<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JANUARY 9, 1998
REGISTRATION NO. 333-
===============================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM S-4
REGISTRATION STATEMENT
UNDER THE SECURITIES ACT OF 1933
FIRSTMERIT CORPORATION
(Exact name of registrant as specified in its charter)
OHIO 6711 34-1339938
(State or other jurisdiction (Primary Standard (I.R.S. Employer
of incorporation or Industrial Identification No.)
organization) Classification Code No.)
III CASCADE PLAZA, AKRON OHIO 44308 (330) 996-6300
(Address, including zip code, and telephone number, including area code,
of Registrant's principal executive offices)
TERRY E. PATTON
SENIOR VICE PRESIDENT AND SECRETARY
FIRSTMERIT CORPORATION
III CASCADE PLAZA, AKRON, OHIO 44308 (330) 996-6300
(Name, address, including zip code, and telephone number, including area code,
of agent for service)
Copies To:
Kevin C. O'Neil Christopher R. Kelly, P.C.
Brouse & McDowell Silver, Freedman & Taff, L.L.P.
500 First National Tower 1100 New York Avenue, N.W., Suite 700
Akron, Ohio 44308 Washington, D.C. 20005
(330) 434-5207 (202) 414-6100
Approximate date of commencement of proposed sale of securities to the public:
AS SOON AS PRACTICABLE AFTER THE EFFECTIVE DATE OF THE REGISTRATION STATEMENT.
If the securities being registered on this Form are being offered in
connection with the formation of a holding company and there is compliance with
General Instruction G, check the following box: [ ]
CALCULATION OF REGISTRATION FEE
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PROPOSED PROPOSED AMOUNT
TITLE OF AMOUNT MAXIMUM MAXIMUM OF
SECURITIES TO BE OFFERING PRICE AGGREGATE REGISTRATION
TO BE REGISTERED REGISTERED(1) PER SHARE(2) OFFERING PRICE(2) FEE
- ------------------------------------------------------------------------------------------------------------
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Common Stock, no par
value(3) 4,300,000 shares $34.94 $120,676,084 $35,599
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- -------------------
(1) Based upon the maximum number of shares of FirstMerit Corporation common
stock, no par value ("FirstMerit Common Stock") that may be issued upon
consummation of the merger described herein.
(2) Calculated in accordance with Rule 457(f)(1) based on the aggregate market
value on January 5, 1998 of the shares of CoBancorp Inc. common stock, no
par value ("CoBancorp Common Stock"), expected to be canceled in connection
with the merger and computed by dividing (i) the product of (a) the average
of the high and low prices of CoBancorp Common Stock as reported by The
Nasdaq Stock Market National Market System on January 5, 1998 ($43.50), and
(b) 3,453,824, representing the maximum number of shares of CoBancorp
Common Stock expected to be canceled in connection with the merger, by (ii)
4,300,000, representing the maximum number of shares of FirstMerit Common
Stock, to be issued in connection with the merger.
(3) Includes associated rights under the FirstMerit Shareholder Rights
Agreement (the "Rights"). Until the occurrence of certain prescribed
events, the Rights are not exercisable, are evidenced by the certificates
representing the FirstMerit Common Stock, and trade with the FirstMerit
Common Stock.
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> 3
COBANCORP INC.
1530 West River Road, North
Elyria, Ohio 44035
[__________], 1998
Dear Fellow Shareholder:
You are cordially invited to attend the special meeting of shareholders
(the "CoBancorp Special Meeting") of CoBancorp Inc. ("CoBancorp") to be held on
[__________], 1998, at 10:00 A.M. (local time) at the Lorain County Community
College, Spitzer Conferencing Center, 1005 North Abbe Road, Elyria, Ohio 44035.
At the CoBancorp Special Meeting, holders of CoBancorp common stock will be
asked to adopt the Agreement of Affiliation and Plan of Merger dated November 2,
1997, by and between FirstMerit Corporation ("FirstMerit") and CoBancorp
("Merger Agreement"). On the date upon which the merger of CoBancorp with and
into FirstMerit (the "Merger") becomes effective, each outstanding share of
CoBancorp common stock (other than shares held by CoBancorp shareholders who
properly perfect dissenters' rights) will be canceled and exchanged for the
right to receive, at the election of the shareholder and subject to the
limitations discussed below, (a) $44.50 in cash, and/or (b) a number of shares
of FirstMerit common stock equal to: (i) if the Average Closing Price (as
defined in the Prospectus and Proxy Statement) of FirstMerit common stock on The
Nasdaq Stock Market National Market System during the period of ten consecutive
trading days ending on the tenth calendar day immediately prior to the effective
time of the Merger is greater than $30.60, $48.53 divided by the Average Closing
Price; (ii) if the Average Closing Price is equal to or greater than $28.05 but
less than or equal to $30.60, 1.586; (iii) if the Average Closing Price is
greater than $22.95 but less than $28,05, $25.50 divided by the Average Closing
Price, multiplied by 1.745; (iv) if the Average Closing Price is equal to or
greater than $20.40 but less than or equal to $22.95, 1.939; or (v) if the
Average Closing Price is less than $20.40, 1.939, subject to the right of
CoBancorp to terminate the Merger Agreement unless FirstMerit agrees that the
Exchange Ratio (as defined below in the Prospectus and Proxy Statement) shall be
calculated by multiplying 1.939 by a factor equal to $20.40 divided by the
Average Closing Price. CoBancorp shareholders may elect to exchange their
CoBancorp common stock for either FirstMerit common stock, $44.50 in cash or a
combination thereof, provided that no less than 30% nor more than 49% of the
total Market Value of the Merger Consideration (as defined in the accompanying
Prospectus and Proxy Statement) will be paid in cash. In certain circumstances,
as set forth in the Merger Agreement and more fully described in the Prospectus
and Proxy Statement, CoBancorp shareholders will not receive in the Merger
FirstMerit common stock and/or cash in amounts consistent with their elections.
Your Board of Directors has concluded that the Merger is in the best
interests of CoBancorp's shareholders and unanimously recommends that CoBancorp
shareholders vote FOR the adoption of the Merger Agreement proposal. The terms
of the proposed Merger, and important information relating to CoBancorp,
FirstMerit and the combined company, are explained in the accompanying
Prospectus and Proxy Statement. Please give this document your prompt attention.
The Board of Directors has received an opinion from Hovde Financial,
Inc. ("Hovde"), CoBancorp's financial advisor, to the effect that, as of the
date the Merger Agreement was signed, the Merger consideration was fair to the
holders of CoBancorp common stock from a financial point of view.
TO APPROVE THE PROPOSED MERGER, IT WILL BE NECESSARY TO OBTAIN THE AFFIRMATIVE
VOTE OF THE HOLDERS OF A MAJORITY OF THE OUTSTANDING SHARES OF COBANCORP COMMON
STOCK, THE AFFIRMATIVE VOTE OF A MAJORITY OF THE SHARES ENTITLED TO VOTE IN THE
ELECTION OF DIRECTORS, AS WELL AS A MAJORITY VOTE OF SUCH SHARES EXCLUDING ANY
SHARES HELD BY CERTAIN INTERESTED SHAREHOLDERS. AN ABSTENTION OR FAILURE TO VOTE
HAS THE SAME EFFECT AS A VOTE AGAINST THE PROPOSED MERGER. IT IS, THEREFORE,
IMPORTANT THAT YOU VOTE ON THE MERGER.
A proxy card is enclosed for your use. Please indicate your voting
instructions and sign, date and mail the proxy card promptly in the postage-paid
envelope provided. Whether or not you plan to attend the CoBancorp Special
Meeting in person, it is important that you return the enclosed proxy card so
that your shares of CoBancorp common stock will be voted.
<PAGE> 4
CoBancorp shareholders are entitled to dissenters rights with respect
to their shares of CoBancorp common stock as more fully discussed in the
accompanying Prospectus and Proxy Statement.
Thank you for your attention to this important matter.
Sincerely,
John S. Kreighbaum
Chairman of the Board,
President and Chief Executive Officer
<PAGE> 5
COBANCORP INC.
1530 West River Road, North
Elyria, Ohio 44035
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NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
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Notice is hereby given that a special meeting (the "CoBancorp Special
Meeting") of holders of the common stock, no par value of CoBancorp Inc., an
Ohio corporation ("CoBancorp") will be held on [__________], 1998, at 10:00 A.M.
(local time) at the Lorain County Community College, Spitzer Conferencing
Center, 1005 North Abbe Road, Elyria, Ohio 44035, for the following purposes:
1. To consider and vote upon a proposal to approve and adopt the
Agreement of Affiliation and Plan of Merger dated as of
November 2, 1997 (the "Merger Agreement"), by and between
FirstMerit Corporation and CoBancorp, pursuant to Sections
1701.78 and 1701.831 of the Ohio Revised Code; and
2. To transact such other business as may properly come before
the CoBancorp Special Meeting or any adjournments or
postponements thereof.
The Board of Directors of CoBancorp has set the close of business on
[__________], 1998, as the record date for the determination of shareholders
entitled to notice of and vote at the CoBancorp Special Meeting and at any
adjournments or postponements thereof.
A copy of the Merger Agreement is attached to the accompanying
Prospectus and Proxy Statement as Appendix A.
Your vote is important regardless of the number of shares you own. Each
shareholder, even though he may plan to attend the CoBancorp Special Meeting in
person, is requested to complete, date, sign and return the enclosed proxy card
without delay in the postage-paid envelope provided.
By Order of the Board of Directors
Lois E. Gunning
Corporate Secretary
Elyria, Ohio
[__________], 1998
THE BOARD OF DIRECTORS OF COBANCORP RECOMMENDS THAT YOU VOTE FOR
THE APPROVAL AND ADOPTION OF THE MERGER AGREEMENT.
PLEASE DO NOT SEND YOUR COBANCORP STOCK CERTIFICATES
AT THIS TIME
<PAGE> 6
PROXY STATEMENT
OF
COBANCORP INC.
FOR THE SPECIAL MEETING OF SHAREHOLDERS
TO BE HELD ON [__________], 1998
--------------------------
PROSPECTUS
OF
FIRSTMERIT CORPORATION
COMMON STOCK, NO PAR VALUE
(Not to Exceed 4,300,000 Shares)
This Prospectus and Proxy Statement relates to the proposed merger of
CoBancorp Inc., an Ohio corporation ("CoBancorp") with and into FirstMerit
Corporation, an Ohio Corporation ("FirstMerit"), as contemplated by the
Agreement of Affiliation and Plan of Merger dated November 2, 1997 (the "Merger
Agreement"), by and between FirstMerit and CoBancorp. The Merger Agreement is
included as Appendix A and incorporated herein by reference.
This Prospectus and Proxy Statement is being furnished to the holders
of common stock, no par value, of CoBancorp ("CoBancorp Common Stock") in
connection with the solicitation of proxies by the Board of Directors of
CoBancorp for use at a special meeting of CoBancorp's shareholders to be held at
10:00 A.M. on [__________], 1998, at the Lorain County Community College,
Spitzer Conferencing Center, 1005 North Abbe Road, Elyria, Ohio 44035 and at any
adjournments or postponements thereof (the "CoBancorp Special Meeting").
This Prospectus and Proxy Statement also constitutes a Prospectus of
FirstMerit in respect of up to 4,300,000 shares of FirstMerit common stock, no
par value, which includes the associated Rights (as defined below) ("FirstMerit
Common Stock"), to be issued in connection with the proposed merger (the
"Merger") of CoBancorp with and into FirstMerit. Upon consummation of the
Merger, each outstanding share of CoBancorp Common Stock, other than shares held
by CoBancorp shareholders who properly perfect dissenters' rights, will be
exchanged for shares of FirstMerit Common Stock and/or cash, at the election of
the shareholder (and subject to certain limitations). See "TERMS OF MERGER --
Conversion of CoBancorp Common Stock;" "Procedures for Election of Cash and/or
FirstMerit Common Stock" and " -- Allocation."
The outstanding shares of FirstMerit Common Stock are, and the shares
of FirstMerit Common Stock offered hereby will be, quoted on The Nasdaq Stock
Market National Market System ("Nasdaq/NMS"). The closing sales price of
FirstMerit Common Stock reported on Nasdaq/NMS on [_____________], 1998 was
$[____] per share.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION, NOR HAS
THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS
PROSPECTUS AND PROXY STATEMENT. ANY REPRESENTATION
TO THE CONTRARY IS A CRIMINAL OFFENSE.
THE SECURITIES OF FIRSTMERIT OFFERED HEREBY ARE NOT
SAVINGS ACCOUNTS OR BANK DEPOSITS, ARE NOT OBLIGATIONS
OF OR GUARANTEED BY ANY BANKING OR NONBANKING AFFILIATE
OF FIRSTMERIT AND ARE NOT INSURED BY THE
FEDERAL DEPOSIT INSURANCE CORPORATION OR ANY OTHER
GOVERNMENTAL AGENCY.
This Prospectus and Proxy Statement shall not constitute a
prospectus for public reoffering of the FirstMerit Common
Stock issuable pursuant to the Merger.
THE DATE OF THIS PROSPECTUS AND PROXY STATEMENT IS [__________], 1998.
<PAGE> 7
TABLE OF CONTENTS
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PAGE
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AVAILABLE INFORMATION .............................................................................................
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE ...................................................................
FORWARD LOOKING STATEMENTS ........................................................................................
SUMMARY ...........................................................................................................
Introduction .............................................................................................
Parties to the Merger ....................................................................................
Terms of Merger ..........................................................................................
Reasons for Merger .......................................................................................
Opinion of CoBancorp's Financial Advisor .................................................................
Recommendation of Directors ..............................................................................
CoBancorp Special Meeting ................................................................................
Interests of Certain Persons in Merger ...................................................................
Comparison of Rights of Holders of FirstMerit Common Stock and CoBancorp Common Stock ....................
Market Prices for FirstMerit and CoBancorp Common Stock ..................................................
Comparative Unaudited Per Share Data .....................................................................
INTRODUCTION ......................................................................................................
ACQUIRING PERSON STATEMENT ........................................................................................
SPECIAL MEETING OF COBANCORP SHAREHOLDERS .........................................................................
Date, Time and Place .....................................................................................
Purpose of Meeting .......................................................................................
Record Date; Shares Outstanding and Entitled to Vote .....................................................
Vote Required ............................................................................................
Voting; Solicitation and Revocation of Proxies ...........................................................
Quorum; Broker Non-Votes .................................................................................
BACKGROUND OF AND REASONS FOR MERGER ..............................................................................
Reasons for Merger -- FirstMerit .........................................................................
Background of Merger -- CoBancorp ........................................................................
Reasons for Merger -- CoBancorp ..........................................................................
Opinion of CoBancorp's Financial Advisor .................................................................
Recommendation of CoBancorp's Board of Directors .........................................................
TERMS OF MERGER ...................................................................................................
General ..................................................................................................
Conversion of CoBancorp Common Stock; Election by CoBancorp Shareholders of Cash and/or
FirstMerit Stock .......................................................................................
Procedure for Election of Cash and/or FirstMerit Common Stock ............................................
Allocation ...............................................................................................
No Effect on FirstMerit Common Stock .....................................................................
No Fractional Shares of FirstMerit Common Stock to be Issued .............................................
Rights of Holders of CoBancorp Stock Certificates Prior to Surrender .....................................
Lost Certificates ........................................................................................
Treatment of Stock Options Outstanding Under CoBancorp Stock Option Plans ................................
Conduct of FirstMerit's Business Pending the Merger ......................................................
Conduct of CoBancorp's Business Pending the Merger .......................................................
Conditions to the Merger .................................................................................
Regulatory Approvals .....................................................................................
Actions Required for Regulatory Approval .................................................................
Waiver of Conditions, Amendment, or Termination of the Merger Agreement ..................................
Effective Time ...........................................................................................
CoBancorp Stock Purchase Option ..........................................................................
Interests of Certain Persons in Merger ...................................................................
Employees of CoBancorp ...................................................................................
</TABLE>
<PAGE> 8
TABLE OF CONTENTS (CONTINUED)
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PRICE RANGE OF COMMON STOCK AND DIVIDENDS .........................................................................
Market Prices ............................................................................................
Dividends ................................................................................................
CERTAIN FEDERAL INCOME TAX CONSEQUENCES ...........................................................................
ACCOUNTING TREATMENT OF MERGER ....................................................................................
RESALES OF FIRSTMERIT COMMON STOCK RECEIVED IN MERGER .............................................................
FIRSTMERIT'S ARTICLES OF INCORPORATION AND CODE OF REGULATIONS ....................................................
RIGHTS OF DISSENTING SHAREHOLDERS .................................................................................
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS ...................................................
BUSINESS OF FIRSTMERIT ............................................................................................
Overview .................................................................................................
Subsidiaries .............................................................................................
Subsidiary Operations ....................................................................................
Recent Acquisitions ......................................................................................
BUSINESS OF COBANCORP .............................................................................................
Overview .................................................................................................
Recent Acquisitions ......................................................................................
REGULATORY MATTERS ................................................................................................
General ..................................................................................................
Regulation of Bank Holding Companies .....................................................................
Regulation of National Banks .............................................................................
Federal Deposit Insurance Corporation ....................................................................
Acquisitions of Savings Associations by Bank Holding Companies ...........................................
Interstate Banking and Branching .........................................................................
Capital ..................................................................................................
Prompt Corrective Regulatory Action ......................................................................
Limits on Dividends and Other Payments ...................................................................
Transactions with Affiliates .............................................................................
DESCRIPTION OF FIRSTMERIT CAPITAL STOCK ...........................................................................
FirstMerit Common Shares .................................................................................
FirstMerit Preferred Stock ...............................................................................
COMPARISON OF FIRSTMERIT AND COBANCORP CAPITAL STOCK ..............................................................
FirstMerit Common Stock and CoBancorp Common Stock .......................................................
Voting Rights ............................................................................................
Shareholder Rights Plan ..................................................................................
Ohio Anti-Takeover Statutes ..............................................................................
Amendment to Charter Documents ...........................................................................
Directors ................................................................................................
Dividends ................................................................................................
Repurchases ..............................................................................................
Preferred Stock ..........................................................................................
Transfer Agent ...........................................................................................
Anti-Takeover Effect .....................................................................................
LEGAL MATTERS .....................................................................................................
EXPERTS ...........................................................................................................
APPENDICES
A. Agreement of Affiliation and Plan of Merger
B. Fairness Opinion of Hovde Financial, Inc.
C. Ohio Dissenters' Rights Statute
</TABLE>
<PAGE> 9
AVAILABLE INFORMATION
Each of FirstMerit and CoBancorp is subject to the informational requirements of
the Securities Exchange Act of 1934, as amended (the "Exchange Act"), and in
accordance therewith files reports, proxy statements, and other information with
the Securities and Exchange Commission (the "Commission"). FirstMerit has filed
with the Commission a Registration Statement on Form S-4 (the "Registration
Statement") under the Securities Act of 1933, as amended (the "Securities Act"),
covering the FirstMerit securities to be issued to CoBancorp shareholders in the
Merger. As permitted by the rules and regulations of the Commission, this
Prospectus and Proxy Statement omits certain information, exhibits and
undertakings contained in the Registration Statement. Reference is made to the
Registration Statement and to the exhibits thereto for further information.
Statements contained herein concerning such documents are not necessarily
complete and, in each instance, reference is made to the copy of such document
filed as an exhibit to the Registration Statement. Each such statement is
qualified in its entirety by such reference.
The Registration Statement and the exhibits thereto, as well as the reports,
proxy statements and other information filed with the Commission by FirstMerit
and CoBancorp under the Exchange Act, may be inspected and copied at the public
reference facilities maintained by the Commission at Room 1024, Judiciary Plaza,
450 Fifth Street, N.W., Washington, D.C. 20549, and at the regional offices of
the Commission located at the Citicorp Center, 500 West Madison Street, Suite
1400, Chicago, Illinois 60661 and 7 World Trade Center, 13th Floor, New York,
New York 10048. Copies of such material may also be obtained at prescribed rates
from the Public Reference Section of the Commission at 450 Fifth Street, N.W.,
Washington, D.C. 20549. The Commission maintains an Internet worldwide web site
that contains reports, proxy and information statements and other information
regarding issuers, like FirstMerit and CoBancorp, who file electronically with
the Commission. The address of that site is http://www.sec.gov. In addition,
reports, proxy statements and other information concerning FirstMerit and
CoBancorp may be inspected at the offices of the National Association of
Securities Dealers, Inc., 1735 K Street, N.W., Washington, D.C. 20006.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
This Prospectus and Proxy Statement incorporates certain documents of FirstMerit
by reference which are not presented herein or delivered herewith. These
documents (without exhibits, unless such exhibits are specifically incorporated
by reference into this Prospectus and Proxy Statement) are available without
charge to each person, including any beneficial owner, to whom a copy of this
Prospectus and Proxy Statement is delivered, upon written or oral request.
Requests for such documents should be directed to Terry E. Patton, Secretary,
FirstMerit Corporation, III Cascade Plaza, Akron, Ohio 44308 (telephone (330)
996-6300).
This Prospectus and Proxy Statement incorporates certain documents of CoBancorp
by reference which are not presented herein or delivered herewith. These
documents (without exhibits, unless such exhibits are specifically incorporated
by reference into this Prospectus and Proxy Statement) are available without
charge to each person, including any beneficial owner, to whom a copy of this
Prospectus and Proxy Statement is delivered, upon written or oral request.
Requests for such documents should be directed to Lois E. Gunning, Corporate
Secretary, CoBancorp Inc., 1530 West River Road, North, Elyria, Ohio 44035
(telephone (440) 284-6422).
FirstMerit or CoBancorp, as the case may be, will send the requested documents
by first-class mail within one business day of the receipt of the request. In
order to ensure timely delivery of the documents, any request should be made by
[________________], 1998. Persons requesting copies of exhibits to such
documents that are not specifically incorporated by reference in such documents
will be charged the costs of reproduction and mailing of such exhibits.
The following documents filed with the Commission under the Exchange Act by
FirstMerit are hereby incorporated by reference into this Prospectus and Proxy
Statement: (a) FirstMerit's Annual Report on Form 10-K for the year ended
December 31, 1996, as amended by Form 10-K/A filed on April 30, 1997; (b) the
portions of FirstMerit's Proxy Statement for the Annual Meeting of Shareholders
held April 9, 1997 that have been incorporated by reference in the FirstMerit
Form 10-K for the year ended December 31, 1996; (c) FirstMerit's Quarterly
Reports on Form 10-Q for the quarters ended March 31, 1997, June 30, 1997 and
September 30, 1997; (d) FirstMerit's Current Report on Form 8-K filed on
November 12, 1997; (e) the description of FirstMerit Common Stock contained in
(i) FirstMerit's Registration Statement on Form S-14 (No. 2-73592), filed with
the Commission on August 5, 1981 and incorporated by reference in FirstMerit's
current report on Form 8-K, filed with the Commission on January 15, 1982, in
lieu of Form 8-B, to report FirstMerit's status as a successor issuer pursuant
to Rule 12g-3(a) (file no. 0-10161), (ii) amendments updating such description
filed with the Commission on Form 10-Q for the quarter ended June 30, 1984 and
on Form 8-K dated May 11, 1988; and (iii) the description of the rights issued
pursuant to the FirstMerit Shareholders Rights Agreement, dated as of dated
October 23, 1993, by and between FirstMerit and FirstMerit Bank, N.A., as
rights agent, contained in FirstMerit's
<PAGE> 10
Registration Statement on Form 8-A with respect thereto dated November 1, 1993,
as amended and restated and filed on July 18, 1996; (and any further amendment
or report filed for the purpose of updating the description).
The following documents filed with the Commission under the Exchange Act by
CoBancorp are hereby incorporated by reference into this Prospectus and Proxy
Statement: (a) CoBancorp's Annual Report on Form 10-K for the year ended
December 31, 1996; (b) the portions of CoBancorp's Proxy Statement for the
Annual Meeting of Shareholders held April 16, 1997 that have been incorporated
by reference in the CoBancorp Form 10-K for the year ended December 31, 1996;
(c) CoBancorp's Quarterly Reports on Form 10-Q for the quarters ended March 31,
1997, June 30, 1997 and September 30, 1997; (d) CoBancorp's Current Reports on
Form 8-K filed on March 13, 1997 and November 14, 1997; and (e) the description
of the CoBancorp capital stock contained in CoBancorp's Registration Statement
on Form 8-A with respect thereto dated February 4, 1985 (and any amendment or
report filed for the purpose of updating the description).
All documents filed by FirstMerit and CoBancorp under Sections 13(a), 13(c), 14
or 15(d) of the Exchange Act after the date of this Prospectus and Proxy
Statement and prior to the date of the CoBancorp Special Meeting shall be deemed
to be incorporated by reference in this Prospectus and Proxy Statement and to be
a part hereof from the date of filing such documents. Any statement contained
herein or in a document incorporated or deemed to be incorporated by reference
herein shall be deemed to be modified or superseded for purposes of this
Prospectus and Proxy Statement to the extent that a statement contained herein
or in any other subsequently filed document which is also incorporated or deemed
to be incorporated by reference herein modifies or supersedes such statement.
Any such statement, as so modified or superseded, shall not be deemed, except as
so modified or superseded, to constitute a part of this Prospectus and Proxy
Statement. The information relating to FirstMerit and CoBancorp contained in
this Prospectus and Proxy Statement should be read together with the information
in the documents incorporated by reference.
FORWARD LOOKING STATEMENTS
This Prospectus and Proxy Statement contains certain forward-looking statements
with respect to the financial condition, results of operations and business of
FirstMerit following the consummation of the Merger, including statements
relating to the cost savings and other advantages that are expected to be
realized from the Merger, the expected impact of the Merger on FirstMerit's
financial performance and earnings estimates for the combined company (See
"BACKGROUND OF AND REASONS FOR MERGER -- Reasons of Merger -- FirstMerit," and "
- -- Reasons for the Merger -- CoBancorp."). 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: (1) expected cost savings
from the Merger cannot be fully realized or realized within the expected time
frame; (2) greater than expected deposit attrition, customer loss or revenue
loss following the Merger; (3) competitive pressure in the banking industry
increases significantly; (4) greater than expected costs or difficulties related
to regulatory requirements attendant to the consummation of the Merger or the
integration of the businesses of FirstMerit and CoBancorp; (5) changes in the
interest rate environment reduce margins; (6) general economic conditions,
either nationally or regionally, are less favorable than expected, resulting in,
among other things, a deterioration in credit quality; (7) legislation or
regulatory requirements or changes adversely affect the businesses in which the
combined company would be engaged; (8) changes in business conditions and
inflation; and (9) changes in the securities markets. The forward-looking
earnings estimates included in this Prospectus and Proxy Statement have not been
examined or compiled by the independent public accountants of FirstMerit or
CoBancorp nor have such accountants applied any procedures thereto. Accordingly,
such accountants do not express an opinion or any other form of assurance on
them. Further information on other factors which could affect the financial
results of FirstMerit after the Merger is included in the Commission filings
incorporated by reference herein.
NO PERSON IS AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY REPRESENTATION
NOT CONTAINED IN THIS PROSPECTUS AND PROXY STATEMENT AND, IF GIVEN OR MADE, SUCH
INFORMATION OR REPRESENTATION SHOULD NOT BE RELIED UPON AS HAVING BEEN
AUTHORIZED BY FIRSTMERIT OR COBANCORP. THIS PROSPECTUS AND PROXY STATEMENT DOES
NOT CONSTITUTE AN OFFER TO SELL, OR A SOLICITATION OF AN OFFER TO PURCHASE, THE
SECURITIES OFFERED BY THIS PROSPECTUS AND PROXY STATEMENT OR THE SOLICITATION OF
A PROXY IN ANY JURISDICTION IN WHICH IT IS UNLAWFUL TO MAKE SUCH AN OFFER,
SOLICITATION OF AN OFFER, OR PROXY SOLICITATION. NEITHER THE DELIVERY OF THIS
PROSPECTUS AND PROXY
<PAGE> 11
STATEMENT, NOR ANY DISTRIBUTION OF THE SECURITIES OFFERED PURSUANT TO THIS
PROSPECTUS AND PROXY STATEMENT SHALL, UNDER ANY CIRCUMSTANCES, CREATE ANY
IMPLICATION THAT THERE HAS BEEN NO CHANGE IN THE INFORMATION SET FORTH HEREIN OR
IN THE AFFAIRS OF FIRSTMERIT OR COBANCORP OR ANY OF THEIR RESPECTIVE
SUBSIDIARIES SINCE THE DATE OF THIS PROSPECTUS AND PROXY STATEMENT.
ALL INFORMATION CONTAINED OR INCORPORATED IN THIS PROSPECTUS AND PROXY STATEMENT
WITH RESPECT TO FIRSTMERIT WAS SUPPLIED BY FIRSTMERIT AND ALL INFORMATION
CONTAINED OR INCORPORATED IN THIS PROSPECTUS AND PROXY STATEMENT WITH RESPECT TO
COBANCORP WAS SUPPLIED BY COBANCORP. ALTHOUGH NEITHER FIRSTMERIT NOR COBANCORP
HAS ANY KNOWLEDGE THAT WOULD INDICATE THAT ANY STATEMENTS OR INFORMATION
RELATING TO THE OTHER PARTY CONTAINED HEREIN IS INACCURATE OR INCOMPLETE,
NEITHER FIRSTMERIT NOR COBANCORP CAN WARRANT THE ACCURACY OR COMPLETENESS OF
SUCH STATEMENTS OR INFORMATION AS THEY RELATE TO THE OTHER PARTY.
<PAGE> 12
SUMMARY
THE FOLLOWING IS A SUMMARY OF CERTAIN INFORMATION CONTAINED ELSEWHERE IN THIS
PROSPECTUS AND PROXY STATEMENT AND IS NOT INTENDED TO BE A COMPLETE STATEMENT OF
ALL MATERIAL FACTS REGARDING THE MATTERS TO BE CONSIDERED AT THE COBANCORP
SPECIAL MEETING. THIS SUMMARY IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO THE
MORE DETAILED INFORMATION CONTAINED ELSEWHERE IN THIS PROSPECTUS AND PROXY
STATEMENT, THE APPENDICES HERETO AND THE DOCUMENTS REFERRED TO AND INCORPORATED
HEREIN.
INTRODUCTION
The Boards of Directors of FirstMerit and CoBancorp have each
unanimously adopted the Merger Agreement. A copy of the Merger Agreement is
attached hereto as Appendix A. The Merger Agreement provides for the proposed
merger of CoBancorp with and into FirstMerit. The terms of the Merger and
information regarding the CoBancorp Special Meeting and related matters are
summarized below.
