As filed with the Securities and Exchange Commission on April 30, 1998
Registration No. 333-__________________
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM S-4
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
MID PENN BANCORP, INC.
(Exact name of Registrant as specified in its charter)
Pennsylvania 6711 25-1666413
- ----------------------------- -------------------- ----------------
(State or other jurisdiction (Primary Standard (I.R.S. Employer
of incorporation or Industrial Classification Identification No.)
organization) Code Number)
Eugene F. Shaffer, Chairman of the Board
MID PENN BANCORP, INC.
Post Office Box 111 Post Office Box 111
349 Union Street 349 Union Street
Millersburg, Pennsylvania 17061 Millersburg, Pennsylvania 17061
(717) 692-2133 (717) 692-2133
- -------------------------------- -----------------------------------
(Address, including ZIP Code, (Name, address, including ZIP Code,
and telephone number, including and telephone number, including
area code, of registrant's area code, of agent for service)
principal executive offices)
With Copies to:
Nicholas Bybel, Jr., Esquire Terrence J. Kerwin, Esquire
B. Tyler Lincoln, Esquire MINERS BANK OF LYKENS
SHUMAKER WILLIAMS, P.C. 550 Main Street, Post Office Box 38
Post Office Box 88 Lykens, Pennsylvania 17048-0038
Harrisburg, Pennsylvania 17108 (717) 453-7185
(717) 763-1121
Approximate date of commencement of the proposed sale of the securities to the
public: As soon as practicable after the effective date of the Registration
Statement and upon consummation of the merger of Miners Bank of Lykens with,
into and under the charter of Mid Penn Bank, a subsidiary of the Registrant.
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. _____
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, check the following box and
list the securities Act registration statement number of the earlier effective
registration statement for the same offering. ____
If this Form is a post-effective amendment filed pursuant to Rule 462(d)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. ____
<TABLE>
<CAPTION>
CALCULATION OF REGISTRATION FEE
- -------------------------------------------------------------------------------
Title of Each Class of Amount to be Proposed Maximum
Securities to be Registered Registered (1) Offering Price Per Share
- -------------------------------------------------------------------------------
<S> <C> <C>
Common Stock, par value
$1.00 per share 148,250 $19.33 (2)
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
Title of Each Class of Proposed Maximum Amount of
Securities to be Registered Aggregate Offering Price Registration Fee
- -------------------------------------------------------------------------------
<S> <C> <C>
Common Stock, par value
$1.00 per share $2,865,672.50 $845.37
- -------------------------------------------------------------------------------
<FN>
(1) Based on maximum number of shares of Registrant's Common Stock that may
be issued in connection with the proposed transaction. In accordance
with Rule 416, this Registration Statement shall also register any
additional shares of the Registrant's common stock that may become
issuable to prevent dilution resulting from stock splits, stock
dividends or similar transactions as provided by the Agreements
relating to the transaction.
<PAGE>
(2) Estimated solely for the purpose of calculating the registration fee
and based, in accordance with Rule 457(f)(2), upon the book value of
the outstanding shares of Miners Bank of Lykens, common stock, par
value $5.00 per share, as of March 31, 1998, of $193.31 and the maximum
of 148,250 shares of the Registrant's common stock to be issued in the
transaction.
</FN>
</TABLE>
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT 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>
[Letterhead of Miners Bank of Lykens]
May 11, 1998
Dear Shareholder:
You are cordially invited to attend the Special Meeting of the Shareholders
of Miners Bank of Lykens (the "Bank") which will be held on Thursday, June 11,
1998, 10:00 a.m., prevailing time, at 550 Main Street, Pennsylvania 17048. The
primary purpose of this meeting is to consider and vote upon the Agreement and
Plan of Reorganization dated January 9, 1998,(the "Acquisition Agreement") by
and among the Bank, Mid Penn Bancorp, Inc. ("Bancorp") and Mid Penn Bank ("Mid
Penn") and the Agreement and Plan of Merger, dated January 9, 1998, by and
between the Bank and Mid Penn (the "Merger Agreement,"collectively, the
Acquisition Agreement and the Merger Agreement are referred to herein as the
"Agreements" ) pursuant to which the Bank will be merged with, into and under
the charter of Mid Penn (the "Merger"), a Pennsylvania chartered bank and a
wholly-owned subsidiary of Bancorp, a Pennsylvania bank holding company located
in Millersburg, Dauphin County, Pennsylvania (the "Merger Proposal"). The
shareholders may also be asked to vote upon a proposal to postpone or adjourn
the Special Meeting to another time and/or place for the purpose of soliciting
additional proxies in favor of the Merger Proposal (the "Adjournment Proposal").
The Merger Proposal and the Adjournment Proposal have been unanimously
approved by your Board of Directors. Your Board of Directors has determined that
the Merger is in the best interests of the Bank and its shareholders and
recommends that you vote FOR approval and adoption of the Merger Proposal and,
if necessary, the Adjournment Proposal. Consummation of the Merger is subject to
certain conditions, including the approval of the Merger Proposal by the Bank's
shareholders and the approval of the Merger by various regulatory agencies. The
enclosed Notice of Special Meeting of Shareholders and Proxy
Statement/Prospectus describe the Merger Proposal and provide specific
information concerning the Special Meeting. Please read these materials
carefully and consider the information contained in them.
<PAGE>
The information contained in the "SUMMARY" portion of the Proxy
Statement/Prospectus sets forth basic information about the transaction. If you
have any questions after a review of the Proxy Statement/Prospectus consult with
your own advisors or contact me at the Bank, telephone number (717) 453-7185.
It is very important that your vote be cast at the Special Meeting,
regardless of whether you attend in person. The affirmative vote of at least
two-thirds of the outstanding shares of the Bank's common stock is required to
approve the Merger Proposal. The affirmative vote of at least one-half of the
votes cast is required for approval of the Adjournment Proposal. Consequently,
failure to vote will have the same effect as a vote against the Merger Proposal.
Therefore, we urge you to complete, sign, date and return the enclosed Proxy
Card in the enclosed postage-paid envelope as soon as possible, to ensure that
your shares will be voted at the Special Meeting.
YOU SHOULD NOT SEND IN THE CERTIFICATE FOR YOUR SHARES OF BANK COMMON STOCK AT
THIS TIME.
Sincerely yours,
/s/ Franklin W. Ruth, Jr.
----------------------------------------
Franklin W. Ruth, Jr., President
<PAGE>
NOTICE OF SPECIAL MEETING OF
SHAREHOLDERS TO BE HELD ON JUNE 11, 1998
TO THE SHAREHOLDERS OF MINERS BANK OF LYKENS :
Notice is hereby given that the Special Meeting of Shareholders of Miners
Bank of Lykens (the "Bank") will be held at 10:00 a.m., prevailing time, on
Thursday, June 11, 1998, at 550 Main Street, Lykens, Pennsylvania 17048, to
consider and take action on the following matters:
1. Approval and adoption of the Agreement and Plan of Reorganization, dated
January 9, 1998 (the "Acquisition Agreement") by and among the Bank, Mid
Penn Bancorp, Inc. ("Bancorp"), and Mid Penn Bank ("Mid Penn") and the
related Agreement and Plan of Merger, dated January 9, 1998 (the "Merger
Agreement") by and between the Bank and Mid Penn, a Pennsylvania banking
institution and a wholly owned subsidiary of Bancorp, (the "Merger
Proposal"), pursuant to which the Bank proposes to merge with, into and
under the charter of Mid Penn (the "Merger"). (The Merger Agreement,
together with the Acquisition Agreement are collectively referred to herein
as the "Agreements.") In connection with the Merger and as more fully
described in the accompanying Proxy Statement/Prospectus and in the
Acquisition Agreement, each share of Bank common stock, par value $5.00 per
share (the "Bank Common Stock") outstanding as of the date of the Merger
will be converted into and be a right to receive ten (10) shares of the
common stock, par value $1.00 per share, of Bancorp (the "Merger
Proposal");
2. Postponement or adjournment of the Special Meeting to another time and/or
place for the purpose of soliciting additional proxies, in the event that
there are not sufficient votes at the time of the Special Meeting to
approve the Merger Proposal (the "Adjournment Proposal"); and
3. Such other business as may properly come before the Special Meeting and any
adjournments or postponements thereof.
Only those shareholders of record at the close of business on Tuesday,
April 28, 1998, will be entitled to notice of and to vote at the Special
Meeting.
<PAGE>
THE AFFIRMATIVE VOTE OF THE HOLDERS OF AT LEAST TWO-THIRDS OF THE
OUTSTANDING SHARES OF THE BANK'S COMMON STOCK IS REQUIRED FOR APPROVAL AND
ADOPTION OF THE MERGER PROPOSAL AND AT LEAST ONE- HALF OF THE VOTES CAST IS
REQUIRED FOR APPROVAL OF THE ADJOURNMENT PROPOSAL. THEREFORE, WHETHER OR NOT YOU
EXPECT TO ATTEND THE SPECIAL MEETING IN PERSON, YOU ARE URGED TO SIGN, DATE AND
PROMPTLY RETURN THE ENCLOSED PROXY. A SELF-ADDRESSED STAMPED ENVELOPE IS
ENCLOSED FOR YOUR CONVENIENCE. YOUR PROXY IS REVOCABLE AND MAY BE WITHDRAWN IN
THE EVENT THAT YOU WISH TO ATTEND THE MEETING AND VOTE IN PERSON.
By Order of the Board of Directors,
/s/ Franklin W. Ruth, Jr.
-----------------------------------------
Franklin W. Ruth, Jr. President
May 11, 1998
<PAGE>
Proxy Statement/Prospectus
MID PENN BANCORP, INC.
148,250 SHARES COMMON STOCK
$1.00 PAR VALUE
MINERS BANK OF LYKENS
PROXY STATEMENT
This Proxy Statement/Prospectus relates to shares of the common stock of
Mid Penn Bancorp, Inc. ("Bancorp"), par value $1.00 per share, ("Bancorp Common
Stock") to be issued following, and conditioned upon, final approval of the
merger of Miners Bank of Lykens (the "Bank") with, into and under the charter of
Mid Penn Bank ("Mid Penn"), a Pennsylvania chartered banking institution and
wholly owned subsidiary of Bancorp (the "Merger"). The Merger is described more
fully in the Bank's Proxy Statement, which is an integral part of this
Prospectus and is furnished in connection with the Special Meeting of the
Shareholders of the Bank at which a vote on the Merger will be taken.
This Proxy Statement/Prospectus constitutes both the proxy statement of the
Bank relating to the solicitation of proxies by the Bank's Board of Directors
for use at the Special Meeting to be held for the purpose of considering and
voting upon the Merger Proposal, and the prospectus of Bancorp with respect to
the Bancorp Common Stock to be issued in the Merger. Completion of the Merger is
subject to various conditions including the approval of the Bank's shareholders.
This Proxy Statement/Prospectus does not cover resales of shares of Bancorp
Common Stock to be issued to affiliates of the Bank in connection with the
Merger. No such person is authorized to make use of this Proxy
Statement/Prospectus in connection with any such resale.
The shares of Bancorp Common Stock to be issued in connection with the
Merger have not been approved or disapproved by the Securities and Exchange
Commission (the "Commission"), the Federal Deposit Insurance Corporation (the
"FDIC"), the Board of Governors of the Federal Reserve System (the "Federal
Reserve Board"), the Pennsylvania Department of Banking (the "Banking
Department") or any state securities commission, nor has the Commission, the
FDIC, the Federal Reserve Board, the Banking Department or any state securities
commission passed upon the accuracy or adequacy of this Prospectus. Any
representation to the contrary is a criminal offense.
The date of this Proxy Statement/Prospectus is May 11, 1998.
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<PAGE>
The shares of Bancorp Common Stock offered hereby are not savings accounts,
deposits, or other obligations of a bank or savings association and are not
insured by the FDIC or any other governmental agency.
No person has been authorized to give any information or to make any
representation not contained in this Proxy Statement/Prospectus, and, if given
or made, any such information or representation should not be relied upon as
having been authorized. This Proxy Statement/Prospectus does not constitute an
offer to any person to exchange or sell, or a solicitation from any person of an
offer to exchange or purchase, the securities offered by this Proxy
Statement/Prospectus, or the solicitation of a proxy from any person, in any
jurisdiction in which it is unlawful to make such an offer or solicitation.
Neither the delivery of this Proxy Statement/Prospectus nor any distribution of
the securities to which this Prospectus relates shall under any circumstances
create any implication that the information contained herein is correct at any
time subsequent to the date hereof.
AVAILABLE INFORMATION
Bancorp is subject to the informational requirements of the Securities
Exchange Act of 1934, as amended, and, in accordance therewith, files periodic
reports, proxy statements and other information with the Commission. Such
periodic reports, proxy statements and other information may be inspected and
copied at the public reference facilities maintained by the Commission at
Judiciary Plaza, 450 Fifth Street, N.W., Washington, DC 20549. The public may
obtain information on the operation of the Public Reference Room by calling the
Commission at 1-800-SEC-0330. The Commission maintains an Internet site that
contains reports, proxy and information statements and other information
regarding registrants that file electronically with the Commission. The address
of the Commission site is http://www.sec.gov. In addition, the Bancorp is listed
on the American Stock Exchange (the "AMEX") and reports, proxy statements and
other information concerning the Bancorp should be available for inspection at
the offices of the AMEX at 86 Trinity Place, New York, New York 10006.
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<PAGE>
DOCUMENTS DELIVERED WITH THIS PROXY STATEMENT/PROSPECTUS
This Proxy Statement/Prospectus is delivered together with the Bank's
Audited Financial Statements for the year ended December 31, 1997, attached as
Annex C hereto.
This Proxy Statement/Prospectus does not constitute an offer to sell, or
solicitation to purchase, the securities offered by this Proxy
Statement/Prospectus, or the solicitation of a Proxy to or from any person in
any jurisdiction where it is unlawful to make such offer or solicitation.
Neither the delivery of this Proxy Statement/Prospectus nor any distribution of
the securities made under this Proxy Statement/Prospectus shall create, under
any circumstances, an implication that there has been no change in the affairs
of Bancorp, Mid Penn or the Bank since the date of the Proxy
Statement/Prospectus.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents and information previously filed by Bancorp with
the Commission are hereby incorporated by reference into this Proxy
Statement/Prospectus:
1. Bancorp's Annual Report on Form 10-K for the year ended December 31,
1997, including, without limitation, the following items thereof:
a. Item 12, relating to the voting securities and principal holders
thereof;
b. Item 10, relating to Directors and Executive Officers;
c. Item 11, relating to Executive Compensation; and
d. Item 13, relating to certain relationships and related
transactions.
2. Bancorp's Current Report on Form 8-K dated January 9, 1998, and filed
with the Commission on January 16, 1998.
3. Description of Bancorp Common Stock contained in Registrant's
Registration Statement No. 33-42938 on Form S-4, filed with the
Commission on September 30, 1991.
All documents filed by Bancorp pursuant to Sections 13(a), 13(c), 14, or
15(d) of the Securities Exchange Act of 1934, as amended (the "1934 Act") after
the date of this Proxy Statement/Prospectus and prior to the Special Meeting of
the Shareholders of the Bank are hereby incorporated by reference into this
Proxy Statement/Prospectus and shall be deemed a part hereof from the date of
filing of each such document. Any statement contained in a document incorporated
-iii-
<PAGE>
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 subsequently filed document that is also incorporated by reference
herein modifies or supersedes such statement. Any statement so modified or
superseded shall not be deemed, except as so modified or superseded, to
constitute a part of this Proxy Statement/Prospectus.
THIS PROXY STATEMENT /PROSPECTUS INCORPORATES DOCUMENTS BY REFERENCE THAT
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 TO CINDY L. WETZEL, SECRETARY, MID PENN BANCORP, INC.,
349 UNION STREET, MILLERSBURG, PENNSYLVANIA 17061; TELEPHONE (717) 692-2133. IN
ORDER TO ENSURE TIMELY DELIVERY OF THESE DOCUMENTS, REQUESTS SHOULD BE MADE BY
MAY 4, 1998.
CAUTIONARY STATEMENT CONCERNING
FORWARD-LOOKING INFORMATION
This Proxy Statement/Prospectus (including information included or
incorporated by reference herein) contains certain forward-looking with respect
to financial condition, results of operations, plans, objectives, future
performance and business of each of the Bank, Bancorp and Mid Penn, including
(i) statements relating to the cost savings estimated to result from the Merger
(see SUMMARY and PROFORMA COMBINED FINANCIAL INFORMATION), (ii) statements
relating to charges estimated to be incurred in connection with the Merger, and
(iii) statements preceded by, followed by, or that include the words "believes,"
expected," "anticipates," "estimates" or similar expressions (see SUMMARY,
PROFORMA COMBINED FINANCIAL INFORMATION. These forward-looking statements
involve certain risks and uncertainties. Factors that may cause actual results
to differ materially from those contemplated by such forward-looking statements
include, among others, the following possibilities: (a) expected cost savings
from the Merger may not be fully realized or realized within the expected time
frame; (b) revenues following the Merger, may be lower than expected or deposit
attrition, operating costs or consumer loss and business disruption following
the Merger , may be greater than expected; (c) competitive pressures among
depository and other financial institutions may increase significantly; (d)
costs or difficulties related to the integration of the business of the Bank and
Mid Penn may be greater than expected ; (e) changes in the interest rate
environment may reduce margins; (f) general economic or business conditions,
either nationally or in Pennsylvania, may be less favorable than expected
resulting in, among other things, a deterioration in credit quality or a reduced
demand for credit; (g) legislative or regulatory changes may adversely affect
the business in which the Bank, Bancorp and Mid Penn are engaged; and (h)
changes may occur in securities markets.
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<PAGE>
TABLE OF CONTENTS
Page
----
SUMMARY ...................................................................vii
GENERAL INFORMATION--SPECIAL
MEETING OF SHAREHOLDERS OF BANK....................................-1-
Introduction.......................................................-1-
Record Date and Required Vote......................................-1-
Revocation and Voting of Proxies...................................-2-
Solicitation of Proxies............................................-2-
Shares Outstanding and Principal Holders Thereof...................-3-
Interests of Certain Persons in Matters to be Voted Upon...........-3-
Recommendation of the Board of Directors of Bank...................-4-
THE MERGER..................................................................-5-
General Information................................................-5-
Background of and Principal Reasons for the Merger.................-6-
Additional Reasons for the Merger..................................-7-
Bancorp Reasons for the Merger.....................................-8-
Conversion and Exchange of Shares..................................-8-
Voting Agreements.................................................-10-
Business Pending the Effective Date...............................-10-
Conditions, Amendment and Termination.............................-11-
Regulatory Considerations and Approvals...........................-12-
Effective Date....................................................-19-
Management and Operations Following the Merger....................-19-
Federal Income Tax Consequences...................................-20-
Accounting Treatment..............................................-21-
Rights of Dissenting Shareholders.................................-21-
Restriction on Resale of Bancorp Common Stock Held By
Affiliates of Bank...............................................-23-
COMPARATIVE STOCK PRICES, DIVIDENDS
AND RELATED SHAREHOLDER MATTERS...................................-24-
Common Stock of Bancorp...........................................-24-
Common Stock of Bank..............................................-25-
PRO FORMA COMBINED FINANCIAL INFORMATION...................................-25-
INFORMATION CONCERNING BANCORP
AND DESCRIPTION OF BANCORP COMMON STOCK...........................-29-
Information Concerning Bancorp....................................-29-
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Loans .........................................................-29-
Description of Bancorp Common Stock...............................-30-
Dividends.........................................................-30-
Principal Owners of Bancorp Common Stock .........................-30-
Beneficial Ownership of Bancorp by Officers, Directors
and Nominees.....................................................-31-
Executive Compensation of Bancorp's Officers......................-32-
Dividend Reinvestment Plan........................................-32-
Securities Laws...................................................-32-
Anti-takeover Provisions..........................................-33-
Indemnification...................................................-36-
Comparison of Shareholder Rights..................................-36-
INFORMATION CONCERNING BANK................................................-39-
Description of Business and Property..............................-39-
Compensation of Directors.........................................-43-
Compensation Committee Report on Executive Compensation...........-43-
Chief Executive Officer Compensation..............................-43-
Executive Officers................................................-43-
Bank Management's Discussion and Analysis of Financial
Condition and Results of Operation.......................-44-
CERTAIN TRANSACTIONS.......................................................-44-
Employees.........................................................-45-
Legal Proceedings.................................................-45-
Bank Common Stock Market Price and Dividends......................-45-
EXPERTS ..................................................................-47-
LEGAL OPINIONS.............................................................-47-
OTHER MATTERS..............................................................-47-
ADDITIONAL INFORMATION.....................................................-47-
ANNEXES
A Agreement and Plan of Reorganization and the related Agrement and Plan
of Merger
B Statute Regarding Dissenters' Rights
C Bank's Audited Financial Statements for the year ended December 31,
1997
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<PAGE>
SUMMARY
The following summary is not intended as a complete description of all
material facts regarding Bancorp, Mid Penn, the Bank and the matters to be
considered at the Special Meeting of Shareholders and is qualified in all
respects by the information appearing elsewhere or incorporated by reference in
this Proxy Statement/Prospectus, the Annexes hereto and the documents referred
to herein. The summary is provided for convenience only and does not set forth
completely all material features of the Merger.
The Parties
Mid Penn Bancorp, Inc.
Mid Penn Bancorp, Inc. ("Bancorp") is a Pennsylvania business corporation
and a bank holding company, registered under the Bank Holding Company Act of
1956, as amended, with its principal offices located at 349 Union Street, P.O.
Box 111, Millersburg, Pennsylvania 17061 (717) 692-2133. Bancorp has one
wholly-owned subsidiary, Mid Penn Bank, a Pennsylvania banking institution,
which engages in the general commercial and retail banking business ("Mid
Penn"). Mid Penn has its principal offices at the same location as Bancorp and
operates 10 banking offices in Dauphin, Northumberland, Schuylkill and
Cumberland Counties, Pennsylvania. As of December 31, 1997, Bancorp had
consolidated total assets, deposits and shareholders' equity of approximately
$228,775,000, $192,239,000 and $26,883,000, respectively.
Miners Bank of Lykens
Miners Bank of Lykens ( the "Bank") is a Pennsylvania chartered commercial
bank, with its deposits insured by the FDIC to the maximum extent permitted by
law. As a full-service commercial bank, the Bank offers demand, savings and time
deposits and commercial, consumer and mortgage loans. The Bank maintains its
only banking office at 550 Main Street, Lykens, Dauphin County, Pennsylvania
17048 (717) 453-7185. As of December 31, 1997, the Bank had total assets,
deposits and shareholders' equity of approximately $27,953,217, $24,907,077 and
$2,847,765, respectively.
Bank Special Meeting of Shareholders
The Special Meeting of the Shareholders of the Bank (the "Special Meeting")
will be held on Thursday, June 11, 1998, at 10:00 a.m., prevailing time, at 550
Main Street, Lykens, Pennsylvania. Only those shareholders of record as of the
close of business on Tuesday, April 28, 1999, will be entitled to vote at the
Special Meeting. As of the record date, the Bank had approximately 14,825 shares
of the common stock, par value $5.00 per share, outstanding (the "Bank Common
Stock"). Each share of Bank Common Stock is entitled to one vote on the Merger.
See, GENERAL INFORMATION--SPECIAL MEETING OF THE SHAREHOLDERS OF BANK.
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<PAGE>
Purpose of the Meeting
The shareholders of Bank will be asked at the Special Meeting to consider
and take action upon the approval of the Agreement and Plan of Reorganization,
dated January 9, 1998, by and among Bank, Bancorp and Mid Penn (the "Acquisition
Agreement"). The Acquisition Agreement includes, as an exhibit thereto, the
related Agreement and Plan of Merger, by and between the Bank and Mid Penn, (the
"Merger Agreement"), under the terms of which: (i) the Bank will be merged with,
into and under the charter of Mid Penn (the "Merger"); (ii) Mid Penn will
survive the Merger; (iii) all of the outstanding shares of the Bank Common Stock
will be converted into and become a right to receive shares of Bancorp Common
Stock; and (iv) each shareholder of the Bank will receive shares of Bancorp
Common Stock in exchange for each share of Bank Common Stock held by him or her
as specified in the Acquisition Agreement and cash in lieu of any fractional
shares of Bancorp Common Stock (collectively, the "Merger Proposal"). The
Acquisition Agreement and the Merger Agreement are sometimes collectively
referred to herein as the "Agreements." See, THE MERGER.
The shareholders of the Bank may also be asked to consider and take action
upon a proposal to postpone or adjourn the Special Meeting to another time
and/or place for the purpose of soliciting additional proxies in the event that
there are not sufficient votes at the time of the Special Meeting to approve the
Merger (the "Adjournment Proposal").
Required Vote
The affirmative vote of shareholders holding at least two-thirds of the
outstanding Bank Common Stock, given at a duly convened and conducted meeting of
the shareholders of the Bank is required to approve and adopt the Merger
Proposal. The affirmative vote of at least one-half of the votes cast at a duly
convened and conducted meeting of the shareholders is required for approval of
the Adjournment Proposal.
As of April 28, 1998, the directors of the Bank and their affiliates
beneficially owned approximately 26.6% of the outstanding shares of Bank Common
Stock. Each member of the Board of Directors of the Bank has entered into an
agreement (a "Support Agreement") pursuant to which he has agreed to vote, or
cause to be voted, the shares of Bank Common Stock as to which he has or shares
voting power, individually or, to the extent of his proportionate interest,
jointly with other persons, as well as other shares over which he may acquire
beneficial ownership, in favor of the Merger Proposal; and use his best efforts
to cause the proposed transaction to be effected. See GENERAL INFORMATION --
SPECIAL MEETING OF SHAREHOLDERS OF THE BANK Interests of Certain Persons in
Matters to be Voted Upon and THE MERGER - Voting Agreements.
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Conversion and Exchange of Shares
The parties expect the Merger to be consummated on or about July 10, 1998.
The date upon which the Merger is effective shall be referred to herein as the
"Effective Date." Pursuant to the terms of the Agreements, on the Effective
Date, each outstanding share of Bank Common Stock will be converted into a right
to receive 10 shares of Bancorp Common Stock. The exchange is subject to certain
anti-dilution adjustments for stock splits, stock dividends, recapitalizations
or similar transactions, pursuant to which an appropriate adjustment will be
made to the number of shares of Bancorp Common Stock to be received in exchange
for Bank Common Stock. No fractional shares of Bancorp Common Stock will be
issued in connection with the Merger. In lieu of the issuance of any fractional
share to which any former Bank shareholder would otherwise be entitled, the
shareholder will receive, in cash, an amount equal to the fair market value of
his or her fractional interest. See THE MERGER--Conversion and Exchange of
Shares.
Each former shareholder of the Bank will be required to surrender to
Bancorp the Bank Common Stock certificates held by him or her in accordance with
the instructions that will be sent immediately following the Effective Date of
the Merger. Upon proper surrender of Bank Common Stock certificates, each former
shareholder of the Bank will be issued a stock certificate representing the
whole number of the shares of Bancorp Common Stock into which the shareholder's
Bank Common Stock has been converted, together with a check in the amount of any
cash in lieu of the issuance of any fractional share. See THE MERGER-Conversion
and Exchange of Shares, and the Acquisition Agreement, attached as Annex "A" to
this Proxy Statement/Prospectus.
Reasons for the Merger
The Boards of Directors of Bancorp, Mid Penn and the Bank are in unanimous
agreement that the Merger is in the best interests of each organization, their
constituents and shareholders. In the case of Bancorp, the Merger will enable
Bancorp and Mid Penn to establish its presence in the desirable banking market
of Lykens, Pennsylvania. The Board of Directors of the Bank has concluded that
the Merger is the most advantageous means for achieving the Board's primary
objective of providing a fair financial return to the Bank's shareholders and of
increasing the liquidity of the shareholders' investment. In addition, Bank's
Board believes that the Merger Proposal is the most effective method for
enabling the Bank to acquire access to the Bancorp enhanced management support
systems and to the specialized banking services offered by Bancorp, thereby
permitting the Bank to provide expanded services to its customers. The Bank's
Board believes the Merger will enable holders of Bank Common Stock to
immediately realize significant value, and enable shareholders to acquire
shares, on a tax-free basis, in a larger financial institution which the Bank
Board believes is better positioned to compete in a consolidating financial
services industry.
-ix-
<PAGE>
Management and Operations Following the Merger
Under the terms of the Agreements, the Bank will merge with, into and under
the charter of Mid Penn. Mid Penn will survive the Merger and will succeed to
the business of the Bank and will continue operations under the name Mid Penn
Bank. Following the Merger, the Board of Directors of Bancorp and Mid Penn will
consist of the same persons who presently serve on the respective Boards of
Directors of Bancorp and Mid Penn , with the addition of Donald E. Sauve and
Gregory M. Kerwin to the Board of Directors of Mid Penn to serve until Mid
Penn's 1999 Special Meeting of Shareholders and until his successor is elected
and qualified. On the Effective Date, the current directors of the Bank will
serve as an advisory board of directors for Mid Penn (the "Bank Office Board".)
The Bank Office Board will sit until fewer than three of its original members
remain. See THE MERGER-Management and Operations Following the Merger, and
GENERAL INFORMATION--SPECIAL MEETING OF SHAREHOLDERS OF BANK-Interests of
Certain Persons in Matters to be voted Upon.
Effective Date
The Parties propose to effect the Merger in accordance with the provisions
specified in the "Articles of Merger" to be delivered to the Banking Department
and filed with the Pennsylvania Department of State, the filing of which will
occur as soon as reasonably practicable after all applicable conditions to the
consummation of the Merger have either been met or waived. The Bancorp and the
Bank presently intend to consummate the Merger on or about July 10, 1998,
assuming the Bank' shareholders approve the Merger, all required regulatory
approvals are obtained, and all other conditions to consummation have been
satisfied or waived. See THE MERGER-- Effective Date.
If the proposed Merger is not been consummated by December 31, 1998, the
Acquisition Agreement will automatically be terminated, unless the Bancorp and
the Bank agree in writing to extend the termination date. See THE
MERGER--Conditions, Amendment and Termination.
Comparison of Shareholder Rights
Upon consummation of the Merger, the shareholders of the Bank will become
shareholders of Bancorp. Several differences between the rights of holders of
Bank Common Stock and Bancorp Common Stock arise from differences between the
respective statutes applicable to the Bank and Bancorp, as well as the
respective Articles of Incorporation and Bylaws of the Bank and of Bancorp.
The most significant differences between the Bank Common Stock and Bancorp
Common Stock include the following: (i) the Bank's shareholders may exercise
preemptive rights to acquire shares of Bank Common Stock; (ii) the Bank's
shareholders may cumulate their shares in voting for directors, while Bancorp's
shareholders have no cumulative voting rights; (iii) all of the directors of the
Bank are elected annually by the Bank's shareholders for one-year terms, while
Bancorp has a classified Board divided into three classes, and only one-third of
Bancorp's directors are elected each
-x-
<PAGE>
year for a three-year term; (iv) certain anti-takeover provisions are contained
in Bancorp's Articles of Incorporation, which may serve to entrench Bancorp's
current management, while the Bank's Articles of Incorporation contain some
similar provisions but not all the anti-takeover provisions applicable to
Bancorp Common Stock; (v) Bancorp offers a dividend reinvestment plan to its
shareholders, while Bank offers no such plan; (vi) Bancorp Common Stock is
registered under the 1934 Act, and is traded on the AMEX, while Bank Common
Stock is not registered under the 1934 Act and is traded on a limited basis in
the local over-the-counter market. See INFORMATION CONCERNING BANCORP AND
DESCRIPTION OF BANCORP COMMON STOCK- Comparison of Shareholder Rights.
Restriction on Resales by Affiliates
The resale of shares of Bancorp Common Stock received in connection with
the Merger Proposal by persons who are executive officers, directors or 10%
shareholders of the Bank will be subject to certain restrictions See THE
MERGER-Restriction on Resale of Bancorp Common Stock Held by Affiliates of Bank.
Federal Income Tax Consequences
The Merger Proposal is structured to qualify as a tax-free reorganization
under Section 368 of the Internal Revenue Code of 1986, as amended (the "Code").
Accordingly, no taxable gain or loss will be recognized by the shareholders of
the Bank upon the receipt of Bancorp Common Stock in exchange for Bank Common
Stock, except to the extent that any shareholders of Bank receive cash in lieu
of the issuance of fractional shares of Bancorp Common Stock. Any Bank
shareholder who exercises dissenters' rights will recognize taxable gain or loss
to the extent of the difference between the amount of cash received by the
shareholder in connection with the exercise of dissenters' rights and the
adjusted tax basis of the shares in the shareholders hands.
Consummation of the Merger is conditioned upon the receipt of an opinion of
Shumaker Williams, P.C., counsel to Bancorp, in a form reasonably satisfactory
to Bancorp, Mid Penn and Bank, dated as of the Effective Date, substantially to
the foregoing effect. A form of opinion of Shumaker Williams, P.C., dated the
date of this Proxy Statement/Prospectus has been filed as Exhibit 8 to the
Registration Statement of which this Proxy Statement/Prospectus is a part. See
THE MERGER--Federal Income Tax Consequences.
Accounting Treatment
Consummation of the Merger is subject to the condition that the transaction
can be treated as a pooling of interests for financial reporting purposes. See
THE MERGER--Accounting Treatment.
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<PAGE>
Dissenters' Rights
Under applicable provisions of Pennsylvania law, holders of the Bank's
Common Stock will have the right to dissent and obtain payment of the fair value
of their shares by complying with the provisions of Subchapter D of Chapter XV
("Subchapter D") of the Pennsylvania Business Corporation Law of 1988, as
amended (the "BCL"). Accompanying this Proxy Statement/Prospectus as Annex B is
a copy of the text of the applicable provisions of Pennsylvania law that
prescribe the procedures for the exercise of dissenters' rights and for
determining the value of their shares. Shareholders of the Bank who seek to
exercise dissenters' rights must carefully follow the procedures described in
such statutory provisions. For additional information concerning dissenters'
rights, See THE MERGER - Rights of Dissenting Shareholders.
Conditions, Amendments and Termination
Consummation of the Merger is subject to various conditions and
contingencies, including, among other things, approval by the shareholders of
the Bank, approval by the Department of Banking, the FDIC, the FRB and the
absence of any pending or threatened litigation seeking to modify, enjoin or
prohibit the transactions contemplated by the Merger. All required applications
for regulatory approval have been filed by Bancorp and the Bank.
The Bank, Bancorp and Mid Penn may amend, modify or waive any term or
condition of the Agreements by action of the Boards of Directors, at any time
before or after approval of the Merger by the shareholders of the Bank;
provided, however, that after receipt of shareholder approval, no amendment or
modification, without further shareholder approval, may reduce the amount or
change the form and the amount of the consideration payable pursuant to the
Merger Proposal.
The Acquisition Agreement may be terminated at any time, whether before or
after it has been approved by the shareholders of the Bank, by mutual consent of
the parties or unilaterally by the Boards of Directors of Bancorp or Bank, if
certain conditions or certain events occur or fail to occur. Nonetheless, the
Acquisition Agreement will terminate on December 31 1998, unless extended by
mutual consent of the parties. See THE MERGER--Conditions, Amendment and
Termination.
Interests of Certain Persons in the Merger
Certain members of the Bank's management and the Bank Board may be deemed
to have interest in the Merger in addition to their interest as shareholders of
the Bank generally. Pursuant to the Acquisition Agreement Bancorp has agreed to
employ all of the former Bank employees; employ Allen J. Trawitz, Cashier of the
Bank, as Executive Vice President of Mid Penn; employ Gregory M. Kerwin, Vice
President and a Director of the Bank, as Vice President of Mid Penn and Chairman
of the Salary and Human Resource Committee; appoint Mr. Kerwin and Donald E.
Sauve
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<PAGE>
to Mid Penn's Board of Directors and establish an advisory board comprised of
the members of the Bank's current Board of Directors. See GENERAL INFORMATION --
SPECIAL MEETING OF SHAREHOLDERS OF BANK-Interests of Certain Persons in Matters
to be Voted Upon.
Selected Historical and Pro Forma Combined Per Share Data
The following tables set forth, at the dates and for the periods indicated,
financial information relating to Bancorp Common Stock and Bank Common Stock on
a per share historical and pro forma combined basis. The pro forma and
equivalent per share information is presented on the basis of an exchange ratio
of 10 shares of Bancorp Common Stock for each share of Bank Common Stock. The
information set forth in the tables below should be read in conjunction with the
pro forma combined financial information set forth elsewhere in this Proxy
Statement/Prospectus, the financial statements of Bancorp, including the notes
thereto which are incorporated herein by reference, and the financial statements
of the Bank, including the notes thereto, which are set forth elsewhere in this
Proxy Statement/Prospectus. See PRO FORMA COMBINED FINANCIAL INFORMATION; and
BANK--INDEX TO FINANCIAL STATEMENTS AND SUPPLEMENTARY FINANCIAL INFORMATION.
SELECTED HISTORICAL, PRO FORMA COMBINED
AND EQUIVALENT PER SHARE DATA
Comparative Stock Prices
On January 8, 1998, the last trading date before public announcement of the
execution of the Agreements, the per share closing bid and asked price
quotations for Bancorp Common Stock were $30.50 and $31.00, respectively, as
reported on AMEX. Bank Common Stock has historically been traded on a limited
basis in the local over-the-counter market and in privately negotiated
transactions. The most recent sale of Bank Common Stock, of which the Bank's
management is aware, is a sale of 422 shares that occurred on December 11, 1997,
at a price of $165.25 per share. Because trading in Bank Common Stock is
sporadic, it cannot be said that an established trading market exists. The
foregoing historical and pro forma equivalent per share market information is
summarized in the following table:
-xiii-
<PAGE>
Pro Forma
Historical Price Equivalent Price
Per Share Per Share
Bancorp Common Stock*
January 8, 1998 Bid $ 30.50 N/A
January 8, 1998 Asked $ 31.00 N/A
Bank Common Stock
January 8, 1998 Bid N/A N/A
January 8, 1998 Asked N/A N/A
* The most recent sale of Bank Common Stock was a sale of 422 shares on
December 12, 1997, for $165.25 per share. The book value of Bank Common Stock
on March 31, 1998 was $193.31.
More detailed information concerning comparative stock prices is set forth
elsewhere in this Proxy Statement/Prospectus. See COMPARATIVE STOCK PRICES AND
DIVIDENDS AND RELATED SHAREHOLDER MATTERS.
Selected Historical and Pro Forma Financial Data
The following tables present selected, unaudited historical financial data
and pro forma information on a combined basis for Bancorp and Bank. The pro
forma combined information is presented as though the proposed Merger between
Bank and Mid Penn had occurred on December 31, 1997, and reflects a pooling of
interests basis of accounting, based upon an assumed exchange ratio of 10 shares
of Bancorp Common Stock for each share of Bank Common Stock. The following
information should be read in conjunction with the pro forma combined financial
information, including the notes thereto, set forth elsewhere in this Proxy
Statement/Prospectus, the financial statements of Bancorp, including the notes
thereto, which are incorporated herein by reference and the financial statements
of the Bank, including the notes thereto, which are set forth elsewhere herein.
SEE PRO FORMA COMBINED FINANCIAL INFORMATION; and BANK -- INDEX TO FINANCIAL
STATEMENTS AND SUPPLEMENTARY FINANCIAL INFORMATION.
-xiv-
<PAGE>
<TABLE>
<CAPTION>
SELECTED HISTORICAL, PRO FORMA COMBINED
AND EQUIVALENT PER SHARE DATA
As and for the years ended December 31
1997 1996 1995
---- ---- ----
<S> <C> <C> <C>
Mid Penn Bancorp
Average shares outstanding 2,607,540 2,607,540 2,607,540
Book value 10.31 9.45 8.70
Cash dividends .76 .46 .65
Net Income 1.54 1.28 1.14
Miners Bank of Lykens
Average shares outstanding 14,990 15,000 15,000
Book value 192.09 185.87 181.00
Cash dividends 5.00 5.00 5.00
Net Income 10.84 9.98 10.19
Pro Forma Combined
Average shares outstanding 2,757,440 2,757,540 2,757,540
Book value 10.78 9.95 9.21
Cash dividends .75 .46 .64
Net Income 1.51 1.26 1.13
1994 1993
---- ----
<S> <C> <C>
Mid Penn Bancorp
Average shares outstanding 2,607,540 2,607,540
Book value 8.04 7.82
Cash dividends .62 .41
Net Income 1.05 1.07
Miners Bank of Lykens
Average shares outstanding 15,000 15,000
Book value 175.93 172.13
Cash dividends 5.00 5.00
Net Income 8.90 14.70
Pro Forma Combined
Average shares outstanding 2,757,540 2,757,540
Book value 8.57 8.42
Cash dividends .61 .41
Net Income 1.04 1.10
</TABLE>
-xv-
<PAGE>
Proxy Statement/Prospectus
MID PENN BANCORP, INC.
AND
MINERS BANK OF LYKENS
GENERAL INFORMATION--SPECIAL
MEETING OF SHAREHOLDERS OF BANK
Introduction
This Proxy Statement/Prospectus is furnished to the holders of the Bank
Common Stock in connection with a solicitation by the Bank's Board of Directors,
of proxies to be voted at the Special Meeting of Shareholders of the Bank, to be
held on June 11, 1998 (the "Special Meeting"). The purpose of the Special
Meeting is to consider and vote upon (i) a proposal, unanimously adopted by the
Board of Directors of the Bank, to approve and adopt the Agreement and Plan of
Reorganization Agreement (the "Acquisition Agreement"), dated January 9, 1998,
by and among the Bancorp, the Bank and Mid Penn, and the related Agreement and
Plan of Merger (the "Merger Agreement") by and between Bank and Mid Penn, the
terms of which are described herein (the "Merger Proposal"), (ii) a proposal,
unanimously recommended by the Bank's Board of Directors, to approve the
postponement or adjournment of the Special Meeting to another time and/or place
for the purpose of soliciting additional proxies in the event that there are not
sufficient votes at the time of the Special Meeting to approve the Merger (the
"Adjournment Proposal") and such other matters that may properly be brought
before the meeting and any adjournment thereof. The Acquisition Agreement and
the Merger Agreement are referred to herein
All information set forth in this Proxy Statement/Prospectus that relates
to Bancorp or Mid Penn has been provided or verified by Bancorp. All information
that relates to the Bank has been provided or verified by the Bank.
Record Date and Required Vote
The Board of Directors of the Bank has fixed the close of business on
Tuesday, April 28, 1998, as the record date for the determination of
shareholders of the Bank entitled to receive notice of and to vote at the
Special Meeting (the "Record Date"). Accordingly, only holders of record of Bank
Common Stock at the close of business on such date will be entitled to vote at
the Special Meeting. At the close of business on the Record Date, there were
14,825 shares of Bank Common Stock outstanding, each of which is entitled to one
vote on each matter properly submitted to a vote at the Special Meeting. On the
Record Date, there were approximately 291 holders of record of Bank Common
Stock. Pursuant to applicable provisions of the Pennsylvania Banking Code of
1965, as amended, (the "Banking Code"), the affirmative vote of two-thirds of
the outstanding shares of Bank Common Stock is required to approve the Merger.
Approval of the Adjournment Proposal requires a majority of the votes cast with
respect thereto at the Special Meeting. Broker non-votes and abstentions will
have the same effect as a negative vote with respect to the Merger.
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<PAGE>
If a quorum is not obtained, or if fewer shares of Bank Common Stock are
voted in favor of the Merger Proposal than the number required for approval, it
expected that, if a majority of the proxies voted with respect to the
Adjournment Proposal have been voted in favor of the Adjournment Proposal, the
Special Meeting will be postponed or adjourned for the purpose of allowing
additional time for obtaining additional proxies or votes, and, at any
subsequent reconvening of the Special Meeting, the proxies will be voted in the
same manner as such proxies would have been voted at the original convening of
the Special Meeting (except for any proxies that have heretofore effectively
been revoked or withdrawn).
As of the Record Date, the Bank's directors and executive officers and
their affiliates beneficially owned 3,952 shares of Bank Common Stock,
representing 26.6% of the outstanding Bank Common Stock; Bancorp and Bancorp's
directors, executive officers and their affiliates did not beneficially own
shares of Bank Common Stock and bank subsidiaries of Bancorp did not hold any
shares of record, or in the name of nominees.
Revocation and Voting of Proxies
The execution and return of the enclosed proxy form will not affect a
shareholder's right to attend the Special Meeting and to vote in person. Any
proxy given pursuant to this solicitation may be revoked at any time before the
proxy is voted at the meeting by: (i) delivering notice of a revocation or a
later-dated proxy to Raymond C. Donley, Secretary, the Bank, 550 Main Street,
Lykens, Pennsylvania 17048; or (ii) appearing at the meeting and notifying the
person in charge thereof that the shareholder wishes to vote his or her shares
in person. Unless revoked, any proxy given pursuant to this solicitation will be
voted at the meeting in accordance with the instructions thereon. In the absence
of instruction, all proxies will be voted FOR the Merger Proposal, FOR the
Adjournment Proposal, if necessary, and otherwise, in the discretion of
proxyholders, as to any other matter that may properly come before the Special
Meeting or any adjournment or postponement thereof. Although the Board of
Directors knows of no other business to be presented, in the event that any
other matters are properly brought before the meeting, any proxy given pursuant
to this solicitation will be voted in accordance with the recommendations of the
management of the Bank.
Solicitation of Proxies
This Proxy Statement/Prospectus is furnished in connection with the
solicitation of proxies, in the accompanying form by the Board of Directors of
the Bank for use at the Special Meeting and at any adjournments thereof. The
expenses to be incurred in soliciting proxies will be borne by the Bank. In
addition to the use of the mails, the directors, officers and employees of the
Bank may, without additional compensation, solicit proxies personally or by
telephone or telecopier.
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<PAGE>
Shares Outstanding and Principal Holders Thereof
At the close of business on the Record Date, the Bank had 14,825 shares of
Bank Common Stock, outstanding, the only issued and outstanding class of stock.
The following table sets forth, as of April 28, 1998, the name and address
of each person who owns of record or who is known by the Board of Directors of
the Bank to be the beneficial owner of more than 5 percent of the Bank Common
Stock, the number of shares beneficially owned by such person and the percentage
of Bank's Common Stock so owned.
