contracts between
GNB and any of its employees, officers or directors, or between
GNB and any business of which any of its employees, officers or
directors is an affiliate.
(b) From and after the date hereof, and prior to
earlier to occur of the Effective Date and the termination of
this Plan, GNB shall not, without the prior written consent of
the Surviving Bank, enter into any transactions, loans,
agreements, or contracts between GNB and any of its employees,
officers, or directors, or between GNB and any business of which
any of its employees, officers or directors is an affiliate,
except (a) for renewals and refinancings of existing loans in an
amount not exceeding their original principal amount, and
(b) loans not exceeding $250,000 individually or $2,500,000 in
aggregate in principal amount made in the ordinary course of
business, on substantially the same terms, including interest
rates and collateral, as those prevailing at the time for
comparable transactions with other persons and which do not
involve more than the normal risk of collectibility or present
other unfavorable features.
6.13 Properties. Except as set forth in the Disclosure
Letter, GNB has good and marketable title free and clear of all
liens, encumbrances, charges, defaults or equities to all of the
properties and assets, real and personal, reflected on the
Interim Balance Sheet or acquired after such date, except
(a) liens for current taxes not yet due and payable, (b) such
imperfections of title, easements and encumbrances, if any,
which, either singly or in the aggregate, are not material in
character, amount or extent and (c) dispositions and encumbrances
in the ordinary course of business. Except as set forth in the
Disclosure Letter, all real property now or previously owned,
operated, used or leased by GNB is now and has always been in
compliance with all applicable laws and regulations concerning or
relating to the protection of health and the environment. Except
as set forth in the Disclosure Letter, all material leases
pursuant to which GNB, as lessee, leases real or personal
property, are valid and enforceable in accordance with their
respective terms. All such leases, and all other agreements to
which GNB is a party, were made in the ordinary course of
business, are in full force and effect, and are valid and binding
obligations of the parties thereto. GNB is not in default or
breach of any such material lease or agreement.
6.14 Employee Benefit Plans. Except as set forth in
the Disclosure Letter, all of GNB's employee benefit and pension
plans and practices now or formerly maintained by GNB have been
administered in compliance with their terms and are in compliance
in all material respects with all applicable laws and
regulations. Except as set forth in the Disclosure Letter, all
"employee benefit plans", as defined in Section 3(3) of the
Employee Retirement Income Security Act of 1974 ("ERISA"), that
cover any of GNB's employees comply in all material respects with
all applicable requirements of ERISA, the Code and other
applicable laws; GNB has not engaged in a "prohibited
transaction" (as defined in Section 406 of ERISA or Section 4975
of the Code) with respect to any such plan which could result in
any material penalties or taxes under Section 502(i) of ERISA or
Section 4975 of the Code; no material liability to the Pension
Benefit Guaranty Corporation has been or is expected by GNB to be
incurred with respect to any such plan which is subject to
Title IV of ERISA ("Pension Plan"); no Pension Plan had an
"accumulated funding deficiency" (as defined in Section 302 of
ERISA (whether or not waived)) as of the last day of the end of
the most recent plan year ending prior to the date hereof; the
present value of the assets of each Pension Plan exceeds the
present value of the liability for accrued benefits under such
Pension Plan as of the end of the most recent plan year with
respect to the respective Plan ending prior to the date hereof;
calculated on the basis of the actuarial assumptions used in the
most recent actuarial valuation for such Pension Plans as of the
date hereof; none of GNB's employees is covered by a collective
bargaining agreement; and it has not contributed to a
"multiemployer plan", as defined in Section 3(37) of ERISA, on or
after September 26, 1980.
6.15 Representations Concerning Tax-Free
Reorganization. All liabilities of GNB and all liabilities to
which assets of GNB are subject have been incurred by GNB in the
ordinary course of its business. No intercorporate indebtedness
exists between GNB and Commonwealth or Meridian or between GNB
and Commonwealth Bank or Meridian Bank. GNB is not an
"investment company" as defined in Sections 368(a)(2)(F)(iii)
and (iv) of the Code. GNB is not the subject of a receivership,
insolvency, or similar proceeding in a federal or state court.
6.16 Full Disclosure. No representation or warranty by
GNB in this Plan nor any other information furnished by it in
connection with the transactions contemplated herein contains any
untrue statement of material fact or omits to state a material
fact necessary to make such representations, warranties and
information not misleading. GNB has no reason to believe that
there is any fact that has not been disclosed to Commonwealth
that materially adversely affects or may materially adversely
affect GNB's business, financial condition, property, operations
or prospects.
7. Representations and Warranties of Surviving Bank.
The Surviving Bank and its parent hereby represent and
warrant as follows:
7.1 Recitals. The facts set forth in the recitals to
this Plan with respect to the Surviving Bank and its parent are
true and correct.
7.2 Operations. The Surviving Bank and its parent
have the corporate power and authority, and all necessary
governmental licenses, approvals and permits, to own their
respective assets and to carry on their respective businesses as
they are now being conducted.
7.3 Exchange Common Shares. The Exchange Common
Shares to be issued in connection with the Merger pursuant to
this Plan, when issued in accordance with the terms of this Plan,
will be duly authorized, validly issued, fully paid and non-
assessable.
7.4 Execution and Delivery of Plan. The execution and
delivery of this Plan and the Supplemental Agreement and the
consummation of the transactions contemplated herein and therein
by the Surviving Bank and its parent have been duly and validly
authorized by all necessary corporate action, and this Plan and
the Supplemental Agreement each is a valid and binding agreement
of each of them enforceable against each of them in accordance
with its terms.
7.5 Absence of Violation. Neither the execution or
delivery of this Plan and the Supplemental Agreement, the
consummation of the transactions contemplated herein or therein
nor the compliance by either the Surviving Bank or its parent
with any of the provisions of this Plan or the Supplemental
Agreement shall breach or violate any provision of their
respective Articles of Incorporation or Bylaws or conflict with
or result in a breach of or default under, any material
agreement, obligation or instrument to which either of them is a
party or by which either is bound, or violate or conflict with,
or result in a breach of or default under, any judgment, order or
decree of any court or governmental agency, under any law, decree
of any court or governmental agency, under any law, statute, rule
or regulation, or any governmental permit or authorization
applicable to either of them or their assets.
7.6 Compliance with Laws. Each of the Surviving Bank
and its parent has conducted its business in compliance in all
material respects with all applicable laws and regulations,
including without limitation, applicable banking laws and
regulations, employment, discrimination and tax laws and
regulations and environmental laws and regulations and neither is
subject to any memorandum of understanding, written agreement or
similar arrangement with any regulatory agency.
7.7 SEC Reports.
(a) The Annual Report on Form 1O-K for the fiscal
year ended December 31, 1992, and any other documents filed
subsequent to December 31, 1992 under Sections 13(a), 13(c), 14
or 15(d) of the Securities Exchange Act of 1934, as amended (the
"Securities Exchange Act"), by the parent of the Surviving Bank
with the SEC (collectively, its "Reports") complied, at the time
of filing, with the applicable requirements of the Securities
Exchange Act and the rules and regulations thereunder.
(b) All financial statements delivered by the
parent of the Surviving Bank to GNB on or after the date hereof
and prior to the Merger shall be prepared on a basis consistent
with the financial statements included in the Reports.
7.8 Adverse Change. There has been no material
adverse change in the consolidated business, financial condition,
property, operations or prospects of the parent of the Surviving
Bank since December 31, 1992.
7.9 Proceedings. No material litigation, proceeding
or controversy before any court or governmental agency is pending
against either of the Surviving Bank or its parent and, to the
best of their knowledge, no such litigation, proceeding or
controversy is threatened or is contemplated.
7.10 Proxy/Prospectus. None of the information
relating to and furnished by or on behalf of the Surviving Bank
or its parent to be included in the Proxy/Prospectus or the
applications to be filed with governmental agencies as described
in Section 4.1 shall contain any untrue statement of a material
fact or omit to state any material fact required to be stated
therein or necessary to make the statements therein, in light of
the circumstances in which they are made, not misleading at the
time the Proxy/Prospectus is distributed to shareholders of GNB
(and at the time of the GNB Meeting) or at the time said
applications are submitted, as applicable.
8. Abandonment and Termination.
8.1 Failure to Satisfy Conditions. Notwithstanding
the approval of this Plan by the shareholders of GNB, any party
to this Plan, acting pursuant to the authorization of its Board
of Directors and with or without the approval of its
shareholders, may by notice to the other parties terminate this
Plan and such party's obligations to proceed with the Merger if
at any time prior to the Effective Date any event shall have
occurred or any state of facts shall exist that renders it
impossible to fulfill any of the conditions to such party's
obligations under this Plan.