PARTIES TO THE MERGER
FIRSTMERIT CORPORATION. FirstMerit is a bank holding company organized
in 1981 under the laws of the State of Ohio and registered under the Bank
Holding Company Act of 1956, as amended ("BHCA"). As of September 30, 1997,
FirstMerit had total consolidated assets of $5.2 billion and total shareholders'
equity of $520.4 million. FirstMerit's principal subsidiaries include FirstMerit
Bank, N.A., Citizens National Bank, Peoples National Bank, Peoples Bank, N.A.,
FirstMerit Credit Life Insurance Company and FirstMerit Community Development
Corporation. On September 30, 1997, FirstMerit and its subsidiaries employed
approximately 2,300 full and part-time employees. See "BUSINESS OF FIRSTMERIT."
FirstMerit's principal business consists of owning and supervising its
subsidiaries which primarily operate in Ashtabula, Cuyahoga, Erie, Geauga, Lake,
Lorain, Medina, Portage, Stark, Summit and Wayne Counties in Ohio. Although
FirstMerit is principally a banking organization, its direct and indirect
nonbanking subsidiaries also provide securities brokerage services, corporate
and personal trust services, equipment lease financing, insurance and other
financial services. FirstMerit directs the overall policies and financial
resources of the subsidiaries, but the day-to-day affairs, including lending
practices, services, and interest rates, are managed by their own officers and
directors, some of whom are also officers and directors of FirstMerit.
FirstMerit Credit Life Insurance engages in underwriting of credit life and
credit accident and health insurance directly related to the extension of credit
by the subsidiary banks to their customers. FirstMerit Community Development
Corporation was organized to further the efforts of the subsidiaries in meeting
the credit needs of their lending communities, and to meet the requirements of
the Community Reinvestment Act. The principal executive offices of FirstMerit
are located at III Cascade Plaza, 7th Floor, Akron, Ohio 44308, and its
telephone number is (330) 996-6300.
COBANCORP INC. CoBancorp is a bank holding company incorporated in 1983
under the laws of the State of Ohio and registered under the BHCA. Headquartered
in Elyria, Ohio, CoBancorp owns all of the outstanding shares of PREMIERBank &
Trust, a commercial bank formed under Ohio law ("PREMIERBank") and Jefferson
Savings Bank, a savings association formed under Ohio law ("Jefferson Savings
Bank"). As of September 30, 1997, CoBancorp had total consolidated assets of
$666.2 million and total shareholders' equity of $58.1 million. PREMIERBank
conducts business through 37 offices located in Crawford, Cuyahoga, Delaware,
Erie, Franklin, Huron, Lorain and Richland Counties, Ohio. Jefferson Savings
Bank conducts business through four offices located in Madison and Lorain
Counties, Ohio. As of September 30, 1997, CoBancorp and its subsidiaries
employed approximately 448 full and part-time employees. See"BUSINESS OF
COBANCORP." The principal executive offices of CoBancorp are located at 1530
West River Road, North, Elyria, Ohio 44035, and its telephone number is (440)
284-6422.
TERMS OF MERGER
STRUCTURE CoBancorp will be merged with and into FirstMerit,
and FirstMerit will be the surviving
12
<PAGE> 13
corporation. See "TERMS OF MERGER -- General." At the
time of the consummation of the Merger, PREMIERBank
and Jefferson Savings Bank will be merged with and
into FirstMerit Bank, N.A., a national bank
subsidiary of FirstMerit ("FirstMerit Bank").
CONVERSION OF Upon consummation of the Merger, at the election of
COBANCORP the CoBancorp shareholders, and subject to the
COMMON STOCK allocation procedures discussed below, each
outstanding share of CoBancorp Common Stock will be
canceled and exchanged for the right to receive
shares of FirstMerit Common Stock and/or cash (the
"Merger Consideration"). Based upon the elections,
and subject to such allocation procedures, each share
of CoBancorp Common Stock (other than shares held by
CoBancorp shareholders who properly perfect
dissenters' rights) will be exchanged for $44.50 in
cash ("Per Share Cash Consideration"), and/or for
shares of FirstMerit Common Stock at an exchange
ratio based upon the average closing price of
FirstMerit Common Stock ("Average Closing Price")
during the ten trading day period ending ten calendar
days prior to the effective time of the Merger
("Pricing Period")("Per Share Stock Consideration").
If a CoBancorp shareholder would receive a fraction
of a share of FirstMerit Common Stock, cash will be
paid in lieu of such fractional share.
The Per Share Cash Consideration is fixed at $44.50,
but the value of the Per Share Stock Consideration
will fluctuate with the value of the FirstMerit
Common Stock. The Average Closing Price for
FirstMerit Common Stock will not be fixed until the
end of the Pricing Period.
The following table shows the relationships between
the Average Closing Price of FirstMerit Common Stock,
the "Exchange Ratio" (the actual number of shares of
FirstMerit Common Stock to be received for each share
of CoBancorp Common Stock) and the "Per Share Value"
(the Average Closing Price multiplied by the Exchange
Ratio) of a share of CoBancorp Common Stock to be
exchanged for FirstMerit Common Stock. The Per Share
Value of the CoBancorp Common Stock is not
necessarily indicative of what the market value per
share of the FirstMerit Common Stock will be at the
Effective Time.
<TABLE>
<CAPTION>
AVERAGE CLOSING PRICE PER SHARE VALUE OF
OF FIRSTMERIT COMMON STOCK EXCHANGE RATIO COBANCORP COMMON STOCK
<S> <C> <C> <C>
MORE THAN $30.60 $48.53 divided by $48.53
the Average Closing
Price
IF $30.60 TO $28.05
$30.60 1.586 $48.53
$30.00 1.586 $47.58
$29.00 1.586 $45.99
$28.05 1.586 $44.50
IF $28.04 TO $22.96
$28.04 1.587 $44.50
$27.00 1.648 $44.50
$26.00 1.711 $44.50
$25.00 1.780 $44.50
$24.00 1.854 $44.50
$22.96 1.938 $44.50
IF $22.95 TO $20.40
$22.95 1.939 $44.50
$22.00 1.939 $42.66
$21.00 1.939 $40.72
</TABLE>
13
<PAGE> 14
<TABLE>
<S> <C> <C> <C>
20.40 1.939 $39.55
LESS THAN $20.40 $20.40 divided by $39.55(1)
the Average Closing
Price, multiplied by
1.939(1)
</TABLE>
-----------------
(1) If the Average Closing Price of FirstMerit Common
Stock is less than $20.40, the Exchange Ratio will be
1.939 unless CoBancorp elects to terminate the Merger
Agreement. If CoBancorp makes such an election,
FirstMerit has the right to fix the Per Share Value
of the Stock Consideration at $39.55 by agreeing to
an Exchange Ratio equal to $20.40 divided by the
Average Closing Price multiplied by 1.939. If
FirstMerit does so, CoBancorp may not terminate the
Merger Agreement.
If the CoBancorp shareholders elect less than 30% or
more than 49% of the Merger Consideration (as defined
below) to be paid in cash, the Merger Agreement
provides that CoBancorp shareholders will have
certain of their elections allocated on a pro rata
basis so that no less than 30% nor more than 49% of
the aggregate "Market Value of the Merger
Consideration" (the sum of (i) the product of the
number of shares of FirstMerit Common Stock to be
issued pursuant to the Merger and the Average Closing
Price and (ii) the aggregate amount of cash payable
pursuant to the Merger) will be paid in cash. See
"TERMS OF MERGER -- Allocation."
ELECTION AND Each CoBancorp shareholder may elect to receive only
ALLOCATION shares of FirstMerit Common Stock in exchange for
PROCEDURES such holder's CoBancorp Common Stock ("Stock
Election Shares"), to elect to receive only cash with
respect to such holder's CoBancorp Common Stock
("Cash Election Shares"), to elect to receive
FirstMerit Common Stock with respect to those shares
of CoBancorp Common Stock designated by the holder as
Stock Election Shares and cash with respect to the
holder's remaining shares of CoBancorp Common Stock,
or to indicate that such holder makes no election
with respect to such holder's CoBancorp Common Stock
("No Election Shares").
Twenty-five days prior to the anticipated
consummation date for the Merger (or on such other
date as FirstMerit and CoBancorp shall mutually
agree), Boston EquiServe, which has been appointed by
FirstMerit as the exchange agent (the "Exchange
Agent" for the Merger), will mail to each CoBancorp
shareholder who is a shareholder of record as of five
business days prior to such mailing date, an election
form (the "Election Form") to be used by each such
shareholder to elect which of his shares of CoBancorp
Common Stock shall be Stock Election Shares, Cash
Election Shares or No Election Shares. In order for
an Election Form to be deemed to be effective, such
Election Form must be properly completed and duly
executed by the CoBancorp shareholder and returned to
the Exchange Agent by 5:00 P.M., Eastern Time, on the
20th day following the mailing date of the Election
Form (or such other time and date as FirstMerit and
CoBancorp may mutually agree) (the "Election
Deadline"). FirstMerit and CoBancorp currently
anticipate that the consummation time for the Merger
(the "Effective Time") will occur on [________],
1998. Based on such anticipated Effective Time, the
Exchange Agent would mail the Election Forms and the
accompanying letters of transmittal on approximately
[__________], 1998 to each CoBancorp shareholder who
is a shareholder of record as of [________], 1998. In
addition, based on such anticipated Effective Time,
the Election Deadline would be 5:00 P.M., Eastern
Time, on [_________], 1998.
Any shares of CoBancorp Common Stock with respect to
which an effective, properly completed Election Form
has not been submitted to the Exchange Agent by the
Election
14
<PAGE> 15
Deadline will be deemed to be No Election Shares. An
Election Form will be deemed properly completed only
if accompanied by one or more certificates (or
customary affidavits and indemnification regarding
the loss or destruction of such certificates or the
guaranteed delivery of such certificates)
representing all shares of CoBancorp Common Stock
covered by such Election Form, together with duly
executed transmittal materials included with the
Election Form at or prior to the Election Deadline.
In the event an Election Form is revoked prior to the
Election Deadline, the shares of CoBancorp Common
Stock represented by such Election Form shall become
No Election Shares and FirstMerit will cause the
certificates representing CoBancorp Common Stock to
be promptly returned without charge to the person
submitting the Election Form upon written request to
that effect from the person who submitted the
Election Form.
The actual Merger Consideration that will be paid to
each CoBancorp shareholder upon consummation of the
Merger may differ from the form of Merger
Consideration elected by such shareholder pursuant to
his Election Form in the event that the aggregate
amount of cash payable pursuant to the Merger to
satisfy all elections by the CoBancorp shareholders
shall be less than 30% of the aggregate Market Value
of the Merger Consideration (the "Minimum Cash
Consideration Amount") or in excess of 49% of the
aggregate Market Value of the Merger Consideration
(the "Maximum Cash Consideration Amount").
In the event the amount of cash that would be payable
upon the conversion into cash of the Cash Election
Shares is less than the Minimum Cash Consideration
Amount, (i) all Cash Election Shares shall be
converted into the right to receive the Per Share
Cash Consideration, (ii) the Exchange Agent shall
select first from among the No Election Shares on a
pro rata basis and then (if necessary) from among the
Stock Election Shares on a pro rata basis, a
sufficient number of shares ("Cash Designated
Shares") such that the aggregate amount of the Per
Share Cash Consideration that will be payable
pursuant to the Merger equals as closely as
practicable the Minimum Cash Consideration Amount,
and all Cash Designated Shares shall be converted
into the right to receive the Per Share Cash
Consideration, and (iii) the No Election Shares and
the Stock Election Shares which are not Cash
Designated Shares shall be converted into the right
to receive the Per Share Stock Consideration.
In the event the amount of cash that would be payable
upon the conversion into cash of the Cash Election
Shares is greater than the Maximum Cash Consideration
Amount, (i) all Stock Election Shares and No Election
Shares shall be converted into the right to receive
FirstMerit Common Stock, (ii) the Exchange Agent
shall select from among the Cash Election Shares on a
pro rata basis, a sufficient number shares ("Stock
Designated Shares") such that the amount of cash that
will be payable pursuant to the Merger equals as
closely as practicable, but not in excess of, the
Maximum Cash Consideration Amount, and all Stock
Designated Shares shall be converted in the right to
receive the Per Share Stock Consideration, and (iii)
the Cash Election Shares which are not Stock
Designated Shares shall be converted into the right
to receive the Per Share Cash Consideration.
In the event the amount of cash that would be payable
upon the conversion into cash of the Cash Election
Shares is at least equal to the Minimum Cash
Consideration Amount and is no more than the Maximum
Cash Consideration Amount (as determined by the
Exchange Agent), then all Cash Election Shares shall
be converted into the right to receive the Per Share
Cash Consideration and all Stock Election Shares and
No Election Shares shall be converted into the right
to receive the Per Share Stock Consideration.
In connection with the allocation procedures
described in the preceding paragraph, any CoBancorp
shareholder who has acquired shares of CoBancorp
Common Stock through the exercise of stock options,
and who elects to receive FirstMerit Common Stock
with respect to (all or a portion of) such
shareholder's CoBancorp Common Stock, shall be
entitled to the maximum amount of the Per Share Stock
Consideration exchanged for the shareholder's Stock
Election Shares being allocated to the shareholder's
shares of CoBancorp Common Stock
15
<PAGE> 16
acquired through the exercise of stock options, with
any required Per Share Cash Consideration being
allocated first to shares of CoBancorp Common Stock
acquired other than through the exercise of stock
options, unless otherwise specifically elected by
such shareholder.
NO ASSURANCE CAN BE GIVEN THAT AN ELECTION BY ANY
GIVEN COBANCORP SHAREHOLDER WILL BE HONORED IN ITS
ENTIRETY. THEREFORE, COBANCORP SHAREHOLDERS MAY NOT
RECEIVE PRECISELY THE FORM OF CONSIDERATION
REQUESTED. SEE "TERMS OF MERGER -- PROCEDURE FOR
ELECTION OF CASH AND/OR FIRSTMERIT COMMON STOCK" AND
"-- ALLOCATION." IN THE EVENT A HOLDER OF COBANCORP
COMMON STOCK RECEIVES BOTH FIRSTMERIT COMMON STOCK
AND CASH, THE RECEIPT OF CASH COULD BE SUBJECT TO
TAX. SEE "CERTAIN FEDERAL INCOME TAX CONSIDERATIONS."
IF THE EXCHANGE AGENT FAILS TO RECEIVE YOUR PROPERLY
COMPLETED ELECTION FORM BY THE ELECTION DEADLINE,
YOUR SHARES WILL BE DEEMED NO ELECTION SHARES AND YOU
WILL RECEIVE THE MERGER CONSIDERATION DETERMINED IN
ACCORDANCE WITH THE ALLOCATION PROCEDURES SET FORTH
IN THE MERGER AGREEMENT AND DESCRIBED UNDER "TERMS OF
MERGER -- ALLOCATION." THEREFORE, IT IS IMPORTANT
THAT THE EXCHANGE AGENT RECEIVES YOUR ELECTION FORM
BY THE ELECTION DEADLINE.
THE MARKET PRICE OF THE FIRSTMERIT COMMON STOCK WILL
LIKELY FLUCTUATE BETWEEN THE DATE OF THIS PROSPECTUS
AND PROXY STATEMENT AND THE EFFECTIVE TIME.
FLUCTUATIONS IN THE MARKET PRICE OF FIRSTMERIT COMMON
STOCK WILL RESULT IN AN INCREASE OR DECREASE IN THE
VALUE OF THE MERGER CONSIDERATION TO BE RECEIVED BY
COBANCORP SHAREHOLDERS WHO ELECT TO RECEIVE
FIRSTMERIT COMMON STOCK. COBANCORP SHAREHOLDERS ARE
ADVISED TO OBTAIN CURRENT MARKET QUOTATIONS FOR
FIRSTMERIT COMMON STOCK PRIOR TO MAKING AN ELECTION.
VALUE OF THE If the Merger had been consummated on [____________],
MERGER 1998, based on the closing sale price of FirstMerit
Common Stock as reported on Nasdaq/NMS on that date,
the market value for a share of CoBancorp Common
Stock would have been $[_____]. The approximate
market value of the total Merger Consideration as of
such date would have equaled $[___] million, assuming
30% of the Merger Consideration would be paid in cash
at $44.50 per share.
EFFECTIVE TIME The Merger will be consummated after the adoption of
the Merger Agreement by the requisite vote of the
CoBancorp shareholders, the receipt of the necessary
regulatory approvals, the satisfaction or waiver of
all other conditions to the consummation of the
Merger specified by the Merger Agreement. See "TERMS
OF MERGER -- Effective Time," "Conditions to the
Merger," and "Regulatory Approvals." It is currently
anticipated that the Merger will be consummated
during the second quarter of 1998.
TAX AND The Merger is intended to qualify as a reorganization
ACCOUNTING under Section 368(a)(1) of the Internal Revenue Code
TREATMENT of 1986, as amended (the "Code"). FirstMerit's legal
counsel has delivered an opinion, based upon certain
customary assumptions and representations, and
assuming the Merger occurs in accordance with the
Merger Agreement and conditioned on the accuracy of
certain representations made or to be made by
FirstMerit and CoBancorp, that the Merger will
constitute a "reorganization" for federal income tax
purposes and that, accordingly, no gain or loss will
be recognized by FirstMerit, CoBancorp or the
CoBancorp shareholders who exchange their shares of
CoBancorp Common Stock solely for shares of
FirstMerit Common Stock in the Merger. CoBancorp
shareholders who, however, receive cash in exchange
for CoBancorp
16
<PAGE> 17
Common Stock (whether in lieu of fractional shares,
in exercising dissenters' rights, or for Cash
Election Shares in respect of some or all of their
CoBancorp Common Stock) will recognize taxable income
to the extent of cash received.
No ruling has been or will be requested from the
Internal Revenue Service ("IRS") with respect to the
federal income tax consequences of the Merger. The
opinion of counsel only represents counsel's best
judgment and is not binding on the IRS or the courts.
Accordingly, no assurance can be given that the IRS
or a court (if a matter is litigated), will agree
with counsel's conclusions, that the IRS will not
challenge the tax treatment of the Merger, or that
such a challenge if made (whether or not it is
litigated), will not be successful.
IT IS IMPORTANT THAT EACH SHAREHOLDER OF COBANCORP
CONSULT THEIR OWN TAX ADVISOR AS TO THE SPECIFIC TAX
CONSEQUENCES TO THEM OF THE MERGER.
For a more complete description of the federal income
tax consequences, see "CERTAIN FEDERAL INCOME TAX
CONSEQUENCES" and "ACCOUNTING TREATMENT OF MERGER."
The transaction will be accounted for as a purchase
transaction under generally accepted accounting
principles. See "ACCOUNTING TREATMENT OF MERGER."
CONDITIONS Consummation of the Merger is conditioned upon the
adoption of the Merger Agreement by the requisite
vote of the CoBancorp shareholders, the receipt of
all necessary approvals of the Merger from government
regulatory agencies, the absence of a material
adverse change in the consolidated financial
condition, results of operations, or business of
FirstMerit or CoBancorp, the truth and accuracy of
the representations and warranties of each party as
set forth in the Merger Agreement, the performance of
obligations by each party, and certain other
customary conditions. See "TERMS OF MERGER --
Conditions to Merger" and "-- Regulatory Approvals."
RIGHT OF In addition to those conditions discussed above,
COBANCORP TO CoBancorp may terminate the Merger Agreement if the
TERMINATE Average Closing Price of FirstMerit Common Stock for
the pricing period is less than $20.40. If CoBancorp
elects to terminate the Merger Agreement, FirstMerit
has a right to fix the Per Share Value at $39.55 by
agreeing to an Exchange Ratio equal to $20.40 divided
by the Average Closing Price multiplied by 1.939. If
FirstMerit does so, CoBancorp may not then terminate
the Merger Agreement. See "TERMS OF MERGER --
Conversion of CoBancorp Common Stock."
NO SOLICITATION CoBancorp has agreed, subject to certain fiduciary
obligations of its Board of Directors, that neither
it nor any of its subsidiaries will solicit or
initiate any discussions or offers from any person to
acquire CoBancorp or any of its subsidiaries or any
material amount of its assets or any of its equity
securities. See "TERMS OF MERGER -- Conduct of
CoBancorp's Business Pending the Merger."
COBANCORP STOCK In connection with the execution of the Merger
PURCHASE OPTION Agreement, CoBancorp has granted FirstMerit an
option to purchase shares of CoBancorp Common Stock
under certain circumstances set forth in the Stock
Purchase Option dated November 3, 1997 between
CoBancorp and FirstMerit (the "CoBancorp Stock
Option" or "Option"). The CoBancorp Stock Option
provides FirstMerit an option to purchase up to 19.9%
of the outstanding shares of CoBancorp's Common Stock
(without giving effect to any shares subject to or
issued pursuant to the Stock Purchase Option) at $40
per share, subject to certain adjustments. The
Option is
17
<PAGE> 18
exercisable only upon the occurrence of certain
events, all as set forth in the CoBancorp Stock
Option. None of such events has occurred as of the
date hereof. CoBancorp granted the Option as a
condition of and in consideration for FirstMerit's
entering into the Merger Agreement. The CoBancorp
Stock Option is intended to increase the likelihood
that the Merger will be consummated in accordance
with the terms of the Merger Agreement. Consequently,
the CoBancorp Stock Option may have the effect of
discouraging persons who might now or prior to the
consummation of the Merger be interested in acquiring
CoBancorp (or a significant interest in CoBancorp)
from considering or proposing such an acquisition,
even if such person were prepared to pay a higher
price per share for CoBancorp Common Stock than the
price per share implicit in the Merger Consideration.
In the event FirstMerit acquires shares pursuant to
the CoBancorp Stock Option, it would vote those
shares in the election of CoBancorp directors and
other matters requiring a shareholder vote, thereby
potentially having a material impact on the outcome
of such matters. See "TERMS OF MERGER -- CoBancorp
Stock Purchase Option."
REASONS FOR MERGER
FIRSTMERIT. After careful review and consideration, FirstMerit's Board
of Directors approved the terms of the Merger. The Merger with CoBancorp
represents the continued realization of FirstMerit's long-standing philosophy of
acquiring retail-oriented financial institutions with dominant market share for
continued customer growth. The Merger also represents a continuation of
FirstMerit's acquisition strategy of combining with banking institutions in Ohio
and contiguous states where FirstMerit already has or intends to obtain a
significant market position. The expansion of FirstMerit's existing operations
in its major northern Ohio market resulting from the Merger will provide both
stronger market positions and opportunities to achieve efficiencies for the
combined operations in that market. FirstMerit will draw on its experience with
previous acquisitions in seeking to achieve an effective consolidation of
CoBancorp's operations with those of FirstMerit. See "BACKGROUND OF AND REASONS
FOR MERGER -- Reasons for Merger -- FirstMerit."
COBANCORP. The Board of Directors of CoBancorp believes that the Merger
is in the best interest of CoBancorp and its shareholders. In the course of
reaching its determination to approve the Merger and recommend the adoption of
the Merger Agreement to shareholders of CoBancorp, the Board of Directors,
without assigning any relative or specific weights, considered a number of
factors, including (i) the Merger Consideration to be received, (ii) the other
terms of the Merger Agreement and (iii) the fairness opinion of CoBancorp's
financial advisor. See "BACKGROUND OF AND REASONS FOR MERGER -- Reasons for
Merger -- CoBancorp," "-- Opinion of CoBancorp's Financial Advisor" and "--
Recommendation of CoBancorp's Board of Directors."
OPINION OF COBANCORP'S FINANCIAL ADVISOR
Hovde Financial, Inc. ("Hovde") has delivered its written opinion to
CoBancorp's Board of Directors to the effect that, as of the date the Merger
Agreement was signed, the Merger Consideration was fair, from a financial point
of view, to the holders of CoBancorp Common Stock. A copy of the opinion of
Hovde is attached hereto as Appendix B. The opinion should be read in its
entirety for a description of the procedures followed, assumptions and
qualifications made and matters considered by Hovde, and the limitations of the
opinion. See also "BACKGROUND OF AND REASONS FOR MERGER -- Opinion of
CoBancorp's Financial Advisor."
RECOMMENDATION OF DIRECTORS
The Board of Directors of FirstMerit has unanimously approved the
Merger Agreement. The Board of Directors of CoBancorp has also unanimously
approved the Merger Agreement and recommends the adoption of the Merger
Agreement by the CoBancorp shareholders. See "BACKGROUND OF AND REASONS FOR
MERGER -- Recommendation of CoBancorp's Board of Directors."
18
<PAGE> 19
ACCORDINGLY, COBANCORP'S BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT
COBANCORP SHAREHOLDERS VOTE FOR THE ADOPTION OF THE MERGER AGREEMENT.
COBANCORP SPECIAL MEETING
MEETING DATE, TIME AND The CoBancorp Special Meeting will be
PLACE held on [__________], 1998, at 10:00
A.M. (local time). The CoBancorp Special
Meeting will be held at the Lorain
County Community College, Spitzer
Conferencing Center, 1005 North Abbe
Road, Elyria, Ohio 44035. This
Prospectus and Proxy Statement is being
furnished to the holders of CoBancorp
Common Stock in connection with the
solicitation of proxies by the Board of
Directors of CoBancorp for use at the
CoBancorp Special Meeting and any
adjournments or postponements thereof.
PURPOSE OF MEETING The purpose of the CoBancorp Special
Meeting is to vote on the adoption of
the Merger Agreement. See "SPECIAL
MEETING OF COBANCORP SHAREHOLDERS --
Purpose of Meeting."
SHARES ENTITLED TO VOTE Shares of CoBancorp Common Stock
are the only shares entitled to be voted
at the CoBancorp Special Meeting.
REQUIRED VOTES TO ADOPT The affirmative vote of a majority of
PROPOSAL the holders of the outstanding shares of
CoBancorp Common Stock is required to
adopt the Merger Agreement at the
CoBancorp Special Meeting.
Approval under the Ohio Control Share
Act ("Acquisition Act") requires the
favorable vote of a majority of the
shares entitled to vote in the election
of directors, as well as a majority
vote of such shares excluding any
shares held by interested shareholders,
which are defined to include
FirstMerit, any corporate officer of
CoBancorp and any employee of CoBancorp
who is also a director of CoBancorp. In
addition, "interested shares" are
defined to include those acquired by
any person (i) after the first date of
public disclosure (November 3, 1997) of
the Merger and prior to the date of the
CoBancorp Special Meeting, provided
such person has paid over $250,000 for
such purchased shares or such purchased
shares represent greater than .05% of
the outstanding shares of CoBancorp,
and (ii) that transfers such shares for
valuable consideration after the record
date established by the directors, if
accompanied by the voting power.
SHARES OUTSTANDING AND [___________], 1998 is the record date
RECORD DATE for the CoBancorp Special Meeting
("CoBancorp Record Date"). On such date,
there were [__________] shares of
CoBancorp Common Stock outstanding. Only
CoBancorp shareholders of record as of
such date are entitled to notice of, and
to vote at, the CoBancorp Special
Meeting.
SHARES OWNED BY DIRECTORS, As of [___________], 1998, CoBancorp's
OFFICERS AND AFFILIATES OF directors and executive officers
COBANCORP and their affiliates beneficially owned
[_________] shares of CoBancorp Common
Stock (excluding any shares that may be
acquired by the exercise of outstanding
options to acquire CoBancorp Common
Stock), which represented [____%] of the
outstanding shares of CoBancorp Common
Stock entitled to vote at the CoBancorp
Special Meeting. As of [_________,]
1998, FirstMerit owned no shares of
CoBancorp Common Stock. See "SPECIAL
MEETING OF COBANCORP SHAREHOLDERS --
Vote Required."
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<PAGE> 20
DISSENTERS' RIGHTS Any shareholder of CoBancorp who does
not vote in favor of the approval of the
Merger Agreement and who delivers a
written demand for appraisal of such
shareholder's shares in the manner
provided by Section 1701.85 of the Ohio
Revised Code("ORC")(a copy of which is
attached hereto as Appendix C), shall be
entitled, if and when the Merger becomes
effective, and upon strict compliance
with the procedures set forth in Section
1701.85, to receive the fair cash value
of the CoBancorp Common Stock. See
"RIGHTS OF DISSENTING SHAREHOLDERS."
INTERESTS OF CERTAIN PERSONS IN MERGER
John R. Cochran, the President and Chief Executive Officer of
FirstMerit, will continue as the President and Chief Executive Officer of
FirstMerit, as the surviving corporation. The persons currently serving as
directors of FirstMerit will continue to serve on the Board of Directors of the
surviving entity. Promptly after the Merger, an individual recommended by the
CoBancorp Board of Directors and approved by the FirstMerit Board of Directors,
will be appointed as a member of the Board of Directors of FirstMerit. After the
Merger, the persons currently serving on the Board of Directors of PREMIERBank
will be appointed as members of the Community Bank Board of FirstMerit Bank -
Elyria Region, and the persons currently serving on the Board of Directors of
Jefferson Savings Bank will be appointed as members of the Community Bank Board
of FirstMerit Bank - Columbus Region.
Certain of the executive officers of CoBancorp ("CoBancorp Officers"),
some of whom also serve as directors of CoBancorp and/or its subsidiaries, have
interests in the Merger as a result of employment and severance agreements which
they entered into with CoBancorp or one of its subsidiaries (the "Severance
Agreements"). These Severance Agreements contain provisions for severance which
are triggered upon a termination of employment of such CoBancorp Officer in
connection with or after a "change of control" of CoBancorp. FirstMerit has
agreed that CoBancorp will pay the financial obligations under the Severance
Agreements as of the Effective Time. The maximum aggregate value of the cash
compensation under the Severance Agreements for the three CoBancorp Officers who
have Severance Agreements is approximately $1.68 million. This value was
determined based on the assumption that all such CoBancorp Officers' employment
would be terminated and that they would be entitled to the payment as of the
Effective Time.
As of December 31, 1997, the total number of options the CoBancorp
Officers currently hold, are currently exercisable and the weighted average
exercise price per option, are as follows: 107,341, 107,341 and $16.16. Any
options held as of the Effective Time which have not been exercised, will be
converted to a cash payment equal to the difference between the exercise price
of the option and $44.50.
FirstMerit has also agreed for a period of six years to honor the terms
of the indemnification provisions of CoBancorp's or its subsidiaries Code of
Regulations or bylaws currently applicable for their officers, directors and
employees of CoBancorp for matters occurring prior to the Effective Time. See
"TERMS OF MERGER -- Interests of Certain Persons in Merger."