<TABLE>
<CAPTION>
Shares Percent of Outstanding
Beneficially Common Stock
Name and Address Owned(1) Beneficially Owned
- ---------------- ------- ------------------
<S> <C> <C>
Raymond C. Donley
662 North 2nd Street
Lykens, Pennsylvania 17048 1,500 10.1%
Jean Marie Schifano
4229 Rancho Park Drive
Liverpool, New York 13090-9999 1,105 7.5%
<FN>
(1) The securities "beneficially owned" are determined in accordance with
the definitions of "beneficial ownership" set forth in the regulations
of the Commission and, accordingly, may include securities owned by or
for, among others, the spouse and/or minor children of the individual
and any other relative who has the same residence as such individual,
as well as, other securities as to which the individual has or shares
voting or investment power or has the right to acquire under
outstanding stock options within sixty (60) days after April 28, 1998.
Beneficial ownership may be disclaimed as to certain of these
securities.
</FN>
</TABLE>
Interests of Certain Persons in Matters to be Voted Upon
Except as described in this section, the directors and executive officers
of Bank have no substantial interest in the Merger, other than in their capacity
as shareholders of Bank. As shareholders, the directors and executive officers
of the Bank will be entitled to receive Bancorp Common Stock in exchange for the
Bank Common Stock in the same proportion and on the same terms and conditions as
all other shareholders of the Bank. See Record Date and Required Vote, above.
On or promptly after the Effective Date, Mid Penn will establish the Bank
Office Board, an advisory board of directors, comprised of all of the current
members of Bank's Board of Directors. The members of the Bank Office Board will
serve until fewer than three of the original members of the Bank Office Board
remain. Thereafter, the members of the Bank Office Board shall serve at the
discretion of the Mid Penn Board of Directors. The members of the Bank Office
Board will continue to receive the same aggregate dollar-cost of compensation
and benefits as they presently enjoy for five years from the Effective Date.
-3-
<PAGE>
During 1997, each Director of the Bank received $6,600 for sitting on the
Board of Directors. The aggregate compensation of the members of the Bank's
Board of Directors for 1997 was $46,200.
Pursuant to the terms of the Acquisition Agreement, Mid Penn has agreed to
appoint Gregory M. Kerwin and Donald E. Sauve to Mid Penn's Board of Directors
to serve until Mid Penn's 1999 Annual Meeting of Shareholders and until their
successors are elected and qualified.
Each member of the Board of Directors of the Bank has entered into an
agreement (a "Support Agreement") pursuant to which he has agreed to vote, or
cause to be voted, the shares of Bank Common Stock as to which he has or shares
voting power, individually or, to the extent of his proportionate interest,
jointly with other persons, as well as other shares over which he may acquire
beneficial ownership in favor of the Agreements and the Merger, and to use his
best efforts to cause the proposed transaction to be effected. These persons
own, collectively, 3,952 or 26.6% of the Bank Common Stock outstanding. See THE
MERGER-Voting Agreements.
All persons employed by the Bank prior to the Merger will be employed by
Mid Penn after the Merger. All employees will receive the same aggregate
dollar-cost compensation and benefits after the Merger as they enjoyed before
the Merger. Immediately after the Effective Date, Gregory M. Kerwin will be
employed by Mid Penn as Vice President and Chairman of the Salary and Human
Resource Committee of Mid Penn, with the aggregate cost of his compensation and
benefits package to be no less than the cost of his total compensation and
benefits package in effect immediately prior to the date execution of the
Agreements. Immediately after the Effective Date, Allen Trawitz will be employed
by Mid Penn as Executive Vice President, with the aggregate cost of his
compensation and benefits package to be no less than the cost of his total
compensation and benefits package in effect immediately prior to the date of the
execution of the Agreements.
The directors and officers of Bancorp and its subsidiaries have no special
interest in the Merger, other than in their capacity as shareholders of Bancorp,
and will not receive any special consideration or compensation in connection
with consummation of the Merger.
Recommendation of the Board of Directors of Bank
For the reasons stated in this Proxy Statement/Prospectus, the Board of
Directors of the Bank has unanimously approved and adopted the Agreements and
believes that the Merger Proposal is in the best interests of the Bank's
shareholders. Accordingly, the Board of Directors unanimously recommends that
the shareholders vote in favor of the Merger Proposal. See The MERGER--
Background of and Principal Reasons for the Merger.
Certain of the directors and officers of the Bank have personal interests
in the consummation of the Merger in addition to their interests as shareholders
of Bank. See GENERAL INFORMATION--SPECIAL MEETING OF SHAREHOLDERS OF BANK -
Interests of Certain Persons in Matters to be Voted Upon.
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<PAGE>
THE MERGER
General Information
The shareholders of the Bank will be asked at the Special Meeting to
consider and vote upon approval and adoption of the Merger Proposal. The Merger
Proposal provides that, under the terms of the Agreements: (i) the Bank will be
merged with, into and under the charter of Mid Penn; (ii) Mid Penn will survive
the Merger; and (iii) each outstanding share of Bank Common Stock will be
converted into the right to receive ten (10) shares of Bancorp Common Stock,
subject to certain adjustments, as described herein and set forth in the
Agreements.
The Bank is a Pennsylvania chartered commercial bank and is currently
regulated by the Department of Banking and, as a member of the Federal Reserve
System, the Federal Reserve Board. Mid Penn is a Pennsylvania chartered banking
institution, a wholly-owned subsidiary of Bancorp, and is currently regulated by
the Department of Banking and the FDIC. Following the Merger, the resulting bank
will be a Pennsylvania chartered banking institution; will not be a member of
the Federal Reserve System; and will have the Department of Banking and the FDIC
as its primary regulators. Bancorp, as the parent company of Mid Penn, will
continue to be a registered bank holding company that is regulated by the
Federal Reserve Board.
The precise terms and conditions of the Merger Proposal are set forth in
the Acquisition Agreement and the Merger Agreement, a copy of each of which is
set forth in Annex A hereto. THE DISCUSSION THAT FOLLOWS IS INTENDED ONLY AS A
SUMMARY OF CERTAIN TERMS OF THE MERGER AND IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO THE FULL TEXT OF THE AGREEMENTS, WHICH ARE INCORPORATED HEREIN BY
REFERENCE AND ATTACHED HERETO AT ANNEX A.
The terms of the Merger are set forth in the Agreements. The Agreements
provide that on the Effective Date, the Bank will merge with, into and under the
charter of Mid Penn, a wholly owned subsidiary of Bancorp, with Mid Penn
surviving the Merger.
In the Merger, shareholders of the Bank will receive 10 shares of Bancorp
Common Stock in exchange for each share of Bank Common Stock. The Acquisition
Agreement provides that, in the event, prior to the Effective Date, Bancorp
effects a stock dividend, recapitalization or similar transaction, an
appropriate adjustment will be made to the number of shares of Bancorp Common
Stock to be received by the Bank's shareholders. No fractional shares will be
issued in the Merger. Each Bank shareholder will receive cash in lieu of any
fraction of a share of Bancorp Common Stock.
The Merger is subject to the approval of the Bank's shareholders at the
Special Meeting and is subject to regulatory approval by the FDIC, the FRB and
the Department of Banking. See THE MERGER-Regulatory Considerations and
Approvals. In addition, the Bank's shareholders will have certain rights to
dissent and demand payment for their shares. See THE MERGER- Rights of
Dissenting Shareholders. No approval will be required by shareholders of Bancorp
for consummation of the Merger.
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<PAGE>
The Board of Directors of Bank has unanimously approved and adopted the
Acquisition Agreement and the Merger Agreement, believes the Merger Proposal is
in the best interests of the shareholders of Bank, and unanimously recommends
that the shareholders vote FOR the following resolutions, which will be
presented at the Special Meeting:
RESOLVED, that the Agreement and Plan of Reorganization, dated January
9, 1998, by and among Mid Penn Bancorp, Inc., Mid Penn and the Bank, and
the Agreement and Plan of Merger, dated January 9, 1998, by and between Mid
Penn Bank and the Bank, approved and adopted by the Board of Directors of
the respective parties, providing, among other things, for the merger of
the Bank with, into and under the charter of Mid Penn Bank, a Pennsylvania
chartered banking institution and a subsidiary of Mid Penn Bancorp, Inc.,
and for the conversion of shares of the common stock of the Bank into the
right to receive shares of Mid Penn Bancorp, Inc. common stock, in
accordance with the Agreement and Plan of Reorganization and the Agreement
and Plan of Merger, is hereby approved, adopted, ratified and confirmed by
the shareholders of the Bank; and
FURTHER RESOLVED, that the appropriate officers and the directors of
the Bank are hereby authorized, empowered, directed and ordered, in the
name of and on behalf of the Bank, to execute all documents and take all
other actions as they may, in their discretion, determine to be necessary,
appropriate and desirable to carry out the intent and the purposes
contemplated in the Agreement and Plan of Reorganization, the Agreement and
Plan of Merger and the foregoing resolution.
Background of and Principal Reasons for the Merger
The Board of Directors of the Bank has, for several years, as part of its
strategic planning, periodically reviewed and evaluated the various options and
alternatives available to the Bank. In particular, the Board has considered the
relative merits of maintaining the independence of the Bank and the prospect of
possible business combinations with other financial institutions. The Board
considered these strategies in light of the many recent changes in federal and
state banking laws and their impact upon the financial services industry. The
Board has reviewed the recent trends in banking that impact the Bank, including
increasing competition from non-bank financial institutions and from banks
outside of local markets, and from consolidation of the banking industry through
mergers. The Board also considered the desirability of increasing the liquidity
of Bank Common Stock by entering into a merger in which the Bank's shareholders
would receive publicly-traded stock of a larger banking organization. The
Board's primary consideration in taking the actions that lead to the execution
of the Agreements was to provide a fair financial return to the Bank's
shareholders and to increase the liquidity of their stock.
For the reasons set forth below in this section and the immediately
following section of this Proxy Statement/Prospectus, the Board of Directors of
the Bank has unanimously concluded that the Merger Proposal is in the best
interests of the Bank's shareholders, employees, customers and the community the
Bank serves. The following discussion describes certain benefits of the Merger
Proposal.
-6-
<PAGE>
The Board of Directors of the Bank expects that the Merger will benefit the
shareholders of the Bank by providing them with equity ownership in a larger,
publicly-traded banking organization, thereby increasing the liquidity of their
investment. Historically, the Bank Common Stock has been traded on a limited
basis in the local over-the-counter market and in privately negotiated
transactions. Upon consummation of the Merger, the shareholders of the Bank will
receive Bancorp Common Stock which is more actively traded and is listed for
quotation on the AMEX. See COMPARATIVE STOCK PRICES AND DIVIDENDS AND RELATED
SHAREHOLDER MATTERS.
In addition to the benefits that the Merger Proposal provides to the Bank's
shareholders, the Board of Directors of the Bank has determined that Bancorp and
Mid Penn would be attractive merger partners for a number of reasons. First,
management believes the Merger provides the Bank with additional management and
support systems that enable the Bank to better adapt its operations to the
rapidly changing legal and competitive conditions within the banking industry,
thus benefitting the Bank employees and customers.
A second benefit of the Merger Proposal is described in more detail in the
following section entitled "Additional Reasons for the Merger," the Merger will
provide the Bank's customers with an expanded range of products and services. In
addition, Bancorp and Mid Penn share with the Bank a strong commitment to the
concept of community-oriented banking, and, as discussed in the paragraph
entitled "Management and Operations Following the Merger," the Bank will
continue to employ, and be administered by, knowledgeable local residents for
the benefit of the local community.
Additional Reasons for the Merger
Recent changes in federal and state banking laws and regulations have had a
major impact upon the banking industry in Pennsylvania and throughout the United
States. In response to these changes, many mergers and consolidations involving
banks and bank holding companies have occurred. Further merger activity is
likely to occur in the future, resulting in increased concentration levels in
banking markets and other significant changes in the competitive environment.
These changes are expected to intensify competition in local and regional
banking markets. In addition, recent changes in federal banking laws have
significantly increased the severity and complexity of federal banking
regulations as well as the costs banks must incur in complying with those
regulations.
From the Bank's standpoint, the Merger Proposal represents an attractive
opportunity to acquire access to additional managerial expertise and specialized
services offered by Bancorp and its banking subsidiary, Mid Penn. This will
permit the Bank's office to provide a broader range of services to its customers
in the face of increasing competition from larger financial institutions. For
example, following the Merger, the Bank will be able to provide new and expanded
banking services to its customers that are provided currently by Mid Penn. Mid
Penn has offered some innovative products to its marketplace. These products can
be easily transferred and implemented, with some modifications for competitive
pricing, into Bank' marketplace.
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Mid Penn has a wide range of deposit and loan products to accommodate the
Bank's customers' borrowing needs. Lending could be expanded in Bank'
marketplace by adding more competitive and additional products that will benefit
the community and its citizens. Mid Penn's and Bancorp's experienced management
and greater financial resources are expected to provide a benefit. For example,
Bank will be able to offer more small to medium size business loans. Thus, the
Merger will enhance the Bank's ability to remain competitive and to satisfy
customers' financial needs. The Merger Proposal will benefit Bancorp by
expanding its market presence to the Lykens area, thereby allowing it to compete
in that region.
The Board of Directors of the Bank believes that the terms of the Merger
are fair to, and in the best interests of, the Bank and its shareholders and
employees. Bank's Board of Directors also believes that the Merger Proposal will
significantly enhance the ability of Bank to satisfy the financial needs of its
customers and the communities which it serves.
Bancorp Reasons for the Merger
The Bancorp Board of Directors approved the Acquisition Agreement and the
Merger Agreement and determined that the Merger and the issuance of Bancorp
Common Stock incident thereto to be in the best interests of Bancorp and its
shareholders. In reaching its determination to approve the Agreements, the
Bancorp Board considered a number of factors, including, without limitation, the
following:
(a) a review of the Bank, including a presentation by Bancorp
management's due diligence review of the Bank, including the asset quality
of its loan portfolio, operations, earnings and financial condition on an
historical, prospective and pro forma basis, as well as the opportunities
for both cost saving and revenue enhancements that are expected to result
from the Merger and the respective contributions the parties would bring to
the combined institution;
(b) a review of the advice of management and legal counsel regarding
the terms of the Agreements;
(c) Bancorp's existing position in the Lykens area and its desire to
expand its presence into the Lykens area; and
(d) the expectation that the Bancorp Common Stock exchanged in the
Merger will be tax-free for federal income tax purposes to Bancorp.
The Bancorp Board did not assign any specific or relative weights to the
factors under its consideration.
Conversion and Exchange of Shares
On the Effective Date, each share of Bank Common Stock then issued and
outstanding will automatically be converted into and become the right to receive
10 shares of Bancorp Common Stock. The actual number of shares issued in the
exchange is subject to adjustment for certain stock
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dividends, stock splits and similar transactions. Following the Effective Date,
the Bank's shareholders will exchange their Bank Common Stock certificates for
Bancorp Common Stock certificates in accordance with procedures described below.
No fractional shares of Bancorp Common Stock will be issued in connection
with the Merger. In lieu of the issuance of any fractional share, each former
shareholder of Bank will receive cash in an amount equal to the fractional part
of a share of Bancorp Common Stock multiplied by the closing price of Bancorp
Common Stock on the Effective Date, rounded to the nearest cent.
Bancorp and Bank anticipate that the Effective Date will occur on or about
July 10, 1998, after receipt of the required regulatory approvals and receipt of
the approval of Bank's shareholders, and all other conditions to closing, set
forth in the Agreements, or required by law or regulation are satisfied. If for
any reason, however, the Effective Date of the Merger fails to occur by December
31, 1998, and the parties have not otherwise agreed prior to that date, the
Agreement and Plan of Reorganization will automatically terminate.
Following the Effective Date, each former shareholder of Bank will be
obligated to surrender to Bancorp the Bank Common Stock certificates. Detailed
instructions concerning the procedure for surrendering Bank Common Stock
certificates will be sent by Bancorp to each former shareholder of Bank on or
promptly after the Effective Date. Upon proper surrender of the Bank Common
Stock certificate, each former shareholder of Bank will be issued a stock
certificate representing the number of whole shares of Bancorp Common Stock into
which the shares of Bank Common Stock have been converted, together with a check
in the amount of any cash to which he or she is entitled in lieu of the issuance
of a fractional share of Bancorp Common Stock. Shareholders of Bank should not
surrender their Bank Common Stock certificates for exchange until they receive
written instructions to do so from Bancorp.
Following the Effective Date and until properly requested and surrendered,
each Bank Common Stock certificate will be deemed for all corporate purposes to
represent the number of whole shares of Bancorp Common Stock which the holder
would be entitled to receive upon its surrender. Provided, however, that
Bancorp, at its option, may withhold dividends payable after the Effective Date
to any former shareholder of Bank who has received written instructions from
Bancorp but has not at that time surrendered his or her Bank Common Stock
certificates. Any dividends so withheld, will be paid without interest to any
former shareholder of Bank upon the proper surrender of his or her Bank Common
Stock certificates.
All Bank Common Stock certificates must be surrendered to Bancorp within
two years after the Effective Date. In the event that any former shareholder of
Bank does not properly surrender outstanding Bank Common Stock certificates
within that time, the shares of Bancorp Common Stock that would otherwise have
been issued, at the option of Bancorp, be sold and the net proceeds of the sale,
together with the cash (if any) issued in lieu of a fractional share and any
previously accrued and unpaid dividends, will be held in a non-interest bearing
account for the shareholder's benefit. From and after the sale, the sole right
of the former shareholder of Bank will be the right to collect
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the net proceeds, cash and accumulated dividends. Subject to all applicable laws
of escheat, the net proceeds, cash and accumulated dividends will be paid to the
former shareholder of the Bank, without interest, upon surrender of Bank Common
Stock certificates.
The foregoing discussion relating to the exchange of Bank Common Stock is
only a summary that is provided for convenience. The foregoing discussion should
be read in conjunction with, and is qualified in its entirety by the terms of
the Acquisition Agreement, including without limitation Article II thereof. The
Acquisition Agreement is reproduced in full and set forth in Annex "A" of this
Proxy Statement/Prospectus.
Voting Agreements
In connection with the Merger Proposal, the directors of the Bank have
entered into agreements to vote certain shares beneficially owned by them in
favor of the Merger. Each member of the Board of Directors of the Bank has
entered into an agreement ("Support Agreement") pursuant to which he has agreed
to vote, or cause to be voted, the shares of Bank Common Stock as to which he
has or shares voting power, individually or, to the extent of his proportionate
interest, jointly with other persons, as well as other shares over which he may
acquire beneficial ownership in favor of the Merger Proposal, and use his best
efforts to cause the Merger Proposal to be effected. In the aggregate, the
Support Agreements commit 3,952 shares of Bank Common Stock or 26.66% of the
total shares outstanding to be voted in favor of the Merger Proposal.
The Support Agreements further provide that, with respect to the shares of
Bank Common Stock owned by the directors and until the Merger is consummated or
the Acquisition Agreement is terminated, such persons will not: (i) sell or
otherwise transfer their respective shares of Bank Common Stock; or (ii)
directly or indirectly solicit or encourage inquiries or proposals from or
participate in any discussion or negotiations with any other person, entity or
group concerning any sale of assets, sale of shares, merger, consolidation or
similar transaction involving the Bank.
Business Pending the Effective Date
Pursuant to the Acquisition Agreement, the Bank is required, pending the
Effective Date, to conduct its business in the usual, regular and ordinary
course, consistent with prudent business judgment. The Bank may not take any
action not in the ordinary course of business without the prior written consent
of Bancorp. The Bank has agreed that, in general, pending the Effective Date, it
will not take any of the following actions without the written consent of
Bancorp: (i) amend its articles of incorporation or bylaws; (ii) enter into or
assume any material contract not in the ordinary course of business; (iii)
breach any warranty or covenant set forth in the Acquisition Agreement; (iv)
declare and pay cash dividends other than its regular semi-annual cash dividend
in amounts and on dates consistent with past practices; (v) authorize, purchase,
issue or sell shares of Bank Common Stock or any other equity or debt securities
or derivatives; (vi) increase the rate of compensation or make a bonus or
severance payment to any employee of Bank; (vii) enter into any related party
transaction other than extensions of credit in the ordinary course of business;
(viii) affect any capitalization reclassification, stock dividends or splits;
(ix) enter into or modify
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any pension, retirement, stock option or similar benefit plan; (x) merge with
any other entity; and (xi) solicit or encourage inquiries in connection with a
business combination involving Bank, other than as contemplated by the
Acquisition Agreement.
There have been no material contracts or other transactions between Bank
and Bancorp since signing the Acquisition Agreement, nor have there been any
material contracts, arrangements, relationships or transactions between Bank and
Bancorp during the past five years, other than in connection with the Agreements
described herein.
Conditions, Amendment and Termination
The obligations of Bancorp and Bank to consummate the Merger are subject to
a number of conditions and contingencies as set forth in the Acquisition
Agreement, the most significant of which include: (i) approval by the
shareholders of Bank; (ii) approval by federal banking regulators, including the
approval of the FDIC and a notice to the FRB; (iii) approval of the Department
of Banking; (iv) the receipt of a favorable opinion of counsel concerning
certain federal income tax consequences relating to the Merger; (v) continued
effectiveness of the Bancorp's Registration Statement on Form S-4, including
this Proxy Statement/Prospectus, filed with the Commission; (vi) the absence of
any pending or threatened action, suit or proceeding before any federal, state
or local governmental authority or arbitration tribunal seeking to modify or
otherwise affect the transactions contemplated by the Agreements; (vii) the
continuing accuracy, in all material respects, of the representations and
warranties and the absence of any breach of any of the covenants made by Bancorp
or Bank in the Agreements; (viii) the absence of any material adverse change in
the financial or business performance or prospects of Bancorp or Bank; (ix) the
determination that the Merger can be accounted for as a pooling of interests for
financial reporting purposes; (x) the determination of Bancorp and Bank and
their counsel that all applicable federal and state securities and anti-trust
laws have been complied with; (xi) the absence of discovery of any material
previously undisclosed environmental problem affecting Bancorp or Bank; (xii)
the execution by each of the directors of Bank of a Support Agreement; and
(xiii) the delivery of certificates at closing, by the respective officers of
Bancorp and Bank, confirming satisfaction of the foregoing. See, THE
MERGER-Regulatory Considerations and Approvals.
To the extent permitted by law, the Acquisition Agreement may be amended by
mutual consent of the parties and any term or condition thereof may be waived by
the party entitled to its benefit at any time before the Effective Date, whether
before or after receipt of the approval of the Merger Proposal by Bank's
shareholders and without seeking shareholder approval; provided, however, that
no change to the amount of consideration to be received by the shareholders of
the Bank can be made unless and until the shareholders of Bank approve and adopt
the change in accordance with applicable federal and state law.
The Acquisition Agreement may be terminated at any time before the
Effective Date, whether before or after its approval and adoption by the
shareholders of Bank by: (i) mutual consent of all of the parties; (ii)
unilateral action by each of the parties in the event of a material breach by
any other party of any representation, warranty or covenant not cured within
thirty (30) days or
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failure to satisfy any condition precedent to the terminating party's obligation
to consummate the Merger through no fault of the terminating party; or (iii)
automatically in the event of a failure to consummate the Merger by December 31,
1998, unless extended in writing.
Regulatory Considerations and Approvals
General. Bancorp is a bank holding company within the meaning of the Bank
Holding Company Act of 1956, as amended (the "1956 Act") and is registered as
such with the Federal Reserve Board. As a bank holding company, Bancorp is also
subject to regulation by applicable state regulatory authorities. Mid Penn, the
Pennsylvania chartered bank subsidiary of Bancorp is subject to regulation,
supervision and regular examination by the Banking Department, as well as
regulation by the FDIC. The Bank was formed under Pennsylvania law and is a
member of the Federal Reserve System. The Bank is, therefore, subject to
regulation and supervision by the Department of Banking and the Federal Reserve
Board.
Bank holding companies and banks are extensively regulated under both
federal and state law. The regulation and supervision of Bancorp, Mid Penn and
the Bank are designed primarily for the protection of depositors and not the
respective institutions or their stockholders. To the extent that the following
information describes statutory and regulatory provisions, it is qualified in
its entirety by reference to the particular statutory and regulatory provisions.
A change in applicable law or regulation may have a material effect on the
business of Bancorp and the Bank.
Bancorp is required to file an annual report with the Federal Reserve Board
containing such additional information as the Federal Reserve Board may require
pursuant to the 1956 Act. Copies of annual and other periodic reports are also
required to be filed with the applicable state regulatory authorities. The 1956
Act requires each bank holding company to obtain the prior approval of the
Federal Reserve Board before it may acquire substantially all of the assets of
any bank, or before it may acquire ownership or control of any voting shares of
any bank, if, after such acquisition, it would own or control, directly or
indirectly, more than 5% of the voting shares of such bank. The 1956 Act also
restricts the types of businesses and operations in which a bank holding company
and its nonbank subsidiaries may engage. Generally, permissible activities are
limited to banking and activities found by the Federal Reserve Board to be so
closely related to banking as to be a proper incident thereto.
The operations of the Bank and Mid Penn are subject to requirements and
restrictions under federal and state law, including requirements to maintain
reserves against deposits, restrictions on the types and amounts of loans that
may be made and limits upon the types of services which may be offered. Various
consumer laws and regulations also affect the operations of the Bank and Mid
Penn. Regulatory approvals are required for branching and for bank mergers.
Capital. Federal regulators generally measure capital adequacy by using a
risk-based capital framework and by monitoring compliance with minimum leverage
ratio guidelines. The required minimum ratio of total risk-based capital to
risk- weighted assets (including certain off-balance sheet items, such as
standby letters of credit) is 8%. At least half of the total capital, or 4%, is
to be comprised of common equity and qualifying perpetual preferred stock, less
deductible intangibles
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("Tier 1 Capital"). The remainder ("Tier 2 Capital") may consist of mandatory
convertible debt securities, qualifying subordinated debt, other preferred stock
and a portion of the reserve for possible credit losses up to 1.25% of total
risk weighted assets. The aggregate amount of Tier 1 Capital and Tier 2 Capital
is referred to herein as "Total Capital".
In addition, guidelines established by federal regulators provide for a
minimum leverage ratio (Tier l Capital to quarterly average total assets less
deductible intangibles) of 3% for bank holding companies and banks that meet
certain criteria, including the maintenance of the highest regulatory rating.
All other bank holding companies and banks are required to maintain a leverage
ratio of 3% plus an additional cushion of at least 100 to 200 basis points.
In addition to considering specific minimum capital levels, the regulatory
agencies review capital adequacy in light of a variety of factors, including
asset quality. Therefore, the capital adequacy of a banking organization will be
impacted by and assessed in relation to its asset quality. Bank regulators
continue to indicate their desire to raise capital requirements applicable to
banking organizations beyond current levels. However, it is difficult to predict
whether and when higher capital requirements would be imposed, and if so, at
what levels and on what schedule. In addition, institutions which meet minimum
regulatory capital requirements, but are not "well capitalized," are subject to
certain restrictions and disadvantages, such as restrictions on the receipt of
brokered deposits. See Certain Regulatory Approvals and Considerations- Fidicia.
Failure to satisfy the minimum capital requirements of the regulatory
guidelines could subject a banking organization to enforcement action by the
regulatory authorities, including the termination of FDIC deposit insurance,
restrictions on the activities of the banking organization and the possible
appointment of a conservator or receiver.
Set forth below are the minimum regulatory capital ratios and the capital
ratios for each of Bancorp, Mid Penn and the Bank as of December 31, 1997:
MINIMUM
RATIO Bancorp Mid Penn The Bank
------ ------- -------- --------
Total Risk Based Capital
Ratio................... 8.0% 17.8% 15.0% 32.99%
Tier 1 Risk Based Capital
Ratio................... 4.0% 16.5% 13.7% 31.81%
Leverage Ratio........... 3.0-5.0% 11.7% 9.5% 10.21%
The capital ratios of Bancorp, Mid Penn and the Bank on April 28, 1998,
exceed all general minimum capital requirements imposed by Federal regulatory
authorities.
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Potential Enforcement Actions. Bank holding companies and banks and their
institution-affiliated parties may be subject to potential enforcement actions
by the Federal Reserve Board or the FDIC for unsafe or unsound practices in
conducting their businesses, or for violations of any law, rule or regulation or
provision, any consent order with any agency, any condition imposed in writing
by the agency or any written agreement with the agency. Enforcement actions may
include the imposition of a conservator or receiver, additional cease-and-desist
orders and written agreements, the termination of insurance of deposits, the
imposition of civil money penalties and removal and prohibition orders against
institution- affiliated parties.
Dividends. Bancorp is a legal entity separate and distinct from its bank
and other subsidiaries. Bancorp principal source of revenue consists of
dividends from Mid Penn. There are limitations on the payment of dividends by
Mid Penn. See INFORMATION CONCERNING BANCORP AND DESCRIPTION OF BANCORP STOCK-
Dividends.
Provisions of state banking law restrict the amount of dividends that can
be paid to Bancorp by Mid Penn. Under applicable state law, dividends may be
declared and paid only out of accumulated net earnings, which are the
undistributed net profits recorded on the books of an institution for the last
complete calendar or fiscal year. Based on these regulations, Mid Penn, without
regulatory approval, could declare dividends at December 31, 1997 of
$10,605,000.
Under applicable state law, the Bank may pay cash dividends only out of
accumulated net earnings, and no such dividend may be declared and paid unless
all required transfers to surplus have been made and the surplus of the Bank
would not be reduced by the payment of the dividend. As of December 31, 1997,
the Bank had $2,498,000 available for the payment of dividends under these
requirements.
The payment of dividends by each of Bancorp, Mid Penn and the Bank may also
be affected by other factors, such as the maintenance of adequate capital. For
example, the Federal Deposit Insurance Corporation Improvement Act of 1991
("FDICIA") generally prohibits an undercapitalized institution from paying
dividends. In addition, if, in the opinion of the applicable regulatory
authority, a bank holding company or a bank under its jurisdiction is engaged in
or is about to engage in an unsafe or unsound practice (which, depending on the
financial condition of the bank, could include the payment of dividends), such
authority may require, after notice and hearing, that such organization cease
and desist from such practice. The Federal Reserve Board and the FDIC have
issued policy statements which provide that insured banks and bank holding
companies should generally only pay dividends out of current operating earnings.
Support of Bank Subsidiaries. A depository institution insured by the FDIC
can be held liable for any loss incurred by, or reasonably expected to be
incurred by, the FDIC in connection with (i) the default of a commonly
controlled FDIC-insured depository institution or (ii) any assistance provided
by the FDIC to a commonly controlled FDIC-insured depository institution in
danger of default. "Default" is defined generally as the appointment of a
conservator or receiver and "in danger of default" is defined generally as the
existence of certain conditions indicating that a "default" is likely to occur
in the absence of regulatory assistance.
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Under Federal Reserve Board regulations, a bank holding company is required
to serve as a source of financial and managerial strength to its subsidiary
banks and may not conduct its operations in an unsafe or unsound manner. In
addition, it is the Federal Reserve Board's policy that in serving as a source
of strength to its subsidiary banks, a bank holding company should stand ready
to use available resources to provide adequate capital funds to its subsidiary
banks during periods of financial stress or adversity and should maintain the
financial flexibility and capital-raising capacity to obtain additional
resources for assisting its subsidiary banks. A bank holding company's failure
to meet its obligations to serve as a source of strength to its subsidiary banks
will generally be considered by the Federal Reserve Board to be an unsafe and
unsound banking practice or a violation of the Federal Reserve Board regulations
or both. This doctrine is commonly known as the "source of strength" doctrine.
Federal law provides for the enforcement of any pro rata assessment of
shareholders of a national bank to cover impairment of capital stock by sale, to
the extent necessary, of the stock of any assessed shareholder failing to pay
the assessment.
Borrowings by Holding Companies. Federal law prevents Bancorp and certain
of its affiliates from borrowing from its banking subsidiaries unless such
borrowings are secured by specified amounts and types of collateral.
Additionally, each such secured loan to an affiliate is generally limited to an
amount not exceeding 10% of the bank's capital and surplus, and all such loans
between the lending bank and its affiliates are limited to an amount not to
exceed 20% of the lending bank's capital and surplus. Further, a bank holding
company and its subsidiaries are prohibited from engaging in certain tie-in
arrangements in connection with any extension of credit, lease or sale of
property or furnishing of services.
FIDICIA. FDICIA, enacted on December 19, 1991 in connection with the
recapitalization of the Bank Insurance Fund ("BIF"), requires the FDIC to set
semi-annual assessment rates for BIF members at levels sufficient to increase
the BIF's reserve ratio to a designated level within a prescribed period of
time, not to exceed 15 years from the date that the FDIC promulgates the
applicable time schedule. Pursuant to FDICIA, the FDIC has developed a
risk-based assessment system, under which the assessment rate for an insured
depository institution varies according to the level of risk incurred in its
activities. An institution's risk category is based upon whether the institution
is well capitalized, adequately capitalized or less than adequately capitalized.
Each insured depository institution is also to be assigned to one of the
following "supervisory subgroups": Subgroup A, B or C. Subgroup A institutions
are financially sound institutions with few minor weaknesses; Subgroup B
institutions are institutions that demonstrate weaknesses which, if not
corrected, could result in significant deterioration; and Subgroup C
institutions are institutions for which there is a substantial probability that
the FDIC will suffer a loss in connection with the institution unless effective
action is taken to correct the areas of weakness. Based on its capital and
supervisory subgroups, each BIF or Savings Association Insurance Fund member
institution is assigned an annual FDIC assessment rate varying between 0.23% per
annum (for well capitalized Subgroup A institutions) and 0.31% per annum (for
undercapitalized Subgroup C institutions). The Bank and each of the Bancorp
banking subsidiaries is considered well capitalized.
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FDICIA requires federal banking agencies to broaden the scope of regulatory
corrective action taken with respect to depository institutions that do not meet
minimum capital requirements and to take such actions promptly in order to
minimize losses to the FDIC. In connection with FDICIA, federal banking agencies
are required to establish capital measures (including both a leverage measure
and a risk-based capital measure) and to specify for each capital measure the
levels at which depository institutions will be considered "well capitalized",
"adequately capitalized", "undercapitalized", "significantly undercapitalized"
or "critically undercapitalized".
Under FDICIA, the Federal banking regulators have adopted regulations
establishing relevant capital measures and relevant capital levels. The relevant
capital measures are the Total Capital to risk adjusted assets ratio, Tier l
Capital to risk adjusted assets ratio and the leverage ratio. Under these
regulations, a bank will be (i) well capitalized if it has a Total Capital to
risk adjusted assets ratio of 10% or greater, a Tier l Capital to risk adjusted
assets ratio of 6% or greater and a leverage ratio of 5% or greater and is not
subject to any order or written directive by its primary Federal regulator to
meet and maintain a specific capital level for any capital measure; (ii)
adequately capitalized if it has a Total Capital to risk adjusted assets ratio
of 8% or greater, a Tier l Capital to risk adjusted assets ratio of 4% or
greater and a leverage ratio of 4% or greater (3% in certain circumstances) and
is not well capitalized; (iii) undercapitalized if it has a Total Capital to
risk adjusted assets ratio of less than 8%, a Tier 1 Capital to risk adjusted
assets ratio of less than 4% or a leverage ratio of less than 4% (3% in certain
circumstances); (iv) significantly undercapitalized if it has a Total Capital to
risk adjusted assets ratio of less than 6%, a Tier 1 Capital to risk adjusted
assets ratio of less than 3% or a leverage ratio of less than 3%; and (v)
critically undercapitalized if its tangible equity is equal to or less than 2%
of average quarterly tangible assets. The Bank and each of the Bancorp banking
subsidiaries is considered well capitalized.
FDICIA authorizes the appropriate federal banking agency, after notice and
an opportunity for a hearing, to treat a well capitalized, adequately
capitalized or undercapitalized insured depository institution as if it had a
lower capital-based classification if it is in an unsafe or unsound condition or
engaging in an unsafe or unsound practice. Thus, an adequately capitalized
institution can be subjected to the restrictions on undercapitalized
institutions described below (except that a capital restoration plan cannot be
required of the institution) and an undercapitalized institution can be
subjected to the restrictions applicable to significantly undercapitalized
institutions described below.
FDICIA generally prohibits a depository institution from making any capital
distribution (including payment of a dividend) or paying any management fee to
its holding company if the depository institution would thereafter be
undercapitalized. Undercapitalized depository institutions are subject to growth
limitations and are required to submit a capital restoration plan. The federal
banking agencies may not accept a capital plan without determining, among other
things, that the plan is based on realistic assumptions and is likely to succeed
in restoring the depository institution's capital. In addition, for a capital
restoration plan to be acceptable, the depository institution's parent holding
company must guarantee that the institution will comply with such capital
restoration plan. The aggregate liability of the parent holding company is
limited to the lesser of (i) an amount equal to five percent of the depository
institution's total assets at the time it became undercapitalized, and (ii) the
amount which is necessary (or would have been necessary) to bring the
institution into
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compliance with all capital standards applicable with respect to such
institution as of the time it fails to comply with the plan. In the event of a
bank holding company's bankruptcy, any commitment by the bank holding company to
a federal bank regulatory agency to maintain the capital of a subsidiary bank
will be assumed by the bankruptcy trustee and entitled to a priority of payment.
If a depository institution fails to submit an acceptable plan, it is treated as
if it is significantly undercapitalized.
Significantly undercapitalized depository institutions may be subject to a
number of requirements and restrictions, including orders to sell sufficient
voting stock to become adequately capitalized, requirements to reduce total
assets and cessation of receipt of deposits from correspondent banks. Critically
undercapitalized institutions are subject to the appointment of a receiver or
conservator.
Under FDICIA, a bank cannot accept brokered deposits (which term is defined
to include payment of an interest rate more than 75 basis points above
prevailing rates) unless (i) it is well capitalized or (ii) it is adequately
capitalized and receives a waiver from the FDIC. A bank that cannot receive
brokered deposits also cannot offer "pass-through" insurance on certain employee
benefit accounts. In addition, a bank that is adequately capitalized may not pay
an interest rate on any deposits in excess of 75 basis points over certain
prevailing market rates. There are no such restrictions on a bank that is well
capitalized. The Bank and each of the Bancorp banking subsidiaries is well
capitalized for purposes of the foregoing.
FDICIA requires that each of the Federal bank regulatory agencies prescribe
by regulation the depository institution and depository institution holding
company standards relating to internal controls, information systems, internal
audit systems, loan documentation, credit underwriting, interest rate exposure,
asset growth, and employee compensation, fees and benefits and standards
specifying minimum earnings sufficient to absorb losses without impairing
capital, to the extent feasible a minimum ratio of market value to book value
for publicly traded shares and such other standards relating to the foregoing as
it deems appropriate. A holding company or institution that fails to comply with
such standards will be required to submit a plan designed to achieve such
compliance. If no such plan is submitted or a failure to implement such a plan
exists, the depository institution or holding company would become subject to
additional regulatory action or enforcement proceedings. FDICIA provides that
final regulations under such provisions should have become effective no later
than December 1, 1993. Since the standards have not yet been prescribed in final
form, neither Bancorp nor The Bank can assess the significance of the impact
such standards will have on their respective operations, which could be
material.
FDICIA also contains a variety of other provisions that may affect the
operations of bank holding companies and banks, including new reporting
requirements, revised regulatory standards for real estate lending, "truth in
savings" provisions and the requirement that a depository institution give 90
days' prior notice to customers and regulatory authorities before closing any
branch.
Interstate Banking and Branching Legislation. In 1994, the Riegle-Neal
Interstate Banking and Branching Efficiency Act (the "Interstate Banking Act")
was enacted. The Interstate Banking Act facilitates the interstate expansion and
consolidation of banking organizations (i) by permitting bank holding companies
that are adequately capitalized and adequately managed to acquire banks
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located in states outside their home states regardless of whether such
acquisitions are authorized under the law of the host state; (ii) by permitting
the interstate merger of banks subject to the right of individual states to "opt
in" or "opt out" of this authority before that date; (iii) by permitting banks
to establish new branches on an interstate basis provided that such action is
specifically authorized by the law of the host state; (iv) by permitting a bank
to engage in certain agency relationships (i.e., to receive deposits, renew time
deposits, close loans (but not including loan approvals or disbursements),
service loans, and receive payments on loans and other obligations) as agent for
any bank or thrift affiliate, whether the affiliate is located in the same state
or a different state then the agent bank; and (v) by permitting foreign banks to
establish, with approval of the regulators in the United States, branches
outside their "home" states to the same extent that national or state banks
located in the home state would be authorized to do so. One effect of this
legislation will be to permit banks and bank holding companies, such as the Bank
and Bancorp, to acquire banks and bank holding companies located in any state
and to permit qualified banking organizations located in any state to acquire
banks and bank holding companies located in Pennsylvania, irrespective of state
law.
Since 1995, the Pennsylvania Banking Code has authorized full interstate
banking and branching under Pennsylvania law. Specifically, the legislation (i)
eliminates the "reciprocity" requirement previously applicable to interstate
commercial bank acquisitions by bank holding companies, (ii) authorizes
interstate bank mergers and reciprocal interstate branching into Pennsylvania by
interstate banks, and (iii) permits Pennsylvania institutions to branch into
other states with the prior approval of the Pennsylvania Department of Banking.
Overall, this federal and state legislation has, as was predicted, had the
effect of increasing consolidation and competition and promoting geographic
diversification in the banking industry.
Proposed Legislation and Regulations. From time to time, various federal
and state legislation is proposed that could result in additional regulation of,
and restrictions on, the business of banking and on the Bank, Bancorp and Mid
Penn, or otherwise change the business environment. Neither management of the
Bank nor management of Bancorp and Mid Penn can predict whether any of this
legislation, if enacted, will have a material effect on the business of the
respective companies.
Approvals. Among other things, the Merger is subject to the approval of the
FDIC, the FRB and the Department of Banking. Mid Penn filed an Application for a
Merger or Other Transaction pursuant to Section 18(c) of the Federal Deposit
Insurance Act with the FDIC on April 27, 1998, which application must be
approved. Bancorp filed a notice with the Federal Reserve Bank of Philadelphia
pursuant to 12 CFR ss.224.14, on March 31, 1998, which notice must be approved.
In addition, Mid Penn filed an Application to Merge or Consolidate pursuant to
ss.1602 et seq. of the Banking Code with the Pennsylvania Department of Banking
on April 28, 1998, which application must be approved.
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Effective Date
The Merger will become effective on the date and according to the
provisions specified in the "Articles of Merger" delivered to the Department of
Banking and filed with the Pennsylvania Department of State. The Articles of
Merger are expected to be filed as soon as reasonably possible after all
conditions precedent have been satisfied or waived. The Bancorp and the Bank
intend to consummate the Merger July 10, 1998, assuming that the Merger is
approved by Bank' shareholders, all required regulatory approvals have been
obtained and all other conditions to closing have been satisfied or waived by
that time. The Acquisition Agreement will automatically be terminated and the
Merger Proposal canceled if all applicable conditions have not been satisfied by
December 31, 1998, unless the parties have agreed, prior to that date, to extend
the termination date. In addition, the Acquisition Agreement provides that the
Effective Date must occur within sixty (60) days after all applicable
conditions, including regulatory approvals, have been satisfied.
Management and Operations Following the Merger
On the Effective Date, the Bank will be merged with, into and under the
charter of Mid Penn, with Mid Penn Bank surviving the Merger. The shareholders
of the Bank will become shareholders of the Bancorp. The Boards of Directors of
Bancorp and Mid Penn, following the Merger, will include the same persons who
are members of those Boards of Directors immediately before the Merger, with the
addition of Gregory M. Kerwin and Donald E. Sauve to the Mid Penn Board of
Directors, to will serve until the 1999 Annual Meeting of Shareholders and until
their successors are elected and qualified. In addition, pursuant to the
Agreements, the Bank's Board of Directors will become Mid Penn's Bank Office
Board.
The Bank Office Board will continue in existence at least until fewer than
three of its original members remain on the board. Following the Effective Date,
members of the Bank Office Board shall receive fees for services, no less than
those currently received as a member of the Bank's Board of Directors, for
service as a Bank Office Board member and as a member of the Mid Penn Board, as
may be the case. Bank Office Board members who also serve on the Mid Penn Board
of Directors shall receive the fees paid to Mid Penn Board members. In no case,
however, shall the fees paid to any Bank Office Board member who serves on both
Boards, for his service as a member of the Bank Office Board, exceed $1,800.
Bank Office Board salaried members shall have salaries and bonuses continued for
a five (5) year period following the Effective Date.
Immediately after the Effective Date, Mid Penn shall employ all of the
employees of the Bank who are employed by the Bank immediately prior to the
Effective Date. The aggregate cost of the compensation and benefit package of
these employees will not be less after the Effective Date than immediately prior
to the Effective Date and will not be reduced during their employment with Mid
Penn.
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Federal Income Tax Consequences
Pursuant to the Acquisition Agreement, an opinion will be provided by
Shumaker Williams, P. C., counsel for Bancorp that will state that for federal
income tax purposes:
1. The transactions contemplated by the Acquisition Agreement will
constitute a reorganization within the meaning of Sections
368(a)(1)(A) and 368(a)(2)(D) of the Code;
2. No gain or loss will be recognized by Bancorp, Mid Penn or Bank as a
result of the reorganization;
3. No gain or loss will be recognized by the shareholders of Bank upon
receipt of Bancorp Common Stock in exchange for the Bank Common Stock
pursuant to the provisions of the Agreements, except with respect to
cash received in lieu of the issuance of fractional shares of Bancorp
Common Stock (or by any shareholder of Bank who exercises dissenters'
rights);
4. In the case of cash received by any shareholder of Bank in lieu of the
issuance of a fractional share of Bancorp Common Stock, taxable gain
or loss will be recognized by the shareholder to the extent of the
difference between the amount of the cash received and the adjusted
tax basis of the fractional share interest;
5. In the case of cash received by any shareholder of Bank who exercises
dissenters' rights, taxable gain or loss will be recognized by the
shareholder to the extent of the difference between the amount of the
cash received and the adjusted tax basis of the shares as to which
dissenters' rights are exercised;
6. The tax basis of the Bancorp Common Stock to be received by the
shareholders of Bank pursuant to the provisions of the Acquisition
Agreement will be the same as the tax basis of Bank Common Stock
surrendered in exchange therefor; and
7. The holding period of the Bancorp Common Stock to be received by the
shareholders of the Bank pursuant to the provisions of the Acquisition
Agreement will include the holding period of the Bank Common Stock
surrendered in exchange therefor, provided that the Bank Common Stock
is held as a capital asset on the Effective Date.