8.2 Other Termination. Notwithstanding the approval
of this Plan by the shareholders of GNB, the Merger may also be
abandoned and this Plan terminated at any time prior to the
Effective Date with or without shareholder approval (a) by mutual
agreement of the parties approved by their respective Boards of
Directors, (b) by any party, acting pursuant to the authorization
of its Board of Directors, by notice to the other parties if the
Effective Date has not occurred on or before June 1, 1994 as such
date may be extended pursuant to Section 1.4(a) above or such
later date as the parties may mutually agree upon either before
or after approval of this Plan by the shareholders of GNB or
(c) by Commonwealth Bank, by giving written notice to GNB by the
close of business on May 15, 1993, if any matter or thing has
come to the attention of Commonwealth Bank in the course of its
investigation pursuant to Section 5.4 hereof or otherwise with
respect to GNB, that, in its sole and exclusive opinion, leads it
to believe that any such matter or thing materially adversely
affects the financial or business performance or prospects of GNB
so that it would be inadvisable for the Surviving Bank to proceed
with the Merger or (d) by Commonwealth Bank if it has not
received on or before the fifteenth day after the date hereof
assurances from its independent accountants satisfactory to it
that the consummation of the Merger and the transactions
contemplated hereby do not disqualify the Meridian/Commonwealth
Merger from "pooling of interests" accounting treatment.
8.3 Liability. The termination of this Plan and the
abandonment of the Merger by any party under Section 8.1 or
8.2(b) shall not relieve any other party of any liability for
breach of any provision hereof prior to the date of termination
or abandonment. The termination of this Plan and the abandonment
of the Merger under Section 8.2(a) or Section 8.2(c) or (d) shall
be without liability to any party.
9. Expenses.
Except as set forth in the next sentence, each party shall
bear and pay all costs and expenses incurred by it in connection
with the transactions contemplated herein, including fees and
expenses of its own financial consultants, accountants and
counsel. The Surviving Bank and its parent shall pay all
application fees in connection with obtaining regulatory
approvals; GNB and the parent of the Surviving Bank shall each
bear and pay half of all registration and qualification fees
payable to federal and state securities authorities in connection
with the Proxy/Prospectus and all printing costs; provided that
GNB shall not be required to pay more than $7,500 in respect of
printing costs, and, if the Merger is abandoned by Commonwealth
or Commonwealth Bank because of circumstances relating to their
pending mergers with Meridian and Meridian Bank, Commonwealth
will reimburse GNB for its legal expenses resulting from the
transactions contemplated herein in an amount not to exceed
$20,000.
10. Brokerage Commissions.
Except for McConnell, Budd & Downes, Inc., which has been
retained by GNB to render the opinion described in Section 3.6
(and which shall be paid by GNB), neither GNB, the Surviving Bank
or its parent nor any of their respective officers, directors,
employees or agents, has employed or will employ any broker,
finder or financial adviser, or has incurred or will incur
liability for any fees or commissions payable to any such person,
in connection with this Plan or the transactions contemplated
herein.
11. Miscellaneous.
11.1 Amendment and Waiver. At any time prior to or (to
the fullest extent permitted by law) after approval of this Plan
by the shareholders of GNB, (a) the parties hereto may, by
written agreement authorized by their respective Boards of
Directors and with or without the approval of their shareholders,
amend any of the provisions of this Plan, and (b) any party may
waive any default by any other party or the failure to satisfy
any of the conditions to its obligations; provided that such
waiver is in writing and authorized by the Board of Directors of
the waiving party, with or without the approval of such party's
shareholders.
11.2 Survival. All representations and warranties
contained herein, in the Supplemental Agreement or in any writing
delivered pursuant hereto or thereto shall expire on, and be
terminated and extinguished at, the Effective Date if the Merger
is consummated; provided that no such representation or warranty
shall be deemed to be terminated or extinguished so as to deprive
GNB, Commonwealth, Commonwealth Bank, Meridian or Meridian Bank
(or any director, officer or controlling person thereof) of any
defense that otherwise would be available against the claims of
any person, including, without limitation, any shareholder or
former shareholder of any party, the aforesaid representations
and warranties being material inducements to the consummation by
the parties of the transactions contemplated herein.
11.3 Notices. Any notice or other communication
required or permitted hereunder shall be sufficiently given if
made in writing and delivered personally or sent by registered or
certified mail, postage prepaid, to the party entitled to notice
at its registered or principal office as set forth in the
recitals.
11.4 Entire Agreement. This Plan and the Supplemental
Agreement contain the final and entire agreement and
understanding of the parties with respect to the transactions
contemplated herein and supersede all prior agreements or
understandings with respect thereto, written or oral. No party
may assign any of its rights or delegate any of its obligations
under this Plan and the Supplemental Agreement to any other
person, except as expressly contemplated by this Plan and the
Supplemental Agreement.
11.5 Confidentiality. If the Merger contemplated
herein is not consummated for any reason, no party shall use or
disclose to third parties, or permit any of its employees, agents
or representatives to use or disclose to third parties, any
information about any other party that is obtained from such
party (or such party's employees, agents or representatives)
pursuant to Section 5.4 or otherwise in connection with the
transactions contemplated hereby, except to the extent such
information is publicly available or obtained from independent
sources.
11.6 Headings. The headings contained herein are for
convenience only and do not constitute a part of this Plan.
11.7 Governing Law. This Plan shall be governed by,
and interpreted in accordance with, the laws of the Commonwealth
of Pennsylvania, except to the extent federal laws are
applicable.
11.8 Counterparts. This Plan may be executed in one or
more counterparts, each of which shall be deemed an original, but
all of which together shall constitute one and the same document.
IN WITNESS WHEREOF, each party has caused this Plan to
be executed on its behalf and its corporate seal to be affixed
hereto by its duly authorized officers, all as of the day and
year first above written.
(CORPORATE SEAL) COMMONWEALTH BANCSHARES CORPORATION
Attest:
/s/ Anthony W. Boroch /s/ William D. Davis
Anthony W. Boroch, William D. Davis, Chairman and
Secretary Chief Executive Officer
(CORPORATE SEAL) THE GRANGE NATIONAL BANK OF
SUSQUEHANNA COUNTY
Attest:
/s/ William S. Kane By:/s/ Agnes M. Jones
William S. Kane Agnes M. Jones,
President and
Secretary Chief Executive officer
(CORPORATE SEAL) COMMONWEALTH BANK
Attest:
/s/ Anthony W. Boroch By:/s/ William E. Snell, Jr.
Anthony W. Boroch, Title: William E. Snell, Jr.
Secretary President and
Chief Executive Officer
<PAGE>
The undersigned Directors of The Grange National Bank of
Susquehanna County do hereby consent to the aforesaid Plan and do
individually agree to support said Plan and to vote the shares of
capital stock each owns in favor of said Plan.
__________________________________
__________________________________
__________________________________
__________________________________
__________________________________
__________________________________
__________________________________
__________________________________
__________________________________
__________________________________
<PAGE>
SUPPLEMENTAL AGREEMENT
TO
JOINT PLAN OF MERGER
Between
GRANGE NATIONAL BANK OF SUSQUEHANNA COUNTY
and
COMMONWEALTH BANK
This Supplemental Agreement (the "Agreement") to the
Joint Plan of merger Between Grange National Bank of Susquehanna
County and Commonwealth Bank of even date herewith (the "Plan")
is dated as of April 26, 1993 and adopted and made by and among
Meridian Bancorp, Inc., a Pennsylvania corporation ("Meridian"),
having its principal place of business at 35 North Sixth Street,
Reading, Pennsylvania 19603, Meridian Bank, a Pennsylvania
banking corporation and a wholly-owned subsidiary of Meridian
("Meridian Bank"), The Grange National Bank of Susquehanna County
("GNB"), a national banking association, with its principal place
of business at 220 Main Street, New Milford, Pennsylvania,
Commonwealth Bancshares Corporation, a Pennsylvania corporation
("Commonwealth") having its principal place of business at
101 West Third Street, Williamsport, Pennsylvania 17703, and
Commonwealth Bank, a Pennsylvania banking corporation and a
wholly-owned subsidiary of Commonwealth ("Commonwealth Bank").
RECITALS
Commonwealth, Commonwealth Bank and GNB are the parties
to the Plan, a copy of which is attached hereto as Annex A.
Meridian and Commonwealth are parties to an Agreement
and Plan of Merger dated as of March 30, 1993, a copy of which is
attached hereto as Exhibit B (the "Meridian/Commonwealth
Agreement"), pursuant to which Commonwealth is to be merged with
and into Meridian, with Meridian being the surviving corporation
(the "Meridian/Commonwealth Merger"), and Commonwealth Bank is to
be merged with and into Meridian Bank, with Meridian Bank being
the surviving corporation (the "Meridian Bank/Commonwealth Bank
Merger").