COMPARISON OF RIGHTS OF HOLDERS OF FIRSTMERIT COMMON STOCK AND COBANCORP COMMON
STOCK
The rights of the holders of CoBancorp Common Stock are governed by the
Ohio General Corporation Law ("OGCL"), CoBancorp's Articles of Incorporation
("CoBancorp's Articles") and CoBancorp's Code of Regulations ("CoBancorp's
Regulations"). At the Effective Time, CoBancorp's shareholders (except holders
who receive only cash payments or perfect dissenters' rights) will become
FirstMerit shareholders and their rights will be governed thereafter by OGCL and
by FirstMerit's Amended and Restated Articles of Incorporation ("FirstMerit
Articles"), its Code of Regulations, as amended ("FirstMerit Regulations"), and
the FirstMerit Shareholders Rights Agreement dated October 21, 1993, as amended
and restated on July 18, 1996 ("FirstMerit Rights Agreement").
The rights of a holder of CoBancorp Common Stock are similar in most
respects to the rights of a holder of FirstMerit Common Stock. FirstMerit Common
Stock has associated rights which trade with the FirstMerit Common Stock, which
arise pursuant to the terms of the FirstMerit Rights Agreement. Each share of
FirstMerit Common Stock issued to shareholders of CoBancorp in the Merger
represents an interest in the FirstMerit Rights Agreement. The rights provide a
shareholder of FirstMerit with the ability to acquire shares of capital stock of
FirstMerit in the event of an attempted "takeover" of FirstMerit. The rights are
not currently exercisable. All references to the FirstMerit Common Stock in this
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<PAGE> 21
Prospectus and Proxy Statement include the associated rights ("Rights"). See
"COMPARISON OF FIRSTMERIT AND COBANCORP CAPITAL STOCK."
MARKET PRICES FOR FIRSTMERIT AND COBANCORP COMMON STOCK
FirstMerit Common Stock and CoBancorp Common Stock are included for
quotation on Nasdaq/NMS, under the symbols "FMER" and "COBI," respectively. As
of [_________], 1998, the CoBancorp Record Date, there were [_________] shares
of FirstMerit Common Stock outstanding and held by approximately [_______]
holders of record, and [_________] shares of CoBancorp Common Stock outstanding
and held by approximately [_______] holders of record.
The information presented in the table below sets forth the last sale
prices as reported on Nasdaq/NMS for FirstMerit Common Stock and CoBancorp
Common Stock on October 31, 1997 (the last trading date preceding the public
announcement of the Merger Agreement). In addition, the table indicates the last
sale prices as reported on Nasdaq/NMS for FirstMerit Common Stock and CoBancorp
Common Stock on [__________], 1998, the most recent practicable date prior to
the mailing of the Prospectus and Proxy Statement. The "Equivalent Value Per
Share" is calculated by multiplying the last sale price of FirstMerit Common
Stock on such dates by an Exchange Ratio of 1.745.
<TABLE>
<CAPTION>
FIRSTMERIT COBANCORP EQUIVALENT
COMMON COMMON VALUE
STOCK STOCK PER SHARE
---------- --------- ---------
<S> <C> <C> <C>
October 31, 1997 $ 25.50 $40.25 $44.50
[_________], 1998 $[_____] $[____] $[____]
</TABLE>
For additional information regarding the market prices and dividends
paid on the FirstMerit Common Stock and CoBancorp Common Stock during 1996, 1997
and 1998, see "PRICE RANGE OF COMMON STOCK AND DIVIDENDS -- Market Prices;" and
"-- Dividends."
NO ASSURANCE CAN BE GIVEN AS TO THE MARKET PRICE OF SHARES OF FIRSTMERIT COMMON
STOCK IF AND WHEN THE MERGER IS CONSUMMATED, OR WHEN THE SHARES OF FIRSTMERIT
COMMON STOCK ARE ACTUALLY DELIVERED.
COMPARATIVE UNAUDITED PER SHARE DATA
The following table shows unaudited comparative per share data for
FirstMerit and CoBancorp on a historical basis, and pro forma combined
comparative per share data for FirstMerit and CoBancorp giving effect to the
Merger. The Merger is a business combination accounted for under the purchase
method of accounting.
<TABLE>
<CAPTION>
Historical
----------
FirstMerit CoBancorp Pro Forma
Corporation Inc. Combined Notes
-------------------------------- --------------------
<S> <C> <C> <C> <C>
Book value per share:
September 30, 1997 $8.38 $16.82 $9.47 1
</TABLE>
21
<PAGE> 22
<TABLE>
<S> <C> <C> <C> <C>
December 31, 1996 $8.20 $15.82
Cash dividends per share:
Nine months ended September 30, 1997 $0.45 $0.53 $0.45 2
Year ended December 31, 1996 $0.54 $0.63 $0.54
Net income per share:
Nine months ended September 30, 1997 $1.01 $1.24 $0.95 3
Year ended December 31, 1996 $1.09 $2.07 $1.04
</TABLE>
NOTES TO COMPARATIVE UNAUDITED PER SHARE DATA:
(1) The information presented is based on the combined shareholders' equity
of FirstMerit and CoBancorp, including the effect of pro forma combined
adjustments. The pro forma combined adjusted amounts are divided by the
number of shares of FirstMerit Common Stock outstanding for the period
indicated plus the pro forma number of shares of FirstMerit Common
Stock assumed to be issued as a result of the Merger.
(2) The pro forma dividends per share is assumed to be the same as
FirstMerit's historical cash dividends per share.
(3) The net income per share amounts reflected herein are not necessarily
indicative of the amounts which will be achieved by the combined
company when the Merger is consummated.
The Comparative Unaudited Per Share Data should be read in conjunction
with the historical consolidated financial statements of FirstMerit and
CoBancorp and related notes thereto, which are incorporated by reference herein,
and the unaudited pro forma financial data included herein. See "UNAUDITED PRO
FORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS" for a description of the
assumptions and adjustments used in preparing the unaudited pro forma financial
data. The comparative unaudited per share data has been included for comparative
purposes only and does not purport to be indicative of the results of operations
that actually would have been obtained by the combined company if the Merger had
been effected on the dates indicated or of those results that may be obtained by
the combined company in the future.
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<PAGE> 23
INTRODUCTION
This Prospectus and Proxy Statement is being furnished in connection
with the solicitation of proxies by the Board of Directors of CoBancorp for use
at the CoBancorp Special Meeting. This Prospectus and Proxy Statement also
serves as a Prospectus for the issuance of FirstMerit Common Stock at the
Effective Time. This Prospectus and Proxy Statement is being mailed to
shareholders of CoBancorp commencing on or about [__________], 1998.
ALL INFORMATION CONTAINED IN THIS PROSPECTUS AND PROXY STATEMENT RELATING TO
FIRSTMERIT HAS BEEN FURNISHED BY FIRSTMERIT, AND ALL INFORMATION CONTAINED IN
THIS PROSPECTUS AND PROXY STATEMENT RELATING TO COBANCORP HAS BEEN FURNISHED BY
COBANCORP. THE PARTY FURNISHING ANY SUCH INFORMATION IS RESPONSIBLE FOR THE
ACCURACY THEREOF.
ACQUIRING PERSON STATEMENT
Consummation of the proposed Merger of CoBancorp with and into
FirstMerit in accordance with the terms of the Merger Agreement requires
compliance with the Acquisition Act. The Acquisition Act requires the advance
approval of the shareholders of an "Issuing Public Corporation" prior to the
purchase of a controlling interest in such corporation. CoBancorp is an Issuing
Public Corporation within the meaning of the Acquisition Act and therefore the
transactions contemplated by the Merger Agreement must be approved under the
Acquisition Act. A vote "for" the Merger will also constitute an affirmative
vote to approve the acquisition of 100% of the outstanding shares of CoBancorp
Common Stock by FirstMerit as required by the Acquisition Act.
Presented below is FirstMerit's Acquiring Person Statement as required
by the Acquisition Act. FirstMerit submitted its Acquiring Person Statement to
CoBancorp on the date this Prospectus and Proxy Statement was first mailed to
CoBancorp shareholders. Approval under the Acquisition Act requires the
favorable vote of a majority of the shares entitled to vote in the election of
directors as well as a majority vote of such shares excluding any shares held by
interested shareholders, which are defined to include FirstMerit, any corporate
officer of CoBancorp and any employee of CoBancorp who is also a director of
CoBancorp. In addition "interested shares" are defined to include those acquired
by any person after the first date of public disclosure (November 3, 1997) of
the Merger and prior to the date of the Special Meeting, provided such person
has paid over $250,000 for such purchased shares or such purchased shares
represents greater than .05% of the outstanding shares of the Issuing Public
Corporation. As of the CoBancorp Record Date, FirstMerit owned no shares of
CoBancorp Common Stock. Officers and employees of CoBancorp who are interested
shareholders within the meaning of the Acquisition Act own [________] shares of
CoBancorp Common Stock. Neither CoBancorp nor FirstMerit are aware of any other
shares of CoBancorp Common Stock which could be considered as held by an
interested shareholder as defined by the Acquisition Act. Therefore approval of
the proposed acquisition of a controlling interest in CoBancorp by FirstMerit
under the provisions of the Acquisition Act requires the affirmative vote of
[_________] shares of CoBancorp Common Stock which represents a majority of the
shares entitled to vote in the election of directors and [_________] shares of
CoBancorp Common Stock in connection with the vote which excludes interested
shares, as defined by the Acquisition Act.
FirstMerit's Acquiring Person Statement under the Ohio Control Share
Acquisition Act is as follows:
1. The identity of the Acquiring Person is FirstMerit Corporation,
Akron, Ohio.
2. This Statement is given pursuant to ORC Section 1701.831(B).
3. FirstMerit owns no shares of CoBancorp Common Stock.
4. If the proposed Merger is consummated, FirstMerit will acquire 100%
of the voting power of CoBancorp Common Stock.
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<PAGE> 24
5. FirstMerit proposes to acquire CoBancorp in a merger transaction
pursuant to and in accordance with the provisions of ORC Section 1701.78 and the
Merger Agreement. The Merger Agreement is incorporated into this Acquiring
Person Statement as if fully restated herein.
The proposed control share acquisition, if consummated, will not be
contrary to law. The Prospectus and Proxy Statement in which this Acquiring
Person Statement appears sets forth the facts upon which the forgoing statement
is based and is incorporated by reference into this Acquiring Person Statement
as if fully restated herein.
SPECIAL MEETING OF COBANCORP SHAREHOLDERS
DATE, TIME AND PLACE
The CoBancorp Special Meeting will be held on [__________], 1998,
commencing at 10 A.M. (local time), at the Lorain County Community College,
Spitzer Conferencing Center, 1005 North Abbe Road, Elyria, Ohio 44035.
PURPOSE OF MEETING
The purpose of the CoBancorp Special Meeting is to consider and vote
upon the adoption of the Merger Agreement and the approval of the acquisition of
the shares of CoBancorp Common Stock under the Acquisition Act.
RECORD DATE; SHARES OUTSTANDING AND ENTITLED TO VOTE
The CoBancorp Record Date for the determination of holders of shares of
CoBancorp Common Stock entitled to notice of and to vote at the CoBancorp
Special Meeting has been fixed by the Board of Directors of CoBancorp as of the
close of business on [_________,] 1998. As of the CoBancorp Record Date, there
were approximately [__________] shares of CoBancorp Common Stock issued and
outstanding, held by approximately [_____] shareholders of record. Holders of
record of CoBancorp Common Stock on the CoBancorp Record Date are entitled to
one vote per share and are entitled to exercise dissenters' rights. See "RIGHTS
OF DISSENTING SHAREHOLDERS."
VOTE REQUIRED
The affirmative vote of the holders of a majority of the shares of
CoBancorp Common Stock outstanding on the CoBancorp Record Date is required to
adopt the Merger Agreement, being [__________] shares of CoBancorp Common Stock.
Approval under the Acquisition Act requires the favorable vote of a majority of
the shares entitled to vote in the election of directors as of the CoBancorp
Record Date, as well as a majority vote of such shares excluding any shares held
by interested shareholders, which are defined to include FirstMerit, any
corporate officer of CoBancorp and any employee of CoBancorp who is also a
director of CoBancorp. In addition "Interested Shares" are defined to include
those acquired by any person (i) after the first date of public disclosure
(November 3, 1997) of the Merger and prior to the date of the CoBancorp Special
Meeting, provided such person has paid over $250,000 for such purchased shares
or such purchased shares represents greater than .05% of the outstanding shares
of the Issuing Public Corporation, and (ii) that transfers such shares for
valuable consideration after the record date established by the directors, if
accompanied by the voting power in form of a blank proxy, an agreement to vote
as instructed by the transferee, or otherwise.
As of the CoBancorp Record Date, FirstMerit owned no shares of
CoBancorp Common Stock. Officers and employees of CoBancorp who are interested
shareholders within the meaning of the Acquisition Act own [________] shares of
CoBancorp Common Stock. Neither CoBancorp nor FirstMerit are aware of any other
shares of CoBancorp Common Stock which could be considered as held by an
interested shareholder as defined by the Acquisition Act. Therefore approval of
the proposed acquisition of a controlling interest in CoBancorp by FirstMerit
under the provisions of the Acquisition Act requires the affirmative vote of
[_________] shares of CoBancorp Common Stock which represents a majority of the
shares entitled to vote in the election of directors and [_________] shares of
CoBancorp Common Stock in connection with the vote which excludes Interested
Shares, as defined by the Acquisition Act.
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<PAGE> 25
VOTING; SOLICITATION AND REVOCATION OF PROXIES
The enclosed CoBancorp proxy card is solicited on behalf of the
CoBancorp Board and may be used by CoBancorp shareholders to vote at the
CoBancorp Special Meeting. CoBancorp shareholders are requested to complete,
date and sign the accompanying proxy card and promptly return it in the
accompanying postage prepaid envelope. The proxy may be revoked at any time
prior to the voting thereof by giving notice in writing to the Secretary of
CoBancorp of the revocation, by filing with the Secretary another proxy card
duly executed and bearing a later date, or by giving written notice of the proxy
revocation at the CoBancorp Special Meeting. Shares represented by valid proxies
will be voted at the CoBancorp Special Meeting in accordance with the
instructions noted thereon, but in the absence of such instructions, will be
voted in favor of the adoption of the Merger Agreement and approval under the
Acquisition Act.
In addition to solicitation by mail, directors, officers and employees
of CoBancorp, who will not be specifically compensated for such services, may
solicit proxies from the stockholders of CoBancorp, personally or by telephone,
telegram or other forms of communication. Brokerage houses, nominees,
fiduciaries and other custodians will be requested to forward soliciting
materials to beneficial owners and will be reimbursed for their reasonable
expenses incurred in sending proxy material to beneficial owners. In addition,
CoBancorp has engaged Regan & Associates, Inc. ("Regan") to assist CoBancorp in
distributing proxy materials and contacting record and beneficial owners of
CoBancorp Common Stock. CoBancorp has agreed to pay Regan approximately $4,000
plus out-of-pocket expenses for its services to be rendered on behalf of
CoBancorp.
QUORUM; BROKER NON-VOTES
The required quorum for the transaction of business at the CoBancorp
Special Meeting is a majority of the shares of CoBancorp Common Stock, issued
and outstanding on the CoBancorp Record Date, which must be present in person or
represented by proxy at the CoBancorp Special Meeting. Abstentions and broker
non-votes will be counted as present for purposes of determining whether there
is a quorum at the CoBancorp Special Meeting but will not be voted. Because the
adoption of the Merger Agreement requires the affirmative vote of the holders of
a majority of the outstanding shares of CoBancorp Common Stock, and under the
Acquisition Act requires the favorable vote of a majority of the shares entitled
to vote in the election of directors, as well as a majority vote of such shares
excluding any Interested Shares, abstentions and broker non-votes will have the
same effect as votes against the adoption of the Merger Agreement and approval
under the Acquisition Act.
If a quorum is not obtained, or if fewer shares of CoBancorp Common
Stock than the number required therefor are voted in favor of the adoption of
the Merger Agreement and approval under the Acquisition Act, the CoBancorp
Special Meeting may be postponed or adjourned in order to permit additional time
for soliciting and obtaining additional proxies or votes, and, at any subsequent
reconvening of the CoBancorp Special Meeting, all proxies will be voted in the
same manner as such proxies would have been voted at the original convening of
the CoBancorp Special Meeting, except for any proxies that have theretofore
effectively been revoked or withdrawn.
BACKGROUND OF AND REASONS FOR MERGER
REASONS FOR MERGER -- FIRSTMERIT
After careful review and consideration, FirstMerit's Board of Directors
approved the terms of the Merger. The Merger with CoBancorp represents the
continued realization of FirstMerit's long-standing philosophy of acquiring
retail
25
<PAGE> 26
oriented financial institutions with dominant market share for continued
customer growth. The Merger will expand FirstMerit's existing banking operations
in its major Northern Ohio markets, providing both stronger market positions and
opportunities to achieve efficiencies for the combined operations in those
markets.
In approving the Merger, FirstMerit's Board of Directors reviewed a
number of factors, including certain risks of the Merger, with a view to
increasing shareholder value in the intermediate and long term. These factors
included the analysis and advice of FirstMerit's management and outside advisors
on the due diligence review of CoBancorp and their analysis and advice on the
financial and strategic implications of the Merger. Some of the significant
strategic matters considered by FirstMerit's Board of Directors and management
included the analysis and advice that the Merger will result in (a) anticipated
cost savings attributable to consolidation of operations, increased
efficiencies, economies of scale, and related factors, (b) improved positions in
FirstMerit's major markets, and (c) a combined entity with increased financial
resources. Certain risks of the Merger considered by FirstMerit's Board and
senior management included CoBancorp's loan quality, litigation, regulatory, and
other legal contingencies, the uncertainties inherent in any combination of two
companies, and the effort that would be necessary to achieve the anticipated
cost savings and enhanced revenues. FirstMerit believes that its prior
successful experience in effecting mergers will assist it in achieving the
anticipated cost savings and enhanced revenues.
In view of the wide variety of factors considered in connection with
its evaluation of the Merger, the FirstMerit Board did not quantify or otherwise
assign relative weights to the specific factors considered in reaching its
determination.
During the review process, FirstMerit's senior management believed it
could achieve cost reductions over time through consolidating the operations of
CoBancorp, especially where those operations will overlap or become redundant,
and by achieving greater efficiencies. See "TERMS OF MERGER -- Conduct of
CoBancorp's Business Pending the Merger." The cost reductions are expected to
result from consolidation of certain facilities, elimination of duplicate data
processing and other corporate overhead, and consolidation of other operations.
While FirstMerit believes that these anticipated cost reductions are realistic
and achievable, no assurance can be given that the cost reductions, in fact,
will be achieved, or will be achieved within the time frame planned by
FirstMerit, or that any cost savings which are achieved will not be offset by
declining revenues or other charges to earnings. In the event that such cost
reductions are not achieved, or are not achieved within the time frame planned
by FirstMerit, there would be a reduction in FirstMerit's anticipated earnings
on a combined basis after the Merger.
BACKGROUND OF MERGER -- COBANCORP
From time to time, CoBancorp has reviewed its strategic alternatives.
In August 1997 CoBancorp held its corporate planning retreat and invited Hovde
to participate for the purpose of providing advice with respect to the strategic
alternatives available to CoBancorp. At the direction of CoBancorp, Hovde
collected data including contacting several institutions on a blind basis to
ascertain their potential interest in an acquisition transaction of a company
possessing the characteristics of CoBancorp in order to analyze, among other
things, the opportunities and risks associated with CoBancorp pursuing a course
of independence and CoBancorp affiliating with another financial institution.
On September 15, 1997, Hovde presented the results of its analysis to
the CoBancorp Board. Such results indicated that a sale of CoBancorp would most
likely provide the greatest return to shareholders. As a result, the CoBancorp
Board authorized management to engage Hovde to explore a sale of CoBancorp.
Initially, a number of the financial institutions contacted by Hovde
upon advice and at the direction of CoBancorp, including FirstMerit, expressed a
potential interest in a possible transaction with an institution meeting
CoBancorp's profile. In connection therewith, these institutions entered into
confidentiality agreements with CoBancorp pursuant to which CoBancorp provided
selected confidential and publicly available information. In the ensuing weeks,
Hovde engaged in preliminary discussions with management of these institutions
including FirstMerit. Based upon these discussions,
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<PAGE> 27
CoBancorp received varying levels of general indications of interest from these
institutions (including FirstMerit), which indications consisted variously of,
among other things, preliminary ranges of value placed on CoBancorp Common
Stock, proposed transaction structures, and the amount and type of additional
due diligence which would be necessary. Thereafter, CoBancorp and Hovde provided
more detailed information to those two institutions (including FirstMerit) which
indicated the greatest interest in pursuing an acquisition of CoBancorp and had
meetings between representatives of Hovde and those institutions during which,
among other things, the preliminary indications of interest were discussed.
Subsequently, FirstMerit presented a formal indication of interest to CoBancorp
which addressed CoBancorp's desired pricing level and structure.
On October 20, 1997, the CoBancorp Board met with Hovde to assess and
consider, among other things, the preliminary indication of interest provided by
FirstMerit and the time frame within which FirstMerit was prepared to act. As a
result of the discussions, the CoBancorp Board authorized management of
CoBancorp and Hovde to continue its discussion with FirstMerit and conduct
further due diligence on FirstMerit and to pursue active negotiations with
FirstMerit and its advisors concerning the terms of a definitive agreement,
based principally on the fact that (i) FirstMerit's operating and balance sheet
management policies were consistent with those of CoBancorp, which fact was
expected to facilitate the integration of CoBancorp's and FirstMerit's
operations, (ii) FirstMerit, based on the in-market nature of a combination with
CoBancorp and the actual performance of FirstMerit's shares relative to other
institutions during relevant periods, appeared to be more willing and more
likely to offer an exchange ratio which would yield a higher value on a then
current trading basis than was likely to be offered by the other potential
bidders, and (iii) the value likely obtainable from FirstMerit exceeded the
range of stand-alone values that Hovde had estimated for CoBancorp.
During the ensuing time period, CoBancorp and FirstMerit and their
respective financial and legal advisors engaged intermittently in negotiations
concerning the terms of a transaction and each institution performed due
diligence on the other.
The CoBancorp Board met in person on October 31, 1997 and
telephonically on November 1 and November 2, 1997 to consider the terms so
negotiated. Following presentations by Hovde and CoBancorp's legal advisor,
including summaries of financial and valuation analyses, Hovde's fairness
opinion, the terms of the proposed acquisition (which were finalized on November
2, 1997), regulatory matters and the due diligence findings of CoBancorp's
management and advisors, the CoBancorp Board voted unanimously to authorize the
execution of the Merger Agreement and related CoBancorp Stock Option for the
reasons described below (see "-- Reasons for Merger--CoBancorp").
REASONS FOR MERGER -- COBANCORP
The CoBancorp Board believes that the Merger is fair to, and in the
best interests of, CoBancorp's shareholders. Accordingly, the CoBancorp Board
has unanimously approved the Merger Agreement and recommends that CoBancorp's
shareholders vote FOR the approval and adoption of the Merger Agreement.
In reaching its determination that the Merger is fair to, and in the
best interests of, CoBancorp and its shareholders, the CoBancorp Board
considered a number of factors, including, without limitation, the following:
(a) the CoBancorp Board's familiarity with and review of CoBancorp's
business, operations, financial condition, earnings and prospects;
(b) the current and prospective economic environment and competitive
constraints facing financial institutions, including CoBancorp;
(c) the CoBancorp Board's review, based in part on presentations by
Hovde and CoBancorp's due diligence review of FirstMerit, of the business,
operations, financial condition, earnings and prospects of FirstMerit on both a
historical and a prospective basis, and the increased market presence, economies
of scale, cost savings opportunities and enhanced opportunities for growth made
possible by the Merger;
(d) the opinion of Hovde that, as of November 2, 1997, the Merger
Consideration to be paid by FirstMerit pursuant to the Merger Agreement was
fair, from a financial point of view, to the shareholders of CoBancorp;
(e) the CoBancorp Board's review of the alternative of continuing to
remain independent. In this regard, the CoBancorp Board considered, based in
part on analyses of Hovde, the range of possible values to CoBancorp
shareholders
27
<PAGE> 28
that could potentially be obtained as an independent entity given the earnings
projections developed by management working in conjunction with Hovde. The range
of values indicated for the stand-alone analysis were below the range of values
implied by the recent stock price trading range of FirstMerit multiplied by the
range of Exchange Ratios. In this regard, the CoBancorp Board was aware of
certain risks of remaining independent, including, among other things, the
limited potential to engage in acquisitions which could further enhance
shareholder value and the costs and operational risks associated with additional
technology enhancements which would be necessary in order for CoBancorp to
maintain its competitiveness;
(f) the CoBancorp Board's evaluation of the risks associated with the
Merger, including, among others, the risks associated with obtaining all
necessary authorizations, consents, orders or approvals of the financial
regulatory agencies which are necessary for the consummation of the Merger; and
(g) the terms of the Merger Agreement, the CoBancorp Stock Option and
the other documents executed in connection with the Merger.
In view of the wide variety of factors considered in connection with
its evaluation of the Merger, the CoBancorp Board did not find it practicable
to, and did not quantify or otherwise attempt to, assign relative weights to the
specific factors considered in reaching its determination.
OPINION OF COBANCORP'S FINANCIAL ADVISOR
CoBancorp has retained Hovde to act as its financial advisor in
connection with the Merger. Hovde has rendered its written opinion to CoBancorp
("the Hovde Opinion"), dated November 2, 1997, to the effect that, based upon
and subject to the factors and assumptions set forth in such opinion, and as of
the date of such opinion, the Merger Consideration to be paid by FirstMerit was
fair to the shareholders of CoBancorp.
The full text of the Hovde Opinion, which sets forth, among other
things, assumptions made, matters considered and qualifications and limitations
on the review undertaken, is attached hereto as Appendix B. CoBancorp
shareholders are urged to read the Hovde Opinion in its entirety. The Hovde
Opinion, which was directed to the CoBancorp Board, addresses only the fairness
to the holders of CoBancorp Common Stock, from a financial point of view, of the
consideration to be paid by FirstMerit for the CoBancorp Common Stock pursuant
to the Merger Agreement, and does not constitute a recommendation to any
CoBancorp shareholder as to how such shareholder should vote. The Hovde Opinion
was rendered to the CoBancorp Board for its consideration in determining whether
to approve the Merger Agreement. The following summary of the Hovde Opinion is
qualified in its entirety by reference to the full text of the Hovde Opinion.
No limitations were imposed by CoBancorp on the scope of Hovde's
investigation or the procedures to be followed by Hovde in rendering its
opinion. Hovde was not requested to and did not make any recommendation to the
CoBancorp Board as to the form or amount of consideration to be offered by
FirstMerit to CoBancorp in the Merger, which was determined through arm's-length
negotiations between the parties. In arriving at its opinion, Hovde did not
ascribe a specific range of value to FirstMerit or CoBancorp, but rather made
its determination as to the fairness, from a financial point of view, of the
consideration to be offered by FirstMerit to CoBancorp shareholders in the
Merger on the basis of the financial and comparative analyses described below.
Hovde was not requested to opine as to, and its opinion does not address,
CoBancorp's underlying business decision to proceed with or effect the Merger.
During the course of the engagement, Hovde reviewed and analyzed
material bearing upon the financial and operating conditions of FirstMerit and
CoBancorp and material prepared in connection with the proposed transaction,
including the following: the Merger Agreement; certain publicly available
information concerning FirstMerit, CoBancorp, PREMIERBank, and Jefferson Savings
Bank, including, as applicable: FirstMerit's, CoBancorp's, PREMIERBank's, and
Jefferson Savings Bank's financial statements for each of the three years ended
December 31, 1994 through December 31, 1996; documents filed with the Commission
and regulatory agencies by any of the foregoing entities for the aforementioned
three year period and for the quarterly periods ended March 31 and June 30,
1997, respectively; as applicable, recent internal reports and financial
projections for CoBancorp; the nature and terms of recent sale and merger
transactions involving banks
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<PAGE> 29
and bank holding companies that Hovde considered relevant; and financial and
other information provided to Hovde by the management of CoBancorp, PREMIERBank
and Jefferson Savings Bank.
In arriving at its opinion, Hovde assumed and relied upon the accuracy
and completeness of the financial and other information used by it without
assuming any responsibility for independent verification of such information and
further relied upon the assurances of the management CoBancorp that it was not
aware of any facts or circumstances that would make such information inaccurate
or misleading. Upon advice of CoBancorp, Hovde assumed that such projections of
future combined operations were reasonably prepared on a basis reflecting the
best currently available estimates and judgments of the management of CoBancorp,
as to the future financial performance of the combined companies including,
without limitation, the projected cost savings, operating synergies and revenue
enhancements expected to result from a combination of the businesses of
FirstMerit and CoBancorp, and that FirstMerit and CoBancorp would perform, and
that the combined company will perform, substantially in accordance with such
projections. Upon advice of CoBancorp, and as indicated in the Merger Agreement,
Hovde assumed that the Merger will be accounted for using the purchase method of
accounting. In arriving at its opinion, Hovde did not conduct a physical
inspection of the properties and facilities of FirstMerit or CoBancorp and did
not make or obtain any evaluations or appraisals of the assets or liabilities of
FirstMerit or CoBancorp. In addition, Hovde noted that it is not expert in the
evaluation of loan portfolios or allowances for loan and real estate owned
losses and, upon advice of CoBancorp, it assumed that the allowances for loan
and real estate owned losses (as currently stated or as adjusted for in
connection with the Merger) provided to it by CoBancorp and used by it in its
analysis and in arriving at its opinion were in the aggregate adequate to cover
all such losses. Hovde's opinion necessarily was based upon market, economic and
other conditions as they existed on, and could be evaluated as of, the date of
the Hovde Opinion.
The following is a summary of the analyses Hovde performed in arriving
at its opinion. In connection with the preparation and delivery of its opinion
to the Board of Directors of CoBancorp, Hovde performed a variety of financial
and comparative analyses, as described below. The preparation of a fairness
opinion involves various determinations as to the most appropriate and relevant
methods of financial and comparative analysis and the application of those
methods to the particular circumstances and, therefore, such an opinion is not
readily susceptible to summary description. Furthermore, in arriving at its
opinion, Hovde did not attribute any particular weight to any analysis or factor
considered by it, but rather made qualitative judgments as to the significance
and relevance of each analysis and factor. Accordingly, Hovde believes that its
analyses must be considered as a whole and that considering any portion of such
analyses and factors, without considering all analyses and factors, could create
a misleading or incomplete view of the process underlying its opinion. In its
analyses, Hovde made numerous assumptions with respect to industry performance,
general business and economic conditions and other matters, many of which are
beyond the control of CoBancorp. Any estimates contained in these analyses were
not necessarily indicative of actual values or predictive of future results or
values, which may be significantly more or less favorable than as set forth
therein. In addition, analyses relating to the value of businesses did not
purport to be appraisals or to reflect the prices at which businesses may
actually be sold.