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The foregoing is intended only as a general summary of certain federal
income tax consequences of the Merger Proposal under present law. Each
shareholder of Bank is urged to consult his or her own tax advisor concerning
the particular tax consequences of the Merger Proposal as they affect his or her
individual circumstances, including the impact of any applicable estate, gift,
state, local, foreign or other tax.
Accounting Treatment
The Acquisition Agreement contemplates that the Merger will be treated as a
pooling of interests for financial accounting purposes. If Bancorp would be
required to purchase more than 10 percent of the outstanding shares of Bank
Common Stock for cash, due to the purchase of fractional shares and the exercise
of dissenters' rights by Bank shareholders, or if other conditions arise that
would prevent the Merger from being treated as a pooling of interests for
financial accounting purposes, Bancorp has the right to terminate the
Acquisition Agreement and to cancel the Merger.
Rights of Dissenting Shareholders
In accordance with the provisions of Subchapter D of the BCL, shareholders
of Bank will be entitled to dissenters' rights.
Under applicable provisions of Pennsylvania law, holders of Bank Common
Shares will have the right to dissent and obtain payment of the fair value of
their shares by complying with the provisions of Subchapter D. Accompanying this
Proxy Statement/Prospectus as Annex B is a copy of the text of the applicable
provisions of Pennsylvania law that prescribe the procedures for the exercise of
dissenters' rights and for determining the value of their shares. Shareholders
of the Bank who seek to exercise dissenters' rights must carefully follow the
procedure described in such statutory provisions. The following summary of such
provisions is qualified in its entirety by reference to the such statutory
provisions.
Any Bank shareholder who wishes to dissent and obtain payment of the fair
value of his shares (i) must file with the Bank, prior to the Special Meeting, a
written notice of intention to demand that he be paid the fair value for his
shares if the Merger is effected, (ii) must effect no change in the beneficial
ownership of his shares from the date of such filing continuously through the
Effective Date, and (iii) must refrain from voting his shares in approval of the
Merger Proposal. A dissenter who fails in any respect shall not acquire any
right to payment of the fair value of his shares. Neither a proxy nor a vote
against the Merger Proposal shall constitute the required written notice. A
record holder of shares of a business corporation may assert dissenters' rights
as to fewer than all of the shares registered in his name only if he dissents
with respect to all the shares of the same class or series beneficially owned by
any person and discloses the name and address of the person or persons on whose
behalf he dissents. In that event, his rights shall be determined as if the
shares as to which he has dissented and his other shares were registered in the
names of different shareholders. A beneficial owner of shares of a business
corporation who is not the record holder may assert dissenters' rights with
respect to shares held on his behalf and shall be treated as a dissenting
shareholder under the terms of Subchapter D if he submits to the Bank not later
than the
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time of the assertion of dissenters' rights a written consent of the record
holder. A beneficial owner may not dissent with respect to some but less than
all shares of the same class or series owned by him, whether or not the shares
so owned by him are registered in his name.
If the Merger is approved by the required vote at the Special Meeting, the
Bank shall mail a further notice to all dissenters who gave due notice of
intention to demand payment of the fair value of their shares and who refrained
from voting in favor of the Merger. The notice shall (i) state where and when a
demand for payment must be sent and certificates representing Bank Common Stock
must be deposited in order to obtain payment, (ii) supply a form for demanding
payment that includes a request for certification of the date on which the
shareholder, or the person on whose behalf the shareholder dissents, acquired
beneficial ownership of the shares, and (iii) be accompanied by a copy of
Subchapter D. A shareholder who fails to timely demand payment or fails to
timely deposit certificates as required by such notice shall not have any right
to receive payment of the fair value of his shares. The dissenter shall retain
all other rights of a shareholder until those rights are modified by
effectuation of the Merger. Within 60 days after the date set for demanding
payment and depositing certificates, if the Merger has not been effectuated, the
Bank shall return any certificates that have been deposited. The Bank may
thereafter send a new notice setting a new date for demanding payment and
depositing certificates.
Promptly after the Effective Date, or upon timely receipt of demand for
payment if the Merger has already been effected, Bancorp, as successor to the
Bank, shall either remit to dissenters who have made demand and deposited
certificates the amount that Bancorp estimates to be the fair value of the
shares, or give written notice that no remittance will be made. The remittance
or notice shall be accompanied by (i) the closing balance sheet and statement of
income of Bancorp for a fiscal year ending not more than 16 months before the
date of remittance or notice together with the latest available interim
statements, (ii) a statement of Bancorp's estimate of the fair value of the
shares and (iii) a notice of the right of the dissenter to demand payment or
supplemental payment, as the case may be, accompanied by a copy of Subchapter D.
If Bancorp does not remit the amount of its estimate of the fair value of the
shares as provided above, it shall return any certificates that have been
deposited. Bancorp may make a notation on any such certificates that such demand
has been made. If shares with respect to which notation has been so made shall
be transferred, each new certificate issued therefor shall bear a similar
notation, together with the name of the original dissenting holder or owner of
such shares. A transferee of such shares shall not acquire by transfer any
rights in the corporation other than those that the original dissenter had after
making demand for payment of their fair value.
If the dissenter believes that the amount stated or remitted by Bancorp is
less than the fair value of his shares, he may send to Bancorp his own estimate
of the fair value of the shares to Bancorp, which estimate shall be deemed a
demand for payment of the amount or the deficiency. Where the dissenter does not
file his own estimate within 30 days after the mailing by Bancorp of its
remittance or notice, the dissenter shall be entitled to no more than the amount
stated in the notice or remitted to him by Bancorp.
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Within 60 days after the latest of (i) the Effective Date of the Merger,
(ii) timely receipt of any demands for payment by a dissenter, or (ii) timely
receipt of any estimate of fair value by the dissenter, if any demands for
payment remain unsettled, Bancorp may file, in court, an application for relief
requesting that the fair value of the shares be determined by the court. All
dissenters, wherever residing, whose demands have not been settled, shall be
made parties to the proceeding as in an action against their shares. A copy of
the application shall be served on each such dissenter. The jurisdiction of the
court shall be plenary and exclusive. The court may appoint an appraiser to
receive evidence and recommend a decision on the issue of fair value. The
appraiser shall have such power and authority as may be specified in the order
of appointment or in any amendment thereof. Each dissenter who is made a party
shall be entitled to recover the amount by which the fair value of his shares is
found to exceed the amount, if any, previously remitted, plus interest. If
Bancorp fails to file an application with the court, any dissenter who made a
demand and who has not already settled his claim against Bancorp may do so at
any time within 30 days after the expiration of the 60 day period for filing by
Bancorp. If a dissenter does not file an application within the 30-day period,
each dissenter entitled to file an application shall be paid Bancorp's estimate
of the fair value of the shares and no more, and may bring an action to recover
any amount not previously remitted.
The foregoing discussion is only a summary of the rights and obligations of
a dissenting shareholder and is qualified in its entirety by reference to the
provisions of the BCL, which are reproduced and set forth in full in Annex "B"
to this Proxy Statement/Prospectus.
Restriction on Resale of Bancorp Common Stock Held By Affiliates of Bank
The shares of Bancorp Common Stock to be issued upon consummation of the
Merger will be registered with the Commission under the Securities Act of 1933
(the "1933 Act") and, may be resold or otherwise transferred by all former
shareholders of Bank, except those former shareholders who are deemed
"affiliates" of Bank, within the meaning of Commission Rules 144 and 145
promulgated pursuant to the 1933 Act. In general terms, any person who is an
executive officer, director or 10 percent shareholder of Bank at the time of the
Special Meeting may be deemed to be an affiliate of Bank for purposes of
Commission Rules 144 and 145.
Bancorp Common Stock received by persons who are deemed to be affiliates of
Bank may be resold only: (i) in compliance with the provisions of Commission
Rule 145(d); (ii) in compliance with the provisions of another applicable
exemption from the registration requirements of the 1933 Act; or (iii) pursuant
to an effective registration statement filed with the Commission. In general
terms, Commission Rule 145(d) would permit an affiliate of Bank to sell shares
of Bancorp Common Stock received by him or her in ordinary brokerage
transactions subject to certain limitations on the number of shares that may be
resold in any consecutive three (3) month period. Notwithstanding the foregoing,
an affiliate of Bank may not, as a general rule and subject to an exception in
the case of certain de minimis sales: (i) sell any shares of Bank Common Stock
during the 30-day period immediately preceding the Effective Date; or (ii) sell
any shares of Bancorp Common Stock received by him or her in exchange for his or
her shares of Bank Common Stock until after the publication of financial results
covering at least thirty (30) days of post-Merger combined operations.
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Under the terms of the Acquisition Agreement, each person who may be deemed
to be an affiliate of Bank is required, prior to the closing of the Merger, to
deliver a letter to Bancorp in form and substance satisfactory to Bancorp,
acknowledging and agreeing to abide by the limitations imposed by the 1933 Act
and the rules of the Commission thereunder regarding the sale or other
disposition of the shares of Bancorp Common Stock to be received by him or her
pursuant to the Merger.
COMPARATIVE STOCK PRICES, DIVIDENDS
AND RELATED SHAREHOLDER MATTERS
Common Stock of Bancorp
Bancorp Common Stock is listed on AMEX under the trading symbol "MBP."
Until December 4, 1997, Bancorp Common Stock was traded in the over-the-counter
market. The table below sets forth, for the periods indicated, the high and low
bid prices for Bancorp Common Stock as reported on over-the-counter market, and
cash dividends declared per share with respect thereto, for the periods
indicated. The prices set forth in the table represent quotations between
dealers, do not include retail markups, markdowns or commissions, and may not
represent actual transactions. All information has been adjusted for stock
dividends and splits throughout the period.
Cash Dividends
1997 High Low Paid Per Share
---- ---- --- --------------
First Quarter 16.19 15.95 $ 0.19
Second Quarter 16.31 15.36 0.19
Third Quarter 18.00 17.38 0.19
Fourth Quarter 32.50 21.25 0.19
1996*
First Quarter 16.07 15.95 0.23
Second Quarter 16.07 15.71 0.00
Third Quarter 16.07 16.07 0.23
Fourth Quarter 16.07 15.95 0.00
1995*
First Quarter 15.00 14.06 0.22
Second Quarter 15.42 14.97 0.00
Third Quarter 15.87 14.97 0.22
Fourth Quarter 15.19 14.97 0.21
* Reflects trade in the over-the-counter market; Bancorp Common Stock was
listed on AMEX on December 4, 1997.
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On Thursday, January 8, 1998, the last trading day before public
announcement of the execution of the Acquisition Agreement, and on April 24,
1998, a day shortly before the mailing of this Proxy Statement/Prospectus, the
closing prices Bancorp Common Stock were $30.75 and $28.50, respectively, as
reported on AMEX. As of April 28, 1998, Bancorp Common Stock was held by 729
holders of record. In the past, Bancorp has paid regular quarterly cash
dividends to its shareholders in February, May, August and November of each
year.
Common Stock of Bank
Bank Common Stock has historically been traded on a limited basis in the
local over-the-counter market and in privately negotiated transactions. Because
trading in Bank Common Stock is sporadic, it cannot be said that an established
trading market exists. The most recent sale of Bank Common Stock of which Bank
management is aware is a trade of 422 shares that occurred on December 11, 1997,
at a price of $165.25 per share.
In the past, Bank has paid regular semi-annual dividends to its
shareholders on or about June 30 and December 31, of each year.
Shareholders are advised to obtain current market quotations for Bancorp
Common Stock and Bank Common Stock. The Bank's shareholders cannot be assured of
receiving a specific market value of Bancorp Common Stock at the Effective Date.
The market price of Bancorp Common Stock and of Bank Common Stock at the
Effective Date may be higher or lower than the market price at the time the
Merger Agreements were executed, at the date of mailing this Proxy
Statement/Prospectus or at the time of the Special Meeting.
PRO FORMA COMBINED FINANCIAL INFORMATION
The unaudited pro forma combined condensed balance sheet and the unaudited
pro forma combined condensed statements of income of Bancorp, set forth below,
give effect, using the pooling of interests method of accounting, to the
acquisition of Bank based upon an exchange ratio of 10 shares of Bancorp Common
Stock for each share of Bank Common Stock. The unaudited pro forma combined
condensed balance sheet is presented as though the Merger had occurred on
January 1, 1997. The unaudited pro forma combined condensed income statements
are presented as though the Merger had occurred on the first day of each
respective reporting period presented. The Merger will be accounted for in
accordance with generally accepted accounting principles, as a pooling of
interests.
The pro forma financial information set forth below is not necessarily
indicative of the financial condition or results of operations of Bancorp as
they would have been had the Merger occurred during the periods presented or as
they may be in the future. This pro forma financial information is based on the
estimates and assumptions set forth in the notes to the Statement. The pro forma
adjustments made in connection with the development of the pro forma information
are preliminary and have been made solely for purposes of developing the pro
forma information as necessary to comply with disclosure requirements of the
Commission. The pro forma information has been prepared using the historical
consolidated financial statements and notes thereto, which are
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incorporated by reference or set forth in this Proxy Statement/Prospectus. The
unaudited pro forma condensed combined financial statements do not purport to be
indicative of the combined financial position or the results of operations of
future periods or indicative of the results that actually would have been
realized had the entities been a single entity during these periods. The pro
forma financial information set forth below should be read in conjunction with
the financial statements of Bancorp, including the notes thereto, which are
incorporated by reference, and the financial statements of Bank, including the
notes thereto, which appear elsewhere in this Proxy Statement/Prospectus. SEE
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE and BANK-INDEX TO FINANCIAL
STATEMENTS AND SUPPLEMENTARY FINANCIAL INFORMATION.
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MID PENN BANCORP, INC. AND SUBSIDIARY
Combined Pro Forma Condensed Balance Sheets
(In Thousands)
December 31, 1997
(Unaudited)
Adjustments Pro Forma
Bancorp Bank Debit Credit Combined
ASSETS ------- ---- ------------ --------
Cash and due from banks $ 4,409 $ 1,589 $ 5,998
Interest-bearing balances 35,727 277 36,004
Securities 39,501 14,098 53,599
Federal funds sold 400 600 1,000
Net Loans 141,510 10,785 152,295
Bank premises and equipment 3,186 267 3,453
Other assets 4,042 337 4,379
-------- ------- ---------
Total Assets 228,775 27,953 256,728
------- ------ -------
LIABILITIES
Deposits 192,239 24,907 217,146
Other liabilities 9,653 199 9,852
-------- -------- ---------
Total Liabilities 201,892 25,106 226,998
------- ------ -------
STOCKHOLDERS' EQUITY
Common stock 2,627 74 (74) 2,775
148
Surplus 13,872 275 (74) 14,073
Undivided Profits 10,605 2,527 (29) 13,103
Net unrealized holding gain 318 0 318
Treasury stock (539) (29) 29 (539)
-------- ------ --------
Total Capital Accounts 26,883 2,847 29,730
------ ----- ------
Total Liabilities and
Capital Accounts $ 228,775 $ 27,953 $ 256,728
======= ====== =======
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MID PENN BANCORP, INC. AND SUBSIDIARY
Pro Forma Condensed Combined Statements of Income
For Year Ended December 31, 1997
(Unaudited)
Pro Forma
Bancorp Bank Combined
------- ---- --------
Interest income 17,325 1,987 19,312
Interest expense 7,942 911 8,853
------- ----- -------
Net interest income 9,383 1,076 10,459
Provision for loan losses 100 9 109
------ ------- --------
Net interest income after 9,283 1,067 10,350
provision for loan losses
Noninterest income 1,721 51 1,772
Noninterest expense 5,322 910 6,232
----- --- -----
Income before provision for 5,682 208 5,890
income tax
Provision for income taxes 1,676 45 1,721
----- ---- -----
Net income 4,006 163 4,169
===== === =====
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INFORMATION CONCERNING BANCORP
AND DESCRIPTION OF BANCORP COMMON STOCK
Information Concerning Bancorp
Bancorp is a Pennsylvania business corporation and a registered bank
holding company with its headquarters in Millersburg, Pennsylvania. Bancorp has
one subsidiary, Mid Penn. Through its subsidiary, Bancorp engages in the general
commercial and retail banking business. Mid Penn operates 10 banking offices in
Dauphin, Northumberland, Schuylkill and Cumberland Counties, Pennsylvania. As of
December 31, 1997, Bancorp had consolidated total assets, deposits and
shareholders' equity of $228,775,000, $192,239,000 and $26,883,000. Mid Penn is
a Pennsylvania chartered banking institution that operates under the primary
supervision of the FDIC and the Banking Department.
As a registered bank holding company, Bancorp is subject to regulation
under the Bank Holding Company Act of 1956, as amended, and the rules adopted by
the Federal Reserve Board thereunder. Under applicable Federal Reserve Board
policies, a bank holding company, such as Bancorp, is expected to act as a
source of financial strength to its subsidiary bank and to commit resources to
support a subsidiary bank in circumstances when it might not do so absent such a
policy. Any capital loans made by a bank holding company to subsidiary bank
would be subordinate in right of payment to the claims of depositors and certain
other creditors of such subsidiary banks.
The principal executive offices of Bancorp are located in Millersburg,
Pennsylvania. As of the Record Date, Bancorp and Mid Penn had, in the aggregate,
approximately 82 full-time equivalent employees.
Loans
Bancorp, through its subsidiary, Mid Penn, grants loans and makes other
credit available to the general public. These extensions of credit are
structured to meet the varying needs of businesses, individuals, and
institutional customers and include mortgages, lines of credit, term loans,
leases and letters of credit. This activity comprises a major source of revenue
for Mid Penn and also exposes Bancorp and its subsidiary to potential losses
upon borrower default. In order to minimize the occurrence of loss, Mid Penn
follows strict loan underwriting and risk weighing policies. While collateral
continues to play an important part in lending decisions, primary emphasis is
placed upon borrowers' underlying ability to pay. Mid Penn confines its lending
activity to customers who live or are based in its respective market area. By
limiting lending activities to a specific geographic area, the staff becomes
more knowledgeable about local market conditions and can thereby make better
credit risk assessments and consequently more prudent lending decisions. Bancorp
believes that this local knowledge, when combined with prudent underwriting
standards, overcomes the risks associated with the geographic concentration of
loans.
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<PAGE>
Description of Bancorp Common Stock
As of April 28, 1998, the authorized capital stock of Bancorp consisted of
10,000,000 shares of Common Stock, par value $1.00 per share, of which 2,607,289
shares were issued and outstanding. Each holder of Bancorp Common Stock has one
vote on matters presented for consideration by the shareholders for each share
held. There are no cumulative voting rights in the election of directors. All
issued and outstanding Bancorp Common Stock is fully paid and non-assessable.
Bancorp Common Stock is quoted on AMEX under the symbol "MBP".
The Bancorp Common Stock issuable pursuant to the Merger will be, when
issued, fully paid and non-assessable. Bancorp Common Stock does not have any
redemption provisions.
Dividends
The holders of Bancorp Common Stock are entitled to receive dividends when,
as and if declared by the Board of Directors out of funds legally available
therefor. Bancorp has historically paid quarterly cash dividends to its
shareholders in February, May, August and November of each year.
The ability of Bancorp to pay dividends to its shareholders is dependent
primarily upon the earnings and financial condition of Mid Penn. Funds for the
payment of dividends on Bancorp Common Stock are expected, for the foreseeable
future, to be obtained primarily from dividends paid to Bancorp by Mid Penn,
which dividends are subject to certain statutory limitations.
Under applicable federal laws, the dividends that may be paid by Mid Penn
without prior regulatory approval are subject to certain prescribed limitations.
Because Mid Penn is a Pennsylvania chartered bank, the approval of the FDIC is
required under federal law if the total of all dividends declared during any
calendar year exceed the total of the net profits, as defined, of the bank for
the year, combined with its retained net profits as defined for the two
preceding years. In addition to the foregoing statutory restrictions on
dividends, the FDIC also has general authority to prohibit Mid Penn from
engaging in an unsafe or unsound banking practice. The payment of a dividend by
a bank could, depending upon the financial condition of the bank involved and
other factors, be deemed to be such an unsafe or unsound practice.
Bancorp paid cash dividends of $0.76 per share in 1997, and $0.19 per share
for each of the first and second quarter of 1998.
Principal Owners of Bancorp Common Stock
The following table sets forth as of March 1, 1998, the persons who own of
record or who are known by the Board of Directors to be the beneficial owners,
as defined below, of more than five percent (5%) of the outstanding shares of
Bancorp Common Stock, the number of shares beneficially owned by such person and
the percentage of outstanding Bancorp Common Stock so owned.
-30-
<PAGE>
Name of Individual Amount and Nature of Percent
or Identity of Group Beneficial Ownership of Class
- -------------------- -------------------- --------
NEBCO (1) 262,664 10.07%
349 Union Street
Millersburg, PA 17061
(1) NEBCO is the nominee registration of the Mid Penn's trust department.
Shares of Bancorp Common Stock are held for various Trust Accounts.
Beneficial Ownership of Bancorp by Officers, Directors and Nominees
The following table sets forth, as of March 1, 1998, and from information
supplied by the respective individuals, the amount and percentage, if over one
percent (1%), of the Common Stock beneficially owned by each director for the
Board of Directors and all officers and directors of the Bancorp as a group.
Unless designated to the contrary in a footnote, all shares are individually
held.
Name of Individual Amount and Nature of Percent
or Identity of Group Beneficial Ownership (1) of Class
- -------------------- ------------------------ --------
Class C Directors
(To Serve Until 2001)
Earl R. Etzweiler 99,832 3.83%
William G. Nelson 58,046 (2) 2.23%
Class A Directors
(To Serve Until 1999)
Warren A. Miller 20,216 (3) --
Edwin D. Schlegel 63,020 (4) 2.42%
Eugene F. Shaffer 113,248 (5) 4.34%
Class B Directors
(To Serve Until 2000)
Jere M. Coxon 31,860 1.22%
Alan W. Dakey 3,737 (6) --
Charles F. Lebo 29,604 (7) 1.14%
Guy J. Snyder, Jr. 75,415 (8) 2.89%
All Officers and Directors
as a Group (11 persons) 497,092 19.06%
- ------------------
(1) The securities "beneficially owned" by an individual are determined in
accordance with the definitions of "beneficial ownership" set forth in the
General Rules and Regulations of the Securities and Exchange Commission and
may include securities owned by or for the individual's spouse and minor
children and any
-31-
<PAGE>
other relative who has the same home, as well as securities to which the
individual has, or shares, voting or investment power or has the right to
acquire beneficial ownership within 60 days after March 1, 1998. Beneficial
ownership may be disclaimed as to certain of the securities.
(2) Includes 8,046 shares held by Mr. Nelson's spouse.
(3) Shares held jointly by Mr. Miller and his spouse.
(4) Shares held jointly by Mr. Schlegel and his spouse.
(5) Includes 5,744 shares held jointly by Mr. Shaffer and his spouse. Mr.
Shaffer is trustee of seven trusts, held for the benefit of various family
members, which hold a total of 42,022 shares.
(6) Shares held jointly by Mr. Dakey and his spouse.
(7) Includes 9,672 shares held jointly by Mr. Lebo and his spouse.
(8) Includes 39,035 shares held jointly by Mr. Snyder and his spouse and 36,380
shares held individually by his spouse.
Executive Compensation of Bancorp's Officers
Certain information with respect to the compensation of Bancorp's officers
is set forth in Bancorp's Annual Report on Form 10-K, filed with the Commission
on March 27, 1998, and incorporated herein by reference.
Dividend Reinvestment Plan
The holders of Bancorp Common Stock may elect to participate in the Bancorp
Dividend Reinvestment Plan. This plan is administered by Norwest Shareholder
Services, as plan agent. Under the plan, dividends payable to participating
shareholders are paid to the plan agent and are used to purchase, on behalf of
the participating shareholders, additional shares of Bancorp Common Stock either
in the AMEX stock market or from authorized but unissued shares of Bancorp
Common Stock. Shares of Bancorp Common Stock held for the account of
participating shareholders are voted by the plan agent in accordance with the
instructions of each participating shareholder, as set forth in his or her
proxy.
Securities Laws
Bancorp, as a business corporation, is subject to the registration and
prospectus delivery requirements of the 1933 Act and is also subject to similar
requirements under state securities laws. Bancorp Common Stock is registered
with the Commission under Section 12(b) of the 1934 Act, and Bancorp is subject
to the periodic reporting, proxy solicitation and insider trading requirements
of the 1934 Act. The executive officers, directors and 10 percent shareholders
of Bancorp are subject to certain restrictions affecting their right to sell the
shares of Bancorp Common Stock beneficially owned by them. Each such person is
subject to the beneficial ownership reporting requirements and the short-swing
profit recapture provisions of Section 16 of the 1934 Act and may sell shares of
Bancorp Common Stock only: (i) in compliance with the provisions of Commission
Rule 144; (ii)
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<PAGE>
in compliance with the provisions of another applicable exemption from the
registration requirements of the 1933 Act; or (iii) pursuant to an effective
registration statement filed with the Commission under the 1933 Act.
Anti-takeover Provisions
BCL, Bancorp's amended Articles of Incorporation and amended Bylaws provide
numerous provisions that may be deemed to be anti-takeover in nature, both as to
purpose and effect. There are four major anti-takeover provisions under the BCL
relating to corporations that have their securities registered with the
Commission under Section 12 of the 1934 Act ("Registered Corporations").
The overall effect of the various provisions described herein might be to
deter a tender offer that a majority of the shareholders might view to be in
their best interest because, among other things, the offer might include a
substantial premium over the market price of Bancorp Common Stock. In addition,
these provisions may have the effect of assisting Bancorp's current management
in retaining its position and placing it in a better position to resist changes
that the shareholders might want to make, if dissatisfied with the conduct of
Bancorp's business.
Two of these statutory provisions have the effect of eliminating the rights
of the shareholders of Registered Corporations to: (i) call a Special Meeting of
shareholders; and (ii) propose an amendment to the Articles of Incorporation of
Bancorp. One effect of these provisions may be to prevent the calling of a
Special Meeting of shareholders for the purpose of considering a merger,
consolidation or other corporate combination that does not have the approval of
a majority of the members of Bancorp's Board of Directors. Therefore, such a
provision may have the effect of making Bancorp less attractive as a potential
takeover candidate by depriving shareholders of the opportunity to initiate
Special Meetings at which a possible business combination may be proposed.
These two provisions under the BCL may serve to discourage attempts by
shareholders to disrupt the business of Bancorp between Annual Meetings of the
shareholders by calling a Special Meeting. Further, these provisions will
provide a greater time for consideration of any shareholder proposal to the
extent that his, her or its proposal must be deferred until the next meeting of
shareholders. Also, when made, such proposals must comply with certain notice
requirements and proxy solicitation rules in advance thereof. These BCL
provisions do not affect the calling of a Special Meeting by the Chairman of the
Board or by a majority of the members of the Board of Directors or of its
Executive Committee if, in their judgment, there are matters to be acted upon
which are in the best interest of Bancorp and its shareholders.
The third BCL provision to which Bancorp is subject assures that all
shareholders will receive the "fair value" for their shares as the result of a
"control transaction". Fair value means an amount that is no less than the
highest price paid per share by a controlling person or group at any time during
the 90-day period ending on the date of the control transaction plus a control
premium, if appropriate. A control transaction is the acquisition by a person or
a group of persons acting in concert that has voting power over voting shares of
Bancorp that would entitle the holders thereof to cast at least 20 percent of
the votes that all shareholders would be entitled to cast in an election
-33-
<PAGE>
of directors of Bancorp. After the occurrence of a control transaction, any
shareholder may, within a specified time period, make written demand on the
controlling person or group, for payment in an amount equal to the fair value of
each voting share as of the date on which the control transaction occurs.
The fourth major provision under the BCL relates to certain business
combinations involving Registered Corporations. Business combinations so
affected would include any one of the following transactions involving an
"interested shareholder" of Bancorp: (i) a merger or consolidation of Bancorp
with an interested shareholder or any other corporation which is, or after the
merger or consolidation would be, an affiliate or associate of the interested
shareholder; (ii) a sale, lease, exchange, mortgage, pledge, transfer or other
disposition to or with the interested shareholder or any affiliate or associate
of such interested shareholder of the assets of Bancorp or any subsidiary of
Bancorp; (iii) the issuance or transfer by Bancorp or any subsidiary of Bancorp
of any shares of Bancorp which has an aggregate market value equal to 5 percent
or more of the aggregate market value of all such outstanding shares of Bancorp
to an interested shareholder or any affiliate or associate thereof; (iv) the
adoption of any plan or proposal for the liquidation or dissolution of Bancorp
proposed by, or pursuant to any agreement with, the interested shareholder or
any affiliate or associate thereof; (v) a reclassification of securities or
recapitalization of Bancorp or any merger or consolidation of Bancorp with any
subsidiary of Bancorp, or any other transaction proposed by, or pursuant to any
agreement, arrangement, or understanding, with, the interested shareholder or
any affiliate or associate of the interested shareholder, which has the effect,
directly or indirectly, of increasing the proportionate share of the outstanding
shares of any class or series of voting shares or securities convertible into
voting shares of Bancorp or any subsidiary of Bancorp which is, directly or
indirectly, owned by the interested shareholder or any affiliate or associate of
the interested shareholder, except as a result of immaterial changes due to
fractional share adjustments; or (vi) the receipt by the interested shareholder
or any affiliate or associate of the interested shareholder of the benefit,
directly or indirectly, of any loans, advances, guarantees, pledges or other
financial assistance or any tax credits or other tax advantages provided by or
through Bancorp. An interested shareholder is any person that is the beneficial
owner, directly or indirectly of shares entitling that person to cast at least
20 percent of the votes that all shareholders would be entitled to cast in an
election of directors of Bancorp.
Bancorp is prohibited from engaging in a business combination with an
interested shareholder other than: (i) a business combination approved by the
Board of Directors prior to the date on which the interested shareholder became
an interested shareholder; (ii) a business combination approved by a majority of
the votes that all shareholders would be entitled to cast, excluding those
shares held by the interested shareholder, at a meeting called for such purpose
no earlier than three (3) months after the interested shareholder became, and if
at the time of the meeting the interested shareholder is, the beneficial owner,
directly or indirectly, of shares entitling the interested shareholder to cast
at least 80 percent of the votes that all shareholders would be entitled to cast
in an election of directors of Bancorp and if the business combination satisfies
certain minimum conditions (see discussion below); (iii) a business combination
approved by the affirmative vote of all of the holders of all of the outstanding
shares; (iv) a business combination approved by a majority of the votes that all
shareholders would be entitled to cast, not including those shares beneficially
owned by the interested shareholder, at a meeting called for such purpose
-34-
<PAGE>
no earlier than five years after the interested shareholder became an interested
shareholder; (v) a business combination approved at a shareholders' meeting
called for such purpose no earlier than five years after the interested
shareholder became an interested shareholder and that meets certain minimum
conditions (see discussion below).
The certain minimum conditions referred to above, would generally require
that the aggregate amount of the cash, and the market value of consideration
other than cash (such as stock, bonds or debentures), to be received per share
by the shareholders of Bancorp be at least equal to the highest per share price
paid by the interested shareholder at a time when the interested shareholder was
the beneficial owner of shares entitling him to cast at least 5 percent of the
votes that all shareholders would be entitled to cast in an election of
directors: (i) within the 5-year period immediately prior to the announcement
date of the business combination or; (ii) in the transaction in the higher,
plus, in either situation, interest compounded annually from the earlier date on
which the highest per-share acquisition price was paid through the consummation
date at the rate of 1-year United States Treasury obligations from time to time
in effect less the aggregate among of any cash dividends paid and the market
value of any dividends paid other than cash.
The BCL provision relating to business combinations is designed to help
assure that if, despite a corporation's best efforts to remain independent, it
is nevertheless taken over, each shareholder will be treated fairly vis-a-vis
every other shareholder and that arbitragers and professional investors will not
profit at the expense of the corporation's long-term public shareholders.
While these anti-takeover provisions are designed to help assure fair
treatment of all shareholder vis-a-vis other shareholders in the event of a
takeover, it is not the purpose of these provisions to assure that shareholders
receive a premium price for their shares in as takeover. Accordingly, the
provisions would not preclude the board of directors' opposition to any future
takeover proposal which it believes not to be in the best interests of Bancorp
and its shareholders, whether or not such a proposal satisfies the minimum
price, form of consideration and procedural requirements under the BCL.
Bancorp's Articles of Incorporation and amended Bylaws contain a number of
additional provisions that could be considered anti-takeover in purpose and
effect. These provisions include: (i) the authorization of 10,000,000 shares of
Common Stock; (ii) the lack of preemptive rights for shareholders to subscribe
to purchase additional shares of stock on a pro rata basis; (iii) the
requirement that an affirmative vote of the holders of 80% of Bancorp Common
Stock is required to approve an amendment to Bancorp's Bylaws or to change an
amendment to its Bylaws that has been approved by the Board of Directors; and
(iv) the requirement that an affirmative vote of the holders of 80% percent of
Bancorp Common Stock is required to approve a merger, consolidation,
liquidation, or sale of substantially all assets unless such transaction has
received prior approval of at least 80% percent of all members of the Board of
Directors in which case 662/3 of the outstanding shares of common stock would be
required for approval of such transaction. These provisions could give the
holders of a minority of Bancorp's outstanding shares a veto power over any
merger, consolidation, dissolution or liquidation of Bancorp, the sale of all or
substantially all of its assets or an amendment to its Bylaws. Absent such
provisions in Bancorp's Articles of Incorporation and
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<PAGE>
Bylaws, the affirmative vote of at least a majority of Bancorp Common Stock
outstanding entitled to vote thereon would be required to approve any merger,
consolidation, dissolution, liquidation, the sale of all of its assets or an
amendment to the Bylaws.
Provisions for a classified board are included in the amended Bylaws of
Bancorp. A classified board will have the effect of moderating the pace of any
change in control of the Board of Directors by extending the time required to
elect a majority of the directors to at least two successive Special Meetings.
However, because this extension of time also tends to discourage a tender offer
or takeover bid, this provision may also be deemed to be anti-takeover in
nature. In addition, a classified board makes it more difficult for a majority
of the shareholders to promptly change the composition of the board of directors
even though such prompt change may be considered desirable for them.
Bancorp's amended Articles of Incorporation contain an additional
anti-takeover provision that enables the Board of Directors to oppose a tender
offer on the basis of factors other than economic benefit based on its
responsibilities to certain constituent groups including Mid Penn and the
communities that they serve by considering factors such as: the impact the
acquisition of Bancorp would have on the community; the effect of the
acquisition upon shareholders, employees, depositors, suppliers and customers;
and the reputation and business practices of the tender offeror.
Indemnification
The Bylaws of Bancorp provide for indemnification of its directors,
officers, employees and agents to the fullest extent permitted under the laws of
the Commonwealth of Pennsylvania, provided that the person seeking
indemnification acted in good faith, in a manner he or she reasonably believed
to be in the best interest of Bancorp, and without willful misconduct or
recklessness.
Insofar as indemnification for liabilities arising under the 1933 Act may
be permitted to directors, officers or persons controlling Bancorp pursuant to
the foregoing provisions, Bancorp has been informed that, in the opinion of the
Commission, such indemnification is against public policy as expressed in the
1933 Act and is therefore unenforceable.
Comparison of Shareholder Rights
Upon consummation of the Merger, the shareholders of the Bank will become
shareholders of Bancorp. Several differences between the rights of holders of
Bank Common Stock and Bancorp Common Stock arise out of (i) differences between
the Articles of Incorporation and Bylaws of Bank and the Articles of
Incorporation and Bylaws of Bancorp, (ii) differences between the respective
federal and state laws applicable to Bank and Bancorp, and (iii) differences in
the types of corporate entities represented by the Bank (a Pennsylvania
chartered commercial bank) and Bancorp (a Pennsylvania business corporation and
registered bank holding company). The most significant of these differences are
those relating to the election of directors, dissenters' rights, anti-takeover
protection and public registration.
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<PAGE>
The Banking Code and the Bank's Articles of Incorporation and Bylaws
provide that Bank' shareholders are entitled to cumulate their votes in electing
directors. Thus, in elections for directors, Bank' shareholders may cast a
number of votes equal to the number of their shares multiplied by the number of
directors to be elected, and they may allocate their votes to one or more than
one director as the shareholders see fit. Cumulative voting maximizes the
ability of a minority group of Bank' shareholders to elect one or more
directors. Bancorp's shareholders are not entitled to cumulate their votes in
the election of directors under Bancorp's Articles of Incorporation and Bylaws,
and therefore it would be more difficult for a minority group of Bancorp's
shareholders to elect one or more directors.
The Bylaws of Bancorp provide for a classified Board of Directors under
which there are three classes of directors and, accordingly, one-third of the
directors are elected each year for a term of three years. By contrast, the
entire Board of Directors of Bank is elected each year. The classification of
the Board of Directors of Bancorp makes it more difficult for the shareholders
of Bancorp to change a majority of the directors, even when the only reason for
such a change may be the performance of the existing directors. It would
normally take two Special Meetings of Bancorp's shareholders in order to replace
a majority of Bancorp's directors, whereas all or a majority of Bank' Board of
Directors could be replaced at a single Special Meeting of Bank' shareholders.
The Articles of Incorporation and Bylaws of Bancorp include a number of
provisions that are intended to protect the shareholders of Bancorp (including
the present shareholders of Bank, who will become shareholders of Bancorp
following the Merger), but which may be considered to be anti-takeover in nature
and may serve to entrench the current management of Bancorp. SEE INFORMATION
CONCERNING MID PENN BANCORP, INC. AND DESCRIPTION OF BANCORP COMMON
STOCK--Anti-takeover Provisions. In contrast, the Articles of Incorporation and
Bylaws of Bank do not include similar anti-takeover provisions.
Bancorp Common Stock, unlike Bank Common Stock, is registered with the
Commission under Section 12(b) of the 1934 Act. As a result, Bancorp is subject
to the periodic reporting, proxy solicitation and insider trading requirements
of the 1934 Act, which do not apply to Bank. Pursuant to these requirements,
Bancorp makes available to shareholders, potential investors and the general
public a significant amount of information regarding Bancorp in the form of
proxy statements, periodic reports and other Commission filings. In addition,
directors, executive officers and 10 percent beneficial shareholders of Bancorp
are subject to the insider trading reporting requirements and short-swing profit
recapture provisions of Section 16 of the 1934 Act.
The material differences between Bank Common Stock and Bancorp Common Stock
and the rights of their respective holders, as of December 31, 1997, are
summarized in the following table:
<TABLE>
<CAPTION>
Title Bank
<S> <C>
Shares Authorized Common Stock, Par Value Two Dollars
($5.00) per share
15,000
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<PAGE>
Shares Issued and Outstanding 14,825
Preemptive Rights
Voting: Election of Directors Cumulative
Classification of Board of Directors Board of Directors not classified;
all directors elected each year
Voting: Other Matters One vote for each share owned of
record
Mergers, Consolidations, Approval by vote of at least 66 2/3
Liquidations Sales of Substantially percent of the outstanding shares.
All Assets
Special Shareholder Meetings Upon request by Chairman of the
Board of Directors, President, a
majority of the Board of Directors,
or at the request of holders of at
least 20 percent of the outstanding
shares.
Authorization to Issue Additional Approval by a majority vote of the
Shares Board of Directors.
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<PAGE>
Repurchase of Additional Shares Cannot reduce or retire any part of
its stock without prior regulatory
approvals.
Dissenters' Rights Yes
Dividend Reinvestment Plan None
Market No established market
Registered Under Securities No
Exchange Act of 1934
Bancorp
-------
<S> <C>
Title Common Stock, Par Value
One Dollar ($1.00) per share
Shares Authorized 10,000,000
Shares Issued and Outstanding 2,626,608
Preemptive Rights
Voting: Election of Directors Non-cumulative
Classification of Board of Directors Board of Directors divided
into 3 classes with 3 year
terms; 1/3 of directors
elected each year
Voting: Other Matters One vote for each share
owned of record
Mergers, Consolidations, Approval by a vote of 80% of
Liquidations Sales of Substantially outstanding shares of
All Assets Common Stock. If such
transaction has received
prior approval of at least
80% of all members of the
Board of Directors, then the
vote of 66 2/3 the outstanding
shares of Common Stock
would be required.
Special Shareholder Meetings Upon request by the
Chairman of the Board,
President, the Executive Vice
President, if any, or a
majority of the Board of
Directors, or by its Executive
Committee.
Authorization to Issue Additional Approval by a majority vote
Shares of the Board of Directors
Repurchase of Additional Shares Stock can be repurchased up
to the extent of unrestricted
or unreserved undivided profits
and as much of its unrestricted
surplus as has been made available
for such purpose by the prior
affirmative vote of shareholders;
stock cannot be repurchased when
the Holding Company is insolvent
or would be made insolvent by the
purchase; and no more than 10
percent of the outstanding shares
can be repurchased in any twelve
(12) month period without prior
regulatory approval; and
provisions of the 1934 Act
restrict the timing, nature and
amount of repurchases.
Dissenters' Rights Yes
Dividend Reinvestment Plan Yes
Market Listed on the American
Stock Exchange
Registered Under Securities Yes
Exchange Act of 1934
</TABLE>
INFORMATION CONCERNING BANK
Description of Business and Property
The Bank commenced operations on March 20, 1872, as a Pennsylvania
chartered commercial bank and trust company. Bank's Articles of Incorporation
were subsequently amended to delete its trust powers. As a Pennsylvania
chartered commercial bank, Bank is subject to regulation and periodic
examination by the FDIC and the Department of Banking. In addition, the Bank's
deposits are insured by the FDIC to the maximum extent permitted by law.
The principal executive offices of Bank are located at 550 Main Street,
Lykens, PA 17048. The building is a brick and stucco two-story building. The
original section was constructed in 1872 with additions added in the early
1900's, 1976 and exterior remodeling was done in 1984. The building is held in
fee simple by the Bank.
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<PAGE>
The Bank is a full-service commercial bank which offers a range of
commercial and retail banking services to its clients, including personal and
business checking accounts, NOW accounts, money market accounts, savings
accounts, IRA accounts and certificates of deposit. The Bank also offers
installment loans, home equity loans, lines of credit, letters of credit,
revolving credit loans and term loans, both on a secured and unsecured basis. It
also makes commercial loans and commercial mortgage loans, and residential
conventional and construction mortgage loans. In addition, the Bank provides
safe deposit boxes, traveler's checks, money orders, wire transfer of funds,
lock box collections and direct deposit of social security and payroll checks.
The Bank provides credit card processing services to local merchants and
retailers. The Bank is a member of the "MAC" system and provides clients with
access to this automated teller machine network. The Bank also provides trust
services, international services and credit cards available to its customers
through correspondent banking institutions. In the event that certain loan
requests may exceed the Bank's lending limit to any one customer, the Bank seeks
to arrange such loans on a participation basis with other financial
institutions. The offering, or continuation, of the above enumerated services is
evaluated periodically.
The Bank actively competes with other area commercial banks and savings and
loan associations, most of which are larger than the Bank, as well as with major
regional banking and financial institutions headquartered elsewhere. The Bank
generates the overwhelming majority of its deposit and loan volume from within
its primary service area (i.e., Dauphin County, Pennsylvania) ("PSA"). The
majority of the residents, businesses and employees within the Bank's PSA are
within a driving time of 30 minutes from the Bank's office. There are no other
commercial bank headquartered in Lykens. The Bank competes with the branch
offices of banking and financial institutions that are headquartered elsewhere.
The PSA also constitutes the community delineated for Bank's Community
Reinvestment Act Statement, which states the intention of the Bank to meet the
credit needs of the local community. It is the Bank's policy to evaluate all
applications for credit without regard to the applicant's race, color, creed,
sex, age, or marital status.
The PSA includes a wide variety of residential neighborhoods, commercial
businesses, retail stores, industrial complexes, and service institutions. The
Lykens area has a large number of business establishments and a substantial
employment base.
As provided in the Bank's bylaws, the Bank's business is managed by a Board
of Directors of such number of the Board, determines, which may not be less than
7 or more than 15 persons. There currently are 8 directors of the Bank.
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<PAGE>
The names of the directors of the Bank and certain information about them,
as of the Record Date are set forth below:
<TABLE>
<CAPTION>
NAME AND AGE DIRECTOR
SINCE
<S> <C> <C>
Franklin W. Ruth, Jr. 80 1/57
Raymond C. Donley 83 1/23
Richard E. Klinger 67 9/79
Gregory M. Kerwin 47 5/87
Harold G. Jury 56 8/90
Donald E. Sauve 56 2/93
Terrence J. Kerwin 43 3/98
Allen J. Trawitz 51 5/93
NAME AND AGE PRINCIPAL OCCUPATION AND
BUSINESS EXPERIENCE
<S> <C> <C>
Franklin W. Ruth, Jr. 80 President of Bank, Retired Accountant
Raymond C. Donley 83 Secretary of Bank, Retired School
Administrator
Richard E. Klinger 67 Retired School Teacher
Gregory M. Kerwin 47 Vice President - The Bank Attorney
Harold G. Jury 56 Florist
Donald E. Sauve 56 Grocer
Terrence J. Kerwin 43 Solicitor - The Bank Attorney
Allen J. Trawitz 51 Cashier - The Bank
</TABLE>
The Bank's Board of Directors met 24 times during 1997. During 1997, all of
the directors attended at least 75% of the aggregate of all Board Meetings and
meeting of Committees on which they served. During 1997, directors who were not
officers of the Bank received a fee of $6,600 for serving as a director.
The Bank's Board of Directors has an Executive Committee which is
authorized, under the Bank's bylaws, to create other committees. Messrs Ruth, J.