The purpose of this Agreement is to set forth the
understanding of the parties that (a) if the
Meridian/Commonwealth Merger is consummated, upon the
effectiveness of that merger, Meridian shall acquire all rights
and assume all obligations of Commonwealth under the Plan and
(b) if the Meridian Bank/Commonwealth Bank Merger is consummated,
upon the effectiveness of such merger, Meridian Bank shall
acquire all rights and assume all obligations of Commonwealth
Bank under the Plan.
NOW, THEREFORE, in consideration of the premises and of
the mutual agreements herein contained and intending to be
legally bound hereby, the parties hereto hereby agree as follows:
1. Consent to Plan. Each of Meridian and Meridian
Bank hereby consents to the execution and delivery of the Plan
and this Supplemental Agreement by Commonwealth and Commonwealth
Bank and the performance by them of their respective obligations
thereunder and hereunder.
2. Effect of the Meridian Mergers.
(a) Upon the effectiveness of the
Meridian/Commonwealth Merger, Meridian shall succeed to all
rights and assume all obligations of Commonwealth under the Plan,
and from and after such time and date, Meridian shall be, and
shall be treated for all purposes under the Plan as, the "parent
of the Surviving Bank" (as defined in the Plan) as if the Plan
had been joined in by it in such capacity the first instance.
(b) Upon the effectiveness of the Meridian
Bank/Commonwealth Bank Merger, Meridian shall succeed to all
rights and assume all obligations of Commonwealth Bank under the
Plan, and from and after such time and date, Meridian Bank shall
be, and shall be treated for all purposes as a "party" to the
Joint Plan of Merger set forth in the Plan and as the Surviving
Bank (as defined in the Plan) as if the Plan had been executed by
it in such capacity in the first instance.
3. Restatement of Section 1.4(a) of the Plan. If, but
only if, the Meridian/Commonwealth Merger has been consummated
before the Effective Date (as defined in the Plan), upon the
effectiveness of the Meridian/Commonwealth Merger:
(a) the first sentence of Section 1.4(a) of the
Plan shall be restated to read in its entirety as follows:
"Subject to the other provisions of this
Section 1.4 and the provisions of the Supplemental
Agreement, on the Effective Date each common share
of GNB issued and outstanding immediately prior
thereto shall, by virtue of the Merger,
automatically and without need for any other act,
be converted into and become (i) if the Effective
Date occurs on or before May 31, 1994, 5.66 common
shares of Meridian common stock unless the Closing
Value (as defined below) of one Meridian common
share is less than $32.685, and, then, into the
lesser of such number of Meridian common shares as
have a Closing Value of $185.00 or 6.50 Meridian
common shares or (ii) if the Effective Date occurs
on or after June 1, 1994, 6.66 shares of Meridian
common stock"; and
(b) the second and third sentences of such
Section 1.4(a) shall be deleted from the Plan in their entirety.
4. Limitations on Liability. The obligations and
liabilities of the parties are limited as follows:
(a) Neither Meridian nor Meridian Bank or any of
their respective directors, officers, shareholders, employees,
agents, representatives, or their respective heirs, successors or
assigns shall have any obligation or liability to GNB,
Commonwealth or Commonwealth Bank, or to their respective
directors, officers, shareholders, employees, agents or
representatives, or to their respective heirs, successors or
assigns until such time, if ever, as Meridian and Meridian Bank
shall, respectively, have joined in or become party to the Joint
Plan of Merger set forth in the Plan as described in Section 2
above, except for such liability, if any, as they may have for
any failure by Meridian or Meridian Bank to perform its
obligations under this Agreement.
(b) Neither Commonwealth nor Commonwealth Bank or
any of their respective directors, officers, shareholders,
employees, agents, representatives, or their respective heirs,
successors or assigns shall have any obligation or liability to
Meridian or Meridian Bank or to GNB or to any of their respective
directors, officers, shareholders, employees, agents or
representatives, or to their respective heirs, successors or
assigns for any breach by Meridian or Meridian Bank of any of its
obligations or representations and warranties to GNB or any
breach by GNB of any of its obligations or representatives and
warranties to Meridian or Meridian Bank.
5. Filings. Each of the parties will use its best
reasonable efforts to cause the Merger, subject to the
satisfaction of the appropriate conditions in Sections 2 and 3 of
the Plan, to be consummated as promptly as practicable, and thus,
the applications for required federal and state banking approvals
referred to in Section 4.1 of the Plan to be filed as promptly as
practicable and to cause the Proxy/Prospectus (as defined in the
Plan) to be filed with the SEC (as defined in the Plan) (a) (as
nearly as practicable) contemporaneously with the filing, if any,
of the joint proxy statement/prospectus seeking approval of the
Meridian/Commonwealth Merger, or (b) as promptly as practicable
thereafter, but, in any event, (c) on or before June 30, 1993;
provided, however, that no party shall have any liability to any
other party or person hereunder or under the Plan if any such
filing cannot be made pursuant to applicable federal or state
banking or securities laws, the rules and regulations promulgated
thereunder or the interpretations thereof by the appropriate
agencies or because of the failure, refusal or inability of any
third party to cooperate in the making of any such filing, and,
provided, further, that any party shall have the right to
postpone the making of any such filing for a period of up to
thirty (30) days if, in its business judgment, there are valid
business reasons (other than the avoidance of its obligations
under Plan or this Supplemental Agreement) for such postponement.
If at any time prior to the meeting of the GNB shareholders to
vote on the Plan, this Supplemental Agreement and the Merger (as
defined in the Plan), or thereafter during the period in which
the Registration Statement (as defined in the Plan) is effective,
there occurs any material development which requires the making
of changes in the Proxy/Prospectus or the Registration Statement
so that such documents will not contain any untrue statement of a
material fact or omit to state any material fact required to be
stated therein, or necessary to make the statements therein, in
light of the circumstances under which they were made, not
misleading, then GNB agrees that it shall postpone any meeting of
its shareholders which has been scheduled until the
Proxy/Prospectus and the Registration Statement of which it is a
part have been amended or supplemented as necessary, and at the
request of the Surviving Bank, recirculate the Proxy/Prospectus,
as so amended or supplemented, and reconvene the meeting of GNB
shareholders to consider such amendment or supplement.
6. Pooling of Interests.
Within two business days after the date hereof each of
Commonwealth and Meridian shall request from their independent
accountants confirmation that consummation of the Merger (as
defined in the Plan) and the transactions contemplated by the
Plan and this Supplemental Agreement do not cause the acquisition
of Commonwealth by Meridian in the Meridian/Commonwealth Merger
to fail to qualify for "pooling of interests" accounting
treatment. If either Meridian or Commonwealth fails to receive
such confirmation in form and substance satisfactory to it, on or
before the date on which GNB is required to deliver the
Disclosure Letter (as defined in the Plan), GNB and Commonwealth
will at the written request of Meridian or Commonwealth delivered
on or before May 11, 1993, terminate the Plan; provided, however,
that at the written request of GNB delivered on or before May 12,
1993, Commonwealth and Meridian shall negotiate in good faith
with GNB to restructure the Plan so that the consummation of the
Merger and the transactions contemplated by the Plan in this
Supplemental Agreement would not cause the acquisition of
Commonwealth by Meridian to fail to qualify for "pooling of
interests" accounting treatment; provided, further that this
clause shall not impose any obligation on the parties other than
to negotiate in good faith.
7. Miscellaneous.
(a) Timing of Certain Events. In the event that
GNB elects pursuant to Section 1.4(a) of the Plan to require
Commonwealth Bank to consummate the Merger within forty-five
(45) days, subject to the satisfaction of the appropriate
conditions precedent in Sections 2 and 3 of the Plan, each party
agrees to use its reasonable best efforts to cause such
consummation to occur within such period; provided, however, that
if the Meridian/Commonwealth Merger can be consummated during
such period, the parties agree that the Meridian/Commonwealth
Merger may be closed prior to the closing of the Merger;
provided, that each of the parties uses their best efforts to
cause the Merger to be consummated simultaneously with or as
promptly as practicable after the Meridian/Commonwealth Merger.
(b) Amendment and Waiver. At any time prior to
or (to the fullest extent permitted by law) after approval of the
Plan by the shareholders of GNB, (a) the parties hereto may, by
written agreement authorized by their respective Boards of
Directors and with or without the approval of their shareholders,
amend any of the provisions of this Agreement, and (b) any party
may waive any default by any other party or the failure to
satisfy any of the conditions to its obligations; provided that
such waiver is in writing and authorized by the Board of
Directors of the waiving party, with or without the approval of
such party's shareholders.
(c) Termination. This Agreement (except for the
provisions of Sections 4 and 7(f) hereof, which shall survive any
such termination) shall terminate, without further action by any
party, upon the first to occur of the termination of the
Meridian/Commonwealth Agreement or the termination of the Plan.