PURCHASE PRICE ANALYSIS. Hovde calculated the price-to-book,
price-to-tangible book, price to earnings multiple, and deposit premium
paid (defined as the transaction value, minus the tangible book value,
divided by total deposits) in the Merger using June 30, 1997 financial
data. This analysis yielded a price-to-book value multiple of 276.2%, a
price-to-tangible book value multiple of 311.4%, a price to last 12
months' earnings multiple of 21.4x, a price to estimated 1998 earnings
multiple of 20.7x, and a deposit premium of 18.7%.
COMPARABLE COMPANY ANALYSIS. Using publicly available information,
Hovde compared the financial performance and stock market valuation of
CoBancorp with the following selected banking institutions with assets
between $400.0 million and $1.5 billion (the "Comparable Bank Group")
deemed relevant by Hovde: BancFirst Ohio Corp. (OH), Citizens
Bancshares (OH), Signal Bancorp (OH), Mahoning National Bancorp (OH),
Peoples Bancorp (OH), and Second Bancorp (OH). Indications of such
financial performance and stock market valuation included profitability
(return on average assets and return on average equity for the latest
12 month period ended June 30, 1997, of 1.15% and 13.19%, respectively,
for CoBancorp and medians of 1.28% and 15.14%, respectively, for the
Comparable Bank Group); the ratio of tangible equity to tangible assets
(7.77% for CoBancorp and a median of 7.73% for the Comparable Bank
Group); the ratio of non-performing assets to total loans (0.39% for
CoBancorp and a median of 0.24% for the Comparable Bank Group); the
ratio of price to estimated 1997 earnings per share (17.05x for
CoBancorp and a median of 17.73x for the Comparable Bank Group); the
ratio of
29
<PAGE> 30
price-to-book (202.3% for CoBancorp and a median of 241.0% for the
Comparable Bank Group) and the ratio of price-to-tangible book (228.1%
for CoBancorp and a median of 278.4% for the Comparable Bank Group).
These ratios for the Comparable Bank Group are based on public
financial statements as of June 30, 1997 and closing stock market
prices three days prior to the announcement of the proposed Merger.
Earnings per share are based on the most recent median estimates for
1997 earnings published by the Institutional Brokers Estimate System
("IBES"). IBES is a data service that monitors and publishes
compilations of earnings estimates produced by selected research
analysts covering companies of interest to institutional investors.
These ratios for CoBancorp are based on public financial statements as
of June 30, 1997, IBES 1997 earnings per share estimates as of October
29, 1997 and the closing price for CoBancorp Common Stock of $33.25 as
of close of business on October 29, 1997, three trading days prior to
the announcement of the Merger.
Because of the inherent differences in the businesses, operations,
financial conditions and prospects of CoBancorp, FirstMerit and the
companies included in the Comparable Bank Group, Hovde believed that a
purely quantitative comparable company analysis would not be
particularly meaningful in the context of the Merger. Hovde believed
that the appropriate use of a comparable company analysis in this
instance would involve qualitative judgments concerning the differences
between CoBancorp and the companies included in the Comparable Bank
Group which would affect the trading values of the comparable companies
and CoBancorp.
COMPARABLE TRANSACTION ANALYSIS. Using publicly available information,
Hovde reviewed certain terms and financial characteristics, including
historical price-to-earnings ratio, the price-to-book ratio, the
price-to-tangible book ratio, and the deposit premium paid at the time
of transaction announcement, of banking institution merger or
acquisition transactions announced from January 1, 1997 to November 5,
1997 (the "Comparable Bank Transactions Group") with asset size of the
target greater than $300.0 million and less than $1.0 billion. The
average values for these transactions for the
price-to-latest-twelve-months-earnings ratio, price-to-book ratio and
price-to-tangible book ratio were 21.2x, 249.7%, and 263.0%,
respectively. These compared to transaction multiples of 21.4x, 276.2%,
and 311.4% for FirstMerit/CoBancorp based on the closing price of
FirstMerit Common Stock on October 31, 1997. The range of deposit
premiums paid in these transactions was 4.14% to 29.4%, with an average
value of 17.8% compared to a deposit premium of 18.7% for
FirstMerit/CoBancorp.
Because the reasons for and circumstances surrounding each of the
transactions analyzed were so diverse and because of the inherent
differences in the businesses, operations, financial conditions and
prospects of CoBancorp, FirstMerit and the companies included in the
Comparable Bank Transactions Group, Hovde believed that a purely
quantitative comparable transaction analysis would not be particularly
meaningful in the context of the evaluation of the fairness of the
Merger Consideration. Hovde believed that the appropriate use of a
comparable transaction analysis in this instance would involve
qualitative judgments concerning the differences between the
characteristics of these transactions and the Merger which would affect
the acquisition values of the acquired companies and CoBancorp.
DISCOUNTED TERMINAL VALUE ANALYSIS. Hovde estimated the value of the
CoBancorp Common Stock by estimating the terminal, or private market,
value of such Common Stock at December 31, 2002, and discounting this
terminal value back to the present assuming a range of discount rates
from 12.0% to 15.0%. Hovde derived an estimate of a range of terminal
values by applying multiples ranging from 16 times to 20 times
estimated year-end 2002 net income, as well as multiples ranging from
240.0 to 280.0% of estimated year-end 2002 book value. Hovde assumed an
8.0% annual growth rate in earnings through 2002, starting from IBES
1997 earnings estimate for CoBancorp. This analysis and its underlying
assumptions yielded a range of total values for CoBancorp of
approximately $91.3 to $152.4 million, as compared to a total
transaction value of $157.1 million. In arriving at the value of
CoBancorp's book value at December 31, 2002, Hovde assumed 8.0%
earnings growth and 70.0% earnings retention from June 30, 1997 through
December 31, 2002. These rates and values were chosen to reflect
different assumptions regarding the required rates of return of holders
or prospective buyers of CoBancorp Common Stock.
PRO FORMA MERGER ANALYSIS. Hovde analyzed the impact of the Merger on
CoBancorp's estimated earnings per share based on the most recent
estimates for 1998 earnings of CoBancorp published by IBES. In
connection with this analysis, management of CoBancorp provided Hovde
with projections for cost savings and fee income and net interest
income revenue enhancements expected to result from the Merger, which
projections were incorporated in Hovde's analyses. Based on IBES
estimates, assumed growth rates and management projections of cost
savings
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<PAGE> 31
and revenue enhancements, Hovde concluded that the Merger
Consideration would result in accretion on a stated basis of 24.2% to
CoBancorp's earnings per share in 1998, assuming a 100% stock
transaction. Stock consideration mixtures of 70.0%, 60.0% and 50.0%
would result in accretion to CoBancorp's earnings on a stated basis of
16.7%, 14.3% and 11.8%, respectively.
CONTRIBUTION ANALYSIS. Hovde analyzed the respective contributions of
CoBancorp and FirstMerit to the combined company's pro forma balance
sheet as of June 30, 1997 and pro forma historic net income for 1997.
This analysis showed that CoBancorp would have contributed 11.0% of
total assets, 12.0% of total deposits, 10.1% of total gross loans, 9.9%
of total equity, and 9.1% of tangible equity on a pro forma basis as of
June 30, 1997, and that CoBancorp's contribution to the combined
company's pre-tax income for the year-ended June 30, 1997, adjusted for
non-recurring items, would have been 8.2%.
Hovde is a nationally recognized investment banking firm. Hovde, as
part of its investment banking business, is continuously engaged in the
valuation of businesses and securities in connection with mergers and
acquisitions, competitive biddings, private placements and valuations for
corporate and other purposes. The CoBancorp Board retained Hovde based upon
Hovde's experience and expertise and its familiarity with CoBancorp. Hovde is
acting as financial advisor to CoBancorp in connection with the Merger. Pursuant
to a letter agreement dated September 15, 1997, between CoBancorp and Hovde,
CoBancorp has agreed to pay Hovde a fee equal to 1% of the aggregate
consideration payable in connection with the Merger, $422,000 of which was paid
to Hovde upon the signing of the Merger Agreement. The letter agreement with
Hovde also provides that CoBancorp will reimburse Hovde for its reasonable
out-of-pocket expenses incurred in connection with the Merger and indemnify
Hovde and certain related persons and entities against certain liabilities,
including liabilities under securities laws, incurred in connection with its
services thereunder.
RECOMMENDATION OF COBANCORP'S BOARD OF DIRECTORS
The CoBancorp Board has unanimously adopted and approved the Merger
Agreement and the transactions contemplated thereby and has determined that the
Merger is fair to, and in the best interests of, CoBancorp and its shareholders.
THE COBANCORP BOARD THEREFORE RECOMMENDS A VOTE FOR APPROVAL OF THE MATTERS
PRESENTED AT THE COBANCORP SPECIAL MEETING.
For a discussion of the factors considered by the CoBancorp Board in
reaching its decision to approve the Merger Agreement, see "BACKGROUND OF AND
REASONS FOR MERGER-- Reasons for Merger -- CoBancorp."
THE BOARD OF DIRECTORS OF COBANCORP UNANIMOUSLY RECOMMENDS THAT ITS
SHAREHOLDERS VOTE FOR THE ADOPTION OF THE MERGER AGREEMENT.
TERMS OF MERGER
This portion of the Prospectus and Proxy Statement describes various
aspects of the Merger. The following description does not purport to be complete
and is qualified in its entirety by reference to the Merger Agreement attached
hereto as Appendix A and incorporated herein by reference. The shareholders of
CoBancorp are urged to read the Merger Agreement in its entirety.
GENERAL
The Merger Agreement provides that, subject to the satisfaction or
waiver of certain conditions (including, among other things, the adoption of the
Merger Agreement by the shareholders of CoBancorp and the receipt of all
necessary regulatory approvals), CoBancorp will be merged with and into
FirstMerit at the Effective Time. The separate corporate existence of CoBancorp
will cease at the Effective Time, FirstMerit will be the surviving corporation
in the Merger and the shareholders of CoBancorp will become shareholders of
FirstMerit (to the extent they receive FirstMerit Common Stock). See "TERMS OF
MERGER -- Effective Time."
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<PAGE> 32
CONVERSION OF COBANCORP COMMON STOCK; ELECTION BY COBANCORP SHAREHOLDERS OF CASH
AND/OR FIRSTMERIT STOCK
Upon consummation of the Merger, each outstanding share of CoBancorp
Common Stock (other than shares held by CoBancorp shareholders who properly
perfect dissenters' rights) will be canceled and exchanged for the right to
receive, at the election of the holder thereof as provided in the Merger
Agreement, and subject to the allocation procedures discussed below (see "TERMS
OF MERGER -- Allocation") (a) $44.50 in cash, and/or (b) a number of shares of
FirstMerit Common Stock equal to: (i) if the Average Closing Price of FirstMerit
Common Stock on the Nasdaq/NMS during the Pricing period is greater than $30.60,
$48.53 divided by the Average Closing Price; (ii) if the Average Closing Price
is equal to or greater than $28.05 but less than or equal to $30.60, 1.586;
(iii) if the Average Closing Price is greater than $22.95 but less than $28,05,
$25.50 divided by the Average Closing Price, multiplied by 1.745; (iv) if the
Average Closing Price is equal to or greater than $20.40 but less than or equal
to $22.95, 1.939; or (v) if the Average Closing Price is less than $20.40,
1.939, subject to the right of CoBancorp to terminate the Merger Agreement
unless FirstMerit agrees that the Exchange Ratio shall be calculated by
multiplying 1.939 by a factor equal to $20.40 divided by the Average Closing
Price. CoBancorp shareholders may elect to exchange their CoBancorp Common Stock
for either FirstMerit Common Stock, $44.50 in cash or a combination thereof,
provided that no less than 30% nor more than 49% of the total Market Value of
the Merger Consideration will be paid in cash. If a CoBancorp shareholder would
receive a fraction of FirstMerit Common Stock, cash will be paid in lieu of such
fractional share. CoBancorp shareholders may also make no election.
The Per Share Cash Consideration is fixed at $44.50, but the value of
the Per Share Stock Consideration will fluctuate with the value of the
FirstMerit Common Stock. The Average Closing Price for FirstMerit Common Stock
will not be fixed until the end of the Pricing Period.
The following table shows the relationships between the Average Closing
Price, the "Exchange Ratio" (the actual number of shares of FirstMerit Common
Stock to be received for each share of CoBancorp Common Stock) and the "Per
Share Value" (the Average Closing Price multiplied by the Exchange Ratio) of a
share of CoBancorp Common Stock to be exchanged for FirstMerit Common Stock. The
Per Share Value of the CoBancorp Common Stock is not necessarily indicative of
the market value of the FirstMerit Common Stock at the Effective Time.
<TABLE>
<CAPTION>
AVERAGE CLOSING PRICE PER SHARE VALUE OF
OF FIRSTMERIT COMMON STOCK EXCHANGE RATIO COBANCORP COMMON STOCK
<S> <C> <C> <C>
MORE THAN $30.60 $48.53 divided by $48.53
the Average Closing
Price
IF $30.60 TO $28.05
$30.60 1.586 $48.53
$30.00 1.586 $47.58
$29.00 1.586 $45.99
$28.05 1.586 $44.50
IF $28.04 TO $22.96
$28.04 1.587 $44.50
$27.00 1.648 $44.50
$26.00 1.711 $44.50
$25.00 1.780 $44.50
$24.00 1.854 $44.50
$22.96 1.938 $44.50
IF $22.95 TO $20.40
$22.95 1.939 $44.50
</TABLE>
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<PAGE> 33
<TABLE>
<S> <C> <C> <C>
$22.00 1.939 $42.66
$21.00 1.939 $40.72
$20.40 1.939 $39.55
LESS THAN $20.40 $20.40 divided by $39.55(1)
the Average Closing
Price, multiplied by
1.939(1)
</TABLE>
- -------------------
(1) If the Average Closing Price of FirstMerit Common Stock is less
than $20.40, the Exchange Ratio will be 1.939 unless CoBancorp elects to
terminate the Merger Agreement. If CoBancorp makes such an election, FirstMerit
has the right to fix the Per Share Value of the Stock Consideration at $39.55 by
agreeing to an Exchange Ratio equal to $20.40 divided by the Average Closing
Price multiplied by 1.939. If FirstMerit does so, CoBancorp may not then
terminate the Merger Agreement. See "TERMS OF MERGER -- Conversion of CoBancorp
Capital Stock into FirstMerit Capital Stock," "DESCRIPTION OF FIRSTMERIT CAPITAL
STOCK" and "COMPARISON OF FIRSTMERIT AND COBANCORP CAPITAL STOCK."
If the CoBancorp shareholders elect less than 30% or more than 49% of
the Merger Consideration (as defined below) to be paid in cash, the Merger
Agreement provides that CoBancorp shareholders will have certain of their
elections allocated on a pro rata basis so that no less than 30% nor more than
49% of the aggregate market value of the Merger Consideration will be paid in
cash.
PROCEDURE FOR ELECTION OF CASH AND/OR FIRSTMERIT COMMON STOCK
FirstMerit has selected FirstMerit Bank to act as the exchange agent
(the "Exchange Agent") to effect the elections by the CoBancorp shareholders,
the exchange of certificates and the payment of cash in connection with the
Merger. Approximately 25 days prior to the anticipated Effective Time, the
Exchange Agent will send to each CoBancorp shareholder who is a shareholder of
record as of five business days prior to such date, an Election Form and
transmittal letter to be used by each such shareholder to indicate Stock
Election Shares, Cash Election Shares or No Election Shares. In order for an
Election Form to be deemed to be effective, such Election Form and transmittal
letter must be properly completed and duly executed by the CoBancorp shareholder
and returned, along with the CoBancorp stock certificates as to which the
election is being made, to the Exchange Agent by the Election Deadline.
FirstMerit and CoBancorp currently anticipate that the Effective Time will occur
on [__________], 1998. Based on such anticipated Effective Time, the Exchange
Agent would mail Election Forms and the accompanying letters of transmittal on
approximately [_________], 1998 to each CoBancorp shareholder who is a
shareholder of record as of [_________], 1998. In addition, based on such
anticipated Effective Time, the Election Deadline would be 5:00 P.M., Eastern
Time, on [_________], 1998.
Each CoBancorp shareholder may elect to receive only shares of
FirstMerit Common Stock, to elect to receive only cash, to elect to receive a
combination of shares of FirstMerit Common Stock and cash or to indicate that
such holder makes no election, in each case, with respect to such holder's
CoBancorp Common Stock. Any shares of CoBancorp Common Stock with respect to
which an effective, properly completed Election Form and stock certificates have
not been submitted to the Exchange Agent by the Election Deadline will be deemed
to be No Election Shares. For purposes of the election procedures, dissenting
shares will be treated as Cash Election Shares, provided, however, that holders
of dissenting shares will receive payment for such shares in accordance with the
provisions of Ohio law. See "RIGHTS OF DISSENTING SHAREHOLDERS." Subject to
compliance with the applicable provisions of Ohio law, holders of dissenting
shares will receive the fair value of their shares of CoBancorp Common Stock.
Holders of Cash Election Shares will receive the Per Share Cash Consideration,
subject to the allocation procedures described below. As a result, the value of
the consideration received by holders of dissenting shares may not be the same
as the value of the consideration received by holders of Cash Election Shares.
Additionally, as a result of the allocation procedures, holders of Cash Election
Shares may receive part of the Merger Consideration in the form of FirstMerit
Common Stock. See "TERMS OF MERGER-- Allocation."
The actual Merger Consideration that will be paid to each CoBancorp
shareholder upon consummation of the Merger may differ from the form of Merger
Consideration elected by such shareholder pursuant to his Election Form in the
event that the aggregate amount by cash payable pursuant to the Merger is less
than the Minimum Cash Consideration
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<PAGE> 34
Amount or in excess of the Maximum Cash Consideration Amount. Because the
aggregate amount of cash that will be payable in the Merger must be at least the
Minimum Cash Consideration Amount and no more than the Maximum Cash
Consideration Amount, the extent to which elections by CoBancorp shareholders
will be accommodated will depend upon the respective numbers of CoBancorp
shareholders who elect to receive all cash, all FirstMerit Common Stock, a
combination of cash and FirstMerit Common Stock or who make no election. In the
event that one type of consideration is oversubscribed, the Exchange Agent will
follow the allocation procedures set forth in the Merger Agreement and described
below. See "TERMS OF MERGER-- Allocation."
NO ASSURANCE CAN BE GIVEN THAT THE CURRENT FAIR MARKET VALUE OF FIRSTMERIT
COMMON STOCK WILL BE EQUIVALENT TO THE FAIR MARKET VALUE OF FIRSTMERIT COMMON
STOCK ON THE DATE SUCH STOCK IS RECEIVED BY A COBANCORP SHAREHOLDER OR AT ANY
OTHER TIME. THE FAIR MARKET VALUE OF FIRSTMERIT COMMON STOCK RECEIVED BY A
COBANCORP SHAREHOLDER MAY BE GREATER OR LESS THAN THE CURRENT FAIR MARKET VALUE
OF FIRSTMERIT COMMON STOCK DUE TO NUMEROUS MARKET FACTORS.
In addition to a properly completed Election Form, each shareholder of
CoBancorp will be required to submit to the Exchange Agent a properly executed
letter of transmittal and surrender to the Exchange Agent the stock
certificate(s) representing shares of CoBancorp Common Stock (the
"Certificates") in order to obtain issuance of a new stock certificate
evidencing the shares of FirstMerit Common Stock and/or cash to which such
shareholder is entitled in the Merger. No dividends or other distributions will
be paid to a former CoBancorp shareholder with respect to shares of FirstMerit
Common Stock until such person surrenders the Certificates, or documentation
acceptable to the Exchange Agent in lieu of lost or destroyed Certificates, at
which time such dividends will be remitted to such person, without interest and
less any taxes that may have been imposed thereon. See "TERMS OF MERGER-- Lost
Certificates."
Twenty-five days prior to the anticipated consummation date for the
Merger (or on such other date as FirstMerit and CoBancorp shall mutually agree),
Boston EquiServe, which has been appointed by FirstMerit as the exchange agent
(the "Exchange Agent" for the Merger), will mail to each CoBancorp shareholder
who is a shareholder of record as of five business days prior to such mailing
date, an election form (the "Election Form") to be used by each such shareholder
to elect which of his shares of CoBancorp Common Stock shall be Stock Election
Shares, Cash Election Shares or No Election Shares. In order for an Election
Form to be deemed to be effective, such Election Form must be properly completed
and duly executed by the CoBancorp shareholder and returned to the Exchange
Agent by 5:00 P.M., Eastern Time, on the 20th day following the mailing date of
the Election Form (or such other time and date as FirstMerit and CoBancorp may
mutually agree) (the "Election Deadline"). FirstMerit and CoBancorp currently
anticipate that the consummation time for the Merger (the "Effective Time") will
occur on [______ __], 1998. Based on such anticipated Effective Time, the
Exchange Agent would mail the Election Forms and the accompanying letters of
transmittal on approximately [__________], 1998 to each CoBancorp shareholder
who is a shareholder of record as of [_______ __], 1998. In addition, based on
such anticipated Effective Time, the Election Deadline would be 5:00 P.M.,
Eastern Time, on [_________], 1998.
TO MAKE AN EFFECTIVE ELECTION, A COBANCORP COMMON SHAREHOLDER MUST SUBMIT A
PROPERLY COMPLETED ELECTION FORM SO THAT IT IS ACTUALLY RECEIVED BY THE EXCHANGE
AGENT AT OR PRIOR TO THE ELECTION DEADLINE IN ACCORDANCE WITH THE INSTRUCTIONS
ON THE ELECTION FORM. AN ELECTION FORM WILL BE PROPERLY COMPLETED ONLY IF
ACCOMPANIED BY CERTIFICATE(S) REPRESENTING ALL SHARES OF COBANCORP COMMON STOCK
COVERED THEREBY. THE ELECTION DEADLINE IS 5:00 P.M. ON THE 20TH DAY FOLLOWING
THE MAILING DATE OF THE ELECTION FORM OR SUCH OTHER DATE UPON WHICH FIRSTMERIT
AND COBANCORP MUTUALLY AGREE. FIRSTMERIT AND COBANCORP CURRENTLY ANTICIPATE THAT
THE EFFECTIVE TIME WILL OCCUR ON[ _______________], 1998 IN WHICH CASE THE
ELECTION DEADLINE WILL BE [____________,] 1998.
FirstMerit will make available one or more Election Forms as may be
reasonably requested by all persons who become holders (or beneficial owners) of
CoBancorp Common Stock between the day that is five business days prior to the
mailing of the Election Forms and close of business on the business day prior to
the Election Deadline, and CoBancorp and FirstMerit will provide to the Exchange
Agent all information reasonably necessary for it to perform as specified in the
Merger Agreement.
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An election will have been properly made only if the Exchange Agent
will have actually received a properly completed Election Form by the Election
Deadline. An Election Form will be deemed properly completed only if accompanied
by one or more Certificates (or customary affidavits and indemnification
regarding the loss or destruction of such Certificates or the guaranteed
delivery of such Certificates) representing all shares of CoBancorp Common Stock
covered by such Election Form, together with duly executed transmittal materials
included with the Election Form. Any Election Form may be revoked or changed by
the person submitting such Election form at or prior to the Election Deadline.
In the event an Election Form is revoked prior to the Election Deadline, the
shares of CoBancorp Common Stock represented by such Election Form shall become
No Election Shares and FirstMerit will cause the Certificates to be promptly
returned without charge to the person who submitted the Election Form upon
written request to that effect from the person who submitted the Election Form.
Subject to the terms of the Merger Agreement and of the Election Form, the
Exchange Agent will have reasonable discretion to determine whether any
election, revocation or change has been properly or timely made and to disregard
immaterial defects in the Election Forms, and any good faith decisions of the
Exchange Agent regarding such matters will be binding and conclusive. Neither
FirstMerit nor the Exchange Agent will be under any obligation to notify any
person of any defect in an Election Form.
IF THE EXCHANGE AGENT FAILS TO RECEIVE YOUR PROPERLY COMPLETED ELECTION FORM AND
STOCK CERTIFICATE(S) BY THE ELECTION DEADLINE, YOUR SHARES WILL BE DEEMED NO
ELECTION SHARES AND YOU WILL RECEIVE THE MERGER CONSIDERATION DETERMINED IN
ACCORDANCE WITH THE ALLOCATION PROCEDURES SET FORTH IN THE MERGER AGREEMENT AND
DESCRIBED BELOW UNDER "TERMS OF MERGER-- ALLOCATION." THEREFORE, IT IS IMPORTANT
THAT THE EXCHANGE AGENT RECEIVES YOUR ELECTION FORM AND STOCK CERTIFICATE(S) BY
THE ELECTION DEADLINE.
ALLOCATION
Within five business days after the Election Deadline, unless the
Effective Time has not yet occurred, in which case as soon thereafter as
practicable, FirstMerit shall cause the Exchange Agent to effect the allocation
among the holders of CoBancorp Common Stock in accordance with the Election
Forms as follows:
(a) In the event the amount of cash that would be payable upon the
conversion into cash of the Cash Election Shares is less than the Minimum Cash
Consideration Amount, (i) all Cash Election Shares shall be converted into the
right to receive the Per Share Cash Consideration, (ii) the Exchange Agent shall
select first from among the No Election Shares on a pro rata basis and then (if
necessary) from among the Stock Election Shares on a pro rata basis, a
sufficient number of shares ("Cash Designated Shares") such that the aggregate
amount of the Per Share Cash Consideration that will be payable pursuant to the
Merger equals as closely as practicable the Minimum Cash Consideration Amount,
and all Cash Designated Shares shall be converted into the right to receive the
Per Share Cash Consideration, and (iii) the No Election Shares and the Stock
Election Shares which are not Cash Designated Shares shall be converted into the
right to receive the Per Share Stock Consideration.
(b) In the event the amount of cash that would be payable upon the
conversion into cash of the Cash Election Shares is greater than the Maximum
Cash Consideration Amount, (i) all Stock Election Shares and No Election Shares
shall be converted into the right to receive FirstMerit Common Stock, (ii) the
Exchange Agent shall select from among the Cash Election Shares on a pro rata
basis, a sufficient number shares ("Stock Designated Shares") such that the
amount of cash that will be payable pursuant to the Merger equals as closely as
practicable, but not in excess of, the Maximum Cash Consideration Amount, and
all Stock Designated Shares shall be converted in the right to receive the Per
Share Stock Consideration, and (iii) the Cash Election Shares which are not
Stock Designated Shares shall be converted into the right to receive the Per
Share Cash Consideration.
(c) In the event the amount of cash that would be payable upon the
conversion into cash of the Cash Election Shares is at least equal to the
Minimum Cash Consideration Amount and is no more than the Maximum Cash
Consideration Amount (as determined by the Exchange Agent), then all Cash
Election Shares shall be converted into the right to receive cash and all Stock
Election Shares and No Election Shares shall be converted into the right to
receive the Per Share Stock Consideration; and
In connection with the special allocation procedures described in the
preceding paragraph, any CoBancorp shareholder who has acquired shares of
CoBancorp Common Stock through the exercise of stock options, and who elects
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to receive FirstMerit Common Stock with respect to (all or a portion of) such
shareholder's CoBancorp Common Stock, shall be entitled to the maximum amount of
the Per Share Stock Consideration exchanged for the shareholder's Stock Election
Shares being allocated to the shareholder's shares of CoBancorp Common Stock
acquired through the exercise of stock options, with any required Per Share Cash
Consideration being allocated first to shares of CoBancorp Common Stock acquired
other than through the exercise of stock options, unless otherwise specifically
elected by such shareholder.
THE MARKET PRICE OF THE FIRSTMERIT COMMON STOCK WILL LIKELY FLUCTUATE BETWEEN
THE DATE OF THIS PROSPECTUS AND PROXY STATEMENT AND THE EFFECTIVE TIME.
FLUCTUATIONS IN THE MARKET PRICE OF FIRSTMERIT COMMON STOCK WILL RESULT IN AN
INCREASE OR DECREASE IN THE VALUE OF THE MERGER CONSIDERATION TO BE RECEIVED BY
COBANCORP SHAREHOLDERS WHO ELECT TO RECEIVE FIRSTMERIT COMMON STOCK. COBANCORP
SHAREHOLDERS ARE ADVISED TO OBTAIN CURRENT MARKET QUOTATIONS FOR FIRSTMERIT
COMMON STOCK PRIOR TO MAKING AN ELECTION.
COBANCORP STOCK CERTIFICATES SHOULD NOT BE FORWARDED TO THE EXCHANGE
AGENT UNTIL A COBANCORP SHAREHOLDER HAS RECEIVED THE ELECTION FORM AND
TRANSMITTAL LETTERS AND SHOULD NOT BE RETURNED WITH THE ENCLOSED PROXY.
NO EFFECT ON FIRSTMERIT COMMON STOCK
At the Effective Time, each share of FirstMerit Common Stock then
issued and outstanding will continue to be one share of FirstMerit Common Stock.
NO FRACTIONAL SHARES OF FIRSTMERIT COMMON STOCK TO BE ISSUED
No fractional shares of FirstMerit Common Stock will be issued in the
Merger. In lieu of fractional shares, each holder of shares of CoBancorp Common
Stock who otherwise would have been entitled to a fraction of a share of
FirstMerit Common Stock, upon surrender of his certificates representing shares
of CoBancorp Common Stock, will be paid the cash value (without interest) of
such fraction, which will be equal to such fraction multiplied by the average of
the last sale prices of FirstMerit Common Stock as reported on Nasdaq/NMS for
the five trading days immediately preceding the Effective Time.