Kerwin, Donley and Klinger are members of the Executive Committee.
The Appraisal Committee of the Bank, which met as need for appraisal during
1997. This committee is used to appraise properties for loan purposes. The
Committee is chaired by Director Franklin W. Ruth, Jr. and includes Directors
Richard E. Klinger, Donald E. Sauve, Allen J. Trawitz, Raymond C. Donley,
Gregory M. Kerwin, Harold G. Jury and Terrence J. Kerwin.
The Property Committee of the Bank, which met two times during 1997. This
committee is used to consider changes or improvements to the building and
grounds. The Committee is chaired by Director Richard E. Klinger and includes
Directors Raymond C. Donley, Harold G. Jury, Donald E. Sauve and Allen J.
Trawitz.
The Pension Committee of the Bank, which met two times during 1997. The
pension committee meets as need to discuss changes to the employees pension
plan. The Committee is chaired by Director Raymond C. Donley and includes
Directors Gregory M. Kerwin and Richard E. Klinger.
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<PAGE>
The Audit and Electronic Committee of the Bank, which met one time in 1997.
This committee is used to review audit and electronic need at the bank. The
Committee is chaired by Director Richard E. Klinger and includes Directors
Harold G. Jury, Donald E. Sauve and Terrence J. Kerwin.
The Investment Committee of the Bank, which met at least ten times in 1997.
This committee reviews potential securities for the investment portfolio. The
Committee is chaired by Director Franklin W. Ruth, Jr. and includes Directors
Raymond C. Donley and Allen J. Trawitz.
The Asset/Liability Committee of the Bank, which met four times in 1997.
This committee reviews the financial goals of the bank and recommends changes as
needed. The Committee is chaired by Director Gregory M. Kerwin and includes
Directors Franklin W. Ruth, Jr., Raymond C. Donley, Richard E. Klinger, Harold
G. Jury, Donald E. Sauve, Allen J. Trawitz and Terrence J. Kerwin.
Shown below is information concerning the annual compensation for services
in all capacities to the Bank for the fiscal years ended December 31, 1997, 1996
and 1995 of those persons who were, at December 31, 1997, (i) the Chief
Executive Officer, and (ii) the four other most highly compensated executive
officers of the Bank to the extent such persons' total annual salary and bonus
exceeded $100,000:
<TABLE>
<CAPTION>
SUMMARY COMPENSATION TABLE
Annual Compensation
(a) (b) (c) (d) (e)
Other
Annual
Compen-
Name and Principal Salary Bonus sation
Position Year ($)(1) ($)(2) ($)
-------- ---- ------ ------ ---
<S> <C> <C> <C> <C>
Franklin W. Ruth, Jr. 1997 40,474.62 3,000 --
President and 1996 39,187.92 3,000 --
Chief Executive 1995 38,230 3,000 --
Officer
Long-Term Compensation
Awards Payouts
(f) (g) (h) (i)
Restricted All other
Stock Options/ LTIP Compen-
Name and Principal Award(s) SARs Payouts sation
Position ($) (#) ($) ($)(3)(4)
-------- --- --- --- ---------
<S> <C> <C> <C> <C>
Franklin W. Ruth, Jr. -- -- -- 3,962.84
President and -- -- -- 3,813.74
Chief Executive -- -- -- 3,688.01
Officer
<FN>
(1) Salary includes annual Board of Directors fee of $6,600 paid to Mr. Ruth in
1997, 1996 and 1995.
(2) Includes life insurance premiums of $275.40, $224.96, and $195.84, paid by
the Bank in 1997, 1996 and 1995, respectively, on behalf of Mr. Ruth
pursuant to life insurance maintained for executive officers.
(3) Includes $3,687.44, $3,688.78, and $3,492.17, contributed by the Bank to
the Pension Plan on behalf of Mr. Ruth in 1997, 1996 and 1995,
respectively.
</FN>
</TABLE>
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<PAGE>
Compensation of Directors
During 1997, the directors received an annual fee of $6,600. In 1997, the
Board of Directors received $46,200.00, in the aggregate,] for all Board of
Directors' meetings and committee meetings attended, and all fees paid to
Directors.
Compensation Committee Report on Executive Compensation
The Board of Directors, acting in the best interests of the Bank's
shareholders, customers, and the communities it serves, is responsible for
providing compensation to all of its employees based on the individual's
contribution and personal performance. The compensation program is administered
by the Executive Committee. The Committee strives to offer a fair and
competitive compensation policy to govern executive officers' base salaries and
incentive plans and to attract and maintain competent, dedicated, and ambitious
managers whose efforts will enhance the products and services of the Bank,
resulting in higher profitability, and increased dividends to the Bank's
shareholders and appreciation in market value of the Bank's Common Stock.
The compensation of the Bank's top executives is reviewed and approved
annually by the Board of Directors upon the recommendations of the Executive
Committee. The Committee determined base salaries, using subjective criteria
after review of relevant factors.
The Committee does not deem Section 162(m) of the Code to be applicable to
the Bank at this time. The Committee intends to monitor the future application
of Code Section 162(m) to the compensation paid to its executive officers and,
in the event that this section becomes applicable to the Bank, the Committee
intends to amend the Bank's compensation plans to preserve deductibility of
compensation payable thereunder.
Chief Executive Officer Compensation
The Board of Directors determined the Chief Executive Officer's 1997
compensation of $36,874.62 (comprised of his annual cash salary and cash bonus,
exclusive of director's fees and bonus) to be appropriate in light of the Bank's
1997 performance. The 1997 compensation represents the combined salary and bonus
reported on the Summary Compensation Table. There is no direct correlation
between the Chief Executive Officer's compensation and any specific performance
criteria, nor is there any weight given by the Committee to any specific
individual criteria. The Chief Executive Officer's compensation is based on the
Committee's subjective determination after review of all information that it
deems relevant.
Executive Officers
The Committee based compensation increases to executive officers on
subjective analysis of each individual's contribution to the Bank. The Board of
Directors considered numerous factors in determining compensation increases
including the Bank's earnings, return on assets, return on equity, market share,
total assets, and non-performing loans. Although performance and increases in
compensation were measured by these factors, among others, there is no direct
correlation
-43-
<PAGE>
between any specific criterion and an employee's compensation. The Committee's
analysis did not provide a specific weight to any criteria. The determination by
the Committee is subjective after review of all information deemed relevant.
Individuals are reviewed annually on a calendar year basis. Total
compensation opportunities available to employees of the Bank are influenced by
general market conditions, specific responsibilities of the individual, and the
individual's contributions to the success of the Bank. The Bank strives to offer
compensation that is competitive with that offered by employers of comparable
size in the banking industry. The Corporation strives to meet its strategic
goals and objectives to its constituencies and to provide fair and meaningful
compensation to its employees.
Executive Committee
Franklin W. Ruth, Jr. Raymond C. Donley
Gregory M. Kerwin Richard E. Klinger
Bank Management's Discussion and Analysis of Financial Condition and Results of
Operation
The information required herein is set forth in Annex C to this Proxy
Statement/Prospectus and incorporated herein by reference.
CERTAIN TRANSACTIONS
There have been no material transactions between the Bank, nor any material
transactions proposed, with any director or executive officer of the Bank, or
any associate of the foregoing persons. The Bank has had, and intends to
continue to have, banking and financial transactions in the ordinary course of
business with directors and officers of the Bank and their associates on
comparable terms and with similar interest rates as those prevailing from time
to time for other customers of the Bank. Total loans outstanding from the Bank
at December 31, 1997 to the Bank's officers and directors as a group and members
of their immediate families and companies in which they had an ownership
interest of 10% or more was approximately $348,779.17 or approximately 12.25% of
the total equity capital of the Bank. Loans to such persons were made in the
ordinary course of business, were made on substantially the same terms,
including interest rates and collateral, as those prevailing at the time for
comparable transactions with other persons, and did not involve more than the
normal risk of collectibility or present other unfavorable features. The largest
aggregate amount of indebtedness outstanding at any time during fiscal year 1997
to officers and directors of the Corporation and the Bank as a group was
approximately $395,120.90.
-44-
<PAGE>
The following table sets forth selected information about the principal
officers of the Bank, each of whom is elected by the Board of Directors and each
of whom holds office at the discretion of the Board of Directors:
Bank Number of Age as of
Held Employee Shares Bene- March 1,
Name and Position Since Since ficially Owned 1998
----------------- ----- ----- -------------- ----
Franklin W. Ruth, Jr. 4/87 1/57 530 80
President
Gregory M. Kerwin 7/90 5/87 453 47
Vice President
Raymond C. Donley 4/87 1/73 1,500 83
Secretary
Allen J. Trawitz 1/89 6/68 125 51
Cashier
Employees
As of December 31, 1997, the Bank had 13 full-time equivalent employees.
Legal Proceedings
The nature of Bank's business generates a certain amount of litigation
involving matters in the ordinary course of business. Except as disclosed below,
in the opinion of management of the Bank, there are no proceedings pending to
which the Bank is a party or to which its property is subject, which, if
determined adversely to the Bank, would be material in relation to the Bank's
undivided profits or financial condition, nor are there any proceedings pending,
other than ordinary routine litigation, incident to the business of the Bank. In
addition, no material proceedings are pending or are known to be threatened or
contemplated against the Bank by government authorities or others.
Bank Common Stock Market Price and Dividends
Bank Common Stock is not traded in any established market and no price
quotations are readily available therefor. There were approximately 291 holders
of record of Bank Common Stock as of December 31, 1997. Recent sales of Bank
Common Stock have occurred solely between individuals in limited
over-the-counter transactions and in direct, privately negotiated transactions.
The most recent sale prior to the public announcement of the Merger on January
9, 1998, and as to which the management of Bank is aware of the sales price,
occurred on December 11, 1997, at a price of $165.25 per share and involved a
total of 422 shares.
-45-
<PAGE>
The holders of Bank Common Stock are entitled to receive dividends when, as
and if declared by the Board of Directors out of funds legally available
therefor, the Bank has historically paid semi-annual cash dividends to its
shareholders on or about June 30 and December 31 of each year. The ability of
the Bank to pay dividends to its shareholders is dependent upon its earnings and
financial condition, without prior regulatory approval, subject to certain
prescribed statutory limitations.
Under the Banking Code, dividends may only be paid out of accumulated net
earnings and only when the dividend does not reduce Bank's surplus below the
amount of capital. In addition to the foregoing statutory restrictions on
dividends, the FDIC has general authority to prohibit the Bank from engaging in
an unsafe or unsound banking practice. The payment of a dividend by a bank
could, depending upon the financial condition of the bank involved and other
factors, be deemed to be such an unsafe or unsound practice.
The Bank paid cash dividends of $5.00 per share in 1997. Under the terms of
the Acquisition Agreement, the Bank will only pay regular semi-annual cash
dividends in amounts and on dates consistent with past practices.
Certain information concerning shares of Bank Common Stock beneficially
owned by each director of Bank and by all directors and executive officers of
Bank, as a group, as of April 28, 1998, is set forth below:
<TABLE>
<CAPTION>
Shares of Bank
Common Stock Percent of
Beneficially Owned Shares
Name of Director April 28,1998(1) Outstanding
- ---------------- ---------------- -----------
<S> <C> <C>
Franklin W. Ruth, Jr. 530 3.58%
Raymond C. Donley 1,500 10.12%
Richard E. Klinger 553 3.73%
Gregory M. Kerwin 453 3.06%
Harold G. Jury 162 1.09%
Donald E. Sauve 157 1.06%
Allen J. Trawitz 125 .84%
Terrence J. Kerwin 472 3.18%
All directors and executive
officers as a group (9 persons)
<FN>
(1) The Securities "beneficially owned" are determined in accordance with
the definitions of "beneficial ownership" as set forth in the
regulations of the Commission and, accordingly, may include securities
owned by or for, among others, the spouse and/or minor children of the
individual and any other relative who has the
-46-
<PAGE>
same residence as such individual as well as other securities as to
which the individual has or shares voting or investment power or has
the right to acquire under outstanding stock options within sixty (60)
days after April 28, 1998. Beneficial ownership may be disclaimed as
to certain of the securities.
</FN>
</TABLE>
EXPERTS
The consolidated financial statements of Bancorp and subsidiaries as of
December 31, 1997, and 1996, and for each of the years in the three-year period
ended December 31, 1997, have been incorporated by reference herein and in the
proxy statement/prospectus in reliance upon the report of Parente, Randolph,
Orlando, Carey & Associates, independent certified public accountants,
incorporated by reference herein, and upon the authority of said firm as experts
in accounting and auditing.
The financial statements of Bank as of and for the year ended December 31,
1997, included in this Proxy Statement/Prospectus have been audited by KPMG Peat
Marwick LLP, independent public accountants, as indicated in their report with
respect thereto, and are included herein in reliance upon the authority of said
firm as experts in accounting and auditing.
LEGAL OPINIONS
The legality of the shares of Bancorp Common Stock to be issued in
connection with the Merger and certain other legal matters relating to the
Merger will be passed upon by the law firm of Shumaker Williams, P.C., Camp
Hill, Pennsylvania, Special Counsel to Bancorp.
OTHER MATTERS
The Board of Directors of Bank knows of no other matters other than those
discussed in this Proxy Statement/Prospectus which will be presented at the
Special Meeting. However, if any other matters are properly brought before the
Special Meeting and any adjournment thereof, any proxy given pursuant to this
solicitation will be voted in accordance with the recommendations of the
management of Bank.
ADDITIONAL INFORMATION
Bancorp has filed a Registration Statement on Form S-4 with the Commission
in respect of the shares of Bancorp Common Stock to be issued in connection with
the Merger. The Registration Statement contains certain additional information
which has been omitted from this Proxy Statement/Prospectus in accordance with
the rules and regulations of the Commission and may be examined at the
Commission in Washington, D.C. Copies of the Registration Statement may be
obtained from the Commission upon payment of the prescribed fee.
-47-
<PAGE>
ANNEXES
A Agreement and Plan of Reorganization and the related Agreement and Plan of
Merger
B Statute Regarding Dissenters' Rights
C Bank's Audited Financial Statements for the year ended December 31, 1997
<PAGE>
ANNEX A
Agreement and Plan of Reorganization
and
the related
Agreement and Plan of Merger
<PAGE>
EXECUTION COPY
01/09/98
AGREEMENT AND PLAN OF REORGANIZATION
AMONG
MID PENN BANCORP, INC.
MID PENN BANK
AND
MINERS BANK OF LYKENS (LYKENS, PA.)
January 9, 1998
<PAGE>
EXECUTION COPY
01/09/98
TABLE OF CONTENTS
Page
ARTICLE I AGREEMENT AND PLAN OF MERGER.................................... 1
1.1 Agreement and Plan of Merger........................... 1
ARTICLE II CONVERSION OF SHARES AND EXCHANGE
OF STOCK CERTIFICATES............................................2
2.1 Conversion of Shares....................................2
2.2 Exchange of Stock Certificates..........................3
ARTICLE III REPRESENTATIONS AND WARRANTIES
OF MINERS BANK OF LYKENS.........................................5
3.1 Authority...............................................5
3.2 Organization and Standing...............................6
3.3 No Subsidiaries.........................................6
3.4 Capitalization..........................................6
3.5 Articles of Incorporation, Bylaws and Minute Books......6
3.6 Consents................................................6
3.7 Financial Statements and Regulatory Reports.............7
3.8 Absence of Undisclosed Liabilities......................7
3.9 Absence of Changes......................................7
3.10 Dividends, Distributions and Stock Purchases............7
3.11 Taxes...................................................8
3.12 Title to and Condition of Assets........................8
3.13 Contracts...............................................8
3.14 Litigation and Governmental Directives..................9
3.15 Compliance with Laws; Governmental Authorizations......9
3.16 Insurance..............................................10
3.17 Financial Institutions Bonds...........................10
3.18 Labor Relations........................................10
3.19 Employee Benefit Plans.................................11
3.20 Related Party Transactions.............................11
3.21 Deleted................................................12
3.22 Deleted................................................12
3.23 Complete and Accurate Disclosure.......................12
3.24 Beneficial Ownership of Mid Penn Bancorp, Inc.
Common Stock...........................................12
3.25 Environmental Matters..................................12
ii
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3.26 Proxy Statement/Prospectus.............................14
3.27 Non-Registration Under the 1934 Act....................14
3.28 Deposit Insurance......................................14
3.29 Repurchase Agreements..................................15
3.30 Assumability of Contracts and Leases...................15
3.31 Loans..................................................15
3.32 Materiality............................................15
3.33 Deleted................................................15
3.34 Deleted................................................15
3.35 Adjustable Rate Mortgages..............................15
3.36 CRA Compliance.........................................15
3.37 Deleted................................................16
3.38 Loan Loss Reserve......................................16
3.39 Deleted................................................16
3.40 Deleted................................................16
3.41 Deleted................................................16
3.42 Accuracy of Representations............................16
ARTICLE IV REPRESENTATIONS AND WARRANTIES OF MID PENN
BANCORP, INC..................................................16
4.1 Authority..............................................16
4.2 Organization and Standing..............................16
4.3 Capitalization.........................................17
4.4 Deleted................................................17
4.5 Financial Statements...................................17
4.6 Absence of Undisclosed Liabilities.....................17
4.7 Absence of Changes.....................................18
4.8 Litigation.............................................18
4.9 Proxy Statement/Prospectus ............................18
ARTICLE V REPRESENTATIONS AND WARRANTIES OF
MID PENN BANK..................................................18
5.1 Capital Structure of Mid Penn Bank.....................18
5.2 Organization and Standing..............................19
5.3 Authorized and Effective Agreement.....................19
ARTICLE VI COVENANTS OF MINERS BANK OF LYKENS..............................19
6.1 Conduct of Business....................................19
6.2 Best Efforts...........................................22
6.3 Access to Properties and Records.......................23
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01/09/98
6.4 Subsequent Financial Statements........................23
6.5 Board and Committee Minutes............................23
6.6 Update Schedule........................................23
6.7 Notice.................................................23
6.8 Other Proposals........................................24
6.9 Dividends..............................................24
6.10 Core Deposits..........................................24
6.11 Affiliate Letters......................................24
6.12 No Purchases or Sales of Mid Penn Bancorp, Inc. Common
Stock During Price Determination Period ...........24
6.13 Accounting Treatment...................................24
6.14 Press Releases.........................................25
6.15 Deleted................................................25
6.16 Phase I Environmental Audit............................25
6.17 Deleted................................................25
ARTICLE VII COVENANTS OF MID PENN BANCORP, INC. AND
MID PENN BANK .................................................25
7.1 Best Efforts...........................................25
7.2 Access to Properties and Records.......................26
7.3 Subsequent Financial Statements........................26
7.4 Update Schedule........................................26
7.5 Notice.................................................26
7.6 No Purchase or Sales of Mid Penn Bancorp, Inc.
Common Stock During Price Determination Period.........26
ARTICLE VIII CONDITIONS PRECEDENT............................................27
8.1 Common Conditions......................................27
8.2 Conditions Precedent to Obligations
of Mid Penn Bancorp, Inc. and Mid Penn Bank............28
8.3 Conditions Precedent to the Obligations
of Miners Bank of Lykens...............................30
ARTICLE IX TERMINATION, AMENDMENT AND WAIVER...............................31
9.1 Termination............................................31
9.2 Effect of Termination..................................32
9.3 Amendment..............................................32
9.4 Waiver.................................................33
iv
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ARTICLE X RIGHTS OF DISSENTING SHAREHOLDERS OF
MINERS BANK OF LYKENS..........................................33
10.1 Rights of Dissenting Shareholders
of Miners Bank of Lykens..............................33
ARTICLE XI CLOSING AND EFFECTIVE DATE.....................................33
11.1 Closing...............................................33
11.2 Effective Date........................................33
ARTICLE XII NO SURVIVAL OF REPRESENTATIONS
AND WARRANTIES.................................................34
12.1 No Survival...........................................34
ARTICLE XIII POST-MERGER AGREEMENTS.........................................34
13.1 Employees.............................................34
13.2 Miners Office Board...................................35
13.3 Additional Commitments of MP Corp. and MP Bank........36
13.4 Merger of Profit Sharing Plans........................36
ARTICLE XIV GENERAL PROVISIONS.............................................36
14.1 Expenses..............................................36
14.2 Other Mergers and Acquisitions........................36
14.3 Access; Confidentiality...............................37
14.4 Notices...............................................37
14.5 Captions..............................................38
14.6 Counterparts..........................................38
14.7 Severability..........................................38
14.8 Parties in Interest...................................38
14.9 Entire Agreement......................................38
14.10 Governing Law.........................................38
EXHIBITS: AGREEMENT AND PLAN OF MERGER..................................A-1
("BANK MERGER AGREEMENT")
SUPPORT AGREEMENT.............................................B-1
v
<PAGE>
EXECUTION COPY
01/09/98
AGREEMENT AND PLAN OF REORGANIZATION
This Agreement and Plan of Reorganization (hereinafter "Agreement") is
dated and made this 9th day of January, 1998, by and among MID PENN BANCORP,
INC., a Pennsylvania business corporation having its corporate headquarters at
349 Union Street, P.O. Box 111, Millersburg, Pennsylvania 17061 ("MP Corp."),
Mid Penn Bank, a Pennsylvania state-chartered banking institution and the
wholly-owned subsidiary of MP Corp., having its corporate headquarters at 349
Union Street, P.O. Box 111, Millersburg, Pennsylvania 17061 ("MP Bank"); and
Miners Bank of Lykens (Lykens, PA.), a Pennsylvania state-chartered banking
institution having its corporate headquarters at 550 Main Street, P.O. Box 38,
Lykens, Pennsylvania 17048-0038 ("Miners").
Background:
MP Corp. is a Pennsylvania business corporation and a registered bank
holding company. MP Bank is a Pennsylvania state-chartered banking institution
and a wholly-owned subsidiary of MP Corp. Miners is a Pennsylvania
state-chartered banking institution. MP Corp. wishes to acquire Miners, and
Miners wishes to merge with and into MP Bank. Subject to the terms and
conditions of this Agreement, the foregoing transaction will be accomplished by
means of a reorganization and merger under which Miners will be merged with and
into MP Bank. MP Bank will survive the merger, and all of the outstanding shares
of the $5.00 par value common stock of Miners ("Miners Common Stock") will be
converted into shares of the $1.00 par value common stock of MP Corp. ("MP Corp.
Common Stock") in the manner, on the terms, and subject to the conditions of
this Agreement.
WITNESSETH:
NOW, THEREFORE, in consideration of the premises, mutual promises,
covenants, agreements, representations and warranties hereinafter set forth, and
of other good and valuable consideration, the receipt and sufficiency of which
are hereby acknowledged, and intending to be legally bound hereby, the parties
agree as follows:
ARTICLE I
AGREEMENT AND PLAN OF MERGER
Section 1.1. Agreement and Plan of Merger. Subject to the terms and
conditions of this Agreement, Miners shall merge with and into MP Bank (the
"Merger") in accordance with the Agreement and Plan of Merger attached hereto as
Exhibit "A" ("Bank Merger Agreement") and pursuant to the provisions of the
Pennsylvania Banking Code of 1965, as amended (the "Banking Code").
1
<PAGE>
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ARTICLE II
CONVERSION OF SHARES AND
EXCHANGE OF STOCK CERTIFICATES
Section 2.1. Conversion of Shares. On the Effective Date (as defined in
Section 11.2 of this Agreement) the shares of Miners Common Stock then
outstanding shall be converted into shares of MP Corp. Common Stock, as follows:
(a) General. Subject to the provisions of Section 2.1(b); 2.1(c) and
2.1(d) of this Article II, each share of Miners Common Stock issued and
outstanding immediately before the Effective Date shall, on the Effective
Date, be converted into and become, without any action on the part of the
holder thereof, ten (10) shares of MP Corp. Common Stock. Subject to the
provisions of Section 2.1(b), the aggregate number of shares of MP Corp.
Common Stock to be issued under this Agreement shall not exceed 148,250
shares.
(b) Anti-dilution Provision. In the event that MP Corp. shall at any
time before the Effective Date: (i) declare or pay a dividend in shares of
MP Corp. Common Stock, (ii) combine the outstanding shares of MP Corp.
Common Stock into a smaller number of shares, or (iii) subdivide the
outstanding shares of MP Corp. Common Stock into a greater number of
shares, or (iv) reclassify the shares of MP Corp. Common Stock, then the
exchange provisions of Section 2.1 (a) of this Article II shall be
proportionately adjusted accordingly.
(c) No Fractional Shares. No fractional shares of MP Corp. Common
Stock , and no scrip or certificates therefor, shall be issued in
connection with the Merger. In lieu of the issuance of any fractional share
to which he would otherwise be entitled, each former shareholder of Miners
shall receive in cash an amount equal to the fair market value of his
fractional interest, which fair market value shall be determined by
multiplying such fraction by the closing market price of MP Corp. Common
Stock.
(d) Miners Treasury Stock. Each share of Miners Common Stock issued
and held in the treasury of Miners as of the Effective Date, if any, shall
be canceled, and no cash, stock, or other property shall be delivered in
exchange therefor.
(e) MP Corp. Common Stock.
(i) Each share of MP Corp. Common Stock issued and outstanding
immediately prior to the Effective Date, shall, on and after the
Effective Date, continue to be issued and outstanding as an identical
share of MP Corp. Common Stock.
2
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01/09/98
(ii) Each share of MP Corp. Common Stock issued and held in the
treasury of MP Corp. as of the Effective Date, if any, shall, on and
after the Effective Date, continue to be issued and held in the
treasury of MP Corp.
Section 2.2. Exchange of Stock Certificates. Miners Common Stock
certificates shall be exchanged for MP Corp. Common Stock certificates in
accordance with the following procedures:
(a) Exchange Agent. The transfer agent of MP Corp. shall act as
exchange agent (the "Exchange Agent") to receive Miners Common Stock
certificates from the holders thereof and to exchange such stock
certificates for MP Corp. Common Stock certificates and (if applicable) to
pay cash for fractional shares of Miners Common Stock pursuant to Section
2.1(c) above. The Exchange Agent shall, on or promptly after the Effective
Date, mail to each former shareholder of Miners a notice specifying the
procedures to be followed in surrendering such shareholder's Miners Common
Stock certificates.
(b) Surrender of Certificates. As promptly as possible after receipt
of the Exchange Agent's notice, each former shareholder of Miners shall
surrender his Miners Common Stock certificates to the Exchange Agent;
provided, that if any former shareholder of Miners shall be unable to
surrender his Miners Common Stock certificates due to loss or mutilation
thereof, he may make a constructive surrender by following procedures
comparable to those customarily used by MP Corp. for issuing replacement
certificates to MP Corp. shareholders whose MP Corp. Common Stock
certificates have been lost or mutilated. Upon receiving a proper actual or
constructive surrender of Miners Common Stock certificates from a former
Miners shareholder, the Exchange Agent shall issue to such shareholder, in
exchange therefor, a MP Corp. Common Stock certificate representing the
whole number of shares of MP Corp. Common Stock into which such
shareholder's shares of Miners Common Stock have been converted in
accordance with this Article II, together with a check in the amount of any
cash to which such shareholder is entitled, pursuant to Section 2.1(c) of
this Agreement, in lieu of the issuance of a fractional share.
(c) Dividend Withholding. Dividends, if any, payable by MP Corp. after
the Effective Date to any former shareholder of Miners who has not, prior
to the payment date, surrendered his Miners Common Stock certificates may,
at the option of MP Corp., be withheld. Any dividends so withheld shall be
paid, without interest, to such former shareholder of Miners upon proper
surrender of his Miners Common Stock certificates.
(d) Failure to Surrender Certificates. All Miners Common Stock
certificates must be surrendered to the Exchange Agent within two (2) years
after the Effective Date. In the event that any former shareholder of
Miners shall not have properly surrendered his Miners Common Stock
certificates within two (2) years after the Effective Date, the shares of
MP Corp. Common Stock that would otherwise have been issued to him may, at
the option of MP Corp., be sold and the net proceeds of such sale, together
with the cash (if any) to which he is entitled in lieu of the issuance of a
fractional share and any previously accrued dividends, shall be held in a
non-interest bearing account for his benefit. From and after any
3
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01/09/98
such sale, the sole right of such former shareholder of Miners shall be the
right to collect such net proceeds, cash and accumulated dividends. Subject
to all applicable laws of escheat, such net proceeds, cash and accumulated
dividends shall be paid to such former shareholder of Miners, without
interest, upon proper surrender of his Miners Common Stock certificates.
(e) Expenses of Share Surrender and Exchange. All costs and expenses
associated with the foregoing surrender and exchange procedure shall be
borne by MP Corp. Notwithstanding the foregoing, no party hereto will be
liable to any holder of Miners Common Stock for any amount paid in good
faith to a public official or agency pursuant to any applicable abandoned
property, escheat or similar law.
(f) Exchange Procedures. Each certificate for shares of Miners Common
Stock delivered for exchange under this Article II must be endorsed in
blank by the registered holder thereof or be accompanied by a power of
attorney to transfer such shares endorsed in blank by such holder. If more
than one certificate is surrendered at one time and in one transmittal
package for the same shareholder account, the number of whole shares of MP
Corp. Common Stock for which certificates will be issued pursuant to this
Article II will be computed on the basis of the aggregate number of shares
represented by the certificates so surrendered. If shares of Miners Common
Stock or payments of cash are to be issued or made to a person other than
the one in whose name the surrendered certificate is registered, the
certificate so surrendered must be properly endorsed in blank, with
signature(s) guaranteed, or otherwise in proper form for transfer, and the
person to whom certificates for shares of MP Corp. Common Stock is to be
issued or to whom cash is to be paid shall pay any transfer or other taxes
required by reason of such issuance or payment to a person other than the
registered holder of the certificate for shares of Miners Common Stock
which are surrendered. As promptly as practicable after the Effective Date,
MP Corp. shall send or cause to be sent to each shareholder of record of
Miners Common Stock transmittal materials for use in exchanging
certificates representing Miners Common Stock for certificates representing
MP Corp. Common Stock into which the former have been converted in the
Reorganization and Merger.
(g) Closing of Stock Transfer Books; Cancellation of Miners
Certificates. Upon the Effective Date, the stock transfer books for Miners
Common Stock will be closed and no further transfers of shares of Miners
Common Stock will thereafter be made or recognized. All certificates for
shares of Miners Common Stock surrendered pursuant to this Article II will
be canceled by MP Corp.
(h) Rights Evidenced by Certificate. Each certificate for shares of MP
Corp. Common Stock issued in exchange for certificates for Miners Common
Stock pursuant to Section 2.2(f) hereof will be dated as of the Effective
Date and be entitled to dividends and all other rights and privileges
pertaining to such shares of MP Corp. Common Stock from and after the
Effective Date. Until surrendered, each certificate theretofore evidencing
shares of Miners Common Stock will, from and after the Effective Date,
evidence solely the right
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to receive certificates for shares of MP Corp. Common Stock pursuant to
Section 2.2(f) hereof. If certificates for shares of Miners Common Stock
are exchanged for MP Corp. Common Stock at a date following one or more
record dates for the payment of dividends or of any other distribution on
the shares of MP Corp. Common Stock subsequent to the Effective Date, MP
Corp. will pay cash in an amount equal to dividends theretofore payable on
such MP Corp. Common Stock and pay or deliver any other distribution to
which holders of shares of MP Corp. Common Stock have theretofore become
entitled. No interest will accrue or be payable in respect of dividends or
cash otherwise payable under this Section 2.2 upon surrender of
certificates for shares of MP Corp. Common Stock. Notwithstanding the
foregoing, no party hereto will be liable to any holder of Miners Common
Stock for any amount paid in good faith to a public official or agency
pursuant to any applicable abandoned property, escheat or similar law.
Until such time as certificates for shares of Miners Common Stock are
surrendered by a Miners shareholder to MP Corp. for exchange, MP Corp.
shall have the right to withhold dividends or any other distributions,
without interest, on the shares of the MP Corp. Common Stock issuable to
such shareholder.
(i) Payment Procedures. As soon as practical after the Effective Date,
MP Corp. shall make payment of the cash consideration provided for in
Section 2.1(c) to each person entitled thereto.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF MINERS
Miners represents and warrants to MP Corp. and MP Bank as of even date
herewith as follows:
Section 3.1. Authority. Miners has all requisite corporate power and
authority to enter into and perform all of its obligations under this Agreement
and the Bank Merger Agreement. The execution and delivery of this Agreement and
the Bank Merger Agreement and the performance of the transactions contemplated
herein and therein have been duly and validly authorized by the Board of
Directors of Miners and, except for the approval of this Agreement and the Bank
Merger Agreement by its shareholders, Miners has taken all corporate action
necessary on its part to authorize this Agreement and the Bank Merger Agreement
and the performance of the transactions contemplated herein and therein. This
Agreement and the Bank Merger Agreement have been duly executed and delivered by
Miners and, assuming due authorization, execution and delivery by MP Corp. and
MP Bank, constitute valid and binding obligations of Miners, in each case
enforceable against it in accordance with their respective terms, subject to
bankruptcy, insolvency, and other laws of general applicability relating to or
affecting creditors' rights and general equity principles. Neither the execution
and delivery of this Agreement and the Bank Merger Agreement, nor consummation
of the transactions contemplated hereby or thereby, nor compliance by Miners
with any of the provisions hereof or thereof shall (i) conflict with or result
in a breach of any provisions of the Articles of Incorporation or By-laws of
Miners, (ii) constitute or result in a material breach of any
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term, condition or provisions of, or constitute a default under or give rise to
any right of termination, cancellation or acceleration with respect to, or
result in the creation of any lien, charge, security interest or other
encumbrance upon any property or asset of Miners pursuant to any note, bond,
mortgage, indenture, deed of trust, license, agreement or other instrument or
obligation, or (iii) violate any order, writ, injunction, decree, statute, code,
ordinance, rule, regulation or judgment applicable to Miners.
Section 3.2. Organization and Standing. Miners is a duly organized bank,
validly existing and in good standing under the laws of the Commonwealth of
Pennsylvania. Miners (i) has full power and authority to carry out its business
as now conducted and (ii) is duly qualified to do business in the states of the
United States and foreign jurisdictions where its ownership or leasing of
property or the conduct of its business requires such qualification and where
failure to so qualify would have a material adverse effect on the financial
condition, results of operations, business or prospects of Miners.
Section 3.3. No Subsidiaries. Miners owns no subsidiaries, directly or
indirectly.
Section 3.4. Capitalization. The authorized capital stock of Miners
consists solely of 15,000 shares of common stock, par value five dollars ($5.00)
per share ("Miners Common Stock"), of which, at the date hereof, 14,825 shares
are issued and outstanding. All outstanding shares of Miners Common Stock have
been duly issued and are validly outstanding, fully paid and nonassessable. None
of the shares of Miners Common Stock have been issued in violation of the
preemptive rights of any person or entity. There are no authorized, issued, or
outstanding options, convertible securities, warrants or other rights to
purchase or acquire any of the Miners Common Stock from Miners, and there is no
commitment of Miners to issue the same. There are no outstanding agreements,
restrictions, contracts, commitments or demands of any character to which Miners
is a party, which relate to the transfer or restrict the transfer of any shares
of Miners Common Stock. Except as previously disclosed, to the knowledge of
Miners, there are no shareholder agreements, understandings or commitments
relating to the right of Miners to vote or dispose of its shares.
Section 3.5. Articles of Incorporation, Bylaws and Minute Books. The copies
of the Articles of Incorporation and Bylaws of Miners which have been delivered
to MP Corp. and MP Bank are true, correct and complete. Except as previously
disclosed, all minute books of Miners have been made available to MP Corp. and
MP Bank for inspection and are true, correct and complete in all material
respects and record the actions taken by the Board of Directors of Miners at the
meetings documented in the minutes.
Section 3.6. Consents. Except for the consents, approvals, filings and
registrations contemplated by Sections 8.1(b) and (d) hereof, and compliance
with any conditions contained therein, and the approval of this Agreement and
the Bank Merger Agreement by the Board of Directors and shareholders of Miners,
no consents or approvals of, or filings or registrations with, any public body
or authority are necessary, and no consents or approvals of any third parties
are necessary, or will be, in connection with (i) the execution and delivery of
this Agreement or the Bank
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Merger Agreement by Miners, and (ii) the consummation by Miners of the
transactions contemplated hereby. Miners has no reason to believe that any
required consents or approvals will not be received or will be received with
conditions, limitations or restrictions unacceptable to it or which would
adversely impact Miners's ability to consummate the transactions contemplated by
this Agreement.
Section 3.7. Financial Statements and Regulatory Reports. Miners has
delivered to MP Corp. and MP Bank its (i) Balance Sheets, Statements of Income,
and Statements of Stockholders' Equity for the years ended December 31, 1996 and
December 31, 1995, and (ii) Call Reports, Consolidated Reports of Condition and
Income, (the aforementioned consolidated report of condition and income as of
September 30, 1997, is referred to herein as the "Bank Balance Sheet") and
accompanying schedules, filed by Miners with any regulatory authority for each
calendar quarter, beginning with the quarter ended September 30, 1997, through
the Closing Date ("Miners Regulatory Reports"). Each of the foregoing financial
statements fairly presents the financial condition, assets and liabilities, and
results of operations of Miners at their respective dates and for the respective
periods then ended and have been prepared in accordance with generally accepted
accounting principles consistently applied, except as otherwise noted in a
footnote thereto. The books and records of Miners are maintained in accordance
with generally accepted accounting principles consistently applied. The Miners
Regulatory Reports have been, or will be, prepared in accordance with applicable
regulatory accounting principles and practices applied on a consistent basis
throughout the periods issued by such statements, and fairly present, or will
fairly present, the financial position, results of operations and changes in
shareholders' equity of Miners as of and for the periods ended on the dates
thereof, in accordance with applicable regulatory accounting principles applied
on a consistent basis.
Section 3.8. Absence of Undisclosed Liabilities. Except as previously
disclosed, or as reflected, noted or adequately reserved against in the Bank
Balance Sheet, as at September 30, 1997, Miners had no liabilities (whether
accrued, absolute, contingent or otherwise) or asset impairment which are
required to be reflected, noted or reserved against therein under generally
accepted accounting principles or which are in any case or in the aggregate
material. Except as previously disclosed, since September 30, 1997, Miners has
not incurred any such liability, other than liabilities of the same nature as
those set forth in the Bank Balance Sheet, all of which have been reasonably
incurred in the ordinary course of business consistent with customary business
practices of prudently managed banks (hereinafter referred to as "Ordinary
Course of Business").
Section 3.9. Absence of Changes. Since September 30, 1997, Miners has
conducted its business in the Ordinary Course of Business and, except as
previously disclosed, Miners has not undergone any change in condition
(financial or otherwise), assets, liabilities, business or operations, other
than changes in the Ordinary Course of Business which have not been, either in
any case or in the aggregate, materially adverse.
Section 3.10. Dividends, Distributions and Stock Purchases. Except as
previously disclosed, since September 30, 1997, Miners has not declared, set
aside, made or paid any dividend or other distribution in respect of the Miners
Common Stock, or purchased, issued or sold any shares of Miners Common Stock.
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Section 3.11. Taxes. Miners has filed all federal, state, county, municipal
and foreign tax returns, reports and declarations which are required to be filed
by Miners. Except as previously disclosed, (i) Miners has paid all taxes,
penalties and interest which have become due pursuant thereto or which became
due pursuant to assessments, and (ii) Miners has not received any notice of
deficiency or assessment of additional taxes and no tax audits are in process.
The Internal Revenue Service ("IRS") has not, to the knowledge of Miners,
commenced, or given notice of its intention to commence any examination or audit
of the federal income tax returns of Miners for any year through and including
the year ended December 31, 1996. Miners has not granted any waiver of any
statute of limitations or otherwise agreed to any extension of a period for the
assessment of any federal, state, county, municipal or foreign income tax.
Except as previously disclosed, the accruals and reserves reflected in the Bank
Balance Sheet are adequate to cover all taxes (including interest and penalties,
if any, thereon) payable or accrued as a result of its operations for all
periods prior to the date of the Bank Balance Sheet.
Section 3.12. Title to and Condition of Assets. Miners has good and
marketable title to all real and personal properties and assets reflected in the
Bank Balance Sheet or acquired subsequent to September 30, 1997 (other than
property and assets disposed of in the Ordinary Course of Business), free and
clear of all liens or encumbrances of any kind whatsoever other than: (i) as
reflected in the Bank Balance Sheet; (ii) liens of current taxes not yet due;
and (iii) such imperfections of title, encumbrances and easements, if any, as
are not substantial in character, amount or extent and do not materially detract
from the value, or interfere with the present or pro posed use, of the
properties and assets subject thereto. The structures and other improvements to
real estate, furniture, fixtures and equipment reflected in the Bank Balance
Sheet or acquired subsequent to September 30, 1997, are in good operating
condition and repair (ordinary wear and tear excepted) and comply in all
material respects with all applicable laws, ordinances and regulations,
including without limitation all building codes, zoning ordinances and other
similar laws. Miners owns or has the right to use all real and personal
properties and assets necessary to the conduct of its business as now conducted.
Section 3.13. Contracts. All contracts, agreements, leases, licenses and
other commitments are valid and in full force and effect, and all parties
thereto have in all material respects performed all obligations required to be
performed by them to date and are not in default in any material respect.
Miners is not a party to or subject to (i) any employment, consulting or
severance contract or arrangement with any past or present officer, director or
employee, except for "at will" arrangements (ii) any plan, arrangement or
contract providing for bonuses, options, deferred compensation, profit sharing
or similar arrangements for or with any past or present officers, directors or
employees of Miners; (iii) any collective bargaining agreement with any labor
union relating to employees of Miners; (iv) any agreement which by its terms
limits the payment of dividends by Miners; (v) any instrument evidencing or
related to indebtedness for borrowed money in excess of $20,000, whether
directly or indirectly, by way of purchase money obligation, conditional sale,
lease purchase, guaranty or otherwise, in respect of which Miners is an obligor
to any person, which instrument evidences or relates to indebtedness other than
deposits, repurchase
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agreements, bankers acceptances and "treasury tax and loan" accounts established
in the Ordinary Course of Business and transactions in federal funds or which
contains financial covenants or other restrictions (other than those relating to
the payment of principal and interest when due) which would be applicable on or
after the Closing Date to MP Corp. or any MP Corp. subsidiary; (vi) any contract
(other than this Agreement) limiting the freedom of Miners to engage in any type
of banking or banking-related business permissible under law; or (vii) any
contract, plan or arrangement which provides for payments or benefits in certain
circumstances which, together with other payments or benefits payable to any
participant therein or party thereto, might render any portion of any such
payments or benefits subject to disallowance of deduction therefor as a result
of the application of Section 280G of the Internal Revenue Code of 1986, as
amended (the "Code").
No party to any material contract, plan, arrangement or instrument that
requires annual payments in excess of $10,000 will have the right to terminate
any or all of the provisions of any such contract, plan, arrangement or
instrument as a result of the transactions contemplated by this Agreement, and
none of the employees of Miners possess the right to terminate their employment
as a result of the execution of this Agreement. No plan, employment agreement,
termination agreement, or similar agreement or arrangement to which Miners is a
party or under which Miners may be liable contains provisions which permit an
employee or independent contractor to terminate it without cause and continue to
accrue future benefits thereunder. No such agreement, plan or arrangement
provides for acceleration in the vesting of benefits or payments due thereunder
upon the occurrence of a change in ownership or control of Miners absent the
occurrence of a subsequent event; provides for benefits which may cause the
disallowance of a federal income tax deduction under Section 280G of the Code;
or requires Miners to provide a benefit in the form of Miners Common Stock or
determined by reference to the value of Miners Common Stock.
Section 3.14. Litigation and Governmental Directives. There is no
litigation, investigation or proceeding pending, or to the knowledge of Miners
threatened, that involves Miners or its properties and that, if determined
adversely, would materially and adversely affect the condition (financial or
otherwise), assets, liabilities, business, operations or future prospects of
Miners; there are no outstanding orders, writs, injunctions, judgments, decrees,
regulations, directives, consent agreements or memoranda of understanding issued
by any federal, state or local court or governmental authority or arbitration
tribunal issued against or with the consent of Miners that materially and
adversely affect the condition (financial or otherwise), assets, liabilities,
business, operations or future prospects of Miners or that in any manner
restrict Miners's right to conduct its business as presently conducted, or
challenge the validity or propriety of any of the transactions contemplated by
the Agreement, or which could adversely affect the ability of Miners to perform
under this Agreement; and Miners is not aware of any fact or condition presently
existing that might give rise to any litigation, investigation or proceeding
which, if determined adversely to Miners, would materially and adversely affect
the condition (financial or otherwise), assets, liabilities, business,
operations or future prospects of Miners.
Section 3.15. Compliance with Laws; Governmental Authorizations. Miners is
in compliance with all statutes, laws, ordinances, rules, regulations,
judgments, orders, decrees, directives, consent agreements, memoranda of
understanding, permits, concessions, grants,
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franchises, licenses, and other governmental authorizations or approvals
applicable to Miners or to any of its properties; all permits, concessions,
grants, franchises, licenses and other governmental authorizations and approvals
necessary for the conduct of the business of Miners as presently conducted have
been duly obtained and are in full force and effect, and there are no
proceedings pending, or to the knowledge of Miners threatened, which may result
in the revocation, cancellation, suspension or materially adverse modification
of any thereof; and Miners has not received any notification or communication
from any regulatory authority (A) asserting that it is not in substantial
compliance with any of the statues, regulations or ordinances which such
regulatory authorities enforce; (B) requiring or threatening to require Miners,
or indicating that Miners may be required, to enter into a cease and desist
order, agreement or memorandum of understanding or any other agreement
restricting or limiting, or purporting to restrict or limit, in any manner the
operations of Miners, including without limitation, any restriction on the
payment of dividends (any such notice, communication, memorandum, agreement or
order described herein is referred to as a "Regulatory Agreement"); (C)
threatening to revoke any license, franchise, permit or governmental
authorization which is material to Miners; Miners has not consented to or
entered into any Regulatory Agreement; (D) requesting board resolutions be
adopted pursuant to regulatory action.
