_________________, 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
Board of Directors of
MID PENN BANCORP, INC. and
MINERS BANK OF LYKENS
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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
Board of Directors of
MID PENN BANCORP, INC. and
MINERS BANK OF LYKENS
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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.
Board of Directors of
MID PENN BANCORP, INC. and
MINERS BANK OF LYKENS
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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
Board of Directors of
MID PENN BANCORP, INC. and
MINERS BANK OF LYKENS
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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.
Board of Directors of
MID PENN BANCORP, INC. and
MINERS BANK OF LYKENS
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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
Board of Directors of
MID PENN BANCORP, INC. and
MINERS BANK OF LYKENS
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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.
Board of Directors of
MID PENN BANCORP, INC. and
MINERS BANK OF LYKENS
____________ 1998
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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.
Board of Directors of
MID PENN BANCORP, INC. and
MINERS BANK OF LYKENS
____________ 1998
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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.