RIGHTS OF HOLDERS OF COBANCORP STOCK CERTIFICATES PRIOR TO SURRENDER
Upon surrender to the Exchange Agent of certificates representing
shares of CoBancorp Common Stock, the shareholder will be entitled to receive in
exchange, pursuant to his election as indicated on the Election Form (and
subject to certain prorations if there is an over election for cash or
FirstMerit Common Stock) (see "TERMS OF MERGER -- Allocation"), cash and/or
certificate(s) representing the appropriate number of shares of FirstMerit
Common Stock to which such shareholder is entitled, as well as cash in lieu of
any fractional shares of FirstMerit Common Stock. Unless and until the
certificates representing shares of CoBancorp Common Stock are so surrendered,
no dividend or other distribution with respect to FirstMerit Common Stock with a
record date occurring after the Effective Time as of any time subsequent to the
consummation of the Merger will be paid to the holder of any such unsurrendered
certificate. Holders of unsurrendered certificates are entitled to vote after
the Effective Time at any meeting of FirstMerit shareholders regardless of
whether such holders have exchanged their certificates. Upon surrender of
certificates to the Exchange Agent, but only to the extent of the election to
receive FirstMerit Common Stock, or as a consequence of the allocation
procedures, the former CoBancorp shareholder will receive certificates
representing the FirstMerit Common Stock into which such shareholder's shares of
CoBancorp Common Stock were converted and the dividends or other distributions
(without interest) that have theretofore become payable with respect to such
FirstMerit Common Stock.
LOST CERTIFICATES
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Any CoBancorp shareholder who has lost or misplaced a certificate for
any of his shares of CoBancorp Common Stock should immediately contact Lois E.
Gunning, Corporate Secretary, at CoBancorp at (440) 284-6422, to begin the
process for replacing the lost certificate prior to the Effective Time. The
Merger Agreement provides for a special exchange procedure for shareholders of
CoBancorp who are unable to deliver the certificate(s) which represents their
shares of CoBancorp Common Stock and such procedure will be explained in the
Transmittal Form, but such shareholders will find it easier to complete the
exchange process if they obtain a replacement certificate(s) from CoBancorp
prior to the Effective Time.
TREATMENT OF STOCK OPTIONS OUTSTANDING UNDER COBANCORP STOCK OPTION PLANS
As of December 31, 1997, there were unexercised stock options
outstanding under the CoBancorp stock option plans ("CoBancorp Option Plans") to
purchase 107,341 shares of CoBancorp Common Stock at prices varying from $11.85
to $22.09 per share. Under the Merger Agreement, CoBancorp has agreed not to
grant additional options under the CoBancorp Option Plans. See "TERMS OF MERGER
- -- Interests of CoBancorp Executive Officers and Directors." CoBancorp stock
options outstanding will not be assumed at the Effective Time by FirstMerit. For
any stock option outstanding at the Effective Time, the holder thereof will
receive cash from FirstMerit in an amount equal to the difference between the
exercise price for such option and $44.50.
CONDUCT OF FIRSTMERIT'S BUSINESS PENDING THE MERGER
The Merger Agreement requires FirstMerit (including its subsidiaries)
to conduct its business, during the period from the date the Merger Agreement
was signed until the Effective Time, in such a manner so as not to materially
interfere with the ability to consummate the Merger, to delay the Effective Time
or to have a material adverse effect upon the transactions contemplated by the
Merger Agreement.
CONDUCT OF COBANCORP'S BUSINESS PENDING THE MERGER
GENERAL. The Merger Agreement requires CoBancorp (including its
subsidiaries) to conduct its business, during the period from the date the
Merger Agreement was signed until the Effective Time, in the ordinary course
substantially consistent with its practices in effect on the date the Merger
Agreement was signed. In addition, the Merger Agreement restricts CoBancorp from
engaging in certain transactions during the period from the date the Merger
Agreement was signed until the Effective Time, including, among other things,(a)
amending, repealing, or otherwise modifying the CoBancorp Articles or
Regulations, or comparable organizational documents of any of the subsidiaries
of CoBancorp, (b) entering into any loan or credit commitment to, or investing
or agreeing to invest in, any person or entity if such commitment or investment
would exceed $375,000 as a residential loan or $750,000 as a commercial loan,
without first consulting with FirstMerit, except that CoBancorp and its
subsidiaries may honor contractual obligations in existence on the date of the
Merger Agreement, (c) selling, assigning or disposing of certain of its
significant assets to a third party or purchasing or acquiring certain
significant assets from a third party, (d) entering into any transaction,
agreement, or commitment outside the ordinary course of its business which is
material to CoBancorp and its subsidiaries taken as a whole, (e) issuing or
selling any capital stock or other securities (with certain limited exceptions,
including pursuant to the exercise of employee stock options outstanding on the
date of the Merger Agreement), (f) acquiring beneficial ownership of any class
of equity securities of any corporation, (g) declaring a dividend, except for a
regular quarterly cash dividend not in excess of .22 cents per share, or (h)
adopting or amending (with certain limited exceptions) any employee
compensation, bonus, or benefit plans or, except in amounts generally consistent
with past practice, increasing the compensation or fringe benefits of any
present or former director, officer or employee or paying any bonus,
compensation, or benefit not required by any existing plan or arrangement.
NO SOLICITATION OF ALTERNATIVE ACQUISITION TRANSACTIONS. The Board of
Directors of CoBancorp is recommending unanimously that the holders of CoBancorp
Common Stock vote in favor of adoption of the Merger Agreement at the CoBancorp
Special Meeting. CoBancorp has agreed that neither it nor any of its
subsidiaries will solicit or initiate any proposals or offers from any person,
or discuss or negotiate with any such person, to acquire CoBancorp, any of its
subsidiaries, any material amount of its assets, any of its equity securities,
or consider any merger or business consolidations, except that CoBancorp and/or
its subsidiaries may furnish information to and discuss or negotiate with any
person making an unsolicited proposal if (i) the Board of Directors of CoBancorp
determines in good faith and upon the
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advice of legal counsel that such action is required for the directors of
CoBancorp to fulfill their fiduciary duties and obligations to the CoBancorp
shareholders and other constituencies under Ohio law, and (ii) prior to
furnishing such information to, or entering into discussions or negotiations
with, such person or entity, CoBancorp provides immediate written notice to
FirstMerit to the effect that it is furnishing information to, or entering into
discussions or negotiations with, such a person or entity. In addition, the
Merger Agreement provides that the CoBancorp Board of Directors may not withdraw
or modify its recommendation to the CoBancorp shareholders following receipt of
a proposal for any such transaction unless the Board of Directors of CoBancorp
determines in good faith and upon the advice of legal counsel that such action
is required for the directors of CoBancorp to fulfill their fiduciary duties and
obligations to the CoBancorp shareholders and other constituencies under Ohio
law.
ADDITIONAL COBANCORP RESERVES, ACCRUALS, CHARGES, AND EXPENSES. The
Merger Agreement provides that FirstMerit and CoBancorp will consult and
cooperate with each other prior to the Effective Time (a) to conform CoBancorp's
approach to determining the level of the allowance for loan losses to the
approach used by FirstMerit, (b) to determine appropriate accruals, reserves and
charges for CoBancorp to establish and take in respect of excess facilities and
equipment capacity, severance costs, write-down or write-off of various assets,
and other appropriate accounting adjustments, taking into account FirstMerit's
business plan following the Merger, and (c) to determine the amount and timing
for recognizing, for financial accounting purposes, the expenses of the Merger
and the restructuring charges related to or to be incurred in connection with
the Merger. CoBancorp will, on a basis mutually satisfactory to CoBancorp and
FirstMerit, establish and take all such reserves, accruals and charges and
recognize, for financial accounting purposes, such expenses and charges,
provided that all conditions to FirstMerit's and CoBancorp's obligations to
consummate the Merger have been satisfied or waived and that such reserves,
accruals and charges conform with generally accepted accounting principles,
applicable laws and regulations and the requirements of governmental entities.
CONDITIONS TO THE MERGER
CONDITIONS FOR BOTH FIRSTMERIT AND COBANCORP. The obligations of each
of FirstMerit and CoBancorp to consummate the Merger are subject to the
fulfillment or waiver at or prior to the closing of the Merger, including, but
not limited to, of the following conditions: (a) the Merger Agreement shall have
been approved and adopted by the requisite vote of the shareholders of
CoBancorp; (b) there shall have been received all necessary consents to and
approvals of the transactions contemplated by the Merger Agreement from
governmental agencies (other than immaterial consents), and such consents shall
not include any conditions or requirements which, in the reasonable opinion of
the Board of Directors of FirstMerit, would have a Material Adverse Effect (as
defined below) on the anticipated economic and business benefits to FirstMerit
of the transactions contemplated by the Merger, taken as a whole; (c) the
Registration Statement shall have been declared effective by the Commission and
shall not be subject to a stop order; (d) no restraining order or injunction
prohibiting the Merger shall be in effect; and (e) FirstMerit shall have
received an opinion of its counsel to the effect the Merger will constitute a
tax-free reorganization under Code Section 368(a)(1)(A).
CONDITIONS FOR FIRSTMERIT. The obligation of FirstMerit to consummate
the Merger is also subject to the fulfillment or waiver of the following
additional conditions: (a) CoBancorp shall have performed in all material
respects all of its obligations contained in the Merger Agreement required to be
performed at or prior to the closing of the Merger; (b) the representations and
warranties of CoBancorp contained in the Merger Agreement shall be true and
correct as of the Effective Time, except (among other exceptions) as expressly
contemplated by the Merger Agreement and to the extent that the inaccuracy of
CoBancorp's representations or warranties, individually or in the aggregate,
shall not have a Material Adverse Effect on CoBancorp; (c) there shall not have
been any change in the financial condition, results of operations or business of
CoBancorp and its subsidiaries that either individually or in the aggregate
would have a Material Adverse Effect on CoBancorp, other than as a result of any
action taken by CoBancorp at the written request of FirstMerit pursuant to the
Merger Agreement to establish specified additional reserves, accruals, charges
or expenses; (d) receipt by FirstMerit of officers' certificates as to certain
matters; and (e) receipt by FirstMerit of an opinion of CoBancorp's legal
counsel regarding certain customary legal matters.
CONDITIONS FOR COBANCORP. The obligation of CoBancorp to consummate the
Merger is also subject to the fulfillment or waiver of the following additional
conditions: (a) FirstMerit shall have performed in all material respects all of
its obligations contained in the Merger Agreement required to be performed at or
prior to the closing of the Merger; (b)
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the representations and warranties of FirstMerit contained in the Merger
Agreement shall be true and correct as of the Effective Time except (among other
exceptions) as expressly contemplated by the Merger Agreement and to the extent
that the inaccuracy of FirstMerit's representations or warranties, individually
or in the aggregate, shall not have a Material Adverse Effect on FirstMerit; (c)
receipt by CoBancorp of officers' certificates as to certain matters; (d)
receipt by CoBancorp of an opinion of FirstMerit's legal counsel regarding
certain customary legal matters; and (e) there shall not have been any change in
the financial condition, results of operations or business of FirstMerit and its
subsidiaries that would have a Material Adverse Effect on FirstMerit.
"Material Adverse Effect" on CoBancorp or FirstMerit is defined in the
Merger Agreement to mean a material adverse effect (other than as a result of
changes (x) in banking laws or regulations of general applicability or
interpretations thereof by court or governmental entities, and (y) in generally
accepted accounting principles) on the respective condition (financial and
otherwise), results of operations, or business of CoBancorp and its
subsidiaries, or FirstMerit and its subsidiaries, as the case may be, taken as a
whole, or on the ability of CoBancorp or FirstMerit, as the case may be, to
consummate the transactions contemplated hereby. The effect of any action taken
by CoBancorp at the written request of FirstMerit pursuant to the Merger
Agreement to establish specified additional reserves, accruals, charges, or
expenses, shall not be taken into consideration in determining whether any
Material Adverse Effect has occurred. See "TERMS OF MERGER -- Conduct of
CoBancorp's Business Pending the Merger."
REGULATORY APPROVALS
Consummation of the Merger is subject to and conditioned upon receipt
by FirstMerit and CoBancorp of all necessary and material regulatory approvals.
Approvals must be obtained from the Board of Governors of the Federal Reserve
System ("Federal Reserve"), the Office of the Comptroller of the Currency
("OCC"), and notices filed with the Office of Thrift Supervision ("OTS"), and
the Ohio Division of Financial Institutions ("Division"). Applications for these
approvals have all been filed, but to date approvals have not been granted by
any of the agencies. The Merger may not be consummated until all of these
regulatory approvals are received and until the 15th day after approval is
received from the latest of the Federal Reserve or OCC.
ACTIONS REQUIRED FOR REGULATORY APPROVAL
The Merger Agreement provides that each of FirstMerit and CoBancorp
shall use its diligent efforts to resolve any objections asserted with respect
to the Merger by the Federal Reserve, the United States Department of Justice
("Department of Justice") or any other governmental entity (including, without
limitation, objections under any antitrust and banking laws). In the event a
suit is threatened or instituted challenging the Merger as violative of the
antitrust laws, the Merger Agreement requires each of FirstMerit and CoBancorp
to use its diligent efforts to avoid the filing of, resist, or resolve such
suit. FirstMerit and CoBancorp must use their diligent efforts to take such
action as may be required (a) by the Federal Reserve, the Department of Justice
or any other governmental entity in order to resolve such objections as any of
them may have to the Merger, or (b) by any federal or state court of the United
States, in any suit brought by a private party or governmental entity
challenging the Merger as violative of any antitrust laws, in order to avoid the
entry of, or to effect the dissolution of, any injunction, temporary restraining
order, or other order, which has the effect of preventing the consummation of
the Merger.
WAIVER OF CONDITIONS, AMENDMENT, OR TERMINATION OF THE MERGER AGREEMENT
WAIVER. The Merger Agreement provides that either FirstMerit or
CoBancorp may extend the time for the performance of the obligations of the
other, waive any inaccuracies in the representations or warranties of the other
party contained in the Merger Agreement or in any document delivered pursuant
thereto, waive compliance with any of the conditions or covenants of the other
party contained in the Merger Agreement, or waive or modify performance of any
of the obligations of the other party under the Merger Agreement.
Notwithstanding these provisions, the Merger cannot be completed unless the
approvals of the Merger by the Federal Reserve, and OCC, and certain other
regulatory authorities are obtained and unless the shareholders of CoBancorp
adopt the Merger Agreement by the requisite affirmative vote. See "TERMS OF
MERGER -- Regulatory Approvals" and "SPECIAL MEETING OF COBANCORP SHAREHOLDERS
- -- Vote Required."
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AMENDMENT. The Merger Agreement may be amended, either before or after
its adoption by the shareholders of CoBancorp, upon authorization by the
respective Boards of Directors of CoBancorp and FirstMerit. Any such amendment,
however, made subsequent to the adoption of the Merger Agreement by the
shareholders of CoBancorp may not (a) alter the amount or change the form of the
consideration contemplated by the Merger Agreement, (b) alter or change any term
of the articles of incorporation of the surviving corporation to be affected by
the Merger, or (c) alter or change the qualification of the Merger as a tax-free
reorganization under the provisions of Section 368 of the Code.
TERMINATION. The Merger Agreement may be terminated at any time prior
to the Effective Time, whether before or after adoption of the Merger Agreement
by the shareholders of CoBancorp, under any of the following circumstances: (a)
by mutual agreement of the parties by the vote of a majority of the Board of
Directors of each of FirstMerit and CoBancorp; (b) by the vote of a majority of
the Board of Directors of either FirstMerit or CoBancorp if the Merger is not
consummated on or before September 1, 1998, unless the failure to consummate is
related to the action or inaction of a regulatory agency and such action or
inaction is not related to either FirstMerit's or CoBancorp's breach of their
respective obligations to file certain material with regulatory agencies, then
on or before November 1, 1998; (c) by the vote of a majority of the Board of
Directors of CoBancorp if certain material conditions have not been met or
waived by CoBancorp; (d) by the vote of a majority of the Board of Directors of
FirstMerit if certain material conditions have not been met or waived by
FirstMerit; (e) by the vote of a majority of the Board of Directors of either
FirstMerit or CoBancorp if any regulatory agency has denied approval of the
Merger and such denial has become final and non-appealable; (f) by the vote of a
majority of the Board of Directors of either FirstMerit or CoBancorp in the
event of a material breach by the other party of any representation or covenant,
which breach is not cured, within 30 days after written notice; (g) by the vote
of a majority of the Board of Directors of CoBancorp at any time during the
fourth and fifth full trading days immediately prior to the Effective Time, if
(x) the Average Closing Price is less than $20.40, and (y) FirstMerit has not
have given written notice to CoBancorp on the second or third full trading day
immediately prior to the Effective Time that FirstMerit agrees that the Exchange
Ratio shall be calculated by multiplying 1.939 by a factor equal to $20.40
divided by the Average Closing Price; and (h) by the vote of a majority of the
Board of Directors of CoBancorp if the costs related to the remediation of
certain property exceeds agreed upon amounts.
EXPENSES. Generally, each party is responsible for the costs and
expenses incurred by it in connection with the transactions contemplated by the
Merger Agreement. If the Merger Agreement is terminated by CoBancorp or
FirstMerit because of the material breach by the other party of any
representation, warranty, covenant, undertaking or restriction contained in the
Merger Agreement, and if the terminating party is not in material breach of any
representation, warranty, covenant, undertaking or restriction contained in the
Merger Agreement, then the breaching party shall pay all costs and expenses of
the terminating party, including but not limited to printing, mailing and
related fees, as well as fees for financial advisors, accountants and legal
counsel; provided, however, that if the Merger Agreement is terminated under
other circumstances, all costs and expenses incurred in connection with the
Merger Agreement and the transactions contemplated thereby will be paid by the
party incurring such costs and expenses.
EFFECTIVE TIME
Upon satisfaction of all conditions under the Merger Agreement that
have not been waived, FirstMerit and CoBancorp will file appropriate
certificates with the Secretary of State of the State of Ohio. The Merger will
become effective when such filing has been made, whereupon FirstMerit will be
the surviving corporation and the separate existence of CoBancorp will cease.
The Effective Time will occur as promptly as practicable after the date all of
the conditions to the Merger are satisfied or duly waived or at such other date
as FirstMerit and CoBancorp may agree. FirstMerit and CoBancorp currently
anticipate that the Merger will be completed during the second quarter of 1998,
although delays in obtaining the necessary regulatory approvals, which approvals
cannot be waived, could delay such completion of the Merger. See "TERMS OF
MERGER -- Regulatory Approvals" and "Actions Required for Regulatory Approvals."
COBANCORP STOCK PURCHASE OPTION
GENERAL. Subsequent to the execution of the Merger Agreement,
FirstMerit and CoBancorp entered into the CoBancorp Stock Option. One effect of
the CoBancorp Stock Option is to increase the likelihood that the Merger will be
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consummated by making it both more difficult and more expensive for another
party to attempt to obtain control of or acquire CoBancorp. The terms of the
CoBancorp Stock Option provide that FirstMerit has an option to purchase up to
19.9% of CoBancorp Common Stock (without giving effect to the issuance of any
shares subject to the CoBancorp Stock Option). The purchase price is $40 per
share. The number of shares and the purchase price are subject to adjustment as
described in the CoBancorp Stock Option.
PURCHASE EVENTS; EXERCISE OF OPTION. The CoBancorp Stock Option
provides that FirstMerit may exercise the CoBancorp Stock Option upon the
occurrence of one or more of the following "Purchase Events:" (a) CoBancorp
shall have proposed to enter into or enters into an agreement to effect (i) a
merger, consolidation, or other business combination involving CoBancorp or any
of its significant subsidiaries with or into any person, (ii) a sale, lease, or
other disposition of assets or earning power of CoBancorp representing 20% or
more of the consolidated assets or earning power of CoBancorp to any person, or
(iii) an issuance, sale, or other disposition of securities representing 20% or
more of the voting power of CoBancorp to any person (any of the foregoing being
an "Acquisition Transaction"); (b) any person, other than FirstMerit, commences
or files a registration statement with respect to a tender offer or exchange
offer to acquire shares of CoBancorp Common Stock such that the person would
beneficially own 25% or more of the CoBancorp Common Stock then outstanding; (c)
any person acquires beneficial ownership of 20% or more of the CoBancorp Common
Stock then outstanding, or any group has been formed that beneficially owns 20%
or more of the CoBancorp Common Stock then outstanding; or (d) the holders of
CoBancorp Common Stock do not approve the Merger Agreement at the CoBancorp
Special Meeting, the CoBancorp Special Meeting is not held or is canceled prior
to termination of the Merger Agreement, or CoBancorp's Board of Directors
withdraws or modifies in a manner adverse to FirstMerit the recommendation of
CoBancorp's Board of Directors that CoBancorp's shareholders approve the Merger,
in each case after any person (i) publicly announces a bona fide proposal, or
publicly discloses a bona fide intention to make a bona fide proposal, to engage
in an Acquisition Transaction, or (ii) files an application or gives notice
under the BHCA or the Change in Bank Control Act of 1978 for approval to engage
in an Acquisition Transaction.
Generally, the right to exercise the CoBancorp Stock Option terminates
upon the earliest of (a) the Effective Time, (b) 12 months after the first
occurrence of a Purchase Event, and (c) termination of the Merger Agreement in
accordance with its terms before the occurrence of a Purchase Event.
In the event of any change in the CoBancorp Common Stock by reason of a
stock dividend, split-up, recapitalization, combination, exchange of shares, or
similar transaction, the type and number of shares or securities subject to the
CoBancorp Stock Option and the purchase price therefor will be adjusted
appropriately.
REPURCHASE OF OPTION. During the 12-month period following the first
occurrence of a Repurchase Event (as described below), FirstMerit will have the
right to require CoBancorp to repurchase the CoBancorp Stock Option and all
shares of CoBancorp Common Stock purchased upon exercise of the CoBancorp Stock
Option that are beneficially owned by FirstMerit at the time the repurchase is
requested. The aggregate repurchase price will be the sum of (a) the aggregate
purchase price paid by FirstMerit for all shares of CoBancorp Common Stock
purchased upon exercise of the CoBancorp Stock Option that are beneficially held
by FirstMerit at the time the repurchase is requested, (b) the excess, if any,
of the Applicable Price (as described below) over the purchase price paid by
FirstMerit for each share of CoBancorp Common Stock purchased upon exercise of
the CoBancorp Stock Option that are beneficially held by FirstMerit at the time
the repurchase is requested, multiplied by the number of such shares, and (c)
the excess, if any, of the Applicable Price over the purchase price payable upon
exercise of the CoBancorp Stock Option multiplied by the number of shares with
respect to which the CoBancorp Stock Option has not been exercised.
"Repurchase Event" has the same meaning as "Acquisition Transaction,"
except that the percentage referred to in subparagraph (a)(ii) of the definition
of Acquisition Transaction above in the paragraph captioned "Purchase Events;
Exercise of Option" is 50%, and the percentage referred to in subparagraph
(a)(iii) of the definition is 40%. "Applicable Price" means the highest of (x)
the highest price per share to be paid by any person (other than FirstMerit) for
CoBancorp Common Stock or the highest consideration per share to be received by
the holders of CoBancorp Common Stock, in each case pursuant to an agreement for
a business combination with CoBancorp that is entered into after November 3,
1997 and before the repurchase is requested, (y) the highest closing sales price
per share of CoBancorp Common Stock reported on Nasdaq/NMS during the 60
business days before the repurchase is requested, and (z) in the event of the
sale by CoBancorp
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of assets or earning power aggregating more than 50% of the consolidated assets
or earning power of CoBancorp and its subsidiaries to any person, the sum of the
price paid for such assets or earning power and the current value of the
remaining assets of CoBancorp and its subsidiaries, divided by the number of
shares of CoBancorp Common Stock outstanding at the time of the sale.
Notwithstanding any other provision, the consideration payable to FirstMerit
shall be adjusted so that the maximum payable to FirstMerit under this provision
will not exceed the aggregate purchase price paid by FirstMerit pursuant to the
CoBancorp Stock Option, plus $5.0 million.
Except to the extent that FirstMerit has exercised its right to require
CoBancorp to repurchase the CoBancorp Stock Option and the CoBancorp Common
Stock purchased upon exercise of the CoBancorp Stock Option, as described in the
preceding paragraph, during the six-month period beginning 12 months after the
first occurrence of a Repurchase Event, CoBancorp will have the right to
repurchase from FirstMerit all of the shares of CoBancorp Common Stock purchased
upon exercise of the CoBancorp Stock Option that are beneficially owned by
FirstMerit at the time the repurchase is requested. The aggregate price will be
the greater of (a) 110% of the average closing sales price per share of
CoBancorp Common Stock reported on Nasdaq/NMS for the ten business days before
the repurchase is requested and (b) the sum of (x) the purchase price per share
paid by FirstMerit for such shares and (y) FirstMerit's "pre-tax per share
carrying cost" (as defined in the CoBancorp Stock Option) for such shares,
multiplied in either case by the number of shares being repurchased.
REGISTRATION RIGHTS; RIGHT OF FIRST REFUSAL. Upon request by FirstMerit
within the 18-month period following the first exercise of the CoBancorp Stock
Option (or later in the event of a delay in obtaining certain regulatory
approvals), CoBancorp will prepare and file a registration statement with the
Commission if such registration is necessary to permit the sale or other
disposition of the shares of CoBancorp Common Stock purchased upon exercise of
the CoBancorp Stock Option. CoBancorp is also required to permit FirstMerit to
include the shares in certain registration statements filed by CoBancorp with
the Commission during the periods referred to in the prior sentence.
At any time after the first occurrence of a Purchase Event and until
the later of (a) 24 months following the first exercise of the CoBancorp Stock
Option and (b) termination of the CoBancorp Stock Option, CoBancorp will have a
right of first refusal with respect to the sale or other disposition of shares
of CoBancorp Common Stock purchased upon exercise of the CoBancorp Stock Option.
This right of first refusal will not, however, apply to (x) any disposition in
which the proposed transferee will receive not more than 2% of the outstanding
CoBancorp Common Stock, (y) any registered public offering in which steps are
taken to reasonably ensure that no purchaser will acquire more than 2% of the
outstanding CoBancorp Common Stock, and (z) any transfer to a wholly owned
subsidiary of FirstMerit that agrees to be bound by the terms of the CoBancorp
Stock Option.
TERMINATION OF OPTION. FirstMerit may not exercise the CoBancorp Stock
Option if, at the time of exercise, it is in material breach of the Merger
Agreement. Moreover, CoBancorp's obligations under the CoBancorp Stock Option
will terminate and the CoBancorp Stock Option will no longer be exercisable if
the Merger Agreement is terminated and FirstMerit is in material breach of the
Merger Agreement when it is terminated; provided that, for this purpose, if the
Merger Agreement is to be terminated by FirstMerit, CoBancorp must upon request
notify FirstMerit if a material breach by FirstMerit exists and, if the Merger
Agreement is terminated by CoBancorp and all of the material breaches by
FirstMerit are curable, CoBancorp must provide FirstMerit with notice of the
material breaches and an opportunity to cure.
ADDITIONAL PROVISIONS. Certain rights and obligations of CoBancorp and
FirstMerit under the CoBancorp Stock Option are subject to receipt of required
regulatory approvals. Among others things, regulatory approvals are required for
the acquisition by FirstMerit of more than 5% of the outstanding CoBancorp
Common Stock.
INTERESTS OF CERTAIN PERSONS IN MERGER
DIRECTORS AND OFFICERS. Mr. John R. Cochran, the President and Chief
Executive Officer of FirstMerit, will continue as the President and Chief
Executive Officer of FirstMerit, as the surviving corporation. The persons
currently serving as directors of FirstMerit will continue to serve on the Board
of Directors of the surviving entity. Promptly after the Merger, an individual
recommended by the CoBancorp Board of Directors and approved by the FirstMerit
Board, will be appointed as a member of the Board of Directors of FirstMerit.
The persons currently serving on the Board of Directors of PREMIERBank will be
appointed as members of the Community Bank Board of FirstMerit Bank - Elyria
Region, and the
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persons currently serving on the Board of Directors of Jefferson Savings Bank
will be appointed as members of the Community Bank Board of FirstMerit Bank -
Columbus Region.
EXISTING EMPLOYMENT AND SEVERANCE AGREEMENTS. CoBancorp has entered
into employment agreements with Messrs. John S. Kreighbaum and Timothy W. Esson,
dated November 16, 1990 and December 31, 1993, respectively, and a severance
agreement with James R. Bryden, dated June 16, 1997 (collectively, the
"Agreements"). The Agreements currently provide for three-year terms in the case
of Messrs. Kreighbaum and Bryden and a two-year term in the case of Mr. Esson.
Pursuant to the Agreements, if employment is terminated for Good Reason (as
defined below) in connection with or within one year of a Change in Control (as
defined below), then (i) for Messrs. Kreighbaum and Esson, CoBancorp will pay in
cash an amount equal to the greater of the compensation and certain benefits for
the remaining term of the Agreement or for the two years following the later of
the date of the Change in Control or date of termination, (ii) for Mr. Bryden,
CoBancorp will pay in cash an amount equal to two times the average annual
salary paid to Mr. Bryden during the year immediately preceding the termination,
and (iii) for each of the executives, continued life, health and disability
insurance coverage substantially identical to the coverage maintained by
CoBancorp or any subsidiary for the earlier of 12 months from the date of
termination and the executive's employment by another employer.
A termination for "Good Reason" includes a termination after a Change
in Control upon a change in the executive's status, title, position or
responsibilities which, in the executive's reasonable judgment, does not
represent a promotion from his status, title, position or responsibilities as in
effect immediately prior thereto. A "Change in Control" under the Agreements
includes a merger on a basis whereby less than 50% of the total voting power of
the surviving cooperation is represented by shares held by former shareholders
of CoBancorp.
Consummation of the Merger will constitute a Change in Control for
purposes of the Agreements. Messrs. Kreighbaum, Esson and Bryden ("CoBancorp
Officers") have indicated their intention to terminate their respective
employment upon consummation of the Merger and FirstMerit has agreed that the
consummation of the Merger will constitute a change in status for the executives
entitling them to terminate employment for Good Reason. FirstMerit has agreed
that as of the Effective Time, CoBancorp will pay (i) in the case of Mr.
Kreighbaum, a lump sum of $900,000, (ii) in the case of Mr. Esson, a lump sum of
$539,800, and (iii) in the case of Mr. Bryden, a lump sum of $240,000. The
CoBancorp Officers will also receive continued life and health insurance
coverage for a period of 12 months following the Effective Time or until
employment by another employer, whichever shall first occur. Each of the
CoBancorp Officers has entered into non-disclosure agreements and
non-competition agreements (the latter of which runs for two years). The
CoBancorp officers have also entered into an agreement relating to the mutual
release of the parties to their respective agreement.