(d) Notices. Any notice or other communication
required or permitted hereunder shall be sufficiently given if
made in writing and delivered personally or sent by registered or
certified mail, postage prepaid, to the party entitled to notice
at its registered or principal office as set forth in the
preamble.
(e) Entire Agreement. The Plan and this
Agreement contain the final and entire agreement and
understanding of the parties with respect to the transactions
contemplated therein and herein and supersede all prior
agreements or understandings with respect thereto and hereto,
written or oral. No party may assign any of its rights or
delegate any of its obligations under the Plan and this Agreement
to any other person, except as expressly contemplated by the Plan
and this Agreement.
(f) Confidentiality. If the Merger (as defined
in the Plan) is not consummated for any reason, no party shall
use or disclose to third parties, or permit any of its employees,
agents or representatives to use or disclose to third parties,
except to the extent publicly available or obtained from
independent sources, any information about any other party that
is obtained from such party (or such party's employees, agents or
representatives) in connection with the transactions contemplated
hereby.
(g) Headings. The headings contained herein are
for convenience only and do not constitute a part of this
Agreement.
(h) Governing Law. This Agreement shall be
governed by, and interpreted in accordance with, the laws of the
Commonwealth of Pennsylvania.
(i) Counterparts. This Agreement may be executed
in one or more counterparts, each of which shall be deemed an
original, but all of which together shall constitute one and the
same document.
IN WITNESS WHEREOF, each party hereto has caused this
Plan to be executed on its behalf and its corporate seal to be
affixed hereto by its duly authorized officers, all as of the day
and year first above written.
[CORPORATE SEAL] COMMONWEALTH BANCSHARES CORPORATION
By /s/William D. Davis
William D. Davis,
Chairman and Chief
Executive Officer
Attest: /s/Anthony W. Boroch
Anthony W. Boroch,
Secretary
[CORPORATE SEAL] THE GRANGE NATIONAL BANK OF
SUSQUEHANNA COUNTY
By /s/Agnes M. Jones
Agnes M. Jones,
President
Attest:/s/ William J. Kane
Secretary
[CORPORATE SEAL] COMMONWEALTH BANK
By /s/ William E. Snell, Jr.
Title:
Attest: /s/Anthony W. Boroch
Secretary
[CORPORATE SEAL] MERIDIAN BANCORP, INC.
By /s/ David E. Sparks
Title:
Attest: /s/ Dawn P. Smith
Secretary
[CORPORATE SEAL] MERIDIAN BANK
By /s/ David E. Sparks
Title:
Attest: /s/ Dawn P. Smith
Secretary
<PAGE>
SECOND SUPPLEMENTAL AGREEMENT TO JOINT PLAN OF MERGER
THIS SECOND SUPPLEMENTAL AGREEMENT TO JOINT PLAN OF MERGER,
dated as of February 17, 1994 (the "Second Supplemental
Agreement"), is adopted and made by and among MERIDIAN BANCORP,
INC. ("Meridian"), a Pennsylvania business corporation, having
its principal place of business at 35 North Sixth Street,
Reading, Pennsylvania 19601, MERIDIAN BANK ("Meridian Bank"), a
Pennsylvania banking corporation and wholly-owned subsidiary of
Meridian, with its principal place of business at 35 North Sixth
Street, Reading, Pennsylvania 19601, and THE GRANGE NATIONAL BANK
OF SUSQUEHANNA COUNTY ("GNB"), a national banking association,
with its principal place of business at 220 Main Street, New
Milford, Pennsylvania 18834.
BACKGROUND
1. Commonwealth Bancshares Corporation ("Commonwealth"),
formerly a Pennsylvania business corporation having its principal
place of business at 101 West Third Street, Williamsport,
Pennsylvania 17703, Commonwealth Bank ("Commonwealth Bank"),
formerly a Pennsylvania banking corporation having its principal
place of business at 101 West Third Street, Williamsport,
Pennsylvania 17703 and GNB entered into a Joint Plan of Merger,
dated as of April 26, 1993 (the "Plan"), providing for, among
other things, the merger of GNB with and into either
(i) Commonwealth Bank, with Commonwealth Bank surviving the
merger, or (ii) Meridian Bank, with Meridian Bank surviving the
merger, in the event that the then pending merger of Commonwealth
Bank and Meridian Bank was completed prior to completion of the
proposed merger of GNB and Commonwealth Bank.
2. Meridian, Meridian Bank, Commonwealth, Commonwealth
Bank and GNB entered into a Supplemental Agreement to Joint Plan
of Merger, dated as of April 26, 1993 (the "First Supplemental
Agreement") (the Plan and the First Supplemental Agreement are
hereinafter collectively referred to as the "Merger Agreement"),
pursuant to which (i) Meridian agreed, among other things, to
acquire all rights and assume all obligations of Commonwealth
under the Plan in the event the then pending merger of Meridian
and Commonwealth was completed, and (ii) Meridian Bank agreed,
among other things, to acquire all rights and assume all
obligations of Commonwealth Bank under the Plan in the event the
then pending merger of Meridian Bank and Commonwealth Bank was
completed.
3. On August 31, 1993, Commonwealth merged into Meridian
and Commonwealth Bank merged into Meridian Bank.
4. Upon the completion of the respective mergers of
Commonwealth and Commonwealth Bank into Meridian and Meridian
Bank, respectively, Meridian and Meridian Bank acquired all
rights and assumed all obligations of Commonwealth and
Commonwealth Bank, respectively, under the Merger Agreement.
5. Meridian, Meridian Bank and GNB desire to amend the
Merger Agreement in certain respects as hereinafter set forth.
AGREEMENT
NOW THEREFORE, in consideration of the premises and of the
mutual covenants and agreements herein contained, the parties
hereto, intending to be legally bound, do hereby agree as
follows:
1. Section 2.12 of the Plan. Section 2.12 of the Plan is
hereby amended and restated in its entirety as follows:
"2.12 Accounting Treatment.
[Intentionally omitted.]"
2. Section 2.14 of the Plan. Section 2.14 of the Plan is
hereby amended and restated to read in its entirety as follows:
"2.14 Employment Agreement. Agnes
Jones shall have executed and delivered to
Commonwealth Bank a "Change in Control
Employment Agreement" in substantially the
form previously delivered to her by
Commonwealth Bank, which agreement provides,
in part, for the automatic termination of her
employment contract dated July 20, 1989 with
GNB and for her employment for up to two
years in accordance with such agreement;
provided, however, that under the terms of
such employment agreement Mrs. Jones shall
have the option during the second year of
such agreement to perform services solely on
a consulting basis during normal business
hours for up to ten hours per week as
requested by the Surviving Bank in
consideration of one-half of the base salary
provided for under such agreement. Agnes
Jones shall have also terminated, to the
satisfaction of the Surviving Bank, any and
all other agreements between herself and GNB
in existence on the date hereof, and shall
have irrevocably waived and relinquished any
and all past, present and future claims to
any compensation or payments (except as
otherwise provided for in the Change in
Control Employment Agreement referred to
above) whatsoever resulting from or related
to the change of control of GNB in the
Merger."
3. Section 5.3 of the Plan. Section 5.3 of the Plan is
hereby amended and restated to read in its entirety as follows:
"5.3 Negative Covenants. Without the
prior written consent of the Surviving Bank,
GNB shall not, prior to the Effective Date,
willfully or intentionally cause or permit to
occur any action or event that would cause
any of its representations or warranties
contained in this Plan to be untrue had such
representation or warranty been made as of
immediately after such action or event;
provided, however, that (i) GNB may declare
and pay a regular cash dividend of $1.00 per
common share on April 1, 1994 for the first
quarter for 1994; and (ii) GNB may, without
the prior written consent of the Surviving
Bank and without causing its representation
and warranty set forth in subclause (c) of
Section 6.7 hereof to be deemed untrue as of
the date hereof or as of the Effective Date,
increase the rate of compensation paid to
directors, officers and employees of GNB,
effective January 1, 1994, in a manner
consistent with past practice with respect to
the timing and amounts of such increases."
4. Section 6.7 of the Plan. Section 6.7 of the Plan is
hereby amended and restated to read in its entirety as follows:
"6.7 Absence of Certain Events. Except
as set forth in the Disclosure Letter, since
December 31, 1992 GNB has not: (a) declared
or paid any dividend or distribution to any
of its shareholders or combined, purchased,
redeemed or otherwise acquired any shares of
its capital stock (other than in a fiduciary
capacity), except for regular, cash dividends
payable on the first day of each calendar
quarter to shareholders of record on the
fifteenth day of the last month of the
immediately preceding calendar quarter in an
amount not exceeding $0.60 per common share;
(b) authorized the creation or issuance of or
issued or sold any additional shares of its
capital stock, or any warrants, options,
calls or commitments relating to its capital
stock or any securities or obligations
convertible into or exchangeable for, or
giving any person any right to subscribe for
or acquire from GNB, shares of its capital
stock; (c) entered into or, except as
contemplated by Section 2.14 hereof, modified
any employment contract with, increased the
rate of compensation of, or paid or agreed to
pay any bonus to any of its directors,
officers or employees; (d) entered into, or
substantially modified or increased its
contributions to, any pension, retirement,
insurance, profit sharing or other benefit
plan or arrangement in respect of any of its
present or former directors, officers or
employees; (e) amended its Articles of
Incorporation or Bylaws; (f) disposed of or
discontinued any of its material businesses
or properties or acquired any material assets
(other than cash received in connection with
deposits obtained by GNB); (g) conducted its
business in any respect otherwise than in the
ordinary course of business consistent with
past practice; or (h) experienced any
material adverse change in its business,
financial condition, loan portfolio,
properties, operations, prospects, or
relations with regulatory authorities.