Section 3.16. Insurance. All policies of insurance, including all policies
of title insurance and financial institutions bonds, held by or on behalf of
Miners are in full force and effect and no notices of cancellation have been
received in connection therewith. All such policies of insurance have been
issued by reputable insurers which in respect of amounts, types and risks, such
insurance is customary with industry practices for the business conducted by
Miners.
Section 3.17. Financial Institutions Bonds. Since January 1, 1991, Miners
has continuously maintained in full force and effect a financial institutions
bond insuring Miners against acts of dishonesty by each of its employees. Except
as previously disclosed, no claim has been made under any such bond, and Miners
is not aware of any fact or condition presently existing which might form the
basis of a claim under any such bond. Miners has no reason to believe that its
present financial institutions bond will not be renewed by its carrier on
substantially the same terms and at the same rate as now in effect.
Section 3.18. Labor Relations. Miners is not a party to or bound by any
collective bargaining agreement, contract or other agreement or understanding
with a labor union or labor organization, nor is Miners the subject of a
proceeding asserting that Miners has committed an unfair labor practice or
seeking to compel Miners to bargain with any labor organization as to wages and
conditions of employment, nor is there any strike or other labor dispute
involving Miners pending, or to the knowledge of Miners, threatened, that might
materially adversely affect the condition (financial or otherwise), assets,
liabilities, business or operations of Miners. Miners is not subject to or a
party in any Complaint or action before the Pennsylvania Human Relations
Commission, the Equal Employment Opportunity Commission, or the Department of
Labor. There are no labor disputes pending, or to the knowledge of Miners
threatened, that might materially and adversely affect the condition (financial
or otherwise), assets, liabilities, business or operations of Miners.
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Section 3.19. Employee Benefit Plans. Each "employee benefit plan", as
defined in Section 3(3) of the Employee Retirement Income Security Act of 1974,
as amended ("ERISA"), that now covers any employee of Miners, its predecessors
or affiliates, complies in all material respects with all applicable
requirements of ERISA, the Code and other applicable laws. Neither Miners nor
any of its predecessors or affiliates has engaged in any "prohibited
transaction" (as defined in Section 406 of ERISA or Section 4975 of the Code) or
any breach of fiduciary responsibility under Part 4 of Title I of ERISA, with
respect to any such plan which prohibited transaction is likely to result in any
material penalties or taxes under Section 502 of ERISA or Section 4975 of the
Code, or any material liability to any participant or beneficiary of such plan.
No material liability to the Pension Benefit Guaranty Corporation has been or is
expected to be incurred by Miners with respect to itself or its predecessors or
affiliates with respect to any such plan which is subject to Title IV of ERISA,
or with respect to any "single employer plan" (as defined in Section 4001(a)(15)
of ERISA) currently or formerly maintained. No such 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 fair market value of the assets of each such plan exceeds the
present value of the "benefit liabilities" (as defined in Section 4001(a)(16) of
ERISA) under each such plan as of the end of the most recent plan year,
calculated on the basis of the actuarial assumptions used in the most recent
actuarial valuation for each such plan. No notice of a "reportable event" (as
defined in Section 4043 of ERISA) for which the 30-day reporting requirement has
not been waived has been required to be filed for any of such plans within the
12- month period ending on the date hereof. Neither Miners, its predecessors or
affiliates has provided, or is required to provide, security to any such plans
pursuant to Section 401(a)(29) of the Code. Miners, its predecessors and
affiliates have contributed to no "multi-employer plan", as defined in Section
3(37) of ERISA, on or after September 26, 1980. All actuarial valuations and
other documents and information concerning benefit plans delivered or made
available in connection with this Agreement are true and correct as of the
date(s) shown thereon, and all actuarial methods and assumptions are appropriate
for such plans, and are consistent with the methods and assumptions permitted by
the Code and ERISA. All such plans are funded to such level as assets of each
such plan would then be sufficient to pay all vested accrued benefits
thereunder, and there would be no employer liability under Title IV of ERISA.
Since 1990, there has been no audit of any benefit plan of Miners by the
Department of Labor, the IRS or the Pension Benefit Guaranty Corporation
("PBGC"). There has not been any audit of the Pension Plan or any of Miners's
other employee benefit plans by the Department of Labor, the IRS or the PBGC
since 1988. Miners, its predecessors and affiliates, have no obligation for
retiree health and life benefits under any benefit plan, contract, or
arrangement. Miners has no obligation for any post-retirement benefits under any
plan, contract or arrangement except as previously disclosed.
Section 3.20. Related Party Transactions. Except as previously disclosed,
Miners has no contract, extension of credit, business arrangement or other
relationship of any kind with any of the following persons: (i) any present or
former officer or director of Miners; (ii) any shareholder owning five percent
or more of the outstanding Miners Common Stock; and (iii) any "associate" (as
defined in SEC Rule 405) of the foregoing persons or any business in which any
of the foregoing persons is an officer, director, employee or five percent or
greater equity owner. Each such extension of credit previously disclosed has
been made in the Ordinary Course of Business on
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substantially the same terms, including interest rates and collateral, as those
prevailing at the time for comparable arms' length transactions with other
persons that do not involve more than a normal risk of collectibility or present
other unfavorable features.
Section 3.21. DELETED.
Section 3.22. DELETED.
Section 3.23. Complete and Accurate Disclosure. Neither this Agreement
(insofar as it relates to Miners, Miners Common Stock and Miners's involvement
in the transactions contemplated hereby) nor any financial statement, schedule,
certificate, or other statement or document delivered by Miners to MP Corp. and
MP Bank in connection herewith contains any statement which, at the time and in
light of the circumstances under which it is made, is false or misleading with
respect to any material fact or omits to state any material fact necessary to
make the statements contained herein or therein not false or misleading. In
particular, without limiting the generality of the foregoing sentence, the
information provided and the representations made by Miners to MP Corp. and MP
Bank in connection with the Registration Statement (as defined in Section 7.1(b)
of this Agreement), both at the time such information and representations are
provided and made and at the time of the Closing, will be true and accurate in
all material respects and will not contain any false or misleading statement
with respect to any material fact or omit to state any material fact necessary
(i) to make the statements made therein not false or misleading, or (ii) to
correct any statement contained in an earlier communication with respect to such
information or representations which has become false or misleading.
Section 3.24. Beneficial Ownership of MP Corp. Common Stock. Prior to the
Effective Date, Miners and its officers and directors will not beneficially own,
in the aggregate, (within the meaning of SEC Rule 13d-3(d)(1)) more than five
percent of the outstanding shares of MP Corp. Common Stock.
Section 3.25. Environmental Matters. For purposes of this Section 3.25, the
following terms shall have the indicated meaning:
"Environmental Law" means any federal, state or local law, statute,
ordinance, rule, regulation, code, license, permit, authorization,
approval, consent, order, judgment, decree, injunction or agreement with
any governmental entity relating to: the protection, preservation or
restoration of the environment (including, without limitation, air, water
vapor, surface water, groundwater, drinking water supply, surface soil,
subsurface soil, plant and animal life or any other natural resource); and
the use, storage, recycling, treatment, generation, transportation,
processing, handling, labeling, production, release or disposal of
Hazardous Substances. The term Environmental Law includes without
limitation: the Comprehensive Environmental Response, Compensation and
Liability Act, as amended, 42 U.S.C. ss.9601, et seq., the Resource
Conservation and Recovery Act, as amended, 42 U.S.C. ss.6901, et seq., the
Clean Air Act, as amended, 42 U.S.C.
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ss.7401, et seq., the Federal Water Pollution Control Act, as amended, 33
U.S.C. ss.1251, et seq., the Toxic Substances Control Act, as amended, 15
U.S.C. ss.9601, et seq., the Emergency Planning and Community Right to Know
Act, 42 U.S.C. ss.11001, et seq., the Safe Drinking Water Act, 42 U.S.C.
ss.300f, et seq., and all comparable state and local laws; and any common
law (including without limitation common law that may impose strict
liability) that may impose liability or obligation for injuries or damages
due to, or threatened as a result of, the presence of or exposure to any
Hazardous Substance.
"Hazardous Substance" means any substance presently listed, defined,
designated or classified as hazardous, toxic, radioactive or dangerous or
otherwise regulated under any Environmental Law, whether by type or by
quantity, including any material containing any such substance as a
component. Hazardous Substances include, without limitation, petroleum or
any derivative or by-product thereof, asbestos, radioactive material, and
polychlorinated biphenyls.
"Miners Loan Portfolio Properties and Other Properties Owned" means
those properties serving as collateral for loans in Miners' loan portfolio,
or properties owned or operated by Miners (including, without limitation,
in a fiduciary capacity).
Except as previously disclosed:
(a) Miners has not been and is not in violation of or liable under any
Environmental Law.
(b) To the knowledge of Miners, after reasonable investigation, none
of the Miners Loan Portfolio Properties and Other Properties Owned have
been or are in violation of or liable under any Environmental Law.
(c) After reasonable investigation, Miners has no knowledge that any
environmental contaminant, pollutant, toxic or hazardous waste or other
similar substance has been generated, used, stored, processed, disposed of
or discharged onto any of the real estate now or previously owned or
acquired (including without limitation any real estate acquired by means of
foreclosure or exercise of any other creditor's right) or leased by Miners,
except as previously disclosed. In particular, without limiting the
generality of the foregoing sentence, except as previously disclosed,
Miners has no knowledge that: (i) any materials containing asbestos have
been used or incorporated in any building or other structure or improvement
located on any of the real estate now or previously owned or acquired
(including without limitation any real estate acquired by means of
foreclosure or exercise of any other creditor's right) or leased by Miners;
(ii) any electrical transformers, fluorescent light fixtures with ballasts
or other equipment containing PCB's are or have been located on any of the
real estate now or previously owned or acquired (including without
limitation any real estate acquired by means of foreclosure or exercise of
any other
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creditor's right) or leased by Miners; (iii) any underground storage tanks
for the storage of gasoline, petroleum products or other toxic or hazardous
substances are or have ever been located on any of the real estate now or
previously owned or acquired (including without limitation any real estate
acquired by means of foreclosure or exercise of any other creditor's right)
or leased by Miners.
(d) Except as previously disclosed, there is no legal, administrative,
arbitration or other proceeding, claim, action, or to the knowledge of
Miners cause of action or governmental investigation of any nature seeking
to impose, or that could result in the imposition, on Miners of any
liability arising under any local, state or federal environmental statute,
regulation or ordinance including, without limitation, the Comprehensive
Environmental Response, Compensation and Liability Act of 1980, as amended,
pending or to the knowledge of Miners threatened against Miners; there is
no reasonable basis for any such proceeding, claim, action or governmental
investigation; and Miners is not subject to any agreement, order, judgment,
decree or memorandum by or with any court, governmental authority,
regulatory agency or third party imposing any such liability.
Section 3.26. Proxy Statement/Prospectus. At the time the Proxy Statement/
Prospectus (as defined in Section 7.1(b) of this Agreement) is mailed to the
shareholders of Miners, and at all times subsequent to such mailing, up to and
including the Effective Date, such Proxy Statement/Prospectus (including any
pre- and post-effective amendments and supplements thereto), with respect to all
information relating to Miners, Miners Common Stock, and actions taken and
statements made by Miners in connection with the transactions contemplated
herein (except for information provided by MP Corp. and MP Bank to Miners) will:
(i) comply in all material respects with applicable provisions of the Securities
Act of 1933, as amended (the "1933 Act"), and the pertinent rules and
regulations thereunder; and (ii) not contain any statement which, at the time
and in light of the circumstances under which it is made, is false or misleading
with respect to any material fact, or omits to state any material fact that is
necessary to be stated therein in order (A) to make the statements therein not
false or misleading, or (B) to correct any statement in an earlier communication
with respect to the Proxy Statement/Prospectus which has become false or
misleading.
Section 3.27. Non-Registration Under the 1934 Act. Miners Common Stock is
neither registered nor required to be registered under Section 12 of the
Securities Exchange Act of 1934 (the "1934 Act") and is not subject to the
periodic reporting requirements imposed by Section 13 or 15(d) of the 1934 Act.
Section 3.28. Deposit Insurance. The deposits of Miners are insured by the
Bank Insurance Fund, as administered by the Federal Deposit Insurance
Corporation ("FDIC") in accordance with the Federal Deposit Insurance Act, and
Miners has paid all assessments and filed all reports required by the Federal
Deposit Insurance Act.
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Section 3.29. Repurchase Agreements. With respect to any agreement,
pursuant to which Miners has purchased securities subject to an agreement to
resell, if any, Miners has a valid, perfected first lien or security interest in
the government securities or other collateral securing the repurchase agreement,
and the value of such collateral equals or exceeds the amount of the debt
secured thereby.
Section 3.30. Assumability of Contracts and Leases. Except as previously
disclosed, all Material Contracts between Miners and any other entity or person
are assumable and assignable and do not contain any term or provision that would
accelerate or increase payments that would otherwise be due by Miners to such
person or entity, or change or modify the provisions or terms of such leases,
contracts and agreements by reason of this Agreement or the transactions
contemplated hereby. Except as previously disclosed, each lease pursuant to
which Miners, as lessee, leases real or personal property is valid and in effect
in accordance with its respective terms, and there is not, under any of such
leases, on the part of the lessee any material existing default or any event
which, with notice or lapse of time, or both, would constitute such a default,
other than defaults which would not individually or in the aggregate have a
material adverse effect on the financial condition, business, prospects, or
operating results of Miners.
Section 3.31. Loans. Except as previously disclosed, each loan reflected as
an asset on Miners's financial statements as of September 30, 1997, or acquired
since that date, is the legal, valid and binding obligation of the obligor named
therein, enforceable in accordance with its terms, subject to bankruptcy,
insolvency and other laws of general applicability relating to or affecting
creditors' rights and to general equity principles. All such loans, and the
collateral and other security therefor, and the documentation for the same, meet
the requirements, rules, regulations or directives of the FDIC, or other
applicable governmental authorities.
Section 3.32. Materiality. For purposes of this Article III, unless
otherwise defined, the term "material" or "materially" refers to amounts in
excess of $20,000.
Section 3.33. DELETED.
Section 3.34. DELETED.
Section 3.35. Adjustable Rate Mortgages. Miners has made all interest rate
adjustments to any mortgage loan according to the terms of said mortgage loan
and has complied and is in compliance in all material respects with all federal,
state and other applicable laws, rules and regulations, including orders, writs,
decrees, injunctions and other requirements of any court or governmental
authorities having jurisdiction over adjustable rate mortgages.
Section 3.36. CRA Compliance. Miners has received a satisfactory compliance
rating and has received a satisfactory Community Reinvestment Act rating. Miners
has no knowledge of any facts or circumstances which would prevent it from
receiving such satisfactory ratings upon its next appropriate examination.
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Section 3.37. DELETED.
Section 3.38. Loan Loss Reserve. The loan loss reserve of Miners is and
shall remain adequate in light of generally accepted accounting principles,
directives of governmental authorities, and all regulations, rules and
directives of the Banking Department and the FDIC. No regulatory authority
requested Miners to increase the allowance for loan losses during 1997, 1996,
1995 or 1994.
Section 3.39. DELETED.
Section 3.40. DELETED.
Section 3.41. DELETED.
Section 3.42. Accuracy of Representations. Miners will promptly notify MP
Corp. if any of the representations contained in this Article III cease to be
true and correct subsequent to the date hereof. Further, no representations made
by Miners pursuant to this Agreement contain any untrue statement of material
fact or omit to state a material fact necessary to make the statements not
misleading.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF MP CORP.
MP Corp. represents and warrants to Miners, as of even date herewith, as
follows:
Section 4.1. Authority. The execution and delivery of this Agreement and
the Bank Merger Agreement and the consummation of the transactions contemplated
herein and therein have been duly and validly authorized by the Board of
Directors of MP Corp., and no other corporate action on the part of MP Corp. is
necessary to authorize the approval of this Agreement and the Bank Merger
Agreement or the consummation of the transactions contemplated herein and
therein. This Agreement and the Bank Merger Agreement have been duly executed
and delivered by MP Corp. and, assuming due authorization, execution and
delivery by Miners, and receipt of all required regulatory and shareholder
approvals, constitutes a valid and binding obligation of MP Corp. Assuming
regulatory and shareholder approval, the execution, delivery and consummation of
this Agreement will not constitute a violation or breach of or default under the
Articles of Incorporation or the Bylaws of MP Corp. or any statute, rule,
regulation, order, decree, directive, agreement, indenture or other instrument
to which MP Corp. is a party or by which MP Corp. or any of its properties are
bound.
Section 4.2. Organization and Standing. MP Corp. is a business corporation
that is duly organized, validly existing and in good standing under the laws of
the Commonwealth of Pennsylvania. MP Corp. is a registered bank holding company
under the Bank Holding Company
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Act of 1956, as amended, and has full power and lawful authority to own and hold
its properties and to carry on its present business. MP Corp. owns all of the
issued and outstanding shares of capital stock of Mid Penn Bank. Mid Penn Bank
is a Pennsylvania state-chartered banking institution validly existing and in
good standing under the laws of the Commonwealth of Pennsylvania and of the
United States, and is duly authorized to engage in the banking business as an
insured bank under the Federal Deposit Insurance Act, as amended.
Section 4.3. Capitalization. The authorized capital stock of MP Corp.
consists of Ten Million (10,000,000) shares of common stock, par value one
dollar ($1.00) per share ("MP Corp. Common Stock") of which, at September 30,
1997, 2,607,552 shares were issued and outstanding. All outstanding shares of MP
Corp. Common Stock have been duly issued and are validly outstanding, fully paid
and nonassessable. The shares of MP Corp. Common Stock to be issued in
connection with the Bank Merger have been duly authorized and, when issued in
accordance with the terms of this Agreement and the Bank Merger Agreement, will
be validly issued, fully paid and nonassessable.
Section 4.4. DELETED.
Section 4.5. Financial Statements. MP Corp. has delivered to Miners the
following financial statements: (i) Consolidated Balance Sheets, Consolidated
Statements of Income, Consolidated Statements of Shareholders' Equity, and
Consolidated Statements of Cash Flows as of and for the years ended December 31,
1996 and December 31, 1995, certified by Parente, Randolph, Orlando, Carey and
Associates and set forth in the Annual Report to the shareholders of MP Corp.
for the year ended on December 31, 1996; and (ii) a Consolidated Statement of
Condition, a Consolidated Statement of Income and a Consolidated Statement of
Changes in Shareholders' Equity for the three-month period ended September 30,
1997, set forth in a "Quarterly Report" to the shareholders of MP Corp. (the
foregoing Consolidated Statement of Condition being hereinafter referred to as
the "MP Corp. Balance Sheet"). Each of the foregoing financial statements fairly
presents the consolidated financial position, assets, liabilities and results of
operations of MP Corp. at their respective dates and for the respective periods
then ended and has been prepared in accordance with generally accepted
accounting principles consistently applied, except as otherwise noted in a
footnote thereto and subject, in the case of the interim financial statements
contained in the aforesaid Quarterly Report, to normal recurring year-end
adjustments, which are not material in any case or in the aggregate.
Section 4.6. Absence of Undisclosed Liabilities. Except as previously
disclosed, or as reflected, noted or adequately reserved against in the MP Corp.
Balance Sheet, at September 30, 1997, MP Corp. had no material liabilities
(whether accrued, absolute, contingent or otherwise) which are required to be
reflected, noted or reserved against therein under generally accepted accounting
principles or which are in any case or in the aggregate material. Except as
previously disclosed, since September 30, 1997, MP Corp. has not incurred any
such liability other than liabilities of the same nature as those set forth in
the MP Corp. Balance Sheet, all of which have been reasonably incurred in the
Ordinary Course of Business.
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Section 4.7. Absence of Changes. Since September 30, 1997, there has not
been any material and adverse change in the condition (financial or otherwise),
assets, liabilities, business or operations of MP Corp. or MP Bank.
Section 4.8. Litigation. Except as previously disclosed: (i) there is no
litigation, investigation or proceeding pending, or to the knowledge of MP Corp.
threatened, that involves MP Corp. or its properties and that, if determined
adversely to MP Corp., would materially and adversely affect the condition
(financial or otherwise), assets, liabilities, business, operations or future
prospects of MP Corp.; (ii) there are no outstanding orders, writs, injunctions,
decrees, consent agreements, memoranda of understanding or other directives of
any federal, state or local court or governmental authority or of any
arbitration tribunal against MP Corp. which materially and adversely affect the
condition (financial or otherwise), assets, liabilities, business, operations or
future prospects of MP Corp., or restrict in any manner the right of MP Corp. to
conduct its business as presently conducted; and (iii) MP Corp. is not aware of
any fact or condition presently existing that might give rise to any litigation,
investigation or proceeding which, if determined adversely to MP Corp., would
materially and adversely affect the condition (financial or otherwise), assets,
liabilities, business or operations of MP Corp. For purposes of this Section
4.8, MP Corp. shall be deemed to include MP Bank.
Section 4.9. Proxy Statement/Prospectus. At the time the Proxy Statement/
Prospectus (as defined in Section 7.1(b) of this Agreement) is mailed to the
shareholders of Miners, and at all times subsequent to such mailing, up to and
including the Effective Date, the Proxy Statement/Prospectus (including any pre-
and post-effective amendments and supplements thereto), with respect to all
information relating to MP Corp. and MP Bank, MP Corp. Common Stock, and actions
taken and statements made by MP Corp. and MP Bank in connection with the
transactions contemplated herein (other than information provided by Miners to
MP Corp. and MP Bank), will: (i) comply in all material respects with applicable
provisions of the 1933 Act and the 1934 Act and the pertinent rules and
regulations thereunder; and (ii) not contain any statement which, at the time
and in light of the circumstances under which it is made, is false or misleading
with respect to any material fact, or omits to state any material fact that is
necessary to be stated therein in order (A) to make the statements therein not
false or misleading, or (B) to correct any statement in an earlier communication
with respect to the Proxy Statement/Prospectus which has become false or
misleading.
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF MP BANK
MP Bank represents and warrants to Miners, as of even date herewith, as
follows:
Section 5.1. Capital Structure of MP Bank. MP Bank is authorized to issue
ten million (10,000,000) shares of capital stock, par value one dollar ($1.00)
per share, of which all shares outstanding are owned by MP Corp.
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Section 5.2. Organization and Standing. MP Bank is a Pennsylvania
state-chartered banking institution which is duly organized, validly existing
and in good standing under the laws of the Commonwealth of Pennsylvania and of
the United States. MP Bank has full power and lawful authority to own and hold
its properties and to carry on its present business.
Section 5.3. Authorized and Effective Agreement. The execution, delivery
and performance of this Agreement and the Bank Merger Agreement have been duly
and validly authorized by the Board of Directors of MP Bank. Subject to
appropriate shareholder and regulatory approvals, neither the execution and
delivery of this Agreement or the Bank Merger Agreement nor the consummation of
the transactions provided for herein or therein will violate any agreement to
which MP Bank is a party or by which it is bound or any law, regulation, order,
decree or any provision of its Articles of Incorporation or By-laws.
ARTICLE VI
COVENANTS OF MINERS
From the date of this Agreement until the Effective Date (as defined in
Section 11.2 of this Agreement), Miners covenants and agrees to do the
following:
Section 6.1. Conduct of Business. Except as otherwise consented to by MP
Corp. and MP Bank in writing, Miners shall:
(a) use all reasonable efforts to carry on its business in, and only
in, the Ordinary Course of Business, consistent with past practices and
written policies;
(b) to the extent consistent with prudent business judgment, use all
reasonable efforts to preserve its present business organization, to retain
the services of its present officers and employees, to maintain good
relationships with its employees, and to maintain its relationships with
customers, suppliers and others having business dealings with Miners;
(c) maintain all of Miners's structures, equipment and other real
property and tangible personal property in good repair, order and
condition, except for ordinary wear and tear and damage by unavoidable
casualty;
(d) use all reasonable efforts to preserve or collect all material
claims and causes of action belonging to Miners;
(e) keep in full force and effect all insurance policies now carried
by Miners;
(f) perform in all material respects each of Miners's obligations
under all material agreements, contracts, instruments and other commitments
to which Miners is a party or by which Miners may be bound or which relate
to or affect its properties, assets and business;
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(g) maintain its books of account and other records in the Ordinary
Course of Business;
(h) comply in all material respects with all statutes, laws,
ordinances, rules and regulations, decrees, orders, consent agreements,
examination reports, memoranda of understanding and other federal, state,
county, local and municipal governmental directives applicable to Miners
and to the conduct of its business;
(i) not amend Miners's Articles of Incorporation or Bylaws;
(j) not enter into or assume any material contract, incur any material
liability or obligation, make any material commitment, acquire or dispose
of any property or asset or engage in any transaction or subject any of
Miners's properties or assets to any material lien, claim, charge, or
encumbrance of any kind whatsoever;
(k) not take or permit to be taken any action which would constitute a
breach of any representation, warranty or covenant set forth in this
Agreement;
(l) not declare, set aside or pay any dividend or make any other
distribution in respect of Miners Common Stock, except as provided in
Section 6.9 of this Article VI;
(m) not authorize, purchase, issue or sell (or authorize, issue or
grant options, warrants or rights to purchase or sell) any shares of Miners
Common Stock or any other equity or debt securities of Miners or any
securities convertible into Miners Common Stock;
(n) not increase the rate of compensation of, pay a bonus or severance
compensation to, or enter into any employment, severance, deferred
compensation or other agreement with any officer, director, employee or
consultant of Miners;
(o) not enter into any related party transaction of the kind
contemplated in Section 3.20 of Article III of this Agreement except such
related party transactions relating to extensions of credit made in
accordance with all applicable laws, regulations and rules and in the
Ordinary Course of Business on substantially the same terms, including
interest rates and collateral, as those prevailing at the time for
comparable arms' length transactions with other persons that do not involve
more than the normal risk of collectibility or present other unfavorable
features and after disclosure of such to MP Corp.;
(p) not change the presently outstanding number of shares or declare
or effect any capitalization, reclassification, stock dividend, stock split
or like change in capitalization;
(q) not enter into or substantially modify (except as may be required
by applicable law) any pension, retirement, stock option, stock warrant,
stock purchase, stock appreciation right, savings, profit sharing, deferred
compensation, severance, consulting, bonus, group insurance or other
employee benefit, incentive or welfare contract, or plan or
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arrangement, or any trust agreement related thereto, in respect to any of
its directors, officers, or other employees;
(r) not merge with or into, or consolidate with, or be purchased or
acquired by, any other corporation, financial institution, entity, or
person (or agree to any such merger, consolidation, affiliation, purchase
or acquisition) or permit (or agree to permit) any other corporation,
financial institution, entity or person to be merged with it or consolidate
or affiliate with any other corporation, financial institution, entity or
person; acquire control over any other firm, financial institution,
corporation or organization or create any subsidiary; acquire, liquidate,
sell or dispose (or agree to acquire, liquidate, sell or dispose) of any
assets, other than in the Ordinary Course of Business and consistent with
prior practice;
(s) not solicit or encourage inquiries or proposals with respect to,
furnish any information relating to, or participate in any negotiations or
discussions concerning any acquisition or purchase of all or a substantial
equity interest or portion of the assets in or of Miners or any business
combination with Miners, other than as contemplated by this Agreement, or
authorize or permit any officer, director, agent or affiliate of it to do
any of the above; or fail to notify MP Corp. immediately if any such
inquiries or proposals are received by, any such information is requested
from, or any such negotiations are sought to be initiated with Miners;
(t) not change any method, practice or principle of accounting except
as may be required by generally accepted accounting principles or any
applicable regulator or take any action that would preclude satisfaction of
the condition to closing contained in Section 8.1(c) relating to financial
accounting treatment of the Merger;
(u) DELETED.
(v) DELETED.
(w) DELETED.
(x) take any action which would result in any of the representations
and warranties of Miners set forth in this Agreement becoming untrue as of
any date after the date hereof;
(y) not sell, exchange or otherwise dispose of any investment
securities or loans that are held for sale, prior to scheduled maturity and
other than pursuant to policies agreed upon from time to time by the
parties;
(z) not purchase any security for its investment portfolio not rated
"A" or higher by either Standard & Poor's Corporation or Moody's Investor
Services, Inc.;
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(aa) not waive, release, grant or transfer any rights of value or
modify or change in any material respect any existing agreement to which
Miners is a party, other than in the ordinary course of business consistent
with past practice;
(bb) not knowingly take any action that would, under any statute,
regulation or administrative practice of any regulatory agency, materially
or adversely affect the ability of any party to this Agreement to obtain
any required approvals for consummation of the transaction; and
(cc) not agree to any of the foregoing items (i) through (bb).
Section 6.2. Best Efforts. Miners shall cooperate with MP Corp. and MP Bank
and shall use its best efforts to do or cause to be done all things necessary or
appropriate on its part in order to fulfill the conditions precedent set forth
in Article VIII of this Agreement and to consummate this Agreement. In
particular, without limiting the generality of the foregoing sentence, Miners
shall:
(a) cooperate with MP Corp. and MP Bank in the preparation of all
required applications for regulatory approval of the transactions
contemplated by this Agreement and in the preparation of the Registration
Statement (as defined in Section 7.1(b) of this Agreement);
(b) call a special or annual meeting of its shareholders and take, in
good faith, all actions which are necessary or appropriate on its part in
order to secure the approval and adoption of this Agreement and the Bank
Merger Agreement by its shareholders at that meeting, including
recommending the approval of such agreements by the shareholders of Miners;
(c) cooperate with MP Corp. and MP Bank in making Miners's employees
reasonably available for training by MP Corp. and MP Bank prior to the
Effective Date, to the extent that such training is deemed reasonably
necessary by MP Corp. and MP Bank to ensure that Miners's office will be
properly operated as a part of MP Bank after the Merger;
(d) make additions to loan loss reserves and make loan write-offs,
write-downs and other adjustments that reasonably should be made by Miners
in light of generally accepted accounting principles, directives of
governmental authorities, and all regulations, rules and directives of the
FDIC, Department of Banking, and Federal Reserve, prior to the closing of
Miners's books of account for its fiscal year ending December 31, 1997, and
for the period from that date until the Effective Date;
(e) suspend any dividend reinvestment and/or stock repurchase plan, as
soon as practicable;
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(f) modify the Articles of Incorporation or Bylaws or any other
documents of Miners reasonably requested by MP Corp. necessary to
effectuate the transactions contemplated hereby; and
(g) use its best efforts to assure that the directors of Miners shall
have executed and delivered the Support Agreement in the form attached
hereto as Exhibit "B".
Section 6.3. Access to Properties and Records. Miners shall give to MP
Corp., MP Bank and their authorized representatives (including, without
limitation, their counsel, accountants, economic and environmental consultants
and other designated representatives) reasonable access during normal business
hours to all properties, books, contracts, documents and records of Miners as MP
Corp. or MP Bank may reasonably request, subject to the obligation of MP Corp.,
MP Bank and their authorized representatives to maintain the confidentiality of
all non-public information concerning Miners obtained by reason of such access.
Section 6.4. Subsequent Financial Statements. Between the date of execution
of this Agreement and the Effective Date, Miners shall promptly prepare and
deliver to MP Corp. and MP Bank, as soon as practicable, all internal monthly
and quarterly financial statements, reports to shareholders and reports to
regulatory authorities prepared by or for Miners, including all audit reports
submitted to Miners by independent auditors in connection with each annual,
interim or special audit of the books of Miners made by such accountants. In
particular, without limiting the generality of the foregoing sentence, Miners
shall deliver to MP Corp. and MP Bank, as soon as practicable, a balance sheet
as of December 31, 1997, and a related statement of income for the twelve (12)
months then ended (which financial statements are hereinafter referred to as the
"December 31, 1997 Bank Financial Statements"). The representations and
warranties set forth in Sections 3.7, 3.8 and 3.9 of this Agreement shall apply
to the December 31, 1997 Bank Financial Statements.
Section 6.5. Board and Committee Minutes. Miners shall provide to MP Corp.,
within 10 days after any meeting of the Board of Directors, or any committee
thereof, or any senior or executive management committee, a copy of the minutes
of such meeting.
Section 6.6. Update Information. Miners shall promptly disclose to MP Corp.
and MP Bank, in writing, any change, addition, deletion or other modification to
the information previously disclosed.
Section 6.7. Notice. Miners shall promptly notify MP Corp. and MP Bank, in
writing, of any actions, claims, investigations, proceedings or other
developments which, if pending or in existence on the date of this Agreement,
would have been required to be disclosed to MP Corp. and MP Bank in order to
ensure the accuracy of the representations and warranties set forth in this
Agreement or which otherwise could materially and adversely affect the condition
(financial or otherwise), assets, liabilities, business operations or future
prospects of Miners.
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Section 6.8. Other Proposals. Miners shall not, nor shall it permit any
officer, director, employee, agent, consultant, counsel or other representative,
to directly or indirectly solicit, encourage, initiate or engage in discussions
or negotiations with, or respond to requests for information, inquiries or other
communications from, any person, other than MP Corp., concerning the fact of, or
the terms and conditions of, this Agreement, or concerning any acquisition of
Miners, or any assets or business thereof (except that Miners' officers may
respond to inquiries from analysts, regulatory authorities and holders of Miners
Common Stock in the Ordinary Course of Business); and Miners shall notify MP
Corp. immediately if any such discussions or negotiations are sought to be
initiated with Miners by any such person other than MP Corp. or if any such
requests for information, inquiries, proposals or communications are received
from any person other than MP Corp.
Section 6.9. Dividends. Between the date of this Agreement and the
Effective Date, Miners shall only declare and pay cash dividends as provided
herein. Miners shall only pay regular semi-annual cash dividends in amounts and
on dates consistent with past practices.
Section 6.10. Core Deposits. Miners shall use commercially reasonable
efforts to maintain deposits.
Section 6.11. Affiliate Letters. Miners shall deliver or cause to be
delivered to MP Corp. and MP Bank, at or before the Closing (as defined in
Section 11.1 of this Agreement), a letter or agreement from each officer,
director and shareholder of Miners who may be deemed to be an "affiliate" (as
that term is defined for purposes of Rules 145 and 405 promulgated by the SEC
under the 1933 Act) of Miners, in form and substance satisfactory to MP Corp.
and MP Bank, under the terms of which each such officer, director or shareholder
acknowledges and agrees to abide by all limitations imposed by the 1933 Act and
by all rules, regulations and releases promulgated thereunder with respect to
the sale or other disposition of the shares of MP Corp. Common Stock to be
received by such person pursuant to this Agreement.
Section 6.12. No Purchases or Sales of MP Corp. Common Stock During Price
Determination Period. Neither Miners nor any executive officer or director of
Miners nor any shareholder of Miners who may be deemed to be an "affiliate" (as
that term is defined for purposes of Rules 145 and 405 promulgated by the SEC
under the 1933 Act) of Miners shall purchase or sell or submit a bid to purchase
or an offer to sell directly or indirectly, any shares of MP Corp. Common Stock
or any options, rights or other securities convertible into shares of MP Corp.
Common Stock within 20 days of the Effective Date.
Section 6.13. Accounting Treatment. Miners acknowledges that MP Corp. and
MP Bank intend to treat the business combination contemplated by this Agreement
as a "pooling of interests" for financial reporting purposes. Miners shall not
take (and shall use its best efforts not to permit any of its directors,
officers, employees, shareholders, agents, consultants or other representatives
to take) any action which would preclude MP Corp. and MP Bank from treating such
business combination as a "pooling of interests" for financial reporting
purposes.
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Section 6.14. Press Releases. Miners shall not issue any press release
related to this Agreement and the Bank Merger Agreement or the transactions
contemplated hereby or thereby as to which MP Corp. has not given its prior
written consent, and shall consult with MP Corp. as to the form and substance of
other public disclosures related thereto.
Section 6.15. DELETED.
Section 6.16. Phase I Environmental Audit. Miners shall permit, if MP Corp.
elects to do, at its own expense, a "phase I environmental audit" to be
performed at any physical location owned or occupied by Miners on the date
hereof.
Section 6.17. DELETED.
ARTICLE VII
COVENANTS OF MP CORP. AND MP BANK
From the date of this Agreement until the Effective Date (as defined in
Section 11.2 of this Agreement), MP Corp. and MP Bank covenant and agree to do
the following:
Section 7.1. Best Efforts. MP Corp. and MP Bank shall cooperate with Miners
and shall use their best efforts to do or cause to be done all things necessary
or appropriate on their part in order to fulfill the conditions precedent set
forth in Article VIII of this Agreement and to consummate this Agreement. In
particular, without limiting the generality of the foregoing sentence, MP Corp.
and MP Bank agree to do the following:
(a) Applications for Regulatory Approval. MP Corp. and MP Bank shall
promptly prepare and file, with the cooperation and assistance of Miners,
all required applications for regulatory approval of the transactions
contemplated by this Agreement and the Bank Merger Agreement.
(b) Registration Statement. MP Corp. shall promptly prepare, with the
cooperation and assistance of Miners, and file with the SEC a registration
statement under the 1933 Act (the "Registration Statement") for the purpose
of registering the shares of MP Corp. Common Stock to be issued under the
provisions of this Agreement. MP Corp. may rely upon all information
provided to it by Miners in this connection, and MP Corp. shall not be
liable for any untrue statement of a material fact or any omission to state
a material fact in the Registration Statement or in the proxy statement and
prospectus (the "Proxy Statement/Prospectus") which is prepared as a part
thereof, if such statement is made by MP Corp. in reliance upon any
information provided to MP Corp. by Miners or by its agents and
representatives. MP Corp. will advise Miners, after it receives notice
thereof, of the time when the Registration Statement or any Pre- or
Post-Effective Amendment thereto has become effective or any supplement or
amendment, thereto has been filed.
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(c) State Securities Laws. MP Corp. and MP Bank, with the cooperation
of Miners, shall promptly take all such actions as may be necessary or
appropriate in order to comply with all applicable securities laws of any
state having jurisdiction over the transactions contemplated by this
Agreement.
Section 7.2. Access to Properties and Records. MP Corp. and MP Bank shall
give to Miners and to its authorized representatives (including without
limitation Miners's counsel, accountants, economic and environmental consultants
and other designated representatives) reasonable access during normal business
hours to all properties, books, contracts, documents and records of MP Corp. and
MP Bank as Miners may reasonably request, subject to the obligation of Miners
and its authorized representatives to maintain the confidentiality of all
non-public information concerning MP Corp. or MP Bank obtained by reason of such
access.
Section 7.3. Subsequent Financial Statements. Between the date of execution
of this Agreement and the Effective Date, MP Corp. shall promptly prepare and
deliver to Miners, as soon as practicable, each Quarterly Report to MP Corp.'s
shareholders and any Annual Report to MP Corp.'s shareholders normally prepared
by MP Corp. The representations and warranties set forth in Sections 4.5, 4.6
and 4.7 of this Agreement shall apply to the financial statements set forth in
the foregoing Quarterly Reports and any Annual Report to MP Corp.'s
shareholders.
Section 7.4. Update Information. MP Corp. and MP Bank shall promptly
disclose to Miners, in writing, any change, addition, deletion or other
modification to the information previously disclosed.
Section 7.5. Notice. MP Corp. and MP Bank shall promptly notify Miners, in
writing, of any actions, claims, investigations or other developments which, if
pending or in existence on the date of this Agreement, would have been required
to be disclosed to Miners in order to ensure the accuracy of the representations
and warranties set forth in this Agreement or which otherwise could materially
and adversely affect the condition (financial or otherwise), assets,
liabilities, business or operations of MP Corp. or MP Bank.
Section 7.6. No Purchase or Sales of MP Corp. Common Stock During Price
Determination Period. Neither MP Corp. nor any subsidiary of MP Corp., nor any
executive officer or director of MP Corp. or any subsidiary of MP Corp., nor any
shareholder of MP Corp. who may be deemed to be an "affiliate" (as that term is
defined for purposes of Rules 145 and 405 promulgated by the SEC under the 1933
Act) of MP Corp., shall purchase or sell on AMEX, or submit a bid to purchase or
an offer to sell on AMEX, directly or indirectly, any shares of MP Corp. Common
Stock or any options, rights or other securities convertible into shares of MP
Corp. Common Stock within 20 days of the Effective Date; provided, however, that
MP Corp. may purchase shares of MP Corp. Common Stock in the Ordinary Course of
Business during this period pursuant to MP Corp.'s employee benefit plans or MP
Corp.'s dividend reinvestment plan.
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ARTICLE VIII
CONDITIONS PRECEDENT
Section 8.1. Common Conditions. The obligations of the parties to
consummate this Agreement shall be subject to the satisfaction of each of the
following common conditions prior to or as of the Closing, except to the extent
that any such condition shall have been waived in accordance with the provisions
of Section 9.4 of this Agreement:
(a) Shareholder and Regulatory Approvals. The Parties hereto are not
under any obligation to consummate the Agreement until the approval of the
FRB (or waiver thereof), the Banking Department and any other approvals
that may be necessary or required by the federal or state regulators has
been received, and all conditions and waiting periods required by such
approvals, if any, have been satisfied or have expired, and until any other
approvals required under the Articles of Incorporation or Bylaws of Miners,
MP Corp. or MP Bank, or from the shareholders of Miners or MP Corp., as the
case may be, have been received. Provided, however, that no such approval
shall have imposed any condition or requirement which, in the opinion of
the Board of Directors of MP Corp., renders consummation of the
transactions contemplated herein inadvisable.
(c) Tax Matters. There shall have been received an opinion of counsel
from Shumaker Williams, P.C., reasonably satisfactory in form and substance
to MP Corp. and MP Bank and to Miners, to the effect that:
(i) The transactions contemplated by this Agreement and by the
Bank Merger Agreement will constitute a reorganization within the
meaning of Sections 368(a)(1)(A) and 368(a)(2)(D) of the Internal
Revenue Code of 1986, as amended;
(ii) No gain or loss will be recognized by MP Corp. or MP Bank or
by Miners as a result of the reorganization;
(iii) No gain or loss will be recognized by the shareholders of
Miners upon receipt of MP Corp. Common Stock in exchange for Miners
Common Stock pursuant to the provisions of this Agreement (except in
respect of cash which is received in lieu of the issuance of
fractional shares of MP Corp. Common Stock and any shareholder of
Miners who receives payment in cash as a dissenting shareholder);
(iv) The tax basis of the MP Corp. Common Stock to be received by
the shareholders of Miners pursuant to the provisions of this
Agreement will be the same as the tax basis of the Miners Common Stock
surrendered in exchange therefor;
(v) The holding periods of the MP Corp. Common Stock to be
received by the shareholders of Miners pursuant to the provisions of
this Agreement will include the holding periods of the Miners Common
Stock surrendered in exchange
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therefor, provided that such Miners Common Stock is held as a capital
asset on the Effective Date; and
(vi) MP Bank, as the surviving bank to the Bank Merger, will
carry-over and take into account all accounting items and tax
attributes of Miners, including, but not limited, to earnings and
profits, methods of accounting, and tax basis and holding periods of
the assets of Miners.
(d) Registration Statement. The Registration Statement (as defined in
Section 7.1(b) of this Agreement, including any amendments thereto) shall
have been declared effective by the SEC; the information contained therein
shall be true, complete and correct in all material respects as of the date
of mailing of the Proxy Statement/Prospectus (as defined in Section 7.1(b)
of this Agreement) to the shareholders of Miners; regulatory clearance for
the offering contemplated by the Registration Statement (the "Offering")
shall have been received from each federal and state regulatory authority
having jurisdiction over the Offering, and no stop order shall have been
issued or proceedings instituted or threatened by any federal or state
regulatory authority to suspend or terminate the effectiveness of the
Registration Statement or the Offering.
(e) No Suits. No action, suit or proceeding shall be pending or
threatened before any federal, state or local court or governmental
authority or before any arbitration tribunal which seeks to modify, enjoin
or prohibit or otherwise adversely and materially affect the transactions
contemplated by this Agreement.
(f) Statutes; Orders. No statute, rule, regulation, order, injunction
or decree shall have been enacted, entered, promulgated or enforced by any
governmental authority which prohibits, restricts or makes illegal the
consummation of the transactions contemplated by this Agreement.
(g) Antitrust Laws. All applicable notifications, statutory and
regulatory Antitrust Law requirements have been met.
(h) Other Requirements. All other requirements prescribed by law, and
the Articles of Incorporation, Bylaws and Contracts of the parties hereto
which are necessary to the consummation of the transactions contemplated by
this Agreement shall have been satisfied.
Section 8.2. Conditions Precedent to Obligations of MP Corp. and MP Bank.
The obligations of MP Corp. and MP Bank to consummate this Agreement shall be
subject to the satisfaction of each of the following conditions prior to or as
of the Closing, except to the extent that any such condition shall have been
waived by MP Corp. and MP Bank in accordance with the provisions of Section 9.4
of this Agreement:
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(a) Accuracy of Representations and Warranties. All of the
representations and warranties of Miners, as set forth in this Agreement
and the information contained in all Bank Closing Documents (as defined in
Section 8.2(j) of this Agreement), shall be true and correct in all
material respects as of the Closing as if made on such date (or on the date
to which it relates in the case of any representation or warranty which
expressly relates to an earlier date).
(b) Covenants Performed. Miners shall have performed or complied in
all material respects with each of the covenants required by this Agreement
to be performed or complied with by it.
(c) DELETED.
(d) Financial Confirmation. Within sixty (60) days of the execution of
this Agreement, MP Corp. and MP Bank (and their accountants if the advice
of such accountants is deemed necessary or desirable by MP Corp. and MP
Bank) shall have established to their satisfaction that the Bank Balance
Sheet fairly presents the financial condition, assets and liabilities of
Miners as at September 30, 1997, and that, since September 30, 1997, there
has not been any material and adverse change in the condition (financial or
otherwise), assets, liabilities, business, operations or future prospects
of Miners.
(e) DELETED.
(f) Accounting Treatment. MP Corp., MP Bank and their accountants
shall have established to their satisfaction that, as of the Closing, the
transactions contemplated by this Agreement can be accounted for as a
"pooling of interests" for financial reporting purposes.
(g) Federal and State Securities and Antitrust Laws. MP Corp., MP Bank
and their counsel shall have determined to their satisfaction that, as of
the Closing, all applicable securities and antitrust laws of the federal
government and of any state government having jurisdiction over the
transactions contemplated by this Agreement shall have been complied with.
(h) DELETED.