STOCK OPTIONS. In 1992, CoBancorp adopted the 1992 Long-Term Incentive
Plan Stock Option Plan. Each holder of an option to purchase shares of CoBancorp
Common Stock not exercised prior to the Effective Time shall receive on or
immediately before the Effective Time, a cash payment equal to the product of
(i) the number of shares of CoBancorp Common Stock subject to such option and
(ii) the excess, if any, of $44.50 over the exercise price per share of such
option, net of any cash which must be withheld under federal and state income
and employment tax requirements. Officers currently hold options to purchase an
aggregate of 107,341 shares of CoBancorp Common Stock. Under this arrangement,
such officers will receive, net of the weighted average option price of $16.16
per share, an aggregate of approximately $3.0 million.
SUPPLEMENTAL INCOME AGREEMENTS. CoBancorp has adopted and maintains
Executive Supplemental Income Agreements ("SERPs") for a limited number of
employees. The SERPs provide for (a) post retirement benefits to participants
currently in retirement status, (b) pre-retirement death benefits for active
employee participants and (c) post-termination benefits for active employee
participants.
As of September 30, 1997, CoBancorp ceased accruing additional
financial obligations under the SERPs except for an actuarially calculated
interest component relating to post-retirement benefits to those participants
currently being paid under a SERP. Pursuant to the Merger Agreement, prior to
the Effective Time, CoBancorp will use its best efforts to secure agreements
from those participants currently receiving post-retirement benefits to accept a
lump sum payment of the present value of their post-retirement benefits (in
amounts not in excess of the accrued financial reporting obligation relating to
such
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benefits on the books and records of CoBancorp) in full satisfaction of such
benefits. CoBancorp will consult with FirstMerit and its employee benefit
consultant relating to the allocation of accrued post-termination benefits to
active employee participants in amounts that have been previously recorded as
liabilities of CoBancorp for financial reporting purposes. In addition to the
foregoing, CoBancorp or its applicable subsidiaries will take all appropriate
action, to the extent legally permissible, to terminate all the SERPs as of the
Effective Time in a manner that does not diminish vested benefits of
participants thereunder.
RESTRICTED STOCK PLAN. CoBancorp has adopted and maintains the
CoBancorp Inc. Restricted Stock Plan (the "Restricted Stock Plan"). As of
October 31, 1997, the Board of Directors of CoBancorp accelerated the vesting of
4,500 shares of CoBancorp Common Stock subject to vesting restrictions held by
Messrs. Kreighbaum (2,000 shares), Esson (1,500) and Bryden (1,000) under the
Restricted Stock Plan.
DIRECTORS DEFERRED INCOME PLAN. CoBancorp has adopted and maintains the
Directors Deferred Income Plan (the "Directors Plan"). Pursuant to the Merger
Agreement, as of the Effective Time, participants in the Directors Plan shall be
vested in their accrued benefits as of such date and FirstMerit will assume the
liabilities under the Directors Plan.
INDEMNIFICATION; DIRECTORS' AND OFFICERS' LIABILITY INSURANCE. Except
as may be limited by applicable law, FirstMerit has agreed to honor, for a
period of six years after the Effective Time, the terms of the indemnification
provisions of Article II of CoBancorp's Code of Regulations (which provides that
CoBancorp shall indemnify its directors, officers, employees and agents to the
fullest extent permitted under Ohio law), and all indemnification provisions of
the CoBancorp subsidiaries, with respect to CoBancorp's directors, officers and
employees, for matters occurring prior to the Effective Time. Indemnification of
directors, officers and employees of CoBancorp and its subsidiaries for
activities following the Effective Time will be provided to the same extent it
is provided to other persons working in similar capacities for FirstMerit. For a
period of at least three years following the Effective Time, FirstMerit has
agreed to maintain in effect the current insurance policies maintained by
CoBancorp (or substitute policies with substantially the same coverage and
terms) covering directors' and officers' liability with respect to claims which
arise from factors or events which occurred before the Effective Time, except
that FirstMerit's obligation for the second and subsequent years following the
Effective Time will be based upon its ability to obtain such insurance at a
commercially reasonable cost.
EMPLOYEES OF COBANCORP
Employees of CoBancorp, other than the persons who are parties to the
Agreements or covered by the Key Employee Severance Provisions (as discussed
below), who do not become employees of FirstMerit or its subsidiaries, or who
become employees of FirstMerit or its subsidiaries but whose employment is
terminated during the 180-day period after the Effective Time (except if such
termination is for cause), will be entitled to receive separation monies in
consideration for a standard release of FirstMerit regarding matters related to
employment and termination of employment. The separation monies will be
calculated as follows:
<TABLE>
<CAPTION>
YEARS OF SERVICE NON-EXEMPT EXEMPT
<S> <C> <C>
Up to one year continuous service 2 Weeks Pay 4 Weeks Pay
One year to 5 years continuous service 4 Weeks Pay 8 Weeks Pay
Five years continuous service or more 1 Week Pay per year of 2 Weeks Pay per
service maximum of year of service;
26 weeks maximum of 26 weeks
</TABLE>
Pursuant to the Merger Agreement, FirstMerit has agreed to pay
separation amounts to 12 key employees under the Key Employee Severance
Provisions, which are in excess of the benefits discussed above. CoBancorp
determined that these employees were critical to the operations of CoBancorp
through the Effective Time. The amount established for each key employee will
not be paid if the employee voluntarily terminates his employment without good
reason prior to the expiration of six months after the Effective Time. Such
payments will be made conditioned upon the execution of a standard release of
FirstMerit regarding matters related to employment and termination of
employment.
The employees and key employees will also be entitled to any other
benefits required by law.
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PRICE RANGE OF COMMON STOCK AND DIVIDENDS
MARKET PRICES
FirstMerit Common Stock and CoBancorp Common Stock are included for
quotation on Nasdaq/NMS, under the symbols "FMER" and "COBI," respectively. As
of the [_________], 1998, there were [_________] shares of FirstMerit Common
Stock outstanding and held by approximately [_______] holders of record, and
[_________] shares of CoBancorp Common Stock outstanding and held by
approximately [_______] holders of record. The following table sets forth the
high and low closing sale prices of the FirstMerit Common Stock and CoBancorp
Common Stock for the periods indicated.
<TABLE>
<CAPTION>
FirstMerit CoBancorp
Sale Prices(1) Sale Prices
High Low High Low
<S> <C> <C> <C> <C>
Year Ended December 31, 1996:
First Quarter 16.25 13.88 20.50 18.63
Second Quarter 16.00 15.00 20.63 18.25
Third Quarter 16.00 14.13 20.00 18.75
Fourth Quarter 18.00 15.63 23.50 19.13
Year Ended December 31, 1997:
First Quarter 21.38 17.38 24.75 21.00
Second Quarter 25.25 19.25 28.50 23.25
Third Quarter 27.00 22.63 30.00 27.00
Fourth Quarter 30.75 24.88 [_____] [_____]
Year Ended December 31, 1998:
First Quarter (through _________, 1998) [_____] [_____] [_____] [_____]
</TABLE>
- ------------------------------
1 Adjusted to reflect 2-for-1 stock split in the form of a 100% stock
dividend completed in September 1997.
DIVIDENDS
The following table sets forth dividends declared per share of
FirstMerit Common Stock and CoBancorp Common Stock, respectively, for the
periods indicated. The ability of either FirstMerit or CoBancorp to pay
dividends to its respective shareholders is subject to certain restrictions. See
"REGULATORY MATTERS."
<TABLE>
<CAPTION>
FirstMerit CoBancorp
Dividends(1) Dividends
<S> <C> <C>
Year Ended December 31, 1996:
First Quarter $0.135 $0.15
Second Quarter 0.135 0.16
Third Quarter 0.135 0.16
Fourth Quarter 0.135 0.16
Year Ended December 31, 1997:
First Quarter $0.145 $0.17
Second Quarter 0.145 0.18
Third Quarter 0.16 0.18
Fourth Quarter 0.16 0.18
</TABLE>
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<TABLE>
<S> <C> <C> <C> <C>
Year Ended December 31, 1998:
First Quarter (through ___________, 1998) [_____] [_____]
</TABLE>
- ------------------------------
1 Adjusted to reflect 2-for-1 stock split in the form of a 100% stock dividend
in September 1997.
CERTAIN FEDERAL INCOME TAX CONSEQUENCES
The following discussion is a summary of the material federal income
tax consequences of the Merger of CoBancorp with and into FirstMerit to
CoBancorp and to the existing shareholders of CoBancorp, but does not purport to
be a complete analysis of all the potential tax effects of the Merger. The
discussion is based upon an opinion of FirstMerit's legal counsel, which is
based upon the Code, Treasury Regulations, IRS rulings and judicial decisions
now in effect, all of which are subject to change at any time by legislative,
judicial, or administrative action. Any such change may or may not be applied
retroactively. No discussion is rendered with respect to the effect, if any, of
any pending or future legislation or administrative regulation or ruling which
may have a bearing on any of the foregoing.
There is no undertaking or requirement to provide notice of changes
which may occur after the date hereof, including any change in the law, whether
by legislative or regulatory action, judicial interpretation or otherwise, or of
any change of facts as they presently exist. No information is provided herein
with respect to foreign, state or local tax laws or estate and gift tax
considerations, or the federal or state income tax considerations that may
affect the treatment of a shareholder who acquired his CoBancorp Common Stock
pursuant to an employee stock option, under special circumstances or is subject
to special rules (such as foreign persons, financial institutions, tax-exempt
organizations, retirement plans, dealers in securities or insurance companies).
No ruling has been or will be requested from the IRS with respect to
the federal income tax consequences of the Merger. The opinion of counsel only
represents counsel's best judgment and is not binding on the IRS or the courts.
Accordingly, no assurance can be given that the IRS or a court (if a matter is
litigated), will agree with counsel's conclusions, that the IRS will not
challenge the tax treatment of the Merger, or that such a challenge if made
(whether or not it is litigated), will not be successful.
IT IS IMPORTANT THAT EACH SHAREHOLDER OF COBANCORP CONSULT THEIR OWN
TAX ADVISOR AS TO THE SPECIFIC TAX CONSEQUENCES TO THEM OF THE MERGER.
FirstMerit has received an opinion of its legal counsel, substantially
to the effect and based upon certain customary assumptions and representations
(including the assumptions that (x) the transactions described in the Merger
Agreement and in this Prospectus and Proxy Statement will be carried out in
accordance therewith, (y) the proposed Merger of CoBancorp with and into
FirstMerit will qualify as a statutory merger under the OGCL, and (z) CoBancorp
and FirstMerit will satisfy all of the terms of the Merger Agreement and the
respective covenants and agreements set forth therein), that as of the Effective
Time:
(a) The Merger will qualify as a "reorganization" within the meaning of
Code Section 368(a)(1)(A) and CoBancorp and FirstMerit each are a "party to a
reorganization" within the meaning of Code Section 368(b)(2).
(b) No gain or loss will be recognized for federal income tax purposes
by CoBancorp and FirstMerit in connection with the Merger.
(c) No gain or loss will be recognized for federal income tax purposes
by holders of the CoBancorp Common Stock upon the conversion in the Merger of
such shares solely into shares of FirstMerit Common Stock.
(d) Any gain realized by shareholders of CoBancorp Common Stock who
receive FirstMerit Common Stock and cash (excluding any cash received in lieu of
a fractional share of FirstMerit Common Stock) in exchange for CoBancorp Common
Stock pursuant to the Merger will be recognized in an amount not in excess of
the amount of the cash received (excluding any cash received in lieu of a
fractional share of FirstMerit Common Stock), that gain will be capital gain
unless the receipt of the cash has the effect of the distribution of a dividend,
and any loss on the exchange will not be recognized.
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(e) Shareholders of CoBancorp Common Stock who receive cash in lieu of
a fractional share of FirstMerit Common Stock will recognize gain or loss equal
to the difference between the cash received and the shareholder's basis in that
fractional share, and that gain or loss will be capital gain or loss if the
fractional share would have been a capital asset in the hands of the
shareholder.
(f) Cash received by shareholders of CoBancorp Common Stock who have
elected pursuant to the Cash Election Shares to receive only cash and have
received only cash will be treated as a distribution in redemption of the
CoBancorp Common Stock held by such shareholders, subject to the provisions and
limitations of Section 302 of the Code.
(g) The basis of shares of FirstMerit Common Stock received in the
Merger by holders of CoBancorp Common Stock who receive solely FirstMerit Common
Stock will be the same as the basis of such shares of such CoBancorp Common
Stock surrendered in exchange therefor.
(h) The basis of shares of FirstMerit Common Stock received in the
Merger by the holders of CoBancorp Common Stock who also receive cash, will be
the CoBancorp Shareholders' basis in the CoBancorp Common Stock surrendered in
exchange therefor, decreased by the cash received and increased by the gain
recognized by such shareholder with respect to the cash received pursuant to the
terms of the Merger Agreement.
(i) The holding period of shares of FirstMerit Common Stock received in
the Merger by holders of CoBancorp Common Stock will include the period during
which such shares of CoBancorp Common Stock surrendered in exchange therefor
were held by the holder thereof, provided such shares of CoBancorp Common Stock
were held as capital assets.
THE FOREGOING IS A SUMMARY OF THE ANTICIPATED FEDERAL INCOME TAX CONSEQUENCES OF
THE PROPOSED MERGER UNDER THE CODE AND IS FOR GENERAL INFORMATION ONLY. IT DOES
NOT INCLUDE CONSEQUENCES OF STATE, LOCAL OR OTHER TAX LAWS OR SPECIAL
CONSEQUENCES TO PARTICULAR SHAREHOLDERS HAVING SPECIAL SITUATIONS. SHAREHOLDERS
OF COBANCORP SHOULD CONSULT THEIR OWN TAX ADVISORS REGARDING SPECIFIC TAX
CONSEQUENCES OF THE MERGER TO THEM, INCLUDING THE APPLICATION AND EFFECT OF
FEDERAL, STATE AND LOCAL TAX LAWS AND TAX CONSEQUENCES OF SUBSEQUENT SALES OF
FIRSTMERIT COMMON STOCK.
ACCOUNTING TREATMENT OF MERGER
Upon consummation of the Merger, the transaction will be accounted for
as a "purchase," in accordance with generally accepted accounting principles,
and all of the assets and liabilities of CoBancorp will be recorded in
FirstMerit's consolidated financial statements at their estimated fair value at
the Effective Time. The amount by which the purchase price paid by FirstMerit
exceeds the fair value of the net assets acquired by FirstMerit through the
Merger will be recorded as goodwill. FirstMerit currently expects that based on
preliminary purchase accounting estimates, the Merger would result in
identifiable intangibles and goodwill of approximately $96.1 million and yearly
amortization of intangibles and goodwill of approximately $4.8 million.
Identifiable intangibles and goodwill will be amortized on a straight-line basis
over an average of 20 years. FirstMerit's consolidated financial statements will
include the operations of CoBancorp after the Effective Time. The unaudited pro
forma financial statements included in this Prospectus and Proxy Statement
reflects the Merger using the purchase method of accounting. See "UNAUDITED PRO
FORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS."
Were the Merger to be accounted for as a pooling, the historical basis
of the assets and liabilities of the merging companies would be combined at the
Effective Time and carried forward at their previously recorded amounts, while
the shareholders' equity accounts of the two companies would be combined in the
surviving corporation's consolidated balance sheet, with no creation of goodwill
or other intangible assets. Also, under pooling-of-interests accounting, the
historical
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results of operations would be retroactively restated as if the merging
companies were combined for all periods covered by such financial statements.
RESALES OF FIRSTMERIT COMMON STOCK RECEIVED IN MERGER
The FirstMerit Common Stock that will be issued upon the consummation
of the Merger will have been registered under the Securities Act and will be
freely transferable, except for shares received by persons, including directors
and executive officers of CoBancorp, who may be deemed to be affiliates of
CoBancorp, as that term is defined in Rule 145 of the Securities Act. Affiliates
may not sell, pledge, transfer or otherwise dispose of the shares of FirstMerit
Common Stock issued to them in exchange for their shares of CoBancorp Common
Stock, unless the requirements of Rule 145(d) are satisfied or the sale, pledge,
transfer, or disposition is otherwise in compliance with the Securities Act and
the rules and regulations promulgated thereunder.
This Prospectus and Proxy Statement does not cover any reoffers or
resales of FirstMerit Common Stock received by affiliates of CoBancorp.
FIRSTMERIT'S ARTICLES OF INCORPORATION AND CODE OF REGULATIONS
The Articles of FirstMerit in effect immediately prior to the Merger
will be the articles of incorporation of FirstMerit as the surviving corporation
after the Merger. The Regulations of FirstMerit in effect immediately prior to
the Merger will be the regulations of FirstMerit after the Merger.
RIGHTS OF DISSENTING SHAREHOLDERS
Holders of CoBancorp Common Stock who so desire are entitled to relief
as dissenting shareholders under Section 1701.84 of the Ohio Revised Code. A
shareholder of CoBancorp, however, will be entitled to such relief only if he
complies strictly with all of the procedural and other requirements of Section
1701.85 of the Ohio Revised Code. The following summary does not purport to be a
complete statement of the method of compliance with Section 1701.85 and is
qualified in its entirety by reference to the copy of Section 1701.85 attached
hereto as Appendix C.
A CoBancorp shareholder who wishes to perfect his rights as a
dissenting shareholder in the event the Merger Agreement is adopted:
(a) must have been a record holder of the CoBancorp Common Stock as to
which he seeks relief as of the CoBancorp Record Date;
(b) must not have voted his CoBancorp Common Stock in favor of adoption
of the Merger Agreement; and
(c) must deliver to CoBancorp, not later than ten days after the
Special Meeting, a written demand for payment of the fair cash value of the
shares as to which he seeks relief. This written demand must state the name of
the shareholder, his address, the number and class of shares as to which he
seeks relief, and the amount claimed as the fair cash value thereof.
A vote against adoption of the Merger Agreement will not satisfy the
requirements of a written demand for payment. Any written demand for payment
must be mailed or delivered to CoBancorp Inc., 1530 West River Road, North,
Elyria, Ohio 44035, Attention: Lois E. Gunning, Corporate Secretary. As the
written demand must be delivered within the ten-day period following the
CoBancorp Special Meeting, it is recommended, although not required, that a
shareholder using the mails should use certified or registered mail, return
receipt requested, to confirm that he has made a timely delivery.
If CoBancorp sends the dissenting shareholder at the address specified
in his demand, a request for the certificate(s) representing his shares, the
shareholder must deliver the certificate(s) within 15 days of the sending of
such request.
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<PAGE> 49
CoBancorp may endorse the certificate(s) with a legend to the effect that the
shareholder has demanded the fair cash value of the shares represented by the
certificate(s). Failure to deliver the certificate(s) within 15 days of the
request terminates the shareholder's rights as a dissenting shareholder.
CoBancorp must notify the shareholder of its election to terminate his rights as
a dissenting shareholder within 20 days after the lapse of the 15 day period.
Unless the dissenting shareholder and CoBancorp shall agree on the fair
cash value per share of the CoBancorp Common Stock, either may, within three
months after the service of the written demand by the shareholder, file a
petition in the Court of Common Pleas of Lorain County, Ohio. If the court finds
that the shareholder is entitled to be paid the fair cash value of any shares,
the court may appoint one or more appraisers to receive evidence and to
recommend a decision on the amount of the fair cash value.
Fair cash value: (a) will be determined as of the day prior to
CoBancorp Special Meeting, (b) will be the amount a willing seller and willing
buyer would accept or pay with neither being under compulsion to sell or buy,
(c) will not exceed the amount specified in the shareholder's written demand,
and (d) will exclude any appreciation or depreciation in market value resulting
from the Merger. The court shall make a finding as to the fair cash value of a
share and render judgment against CoBancorp for its payment with interest at
such rate and from such date as the court considers equitable. The costs of
proceedings shall be assessed or apportioned as the court considers equitable.
The rights of any dissenting shareholder will terminate if (a) he has
not complied with Section 1701.85, unless CoBancorp by its Board of Directors
waives such failure, (b) CoBancorp abandons or is finally enjoined or prevented
from carrying out, or the shareholders of CoBancorp rescind their adoption of,
the Merger, (c) the dissenting shareholder withdraws his written demand, with
the consent of CoBancorp, by its Board of Directors, or (d) CoBancorp and the
dissenting shareholder shall not have agreed upon the fair cash value per share
of the CoBancorp Common Stock, respectively, and neither shall have timely filed
or joined in a petition in an appropriate court for a determination of the fair
cash value of the shares. For a discussion of the tax consequences to a
shareholder exercising dissenters' rights, see "CERTAIN FEDERAL INCOME TAX
CONSEQUENCES."
Because a proxy which does not contain voting instructions will be
voted for adoption of the Merger Agreement, a shareholder who wishes to exercise
his dissenters' rights must either not sign and return his proxy or, if he signs
and returns his proxy, vote against or abstain from voting on the adoption of
the Merger Agreement.
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
The following unaudited pro forma condensed consolidated balance sheet
as of September 30, 1997, and the unaudited pro forma condensed consolidated
statements of income for the nine months ended September 30, 1997 and for the
year ended December 31, 1996, have been prepared to reflect the proposed Merger
between FirstMerit and CoBancorp. The unaudited pro forma condensed consolidated
balance sheet assumes the Merger was consummated on September 30, 1997. The
unaudited pro forma condensed consolidated statements of income reflect the
consolidation of the historical results of operations of FirstMerit and
CoBancorp for the year ended December 31, 1996 and the nine months ended
September 30, 1997. Both the pro forma condensed consolidated balance sheet and
the pro forma condensed consolidated statements of income reflect the pro forma
adjustments described in the notes to pro forma statements.
The pro forma adjustments are based on estimates made for the purpose
of preparing these pro forma financial statements. The total Merger
Consideration, the number of shares of FirstMerit Common Stock issued, the
amount of cash payments to CoBancorp shareholders, cost recorded in excess of
fair value of net assets acquired, pro forma earnings per share, and book value
per share, could vary based on the actual Average Closing Price for FirstMerit
Common Stock and other factors. The actual adjustments to the accounts of
CoBancorp will be made on the basis of more exact appraisals and evaluations
that will be made as of the Effective Time and may, therefore, differ from those
reflected in these pro forma financial statements. In the opinion of
FirstMerit's management, the estimates used in the preparation of these pro
forma financial statements are reasonable under the circumstances. If the Merger
is consummated as described above, the transaction will be accounted for as a
purchase. Accordingly, the consolidated results of operations of FirstMerit and
49
<PAGE> 50
CoBancorp will be included in the consolidated financial statements of
FirstMerit for periods subsequent to the Effective Time of the Merger.
These pro forma financial statements should be read in conjunction with
the historical financial statements and related notes of FirstMerit and
CoBancorp incorporated by reference in this Prospectus and Proxy Statement. The
combined company expects to achieve benefits from the Merger including operating
cost savings and revenue enhancements. The pro forma earnings contained within
this filing do not reflect any potential cost savings or revenue enhancements
which are expected to result from the consolidation of operations of FirstMerit
and CoBancorp and are not indicative of the results of future operations. No
assurances can be given with respect to the ultimate level of expense savings
and revenue enhancements to be realized. As a result, the unaudited pro forma
condensed consolidated balance sheet at September 30, 1997 is not necessarily
indicative of the combined financial position had the transaction been effective
at September 30, 1997, and the unaudited pro forma condensed consolidated
statements of income are not necessarily indicative of either the results of
operations that would have occurred had the Merger been effective at the
beginning of each period or of future results of FirstMerit.
PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET (UNAUDITED)
<TABLE>
<CAPTION>
SEPTEMBER 30, 1997
----------------------------------------------------------------------
(Dollars in thousands) FirstMerit CoBancorp Pro Forma Pro Forma
Corporation Inc. Adjustments Note Combined
----------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Assets:
Investment securities-available for sale $1,062,998 116,447 22,068 3 1,201,875
362 1D
Investment securities-held to maturity 22,068 (22,068) 3 --
Federal funds sold 35,092 38,300 73,392
Loans less unearned income 3,789,384 420,832 (6,752) 1E 4,203,464
Less allowance for loan losses 52,400 4,385 56,785
Net loans 3,736,984 416,447 4,146,679
Cash and due from banks 188,773 31,810 (46,106) 1 174,477
Premises and equipment, net 100,108 19,658 119,766
Accrued interest and other assets 113,888 21,456 96,076 1G 231,420
---------- -------- ------- ----------
$5,237,843 666,186 43,580 5,947,609
========== ======= ======= =========
Liabilities and Shareholders' Equity:
Deposits $4,186,587 580,516 (5,906) 1F 4,761,197
Securities sold under agreement to
repurchase and other borrowings 446,271 19,137 465,408
Accrued taxes, expenses and other
liabilities 84,624 8,438 93,062
---------- --------- ----------- ----------
4,717,482 608,091 (5,906) 5,319,667
</TABLE>
50
<PAGE> 51
<TABLE>
<S> <C> <C> <C> <C> <C>
Common stock 109,937 5,975 (5,975) 1 217,518
107,581 1
Treasury stock (102,907) (102,907)
Capital surplus 18,554 (18,554) 1 --
Net unrealized gains on
available for sale securities 1,459 827 (827) 1 1,459
Retained earnings 511,872 32,739 32,739 1 511,872
---------- ------- ------ ---------
520,361 58,095 49,486 627,942
---------- ------- ------ ---------
$5,237,843 666,186 43,580 5,947,609
========== ======= ======= =========
</TABLE>
See accompanying notes to Unaudited Pro Forma Condensed Consolidated Financial
Statements.
51
<PAGE> 52
PRO FORMA CONDENSED CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1997
<TABLE>
<CAPTION>
(In thousands, except per share amounts)
FirstMerit CoBancorp Pro Forma Pro Forma
Corporation Inc. Adjustments Note(s) Combined
----------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Interest income $303,287 35,852 (90) 2 339,771
722 2
Interest expense 1,985 2
112,747 14,171 1,474 2 130,377
-------- ------ --------- -------
Net interest income 190,540 21,681 (2,827) 209,394
Provision for loan losses 15,376 150 15,526
-------- -------- ----------- --------
Net interest income after provision for
loan losses 175,164 21,531 (2,827) 193,868
Other income 60,108 5,475 65,583
Net securities gains 1,825 238 2,063
Other expenses 143,646 21,834 3,596 2 169,076
------- ------ ------- -------
Income before Federal income taxes 93,451 5,410 (6,423) 92,438
Federal income taxes 29,886 1,137 (2,248) 2 28,775
------- ------ ------- -------
Net income $63,565 4,273 (4,175) 63,663
======= ====== ======= =======
Per share data:
Net income $1.01 1.24 0.95
======= ==== ====
Average common shares outstanding $62,937 3,454 67,156
======= ===== ======
</TABLE>
See accompanying notes to Unaudited Pro Forma Condensed Consolidated Financial
Statements.
52
<PAGE> 53
PRO FORMA CONDENSED CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)
FOR THE YEAR ENDED DECEMBER 31, 1996
<TABLE>
<CAPTION>
(In thousands, except per share amounts)
FirstMerit CoBancorp Pro Forma Pro Forma
Corporation Inc. Adjustments Note(s) Combined
-----------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Interest income $411,745 43,181 (121) 2 455,770
965 2
Interest expense 2,651 2
160,773 16,799 1,969 2 182,192
--------- ------ --------- -------
Net interest income 250,972 26,382 (3,776) 273,578
Provision for loan losses 17,751 (1,775) 15,976
--------- ------- ----------- -------
Net interest income after provision for
loan losses 233,221 28,157 (3,776) 257,602
Other income 84,272 6,021 90,293
Net securities gains (losses) (1,776) 409 (1,367)
Other expenses 209,702 25,792 (4,804) 2 240,298
--------- ------ -------- -------
Income before Federal income taxes 106,015 8,795 (8,580) 106,230
Federal income taxes 35,075 1,663 (3,003) 2 33,735
--------- ------ ------- --------
Net income $ 70,940 7,132 (5,577) 72,495
========= ====== ======= ========
Per share data:
Net income $1.09 2.07 1.04
===== ==== ====
Average common shares outstanding $ 65,216 3,454 69,435
========= ===== ======
</TABLE>
See accompanying notes to Unaudited Pro Forma Condensed Consolidated Financial
Statements.
NOTES TO THE UNAUDITED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
The unaudited pro forma condensed consolidated financial statements
are based on the following adjustments and related assumptions; the actual
purchase accounting adjustments will be made on the basis of appraisals and
evaluations as of the Effective Time and, therefore, will differ from those
reflected in the unaudited pro forma condensed financial statements. All dollar
information is in thousands, except per share amounts are in dollars.
53
<PAGE> 54
NOTE 1: The purchase accounting adjustments to record the Merger used in the
preparation of the unaudited Pro Forma Condensed Balance Sheet are summarized
below (in thousands, except share data):
<TABLE>
<S> <C>
Shares of CoBancorp's Common Stock outstanding 3,453,824 (A)
Exchange Ratio 1.745
-----------
FirstMerit Corporation Common Stock equivalent 6,026,923
Consideration to be paid in FirstMerit Common Stock 70% (B)
FirstMerit Corporation Common Stock assumed issued 4,218,846
Assumed FirstMerit Corporation share price $ 25.50 (C)
-----------
Assumed additional shareholders' equity $ 107,581
-----------
Consideration to be paid in cash 30% (B)
FirstMerit Common Stock assumed issued 1,808,077
Assumed FirstMerit Corporation share price $ 25.50 (C)
-----------
Assumed cash consideration $ 46,106
-----------
Total purchase price $ 153,687
-----------
Less: historical net assets acquired $ 58,095
-----------
Premium to allocate $ 95,592
===========
Adjustments to fair value of net assets acquired:
Investment securities $ 362 (D)
Loans (6,752) (E)
Deposits 5,906 (F)
Intangibles 96,076 (G)
-----------
$ 95,592
===========
</TABLE>
(A) The number of shares of CoBancorp Common Stock to be exchanged
will be those outstanding immediately prior to the Effective
Time. The number of shares of CoBancorp Common Stock
outstanding on September 30, 1997 has been used in the pro
forma computations.
(B) Each share of CoBancorp Common Stock outstanding at the
Effective Time will be exchanged in the Merger for $44.50 in
cash and/or for a number of shares of Common Stock of
FirstMerit based upon the market value of FirstMerit Common
Stock during the Pricing Period, subject to adjustment as
provided for in the Merger Agreement. CoBancorp shareholders
may elect to exchange their CoBancorp Common Stock for either
Common Stock of FirstMerit, and/or $44.50 in cash, provided
that no less than 30% nor more than 49% of the Market Value of
the Merger Consideration will be paid in cash.