Notwithstanding Section 6.7(b), if the
Effective Date occurs after May 15, 1994, GNB
may declare and pay, immediately prior to the
Effective Date, a cash dividend in an amount
equal to $.32 multiplied by the number of
shares of Meridian Common Stock into which
each common share of GNB issued and
outstanding immediately prior to the
Effective Date shall be converted in
accordance with this Agreement."
5. Further Assurances. Meridian and Meridian Bank shall
each use its best efforts in good faith to complete the Merger as
expeditiously as possible notwithstanding the effect of any other
merger or acquisition agreement to which Meridian or Meridian
Bank is a party or may become a party in the future.
6. Miscellaneous.
(a) Except as amended hereby, the Plan and the First
Supplemental Agreement are ratified and confirmed in all
respects.
(b) The Plan, the First Supplemental Agreement and
this Second Supplemental Agreement contain the entire agreement
and understanding of the parties with respect to the transactions
contemplated herein and therein and supersede all prior
agreements or understandings with respect hereto and thereto,
whether written or oral.
(c) Neither party hereto may assign any of its rights
or obligations hereunder to any other person, without the prior
written consent of the other party hereto.
(d) This Second Supplemental Agreement shall be
governed and construed in accordance with the domestic, internal
law of the Commonwealth of Pennsylvania without regard to its
conflicts of laws principles.
(e) This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original, but all
of which together shall constitute one and the same document.
IN WITNESS WHEREOF, the parties have caused this Second
Supplemental Agreement to be executed by their duly authorized
officers as of the day and year first above written.
MERIDIAN BANCORP, INC.
By/s/ Michael J. Hughes
(SEAL) Attest:/s/ William L. Gaunt
MERIDIAN BANK
By/s/ Wayne R. Huey, Jr.
(SEAL) Attest:/s/ William L. Gaunt
THE GRANGE NATIONAL BANK OF
SUSQUEHANNA COUNTY
By/s/ Agnes M. Jones
(SEAL) Attest:___________________________
<PAGE>
OPINION OF McCONNELL, BUDD & DOWNES, INC.
<PAGE>
March 14, 1994
The Board of Directors
The Grange National Bank of Susquehanna County
220 Main Street
New Milford, Pennsylvania 18834
Dear Members of the Board:
You have requested our opinion as to the fairness from a
financial point of view to the holders of common stock of the
Grange National Bank of Susquehanna County ("Grange") of the
Exchange Ratio, (within the maximum and minimum limits as defined
hereinbelow) by which the consideration to be paid by Meridian
Bancorp, Inc. ("Meridian") is to be determined, in accordance
with the terms of the Joint Plan of Merger as dated April 26,
1993, the Supplemental Agreement to Joint Plan of Merger and a
Second Supplemental Agreement to the Joint Plan of Merger as
dated February 17, 1994. Under the terms of the Joint Plan of
Merger, each outstanding share of Grange common stock, other than
shares already held by Meridian, shares held by Grange as
treasury stock and shares of Grange as to which dissenters'
rights have been perfected, will be converted into that number of
shares of Meridian common stock as shall equal the quotient (the
"Exchange Ratio") of $185.00 divided by the Closing Value (as
defined hereinbelow) but in no event prior to June 1, 1994 shall
the Exchange Ratio be less than 5.66 nor more than 6.5. For
purposes of the Joint Plan of Merger, Closing Value of Meridian
Common Stock means the average of the last quoted per share sales
price for the Exchange Common Shares for the twenty Trading Days
immediately preceding the Effective Date, as reported by the
national securities exchange, if any, on which such shares are
then listed for sale or on the NASDAQ, as the case may be, or if
not so quoted, the average of the high bid and low asked prices
in the over-the-counter market, as reported by the NASDAQ or such
other system then in use for such period. Terms not otherwise
defined in this letter shall have the same meanings given them in
the Joint Plan of Merger.
McConnell, Budd & Downes, Inc. as part of its investment
banking business is continually engaged in the valuation of Bank
Holding Companies, Banks, Thrift Holding Companies and Thrifts
and their securities in connection with mergers and acquisitions,
negotiated underwritings, competitive biddings, market making as
a NASDAQ market maker, secondary distributions of listed
securities, private placements and valuations for corporate and
other purposes. We are familiar with Grange having acted as
financial advisor to Grange since October 30, 1992 on a
contractual basis, including n the negotiations leading up to the
transaction with Meridian. In the course of our acting as
financial advisor to Grange in conjunction with this transaction
we have received fees for our services and will receive
additional fees contingent on certain occurrences. We will
receive a fee for tendering this opinion.
In the ordinary course of our business, we may trade the
equity securities of Meridian, for our own account, for the
accounts of our customers and for the accounts of individual
employees of McConnell, Budd & Downes. Accordingly we may from
time to time hold a long or short position in the equity
securities of Meridian. As of the date of this opinion letter
the aggregate amount of Meridian equity securities held by this
firm, its principals and employees and customers is zero.
In forming our opinion, we have reviewed publicly available
business and financial information relating to Grange and
Meridian. We also reviewed the Joint Plan of Merger, the
Supplemental Agreement to Joint Plan of Merger and a Second
Supplemental Agreement to the Joint Plan of Merger. We have also
reviewed certain other information including internal reports and
documents of Grange and other internal, management prepared
financial forecasts or projections provided to us by Grange. Due
to its corporate policy, Meridian did not provide us with any
specific management prepared financial forecasts or projections
concerning Meridian's future performance. Meridian also declined
to provide other requested non-public information based on the
same policy. We have also met with and had discussions with
members of senior management of each of Grange and Meridian
regarding their respective past and current business operations
and financial condition. We have reviewed and studied the
historical stock prices and trading volumes of the common stocks
of both Grange and Meridian. We have also reviewed the publicly
available terms and conditions of recent acquisitions of
commercial banks within Pennsylvania. We have also conducted
such other studies, analyses and investigations as we deemed
appropriate under the circumstances surrounding this transaction.
In the course of our review and analysis we have relied upon
and assumed, without independent verification, the accuracy and
completeness of the financial and other information provided to
us by the management of both Grange and Meridian or publicly
available. In reaching our opinion, we have not performed or
obtained from any other source, any independent appraisals of the
assets of Grange or of Meridian.
In the course of rendering this opinion, which is being
rendered prior to receipt of all required regulatory approvals
necessary for the consummation of the transaction, we are
assuming that no conditions will be imposed by any regulatory
agency in connection with its approval of the transaction that
will have a material adverse effect on the results of operations
or the financial condition or the prospects of the pro forma
company.
Based upon and subject to the foregoing, it is our opinion
that, as of the date of this letter, the Exchange Ratio,
(including the maximum and minimum ratios permitted) provided for
in the Joint Plan of Merger is fair to the holders of Grange
common stock from a financial point of view.
Sincerely yours,
/s/McConnell, Budd & Downes, Inc.
<PAGE>
ANNEX C
EXCERPTS FROM NATIONAL BANK ACT
RELATING TO DISSENTERS' RIGHTS
<PAGE>
Procedure for Conversion, Merger, or
Consolidation; Vote of Stockholders
Section 2. A national banking association may, by vote
of the holders of at least two-thirds of each class of its
capital stock, convert into, or merge or consolidate with, a
State bank in the same State in which the national banking
association is located, under a State charter, in the following
manner:
Approval of Board of Directors; Publication of Notice
of Stockholders' Meeting; Waiver of Publication;
Notice by Registered or Certified Mail
(a) The plan of conversion, merger, or consolidation
must be approved by a majority of the entire board of directors
of the national banking association. The bank shall publish
notice of the time, place, and object of the shareholders'
meeting to act upon the plan, in some newspaper with general
circulation in the place where the principal office of the
national banking association is located, at least once a week for
four consecutive weeks: Provided, That newspaper publication may
be dispensed with entirely if waived by all the shareholders and
in the case of a merger or consolidation one publication at least
ten days before the meeting shall be sufficient if publication
for four weeks is waived by holders of at least two-thirds of
each class of capital stock and prior written consent of the
Comptroller of the Currency is obtained. The national banking
association shall send such notice to each shareholder of record
by registered mail or by certified mail at least ten days prior
to the meeting, which notice may be waived specifically by any
shareholder.