(i) Environmental Matters. No environmental problem of the kind
contemplated in Section 3.25 of Article III of this Agreement, and not
previously disclosed shall have been discovered which would, or which
potentially could, materially and adversely affect the condition (financial
or otherwise), assets, liabilities, business, operations or future
prospects of Miners. The result of any "Phase I environmental audit"
conducted pursuant to Section 6.16 with respect to owned or occupied bank
premises shall be reasonably satisfactory to MP Corp.
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(j) Closing Documents. Miners shall have delivered to MP Corp. and MP
Bank: (i) a certificate signed by Miners' Chairman of the Board or
President and by its Secretary, or such other designated and authorized
officers, verifying that, to the best of their knowledge after reasonable
investigation, all of the representations and warranties of Miners set
forth in this Agreement are true and correct in all material respects as of
the Closing and that Miners has performed in all material respects each of
the covenants required to be performed by it under this Agreement; (ii) all
consents and authorizations of landlords and other persons that are
necessary to permit this Agreement to be consummated without violation of
any lease or other agreement to which Miners is a party or by which Miners
or any of its properties are bound; and (iii) such other certificates and
documents as MP Corp., MP Bank and their counsel may reasonably request
(all of the foregoing certificates and other documents being herein
referred to as the "Bank Closing Documents").
(k) DELETED.
(l) DELETED.
(m) Support Agreement. Each of the Directors of Miners shall have
executed and delivered to MP Corp. a "Support Agreement" in the form
attached hereto as Exhibit "B".
(n) Shareholder Approval. MP Corp. shareholders, if required, have
approved and/or adopted this Agreement and the transactions contemplated
thereby.
Section 8.3. Conditions Precedent to the Obligations of Miners. The
obligation of Miners to consummate this Agreement shall be subject to the
satisfaction of each of the following conditions prior to or as of the Closing,
except to the extent that any such condition shall have been waived by Miners in
accordance with the provisions of Section 9.4 of this Agreement:
(a) Accuracy of Representations and Warranties. All of the
representations and warranties of MP Corp. and MP Bank, as set forth in
this Agreement and the information contained in Schedule II and all MP
Corp./MP Bank Closing Documents (as defined in Section 8.3(e) of this
Agreement), shall be true and correct in all material respects as of the
Closing as if made on such date (or on the date to which it relates in the
case of any representation or warranty which expressly relates to an
earlier date).
(b) Covenants Performed. MP Corp. and MP Bank shall have performed or
complied in all material respects with each of the covenants required by
this Agreement to be performed or complied with by them.
(c) DELETED.
(d) DELETED.
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(e) Closing Documents. MP Corp. shall have delivered to Miners: (i) a
certificate signed by its Chairman of the Board or President and its
Secretary verifying that, to the best of their knowledge after reasonable
investigation, all of the representations and warranties of MP Corp. and MP
Bank set forth in this Agreement are true and correct in all material
respects as of the Closing and that MP Corp. and MP Bank have performed in
all material respects each of the covenants required to be performed by
them; and (ii) such other certificates and documents as Miners and its
counsel may reasonably request (all of the foregoing certificates and
documents being herein referred to as the "MP Corp./MP Bank Closing
Documents").
ARTICLE IX
TERMINATION, AMENDMENT AND WAIVER
Section 9.1. Termination. This Agreement may be terminated at any time
before the Effective Date (whether before or after the authorization, approval
and adoption of this Agreement by the shareholders) as follows:
(a) Mutual Consent. This Agreement may be terminated by mutual consent
of the parties upon the affirmative vote of a majority of each of the
Boards of Directors of Miners, MP Corp. and MP Bank, followed by written
notices given to each of the other parties.
(b) Unilateral Action by MP Corp. and MP Bank. This Agreement may be
terminated unilaterally by the affirmative vote of each of the Boards of
Directors of MP Corp. and MP Bank, followed by written notice given to
Miners, if: (i) there has been a material breach by Miners of any
representation, warranty or covenant set forth in this Agreement and such
breach has not been cured within thirty (30) days after written notice of
such breach has been given by MP Corp. and MP Bank to Miners; or (ii) any
condition precedent to MP Corp.'s and MP Bank's obligations, as set forth
in Article VIII of this Agreement, remains unsatisfied, through no fault of
MP Corp. or MP Bank, on December 31, 1998.
(c) Unilateral Action By Miners. This Agreement may be terminated
unilaterally by the affirmative vote of a majority of the Board of
Directors of Miners, followed by written notice given to MP Corp. and MP
Bank, if: (i) there has been a material breach by MP Corp. or MP Bank of
any representation, warranty or covenant set forth in this Agreement and
such breach has not been cured within thirty (30) days after written notice
of such breach has been given to MP Corp. and MP Bank; or (ii) any
condition precedent to Miners's obligations as set forth in Article VIII of
this Agreement remains unsatisfied, through no fault of Miners, on December
31, 1998.
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(d) Automatic Termination. If, for any reason, this transaction shall
not have been consummated by December 31, 1998, this Agreement shall
terminate automatically as of that date unless extended, in writing, prior
to said date by mutual action of the Boards of Directors of the parties
hereto.
(e) Due Diligence Termination. MP Corp. and MP Bank may terminate this
Agreement by giving written notice to Miners, if any matter or thing has
come to the attention of MP Corp. in the course of its due diligence
investigation or otherwise with respect to Miners that, in its sole
opinion, leads it to believe that any such matter or thing materially and
adversely affects the financial or business performance or prospects of
Miners so that it would be inadvisable for MP Corp., in its sole and
exclusive judgment, exercised in a commercial and reasonable manner, to
proceed with this transaction.
Section 9.2. Effect of Termination.
(a) Effect. In the event of termination, this Agreement shall become
null and void and the transactions contemplated herein shall thereupon be
abandoned, except that the provisions relating to limited liability and
confidentiality set forth in Sections 9.2(b) and 9.2(c) of this Agreement
shall survive.
(b) Limited Liability. The termination of this Agreement in accordance
with the terms of Section 9.1 shall create no liability on the part of any
party, or on the part of any party's directors, officers, shareholders,
agents or representatives, except that if this Agreement is terminated by
MP Corp. and MP Bank by reason of a material breach by Miners, or if this
Agreement is terminated by Miners by reason of a material breach by MP
Corp. or MP Bank, and such breach involves an intentional, willful or
grossly negligent misrepresentation or breach of covenant, the breaching
party shall be liable to the non- breaching party or parties for all costs
and expenses reasonably incurred by the non- breaching party or parties in
connection with the preparation, execution and consummation of this
Agreement, including the fees of its or their counsel, accountants,
consultants and other representatives.
(c) Confidentiality. In the event of the termination of this
Agreement, neither MP Corp. nor MP Bank nor Miners shall use or disclose to
any other person any confidential information obtained by it during the
course of its investigation of the other party or parties.
Section 9.3. Amendment. To the extent permitted by law, this Agreement may
be amended at any time before the Effective Date (whether before or after the
authorization, approval and adoption of this Agreement by the shareholders of
Miners) by a written instrument duly authorized, executed and delivered by MP
Corp. and MP Bank and by Miners; provided, however, that any amendment to the
provisions of Article II of this Agreement relating to the consideration to be
received by the former shareholders of Miners in exchange for their shares of
Miners Common Stock shall not take effect until such amendment has been
approved, adopted or ratified by the shareholders of Miners in accordance with
applicable federal and state law.
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Section 9.4. Waiver. Any term or condition of this Agreement may be waived,
to the extent permitted by law, by the party or parties entitled to the benefit
thereof at any time before the Effective Date (whether before or after the
authorization, approval and adoption of this Agreement by the shareholders of
Miners) by a written instrument duly authorized, executed and delivered by such
party or parties.
ARTICLE X
RIGHTS OF DISSENTING SHAREHOLDERS OF MINERS
Section 10.1. Rights of Dissenting Shareholders of Miners. The shareholders
of Miners shall be entitled to and may exercise dissenters' rights if and to the
extent they are entitled to do so under the provisions of the Banking Code or
applicable law.
ARTICLE XI
CLOSING AND EFFECTIVE DATE
Section 11.1. Closing. Provided that all conditions precedent set forth in
Article VIII of this Agreement shall have been satisfied or shall have been
waived in accordance with Section 9.4 of this Agreement, the parties shall hold
a closing (the "Closing") at the offices of MP Corp. at 349 Union Street, P. O.
Box 111 Millersburg, Pennsylvania, or such other mutually agreed upon location,
within sixty (60) days after the receipt of all required regulatory approvals
and after the expiration of all applicable waiting periods, at which time the
parties shall deliver the Miners Closing Documents, the MP Corp./MP Bank Closing
Documents, and such other documents and instruments as may be necessary or
appropriate to effectuate the purposes of this Agreement.
Section 11.2. Effective Date. The Merger of Miners with and into MP Bank
shall become effective and this Agreement and the Bank Merger Agreement shall be
consummated on the date upon which Articles of Merger shall be filed with the
Pennsylvania Department of State, or such later date as shall be specified as
the Effective Date in the Articles of Merger pursuant to the mutual agreement of
MP Corp., MP Bank and Miners and in accordance with the Pennsylvania Banking
Code ("Effective Date"). At the Effective Date, Miners shall cease to exist as a
separate banking institution, and MP Bank shall become the surviving institution
of the Merger.
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ARTICLE XII
NO SURVIVAL OF REPRESENTATIONS AND WARRANTIES
Section 12.1. No Survival. The representations and warranties of Miners and
of MP Corp. and MP Bank set forth in this Agreement shall expire and be
terminated on the Effective Date by consummation of this Agreement, and no such
representation or warranty shall thereafter survive.
ARTICLE XIII
POST-MERGER AGREEMENTS
Section 13.1. Employees.
(a) Immediately after the Effective Date, MP Bank shall employ all of
the former Miners employees who are employed by Miners immediately prior to
the Effective Date. The aggregate cost of the compensation and benefit
package of such employees shall not be less after the Effective Date than
immediately prior to the Effective Date and will not be reduced during
their employment.
(b) Immediately following the Effective Date, former Miners employees
who are employed by MP Bank shall be entitled to participate in all
benefit, health, incentive, retirement, life insurance, disability, eye and
dental, performance award, vacation, leave and personal days plans,
policies and programs in effect at such time for employees of MP Bank,
subject, however, to the terms of such plans. Former Miners employees who
are employed by MP Bank shall receive service credit from their respective
hire dates for employment at Miners for purposes of eligibility and vesting
requirements under MP Bank's benefit plans and vacation plans.
(c) Immediately after the Effective Date, Allen Trawitz shall be
employed by MP Bank as Executive Vice President, with the aggregate cost of
his compensation and benefits package to be no less than the cost of his
total compensation and benefits package in effect immediately prior to the
date of this Agreement.
(d) Immediately after the Effective Date, Greg Kerwin shall be
employed by MP Bank as Vice President and Chairman of the Salary and Human
Resource Committee of MP Bank, with the aggregate cost of his compensation
and benefits package to be no less than the cost of his total compensation
and benefits package in effect immediately prior to the date of this
Agreement.
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Section 13.2. Miners Office Board.
(a) Composition; Term; Duties. Immediately following the Effective
Date and until fewer than three (3) of the original members remain, there
shall be established an advisory board (the "Miners Office Board")
comprised of the following members of the Board of Directors of Miners as
of the date of this Agreement and for the position on the Board as
indicated, if any: Allen Trawitz, Franklin Ruth (Chairman and President),
Greg Kerwin, Raymond Donley (Vice Chairman and Secretary), Don Sauve,
Richard Klinger, Harold Jury, and Terrence Kerwin. Except as provided
herein, the Board of Directors of MP Bank shall determine from time to
time, the duties, obligations and responsibilities of the Miners Office
Board. Members of the Miners Office Board who are age 66 or older shall be
grandfathered for a five (5) year period commencing on the Effective Date
from the MP Bank mandatory retirement policy at age 70.
(b) Fees of Miners Office Board Members. Following the Effective Date,
members of the Miners Office Board shall receive fees for services no less
than those currently received as a Miners Board member for service as a
Miners Office Board member and as a member of the MP Bank Board, as may be
the case. Miners Office Board members who also serve on the MP Bank Board
of Directors shall receive the full fees paid to MP Bank Board members. In
no case, however, shall the fees paid to any Miners Office Board member who
serves on both Boards, for his service as a member of the Miners Office
Board, exceed $1,800. Miners Office Board salaried members shall have
salaries and bonuses continued for a five (5) year period following the
Effective Date.
(c) Benefits. Members of the Miners Office Board shall continue to
receive the benefits received by them in their capacity as Miners'
Directors immediately before the Effective Date for service on the Miners
Office Board, and such benefits, subject to the terms and conditions of MP
Bank's Plans, shall be continued for a period of five (5) years following
the Effective Date, as follows:
1. For five years following the Effective Date, members of the
Miners Office Board who, prior to the Effective Date, were enrolled in
the Blue Cross/Blue Shield Plan of Miners shall be entitled to have
100% of the premiums paid by MP Bank for participation in MP Bank's
current Blue Cross/Blue Shield health insurance plan, subject to the
terms and conditions of the plans.
2. For five years following the Effective Date, medical insurance
for widows and retired employees, covered by Miners as of the date of
this Agreement, will, subject to the terms and conditions of those
plans, be provided by MP Bank, at MP Bank's expense.
3. For five years following the Effective Date, MP Bank shall use
its best efforts to obtain eye and dental insurance coverage for the
members of the Miners Office Board, who prior to the Effective Date
were covered under the Miners eye and
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dental plan, under the MP Bank Blue Cross/Blue Shield Plan. If such
plan is not available, MP Bank will include the members of the Miners
Office Board in its eye and dental plan, subject to the terms and
conditions of the Plans.
4. For five years following the Effective Date, MP Bank shall pay
100% of the premiums for the current group life insurance policies for
the members of the Miners Office Board, subject to the availability of
such continued participation.
If such participation or Plan is not available, MP Bank will use its
best efforts to obtain coverage in another group health, life, eye and
dental, insurance plan, the benefits and terms of which are comparable,
for the remainder of the five-year period.
Section 13.3. Board Appointments.
Immediately after the Effective Date, the following persons shall be
appointed to serve as members of the Board of Directors of MP Bank until the
1999 Annual Meeting of Shareholders, and until their successors are elected and
qualified: Greg Kerwin and Don Sauve. Mr. Kerwin shall also serve as a member of
the Trust Committee of MP Bank. Mr. Sauve shall serve as a member of the
Executive Committee of MP Bank.
Section 13.4. Merger of Profit Sharing Plans.
Miners Profit Sharing Retirement Plan shall be merged into MP Bank's Profit
Sharing Retirement Plan as soon as practicable.
ARTICLE XIV
GENERAL PROVISIONS
Section 14.1. Expenses. Except as provided in Section 9.2(b) of this
Agreement, each party shall pay its own expenses incurred in connection with
this Agreement and the consummation of the transactions contemplated herein. For
purposes of this Section 14.1, the cost of printing the Proxy
Statement/Prospectus shall be deemed to be an expense of MP Corp. and MP Bank.
Section 14.2. Other Mergers and Acquisitions. Subject to the right of
Miners to not consummate this Agreement pursuant to Section 9.1(c) of this
Agreement, nothing set forth in this Agreement or any Exhibit hereto shall be
construed:
(a) to preclude MP Corp. from acquiring, or to limit in any way the
right of MP Corp. to acquire, prior to or following the Effective Date, the
stock or assets of any other financial services institution or other
corporation or entity, whether by issuance or exchange of MP Corp. Common
Stock or otherwise;
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(b) to preclude MP Corp. from issuing, or to limit in any way the
right of MP Corp. to issue, prior to or following the Effective Date, MP
Corp. Common Stock or other securities;
(c) to preclude MP Corp. from granting options at any time with
respect to MP Corp. Common Stock or other securities;
(d) to preclude option holders of MP Corp. from exercising options at
any time with respect to MP Corp. Common Stock or other securities; or
(e) to preclude MP Corp. from taking, or to limit in any way the right
of MP Corp. to take, any other action not expressly and specifically
prohibited by the terms of this Agreement.
Section 14.3. Access; Confidentiality. The parties hereby agree to conduct
the investigations and discussions contemplated by Section 6.3 and Section 7.2
of this Agreement in a manner so as to not interfere unreasonably with normal
operations and customer and employee relationships. If the transactions
contemplated by this Agreement are not consummated, the parties hereby agree to
destroy or return all documents and records obtained from the other or their
respective representatives, during the course of any investigation and will
cause all information with respect to the other party obtained pursuant to this
Agreement or preliminarily thereto to be kept confidential, except to the extent
such information becomes public through no fault of the party which has obtained
such information or any of its respective representatives or agents and except
to the extent disclosure of any such information is legally required. Each party
hereby agrees to give the other party prompt notice of any contemplated
disclosure where such disclosure is so legally required.
Section 14.4. Notices. All notices, claims, requests, demands and other
communications which are required or permitted to be given under this Agreement
shall be in writing and shall be deemed to have been duly delivered if delivered
in person, transmitted by facsimile machine (but only if receipt is acknowledged
in writing), mailed by registered or certified mail, return receipt requested or
sent by recognized overnight delivery service guaranteeing next day delivery
addressed as follows:
(a) If to Mid Penn Bancorp, Inc. and/or Mid Penn Bank, to:
Mr. Eugene F. Shaffer
Chairman, President & Chief Executive Officer
MID PENN BANCORP, INC.
349 Union Street, P. O. Box 111
Millersburg, Pennsylvania 17061
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(b) If to Miners Bank of Lykens to:
Mr. Franklin W. Ruth
President and Chief Executive Officer
MINERS BANK OF LYKENS
550 Main Street, P. O. Box 38
Lykens, Pennsylvania 17048
Section 14.5. Captions. The captions contained in this Agreement are for
reference purposes only and are not part of this Agreement.
Section 14.6. Counterparts. This Agreement may be executed simultaneously
in several counterparts, each of which shall be deemed an original, but all such
counterparts together shall be deemed to be one and the same instrument.
Section 14.7. Severability. If any provision of this Agreement or the
application thereof to any party or circumstance shall be invalid or
unenforceable to any extent, the remainder of this Agreement and the application
of such provisions to other parties or circumstances shall not be affected
thereby and shall be enforced to the greatest extent permitted by law.
Section 14.8. Parties in Interest. This Agreement shall be binding upon and
inure to the benefit of the parties hereto and their respective successors and
assigns; provided, however, that the rights and obligations of any party under
this Agreement may not be assigned or delegated by that party without the prior
written consent of each other party.
Section 14.9. Entire Agreement. This Agreement, including the documents and
other writings referred to herein or delivered pursuant hereto, sets forth the
entire understanding and agreement of the parties hereto and supersedes any and
all prior agreements, arrangements and understandings, oral or written, relating
to the subject matter hereof.
Section 14.10. Governing Law. This Agreement shall be governed by and
construed in accordance with the domestic internal laws of the Commonwealth of
Pennsylvania, without regard to the conflict laws principles thereof.
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IN WITNESS WHEREOF, intending to be legally bound hereby, this Agreement is
executed as of the day and year first above written.
ATTEST: MID PENN BANCORP, INC.
By: By:/s/ Eugene F. Shaffer
-------------------------- -----------------------------------
Eugene F. Shaffer, Chairman
President, and Chief Executive Officer
[CORPORATE SEAL]
ATTEST: MID PENN BANK
By: By:/s/ Alan W. Dakey
-------------------------- -------------------------------------
Alan W. Dakey, President and
Chief Executive Officer
[BANK SEAL]
ATTEST: MINERS BANK OF LYKENS
By: By:/s/ Franklin W. Ruth, Jr.
--------------------------- ------------------------------------
Franklin W. Ruth, Jr., President and
Chief Executive Officer
[BANK SEAL]
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Exhibit A
AGREEMENT AND PLAN OF MERGER
of
MINERS BANK OF LYKENS
with and into
MID PENN BANK
THIS AGREEMENT AND PLAN OF MERGER ("Bank Merger Agreement") is dated as of
January 9, 1998, by and between MID PENN BANK, a Pennsylvania state-chartered
bank , having its principal office at 349 Union Street, P. O. Box 111,
Millersburg, Pennsylvania 17061- 0111, and MINERS BANK OF LYKENS, a Pennsylvania
state-chartered bank, having its principal office at 550 Main Street, P. O. Box
38, Lykens, Pennsylvania 17048-0038 (the two parties being sometimes
collectively referred to as the "Constituent Banks") each acting pursuant to
resolutions approved and adopted by the vote of a majority of its directors.
WITNESSETH:
WHEREAS, Miners Bank of Lykens and Mid Penn Bank are parties to an
Agreement and Plan of Reorganization of even date herewith (the "Reorganization
Agreement") which provides, among other things, for the execution of the Bank
Merger Agreement and the merger of Miners Bank of Lykens with and into Mid Penn
Bank (the "Merger") in accordance with the terms and conditions set forth
therein and herein; and
WHEREAS, the respective Boards of Directors of Miners Bank of Lykens and
Mid Penn Bank deem the Merger of Miners Bank of Lykens with and into Mid Penn
Bank in accordance with the Reorganization Agreement and pursuant to the terms
and conditions herein set forth or referred to, desirable and in the best
interests of the Constituent Banks and their respective shareholders; and
WHEREAS, the respective Boards of Directors of Miners Bank of Lykens and
Mid Penn Bank have adopted resolutions approving and adopting this Bank Merger
Agreement, and the respective Boards of Directors of Mid Penn Bank, Mid Penn
Bancorp, Inc., and Miners Bank of Lykens have adopted resolutions approving and
adopting the Reorganization Agreement, and the Boards of Directors of Miners
Bank of Lykens and Mid Penn Bank have directed that this Bank Merger Agreement
be submitted to their respective shareholders;
WHEREAS, the approval of this Bank Merger Agreement and the Reorganization
Agreement requires the approval of the shareholders of the Constituent Banks, as
required by applicable laws and by each party's Articles of Incorporation and
Bylaws;
WHEREAS, one hundred percent (100%) of the outstanding shares of Mid Penn
Bank are held by its sole shareholder, Mid Penn Bancorp, Inc.;
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EXECUTION COPY
01/09/98
Exhibit A
NOW, THEREFORE, in consideration of their mutual covenants and agreements
contained herein and in the Reorganization Agreement, and for the purpose of
stating the method, terms and conditions of the Merger, and such other details
and provisions as are deemed desirable, the parties hereto, intending to be
legally bound hereby, agree as follows:
1. The Merger. Subject to the terms and conditions of this Bank Merger
Agreement and the Reorganization Agreement, and in accordance with the laws of
the Commonwealth of Pennsylvania, on the Effective Date (as defined in Section
11.2 of the Reorganization Agreement, and referred to herein as the "Effective
Date"), Miners Bank of Lykens shall be merged with and into Mid Penn Bank under
the Pennsylvania Banking Code of 1965, as amended (the "Banking Code"), and Mid
Penn Bank shall be the surviving institution. On the Effective Date, the
separate existence of Miners Bank of Lykens shall cease, and Mid Penn Bank shall
be the surviving institution (the "Surviving Institution"), the principal and
branch offices of Miners Bank of Lykens shall become authorized branch offices
of Mid Penn Bank; and all the property (real, personal and mixed), rights,
powers, duties, and obligations of Miners Bank of Lykens and Mid Penn Bank shall
be taken and deemed to be transferred to and vested in the Surviving
Institution, Mid Penn Bank, without further act or deed, as provided by
applicable laws and regulations.
2. Name. The name of the Surviving Institution shall be Mid Penn Bank, and
the location of its principal office shall be 349 Union Street, P. O. Box 111,
Millersburg, Pennsylvania 17061-0111. 3. Articles of Incorporation. The Articles
of Incorporation of Mid Penn Bank as in effect immediately prior to the
Effective Date, at the Effective Date, shall be the Articles of Incorporation of
the Surviving Institution, until amended in accordance with applicable law.
4. Bylaws. The Bylaws of Mid Penn Bank as in effect immediately prior to
the Effective Date, at the Effective Date, shall be the Bylaws of the Surviving
Institution, until amended in accordance with applicable law.
5. Conversion of Shares. The manner and basis of converting shares of
common stock of the Constituent Banks shall be as follows:
5.1 Conversion of Miners Bank of Lykens Common Stock. On the Effective
Date, the shares of Miners Bank of Lykens Common Stock then outstanding and
eligible for conversion under Article II of the Reorganization Agreement
shall be converted into shares of Mid Penn Bancorp, Inc. Common Stock in
accordance with the terms of and as provided in Section 2.1(a) of the
Reorganization Agreement.
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EXECUTION COPY
01/09/98
Exhibit A
5.2 Stock of Mid Penn Bank. The shares of Mid Penn Bank Common Stock
issued and outstanding immediately prior to the Effective Date shall
continue to be issued and outstanding shares of Common Stock of the
Surviving Institution. From and after the Effective Date, each certificate
that, prior to the Effective Date, represented shares of Mid Penn Bank
Common Stock, shall evidence ownership of shares of such Common Stock of
the Surviving Institution.
6. Surrender and Exchange of Miners Bank of Lykens Certificates. On the
Effective Date, the shares of Miners Bank of Lykens Common Stock certificates
shall be exchanged for Mid Penn Bancorp, Inc. Common Stock certificates in
accordance with and as provided in Section 2.2 of the Reorganization Agreement.
7. Effect of Merger. On the Effective Date, the Surviving Institution shall
succeed, without further act or deed, to all of the property, rights, powers,
duties and obligations of the Constituent Banks in accordance with the Banking
Code. Any claim existing or action pending by or against either of the
Constituent Banks may be prosecuted to judgment as if the Bank Merger had not
taken place, and the Surviving Institution may be substituted in its place.
8. Continuation of Business. The Surviving Institution shall continue in
business with the assets and liabilities of each of the Constituent Banks. The
Surviving Institution shall be a bank organized and having perpetual existence
under the laws of the Commonwealth of Pennsylvania. Any branch offices of the
Surviving Institution shall consist of Mid Penn Bank's and Miners Bank of
Lykens' present branch offices and any other branch office or offices that Mid
Penn Bank and Miners Bank of Lykens may be authorized to have as of the
Effective Date.
9. Board of Directors and Officers. The Directors and Officers of Mid Penn
Bank as in effect immediately prior to the Effective Date shall be the Directors
and Officers of the Surviving Institution, until such time as their successors
have been elected, qualified, or appointed in the case of directors, and
appointed in the case of officers. In addition, the following persons shall also
be directors of the Surviving Institution: Greg Kerwin and Don Sauve.
10. Dissenters' Rights of Miners Bank of Lykens Shareholders. The rights
and remedies of a dissenting shareholder under the Banking Code and Subchapter D
of Chapter 15 of the Pennsylvania Business Corporation Law of 1988, as amended
(15 Pa. C.S. ss.1571, et seq.), shall be afforded to any holder of Miners Bank
of Lykens Common Stock who objects to this Bank Merger Agreement and who takes
the necessary steps to perfect the rights of a dissenting shareholder, to the
extent required under such laws.
11. Effective Date of the Bank Merger. The Effective Date of the Bank
Merger shall be as defined and provided for in Section 11.2 of the
Reorganization Agreement.
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EXECUTION COPY
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Exhibit A
12. Further Assurances. If at any time the Surviving Institution shall
consider or be advised that any further assignments, conveyances or assurances
are necessary or desirable to vest, perfect or confirm in the Surviving
Institution title to any property or rights of Miners Bank of Lykens, or
otherwise carry out the provisions hereof, the proper officers and directors of
Miners Bank of Lykens, as of the Effective Date, on behalf of Miners Bank of
Lykens shall execute and deliver any and all proper assignments, conveyances and
assurances, and do all things necessary or desirable to vest, perfect or confirm
title to such property or rights in the Surviving Institution and otherwise
carry out the provisions hereof.
13. Shareholder Approval. This Bank Merger Agreement shall be approved and
adopted by the affirmative vote of the shareholders of each Constituent Bank as
required by applicable law and by the Constituent Banks' Articles of
Incorporation and Bylaws.
14. Termination and Amendment. Notwithstanding prior approval by the
respective shareholders of Miners Bank of Lykens and Mid Penn Bank, this Bank
Merger Agreement shall be terminated and the Merger shall be abandoned in the
event that, prior to the Effective Date, the Reorganization Agreement is
terminated, as provided therein. If there is such termination after the delivery
of Articles of Merger to the Pennsylvania Department of State, the parties shall
execute and file with the Pennsylvania Department of State, prior to the
Effective Date, a statement of termination, pursuant to Section 1902 of the
Pennsylvania Business Corporation Law of 1988, as amended. Notwithstanding prior
approval by the shareholders of Miners Bank of Lykens and Mid Penn Bank, this
Agreement may be amended in any respect in the manner and subject only to the
limitations set forth in Section 9.3 of the Reorganization Agreement.
15. Counterparts; Headings. This Bank Merger Agreement may be executed in
several counterparts, and by the parties hereto on separate counterparts, each
of which will constitute an original. The headings and captions contained herein
are for reference purposes only and do not constitute a part hereof.
16. Governing Law. This Agreement shall be governed by and construed in
accordance with the laws of the Commonwealth of Pennsylvania.
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EXECUTION COPY
01/09/98
Exhibit A
IN WITNESS WHEREOF, the parties hereto, intending to be legally bound
hereby, by their officers thereunto duly authorized, have executed this Bank
Merger Agreement as of the day and year first above written.
ATTEST: MINERS BANK OF LYKENS
By: _______________________________ By: /s/ Franklin W. Ruth, Jr.
------------------------------------
Franklin W. Ruth, Jr., President and
Chief Executive Officer
[BANK SEAL]
ATTEST: MID PENN BANK
By: ________________________________ By: /s/ Alan W. Dakey
------------------------------------
Alan W. Dakey, President and
Chief Executive Officer
[BANK SEAL]
EXECUTION COPY
01/09/98
MID PENN BANCORP., INC.
January __, 1998
Page 1
January __, 1998
MID PENN BANCORP., INC.
Gentlemen:
The undersigned understands that MID PENN BANCORP, INC. and its wholly
owned subsidiary, MID PENN BANK (collectively, "MP Corp."), is about to enter
into an Agreement and Plan of Reorganization (the "Plan of Reorganization") with
MINERS BANK OF LYKENS (LYKENS, PA.) ("Miners"), pursuant to which each of the
outstanding shares of Miners Common Stock (as defined in the Plan of
Reorganization) would be converted into the right to receive shares of MP Corp.
Common Stock, as defined and specified in the Plan of Reorganization.
In order to induce MP Corp. to enter into the proposed transaction, and
intending to be legally bound hereby, the undersigned (the "Shareholder")
represents and warrants and agrees that at a meeting of shareholders of Miners
as contemplated in the Plan of Reorganization, and any adjournment or
postponement thereof, the Shareholder shall vote, in person or by proxy, or
cause to be voted, his or her shares of Miners Common Stock as to which the
shareholder has or shares voting power, individually or, to the extent of the
Shareholder's proportionate interest, jointly with other persons, as set forth
herein and described on Schedule A, attached hereto, and incorporated herein by
reference in its entirety, as well as other shares of Miners Common Stock over
which the Shareholder may hereafter acquire beneficial ownership in such
capacities (collectively the "Shares") in favor of the Plan of Reorganization
and the transactions contemplated thereby, and shall use his or her best efforts
to cause the transactions to be effected. The Shareholder further agrees that he
or she will use his or her best efforts to cause any other shares of Miners
Common Stock over which he or she has or shares voting power to be voted in
favor of the Plan of Reorganization and the proposed transaction, unless such
shares are beneficially owned by the Shareholder as a trustee or fiduciary.
The Shareholder further represents, warrants and agrees that until the
earlier of (i) consummation of the Plan of Reorganization or (ii) the
termination of the Plan of Reorganization in accordance with the terms thereof,
the Shareholder will not, directly or indirectly:
(a) vote any of the Shares in favor of, or cause or permit any of the
Shares to be voted in favor of, or solicit, initiate or encourage inquiries
or proposals from, or participate in any discussions or negotiations with,
or provide any information to, any individual, corporation, partnership, or
other person, entity or group (other than MP Corp. and its officers,
employees, representatives and agents) concerning, any sale of assets, sale
of shares of capital stock, merger, consolidation, share exchange, plan of
liquidation, reclassification, or similar transactions involving Miners,
which
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EXECUTION COPY
01/09/98
MID PENN BANCORP., INC.
January __, 1998
Page 2
would have the effect of any person other than MP Corp. acquiring control
over Miners, or any substantial portion of its assets. As used herein, the
term "control" means (i) the ability to direct the voting of 20 percent or
more of the outstanding voting securities of a person having ordinary
voting power in the election of directors or in the election of any other
body having similar functions or (ii) the ability to direct the management
and policies of a person, whether through ownership of securities, through
any contract, arrangement or understanding or otherwise; and
(b) pledge, hypothecate, grant a security interest in, sell, transfer
or otherwise dispose of or encumber any of the Shares, except by gift, and
will not enter into any agreement, arrangement or understanding which
would, during that term (i) restrict, (ii) establish a right of first
refusal to, or (iii) otherwise relate to the transfer or voting of the
Shares; except the pledge, hypothecation or grant of security interest in
connection with a renewal of an existing loan, the pledge, hypothecation,
grant of security interest, or a transfer or other distribution in
connection with a bankruptcy proceeding or a court ordered liquidation, or
a transfer or other disposition upon the death of the Shareholder under the
laws of descent and distribution.
It is understood and hereby agreed that this Agreement: (i) relates solely
to the capacity of Shareholder as a shareholder or beneficial owner of the
Shares and is not in any way intended to affect the exercise of Shareholder's
responsibilities and fiduciary duties as a director or officer of Miners; (ii)
shall in all respects be governed by and construed under the laws of
Pennsylvania, all rights and remedies being governed by such laws; and (iii)
shall be binding upon and inure to the benefit of, and shall be enforceable by,
the parties hereto and their respective personal representatives, successors and
assigns, except that neither party may transfer or assign any of its respective
rights or obligations hereunder without the prior written consent of the other
party or, if by MP Corp., in accordance with the Plan of Reorganization.
Sincerely,
(Signature of Shareholder)
(as owner of ______ shares*)
(Print name of Shareholder)
* Describe beneficial ownership of Shareholder on Schedule A attached hereto.
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EXECUTION COPY
01/09/98
MID PENN BANCORP., INC.
January __, 1998
Page 3
SCHEDULE A
Print or type name of Director or Officer:___________________________________
SHARES OF MINERS BANK OF LYKENS (LYKENS, PA.) BANK COMMON STOCK
BENEFICIALLY OWNED
As of January __, 1998
Capacity of
Name(s) of Director's/Officer's Number
Record Owners Beneficial Ownership of Shares
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<PAGE>
ANNEX B
Statute Regarding Dissenters' Rights
<PAGE>
SUBCHAPTER D OF CHAPTER 15 OF THE
PENNSYLVANIA BUSINESS CORPORATION LAW OF 1988
Subchapter D.-Dissenters Rights
Section 1571. Application and effect of subchapter.
(a) General rule.--Except as otherwise provided in subsection (b), any
shareholder of a business corporation shall have the right to dissent from, and
to obtain payment of the fair value of his shares in the event of, any corporate
action, or to otherwise obtain fair value for his shares, where this part
expressly provides that a shareholder shall have the rights and remedies
provided in this subchapter.
See:
Section 1906(c)(relating to dissenters rights upon special treatment).
Section 1930 (relating to dissenters rights).
Section 1931(d)(relating to dissenters rights in share exchanges).
Section 1932(c) (relating to dissenters rights in asset transfers).
Section 1952(d) (relating to dissenters rights in division).
Section 1962(c) (relating to dissenters rights in conversion).
Section 2104(b) (relating to procedure).
Section 2324(relating to corporation option where a restriction on transfer
of a security is held invalid).
Section 2325(b)(relating to minimum vote requirement).
Section 2704(c)(relating to dissenters rights upon election).
Section 2705(d)(relating to dissenters rights upon renewal of election).
Section 2907(a)(relating to proceedings to terminate breach of
qualifying conditions).
Section 7104(b)(3) (relating to procedure).
(b) Exceptions.--
(1) Except as otherwise provided in paragraph (2), the holders of the
shares of any class or series of shares that, at the record date fixed to
determine the shareholders entitled to notice of and to vote at the meeting at
which a plan specified in any of section 1930, 1931(d), 1932(c) or 1952(d) is to
be voted on, are either:
(i) listed on a national securities exchange; or
(ii) held of record by more than 2,000 shareholders; shall not
have the right to obtain payment of the fair value of any such shares
under this subchapter.
(2) Paragraph (1) shall not apply to and dissenters rights shall be
available without regard to the exception provided in that paragraph in the case
of:
(i) Shares converted by a plan if the shares are not converted
solely into shares of the acquiring, surviving, new or other
corporation or solely into such shares and money in lieu of fractional
shares.
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<PAGE>
(ii) Shares of any preferred or special class unless the
articles, the plan or the terms of the transaction entitle all
shareholders of the class to vote thereon and require for the adoption
of the plan or the effectuation of the transaction the affirmative
vote of a majority of the votes cast by all shareholders of the class.
JR\00 Shares entitled to dissenters rights under section 1906(c)
(relating to dissenters rights upon special treatment).
(3) The shareholders of a corporation that acquires by purchase, lease,
exchange or other disposition all or substantially all of the shares, property
or assets of another corporation by the issuance of shares, obligations or
otherwise, with or without assuming the liabilities of the other corporation and
with or without the intervention of another corporation or other person, shall
not be entitled to the rights and remedies of dissenting shareholders provided
in this subchapter regardless of the fact, if it be the case, that the
acquisition was accomplished by the issuance of voting shares of the corporation
to be outstanding immediately after the acquisition sufficient to elect a
majority or more of the directors of the corporation.
(c) Grant of optional dissenters rights.--The bylaws or a resolution
of the board of directors may direct that all or a part of the shareholders
shall have dissenters rights in connection with any corporate action or
other transaction that would otherwise not entitle such shareholders to
dissenters rights.
(d) Notice of dissenters rights.--Unless otherwise provided by
statute, if a proposed corporate action that would give rise to dissenters
rights under this subpart is submitted to a vote at a meeting of
shareholders, there shall be included in or enclosed with the notice of
meeting: (1) a statement of the proposed action and a statement that the
shareholders have a right to dissent and obtain payment of the fair value
of their shares by complying with the terms of this subchapter; and DMS a
copy of this subchapter.
(e) Other statutes.--The procedures of this subchapter shall also be
applicable to any transaction described in any statute other than this part
that makes reference to this subchapter for the purpose of granting
dissenters rights.
(f) Certain provisions of articles ineffective.--This subchapter may
not be relaxed by any provision of the articles.
(g) Cross references.--See sections 1105 (relating to restriction on
equitable relief), 1904 (relating to de facto transaction doctrine
abolished) and 2512 (relating to dissenters rights procedure).
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Section 1572. Definitions.
The following words and phrases when used in this subchapter shall have the
meanings given to them in this section unless the context clearly indicates
otherwise: "Corporation." The issuer of the shares held or owned by the
dissenter before the corporate action or the successor by merger, consolidation,
division, conversion or otherwise of that issuer. A plan of division may
designate which of the resulting corporations is the successor corporation for
the purposes of this subchapter. The successor corporation in a division shall
have sole responsibility for payments to dissenters and other liabilities under
this subchapter except as otherwise provided in the plan of division.
"Dissenter." A shareholder or beneficial owner who is entitled to and does
assert dissenters rights under this subchapter and who has performed every act
required up to the time involved for the assertion of those rights. "Fair
value." The fair value of shares immediately before the effectuation of the
corporate action to which the dissenter objects taking into account all relevant
factors, but excluding any appreciation or depreciation in anticipation of the
corporate action. "Interest." Interest from the effective date of the corporate
action until the date of payment at such rate as is fair and equitable under all
of the circumstances, taking into account all relevant factors including the
average rate currently paid by the corporation on its principal bank loans.
Section 1573. Record and beneficial holders and owners.
(a) Record holders of shares.--A record holder of shares of a business
corporation may assert dissenters rights as to fewer than all of the shares
registered in his name only if he dissents with respect to all the shares
beneficially owned by any one person and discloses the name and address of
the person or persons on whose behalf he dissents. In that event, his
rights shall be determined as if the shares as to which he has dissented
and his other shares were registered in the names of different
shareholders.
(b) Beneficial owners of shares.--A beneficial owner of shares of a
business corporation who is not the record holder may assert dissenters
rights with respect to shares held on his behalf and shall be treated as a
dissenting shareholder under the terms of this subchapter if he submits to
the corporation not later than the time of the assertion of dissenters
rights a written consent of the record holder. A beneficial owner may not
dissent with respect to some but less than all shares of the same class or
series owned by the owner, whether or not the shares so owned by him are
registered in his name.
Section 1574. Notice of intention to dissent.
If the proposed corporate action is submitted to a vote at a meeting of
shareholders of a business corporation, any person who wishes to dissent and
obtain payment of the fair value of his shares must file with the corporation,
prior to the vote, a written notice of intention to demand that he be paid the
fair value of his shares if the proposed action is effectuated, must effect no
change in the beneficial ownership of his shares from the date of such filing
continuously through the effective
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<PAGE>
date of the proposed action and must refrain from voting his shares in approval
of such action. A dissenter who fails in any respect shall not acquire any right
to payment of the fair value of his shares under this subchapter. Neither a
proxy nor a vote against the proposed corporate action shall constitute the
written notice required by this section.
Section 1575. Notice to demand payment.
(a) General rule.--If the proposed corporate action is approved by the
required vote at a meeting of shareholders of a business corporation, the
corporation shall mail a further notice to all dissenters who gave due
notice of intention to demand payment of the fair value of their shares and
who refrained from voting in favor of the proposed action. If the proposed
corporate action is to be taken without a vote of shareholders, the
corporation shall send to all shareholders who are entitled to dissent and
demand payment of the fair value of their shares a notice of the adoption
of the plan or other corporate action. In either case, the notice shall:
(1) State where and when a demand for payment must be sent and certificates
for certificated shares must be deposited in order to obtain payment. (2)
Inform holders of uncertificated shares to what extent transfer of shares
will be restricted from the time that demand for payment is received. (3)
Supply a form for demanding payment that includes a request for
certification of the date on which the shareholder, or the person on whose
beneficial shareholder dissents, acquired beneficial ownership of the
shares. (4) Be accompanied by a copy of this subchapter.
(b) Time for receipt of demand for payment.--The time set for receipt
of the demand and deposit of certificated shares shall be not less than 30
days from the mailing of the notice.
Section 1576. Failure to comply with notice to demand payment, etc.
(a) Effect of failure of shareholder to act.--A shareholder who fails
to timely demand payment, or fails (in the case of certificated shares) to
timely deposit certificates, as required by a notice pursuant to section
1575 (relating to notice to demand payment) shall not have any right under
this subchapter to receive payment of the fair value of his shares.
(b) Restriction on uncertificated shares.--If the shares are not
represented by certificates, the business corporation may restrict their
transfer from the time of receipt of demand for payment until effectuation
of the proposed corporate action or the release of restrictions under the
terms of section 1577(a) (relating to failure to effectuate corporate
action).
(c) Rights retained by shareholder.--The dissenter shall retain all
other rights of a shareholder until those rights are modified by
effectuation of the proposed corporate action.
Section 1577. Release of restrictions or payment for shares.
(a) Failure to effectuate corporate action.--Within 60 days after the
date set for demanding payment and depositing certificates, if the business
corporation has not effectuated the proposed
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<PAGE>
corporate action, it shall return any certificates that have been deposited
and release uncertificated shares from any transfer restrictions imposed by
reason of the demand for payment.
(b) Renewal of notice to demand payment.--When uncertified shares have
been released from transfer restrictions and deposited certificates have
been returned, the corporation may at any later time send a new notice
conforming to the requirements of section 1575 (relating to notice to
demand payment), with like effect.
(c) Payment of fair value of shares.--Promptly after effectuation of
the proposed corporate action, or upon timely receipt of demand for payment
if the corporate action has already been effectuated, the corporation shall
either remit to dissenters who have made demand and (if their shares are
certificated) have deposited their certificates the amount that the
corporation estimates to be the fair value of the shares, or give written
notice that no remittance under this section will be made. The remittance
or notice shall be accompanied by: S\R The closing balance sheet and
statement of income of the issuer of the shares held or owned by the
dissenter or a fiscal year ending not more than 16 months before the date
of remittance or notice together with the latest available interim
financial statements. (2) A statement of the corporation's estimate of the
fair value of the shares. (3) A notice of the right of the dissenter to
demand payment or supplemental payment, as the case may be, accompanied by
a copy of this subchapter.
(d) Failure to make payment.--If the corporation does not remit the
amount of its estimate of the fair value of the shares as provided by
subsection (c), it shall return any certificates that have been deposited
and release uncertificated shares from any transfer restrictions imposed by
reason of the demand for payment. The corporation may make a notation on
any such certificate or on the records of the corporation relating to any
such uncertificated shares that such demand has been made. If shares with
respect to which notation has been so made shall be transferred, each new
certificate issued therefor or the records relating to any transferred
uncertificated shares shall bear a similar notation, together with the name
of the original dissenting holder or owner of such shares. A transferee of
such shares shall not acquire by such transfer any rights in the
corporation other than those which the original dissenter had after making
demand for payment of their fair value.
Section 1578. Estimate by dissenter of fair value of shares.
DMS General rule.--If the business corporation gives notice of its estimate
of the fair value of the shares, without remitting such amount, or remits
payment of its estimate of the fair value of a dissenter's shares as permitted
by section 1577(c) (relating to payment of fair value of shares) and the
dissenter believes that the amount stated or remitted is less than the fair
value of his shares, he may send to the corporation his own estimate of the fair
value of the shares, which shall be deemed a demand for payment of the amount or
the deficiency.
(b) Effect of failure to file estimate.--Where the dissenter does not
file his own estimate under subsection (a) within 30 days after the mailing
by the corporation of its remittance or notice, the dissenter shall be
entitled to no more than the amount stated in the notice or remitted to him
by the corporation.
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<PAGE>
Section 1579. Valuation proceedings generally.