An assumed cash payment for 30% of the Merger Consideration
has been used in the pro forma computations. The unaudited pro
forma condensed consolidated financial statements reflects
funding of the cash component of the purchase price from
operations of FirstMerit.
(C) Closing price of FirstMerit Common Stock as of August 31,
1997.
54
<PAGE> 55
(D) Reflects the net appreciation in the held-to-maturity
investment securities portfolio at September 30, 1997.
(E) Reflects the carrying value of the loan portfolio in excess of
the estimated fair value at December 31, 1996.
(F) Reflects the carrying value of deposit liabilities in excess
of the estimated fair value at December 31, 1996.
(G) Includes both identifiable intangibles and goodwill. Since the
final determination of adjustments to assets and liabilities
will be made based upon the fair values as of the Effective
Time and after appraisals and evaluations are complete, the
final amounts will differ from the estimates provided herein.
NOTE 2: The purchase accounting adjustments and amortization periods related to
the Merger reflected in the unaudited Pro Forma Condensed Statements of Income
are summarized as follows:
<TABLE>
<CAPTION>
Nine Months
Ended Year Ended
Amortization September 30, December 31,
Period 1997 1996
--------------------- ----------------- ---------
<S> <C> <C> <C>
Adjustments increase (decrease) pro forma combined net
income as follows:
Interest Income
Amortization of investment securities adjustment 3 years ($ 90) (121)
Amortization of loan portfolio adjustment 7 years 722 965
Interest Expense
Amortization of deposit liabilities adjustment 3 years (1,474) (1,969)
Imputed interest to fund cash component of purchase price
at implied interest rate of 5.75% (1,985) (2,651)
Other Expenses
Amortization of incremental intangibles 20 years (3,596) (4,804)
Federal tax benefit on pro forma adjustments 2,248 3,003
------ ------
Net decrease to pro forma combined net income $(4,175) (5,577)
</TABLE>
NOTE 3: Investment securities held-to-maturity have been reclassified to
investment securities-available for sale.
55
<PAGE> 56
BUSINESS OF FIRSTMERIT
OVERVIEW
FirstMerit is a bank holding company organized in 1981 under the laws
of the State of Ohio and registered under the BHCA. At September 30, 1997,
FirstMerit, its affiliated banks and other subsidiaries had total consolidated
assets of approximately $5.2 billion and consolidated total shareholders' equity
of approximately $520.4 million. FirstMerit through its affiliates operates
principally as a regional banking organization, providing a wide range of
banking, fiduciary, financial, insurance and investment services to corporate,
institutional and individual customers throughout northern Ohio, including
Ashtabula, Cuyahoga, Erie, Geauga, Lake, Lorain, Medina, Portage, Stark, Summit
and Wayne Counties. At September 30, 1997, FirstMerit's subsidiaries operated
128 full service banking offices, had 161 automated teller machines located in
11 counties in Ohio and employed approximately 2,300 full- and part-time
employees. FirstMerit's principal business consists of owning and supervising
its affiliates. FirstMerit directs their overall policies, including lending
practices, and financial resources, but most day-to-day affairs are managed by
the affiliates' own officers and directors, some of whom are also officers and
directors of FirstMerit.
SUBSIDIARIES
FirstMerit's wholly-owned subsidiaries include FirstMerit Bank, N.A.
("FirstMerit Bank"), Citizens National Bank ("Citizens"), Peoples National Bank,
Peoples Bank, N.A. (collectively, the "Banks"), FirstMerit Credit Life Insurance
Company, FirstMerit Community Development Corporation, Citizens Investment
Corporation and Citizens Savings Corporation of Stark County. The Banks all
provide a full range of customary banking products and services. In addition,
the Banks provide a wide range of specialized services tailored to specific
markets, including personal and corporate trust services, personal financial
services, cash management services and international banking services.
FirstMerit's nonbanking direct and indirect subsidiaries provide insurance sales
services, credit life, accident and health insurance, securities brokerage
services, equipment lease financing and other financial services.
FirstMerit is in the process of merging the Banks under a single
charter. It is contemplated that this process will be completed in early 1998.
FirstMerit began the consolidation process in 1997, when it merged its former
bank subsidiaries, The Old Phoenix National Bank of Medina and EST National
Bank, with and into First National Bank of Ohio, under the new charter name
"FirstMerit Bank, N.A." FirstMerit Bank also will be the resulting institution
of the remaining charter consolidations.
In 1996, FirstMerit Bank, FSB, a former federal savings association
subsidiary of FirstMerit located in Clearwater, Florida ("FirstMerit FSB"), was
merged with and into FirstMerit Trust Company, N.A., a former national trust
company subsidiary of FirstMerit located in Naples, Florida under the name
"FirstMerit Bank, N.A." ("FirstMerit NA"). On December 31, 1996, FirstMerit NA
was merged with and into SouthTrust Bank of Florida N.A.
FirstMerit is a corporate entity legally separate and distinct from its
affiliates, however, bank holding companies such as FirstMerit are expected to
act as a source of financial strength to their respective subsidiary banks. See
"REGULATORY MATTERS -- Regulation of Bank Holding Companies." The principal
source of FirstMerit's income is dividends from its subsidiaries. There are
certain regulatory restrictions on the extent to which the subsidiaries can pay
dividends or otherwise supply funds to FirstMerit. See "REGULATORY MATTERS --
Limits on Dividends and Other Payments."
SUBSIDIARY OPERATIONS
Each Bank engages in commercial banking in its respective geographical
market. Commercial banking includes the acceptance of a variety of demand,
savings and time deposits and the granting of commercial and consumer loans for
the financing of both real and personal property. Other services include
automated banking programs, credit cards, rental of safe deposit boxes, letters
of credit, leasing, discount brokerage and credit life insurance. The Banks also
operate trust departments which offer estate and trust services. Each Bank
offers its services primarily to consumers and small and medium size businesses
in its respective geographical market. None of the Banks are engaged in lending
outside the continental United States. None of the Banks are dependent upon any
one significant customer or a specific industry.
56
<PAGE> 57
FirstMerit Credit Life Insurance Company was formed in 1985 to engage
in underwriting of credit life and credit accident and health insurance directly
related to the extension of credit by the Banks to their customers. FirstMerit
Community Development Corporation was organized in 1994 to further the efforts
of the subsidiaries in meeting the credit needs of their lending communities,
and the requirements of the Community Reinvestment Act ("CRA"). Congress enacted
CRA to assure that financial institutions meet the deposit and credit needs of
their communities. Through a community development corporation, financial
institutions can meet these needs by nontraditional activities such as
acquiring, rehabilitating or investing in real estate in low to moderate income
neighborhoods, and promoting the development of small businesses.
In 1995 the Banks jointly organized and capitalized FirstMerit Mortgage
Corporation ("FirstMerit Mortgage"), which is located in Canton, Ohio.
FirstMerit Mortgage is engaged in the business of originating residential
mortgage loans and providing mortgage loan servicing for itself, the Banks and
third parties.
FirstMerit Bank is the parent corporation of two wholly-owned Ohio
corporations organized in 1993, FirstMerit Leasing Company ("FirstMerit
Leasing") and FirstMerit Securities, Inc. ("FirstMerit Securities"). FirstMerit
Leasing primarily provides equipment lease financing and related services, while
FirstMerit Securities primarily provides discount brokerage services to
customers of FirstMerit Bank and other FirstMerit subsidiaries. FirstMerit Bank
is also the parent corporation of Abell & Associations, Inc. ("Abell"), a
nationally known life insurance and financial consulting firm, which it acquired
in May 1997. Abell assists in the design and funding of estate plans, corporate
succession plans and executive compensation plans. The firm also does consulting
work for law and accounting firms and with individual corporations, designing
funding for corporate liability issues and structured settlements.
Peoples Bank, N.A. is the parent corporation of FirstMerit Insurance
Agency, Inc., a subsidiary acquired by FirstMerit when it acquired Great
Northern Financial Corporation in 1994. FirstMerit Insurance Agency, Inc.'s
license to sell life insurance products and annuities was reactivated in 1997.
RECENT ACQUISITIONS
FirstMerit engages on a regular basis in discussions concerning
possible acquisitions of other financial institutions and financial services
companies. FirstMerit also acquires from time to time, branches and deposits in
its principal markets.
In October 1997, FirstMerit, through a wholly-owned subsidiary bank,
entered into a purchase and assumption agreement with First Western Bank, N.A.,
to acquire three branches located in Lake County, Ohio. The three branches had a
total of $49.0 million in deposits at the time the agreement was signed. The
transaction is expected to close in early 1998.
In May 1997, FirstMerit, through a wholly owned subsidiary, acquired
Abell & Associates, Inc. Abell is a nationally known life insurance and
financial consulting firm which assists in the design and funding of estate
plans, corporate succession plans and executive compensation plans. The firm
also does consulting work for law and accounting firms and with individual
corporations, designing funding for corporate liability issues and structured
settlements.
BUSINESS OF COBANCORP
OVERVIEW
CoBancorp, headquartered in Elyria, Ohio, is a bank holding company
registered with the Federal Reserve whose principal assets are the common stock
of its wholly owned subsidiaries, PREMIERBank & Trust and Jefferson Savings
Bank. CoBancorp was organized under Ohio law in November 1983 and remained
inactive until September 8, 1984. On that date, PREMIERBank's shareholders
became CoBancorp shareholders in a tax-free reorganization. This transaction was
accounted for as a pooling of interests. As a bank holding company, CoBancorp is
engaged in the management of PREMIERBank and
57
<PAGE> 58
Jefferson Savings Bank. CoBancorp's activities as a bank holding company are
regulated by the Federal Reserve, and its corporate governance is determined by
the CoBancorp Articles, Regulations and by Ohio law.
As of September 30, 1997, PREMIERBank and Jefferson Savings Bank
operated 41 banking offices throughout its primary market area of Lorain County,
and in portions of Crawford, Cuyahoga, Delaware, Erie, Franklin, Huron, Madison
and Richland Counties, Ohio. CoBancorp's subsidiaries operate in markets that
are diverse in their economic base, ranging from service, governmental and
educational orientation in the Columbus, Ohio MSA, to heavy and light industrial
activity in the Cleveland/Elyria markets and agricultural orientation in the
geographical area between Lorain and Columbus. As of September 30, 1997,
CoBancorp and its subsidiaries employed approximately 448 full-time and
part-time employees.
PREMIERBank was chartered by the State of Ohio in 1926 and is a member
bank of the Federal Reserve. PREMIERBank has 47 automated teller machines
("ATMs") and is a member of the MAC and Plus ATM networks. As a member bank of
the Federal Reserve, PREMIERBank is an insured bank under the Federal Deposit
Insurance Act and its deposits are insured by the Federal Deposit Insurance
Corporation (the "FDIC") to the extent permitted by law. PREMIERBank is subject
to primary regulation by the Federal Reserve and the Division. PREMIERBank is
also subject to regulation by the FDIC.
Jefferson Savings Bank's deposits are insured by the FDIC, to the
extent permitted by law. Jefferson Savings Bank is subject to primary regulation
by the OTS. Jefferson Savings Bank is also subject to regulation by the
Division.
PREMIERBank provides commercial and retail banking services to
individual, business, institutional and governmental customers. These services
include personal and commercial checking accounts, savings and time deposit
accounts, personal and business loans, and safe deposit facilities.
PREMIERBank offers a variety of commercial loans involving differing
characteristics depending on purpose, intent, maturity and collateral; real
estate loans structured to include traditional and nonresidential lending
activities; and consumer loans designed to meet a multitude of credit needs on
both a secured and unsecured basis. The Trust Department of PREMIERBank performs
complete trust administrative functions and offers agency and trust services to
individuals, partnerships, corporations, institutions and municipalities.
RECENT ACQUISITIONS
On February 28, 1997 CoBancorp acquired Jefferson Savings Bank by means
of a merger of an interim subsidiary of CoBancorp with and into Jefferson
Savings Bank. Jefferson Savings Bank's shareholders received cash in the amount
of $6.7 million and received additional consideration of $649,000 attributable
to certain favorable tax benefits (confirmed by an IRS Private Letter Ruling
dated May 31, 1996) in exchange for Jefferson Savings Bank's 3,535 issued and
outstanding shares of common stock. The transaction was accounted for under the
purchase method of accounting. Jefferson Savings Bank remains a separate savings
association subsidiary of CoBancorp. Jefferson Savings Bank conducts its
operations in four branch locations in Lorain and Madison Counties, Ohio.
On February 16, 1996, CoBancorp and PremierBank completed the
acquisition of 11 branches of Bank One, Cleveland, N.A. ("Bank One") located in
Lorain County, Ohio. The branches acquired by PREMIERBank had total deposits of
approximately $110.0 million as of that date. The branches were acquired by
PREMIERBank for total consideration of $5.5 million, representing a premium of
5.0% on core deposits. Eight of the branches are situated on real estate
acquired by PREMIERBank, and the other three are leased. During 1996, three of
the branches acquired from Bank One were consolidated into existing PREMIERBank
branch locations.
REGULATORY MATTERS
GENERAL
58
<PAGE> 59
Bank holding companies, banks and savings associations are regulated
extensively under federal and state law. The following information describes
statutory and regulatory provisions and is qualified in its entirety by
reference to the particular statutory or regulatory provisions.
The FirstMerit Banks are national banks and members of the Federal
Reserve, and are subject to the supervision of and regular examination by OCC
and the Federal Reserve. As insured banks under the Federal Deposit Insurance
Act, the Banks (except Peoples National and Peoples N.A.) are members of the
Bank Insurance Fund ("BIF"), and new deposits are insured under BIF. All of the
Banks are regulated by the FDIC. The affairs and records of the Banks are
examined regularly by OCC and the Banks must furnish quarterly and annual
reports to OCC. Peoples National and Peoples N.A. were converted in 1994 into
national banks from a federal savings association and a state savings
association, respectively. As converted savings associations, they remained
members of SAIF, and their deposits are insured thereunder.
PREMIERBank is a state banking association organized under the laws of
the State of Ohio and its deposits are insured by the FDIC as a member of BIF.
As such, PREMIERBank is subject to regulation, examination and oversight by the
Division, the FDIC and the FRB. PREMIERBank must file periodic reports with
these governmental agencies concerning its activities and financial condition.
Joint examinations are conducted periodically by the Division, the FDIC and the
FRB to determine whether PREMIERBank is in compliance with various regulatory
requirements. Jefferson Savings Bank is a savings association organized under
the laws of the State of Ohio and its deposits also are insured by the FDIC as a
member of SAIF. Jefferson Savings Bank is subject to regulation, examination and
oversight by the Division, OTS and the FDIC. It also must file periodic reports
with these governmental agencies concerning its activities and financial
condition. Joint examinations are conducted periodically by the Division and OTS
to determine whether Jefferson Savings Bank is in compliance with various
regulatory requirements. PREMIERBank and Jefferson Savings Bank are also subject
to certain reserve requirements under regulations of the Federal Reserve. After
the Merger, PREMIERBank and Jefferson Savings Bank will be merged with and into
FirstMerit Bank and will cease to exist as separate chartered institutions, and
therefore neither will be subject to separate regulation.
The periodic examinations by the regulatory agencies are intended to
test institutions' compliance with various regulatory requirements and to
determine if operations are conducted in a safe and sound manner. The regulatory
structure also gives the regulatory authorities extensive discretion in
connection with their supervisory and enforcement activities and examination
policies, including policies with respect to the classification of nonperforming
and other assets and the establishment of adequate loan loss reserves for
regulatory purposes. Any change in such regulation, whether by OTS, OCC, the
FDIC, the Division, the Federal Reserve or Congress, could materially and
adversely impact the powers and operations of FirstMerit, CoBancorp or any of
their respective subsidiary financial institutions. It is impossible to predict
when or whether any such proposals will be adopted and the impact, if any, of
such adoption on the business of CoBancorp or FirstMerit, or their subsidiaries.
The operations of financial institutions are significantly affected by
general economic conditions as well as the monetary and fiscal policies of the
federal government and its agencies, particularly the Federal Reserve, and other
policies of federal and state regulatory authorities. The Federal Reserve's
actions affect interest rates charged on bank loans and paid on bank deposits,
and therefore influence growth in bank loans, investments and deposits. The
nature and results of changes in monetary and fiscal policies likewise cannot be
predicted.
FirstMerit and CoBancorp are also under the jurisdiction of the
Commission and certain state securities commissions for matters relating to the
offering and sale of securities. FirstMerit and CoBancorp are subject to the
disclosure and regulatory requirements of the Securities Act and the Exchange
Act, as administered by the Commission.
REGULATION OF BANK HOLDING COMPANIES
FirstMerit and CoBancorp are registered with the Federal Reserve as
bank holding companies under the BHCA. Bank holding companies and their
activities are subject to extensive regulation by the Federal Reserve. Bank
holding
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companies are required to file reports with the Federal Reserve and such
additional information as the Federal Reserve may require, and are subject to
regular inspections by the Federal Reserve. The Federal Reserve also has
extensive enforcement authority over bank holding companies, including, among
other things, the ability to assess civil money penalties, to issue cease and
desist or removal orders and to require that a holding company divest
subsidiaries (including its bank subsidiaries). In general, enforcement actions
may be initiated for violations of law and regulations and unsafe or unsound
practices.
Under Federal Reserve policy, a bank holding company is expected to act
as a source of financial strength to each subsidiary bank and to commit
resources to support such subsidiary banks. Under this policy the Federal
Reserve may require a bank holding company to contribute additional capital to
an undercapitalized subsidiary bank.
The BHCA requires the prior approval of the Federal Reserve in any case
where a bank holding company proposes to acquire direct or indirect ownership or
control of more than 5% of the voting shares of any bank that is not already
majority-owned by it, to acquire all or substantially all of the assets of
another bank or bank holding company, or to merge or consolidate with any other
bank holding company. Section 4 of the BHCA also prohibits a bank holding
company, with certain exceptions, from acquiring more than 5% of the voting
shares of any company that is not a bank and from engaging in any business other
than banking or managing or controlling banks. The primary exception allows the
ownership of shares by a bank holding company in any company the activities of
which the Federal Reserve has determined to be so closely related to banking or
to managing or controlling banks as to be a proper incident thereto. The Federal
Reserve has by regulation determined that certain activities are closely related
to banking within the meaning of the BHCA. These activities include: operating a
savings association, mortgage company, finance company, credit card company or
factoring company; performing certain data processing operations; providing
investment and financial advice; and acting as an insurance agent for certain
types of credit-related insurance.
Subsidiary banks of a bank holding company are subject to certain
restrictions imposed by the Federal Reserve Act on maintenance of reserves
against deposits, extensions of credit to the bank holding company or any of its
subsidiaries, on investments in the stock or other securities of the bank
holding company or its subsidiaries and on the taking of such stock or
securities as collateral for loans to any borrower. 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 any services. Various consumer laws and regulations
also affect the operations of these subsidiaries.
REGULATION OF NATIONAL BANKS
As national banks and members of the Federal Reserve, FirstMerit's
Banks are subject to the supervision of and regular examination by OCC and the
Federal Reserve. As insured banks under the Federal Deposit Insurance Act, all
of the Banks are regulated by the FDIC and, with the exception of Peoples
National and Peoples N.A., are members of BIF. Areas of operation subject to
regulation by federal laws, regulations and regulatory agencies include reserves
on deposits, interest rates and other terms of deposits, investments, loans,
fiduciary activities, mergers and acquisitions, issuance of securities, payment
of dividends, establishment of branches, transactions with officers and
principal shareholders, and other aspects of bank operations. Representatives of
OCC regularly conduct examinations of the affairs and records of national banks,
and all national banks must furnish quarterly and annual reports to OCC.
FEDERAL DEPOSIT INSURANCE CORPORATION
The FDIC is an independent federal agency which insures the deposits,
up to prescribed statutory limits, of federally-insured banks and savings
associations and safeguards the safety and soundness of the financial
institution industry. Two separate insurance funds are maintained and
administered by the FDIC. In general, banking institutions are members of BIF
and savings associations are SAIF members. The insurance fund conversion
provisions do not prohibit a SAIF member from either converting to a bank
charter, as long as the resulting bank remains a SAIF member, or merging with a
bank, as long as the bank continues to pay the SAIF insurance assessments on the
deposits acquired. Exit and entrance fees must be paid to the FDIC in full
conversions.
Insurance premiums for SAIF and BIF members are determined during each
semi-annual assessment period based upon the members' respective categorization
as either (1) well capitalized, (2) adequately capitalized or (3)
undercapitalized. An institution is also assigned by the FDIC to one of three
supervisory subgroups within each capital group. The supervisory subgroup to
which an institution is assigned is based on a supervisory evaluation provided
to the FDIC by the institution's primary federal regulator and information which
the FDIC determines to be relevant to the institution's financial condition
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and the risk posed to the deposit insurance funds (which may include, if
applicable, information provided by the institution's state supervisor). An
institution's assessment rate depends on the capital category and supervisory
category to which it is assigned.
Insurance of deposits may be terminated by the FDIC upon a finding that
the institution has engaged in unsafe or unsound practices, is in an unsafe or
unsound condition to continue operations, or has violated any applicable law,
regulation, rule, order or condition imposed by the FDIC or OTS.
ACQUISITIONS OF SAVINGS ASSOCIATIONS BY BANK HOLDING COMPANIES
Section 4 of the BHCA prohibits bank holding companies from acquiring
or retaining shares of any company that is not a bank or is not engaging in any
activity other than managing and controlling banks, except under certain
circumstances. The primary exception permits bank holding companies to conduct
activities and acquire companies solely in activities the Federal Reserve has
determined to be closely related to banking and a proper incident thereto.
Section 346 of the Riegle Community Development and Regulatory
Improvement Act of 1994 (the "Riegle-Neal Act") amended Section 4 of the BHCA to
establish a new notice procedure for obtaining Federal Reserve Board approval
under Section 4(a)(2) and 4(c)(8) of the BHCA. Under Section 346, a proposal
requiring Federal Reserve approval under Section 4(a)(2) or 4(c)(8) may be
consummated 60 days after providing the Federal Reserve with complete written
notice of the proposal, unless the notice period is extended as provided in the
statute. Section 346 also permits proposals to be consummated at any time during
this notice period if approved by the Federal Reserve during this period. This
interim rule replaced the application procedures of Section 4(c)(8) of the BHCA
with a new notice procedure and streamlined the procedures for obtaining Federal
Reserve approval for nonbanking proposals in several respects. The interim rule
contemplates action by the Federal Reserve on nonbanking proposals involving
listed activities (including the acquisition of a savings association or its
assets) within 30 days after a notice containing all of the information required
by the rule has been received by the Federal Reserve. In approving the
activities contained in such a notice, the Federal Reserve is precluded from
opposing any restrictions on transactions between the bank holding company and
the acquired savings association, except as required by Section 23A or 23B of
the Federal Reserve Act or any other applicable law.
Section 18(c) of the Federal Deposit Insurance Act ("FDIA") (12 U.S.C.
ss. 1828(c)) authorizes the Federal Reserve to approve the application of a bank
to effect a merger, consolidation, acquisition of assets or assumption of
deposit liabilities, and, incident thereto, to establish a branch or branches
pursuant to Section 9 of the Federal Reserve Act (12 U.S.C. ss. 321) and Section
5(d)(3) of the FDIA (12 U.S.C. ss. 1815(d)(3)) authorizes the Federal Reserve to
approve the application of a bank to effect a merger, consolidation or
acquisition of assets or assumption of deposit liabilities of a savings
association by a bank that is insured by the BIF.
INTERSTATE BANKING AND BRANCHING
In 1994, the Riegle-Neal Act was enacted to ease restrictions on
interstate banking. Effective September 29, 1995, the Riegle-Neal Act allows the
Federal Reserve to approve an application of an adequately capitalized and
adequately managed bank holding company to acquire control of, or acquire all or
substantially all of the assets of, a bank located in a state other than such
holding company's home state, without regard to whether the transaction is
prohibited by the laws of any state. The Federal Reserve may not approve the
acquisition of a bank that has not been in existence for the minimum time period
(not exceeding five years) specified by the statutory law of the host state. The
Riegle-Neal Act also prohibits the Federal Reserve from approving an application
if the applicant (and its depository institution affiliates) controls or would
control more than 10% of the insured deposits in the United States or 30% or
more of the deposits in the target bank's home state or in any state in which
the target bank maintains a branch. The Riegle-Neal Act does not affect the
authority of states to limit the percentage of total insured deposits in the
state which may be held or controlled by a bank or bank holding company to the
extent such limitation does not discriminate against out-of-state banks or bank
holding companies. Individual states may also waive the 30% statewide
concentration limit contained in the Riegle-Neal Act.
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Additionally, beginning on June 1, 1997, the federal banking agencies
were authorized to approve interstate merger transactions without regard to
whether such transaction is prohibited by the law of any state, unless the home
state of one of the banks opts out of the Riegle-Neal Act by adopting a law
after the date of enactment of the Riegle-Neal Act and prior to June 1, 1997
which applies equally to all out-of-state banks and expressly prohibits merger
transactions involving out-of-state banks. A state could have permitted such
transactions before such time by enacting authorizing legislation. Interstate
acquisitions of branches are permitted only if the law of the state in which the
branch is located permits such acquisitions. Interstate mergers and branch
acquisitions will also be subject to the nationwide and statewide insured
deposit concentration amounts described above.
The Riegle-Neal Act authorizes the OCC and the FDIC to approve
interstate branching de novo by national and state banks, respectively, only in
states which specifically allow for such branching. The Riegle-Neal Act also
required the appropriate federal banking agencies to prescribe regulations by
June 1, 1997 which prohibited any out-of-state bank from using the interstate
branching authority primarily for the purpose of deposit production. These
regulations include guidelines to ensure that interstate branches operated by an
out-of-state bank in a host state are reasonably helping to meet the credit
needs of the communities which they serve.
CAPITAL
The Federal Reserve has adopted risk-based capital guidelines for bank
holding companies. The guidelines provide a systematic analytical framework
which makes regulatory capital requirements sensitive to differences in risk
profiles among banking organizations, takes off-balance sheet exposures
expressly into account in evaluating capital adequacy, and minimizes
disincentives to holding liquid, low-risk assets. Capital levels as measured by
these standards also are used to categorize financial institutions for purposes
of certain prompt corrective action regulatory provisions. See "REGULATORY
MATTERS -- Prompt Corrective Regulatory Action."
The minimum guideline for the ratio of total capital ("Total Capital")
to risk-weighted assets (including certain off-balance sheet items such as
standby letters of credit) is 8% ("Total Risk-Based Capital"). This Total
Risk-Based Capital ratio must be at least 10% to be considered well capitalized.
At least half of the minimum Total Risk-Based Capital ratio (4%) must be
composed of common stockholders' equity, minority interests in the equity
accounts of consolidated subsidiaries and a limited amount of perpetual
preferred stock, less goodwill and certain other intangibles ("Tier 1 Risk-Based
Capital"). To be considered well capitalized, the Tier 1 Risk-Based Capital
ratio must be at least 6%. See "REGULATORY MATTERS -- Prompt Corrective
Regulatory Action." The remainder of Total Risk-Based Capital may consist of
subordinated debt, other preferred stock and a limited amount of loan and lease
loss allowance.
The Federal Reserve also has established minimum leverage ratio
guidelines for bank holding companies. The guidelines provide for a minimum
ratio of Tier 1 Risk-Based Capital to average assets (excluding the loan and
lease loss allowance, goodwill and certain other intangibles) ("Leverage Ratio")
of 3% for bank holding companies that meet certain criteria, including having
the highest regulatory rating. To be considered well capitalized, the Leverage
Ratio must be at least 5%. The guidelines further provide that bank holding
companies making acquisitions will be expected to maintain strong capital
positions substantially above the minimum levels.
FirstMerit and CoBancorp are in compliance with the current guideline
ratios. As of September 30, 1997, FirstMerit had a Total Risk-Based Capital
Ratio of 12.72%, Tier 1 Risk-Based Capital Ratio of 11.53% and a Leverage Ratio
of 9.68%, and CoBancorp had a Total Risk-Based Capital Ratio of 13.03%, Tier 1
Risk-Based Capital Ratio of 12.00% and a Leverage Ratio of 7.80%.
Each of the subsidiary financial institutions of FirstMerit and
CoBancorp is subject to similar capital requirements adopted by OCC, OTS or FRB,
as the case may be. OTS also imposes a tangible capital requirement, which
requires savings associations to maintain "tangible capital" of not less than
1.5% of the association's adjusted total assets. "Tangible capital" is defined
as core capital minus any "intangible assets," such as goodwill. At September
30, 1997, each financial institution subsidiary of FirstMerit and CoBancorp
satisfied the minimum capital ratio requirements under the capital ratio
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guidelines. Failure by any financial institution subsidiary of FirstMerit or
CoBancorp to comply in the future with applicable capital standards may subject
the institution to sanctions and limitations upon operations.
PROMPT CORRECTIVE REGULATORY ACTION
The federal banking agencies have established a system of prompt
corrective action to resolve certain of the problems of undercapitalized
institutions. This system is based on five capital level categories for insured
depository institutions -- "well capitalized," "adequately capitalized,"
"undercapitalized," "significantly undercapitalized," and "critically
undercapitalized." The federal banking agencies may (or in some cases must) take
certain supervisory actions depending upon an insured institution's capital
level. For example, the banking agencies must appoint a receiver or conservator
for an institution within 90 days after it becomes "critically undercapitalized"
unless the institution's primary regulator determines, with the concurrence of
the FDIC, that other action would better achieve regulatory purposes. Banking
operations otherwise may be significantly affected depending on an institution's
capital category. For example, an institution that is not "well capitalized"
generally is prohibited from accepting brokered deposits and offering interest
rates on deposits higher than the prevailing rate in its market, and the holding
company of any undercapitalized depository institution must guarantee, in part,
certain aspects of such depository institution's capital plan for such plan to
be acceptable.
Under the final rules implementing the prompt corrective action
provisions, a financial institution that has a Total Risk-Based Capital of 10%
or greater, a Tier 1 Risk-Based Capital ratio of 6% or greater and a Leverage
Ratio of 5% or greater is deemed to be "well capitalized." An institution with a
Total Risk-Based Capital ratio of 8% or greater, a Tier 1 Risk-Based Capital
ratio of 4% or greater and a Leverage Ratio of 4% or greater (or a Leverage
Ratio of 3% or greater and a CAMEL 1 rating), is considered to be "adequately
capitalized." An institution that has a Total Risk-Based Capital of less than
8%, a Tier 1 Risk-Based Capital ratio of less than 4%, and a Leverage Ratio that
is less than 4% (or a Leverage Ratio of less than 3% and a CAMEL 1 rating), is
considered "undercapitalized." An institution that has a Total Risk-Based
Capital less than 6%, a Tier 1 Risk-Based Capital ratio of less than 3% or a
Leverage Ratio that is less than 3% is considered to be "significantly
undercapitalized." An institution that has tangible equity (core capital minus
intangible assets other than qualifying supervisory goodwill and purchased
mortgage servicing rights) to total assets ratio equal to or less than 2% is
deemed to be "critically undercapitalized."