Rights of Dissenting Shareholders
Section 2(b). A shareholder of a national banking
association who votes against the conversion, merger, or
consolidation, or who has given notice in writing to the bank at
or prior to such meeting that he dissents from the plan, shall be
entitled to receive in cash the value of the shares held by him,
if and when the conversion, merger, or consolidation is
consummated, upon written request made to the resulting State
bank at any time before thirty days after the date of
consummation of such conversion, merger, or consolidation,
accompanied by the surrender of his stock certificates. The
value of such shares shall be determined as of the date on which
the shareholders' meeting was held authorizing the conversion,
merger, or consolidation, by a committee of three persons, one to
be selected by majority vote of the dissenting shareholders
entitled to receive the value of their shares, one by the
directors of the resulting State bank, and the third by the two
so chosen. The valuation agreed upon by any two of three
appraisers thus chosen shall govern; but, if the value so fixed
shall not be satisfactory to any dissenting shareholder who has
requested payment as provided herein, such shareholder may within
five days after being notified of the appraised value of his
shares appeal to the Comptroller of the Currency, who shall cause
a reappraisal to be made, which shall be final and binding as to
the value of the shares of the appellant. If, within ninety days
from the date of consummation of the conversion, merger, or
consolidation, for any reason one or more of the appraisers is
not selected as herein provided, or the appraisers fail to
determine the value of such shares, the Comptroller shall upon
written request of any interested party, cause an appraisal to be
made, which shall be final and binding on all parties. The
expenses of the Comptroller in making the reappraisal, or the
appraisal as the case may be, shall be paid by the resulting
State bank. The plan of conversion, merger, or consolidation
shall provide the manner of disposing of the shares of the
resulting State bank not taken by the dissenting shareholders of
the national banking association.
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 20. Indemnification of Directors and Officers.
Pennsylvania law provides that a Pennsylvania corporation
may indemnify directors, officers, employees and agents of the
corporation against liabilities they may incur in such capacities
for any action taken or any failure to act, whether or not the
corporation would have the power to indemnify the person under
any provision of law, unless such action or failure to act is
determined by a court to have constituted recklessness or willful
misconduct. Pennsylvania law also permits the adoption of a
bylaw amendment, approved by shareholders, providing for the
elimination of a director's liability for monetary damages for
any action taken or any failure to take any action unless (1) the
director has breached or failed to perform the duties of his
office and (2) the breach or failure to perform constitutes
self-dealing, willful misconduct or recklessness.
The bylaws of Meridian provide for (1) indemnification of
directors, officers, employees and agents of the registrant and
its subsidiaries and (2) the elimination of a director's
liability for monetary damages, to the fullest extent permitted
by Pennsylvania law.
Directors and officers are also insured against certain
liabilities for their actions, as such, by an insurance policy
obtained by Meridian.
Item 21. Exhibits and Financial Statement Schedules.
(a) Exhibits.
2.1 Joint Plan of Merger, dated as of April 26, 1993
(included as Annex A to the Proxy
Statement/Prospectus).
2.2 Supplemental Agreement to Joint Plan of Merger,
dated as of April 26, 1993 (included as Annex A to
the Proxy Statement/Prospectus.
2.3 Second Supplemental Agreement to Joint Plan of
Merger, dated as of February 17, 1994 (included as
Annex A to the Proxy Statement/Prospectus.
4.1 Subordinated Trust Indenture dated as of March 9,
1992, between Meridian Bancorp, Inc. and The First
National Bank of Chicago, as Trustee (incorporated
herein by reference to Exhibit 4.1 to Registration
Statement No. 33-45562 on Form S-3 of Meridian
Bancorp, Inc.).
4.2 Senior Trust Indenture dated as of March 9, 1992,
between Meridian Bancorp, Inc. and The First
National Bank of Chicago, as Trustee (incorporated
herein by reference to Exhibit 4.2 to Registration
Statement No. 33-45562 on Form S-3 of Meridian
Bancorp, Inc.).
4.3 Indenture dated December 1, 1984, relating to
$75,000,000 of floating rate subordinated capital
notes of Meridian Bancorp, Inc. due December 1,
1996 (incorporated herein by reference to
Exhibit 4.2 to Registration Statement No. 2-94325
on Form S-3 of Meridian Bancorp, Inc.).
4.4 Form of Meridian Bancorp, Inc. floating rate
subordinated capital notes due December 1, 1996
(incorporated herein by reference to Exhibit 4.3
to Registration Statement No. 2-94325 on Form S-3
of Meridian Bancorp, Inc.).
4.5 Rights Agreement dated July 25, 1989, between
Meridian Bancorp, Inc. and Meridian Bank, as
Rights Agent (incorporated herein by reference to
the Registration Statement on Form 8-A of Meridian
Bancorp, Inc. filed August 14, 1989).
4.6 Meridian Bancorp, Inc. has outstanding long-term
debt which does not exceed 10% of the total assets
of Meridian Bancorp, Inc. and its consolidated
subsidiaries; therefore, copies of the constituent
instruments defining the rights of the holders of
such debt are not included as exhibits to this
Registration Statement. Meridian Bancorp, Inc.
agrees to furnish copies of such instruments to
the Commission upon request.
5. Opinion of Stevens & Lee re: Validity.
8. Form of opinion of Stevens & Lee re: Tax Matters.
23.1 Consent of Davidson, Fox & Co..
23.2 Form of Consent of KPMG Peat Marwick.
23.3 Consent of Stevens & Lee (contained in Exhibit 5).
23.4 Consent of Stevens & Lee (contained in Exhibit 8).
23.5 Consent of McConnell, Budd & Downes, Inc.
24. Power of Attorney.
99.1 Opinion of McConnell, Budd & Downes, Inc. dated
January 25, 1994 (included as Annex B to the Proxy
Statement/Prospectus).
(b) Financial Statement Schedules.
None required.
Item 22. Undertakings.
(a)(1) The undersigned registrant hereby undertakes as
follows: that prior to any public reoffering of the
securities registered hereunder through 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 will 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.
(2) The registrant undertakes that every prospectus
(i) that is filed pursuant to paragraph (1) immediately
preceding, or (ii) that purports to meet the requirements of
section 10(a)(3) of the 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 of 1933, each such post-effective amendment
shall be deemed to be a new registration statement relating
to the securities offered therein, and the offering of such
securities at that time shall be deemed to be the initial
bona fide offering thereof.
(b) Insofar as indemnification for liabilities arising
under the Securities act of 1933 may be permitted to directors,
officers and controlling persons of the registrant pursuant to
the bylaws of the registrant, 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 Act and is, therefore, unenforceable. In the
event that a claim for indemnification against such liabilities
(other than the payment by the registrant of expenses incurred or
paid by a director, officer or controlling person of the
registrant in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling
person in connection with the securities being registered, the
registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of
appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in
the Act and will be governed by the final adjudication of such
issue.
(c) The undersigned registrant hereby undertakes to respond
to requests for information that is incorporated by reference
into the 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.
(d) 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.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of
1933, the registrant has duly caused this Registration Statement
to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of Reading, Commonwealth of Pennsylvania,
on January 25, 1994.
MERIDIAN BANCORP, INC.
(Registrant)
By:/s/Samuel A. McCullough
Samuel A. McCullough
Chairman and
Chief Executive Officer
Pursuant to the requirements of the Securities Act of
1933, this Amendment to Registration Statement has been signed by
the following persons in the capacities and on the dates
indicated.
Signature Title Date
/s/ Samuel A. McCullough Chairman, January 25, 1994
Samuel A. McCullough Chief
Executive
Officer and
Director
(Principal
Executive
Officer)
/s/ David E. Sparks Vice Chairman January 25, 1994
David E. Sparks Chief
Financial
Officer and
Director
(Principal
Financial
Officer)
/s/ Michael J. Mizak, Jr. Senior Vice January 25, 1994
Michael J. Mizak, Jr. President and
Controller
(Principal
Accounting
Officer
/s/ Director January 25, 1994
Delight E. Breidegam, Jr.
/s/ Thomas F. Burke, Jr. Director January 25, 1994
Thomas F. Burke, Jr.
/s/ Robert W. Cardy Director January 25, 1994
Robert W. Cardy
Director January 25, 1994
Harry Corless
/s/ William D. Davis Director January 25, 1994
William D. David
Director January 25, 1994
Julius Erving
/s/ Fred D. Hafer Director January 25, 1994
Fred D. Hafer
/s/ Joseph H. Jones Director January 25, 1994
Joseph H. Jones
/s/ Lawrence C. Karlson Director January 25, 1994
Lawrence C. Karlson
/s/ Ezekiel S. Ketchum Director January 25, 1994
Ezekiel S. Ketchum
/s/ Sidney D. Kline, Jr. Director January 25, 1994
Sidney D. Kline, Jr.