(a) General rule.--Within 60 days after the latest of:
(1) effectuation of the proposed corporate action;
(2) timely receipt of any demands for payment under section 1575
(relating to notice to demand payment); or
(3) timely receipt of any estimates pursuant to section 1578
(relating to estimate by dissenter of fair value of shares); if any
demands for payment remain unsettled, the business corporation may
file in court an application for relief requesting that the fair value
of the shares be determined by the court.
(b) Mandatory joinder of dissenters.--All dissenters, wherever
residing, whose demands have not been settled shall be made parties to the
proceeding as in an action against their shares. A copy of the application
shall be served on each such dissenter. If a dissenter is a nonresident,
the copy may be served on him in the manner provided or prescribed by or
pursuant to 42 Pacs Ch. 53 (relating to bases of jurisdiction and
interstate and international procedure).
(c) Jurisdiction of the court.--The jurisdiction of the court shall be
plenary and exclusive. The court may appoint an appraiser to receive
evidence and recommend a decision on the issue of fair value. The appraiser
shall have such power and authority as may be specified in the order of
appointment or in any amendment thereof.
(d) Measure of recovery.--Each dissenter who is made a party shall be
entitled to recover the amount by which the fair value of his shares is
found to exceed the amount, if any, previously remitted, plus interest.
(e) Effect of corporation's failure to file application.-- If the
corporation fails to file an application as provided in subsection (a), any
dissenter who made a demand and who has not already settled his claim
against the corporation may do so in the name of the corporation at any
time within 30 days after the expiration of the 60-day period. If a
dissenter does not file an application within the 30-day period, each
dissenter entitled to file an application shall be paid the corporation's
estimate of the fair value of the shares and no more, and may bring an
action to recover any amount not previously remitted.
Section 1580. Costs and expenses of valuation proceedings.
(a) General rule.--The costs and expenses of any proceeding under
section 1579 (relating to valuation proceedings generally) including the
reasonable compensation and expenses of the appraiser appointed by the
court, shall be determined by the court and assessed against the business
corporation except that any part of the costs and expenses may be
apportioned and assessed as the court deems appropriate against all or some
of the dissenters who are parties and whose action in demanding
supplemental payment under section 1578 (relating to estimate by dissenter
of fair value of shares) the court finds to be dilatory, obdurate,
arbitrary, vexatious or in bad faith.
-6-
<PAGE>
(b) Assessment of counsel fees and expert fees where lack of good
faith appears.--Fees and expenses of counsel and of experts for the
respective parties may be assessed as the court deems appropriate against
the corporation and in favor of any or all dissenters if the corporation
failed to comply substantially with the requirements of this subchapter and
may be assessed against either the corporation or a dissenter, in favor of
any other party, if the court finds that the party against whom the fees
and expenses arc assessed acted in bad faith or in a dilatory, obdurate,
arbitrary or vexatious manner in respect to the rights provided by this
subchapter.
(c) Award of fees for benefits to other dissenters.--If the court
finds that the services of counsel for any dissenter were of substantial
benefit to other dissenters similarly situated and should not be assessed
against the corporation, it may award to those counsel reasonable fees to
be paid out of the amounts awarded to the dissenters who were benefitted.
-7-
<PAGE>
ANNEX C
Bank's Audited Financial Statements
for the year ended December 31, 1997
<PAGE>
THE BANK
INDEX TO FINANCIAL STATEMENTS AND
SUPPLEMENTARY FINANCIAL INFORMATION
Page
Management's Discussion and Analysis M-1
Report of Independent Accountants F-1
Balance Sheet F-2
Statements of Income F-3
Statements of Changes in Shareholders' Equity F-4
Statements of Cash Flows F-5
Notes to Financial Statements F-6
<PAGE>
MINERS BANK OF LYKENS
MANAGEMENT'S DISCUSSION AND ANALYSIS
The purpose of this discussion is to further detail the financial condition and
results of operations of Miners Bank of Lykens (the Bank). This discussion
should be read in conjunction with the financial statements appearing elsewhere
in this report.
Financial Summary
The Bank earned net income of $163,000 during 1997, an increase of $15,000 or
10.1% from $148,000 in 1996. Net income per share was $10.84 in 1997, an
increase of $0.86 or 8.6% from $9.98 in 1996. Total assets of the Bank were
$27.9 million at December 31, 1997, consistent with December 31, 1996. The Bank
earned 0.58% return on average assets during 1997, an increase of 9.4% from
0.53% earned during 1996. Return on average equity was 5.71% for 1997, an
increase of 7.1% from 5.33% earned during 1996. Tier one capital (to risk
weighted assets) of $2,848,000 or 31.8% and total capital (to risk weighted
assets) of $2,953,000 or 33.0% at December 31, 1997 are well above the minimum
regulatory requirement of 4% for tier one capital and 8% for tier two capital.
On January 9, 1998, the Bank entered into an agreement to be acquired by Mid
Penn Bancorp, Inc. (Mid Penn), subject to regulatory approval. The agreement
calls for Mid Penn to exchange 148,250 shares of its common stock for all of the
outstanding common stock of the Bank in a business combination expected to be
accounted for as a pooling of interests.
Net Interest Income
The primary component of the Bank's earnings is its net interest income, which
represents the difference between interest income earned on interest-earning
assets and interest expense incurred on interest-bearing liabilities. Net
interest income is affected by changes in interest rates and changes in average
balances and by the mix of interest-earning assets and interest-bearing
liabilities. Net interest income, before provision for loan losses, on a taxable
equivalent basis, was $1.1 million in 1997, consistent with 1996.
Table 1 presents the average asset and liability balances, interest income and
expense recorded, and average interest rates earned and paid for each of the
years in the two year period ended December 31, 1997.
M-1
<PAGE>
<TABLE>
<CAPTION>
TABLE 1: AVERAGE BALANCES, AVERAGE RATES, AND EFFECTIVE INTEREST
DIFFERENTIAL AND INTEREST YIELDS
(Dollars in thousands)
1997
----------------------------------
Interest
Average Income / Average
Balance Expense Rate
----------------------------------
<S> <C> <C> <C>
ASSETS:
Interest Earning Balances 544 36 6.62%
Investment Securities
Taxable 13,191 871 6.60%
Tax-Exempt 845 59 6.98%
----------------------------------
Total Investment Securities 14,036 930 6.63%
Federal Funds Sold 965 57 5.91%
Loans, net 10,510 989 9.41%
----------------------------------
Total Earning Assets 26,055 2,012 7.72%
Cash and Due From Banks 1,278
Other Assets 612
------------
Total Assets 27,945
============
LIABILITIES AND
STOCKHOLDERS' EQUITY
Interest Bearing Deposits
NOW 3,034 69 2.27%
Savings 8,045 209 2.60%
Time 11,805 633 5.36%
----------------------------------
Total Interest Bearing Liabilities 22,884 911 3.98%
Demand Deposits 2,033
Other Liabilities 173
Stockholders' Equity 2,855
------------
Total Liabilities and
Stockholders' Equity 27,945
============
Net Interest Income 1,101
============
Net Yield on Interest Earning Assets:
Total Yield on Earning Assets 7.72%
Rate on Supporting Liabilities 3.98%
----------
Net Interest Margin 3.74%
==========
1996
----------- ----------- ----------
Interest
Average Income / Average
Balance Expense Rate
----------- ----------- ----------
<S> <C> <C> <C>
ASSETS:
Interest Earning Balances 1,288 73 5.67%
Investment Securities
Taxable 12,259 852 6.95%
Tax-Exempt 596 38 6.38%
----------- ----------- ----------
Total Investment Securities 12,855 890 6.92%
Federal Funds Sold 1,623 84 5.18%
Loans, net 10,002 968 9.68%
----------- ----------- ----------
Total Earning Assets 25,768 2,015 7.82%
Cash and Due From Banks 1,347
Other Assets 624
-----------
Total Assets 27,739
===========
LIABILITIES AND
STOCKHOLDERS' EQUITY
Interest Bearing Deposits
NOW 2,469 56 2.27%
Savings 8,656 257 2.97%
Time 11,172 603 5.40%
----------- ----------- ----------
Total Interest Bearing Liabilities 22,297 916 4.11%
Demand Deposits 2,525
Other Liabilities 147
Stockholders' Equity 2,770
-----------
Total Liabilities and
Stockholders' Equity 27,739
===========
Net Interest Income 1,099
===========
Net Yield on Interest Earning Assets:
Total Yield on Earning Assets 7.82%
Rate on Supporting Liabilities 4.11%
----------
Net Interest Margin 3.71%
==========
</TABLE>
The yield on earning assets decreased to 7.72% in 1997 from 7.82% in 1996, a
decrease of 1.28%, primarily due to higher rate investments repricing at lower
rates during 1997. The average rate paid on interest-bearing liabilities
decreased to 3.98% in 1997 from 4.11% in 1996, a decrease of 3.16%. The decrease
in 1997 was due primarily to management lowering the rate paid on savings
accounts. An effective tax rate of 27% was assumed and non-accruing loans were
included in the loan balances. The Bank does not generally charge fees for the
origination of loans.
Table 2 presents an analysis of the changes in tax equivalent net interest
income attributable to changes in the volume and rate components of net interest
income for the years ended December 31, 1997 and 1996.
<TABLE>
<CAPTION>
TABLE 2: RATE - VOLUME ANALYSIS OF CHANGES IN NET INTEREST INCOME
(Dollars in thousands)
1997 Compared to 1996
Increase (Decrease) Due To:
Volume Rate Net
------------------------------
<S> <C> <C> <C>
INTEREST INCOME
Interest-Earning Balances (42) 5 (37)
Investment Securities
Taxable 65 (46) 19
Tax-Exempt 16 5 21
------------------------------
Total Investment Securities 81 (41) 40
Federal Funds Sold (34) 7 (27)
Loans, net 49 (28) 21
------------------------------
Total Interest Income 54 (57) (3)
INTEREST EXPENSE
Interest Bearing Deposits
NOW 13 - 13
Savings (18) (30) (48)
Time 34 (4) 30
------------------------------
Total Interest Expense 29 (34) (5)
NET INTEREST INCOME 25 (23) 2
==============================
1996 Compared to 1995
Increase (Decrease) Due
To:
Volume Rate Net
------------------------------
<S> <C> <C> <C>
INTEREST INCOME
Interest-Earning Balances 17 (5) 12
Investment Securities
Taxable 58 (35) 23
Tax-Exempt 9 (1) 8
------------------------------
Total Investment Securities 67 (36) 31
Federal Funds Sold 33 (5) 28
Loans, net (60) 55 (5)
------------------------------
Total Interest Income 57 9 66
INTEREST EXPENSE
Interest Bearing Deposits
NOW 4 - 4
Savings (9) (8) (17)
Time 34 12 46
------------------------------
Total Interest Expense 29 4 33
28 5 33
==============================
</TABLE>
NET INTEREST INCOME
As illustrated in Table 2, the small increases in the Bank's net interest income
during 1997 and 1996 were primarily a result of increases in volume in
investment securities and a decrease in rate on savings deposits during 1997.
The effect of changes in volume and rate has been allocated entirely to the rate
column. Tax exempt income is shown on a tax equivalent basis assuming a federal
income tax rate of 27%.
Provision for Loan Losses
The provision for loan losses charged to operating expense represents the amount
deemed appropriate by management to maintain an adequate allowance for loan
losses. Due to the Bank's conservative underwriting standards, stable local
economy, small loan growth, and predominantly real estate loan portfolio, the
Bank has
M-2
<PAGE>
historically incurred very few loan losses. As a result, the provision for loan
losses has also historically been low and has generally approximated the amount
necessary to replenish net charge-offs. The Bank's ratio of net charge-offs to
average loans of 0.09% and 0.07% in 1997 and 1996, respectively, is well below
the Bank's peer group.
Management reviews loan delinquencies and asset quality on a periodic basis to
determine the adequacy of the allowance for loan losses. In addition, various
regulatory agencies, as an integral part of the examination process,
periodically review the Bank's allowance for loan losses. Such agencies may
require the Bank to recognize additional provision for loan losses based on
their judgment about information available to them at the time of their
examination.
Table 3 presents a summary of charge-offs and recoveries during the years ended
December 31, 1997 and 1996.
TABLE 3: ANALYSIS OF THE ALLOWANCE FOR LOAN LOSSES
(Dollars in thousands)
1997 1996
-------------------------
Balance at beginning of period 105 110
Loans charged off:
Real estate mortgage 8 4
Installment loans to individuals 3 8
-------------------------
Total loans charged off 11 12
-------------------------
Recoveries on loans charged off
Real estate mortgage 0 3
Installment loans to individuals 2 2
-------------------------
Total recoveries 2 5
-------------------------
Net charge-offs 9 7
-------------------------
Provision for loan losses 9 2
-------------------------
Balance at end of period 105 105
=========================
Ratio of net charge-offs during the period to average
loans outstanding during the period 0.09% 0.07%
=========================
M-3
<PAGE>
Noninterest Income
The Bank' s non-interest income is composed primarily of service charge fees on
deposit accounts and increased to $52,000 in 1997 from $51,000 in 1996. This
represented an increase of 2.0% in 1997. The Bank has limited sources of
non-interest income because it does not sell loans in the secondary market,
service loans for others, or sell investment securities before maturity.
Noninterest Expense
A summary of the major component's of non-interest expense for the years ended
December 31, 1997 and 1996 is reflected in Table 4.
TABLE 4: NONINTEREST EXPENSE
(Dollars in thousands)
Years ended December 31,
1997 1996
---------------- -----------------
Salaries and employee benefits 551 534
Occupancy, net 26 24
Equipment 87 94
Postage and supplies 66 61
FDIC assessment 3 2
Marketing & advertising 12 11
Pennsylvania bank shares tax 19 19
Professional services - 35
Telephone 11 11
Other 135 152
---------------- -----------------
Total non-interest expense 910 943
================ =================
Total noninterest expense decreased from $943,000 in 1996 to $910,000 in 1997, a
decrease of 3.5%. The decrease in 1997 is due primarily to additional
professional expenditures incurred and the establishment of a reserve in
connection with an employee irregularity discovered during 1996. The Bank
recovered all of these expenditures during 1997 and the reserve was reversed.
The decrease in professional services expense during 1997 is due to a change in
the timing of the Bank's annual audit which is accounted for on a cash basis.
Investments
The Bank maintains an investment portfolio to provide liquidity and to invest
excess cash in high-yielding assets. The Bank records all investments except
equity securities as held-to-maturity. As a result, no unrealized gain or loss
was recorded as of December 31, 1997 and 1996. The Bank's investment in equity
securities is comprised solely of a required investment in Federal Reserve Bank
and Federal Home Loan Bank stock for which the cost approximates fair value. The
Bank did not sell any investment securities prior to maturity during the years
ended December 31, 1997 and 1996. Proceeds from the maturity of investments
M-4
<PAGE>
held-to-maturity approximated $3,413,000 in 1997 and $7,831,000 in 1996. The
Bank does not have any significant concentrations of investment securities. As
shown in Table 5 below, the Bank's investment securities are invested
conservatively primarily in obligations of the U.S. Government and it's
agencies.
A summary of the book values of the Bank's investments as of December 31, 1997
and 1996 is presented in Table 5.
TABLE 5: BOOK VALUES OF INVESTMENT SECURITIES
(Dollars in thousands)
December 31,
1997 1996
------------ ------------
U. S. Treasury & U.S. government agencies 12,942 12,636
Mortgage backed U.S. government agencies 313 378
State and political subdivisions 749 899
Equity securities 94 94
------------ ------------
Total 14,098 14,007
============ ============
Loans
Net loans totaled $10.8 million at December 31, 1997, an increase of 3.2% from
net loans of $10.5 million at December 31, 1996. The Bank's primary source of
loans continues to be the origination of one to four family mortgage loans. The
Bank also offers a wide variety of fixed-rate agricultural loans, commercial
loans, home equity lines of credit and second mortgages and installment loans to
individuals. The Bank does not originate credit card loans. During 1997, the
primary increase in loans was a result of growth in mortgage loans secured by
commercial and agricultural real estate. The Bank's loan portfolio includes
loans primarily to borrowers within the upper Dauphin County and western
Schuylkill County area of central Pennsylvania. Accordingly, future fluctuations
in the economic conditions prevailing within this region may have a material
impact on the Bank's financial condition and results of operations.
A distribution of the Bank's loan portfolio according to major loan
classification is shown in Table 6.
TABLE 6: LOAN PORTFOLIO
(Dollars in thousands)
December 31
1997 1996
-------------------------
Commercial, financial and agricultural 1,951 1,337
Real estate - construction 106 230
Residential real estate 7,186 7,443
Installments loans to individuals 1,647 1,546
-------------------------
Total loans 10,890 10,556
Allowance for loan losses
(105) (105)
-------------------------
Net loans 10,785 10,451
=========================
M-5
<PAGE>
Allowance for Loan Losses
The Bank maintains an allowance for loan losses at a level adequate to absorb
potential loan losses in the portfolio. The allowance for loan losses is
determined based on a rolling average of historical charge-offs, adjusted for
qualitative factors such as delinquencies, the local economy, and concentrations
of credit. Additionally, specific reserves are established for loans which
individually represent a risk of loss to the Bank. The total of reserves
resulting from this analysis are considered allocated reserves. Any additional
amounts in the allowance for loan losses are considered unallocated reserves and
represent a reserve for unexpected losses and conditions. The allowance for loan
losses as a percentage of net loans at December 31, 1997 and 1996 was 0.97% and
0.99%, respectively.
The allocation of the allowance for loan losses among major loan classifications
is shown in Table 7 as of December 31, 1997 and 1996.
TABLE 7: ALLOCATION OF THE ALLOWANCE FOR LOAN LOSSES
(Dollars in thousands)
December 31,
1997 1996
--------------------- ------------------
Percent Percent
Amount of Loans Amount of Loans
--------------------- ------------------
Commercial, financial and agricultural 7 17.9% 6 12.7%
Real estate - construction 6 1.0% 4 2.1%
Residential real estate 8 66.0% 8 70.6%
Installments loans to individuals 6 15.1% 6 14.6%
Unallocated 78 0.0% 81 0.0%
--------------------- ------------------
Total 105 100.0% 105 100.0%
===================== ==================
Nonperforming Assets
Nonperforming assets include nonaccrual loans, loans past due 90 days or more,
restructured loans and foreclosed assets. A loan is generally placed on
nonaccrual when past due 90 days or more or when payment in full of principal
and interest is not expected. Loans past due 90 days or more and still accruing
interest are loans that are generally well-secured and in the process of
collection or repayment. Restructured loans are those loans whose terms have
been modified to provide for a reduction of interest or principal payments
because of borrower financial difficulties. Foreclosed assets represent those
assets acquired through foreclosure.
Non-performing assets at December 31, 1997 and 1996 consist primarily of two
small real estate loans for which the Bank is currently considering repayment
options. An immaterial amount of interest income was recognized and excluded
from net income during 1997 and 1996 as a result of nonaccrual loans. The Bank
did not have any restructured loans or foreclosed assets at December 31, 1997
and 1996. The Bank's level of nonperforming assets is well below its peer group
and management considers all nonperforming assets in its evaluation of the
adequacy of the allowance for loan losses. The Bank considers impaired loans to
be individually significant loans for which the repayment of principal and
interest in full is doubtful. Accordingly, the Bank had no impaired loans as of
December 31, 1997 and 1996 or for the years then ended. There are no borrowers
which management expects will materially impact future operating results,
liquidity or capital resources as a result of inability to comply with loan
repayment terms.
M-6
<PAGE>
Table 8 presents the Bank's nonperforming assets as of December 31, 1997 and
1996.
TABLE 8: NONPERFORMING ASSETS
(Dollars in thousands)
December 31,
----------------------------
1997 1996
------------- --------------
Nonaccrual loans 21 0
Past due 90 days or more 5 25
Restructured loans 0 0
------------- --------------
Total nonperforming loans 26 25
Foreclosed assets 0 0
------------- --------------
Total nonperforming assets 26 25
============= ==============
Percent of total loans outstanding 0.24% 0.24%
Percent of total assets 0.09% 0.09%
Deposits and Other Funding Sources
The Bank's primary source of funds is its deposits. Deposits increased 0.38% in
1997 to $24.9 million from $24.8 million at December 31, 1996. During 1997,
depositors transferred funds from savings deposits to time deposits after the
Bank lowered the rate on paid on savings deposits. The Bank has historically not
borrowed other funds as new deposits and investment maturities have been
sufficient to fund limited loan growth.
Table 9 presents the average balances and average interest rates paid on major
classifications of deposits for the years ended December 31, 1997 and 1996.
TABLE 9: DEPOSITS BY MAJOR CLASSIFICATION
(Dollars in thousands)
Years ended December 31,
1997 1996
-----------------------------------------
Average Average Average Average
Balance Rate Balance Rate
-------------------- --------------------
Non-interest bearing demand deposits 2,033 0.00% 2,525 0.00%
Interest-bearing demand deposits 3,034 2.27% 2,469 2.27%
Savings deposits 8,045 2.60% 8,656 2.97%
Time deposits 11,805 5.36% 11,172 5.40%
-------------------- --------------------
Total 24,917 3.66% 24,822 3.69%
==================== ====================
M-7
<PAGE>
Capital Resources
During 1997, total capital grew from $2.79 million to $2.85 million, an increase
of 2.1%. The primary components of this increase were net income of $163,000
offset by dividends of $75,000 and a stock retirement of $29,000. During 1997
and 1996, the Bank paid a $5.00 per share cash dividend which represented a 46%
and 51% dividend payout ratio, respectively. Also, during 1997, the Bank
acquired 175 shares of its own stock for $28,919 or $165.25 per share which was
retired. At December 31, 1997 and 1996, the Bank had a total risk-based capital
ratio of 33.0% and 31.7%, respectively, which significantly exceeded minimum
risk-based capital regulatory requirements.
Federal Income Taxes
Federal income tax expense for 1997 and 1996 was $45,000 and $38,000,
respectively. The Bank's effective income tax rate was 22% and 20% for 1997 and
1996, respectively. The Bank's effective income tax rate differs from its
statutory rate primarily because of tax-exempt income.
Liquidity
The Bank's asset-liability management policy addresses the ability of the Bank
to raise sufficient funds to enable it to meet deposit withdrawals, fund loan
growth and meet other operational needs. The Bank utilizes maturities from its
investment portfolio as a source of liquidity, along with loan repayments and
deposit growth. The Bank also has the ability to borrow funds from the Federal
Home Loan Bank of Pittsburgh although there were no such borrowings during 1997
or 1996.
During 1997 and 1996, the primary sources of cash were from investment
maturities of $3,413,000 in 1997 and $7,831,000 in 1996 which was primarily
re-invested in other investment securities.
Asset-Liability Management and Interest Rate Sensitivity
Interest rate sensitivity is a function of the repricing characteristics of the
Bank's portfolio of assets and liabilities. Each asset and liability reprices
either at maturity or during the life of the instrument. Interest rate
sensitivity is measured as the difference between the volume of assets and
liabilities that are subject to repricing in a future period of time. These
differences are known as interest sensitivity gaps.
The Bank primarily uses gap analysis to manage its interest rate risk. The Bank
does not attempt to achieve an exact match between interest sensitive assets and
liabilities because it believes that a controlled amount of interest rate risk
is desirable. The Bank has an asset liability management committee which meets
monthly with the assistance of an outside consultant.
The maturity distribution and weighted average yields of investments as of
December 31, 1997 are presented in Table 10.
M-8
<PAGE>
<TABLE>
<CAPTION>
TABLE 10: INVESTMENT MATURITY AND YIELD
(Dollars in thousands)
After One After Five
One Year Year thru Years thru
and Less Five Years Ten Years
---------- -----------------------
<S> <C> <C> <C>
Maturities
U. S. Treasury & U.S. government agencies 5,398 4,993 1,694
State and political subdivisions - 7 104
Mortgage backed U.S. government agencies - 50 390
Equity securities - - -
---------- -----------------------
Total 5,398 5,050 2,188
========== =======================
Weighted Average Yield
U. S. Treasury & U.S. government agencies 6.09% 6.20% 6.87%
State and political subdivisions 0.00% 6.58% 6.70%
Mortgage backed U.S. government agencies 0.00% 9.00% 7.00%
Equity securities 0.00% 0.00% 0.00%
---------- ----------- ----------
Total 6.09% 6.23% 6.89%
========== =======================
After Ten
Years Total
----------------------
<S> <C> <C>
Maturities
U. S. Treasury & U.S. government agencies 857 12,942
State and political subdivisions 202 313
Mortgage backed U.S. government agencies 309 749
Equity securities 94 94
----------------------
Total 1,462 14,098
======================
Weighted Average Yield
U. S. Treasury & U.S. government agencies 8.06% 6.36%
State and political subdivisions 7.10% 6.96%
Mortgage backed U.S. government agencies 8.45% 7.73%
Equity securities 6.34% 6.34%
----------------------
Total 7.49% 6.41%
======================
</TABLE>
The maturity distribution and repricing characteristics of the loan portfolio as
of December 31, 1997 are presented in Table 11.
TABLE 11: LOAN MATURITY
(Dollars in thousands)
After One
One Year Year thru After Five
and Less Five Years Years Total
--------- ---------- ----- -----
Loan Maturity
- -------------
Commercial, financial and agricultural 9 871 1,071 1,951
Real estate - construction - 106 106
Residential real estate 163 1,781 5,242 7,186
Installments loans to individuals 42 481 1,124 1,647
-------- --------- -------- ------
Total loans 214 3,133 7,543 10,890
======== ========= ======== ======
Interest Sensitivity
- --------------------
Fixed rate 212 2,917 7,385 10,514
Floating or adjustable rate 2 216 158 376
-------- --------- -------- ------
214 3,133 7,543 10,890
======== ========= ========= ======
M-9
<PAGE>
The Bank's interest rate gap position as of December 31, 1997 is presented in
Table 12.
<TABLE>
<CAPTION>
TABLE 12: INTEREST RATE SENSITIVITY GAP
(Dollars in thousands)
Maturing or Repricing
Years ended December 31,
1998 1999 2000 2001 2002
-------------------- ----------------------------
<S> <C> <C> <C> <C> <C>
Interest-earning assets:
Interest-bearing balances 764 - - - -
Investment securities 5,398 3,398 300 1,152 200
Loans 214 852 393 616 1,272
Federal funds sold 600 - - - -
-------------------- ----------------------------
Total 6,976 4,250 693 1,768 1,472
==================== ============================
Interest-bearing liabilities
Demand and savings 12,767 - - - -
Time deposits 8,344 1,476 1,234 275 297
-------------------- ----------------------------
Total 21,111 1,476 1,234 275 297
==================== ============================
Rate sensitivity gap
Periodic gap (14,135) 2,774 (541) 1,493 1,175
Cumulative gap (14,135) (11,361) (11,902) (10,409) (9,234)
Cumulative gap as a
percentage of total assets -50.61% -40.68% -42.61% -37.27% -33.06%
Thereafter Total
------------- --------
<S> <C> <C>
Interest-earning assets:
Interest-bearing balances - 764
Investment securities 3,650 14,098
Loans 7,543 10,890
Federal funds sold - 600
------------- --------
Total 11,193 26,352
============= ========
Interest-bearing liabilities
Demand and savings - 12,767
Time deposits 514 12,140
-------------- --------
Total 514 24,907
============== ========
Rate sensitivity gap
Periodic gap 10,679 1,445
Cumulative gap 1,445 2,890
Cumulative gap as a
percentage of total assets 5.17% 10.35%
</TABLE>
M-10
<PAGE>
The maturity distribution of time deposits of $100,000 or more as of December
31, 1997 and 1996 is shown in Table 13.
TABLE 13: MATURITY OF TIME DEPOSITS OF $100,000 OR MORE
(Dollars in thousands)
1997 1996
---------------------------------
Three months or less 529 413
Over three months to twelve months 308 203
Over twelve months 377 463
---------------------------------
Total 1,214 1,079
=================================
Off-Balance Sheet Items
The Bank makes contractual commitments to extend credit and extends lines of
credit which are subject to the Bank's credit approval and monitoring
procedures. At December 31, 1997 and 1996, commitments to extend credit amounted
to $115,000 and $456,000.
Environmental Regulation
There are several federal and state statutes which regulate the obligations and
liabilities of financial institutions pertaining to environmental issues. In
addition to the potential for attachment of liability resulting from its own
actions, a bank may be held liable under certain circumstances for the actions
of its borrowers, or third parties, when such actions result in environmental
problems on properties that collateralize loans held by the bank. Further, the
liability has the potential to far exceed the original amount of the loan issued
by the Bank. Currently, the Bank is not a party to any pending legal proceeding
pursuant to any environmental statute, nor is the Bank aware of any
circumstances which may give rise to liability under any such statute.
Inflation and Changing Prices
The Bank's financial statements have been prepared in accordance with generally
accepted accounting principles, which require the measurement of financial
position and operating results in terms of historical dollars without
considering the changes in the relative purchasing power of money due to
inflation. The impact of inflation is reflected in the increased cost of the
Bank's operations. Unlike most industrial companies, nearly all the assets and
liabilities of the Bank are monetary in nature. As a result, interest rates have
a greater impact on the Bank's performance than do the effects of general levels
of inflation.
New Accounting Standards
In June, 1997, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 130 (SFAS 130), "Reporting Comprehensive
Income". SFAS 130 is effective for fiscal years beginning after December 15,
1997. SFAS 130 requires that comprehensive income be reported in a financial
statement and be displayed with the same prominence as other financial
information. Comprehensive income, as defined by SFAS 130, is the total of net
income and all other non-owner changes in equity. The implementation of SFAS 130
will not have an impact on the operating results of the Bank.
M-11
<PAGE>
Also in June, 1997, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 131 (SFAS 131), "Disclosures about Segments
of an Enterprise and Related Information". SFAS 131 is effective for fiscal
years beginning after December 15, 1997. SFAS 131 requires that a public
enterprise report financial and descriptive information about its operating
segments which are to be determined on a basis consistent with how internal
decision makers evaluate and allocate resources to operating segments. The
implementation of SFAS 131 will not impact the Bank as it is not currently
subject to public reporting.
M-12
<PAGE>
MINERS BANK OF LYKENS
Financial Statements
December 31, 1997
(With Independent Auditors' Report Thereon)
<PAGE>
MINERS BANK OF LYKENS
Table of Contents
December 31, 1997
- -------------------------------------------------------------------------------
Page
Independent Auditors' Report..................................................1
Financial Statements:
Balance Sheet........................................................2
Statement of Income..................................................3
Statement of Stockholders' Equity....................................4
Statement of Cash Flows..............................................5
Notes to Financial Statements.................................................6
- -------------------------------------------------------------------------------
<PAGE>
KPMG Pear Marwick LLP
225 Market Street
Suite 300
P.O. Box 1190
Harrisburg, PA 17108-190
Independent Auditors' Report
The Board of Directors
Miners Bank of Lykens:
We have audited the accompanying balance sheet of Miners Bank of Lykens as of
December 31, 1997, and the related statements of income, stockholders' equity
and cash flows for the year then ended. 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 audit.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit 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 audit provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above presently fairly, in
all material respects, the financial position of Miners Bank of Lykens as of
December 31, 1997, and the results of its operations and its cash flows for the
year then ended in conformity with generally accepted accounting principles.
/s/ KPMG Peat Marwick LLP
February 13, 1998
F-1
<PAGE>
MINERS BANK OF LYKENS
Balance Sheet
December 31, 1997
Assets
Cash and due from banks $ 1,589,204
Interest-bearing deposits in other banks 276,587
Federal funds sold 600,000
Investment securities:
Available for sale, at fair value 94,300
Held to maturity (fair value of $14,203,672) 14,003,878
Loans 10,889,938
Allowance for loan losses (105,010)
Net loans 10,784,928
Bank premises and equipment, net 266,953
Accrued interest receivable 291,926
Deferred tax asset 1,999
Other assets 43,442
Total assets $ 27,953,217
- -------------------------------------------------------------------------------
Liabilities and Stockholders' Equity:
Deposits:
Demand $5,444,878
Savings and NOW 7,322,521
Time 12,139,678
Total Deposits 24,907,077
Dividends payable 37,063
Accrued interest payable 97,082
Accrued income taxes payable 2,180
Other liabilities 62,050
Total liabilities 25,105,452
Stockholders' equity:
Common stock, $5 per share; 15,000 authorized shares;
14,825 issued and outstanding shares 74,125
Surplus 275,000
Undivided profits 2,498,640
Total stockholders' equity 2,847,765
Total liabilities and stockholders' equity $ 27,953,217
- -------------------------------------------------------------------------------
See accompanying notes to financial statements.
F-2
<PAGE>
MINERS BANK OF LYKENS
Statement of Income
Year ended December 31, 1997
Interest income:
Interest on loans $ 979,651
Interest on federal funds sold 57,030
Interest and dividends on
investment securities:
Dividend income 5,966
U.S. Treasury notes and agencies 864,432
Tax exempt state and municipal 42,864
Taxable state and municipal 1,235
Interest on deposits in other banks 35,852
Total interest income 1,987,030
Interest expense:
Interest on deposits:
Demand 69,127
Savings and NOW 208,745
Time 633,551
Total interest expense 911,423
Net interest income 1,075,607
Provision for loan losses 9,271
Net interest income after provision
for loan losses 1,066,336
Noninterest income:
Service charges and fees 28,119
Other 23,411
Total noninterest income 51,530
Noninterest expenses:
Salaries and employee benefits 551,070
Net occupancy expense 25,809
Furniture and equipment expense 87,484
Directors fees 45,200
Stationary and supplies 48,401
State shares tax 19,334
Other 132,964
Total noninterest expenses 910,262
Income before income taxes 207,604
Income taxes 45,083
Net income $ 162,521
- -------------------------------------------------------------------------------
Basic earnings per share $ 10.85
- -------------------------------------------------------------------------------
See accompanying notes to financial statements.
<TABLE>
<CAPTION>
MINERS BANK OF LYKENS
Statement of Stockholders' Equity
Year ended December 31, 1997
- -------------------------------------------------------------------------------
Common
stock Surplus
----- -------
<S> <C> <C>
Balance, January 1, 1997 $ 75,000 275,000
Net income - -
Stock retirement (875) -
Dividends declared, $5.00 per share - -
- --------------------------------------- -------------- -------------
Balance, December 31, 1997 $ 74,125 275,000
- --------------------------------------- -------------- -------------
Undivided
profits Total
------------------- -----------------
<S> <C> <C>
Balance, January 1, 1997 2,438,726 2,788,726
Net income 162,521 162,521
Stock retirement (28,044) (28,919)
Dividends declared, $5.00 per share (74,563) (74,563)
- --------------------------------------- ------------------- -----------------
Balance, December 31, 1997 2,498,640 2,847,765
- --------------------------------------- ------------------- -----------------
</TABLE>
See accompanying notes to financial statements.
F-3
<PAGE>
MINERS BANK OF LYKENS
Statement of Cash Flows
Year ended December 31, 1997
Operating activities:
Net income $ 162,521
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation 42,059
Provision for loan losses 9,271
Provision for deferred income taxes 4,550
Amortization of investment premiums 2,536
Accretion of investment discounts (13,002)
Decrease in accrued interest receivable and other assets 12,632
Increase in accrued interest payable and other liabilities 20,312
Other 21,419
Net cash provided by operating activities
262,298 Investing activities:
Net increase in interest bearing deposits (13,287)
Net decrease in federal funds sold 100,000
Proceeds from maturities and principal reductions of
investments held-to-maturity 3,413,250
Purchases of investments held-to-maturity (3,494,692)
Purchases of investments available for sale (400)
Purchases of bank premises and equipment (61,773)
Loan originations less repayments (334,006)
Net cash used in investing activities
(390,908) Financing activities:
Net decrease in deposits (93,419)
Stock retirement (28,919)
Cash dividends (74,563)
Net cash used in financing activities (196,901)
Decrease in cash and due from banks (325,511)
Cash and due from banks, January 1, 1997 1,914,715
Cash and due from banks, December 31, 1997 $ 1,589,204
- -------------------------------------------------------------------------------
For the year ended December 31, 1997, the Bank paid interest and income taxes as
follows:
Interest paid $ 921,180
Income taxes paid 42,024
- ----------------------------------------- ---------------
See accompanying notes to financial statements.
F-4
<PAGE>
MINERS BANK OF LYKENS
Notes to Financial Statements
December 31, 1997
- ------------------------------------------------------------------------------
(1) Business
Miners Bank of Lykens (the Bank) provides a full range of services to
individuals and corporate customers primarily in Dauphin County,
Pennsylvania and contiguous counties. The Bank is subject to the
regulations of certain regulatory agencies and undergoes periodic
examinations by those regulatory agencies.
(2) Summary of Significant Accounting Policies
The following is a description of the more significant accounting policies
of the Bank.
Basis of Financial Statement Presentation
The financial statements have been prepared in conformity with generally
accepted accounting principles and general practice within the banking
industry. The Bank is on the accrual basis of accounting.
Use of Estimates
In preparing the financial statements, management is required to make
estimates and assumptions that affect the reported amounts of assets and
liabilities as of the date of the balance sheet and revenues and expenses
for the period. Actual results could differ significantly from those
estimates. A material estimate that is particularly susceptible to
significant change in the near-term relates to the determination of the
allowance for loan losses. In connection with the determination of the
allowance for loan losses, management obtains independent appraisals for
significant properties when considered necessary.
Federal Funds Sold
Federal funds sold consist of short-term interest bearing deposits with
other financial institutions which are carried at cost.
(Continued)
F-5
<PAGE>
MINERS BANK OF LYKENS
Notes to Financial Statements
- ------------------------------------------------------------------------------
(2) Continued
Investment Securities Held-to-Maturity and Investment Securities
Available-for-Sale
The Bank classifies its debt and marketable securities as
available-for-sale or held-to-maturity. Investment securities
held-to-maturity consist of investment securities that are carried at cost
adjusted for amortization of premium and accretion of discount. These
investment securities are held specifically for investment purposes by the
Bank. The Bank intends and has the ability to hold these securities until
maturity.
Investment securities available-for-sale consist of equity securities,
which are carried at fair value. Unrealized holding gains or losses, net of
the related tax effect, on investment securities available-for-sale are
excluded from earnings and are reported as a separate component of
stockholders' equity. Federal Reserve Bank stock is carried at cost which
approximates fair value.
A decline in the fair value of investment securities below cost that is
deemed other than temporary is charged to earnings resulting in the
establishment of a new cost basis for the security. Premiums and discounts
are amortized/accreted to income over the estimated life of the security
using a method which approximates a level yield. Purchases and sales are
recorded on a trade-date basis using the specific identification method.
Federal Home Loan Bank Stock
As a member of the Federal Home Loan Bank (FHLB) of Pittsburgh, the Bank is
required to maintain certain minimum investments in FHLB stock. The minimum
required investment is based on the amount of mortgage loans and
mortgage-backed securities owned by the Bank. As no active market exists
for this stock, the investment is carried at cost.
(Continued)
F-6
<PAGE>
MINERS BANK OF LYKENS
Notes to Financial Statements
- ------------------------------------------------------------------------------
(2) Continued
Loans
Loans are carried at the principal amount outstanding. The accrual of
interest is discontinued when and as long as it appears that future
collection of principal or interest in accordance with the contractual
terms may be doubtful, generally after 90 days of delinquency. Interest
income on impaired loans is generally recognized on a cash basis. If the
collectibility of loan principal in full is in question, interest received
on impaired loans is applied to principal. Loan fees are recognized as
income when received and costs are recognized as incurred.
A loan is considered impaired when it is probable that the Bank will be
unable to collect all amounts due according to the contractual terms of the
loan agreement. When a loan is considered to be impaired, the amount of the
impairment is generally measured based on the fair value of the underlying
collateral. Loans are evaluated individually for impairment and smaller
balance, homogenous loans are excluded from the evaluation of impairment.
Interest income on impaired loans is generally recorded as cash payments
are collected.
Allowance for Loan Losses
The allowance for loan losses is a valuation reserve to absorb known and
inherent losses on loans. Losses occur primarily from the loan portfolio,
but may also be derived from commitments to extend credit. The provision
for loan losses is management's estimate of the amount required to
establish an adequate allowance for the loan portfolio of the Bank. Loan
losses are charged directly against the allowance for loan losses, and
recoveries on previously charged-off loans are added to the allowance.
Management believes that the allowance for loan losses is adequate. While
management uses the best available information to recognize losses on
loans, future additions to the allowance may be necessary based on changes
in economic conditions. In addition, various regulatory agencies, as an
integral part of their examination process, periodically review the Bank's
allowance for loan losses. Such agencies may require the Bank to recognize
additions to the allowance based on their judgments of information
available to them at the time of their examination.
(Continued)
F-7
<PAGE>
MINERS BANK OF LYKENS
Notes to Financial Statements
- ------------------------------------------------------------------------------
(2) Continued
Bank Premises and Equipment
Bank premises and equipment are carried at cost less accumulated
depreciation. Depreciation is computed over the assets' estimated useful
lives. Maintenance and repair expenditures are charges to expense as
incurred.
Income Taxes
The Bank accounts for income taxes under the asset and liability method.
Under the asset and liability method, deferred tax assets and liabilities
are recognized for the estimated future tax consequences attributable to
differences between the financial statement carrying amounts of existing
assets and liabilities and their respective tax bases. Deferred tax assets
and liabilities are measured using enacted tax rates in effect for the year
in which those temporary differences are expected to be recovered or
settled. The effect on deferred tax assets and liabilities of a change in
tax rates is recognized in income in the period that includes the enactment
date.
Earnings Per Share
The Bank adopted Statement of Financial Accounting Standards (SFAS) No.
128, "Earnings per Share", during 1997. SFAS No. 128 replaces the
presentation of primary and fully diluted earnings per share (EPS) with
basic and diluted EPS. Primary EPS is based on the weighted average number
of shares outstanding for the year while diluted EPS is computed similarly
to fully diluted EPS pursuant to APB Opinion 15. Because the Bank has a
simple capital structure, only basic EPS is required to be disclosed by
SFAS No. 128. The weighted average shares outstanding for 1997 were 14,985.
(3) Cash and Due from Banks
Cash and due from banks consists of cash and cash items, balances due from
correspondent banks, and balances maintained with the Federal Reserve Bank.
The Bank is required to maintain average reserve balances with the Federal
Reserve Bank. The required reserve balance was $87,500 at December 31, 1997
and was satisfied through vault cash.
F-8
<PAGE>
MINERS BANK OF LYKENS
Notes to Financial Statements
- ------------------------------------------------------------------------------
(4) Investment Securities Available-for-Sale and Investment Securities
Held-to-Maturity
A summary of the actual and amortized cost and fair value of investment
securities available- for-sale and investment securities held-to-maturity
at December 31, 1997, is as follows:
Gross Gross
Investment Securities Actual unrealized unrealized Fair
Available-for-Sale cost gains losses value
- -------------------------------------------------------------------------------
Federal Reserve Bank stock $ 10,500 - - 10,500
Federal Home Loan Bank stock 83,800 - - 83,800
Investment securities available-for-sale $ 94,300 - - 94,300
<TABLE>
<CAPTION>
Gross Gross
Investment Securities Amortized unrealized unrealized
Held-to-Maturity cost gains losses
- -------------------------------------------------------------------------------
<S> <C> <C> <C>
U.S. Treasury notes $ 10,548,177 161,566 308
U.S. government agency mortgage-
backed securities 313,016 11,851 -
Obligations of state and political
subdivisions 749,071 16,299 -
Federal Home Loan Bank bonds 2,393,614 11,160 774
Investment securities held-to-maturity $ 14,003,878 200,876 1,082
- --------------------------------------- ------------ ------- -----
Fair
value
----
<S> <C>
U.S. Treasury notes 10,709,435
U.S. government agency mortgage-
backed securities 324,867
Obligations of state and political
subdivisions 765,370
Federal Home Loan Bank bonds 2,404,000
Investment securities held-to-maturity 14,203,672
- -------------------------------------- -------------
</TABLE>
The amortized cost and fair value of investment securities held-to-maturity
at December 31, 1997, by contractual maturity, are shown below. Expected
maturities may differ from contractual maturities because certain issuers
may have the right to call or prepay obligations with or without penalties.
(Continued)
F-9
<PAGE>
MINERS BANK OF LYKENS
Notes to Financial Statements
- -------------------------------------------------------------------------------
(4) Continued
Amortized Fair
Investment Securities Held-to-Maturity cost value
Due in one year or less $ 5,397,799 5,410,891
Due after one year through five years 5,042,628 5,097,878
Due after five years through ten years 2,084,867 2,100,658
Due after ten years 1,165,568 1,269,378
Mortgage-backed securities 313,016 324,867
Totals $ 14,003,878 14,203,672
- ------------------------------------------------------------- ----------------
Investment securities having a book value and fair value of $900,618 and
$908,235, respectively, at December 31, 1997 were pledged as required by
law to secure public funds and for other purposes.
(5) Loans
The composition of the loan portfolio at December 31, 1997, is as follows:
Loans secured by real estate:
Construction and land development $ 106,421
Secured by farmland 292,316
Secured by 1-4 family residential properties:
Revolving, open-ended lines of credit 201,579
Secured by first liens 6,187,684
Secured by junior liens 796,209
Secured by multi-family residential properties 221,168
Secured by commercial real estate 811,791
Commercial and industrial loans 466,832
Consumer loans 1,647,091
Loans to state and political subdivisions 158,847
$ 10,889,938
- ------------------------------------------------------------------------------
Included with the loan portfolio are loans for which the accrual of
interest has been discontinued. These loans amounted to approximately
$21,000 at December 31, 1997. There were approximately $5,000 of loans past
due greater than 90 days and still accruing
(Continued)
F-10
<PAGE>
MINERS BANK OF LYKENS
Notes to Financial Statements
- -------------------------------------------------------------------------------
(5) Continued
interest at December 31, 1997. The Bank did not have any impaired loans at
or for the year ended December 31, 1997. The impact of nonaccrual loans on
income for the year ended December 31, 1997 was not material.
Officers, directors and employees (related parties) were indebted to the
Bank as follows:
Balance, December 31, 1996 $ 624,692
New loans 63,500
Repayments (208,327)
Balance, December 31, 1997 $ 479,865
- --------------------------------------------------------------------------
Related party loans were made on substantially the same terms, including
interest rates and collateral, as those prevailing at the time for
comparable transactions with unrelated borrowers and do not, in the opinion
of management, involve more than normal risk of collectibility.
(6) Allowance for Loan Losses
An analysis of the changes in the allowance for loan losses is as follows:
Balance, January 1, 1997 $ 104,709
Provision charged to operations 9,271
Recoveries on loans charged-off 2,134
Loans charged-off (11,104)
Balance, December 31, 1997 $ 105,010
- --------------------------------------------------------------------------
(Continued)
F-11
<PAGE>
MINERS BANK OF LYKENS
Notes to Financial Statements
- ------------------------------------------------------------------------------
(7) Bank Premises and Equipment
A summary of bank premises and equipment at December 31, 1997, is as
follows:
Estimated
useful life Amount
- -------------------------------------------------------------------------------
Buildings 31 years $ 352,519
Furniture, fixtures, and equipment 7 years 762,086
- -------------------------------------------------------------------------------
1,114,605
Accumulated depreciation and amortization 847,652
- -------------------------------------------------------------------------------
$ 266,953
- -------------------------------------------------------------------------------
(8) Deposits
Time certificates of deposit over $100,000 at December 31, 1997 amounted to
approximately $1,214,000.
A summary of maturities of time deposits at December 31, 1997 is as
follows:
1998 $ 8,344,321
1999 1,475,575
2000 1,234,118
2001 274,712
2002 297,318
Thereafter 513,634
$ 12,139,678
------------------------------ -----------------------
Deposits from related parties amounted to $1,332,953 as of December 31,
1997.
(9) Line of Credit
The Bank has a $7.5 million line of credit with the Federal Home Loan Bank
of Pittsburgh under which funds may be drawn. No advances were taken during
1997.
(Continued)
F-12
<PAGE>
MINERS BANK OF LYKENS
Notes to Financial Statements
- -------------------------------------------------------------------------------
(10) Income Taxes
The tax effects of temporary differences that give rise to significant
deferred tax assets and deferred tax liabilities at December 31, 1997 are
presented below:
Deferred tax assets:
Allowance for loan losses $ 16,373
Deferred tax liabilities:
Depreciation of property and equipment 558
Accretion of discounts on investment securities 13,816
Net deferred tax asset $ 1,999
- -----------------------------------------------------------------------------
Management has determined that it is not required to establish a valuation
reserve for the deferred tax asset at December 31, 1997 since it is more
likely than not that the deferred tax asset will be realized through future
reversals of existing temporary differences, future taxable income, and tax
planning strategies.
Total income tax expense differed from the amounts computed by applying the
U.S. federal income tax rate of 34% to income before income taxes for the
year ended December 31, 1997 as a result of the following:
Expected income tax expense at federal tax rate $ 70,585
TEFRA disallowance 2,245
Tax exempt income (18,439)
Exemption from tax surcharge (9,432)
Other 124
Total income tax expense $ 45,083
- -------------------------------------------------------------------------
Income tax expense for the year ended December 31, 1997 is summarized as
follows:
Current federal $ 40,533
Deferred federal 4,550
Provision for income taxes $ 45,083
- ------------------------------------------------------------------------
The Bank is not currently subject to state income taxes.
(Continued)
F-13
<PAGE>
MINERS BANK OF LYKENS
Notes to Financial Statements
- -------------------------------------------------------------------------------
(11) Financial Instruments with Off-Balance-Sheet Risk and Concentrations of
Credit Risk
The Bank is a party to financial instruments with off-balance-sheet risk in
the normal course of business to meet the financing needs of its customers.
These financial instruments include commitments to extend credit. Those
instruments involve, to varying degrees, elements of credit and interest
rate risk in excess of the amount recognized in the balance sheet. The
Bank's exposure to credit loss in the event of nonperformance by the other
party to the financial instrument for commitments to extend credit is
represented by the contractual notional amount of those instruments. The
Bank uses the same credit policies in making commitments as it does for
on-balance-sheet instruments.
At December 31, 1997, the Bank had the following off-balance-sheet risk
items:
Financial instruments whose contract amounts
represent credit risk:
Loan origination commitments $ 8,000
Unused home equity lines of credit 72,000
Other unused commitments 35,000
- --------------------------------------------------------- --------------------
Commitments to extend credit are agreements to lend to a customer as long
as there is no violation of any condition established in the contract.
Commitments generally have fixed expiration dates or other termination
clauses. Since many of the commitments are expected to expire without being
drawn upon, the total commitment amounts do not necessarily represent
future cash requirements. The Bank evaluates each customer's
creditworthiness on a case-by-case basis. The amount of collateral
obtained, if deemed necessary by the Bank upon extension of credit, is
based on management's credit evaluation of the customer. Collateral held
varies but may include property and equipment.
Most of the Bank's business activity is with customers located within the
County of Dauphin, Pennsylvania, and its contiguous counties. As of
December 31, 1997, the Bank had no significant loans or other receivables
from companies located outside its normal trade area. Accordingly, the
financial performance of the Bank is significantly impacted by the effect
of economic conditions within its trading area on Bank customers.
(Continued)
F-14
<PAGE>
MINERS BANK OF LYKENS
Notes to Financial Statements
- ------------------------------------------------------------------------------
(12) Restriction on Payment of Dividends
Certain regulatory restrictions exist regarding the availability of the
Bank to pay dividends. As a state chartered bank, the Bank is regulated by
the Pennsylvania Banking Code (the Code). Under the Code, the Bank may pay
cash dividends from accumulated net earnings (undivided profits) as long as
minimum capital requirements are met. Such capital requirements require the
Bank to maintain minimum amounts of capital to total risk weighted assets
as defined by banking regulators. The requirement is to have a minimum Tier
1 and total capital ratios of 4% and 8%, respectively. The Bank may not pay
dividends which would allow these risk-based capital ratios to fall below
the minimum capital requirements. The Bank is above these capital
requirements and the balance of undivided profits at December 31, 1997 is
available for cash dividends subject to the capital requirements noted
above.
(13) Regulatory Matters
The Bank is subject to various regulatory capital requirements administered
by the federal banking agencies. Failure to meet minimum capital
requirements can initiate certain mandatory - and possibly additional
discretionary - actions by regulators that, if undertaken, could have a
direct material effect on the Bank's financial statements. Under capital
adequacy guidelines and the regulatory framework for prompt corrective
action, the Bank must meet specific capital guidelines that involve
quantitative measures of the Bank's assets, liabilities, and certain
off-balance-sheet items as calculated under regulatory accounting
practices. The Bank's capital amounts and classification are also subject
to qualitative judgments by the regulators about components, risk
weightings, and other factors.
Quantitative measures established by regulation to ensure capital adequacy
require the Bank to maintain minimum amounts and ratios (set forth in the
table below) of total and Tier 1 capital to risk-weighted assets, and of
Tier 1 capital to average assets. Management believes, as of December 31,
1997, that the Bank meets all capital adequacy requirements to which it is
subject.
(Continued)
F-15
<PAGE>
MINERS BANK OF LYKENS
Notes to Financial Statements
- ------------------------------------------------------------------------------
(13) Continued
As of March 31, 1997, the most recent notification from the Federal
Reserve, the Bank was classified as well capitalized under the regulatory
framework for prompt corrective action. To be categorized as well
capitalized, the Bank must maintain minimum capital as detailed in the
table below. There are no conditions or events since that notification that
management believes have changed the Bank's category.
The Bank's actual and required capital amounts and ratios as of December
31, 1997 are as follows:
<TABLE>
<CAPTION>
For capital
Actual adequacy purposes
Amount Ratio Amount Ratio
- ------------------------ ---------------------------- -------------------------
<S> <C> <C> <C> <C>
Total Capital
(to Risk Weighted
Assets) $ 2,952,775 33.00% $ 715,920 8.00%
Tier 1 Capital
(to Risk Weighted
Assets) $ 2,847,765 31.82% $ 357,960 4.00%
Tier 1 Capital
(to Average Assets) $ 2,847,765 10.21% $ 1,115,160 4.00%
- ---------------------- -------------- ------------ -------------- ------------
To be well capitalized
under prompt corrective
action provisions
Amount Ratio
- ----------------------- -------------------------------
<S> <C> <C>
Total Capital
(to Risk Weighted
Assets) $ 894,900 10.00%
Tier 1 Capital
(to Risk Weighted
Assets) $ 536,940 6.00%
Tier 1 Capital
(to Average Assets) $1,393,950 5.00%
- ---------------------- --------------- --------------
</TABLE>
(14) Stock Retirement
During December 1997, the Bank acquired 175 shares of its own stock for
$28,919 or $165.25 per share which was subsequently retired. The excess of
the purchase price over the par value was charged against undivided
profits.
(Continued)
F-16
<PAGE>
MINERS BANK OF LYKENS
Notes to Financial Statements
- -------------------------------------------------------------------------------
(15) Pension Plan
The Bank funds a non-contributory defined contribution plan for the benefit
of all employees. Contributions are made based on a percentage of salaries.
The total contribution to the plan during 1997 was $36,365 which also
represented the expense recognized.
(16) Post-Retirement Benefits
The Bank provides post-retirement benefits to retired employees, directors,
and their spouses in the forms of medical and life insurance. The Bank
accounts for these benefits on a cash basis since the Bank votes annually
whether to continue providing these benefits. The amount of expense
recognized during 1997 related to these benefits was $9,355.
(17) Fair Value of Financial Instruments
The Bank is required to disclose the estimated fair value of its financial
instruments assets and liabilities. Many of the Bank's financial
instruments, however, lack an available trading market as characterized by
a willing buyer and a willing seller engaging in an exchange transaction.
Therefore, significant estimations and present value calculations were used
by the Bank for the purposes of this disclosure.
The following methods and assumptions were used to estimate the fair value
of each class of financial instruments.
Financial instruments actively traded in a secondary market have been
valued using quoted available market prices. The loan categories are
segmented into fixed and adjustable types. Fair value for adjustable rate
loans is considered to be the same as carrying value because these loans
reprice frequently at market rates. Fixed rate loans have been revalued
using discounted cash flows at rates which reflect current market rates for
loans with similar characteristics, including credit quality.
(Continued)
F-17
<PAGE>
MINERS BANK OF LYKENS
Notes to Financial Statements
- ------------------------------------------------------------------------------
(17) Continued
December 31, 1997
---------------------------------------
Estimated Carrying
fair value amount
- ------------------------------------------------------------------------------
(In thousands)
Cash and due from banks $ 1,589 1,589
Interest-bearing deposits 277 277
Federal funds sold 600 600
Investment securities 14,298 14,098
Gross loans 10,860 10,890
Accrued interest receivable 291 291
- -----------------------------------------------------------------------------
The fair value of deposits with no maturity, such as noninterest-bearing
demand deposits, savings, NOW accounts, and Money Market accounts, is equal
to the amount payable on demand as of December 31, 1997. The fair value of
certificates of deposit is based on discounted cash flows. The discount
rate is estimated using the rates currently offered for deposits of similar
remaining maturities. The fair value estimates do not include the benefit
that results from the low-cost funding provided by the deposit liabilities
compared to the cost of borrowing funds in the market.
December 31, 1997
------------------------------------------
Estimated Carrying
fair value amount
- -------------------------------------------------------------------------------
(In thousands)
Nonmaturing deposits $ 12,767 12,767
Time deposits 12,177 12,140
Accrued interest payable 97 97
- -------------------------------------------------------------------------------
The fair value of off-balance sheet commitments is equal to the carrying
value of $0 as of December 31, 1997 since there is no active-market for
these types of financial instruments.
F-18
<PAGE>
MINERS BANK OF LYKENS
Notes to Financial Statements
- -------------------------------------------------------------------------------
(18) Subsequent Event
On January 9, 1998 the Bank entered into an agreement to be acquired by Mid
Penn Bancorp, Inc. (Mid Penn) subject to regulatory and stockholder
approval. The agreement calls for Mid Penn to exchange 148,250 shares of
its common stock for all of the outstanding common stock of the Bank in a
business combination expected to be accounted for as a pooling of
interests.
- -------------------------------------------------------------------------------
F-19
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 20. Indemnification of Directors and Officers.
Subchapter D of Chapter 17 of the BCL, (15 Pa. C.S. ss.ss.1101-4162)
provides that a business corporation shall have the power under certain
circumstances to indemnify its directors, officers, employees and agents against
certain expenses incurred by them in connection with any threatened, pending or
completed action, suit or proceeding.
Article 24 of the Bylaws of Mid Penn Bancorp, Inc. provides for the
indemnification of its directors, officers, employees and agents in accordance
with, and to the maximum extent permitted by, the provisions of Subchapter D of
Chapter 17 of the BCL, which Subchapter is set forth at Annex B to the Proxy
Statement/Prospectus and incorporated herein by reference.
Item 21. Exhibits and Financial Statement Schedules.
2.1 Agreement and Plan of Reorganization, dated January 9, 1998, by and
among Mid Penn Bancorp, Inc., Mid Penn Bank, and Miners Bank of
Lykens, and Agreement and Plan of Merger, dated January 9, 1998, by
and between Mid Penn Bank and Bank Bank of Lykens (included as Annex A
to the Proxy Statement contained herein).
2.2 Form of Support Agreement (included as an Exhibit to the Agreement and
Plan of Reorganization, dated January 9, 1998, by and among Mid Penn
Bancorp, Inc., Mid Penn Bank, and Miners Bank of Lykens, which
agreement is attached as Annex A to the Proxy Statement contained
herein).
3(i) Articles of Incorporation of Mid Penn Bancorp, Inc. (Incorporated by
Reference to Exhibit 3(i) to Registrant's Annual Report on Form 10-K
for the year ended December 31, 1996, and filed with the Commission on
March 31, 1997.)
3(ii)Bylaws of Mid Penn Bancorp, Inc. (Incorporated by Reference to
Exhibit 3(ii) to Registrant's Annual Report on Form 10-K for the year
ended December 31, 1996, and filed with the Commission on March 31,
1997.)
4.1 Articles of Incorporation of Mid Penn Bancorp, Inc. ( Incorporated by
Reference at 3(i) hereto.)
II-1
<PAGE>
4.2 Bylaws of Mid Penn Bancorp, Inc. (Incorporated by Reference at Exhibit
3(ii) hereto.)
5 Opinion of Shumaker Williams, P.C.
8 Form of Tax Opinion.
9 Voting Trust Agreement (See, Form of Support Agreement, attached as
Exhibit 2.2 hereto).
11 Statement re: Computation of Earnings Per Share. ( Incorporated by
Reference to Registrant's Annual Report on Form 10-K for the year
ended December 31, 1997 ("Form 10-K"), filed with the Commission on
March 27, 1998).
13.1 Form 10-K (Incorporated by Reference to Registrant's Form 10-K, filed
with the Commission on March 27, 1998.)
13.2 Excerpts from Registrant's 1997 Annual Report to Shareholders.
(Incorporated by reference to Exhibit 13 of Registrant's Form 10-K,
filed with the Commission on March 27, 1998.)
21 Subsidiaries of the Registrant. (Incorporated by reference to Exhibit
21 of Registrant's Form 10-K, filed with the Commission on March 27,
1998.)
23(a) Consent of Shumaker Williams, P.C. (included at Exhibit 5).
23(b) Consent of Parente, Randolph, Orlando Carey & Associates.
23(c) Consent of KPMG Peat Marwick LLP.
24 Power of Attorney (included on Signature Page).
99.1 Form of Proxy.
99.2 Letter to Shareholders of Bank (included in Proxy Statement contained
herein).
II-2
<PAGE>
99.3 Notice of Special Meeting (included in Proxy Statement contained
herein).
99.4 Statute Relating to Dissenters' Rights (included as Annex B to the
Proxy Statement contained herein).
(b) Financial Statement Schedules: Set forth in the Proxy
Statement/Prospectus which is included in this Registration
Statement.
(c) Opinion of Financial Advisor:
Not Applicable.
Item 22. Undertakings.
(a)
1. The undersigned Registrant hereby undertakes:
(A) To file, during any period in which offers or sales are being
made, a post-effective amendment to this registration statement: (i)
to include any prospectus required by Section 10(a)(3) of the
Securities Act of 1933; (ii) to reflect in the prospectus any facts or
events arising after the effective date of the registration statement
(or the most recent post-effective amendment thereof) which,
individually or in the aggregate, represent a fundamental change in
the information set forth in the registration statement; (iii) to
include any material information with respect to the plan of
distribution not previously disclosed in the registration statement or
any material change to such information in the registration statement;
(B) That, for the purpose of determining any liability under the
Securities Act of 1933, each such post-effective amendment shall be
deemed to be a new registration statement relating to the securities
offered therein, and the offering of such securities at that time
shall be deemed to be the initial bona fide offering thereof.
(C) To remove from registration by means of a post-effective
amendment any of the securities being registered which remain unsold
at the termination of the offering.
2. The undersigned registrant hereby undertakes that, for purposes
of determining any liability under the Securities Act of 1933,
each filing of the registrant's annual report pursuant to Section
13(a) or Section 15(d) of the Securities Exchange Act of 1934
(and, where applicable, each filing of an employee benefit plan's
annual report pursuant to Section 15(d) of the Securities
II-3
<PAGE>
Exchange Act of 1934) that is incorporated by reference in the
registration statement shall be deemed to be a new registration
statement relating to the securities offered therein, and the
offering of such securities at the time shall be deemed to be the
initial bona fide offering thereof.
3. The undersigned registrant hereby undertakes as follows:
(1) 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 the reofferings by persons who may be deemed underwriters,
in addition to the information called for by the other items of the
applicable form.
The registrant undertakes that every prospectus (i) that is filed
pursuant to the preceding paragraph, 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-operative 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.
4. 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.
(b) 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 (1) 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.
II-4
<PAGE>
(c) The undersigned registrant hereby undertakes to
supplement by means of a post-effective amendment all information
concerning a transaction, and the company being acquired involved
therein, that was not the subject of and included in the
registration statement when it became effective.
II-5
<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 Millersburg, Commonwealth
of Pennsylvania on April 22, 1998.
Mid Penn Bancorp, Inc.
By: /s/ Eugene F. Shaffer
-------------------------------------
Eugene F. Shaffer
Chairman, President and
Chief Executive Officer
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears
below constitutes and appoints Eugene F. Shaffer and Alan W. Dakey, and each of
them, his true and lawful attorneys-in-fact and agents, with full power of
substitution and resubstitution, for him and in his name, place and stead, in
any and all capacities, to sign any and all amendments (including post-effective
amendments) to this registration statement, and to file the same, with all
exhibits thereto, and other documents in connection therewith, with the
Securities and Exchange Commission, granting unto said attorneys-in-fact and
agents, and each of them, full power and authority to do and perform each and
every act and thing requisite and necessary to be done, as fully to all intents
and purposes as he might or could do in person, hereby ratifying and confirming
all that said attorneys-in-fact and agents or either of them, or their or his
substitutes, may lawfully do or cause to be done by virtue thereof.
Pursuant to the requirements of the Securities Act of 1933, this
registration statement has been signed by the following persons in the
capacities and on the dates indicated.
<PAGE>
Capacity Date
-------- ----
/s/ Eugene F. Shaffer President and Chief April 22, 1998
- ------------------------------
Eugene F. Shaffer Executive Officer
and Director (Principal
Executive Officer)
/s/ Kevin W. Laudenslager Treasurer April 22, 1998
- ------------------------------
Kevin W. Laudenslager (Principal Financial and
Accounting Officer)
/s/ Alan W. Dakey Director April 22, 1998
- ------------------------------
Alan W. Dakey
/s/ Jere M. Coxon Director April 22, 1998
- ------------------------------
Jere M. Coxon
/s/ Earl R. Etzweiler Director April 22, 1998
- ------------------------------
Earl R. Etzweiler
/s/ Charles F. Lebo Director April 22, 1998
- ------------------------------
Charles F. Lebo
/s/ Warren A. Miller Director April 22, 1998
- ------------------------------
Warren A. Miller
/s/ William G. Nelson Director April 22, 1998
- ------------------------------
William G. Nelson
/s/ Edwin D. Schlegel Director April 22, 1998
- ------------------------------
Edwin D. Schlegel
/s/ Guy J. Snyder, Jr. Director April 22, 1998
- ------------------------------
Guy J. Snyder, Jr.
<PAGE>
EXHIBIT INDEX
Page
Number
In
Sequential Number
Number Title System
2.1 Agreement and Plan of Reorganization, dated
January 9, 1998, by and among Mid Penn Bancorp, Inc.,
Mid Penn Bank, and Miners Bank of Lykens,
and Agreement and Plan of Merger, dated
January 9, 1998, by and between Mid Penn Bank
and Bank Bank of Lykens (included as Annex A
to the Proxy Statement contained herein).
2.2 Form of Support Agreement (included as an Exhibit
to the Agreement and Plan of Reorganization,
dated January 9, 1998, by and among Mid Penn
Bancorp, Inc., Mid Penn Bank, and Miners
Bank of Lykens, which agreement is attached
as Annex A to the Proxy Statement contained
herein).
3(i) Articles of Incorporation of Mid Penn Bancorp, Inc.
(Incorporated by Reference to Exhibit 3(i) to
Registrant's Annual Report on Form 10-K
for the year ended December 31, 1996, and filed
with the Commission on March 31, 1997.)
3(ii)Bylaws of Mid Penn Bancorp, Inc. (Incorporated
by Reference to Exhibit 3(ii) to Registrant's
Annual Report on Form 10-K for the year ended
December 31, 1996, and filed with the Commission
on March 31, 1997.)
4.1 Articles of Incorporation of Mid Penn Bancorp, Inc.
(Incorporated by Reference at Exhibit 3(i) hereto.)
5 Opinion of Shumaker Williams, P.C.
8 Form of Tax Opinion.
9 Voting Trust Agreement (See, Form of Support Agreement,
attached as Exhibit 2.2 hereto).
11 Statement re: Computation of Earnings Per Share.
(Incorporated by Reference to Registrant's
Annual Report on Form 10-K for the year
ended December 31, 1997 ("Form 10-K"), filed
with the Commission on March 27, 1998.)
13.1 Form 10-K (Incorporated by Reference to Registrant's
Form 10-K, filed with the Commission on March 27, 1998.)
-1-
<PAGE>
13.2 Excerpts from Registrant's 1997 Annual
Report to Shareholders.(Incorporated by reference
to Exhibit 13 of Registrant's Form 10-K,
filed with the Commission on March 27, 1998.)
21 Subsidiaries of the Registrant. (Incorporated by
reference to Exhibit 21 of Registrant's Form 10-K,
filed with the Commission on March 27, 1998.)
23(a) Consent of Shumaker Williams, P.C.
(included at Exhibit 5).
23(b) Consent of Parente, Randolph, Orlando Carey & Associates.
23(c) Consent of KPMG Peat Marwick LLP. *
24 Power of Attorney (included on Signature Page).
99.1 Form of Proxy.
99.2 Letter to Shareholders of Bank (included in Proxy
Statement contained herein).
99.3 Notice of Special Meeting (included in Proxy
Statement contained herein).
99.4 Statute Relating to Dissenters' Rights
(included as Annex B to the Proxy Statement
contained herein).
* To be filed by Amendment.
-2-
SHUMAKER WILLIAMS, P.C.
P.O. BOX 88
HARRISBURG, PA 17108
(717) 763-1121
April 30, 1998
Mr. Eugene F. Shaffer Mr. Franklin W. Ruth, Jr.
President, Chairman and CEO President and CEO
Mid Penn Bancorp, Inc. Miner's Bank of Lykens
349 Union Street 550 Main Street
Millersburg, PA 17061 Lykens, PA 17048
RE: Merger of Miner's Bank of Lykens
Our File No. 517-98
Gentlemen:
We have acted as special counsel to Mid Penn Bancorp, Inc. ("Bancorp") and
its wholly-owned subsidiary, Mid Penn Bank ("Mid Penn"), in connection with the
registration under the Securities Act of 1933, as amended, by means of a
registration statement on Form S-4 (the "Registration Statement") of 148,250
shares of the common stock of Bancorp, par value $1.00 per share (the "Bancorp
Common Stock") to be issued pursuant to the terms of an Agreement and Plan of
Reorganization, dated January 9, 1998, (the "Agreement") entered into among
Bancorp, Mid Penn and Miner's Bank of Lykens ( the "Bank").
Upon consummation of the transaction contemplated by the Agreement: (i) the
Bank will merge with, into and under the charter of Mid Penn (the "Merger");
(ii) Mid Penn will survive the Merger; (iii) all of the outstanding shares of
common stock of the Bank, par value $5.00 per share (the "Bank Common Stock")
will be converted into the right to receive ten (10) shares of Bancorp Common
Stock; and (iv) each shareholder of the Bank will receive cash in lieu of any
fractional shares of Bancorp Common Stock.
<PAGE>
Mr. Eugene F. Shaffer
President, Chairman and CEO
Mid Penn Bancorp, Inc.
Mr. Franklin W. Ruth
President and CEO
Miners Bank of Lykens
- -----------------
Page 2
This opinion is rendered pursuant to the requirements of Item 601(b)(5)(i)
of Regulation S-K of the Securities and Exchange Commission (17 C.F.R.
ss.229.601(b)(5)(i)) for inclusion as an exhibit to the Registration Statement.
In connection with the preparation of this opinion, we have examined such
documents and corporate and other records and questions of law as we deem
necessary or appropriate.
Based upon the foregoing and subject to the conditions that: (i) all
conditions precedent to the obligations of the parties set forth in the
Agreement will have been satisfied at the time of the Merger; (ii) all covenants
required to be performed by the parties as set forth in the Agreement will have
been performed by them at the time of the Merger; and (iii) the shares of
Bancorp Common Stock will be issued in strict accordance with the terms of the
Agreement, we are of the opinion that the Bancorp Common Stock has been duly
authorized and, when issued, will be legally issued, fully paid and
non-assessable.
In rendering the foregoing opinion, we have assumed without investigation
that: (i) Bank has full corporate power and authority to execute and deliver the
Agreement and to carry out the transactions contemplated therein; (ii) the
Agreement has been duly executed and delivered by Bank and constitutes a valid
and binding obligation of Bank; (iii) all corporate actions required to be taken
by Bank to authorize the execution and delivery of the Agreement and the
performance of the transactions contemplated therein will have been taken at the
time of the Merger; and (iv) the shares of Bank Common Stock issued and
outstanding at the time of the Merger are duly authorized, validly issued, fully
paid and non-assessable.
We hereby consent to the inclusion of this opinion as an exhibit to the
Registration Statement and to the reference to our firm in the section of the
Registration Statement entitled "Legal Opinions".
SHUMAKER WILLIAMS, P.C.
/s/ Nicholas Bybel, Jr.
-------------------------------
By: Nicholas Bybel, Jr.
_________________, 1998
Board of Directors Board of Directors
MID PENN BANCORP, INC. MINERS BANK OF LYKENS
349 Union Street 550 Main Street
P. O. Box 111 P. O. Box 38
Millersburg, Pennsylvania 17061-0111 Lykens, Pennsylvania 17048-0038
Re: Merger of Miners Bank of Lykens with
Mid Penn Bank, a Subsidiary of
Mid Penn Bancorp, Inc.
Dear Members of the Boards:
You have asked for our opinion regarding certain federal income tax
consequences of the merger of Miners Bank of Lykens (the "Bank") with and into
Mid Penn Bank (the "Surviving Bank") pursuant to which the shareholders of the
Bank will receive voting common stock of the Surviving Bank's parent, Mid Penn
Bancorp, Inc. (the "Holding Company").
In providing our opinions, we have reviewed the Agreement and Plan of
Reorganization, dated January 9, 1998, among the Holding Company, the Surviving
Bank and the Bank (the "Plan of Reorganization") and the Agreement and Plan of
Merger, dated January 9, 1998, by and between the Bank and the Surviving Bank
(the "Agreement of Merger"). In rendering our opinions, we have assumed that:
(a) all parties have the legal right, power, capacity and authority to enter
into and perform all obligations under the Plan of Reorganization and the
Agreement of Merger; (b) the due and proper execution and delivery of all
relevant or necessary instruments and documents; (c) the receipt of all federal
and state regulatory approvals necessary to consummate the merger transaction;
and (d) the satisfaction or proper waiver of any other conditions under the Plan
of Reorganization and the Agreement of Merger so that the merger transaction may
be consummated. All statements in this letter regarding the federal income tax
consequences of this merger transaction are based upon the Internal Revenue Code
of 1986, as amended (the "Code"), the Treasury Regulations promulgated by the
United States Department of Treasury (the "Regulations"), current positions of
the Internal Revenue Service (the "IRS") as
<PAGE>
Board of Directors of
MID PENN BANCORP, INC. and
MINERS BANK OF LYKENS
____________ 1998
Page 2
contained in published Revenue Rulings and Procedures, current published
administrative positions of the IRS, and existing court decisions, all as in
effect as of this date and each of which is subject to change at any time.
Our opinions are based upon and assume the following Factual Background and
Assumptions relating to the merger transaction:
I. Factual Background
A. The Bank is a Pennsylvania chartered commercial bank. The Bank is a
full-service commercial bank, and commenced operations on March 20,
1872, Its principal place of business is located at 550 Main Street,
Lykens, Dauphin County, Pennsylvania. The Bank is authorized to issue
15,000 shares of common stock, par value $5.00 per share, of which on
June 11, 1998, 14,825 shares were issued and outstanding (the "Bank
Common Stock"). The Bank has approximately 291 shareholders. The Bank
Common Stock is not publicly traded in any established market and,
therefore, no price quotes are readily available. The common stock is
the only class of security, authorized or outstanding, of the Bank.
Recent sales of the Bank Common Stock have occurred solely between
individuals in limited over the counter transactions and in direct,
privately negotiated transactions. The most recent sale prior to the
public announcement of the merger on January 9, 1998, as to which
management of the Bank is aware of the sales price, occurred on
December 11, 1997 at a price of One Hundred Sixty- Five Dollars and
Twenty-five Cents ($165.25) per share and involved a total of 422
shares.
B. The Surviving Bank is a Pennsylvania chartered banking institution
which was acquired by the Holding Company on December 31, 1991. On the
Effective Date of the merger, the shares of the Bank Common Stock then
outstanding and eligible for conversion will be converted into shares
of the Holding Company's common stock pursuant to the Plan of
Reorganization.
C. The Holding Company is a business corporation organized on August 14,
1991, under the laws of the Commonwealth of Pennsylvania. The Holding
Company is solely organized to engage in the business and activities
associated with bank holding company's. The Holding Company is
authorized to issue 10,000,000 shares of common stock, par value $1.00
per share, of which on April 28, 1998, 2,607,552 shares were issued
and outstanding (the "Holding Company Common Stock"). Each share of
the Bank Common Stock, then issued and outstanding will
<PAGE>
Board of Directors of
MID PENN BANCORP, INC. and
MINERS BANK OF LYKENS
____________ 1998
Page 3
automatically be converted into and become the right to receive ten
(10) shares of Holding Company Common Stock. Subject to the
anti-dilutive provision of Section 2.1(b), of the Plan of
Reorganization, the aggregate number of shares of the Holding Company
to be issued in exchange of Bank Common Stock shall not exceed 148,250
shares.
D. In accordance with the Pennsylvania Banking Code of 1965, as amended
("Banking Code"), the Bank will merge with and into the Surviving
Bank. Upon the effective date of the merger: (a) the separate
corporate existence of the Bank will terminate; (b) the Surviving Bank
will acquire all of the assets and assume all of the liabilities of
the Bank; and (c) the Surviving Bank will continue to carry on the
banking business previously carried on by the Bank at the same
principal offices. The approval of shareholders owning at least
two-thirds of the outstanding stock of both the Bank and the Surviving
Bank are required by law to approve the merger.
E. The shareholders of the Bank will be entitled to receive ten (10)
shares of Holding Company Common Stock for each share of the Bank
Common Stock held by the shareholder on the effective date of the
merger.
F. Dissenters to the merger transaction, if any, will receive cash for
their shares provided by the Bank, pursuant to the Banking Code and
Subchapter D of Chapter 15 of the Pennsylvania Business Corporation
Law of 1988, as amended (15 C.S. ss.1571, et seq.).
II. Assumptions
A. The Bank proposes to merge with and into the Surviving Bank in
order to: (1) allow the Bank to acquire access to enhanced
management support systems and specialized banking services
thereby expanding services to their customers, and (2) allow
the Holding Company, through the Surviving Bank, to expand its
market area and give it the ability, through the Surviving
Bank, to offer its products and services in Lykens,
Pennsylvania.
B. The fair market value of the Holding Company Common Stock and
other consideration received by each shareholder of the Bank
will be approximately equal to the fair market value of the
Bank Common Stock surrendered in exchange.
<PAGE>
Board of Directors of
MID PENN BANCORP, INC. and
MINERS BANK OF LYKENS
____________ 1998
Page 4
C. There is no plan or intention by the shareholders of Bank who own
one percent (1%) or more of the Bank Common Stock, and to the
best of the knowledge of the management of Bank, there is no plan
or intention on the part of the remaining shareholders of Bank to
sell, exchange or otherwise dispose of a number of shares of
Holding Company Common Stock received in the transaction that
would reduce the Bank shareholders' ownership of Holding Company
Common Stock to a number of shares having a value, as of the date
of the transaction, of less than fifty percent (50%) of the value
of all of the formerly outstanding Bank Common Stock as of the
same date. For purposes of this assumption, shares of Bank Common
Stock exchanged for cash or other property, surrendered by
dissenters or exchanged for cash in lieu of fractional shares of
Holding Company Common Stock, are and will be treated as
outstanding Bank Common Stock on the date of the transaction, and
shares of Bank Common Stock and shares of Holding Company Common
Stock held by the Bank shareholders and otherwise sold, redeemed,
or disposed of prior or subsequent to the merger transaction will
be considered.
D. The Surviving Bank will acquire at least ninety percent (90%) of
the fair market value of the net assets and at least seventy
percent (70%) of the fair market value of the gross assets held
by the Bank immediately prior to the merger transaction. For the
purposes of this assumption, amounts paid by the Bank to
dissenters, amounts paid by the Bank to shareholders who receive
cash or other property, assets of the Bank used to pay its
reorganization expenses, and all redemptions and distributions
(except for regular, normal dividends) made by the Bank
immediately preceding the transfer, are and will be included as
assets of the Bank held immediately prior to the merger
transaction.
E. Prior to the merger transaction, the Holding Company will be in
control of the Surviving Bank within the meaning of Code Section
368(c)(1).
F. Following the transaction, the Surviving Bank will not issue
additional shares of its stock that would result in the Holding
Company losing control of the Surviving Bank within the meaning
of Code Section 368(c)(1).
G. The Holding Company has no plan or intention to redeem or
otherwise reacquire any of its stock to be issued in the merger
transaction.
H. The Holding Company has no plan or intention to liquidate the
Surviving Bank; to merge the Surviving Bank with and into another
corporation, other than the
<PAGE>
Board of Directors of
MID PENN BANCORP, INC. and
MINERS BANK OF LYKENS
____________ 1998
Page 5
Bank as hereinabove described; to sell or otherwise dispose of
the stock of the Surviving Bank; or to cause the Surviving Bank
to sell or otherwise dispose of any of the assets of the Bank to
be acquired in the merger transaction, except for dispositions
made in the ordinary course of business, and transfers described
in Code Section 368(a)(2)(C).
I. The liabilities of the Bank to be assumed by the Surviving Bank
and the liabilities to which the transferred assets of the Bank
are subject were incurred by the Bank in the ordinary course of
its business, and are associated with the assets to be
transferred.
J. Following the merger transaction, the Surviving Bank will
continue the historic business of the Bank or use a significant
portion of the Bank's business assets in a business.
K. The Holding Company, the Bank, the Surviving Bank and the
shareholders of the Bank will pay their respective expenses, if
any, incurred in connection with the merger transaction.
L. There is no intercorporate indebtedness existing between the
Holding Company and the Bank or between the Surviving Bank and
the Bank that was issued or acquired, or will be settled at a
discount.
M. No two parties to the merger transaction are investment companies
as defined in Code Sections 368(a)(2)(F)(iii) and (iv).
N. The Bank is not under the jurisdiction of a court in a Title 11
or similar case within the meaning of Code Section 368(a)(3)(A).
O. The adjusted basis and fair market value of the Bank's assets to
be transferred to the Surviving Bank will, in each instance,
equal or exceed the sum of the Bank's liabilities to be assumed
by the Surviving Bank, plus the liabilities, if any, to which the
transferred assets are subject.
P. No stock of the Surviving Bank will be issued to any of the
shareholders of the Bank in the merger transaction.
Q. There is no larger integrated transaction of which the merger
transaction constitutes only one step.
<PAGE>
Board of Directors of
MID PENN BANCORP, INC. and
MINERS BANK OF LYKENS
____________ 1998
Page 6
R. The expenses of the merger transaction and the amount to be paid
to dissenters, if any, will not exceed ten percent (10%) of the
fair market value of the net assets of the Bank.
S. Within the past three (3) years, there were no redemptions of the
Bank Common Stock made in contemplation of this or any other
merger transaction.
T. There are no fractional shares of the Bank Common Stock
outstanding and no fractional shares will be issued in the merger
transaction.
U. The Surviving Bank has no plan or intention of disposing of the
assets of the Bank to be received by it in the merger
transaction, other than in the ordinary course of business.
V. No dividends or distributions have been or will be made with
respect to any of the Bank Common Stock immediately prior to the
merger transaction.
W. None of the compensation received by any shareholder-employees of
the Bank will be separate consideration for, or allocable to, any
of their shares of the Bank Common Stock; none of the shares of
the Holding Company Common Stock received by any
shareholder-employees will be separate consideration for, or
allocable to, any employment agreement; and the compensation paid
to any shareholder-employees will be for services actually
rendered and will be commensurate with amounts paid to third
parties bargaining at arm's-length for similar services.
X. There is no present plan or intention to issue any of the
authorized common stock of the Holding Company in excess of the
amounts described in this letter in the merger transaction.
Y. Prior to the effective date of the merger transaction, neither
the Holding Company nor the Surviving Bank held either directly
or indirectly any stock or securities in the Bank.
Z. The payment of cash in lieu of fractional shares of the Holding
Company Common Stock is solely for the purpose of avoiding the
expense and inconvenience to the Holding Company of issuing
fractional shares and does not represent separately bargained-for
consideration. The total cash consideration that will be paid in
the proposed transaction to the shareholders of the Bank instead
of
<PAGE>
Board of Directors of
MID PENN BANCORP, INC. and
MINERS BANK OF LYKENS
____________ 1998
Page 7
issuing fractional shares of the Holding Company Common Stock
will not exceed one percent (1%) of the total consideration that
will be issued in the proposed transaction to the Shareholders of
the Bank in exchange for their shares of Bank Common Stock. Each
shareholder of the Bank will be aggregated with no shareholder
receiving cash in an amount greater than the value of one (1)
share of the Holding Company Common Stock.
Based on the foregoing and subject to and specifically relying upon the
aforesaid Factual Background and Assumptions and other matters herein referred
to, it is our opinion that:
1. Provided the merger of the Bank with and into the Surviving Bank
qualifies as a merger under the applicable federal and state
laws, the acquisition by the Surviving Bank of substantially all
of the assets of the Bank in exchange for the Holding Company
Common Stock and the assumption by the Surviving Bank of all of
the liabilities of the Bank plus liabilities to which the
acquired assets of the Bank may be subject, will qualify as a
reorganization within the meaning of Code Sections 368(a)(1)(A)
and (a)(2)(D). For purposes of this opinion, "substantially all"
means at least ninety percent (90%) of the fair market value of
the net assets and at least seventy percent (70%) of the fair
market value of the gross assets of the Bank. The Holding
Company, the Surviving Bank, and the Bank will each be "a party
to a reorganization" within the meaning of Code Section 368(b).
2. No gain or loss will be recognized to either the Holding Company,
the Surviving Bank or the Bank on the transfer of substantially
all of Bank's assets to the Surviving Bank in exchange for the
Holding Company Common Stock and the assumption by the Surviving
Bank of all of the liabilities of the Bank plus the liabilities
to which the acquired assets of the Bank may be subject.
3. No gain or loss will be recognized to the shareholders of the
Bank upon the exchange of their Bank Common Stock solely for the
Holding Company Common Stock pursuant to the Plan of
Reorganization and Agreement of Merger, except in respect of cash
which is received in lieu of the issuance of fractional shares of
the Holding Company Common Stock and for any shareholder of the
Bank who receives payment in cash as a dissenting shareholder.
<PAGE>
Board of Directors of
MID PENN BANCORP, INC. and
MINERS BANK OF LYKENS
____________ 1998
Page 8
4. In the case of cash received by any shareholder of the Bank in
lieu of the issuance of a fractional share of Holding Company
Common Stock, taxable gain or loss will be recognized by such
shareholder to the extent of the difference between the amount
the cash received and the adjusted tax basis of such fractional
share interest.
5. In the case of cash received by any shareholder of the Bank who
exercises dissenter's rights, taxable gain or loss will be
recognized by such shareholder to the extent of the difference
between the amount of the cash received and the adjusted tax
basis of the shares as to which dissenter's rights are exercised,
provided that the purchase is a complete redemption of the
shareholder's stock ownership interest in the Bank.
6. The basis of the shares of the Holding Company Common Stock to be
received by the shareholders of the Bank will be the same as the
basis of the shares of Bank Common Stock exchanged therefor.
7. The holding period of the shares of the Holding Company Common
Stock to be received by the shareholders of the Bank will include
the period during which the Bank Common Stock, surrendered in
exchange therefor, was held by the shareholders of the Bank,
provided the Bank Common Stock was held as a capital asset in the
hands of the shareholders of the Bank at the time of the
exchange.
8. Surviving Bank, as the surviving bank to the merger, will
carry-over and take into account all accounting items and tax
attributes, and tax basis and holding periods of the assets of
the Bank.
The opinions set forth in this letter are given and based upon the
existence of the assumed facts as hereinabove set forth, all as of the date of
this letter. Should any facts or assumptions be otherwise than as hereinabove
set forth or change after the date of this letter, no opinion is made or
expressed with respect thereto or as to the legal, tax or other consequences
thereof. We assume no obligation to investigate, research or determine any facts
or laws, rules or regulations occurring, existing or in effect after the date
hereof, or to update or supplement any of the opinions herein expressed to
reflect any facts or circumstances or changes in law that hereafter may occur or
come to our attention.
<PAGE>
Board of Directors of
MID PENN BANCORP, INC. and
MINERS BANK OF LYKENS
____________ 1998
Page 9
The Holding Company, the Bank, the Surviving Bank and the shareholders of
the Bank may rely upon this opinion letter. No other person, whether natural or
otherwise, may rely upon this opinion letter, and it may not be disclosed to any
other persons without our prior written consent.
Sincerely,
SHUMAKER WILLIAMS, P.C.
By:___________________________________
Nicholas Bybel, Jr.
Exhibit 23(b)
INDEPENDENT AUDITOR'S CONSENT
We hereby consent to the incorporation by reference in this Registration
Statement on Form S-4 of Mid Penn Bancorp, Inc. (the "Registrant"), filed with
the Commission in connection with the registration of 148,250 shares of common
stock, par value $1.00 per share, of our report, dated January 13, 1998,
relating to the financial statements of the Registrant and Subsidiary included
in its Annual Report on Form 10-K for the year ended December 31, 1997. We also
consent to the reference to our firm under the caption "Experts" in the Proxy
Statement/ Prospectus.
/s/ Parente, Randolph, Orlando, Carey
& Associates
---------------------------------
April 30, 1998 Parente, Randolph, Orlando, Carey
Williamsport, Pennsylvania & Associates
Exhibit 99.1
MINER'S BANK OF LYKENS
PROXY
SPECIAL MEETING OF SHAREHOLDERS TO BE HELD ON JUNE 11, 1998
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby constitutes and appoints Franklin W. Ruth, Jr.,
Gregory M. Kerwin, Raymond C. Donley and Richard E. Klinger and each or any of
them, proxies of the undersigned, with full power of substitution, to vote all
of the shares of Miners Bank of Lykens (the "Bank") that the undersigned may be
entitled to vote at the Special Meeting of Shareholders of the Bank to be held
at 550 main Street, Lykens, Pennsylvania on Thursday, June 11, 1998, commencing
at 10:00 a.m., prevailing time, and at any adjournment or postponement thereof,
as follows:
1. PROPOSAL TO APPROVE AND ADOPT THE AGREEMENT AND PLAN OF
REORGANIZATION AND RELATED AGREEMENT AND PLAN OF
MERGER.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
The Board of Directors recommends a vote FOR this proposal.
2. POSTPONEMENT OR ADJOURNMENT OF THE SPECIAL MEETING TO ANOTHER TIME
AND/OR PLACE FOR THE PURPOSE OF SOLICITING ADDITIONAL PROXIES, IN THE
EVENT THAT THERE ARE NOT SUFFICIENT VOTES AT THE TIME OF THE SPECIAL
MEETING TO APPROVE THE MERGER PROPOSAL.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
The Board of Directors recommends a vote FOR this proposal.
<PAGE>
3. In their discretion, the proxies are authorized to vote upon such other
business as may properly come before the meeting and any adjournment or
postponement thereof.
THIS PROXY, WHEN PROPERLY SIGNED, WILL BE VOTED IN THE MANNER DIRECTED
HEREIN BY THE UNDERSIGNED SHAREHOLDER. IF NO DIRECTION IS MADE, THIS PROXY WILL
BE VOTED FOR PROPOSAL 1 AND FOR PROPOSAL 2.
Dated: ___________________________________ , 1998
Signature of Shareholder____________________________
Signature of Shareholder____________________________
Number of Shares Held of Record on April 28, 1998:
THIS PROXY MUST BE DATED, SIGNED BY THE SHAREHOLDER AND RETURNED PROMPTLY
TO THE BANK IN THE ENCLOSED ENVELOPE. WHEN SIGNING AS ATTORNEY, EXECUTOR,
ADMINISTRATOR, TRUSTEE OR GUARDIAN, PLEASE GIVE FULL TITLE. IF MORE THAN ONE
TRUSTEE, ALL SHOULD SIGN. IF STOCK IS HELD JOINTLY, EACH OWNER SHOULD SIGN.