/s/ George W. Leighow Director January 25, 1994
George W. Leighow
Director January 25, 1994
Joseph F. Paquette, Jr.
/s/ Daniel H. Polett Director January 25, 1994
Daniel H. Polett
Director January 25, 1994
Lawrence R. Pugh
/s/ Paul R. Roedel Director January 25, 1994
Paul R. Roedel
/s/ Wilmer R. Schultz Director January 25, 1994
Wilmer R. Schultz
/s/ Robert B. Seidel Director January 25, 1994
Robert B. Seidel
/s/ Wilmer R. Schultz Director January 25, 1994
Wilmer R. Schultz
/s/ Robert B. Seidel Director January 25, 1994
Robert B. Seidel
Director January 25, 1994
Judith M. von Seldeneck
/s/ George Strawbridge, Jr. Director January 25, 1994
George Strawbridge, Jr.
Director January 25, 1994
Anita A. Summers
/s/ Earle Wootton Director January 25, 1994
Earle Wootton
<PAGE>
EXHIBIT INDEX
Sequentially
Numbered
Number Description Page
2.1 Joint Plan of Merger, dated as of
April 26, 1993 (included as Annex A
to the Proxy Statement/Prospectus.
2.2 Supplemental Agreement to Joint Plan of
Merger, dated as of April 26, 1993
(included as Annex A to the Proxy
Statement/Prospectus.
2.3 Second Supplemental Agreement to Joint
Plan of Merger, dated as of February 17,
1994 (included as Annex A to the Proxy
Statement/Prospectus.
4.1 Subordinated Trust Indenture dated as
of March 9, 1992, between Meridian
Bancorp, Inc. and The First National
Bank of Chicago, as Trustee
(incorporated herein by reference to
Exhibit 4.1 to Registration
Statement No. 33-45562 on Form S-3 of
Meridian Bancorp, Inc.).
4.2 Senior Trust Indenture dated as of
March 9, 1992, between Meridian Bancorp,
Inc. and The First National Bank of
Chicago, as Trustee (incorporated
herein by reference to Exhibit 4.2 to
Registration Statement No. 33-45562
on Form S-3 of Meridian Bancorp, Inc.).
4.3 Indenture dated December 1, 1984,
relating to $75,000,000 of floating
rate subordinated capital notes of
Meridian Bancorp, Inc. due
December 1, 1996 (incorporated herein
by reference to Exhibit 4.2 to
Registration Statement No. 2-94325
on Form S-3 of Meridian Bancorp, Inc.).
4.4 Form of Meridian Bancorp, Inc. floating
rate subordinated capital notes due
December 1, 1996 (incorporated herein by
reference to Exhibit 4.3 to Registration
Statement No. 2-94325 on Form S-3 of
Meridian Bancorp, Inc.).
4.5 Rights Agreement dated July 25, 1989,
between Meridian Bancorp, Inc. and
Meridian Bank, as Rights Agent
(incorporated herein by reference to
the Registration Statement on Form 8-A
of Meridian Bancorp, Inc. filed
August 14, 1989).
4.6 Meridian Bancorp, Inc. has outstanding
long-term debt which does not exceed 10%
of the total assets of Meridian Bancorp,
Inc. and its consolidated subsidiaries;
therefore, copies of the constituent
instruments defining the rights of the
holders of such debt are not included as
exhibits to this Registration Statement.
Meridian Bancorp, Inc. agrees to furnish
copies of such instruments to the
Commission upon request.
5. Opinion of Stevens & Lee re: Validity.
8. Form of opinion of Stevens & Lee re:
Tax Matters.
23.1 Consent of Davidson, Fox & Co..
23.2 Form of Consent of KPMG Peat Marwick.
23.3 Consent of Stevens & Lee (contained in
Exhibit 5).
23.4 Consent of Stevens & Lee (contained in
Exhibit 8).
23.5 Consent of McConnell, Budd & Downes, Inc.
24. Power of Attorney.
99.1 Opinion of McConnell, Budd & Downes, Inc.
dated January 25, 1994 (included as
Annex B to the Proxy Statement/Prospectus).
EXHIBIT 5
March 15, 1994
Board of Directors
Meridian Bancorp, Inc.
35 North Sixth Street
Reading, Pennsylvania 19601
Re: Registration Statement on Form S-4
The Grange National Bank of Susquehanna County
Ladies and Gentlemen:
In connection with the proposed offering of up to 166,500
shares of common stock, $5.00 par value per share (the "Common
Stock"), by Meridian Bancorp, Inc. (the "Company"), covered by
the Company's Registration Statement on Form S-4 (the
"Registration Statement") filed with the Securities and Exchange
Commission under the Securities Act of 1933, as amended, with
respect to such Common Stock, we, as special counsel to the
Company, have reviewed:
(1) The Articles of Incorporation of the Company;
(2) The Bylaws of the Company;
(3) The minute books of the Company;
(4) The Registration Statement; and
(5) Copies of the certificates representing shares of the
Common Stock.
Based upon our review of the foregoing, it is our opinion
that:
(a) the Company has been duly incorporated under the laws
of the Commonwealth of Pennsylvania and is validly existing and
in good standing under the laws of the Commonwealth; and
(b) The Common Stock covered by the Registration Statement
has been duly authorized and, when issued pursuant to the terms
described in the Registration Statement, will be legally issued
by the Company and fully paid and nonassessable.
We consent to the filing of this opinion as an exhibit to
the Registration Statement and to the reference to us under the
heading "Legal Matters" in the related Prospectus. In giving
this consent, we do not thereby admit that we come within the
category of persons whose consent is required under Section 7 of
the Securities Act of 1933, as amended, or the rules and
regulations of the Securities and Exchange Commission thereunder.
Very truly yours,
/s/STEVENS & LEE
EXHIBIT 8
_______________, 1994
Board of Directors
Meridian Bancorp, Inc.
35 North Sixth Street
Reading, PA 19601
Board of Directors
The Grange National Bank of Susquehanna County
220 Main Street
New Milford, PA 18834
Re: Merger of The Grange National Bank of Susquehanna County
With and Into Meridian Bank, a Wholly Owned Subsidiary of
Meridian Bancorp, Inc.
Ladies and Gentlemen:
You have requested our opinion in connection with the
transaction contemplated by (i) the Joint Plan of Merger, dated
as of April 26, 1993, between and among The Grange National Bank
of Susquehanna County, a national banking association ("Grange"),
Commonwealth Bank, a former Pennsylvania banking corporation, and
Commonwealth Bancshares Corporation, a former Pennsylvania
corporation ("Commonwealth"), (ii) a first Supplemental Agreement
thereto, dated as of April 26, 1993, between and among Grange,
Commonwealth Bank, Commonwealth, Meridian Bancorp, Inc., a
Pennsylvania corporation ("Meridian"), and Meridian Bank, a
Pennsylvania banking corporation, and (iii) a Second Supplemental
Agreement thereto, dated as of February 17, 1994, between and
among Grange, Meridian, and Meridian Bank (all of such documents
being collectively referred to herein as the "Merger Agreement"),
pursuant to which Grange will be merged with and into Meridian
Bank, which will be the surviving bank (the "Merger"). On August
31, 1993, Commonwealth merged with and into Meridian, and
Commonwealth Bank merged with and into Meridian Bank.
At the Effective Date of the merger, each share of Grange
common stock issued and outstanding immediately prior to such
date will, by virtue of the Merger and without any action on the
part of the holder thereof, be converted into the right to
receive 5.66 shares of Meridian common stock, subject to possible
adjustment as provided in the Merger Agreement. No fractional
shares of Meridian common stock will be issued. In lieu thereof,
shareholders of Grange will receive cash in an amount determined
pursuant to Section 1.4(e) of the Joint Plan of Merger.
Shareholders of Grange who perfect their right to dissent to the
Merger will be entitled to receive cash in exchange for their
Grange common stock, as provided by applicable law. All shares
of Grange common stock (i) held as treasury shares by Grange or
(ii) held by Meridian on the Effective Date of the Merger will be
cancelled, and no shares of Meridian common stock or other
property will be delivered in exchange therefor. Attached to and
trading with each share of Meridian common stock are certain
"poison pill" rights (the "Rights") issued pursuant to the
Meridian Rights Agreement. This opinion is being furnished
pursuant to Sections 2.6 and 3.7 of the Joint Plan of Merger.
All capitalized terms herein, unless otherwise specified, have
the meanings assigned thereto in the Merger Agreement.
In connection with our opinion, we have examined and are
familiar with originals or copies, certified or otherwise
identified to our satisfaction, of the Merger Agreement, the
exhibits thereto, and such other documents as we have deemed
necessary or appropriate for the opinions set forth below. In
our examination, we have assumed the genuineness of all
signatures, the authenticity of all documents submitted to us as
originals, the conformity to original documents of all documents
submitted to us as certified or photostatic copies, and the
authenticity of such latter documents. As to any facts material
to this opinion which we did not independently establish or
verify, we have relied upon the foregoing documents and upon
statements and representations of officers and other
representatives of Grange and Meridian, including certain written
representations of the managements of Grange and Meridian annexed
hereto. The opinions expressed herein are conditioned on the
initial and continuing accuracy of the information and enumerated
facts and representations contained in the aforesaid documents or
otherwise referred to above.
In preparing our opinion, we have considered applicable
provisions of the Code, Treasury regulations, pertinent judicial
authorities, interpretive rulings of the Internal Revenue
Service, and such other authorities as we have deemed relevant.
Based solely upon the foregoing and upon the assumptions set
forth herein, and subject to the qualifications and caveats set
forth herein, we are of the opinion that, under present law, for
federal income tax purposes:
1. Provided the Merger of Grange with and into Meridian
Bank qualifies as a statutory merger under the applicable laws of
the United States of America and the Commonwealth of
Pennsylvania, such Merger will constitute a reorganization within
the meaning of Sections 368(a)(1)(A) and 368(a)(2)(D) of the
Code.
2. Meridian, Meridian Bank and Grange will each be "a
party to a reorganization" within the meaning of Section 368(b)
of the Code.
3. Except for any loan loss reserve that may be required
to be recaptured with respect to Grange, no gain or loss will be
recognized by Grange upon the transfer of its assets to Meridian
Bank in exchange for Meridian common stock (including fractional
share interests) and the assumption by Meridian Bank of the
liabilities of Grange, or the distribution of Meridian common
stock received in the exchange to its shareholders.
4. Except for any loan loss reserve that may be required
to be recaptured with respect to Grange, no gain or loss will be
recognized by either Meridian or Meridian Bank upon the receipt
by Meridian Bank of the assets of Grange in exchange for Meridian
common stock (including fractional share interests) and the
assumption of Grange's liabilities by Meridian Bank.
5. The basis of the Grange assets in the hands of Meridian
Bank will be the same as the basis of such assets in the hands of
Grange immediately prior to the Merger.
6. The holding period of the assets of Grange to be
received by Meridian Bank will include the period during which
the assets were held by Grange.
7. No gain or loss will be recognized by the shareholders
of Grange on the receipt of Meridian common stock (including
fractional share interests) solely in exchange for their shares
of Grange common stock.
8. The basis of the Meridian common stock (including
fractional share interests) to be received by the Grange
shareholders in the Merger will be the same as the basis of the
Grange common stock surrendered in exchange therefor.
9. The holding period of the Meridian common stock
(including fractional share interests) to be received by the
Grange shareholders in the Merger will include the period during
which the Grange shareholders held their Grange common stock,
provided the shares of Grange common stock are held as a capital
asset on the Effective Date.
10. The payment of cash in lieu of fractional share
interests of Meridian common stock will be treated as if the
fractional share interests were distributed as part of the Merger
and then redeemed by Meridian. Such cash payments will be
treated as having been received as distributions in full payment
in exchange for the fractional share interests redeemed, as
provided in Section 302(a) of the Code.
11. The Rights transferred with the shares of Meridian
common stock will not constitute "other property" within the
meaning of Section 356(a)(1)(B) of the Code.
12. As provided in Section 381(c)(2) of the Code and
related Treasury regulations, Meridian Bank will succeed to and
take into account the earnings and profits, or deficit in
earnings and profits, of Grange as of the date of the Merger.
Any deficit in the earnings and profits of Meridian Bank or
Grange will be used only to offset the earnings and profits
accumulated after the Effective Date.
13. Pursuant to Section 381(a) of the Code and related
Treasury regulations, Meridian Bank will succeed to and take into
account the items of Grange described in Section 381(c) of the
Code. Such items will be taken into account by Meridian Bank
subject to the conditions and limitations of Sections 381, 382,
383, and 384 of the Code and the Treasury regulations thereunder.
Except as set forth above, we express no other opinion as to
the tax consequences of the Merger and related transactions to
any party under federal, state, local or foreign laws. We are
furnishing this opinion to you solely in connection with the
Merger and this opinion is not to be used, circulated, quoted or
otherwise referred to for any other purpose.
Very truly yours,
EXHIBIT 23.1
CONSENT OF INDEPENDENT AUDITORS
We consent to the reference to our firm under the caption
"Experts" and to the use of our report dated January 31, 1994
with respect to the financial statements of The Grange National
Bank of Susquehanna County included in the registration statement
(Form S-4) and in The Grange National Bank of Susquehanna County
proxy statement and Meridian Bancorp, Inc. prospectus for the
registration of shares of its common stock.
/s/ Davidson, Fox & Company
Binghamton, N.Y.
March 14, 1994
EXHIBIT 23.2
The Board of Directors
Meridian Bancorp, Inc.
We consent to the use of our report incorporated herein by
reference and to the reference to our firm under the heading of
"Experts" in the Registration Statement and Prospectus.
Philadelphia, PA
March ___, 1994
EXHIBIT 23.5
March 14, 1994
Financial Advisors Consent
The Board of Directors
The Grange National Bank of Susquehanna County
We hereby consent to the reference contained in the
Registration Statement on Form S-4 which this consent is filed to
our firm and to the use in said Registration Statement of the
proposed form of our opinion as to the fairness, form a financial
point of view, of the Exchange Ratio contained in the Merger
Agreement (as such terms are defined in said Registration
Statement). In giving such consent, we do not hereby admit that
we are in the category of persons whose consent is required under
Section 7 of the Securities Act of 1933, as amended.
/s/McConnell, Budd & Downes, Inc.
EXHIBIT 24
POWER OF ATTORNEY
The undersigned directors and officers of MERIDIAN
BANCORP, INC., a Pennsylvania business corporation, hereby
constitutes and appoints any one of Samuel A. McCullough,
David E. Sparks, and Joseph M. Harenza, his true and lawful
attorney-in-fact and agent, with full power to act for the
undersigned and in the name, place and stead of the undersigned,
in any and all capacities, to sign a Registration Statement on
Form S-4 to be filed with the Securities and Exchange Commission,
Washington, D.C., under the Securities Act of 1933 and any and
all amendments thereto (including post-effective amendments)
relating to any registration and offering of shares of the common
stock of Meridian Bancorp, Inc. in connection with the
transactions described therein, and to file said Registration
Statement and each amendment (including post-effective
amendments) so signed, with all exhibits thereto, and any and all
documents in connection therewith, with the Securities and
Exchange Commission, and to appear before the Securities and
Exchange Commission in connection with any matter relating to
said Registration Statement and to any and all amendments thereto
(including post-effective amendments), hereby granting said
attorney-in-fact and agent, full power and authority to do and
perform any and all acts and things requisite and necessary to be
done as the undersigned might or could do in person, and hereby
ratifying and confirming all that said attorney-in-fact and
agent, may lawfully do or cause to be done by virtue hereof.
IN WITNESS WHEREOF, the undersigned have executed this
power of attorney as of the 25th day of January, 1994.
Signature Title
/s/ Samuel A. McCullough Chairman,
Samuel A. McCullough Chief Executive
Officer and
Director
(Principal
Executive
Officer)
Vice Chairman
David E. Sparks Chief
Financial
Officer and
Director
(Principal
Financial
Officer)
Senior Vice
Michael J. Mizak, Jr. President and
Controller
(Principal
Accounting
Officer
Director
Delight E. Breidegam, Jr.
/s/ Thomas F. Burke, Jr. Director
Thomas F. Burke, Jr.
/s/ Robert W. Cardy Director
Robert W. Cardy
Director
Harry Corless
/s/ William D. Davis Director
William D. Davis
Director
Julius Erving
/s/ Fred D. Hafer Director
Fred D. Hafer
/s/ Joseph H. Jones Director
Joseph H. Jones
/s/ Lawrence C. Karlson Director
Lawrence C. Karlson
/s/ Ezekiel S. Ketchum Director
Ezekiel S. Ketchum
/s/ Sidney D. Kline, Jr. Director
Sidney D. Kline, Jr.
/s/ George W. Leighow Director
George W. Leighow
Director
Joseph F. Paquette, Jr.
/s/ Daniel H. Polett Director
Daniel H. Polett
Director
Lawrence R. Pugh
/s/ Paul R. Roedel Director
Paul R. Roedel
/s/ Wilmer R. Schultz Director
Wilmer R. Schultz
/s/ Robert B. Seidel Director
Robert B. Seidel
Director
Judith M. von Seldeneck
Director
George Strawbridge, Jr.
Director
Anita A. Summers
/s/ Earle Wootton Director
Earle Wootton