LIMITS ON DIVIDENDS AND OTHER PAYMENTS
FirstMerit and CoBancorp are legal entities separate and distinct from
their respective subsidiary financial institutions. There are various legal
limitations on the extent to which such subsidiary banks and savings
associations may finance or otherwise supply funds to their parent holding
companies. Under federal law, subsidiary banks may not, subject to certain
limited exceptions, make loans or extensions of credit to, or investments in the
securities of, their bank holding companies. Subsidiary banks are also subject
to collateral security requirements for any loans or extension of credit
permitted by such exceptions.
Each bank subsidiary of FirstMerit is required by federal law to obtain
the prior approval of OCC for the declaration and payment of dividends if the
total of all dividends declared by the board of directors of the bank in any
year will exceed the total of (i) the bank's net profits for that year, plus
(ii) the retained net profits for the preceding two years, less any required
transfers to surplus. In addition, these banks may only pay dividends to the
extent that retained net profits (including any portion transferred to surplus)
exceed bad debts. Similar limitations are imposed upon capital distributions,
including cash dividends, by PREMIERBank and Jefferson Savings Bank.
As of September 30, 1997, FirstMerit's Banks, without obtaining
governmental approvals, could declare aggregate dividends of approximately
$[___] million, and PremierBank and Jefferson Savings Bank, without obtaining
governmental approval, could declare total dividends of approximately $[____]
million.
TRANSACTIONS WITH AFFILIATES
Sections 23A and 23B of the Federal Reserve Act (the "FRA") restrict
transactions by insured depository institutions and their subsidiaries with
their affiliates. An affiliate of an institution is any company or entity which
controls, is controlled by or is under common control with the institution.
Generally, Sections 23A and 23B (i) limit the extent to which an institution or
its subsidiaries may engage in "covered transactions" with any one affiliate to
an amount equal to 10%
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of such institution's capital stock and surplus (i.e., tangible capital) and
(ii) require that all such transactions be on terms substantially the same, or
at least as favorable to the institution or subsidiary, as those provided to a
non-affiliate. The term "covered transaction" includes the making of loans,
purchase of assets, issuance of a guarantee and other similar types of
transactions.
A financial institution's authority to extend credit to executive
officers, directors and greater than 10% shareholders, as well as entities such
persons control, is subject to Sections 22(g) and 22(h) of the FRA and
Regulation O promulgated thereunder by the Federal Reserve. Among other things,
such loans must be made on terms substantially similar to those offered to
unaffiliated individuals, the amount of loans an institution may make to such
persons is based, in part, on the institution's capital position, and certain
approval procedures must be followed in making such loans.
DESCRIPTION OF FIRSTMERIT CAPITAL STOCK
FIRSTMERIT COMMON SHARES
FirstMerit's Articles have authorized 80,000,000 shares of Common
Stock, no par value, of which 62,093,698 were outstanding as of September 30,
1997. Of the authorized shares of FirstMerit Common Stock, [________] shares are
currently unreserved and available for issuance. These shares may be issued and
sold without further shareholder action provided that the issuance and sale is
made in compliance with the corporate governance documents of FirstMerit and
OGCL. Each share of FirstMerit Common Stock is accompanied by one FirstMerit
Right pursuant to the Rights Agreement.
Each share of FirstMerit Common Stock is entitled to (a) dividends when
and as declared by the directors, but after payment of dividends to any
FirstMerit Preferred Stock that may hereafter be issued, (b) to one vote per
share on each matter properly submitted to shareholders for their vote, and (c)
to participate ratably in the net assets of FirstMerit in the event of
liquidation, after any FirstMerit Preferred Stock that may hereafter be issued.
On September 30, 1997, FirstMerit had 6,888 shareholders of record.
Holders of FirstMerit Common Stock have no preemptive rights for the purchase of
additional shares of any class of FirstMerit capital stock, nor do they have the
right to cumulate their voting power.
FIRSTMERIT PREFERRED STOCK
FirstMerit's Articles have authorized 7,000,000 shares of Preferred
Stock, no par value, of which no shares were outstanding as of September 30,
1997. FirstMerit has created a class of Preferred Stock entitled the "Series A
Preferred Stock" and has currently designated 600,000 shares for issuance
thereunder. The Series A Preferred Stock was created pursuant to the
FirstMerit's Rights Agreement. The remaining 6,400,000 shares of Preferred Stock
may be issued and sold without further shareholder action provided that the
issuance and sale is made in compliance with the corporate governance documents
of FirstMerit and OGCL.
The holders of FirstMerit Preferred Stock are entitled to one vote per
share on matters on which they are entitled to vote, and the other terms thereof
may be fixed by FirstMerit's Board of Directors, including dividend rate,
liquidation price, redemption price, sinking fund provisions, conversion rights,
and restrictions on issuance of shares of the same series or any other class or
series as may be determined by the directors. As to dividend, redemption, and
liquidation rights, each series of FirstMerit Preferred Stock will be senior to
FirstMerit Common Stock. See "COMPARISON OF FIRSTMERIT AND COBANCORP CAPITAL
STOCK."
COMPARISON OF FIRSTMERIT AND COBANCORP CAPITAL STOCK
FIRSTMERIT COMMON STOCK AND COBANCORP COMMON STOCK
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If the Merger is consummated, all shareholders of CoBancorp (except
holders of CoBancorp Common Stock who receive only cash for their shares or who
perfect their dissenters' rights) will become shareholders of FirstMerit.
FirstMerit is a corporation organized under, and governed by the OGCL, the
FirstMerit Articles and the FirstMerit Regulations. CoBancorp is also a
corporation organized under Ohio law, and is governed by OGCL, the CoBancorp
Articles, and the CoBancorp Regulations. The rights of a holder of CoBancorp
Common Stock are similar in most respects to, but different in certain other
respects from, the rights of a holder of FirstMerit Common Stock. Certain of the
most significant similarities and differences are summarized below.
THIS SUMMARY IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO THE OGCL, FIRSTMERIT'S
ARTICLES AND REGULATIONS, AND COBANCORP'S ARTICLES AND REGULATIONS.
VOTING RIGHTS
CUMULATIVE VOTING AND PREEMPTIVE RIGHTS. Each holder of FirstMerit
Common Stock and CoBancorp Common Stock has the right to cast one vote for each
share owned on all matters submitted to a vote of shareholders. No holder of
shares of any class of capital stock of FirstMerit or CoBancorp is entitled to
the right of cumulative voting. No holder of shares of any class of capital
stock of FirstMerit or CoBancorp is entitled to preemptive rights.
DIRECTOR NOMINATIONS. Any shareholder of FirstMerit who determines to
nominate a person for election as a director must deliver written notice to the
Secretary of FirstMerit not later than (a) with respect to an election to be
held at an Annual Meeting of Shareholders for the election of directors, 90 days
in advance of such meeting, and (b) with respect to such an election to be held
at a Special Meeting of Shareholders, the close of business on the seventh day
following the date on which notice of such meeting is first given to
shareholders. The notice must set forth specific information regarding the
nominating shareholder and nominee, and must be accompanied by a consent of the
nominee to serve as a director if so elected. The chairman of the meeting may
refuse to acknowledge the nomination of any person not made in compliance with
this procedure. CoBancorp's Regulations do not include a director nomination
provision.
SPECIAL MEETINGS. A special meeting of the shareholders of FirstMerit
can be called by the President, by the Board of Directors acting at a meeting,
by a majority of the Board when not in a meeting, or by shareholder(s) owning
one-half or more of the outstanding shares of FirstMerit Common Stock. A special
meeting of the shareholders of CoBancorp can be called by the Chairman of its
Board of Directors, its President, a Vice President, or by a majority of the
Board, or by shareholder(s) owning one-fourth or more of all of the outstanding
shares of capital stock of CoBancorp.
MERGERS, CONSOLIDATIONS, DISSOLUTIONS, COMBINATIONS, AND OTHER
TRANSACTIONS. Subject to the provisions discussed in "Ohio Anti-Takeover
Statutes" below, Ohio law requires a merger, consolidation, dissolution,
disposition of all or substantially all of a corporation's assets, and a
"majority share acquisition" or "combination" involving issuance of shares with
one-sixth or more of the voting power of the corporation be adopted by the
affirmative vote of the holders of shares entitled to exercise at least
two-thirds of the voting power of the corporation on such proposal, unless the
articles of incorporation specify a different proportion (but not less than a
majority). Adoption by the affirmative vote of the holders of two-thirds of any
class of shares, unless otherwise provided in the articles, may also be required
if the rights of holders of that class are affected in certain respects by the
merger or consolidation. Except for the "Fair Price and Supermajority Vote
Provisions" discussed below, neither FirstMerit's Articles nor CoBancorp's
Articles modify such voting requirements.
FAIR PRICE AND SUPERMAJORITY VOTE PROVISIONS. Article Seventh of
FirstMerit's Articles requires that a merger or consolidation of FirstMerit into
or with a corporation, person, or entity that is the beneficial owner of 10% or
more of the issued and outstanding shares of a class of FirstMerit capital stock
("Interested Party"), or the sale, lease or other disposition of all or
substantially all of the assets of FirstMerit to an Interested Party, requires
the approval of 80% of the outstanding voting shares of each class of FirstMerit
stock entitled to vote as a class. This supermajority vote requirement is waived
in the event the transaction has been approved (i) by the Board of Directors
prior to the time the Interested Party beneficially owns 10% or more of the
outstanding capital stock of FirstMerit, or (ii) at any time before its
consummation by two-thirds vote of the total members of the FirstMerit Board of
Directors and a majority of the directors who either were appointed prior to the
time the party beneficially owned four percent or more of an outstanding class
of capital stock or were recommended
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to succeed such a director by a majority of such directors; provided, that the
transaction is structured in such a manner that the price to be paid by the
Interested Party is fair to all shareholders of FirstMerit. A FirstMerit
shareholder must receive a price equal to the highest price per share previously
paid to a shareholder by the Interested Party for a share of FirstMerit capital
stock of the same class. If that supermajority vote requirement is waived, the
transaction may be approved by the holders of at least two-thirds of the
outstanding capital stock.
The CoBancorp Articles provide that the approval of the holders of 75%
of the outstanding shares of CoBancorp Common Stock is required in order to
approve a merger, consolidation or acquisition unless the transaction has been
approved by the Board of Directors. The CoBancorp Articles do not include a fair
price vote provision.
SHAREHOLDER RIGHTS PLAN
Pursuant to the terms of the Rights Agreement, between FirstMerit and
FirstMerit Bank, as rights agent, a dividend of one preferred share purchase
right (a "Right") for each outstanding share of FirstMerit Common Stock
(sometimes hereinafter "Common Stock") was declared by the FirstMerit Board of
Directors. Each Right entitles its registered holder to purchase from
FirstMerit, after the Distribution Date, one one-hundredth of a share of Series
A Preferred Stock, no par value (the "Preferred Shares"), for $45 (the "Purchase
Price"), subject to adjustment. The Rights will be evidenced by the Common Share
certificates until the close of business on the earlier of the date (either,
the "Distribution Date") which is (i) the tenth business day (or such later date
as the Board of Directors of FirstMerit may from time to time fix by resolution
adopted prior to the Distribution Date that would otherwise have occurred) after
the date on which any Person (as defined in the Rights Agreement) commences a
tender or exchange offer which, if consummated, would result in such Person's
becoming an Acquiring Person, as defined below, or (ii) the tenth business day
(or such earlier or later date as the Board of Directors of FirstMerit may from
time to time fix by resolution adopted prior to the Flip-in Date (as defined
below) that would otherwise have occurred) after the first date of public
announcement by FirstMerit that such Person has become an Acquiring Person (the
"Flip-in Date"); provided that if a tender or exchange offer referred to in
clause (i) is canceled, terminated or otherwise withdrawn prior to the
Distribution Date without the purchase of any shares of stock pursuant thereto,
such offer shall be deemed never to have been made.
An Acquiring Person is any Person who is the Beneficial Owner (as
defined in the Rights Agreement) of 10% or more of the outstanding Common Stock,
provided, however, such term shall not include (i) FirstMerit, any wholly-owned
subsidiary of FirstMerit or any employee stock ownership or other employee
benefit plan of FirstMerit, (ii) any person who is the Beneficial Owner of 10%
or more of the outstanding Common Stock as of the date of the Rights Agreement
or who shall become the Beneficial Owner of 10% or more of the outstanding
Common Stock solely as a result of an acquisition of Common Stock by FirstMerit,
until such time as such Person acquires additional Common Stock, other than
through a dividend or stock split, (iii) any Person who becomes an Acquiring
Person without any plan or intent to seek or affect control of FirstMerit if
such Person promptly divests sufficient securities such that such 10% or greater
Beneficial Ownership ceases; or (iv) any Person who Beneficially Owns Common
Stock consisting solely of (A) shares acquired pursuant to the grant or exercise
of an option granted by FirstMerit in connection with an agreement to merge
with, or acquire, FirstMerit prior to a Flip-in Date, (B) shares owned by such
Person and its Affiliates and Associates at the time of such grant, (C) shares,
amounting to less than 1% of the outstanding Common Stock, acquired by
Affiliates and Associates of such Person after the time of such grant and (D)
shares which are held by such Person in trust accounts, managed accounts and the
like or otherwise held in a fiduciary capacity, that are beneficially owned by
third persons who are not Affiliates or Associates of such Person or acting
together with such Person to hold shares, or which are held by such Person in
respect of a debt previously contracted.
The Rights Agreement provides that, until the Distribution Date, the
Rights will be transferred with and only with the Common Stock. Promptly
following the Distribution Date, separate certificates evidencing the Rights
("Rights Certificates") will be mailed to holders of record of Common Stock at
the Distribution Date.
The Rights will not be exercisable until the Business Day (as defined
in the Rights Agreement) following the Distribution Date. The Rights will expire
on the earliest of (i) the Exchange Time (as defined below), (ii) the close of
business on July 18, 2006, (iii) the date on which the Rights are redeemed as
described below and (iv) upon certain mergers
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of FirstMerit with another corporation pursuant to an agreement entered into
prior to a Flip-in Date (in any such case, the "Final Expiration Date").
In the event that prior to the Expiration Time a Flip-in Date occurs,
each Right (other than Rights Beneficially Owned by the Acquiring Person or any
affiliate or associate thereof, which Rights shall become void) shall constitute
the right to purchase from FirstMerit, upon the exercise thereof in accordance
with the terms of the Rights Agreement, that number of Common Stock of
FirstMerit having an aggregate Market Price (as defined in the Rights
Agreement), on the date of the public announcement of an Acquiring Person's
becoming such (the "Stock Acquisition Date") that gave rise to the Flip-in Date,
equal to twice the Purchase Price for an amount in cash equal to the then
current Purchase Price. In addition, the Board of Directors of FirstMerit may,
at its option, at any time after a Flip-in Date and prior to the time an
Acquiring Person becomes the Beneficial Owner of more than 50% of the
outstanding Common Stock, elect to exchange all (but not less than all) the then
outstanding Rights (other than Rights Beneficially Owned by the Acquiring Person
or any affiliate or associate thereof, which Rights become void) for Common
Stock at an exchange ratio of one Common Share per Right, appropriately adjusted
to reflect any stock split, stock dividend or similar transaction occurring
after the date of the Distribution Date (the "Exchange Ratio"). Immediately upon
such action by the Board of Directors (the "Exchange Time"), the right to
exercise the Rights will terminate and each Right will thereafter represent only
the right to receive a number of Common Stock equal to the Exchange Ratio.
Whenever FirstMerit shall become obligated under the preceding
paragraph to issue Common Stock upon exercise of or in exchange for Rights,
FirstMerit, at its option, may substitute therefor shares of Preferred Stock, at
a ratio of one one-hundredth of a share of Preferred Stock for each Common Share
so issuable.
In the event that prior to the Final Expiration Date FirstMerit enters
into, consummates or permits to occur a transaction or series of transactions
after the time an Acquiring Person has become such in which, directly or
indirectly, (i) FirstMerit shall consolidate or merge or participate in a
binding share exchange with any other Person if, at the time of the
consolidation, merger or share exchange or at the time FirstMerit enters into an
agreement with respect to such consolidation, merger or share exchange, the
Acquiring Person Controls the Board of Directors of FirstMerit (as defined in
the Rights Agreement) and either (A) any term of or arrangement concerning the
treatment of shares of capital stock in such merger, consolidation or share
exchange relating to the Acquiring Person is not identical to the terms and
arrangements relating to other holders of Common Stock or (B) the Person with
whom the transaction or series of transactions occurs is the Acquiring Person or
an Affiliate or Associate of the Acquiring Person or (ii) FirstMerit shall sell
or otherwise transfer (or one or more of its subsidiaries shall sell or
otherwise transfer) assets (A) aggregating more than 50% of the assets (measured
by either book value or fair market value) or (B) generating more than 50% of
the operating income or cash flow, of FirstMerit and its subsidiaries (taken as
a whole) to any other Person (other than FirstMerit or one or more of its
wholly-owned subsidiaries) or to two or more such Persons which are affiliated
or otherwise acting in concert, if, at the time such sale or transfer of assets
or at the time FirstMerit (or any such subsidiary) enters into an agreement with
respect to such sale or transfer, the Acquiring Person Controls the Board of
Directors of FirstMerit (a "Flip-over Transaction or Event"), FirstMerit shall
take such action as shall be necessary to ensure, and shall not enter into,
consummate or permit to occur such Flip-over Transaction or Event until it
shall have entered into a supplemental agreement with the Person engaging in
such Flip-over Transaction or Event or the parent corporation thereof (the
"Flip-over Entity"), for the benefit of the holders of the Rights, providing,
that upon consummation or occurrence of the Flip-over Transaction or Event (i)
each Right shall thereafter constitute the right to purchase from the Flip-over
Entity, upon exercise thereof in accordance with the terms of the Rights
Agreement, that number of shares of common stock of the Flip-over Entity having
an aggregate Market Price on the date of consummation or occurrence of such
Flip-over Transaction or Event equal to twice the Exercise Price for an amount
in cash equal to the then current Exercise Price and (ii) the Flip-over Entity
shall thereafter be liable for, and shall assume, by virtue of such Flip-over
Transaction or Event and such supplemental agreement, all the obligations and
duties of FirstMerit pursuant to the Rights Agreement. For purposes of the
foregoing description, the term "Acquiring Person" shall include any Acquiring
Person and its Affiliates and Associates counted together as a single Person.
The Board of Directors of FirstMerit may, at its option, at any time
prior to the close of business on the Flip-in Date, redeem all (but not less
than all) the then outstanding Rights at a price of $.01 per Right (the
"Redemption Price"), as provided in the Rights Agreement. Immediately upon the
action of the Board of Directors of FirstMerit electing to redeem the Rights,
without any further action and without any notice, the right to exercise the
Rights will terminate and each Right will thereafter represent only the right to
receive the Redemption Price in cash for each Right so held.
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The holders of Rights will, solely by reason of their ownership of
Rights, have no rights as shareholders of FirstMerit, including, without
limitation, the right to vote or to receive dividends.
A copy of Rights Agreement is included as an exhibit to the Amendment
No. 1 to Form 8-A filed by FirstMerit with the Commission on July 19, 1996. The
foregoing description of the Rights Agreement does not purport to be complete
and is qualified in its entirety by reference to the Rights Agreement.
CoBancorp has not adopted a shareholder rights or similar plan.
OHIO ANTI-TAKEOVER STATUTES
Except as otherwise noted, the statutes described below apply to both
FirstMerit and CoBancorp.
OHIO CONTROL SHARE ACQUISITION ACT. The Acquisition Act provides that
certain notice and informational filings and special shareholder meeting and
voting procedures must be followed prior to consummation of a proposed "control
share acquisition," which is defined as any acquisition of an issuer's shares
which would entitle the acquiror, immediately after such acquisition, directly
or indirectly, to exercise or direct the exercise of voting power of the issuer
in the election of directors within any of the following ranges of such voting
power: (a) one-fifth or more but less than one-third of such voting power; (b)
one-third or more but less than a majority of such voting power; or (c) a
majority or more of such voting power. Assuming compliance with the notice and
information filings prescribed by statute, the proposed control share
acquisition may be made only if, at a duly convened special meeting of
shareholders, the acquisition is approved by both a majority of the voting power
of the issuer represented at the meeting and a majority of the voting power
remaining after excluding the combined voting power of the "interested shares,"
being the shares held by the intended acquiror and the directors and officers of
the issuer. In addition "interested shares" are defined to include those
acquired by any person: (i) after the first date of public disclosure (November
3, 1997) of the Merger and prior to the date of the CoBancorp Special Meeting,
provided such person has paid over $250,000 for such purchased shares or such
purchased shares represents greater than .05% of the outstanding shares of the
company being acquired, and (ii) that transfers such shares for valuable
consideration after the record date established by the directors, if accompanied
by the voting power. The Acquisition Act may be made inapplicable to a company
by its corporate governance documents, but those of FirstMerit and CoBancorp do
not so provide.
OHIO MERGER MORATORIUM STATUTE. The Ohio Merger Moratorium provisions
prohibit certain business combinations and transactions between an "issuing
public corporation" and a beneficial owner of 10% or more of the shares of the
corporation (an "interested shareholder") for at least three years after the
interested shareholder attains 10% ownership, unless the board of directors of
the issuing public corporation approves the transaction before the interested
shareholder attains 10% ownership. An "issuing public corporation" is defined as
an Ohio corporation with 50 or more shareholders that has its principal place of
business, principal executive offices, or substantial assets within the State of
Ohio, and as to which no close corporation agreement exists. Examples of
transactions regulated by the Merger Moratorium provisions include the
disposition of assets, mergers and consolidations, voluntary dissolutions, and
the transfer of shares ("Moratorium Transactions").
Subsequent to the three-year period, a Moratorium Transaction may take
place provided that certain conditions are satisfied, including (a) the board of
directors approves the transaction, (b) the transaction is approved by the
holders of shares with at least two-thirds of the voting power of the
corporation (or a different proportion set forth in the articles of
incorporation), including at least a majority of the outstanding shares after
excluding shares controlled by the interested shareholder, or (c) the business
combination results in shareholders, other than the interested shareholder,
receiving a fair price plus interest for their shares. The Merger Moratorium
provisions are applicable to all corporations formed under Ohio law, but a
corporation may elect not to be covered by the Merger Moratorium provisions, or
subsequently elect to be covered, with an appropriate amendment to its articles
of incorporation. Neither FirstMerit nor CoBancorp has taken any such corporate
action to opt out of the Ohio Merger Moratorium statute.
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OHIO "ANTI-GREENMAIL" STATUTE. Pursuant to ORC Section 1707.043, a
public corporation formed in Ohio may recover profits that a shareholder makes
from the sale of the corporation's securities within 18 months after making a
proposal to acquire control or publicly disclosing the possibility of a proposal
to acquire control. The corporation may not, however, recover from a person who
proves either (i) that his sole purpose in making the proposal was to succeed in
acquiring control of the corporation and there were reasonable grounds to
believe that he would acquire control of the corporation or (ii) that his
purpose was not to increase any profit or decrease any loss in the stock. Also,
before the corporation may obtain any recovery, the aggregate amount of the
profit realized by such person must exceed $250,000. Any shareholder may bring
an action on behalf of the corporation if a corporation refuses to bring an
action to recover these profits. The party bringing such an action may recover
his attorneys' fees if the court having jurisdiction over such action orders
recovery of any profits. An Ohio corporation may elect not to be covered by the
"anti-greenmail" statute with an appropriate amendment to its articles of
incorporation, but neither FirstMerit nor CoBancorp has taken any such corporate
action to opt out of the statute.
AMENDMENT TO CHARTER DOCUMENTS
The FirstMerit Articles presently require that two-thirds of the voting
power of FirstMerit approve any amendment to the Articles, except that (i) with
regard to FirstMerit's Series A Preferred Stock (no shares of which are
presently issued or outstanding), any amendment to FirstMerit's Articles that
would materially alter or change the powers, preferences, or special rights of
such Series A Preferred Stock so as to affect them adversely would have to be
approved by at least a majority vote of the holders of such shares, voting
together as a single class, and (ii) with regard to Article Seventh of
FirstMerit's Articles, certain business combinations require a vote of 80% of
the voting power of FirstMerit, unless the amendment is approved by 75% of the
Board and by a majority of the Continuing Directors, then by two-thirds of the
voting power. CoBancorp's Articles do not contain a comparative provision and
therefore the CoBancorp Articles may be amended pursuant to OGCL.
Directors may not amend the code of regulations of an Ohio corporation.
The Regulations of FirstMerit provide for amendment by shareholders holding a
majority of the voting power at a meeting (although Ohio law requires that all
amendments by written action of the shareholders without a meeting must be
approved unanimously by the shareholders entitled to vote thereon). In addition,
any amendments regarding the calling of special meetings of shareholders,
classification of directors, nomination of or removal of directors, or amendment
to the FirstMerit Regulations, must be approved by shareholders holding at least
two-thirds of the voting power of FirstMerit. The CoBancorp Regulations provide
for amendment by shareholders holding a majority of the voting power of
CoBancorp Common Stock.
DIRECTORS
NUMBER; CLASSIFICATION. FirstMerit's Regulations presently provide that
the number of directors shall not be greater than 24, divided into three
classes. The shareholders of FirstMerit at the 1994 Annual Meeting of
Shareholders fixed the number of Directors at 16. The respective terms of the
classes are staggered so that the term of one class expires each year, at which
time members of that class are elected to a three-year term.
The CoBancorp Regulations presently provide that the number of
directors shall be determined by Resolution of the shareholders, which number
shall not be less than three, divided into three classes. The number of
directors of CoBancorp has been set at 13. The respective terms of the classes
are staggered so that the term of one class expires each year, at which time
members of that class are elected to a three-year term.
REMOVAL. FirstMerit's Regulations provide that FirstMerit's
shareholders may remove a director for good cause by a vote of two-thirds of the
capital stock entitled to vote for directors. CoBancorp's Regulations do not
contain a provision addressing director removal and therefore the general
provisions of OGCL prevail.
INDEMNIFICATION. Under Ohio law, Ohio corporations are authorized to
indemnify directors, officers, employees, and agents within prescribed limits
and must indemnify them under certain circumstances. Ohio law does not provide
statutory authorization for a corporation to indemnify directors, officers,
employees, and agents for settlements, fines, or judgments in the context of
derivative suits. It provides, however, that directors (but not officers,
employees, and agents)
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are entitled to mandatory advancement of expenses, including attorneys' fees,
incurred in defending any action, including derivative actions, brought against
the director, provided the director agrees to cooperate with the corporation
concerning the matter and to repay the amount advanced if it is proved by clear
and convincing evidence that his act or failure to act was done with deliberate
intent to cause injury to the corporation or with reckless disregard for the
corporation's best interests.
Ohio law does not authorize payment of expenses or judgments to a
director, officer, employee, or agent after a finding of negligence or
misconduct in a derivative suit absent a court order. Indemnification is
required, however, to the extent such person succeeds on the merits. In all
other cases, if a director, officer, employee, or agent acted in good faith and
in a manner he reasonably believed to be in or not opposed to the best interests
of the corporation, indemnification is discretionary except as otherwise
provided by a corporation's articles, code of regulations, or by contract and
except with respect to the advancement of expenses of directors.
Under Ohio law, a director is not liable for monetary damages unless it
is proved by clear and convincing evidence that his action or failure to act was
undertaken with deliberate intent to cause injury to the corporation or with
reckless disregard for the best interests of the corporation. There is, however,
no comparable provision limiting the liability of officers, employees, or agents
of a corporation. The statutory right to indemnification is not exclusive in
Ohio, and Ohio corporations may, among other things, procure insurance for such
persons.
FirstMerit's Articles provide that FirstMerit may indemnify to the
fullest extent permitted by law any person made or threatened to be made a party
to any action, suit, or proceeding by reason of the fact that he is or was a
director, officer, employee or agent of FirstMerit, or of any other corporation
or organization for which he was serving as a director, officer, employee or
agent at the request of FirstMerit. FirstMerit has entered into Indemnification
Agreements with each of its directors and executive officers. CoBancorp's
Regulations provide that CoBancorp shall indemnify its directors, officers,
employees and agents to the fullest extent permitted under Ohio law. See "TERMS
OF MERGER -- Interests of Certain Persons in Merger." CoBancorp has not entered
into separate indemnification agreements with any of its executive officers or
directors. Both FirstMerit and CoBancorp have acquired insurance for their
obligations to provide indemnification to their officers and directors.
DIVIDENDS
An Ohio corporation may pay dividends out of surplus, however created,
but must notify its shareholders if a dividend is paid out of capital surplus.
The ability of FirstMerit and CoBancorp to pay cash dividends to their
respective shareholders is largely dependent on the amount of dividends which
may be declared and paid to each of them by their respective subsidiaries. There
are a number of statutory and regulatory requirements applicable to the payment
of dividends by banks, savings associations and bank holding companies. See
"REGULATORY MATTERS."
REPURCHASES
Under Ohio law, a corporation may by action of its board of directors
purchase or redeem its own shares if authorized to do so by its articles of
incorporation or under certain other circumstances, but may not do so if
immediately thereafter its assets would be less than its liabilities plus its
stated capital, if any, or if the corporation is insolvent or would be rendered
insolvent by such a purchase or redemption. FirstMerit's and CoBancorp's
Articles permit their respective Boards of Directors to authorize the repurchase
or redemption of shares to the extent permitted by law.
PREFERRED STOCK
The terms and provisions of FirstMerit's Preferred Stock are delineated
above under "DESCRIPTION OF FIRSTMERIT CAPITAL STOCK -- FirstMerit Preferred
Stock." CoBancorp is not authorized to issue preferred stock.
TRANSFER AGENT
FirstMerit's transfer agent is FirstMerit Bank and CoBancorp's is
Registrar and Transfer Company.
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ANTI-TAKEOVER EFFECT
FirstMerit has adopted certain corporate governance provisions
described above which may have anti-takeover effects. These provisions may
discourage or delay takeover attempts or a change of control of FirstMerit. In
addition, they may tend to insulate current directors and management against the
possibility of removal, and may give holders of a minority of FirstMerit Common
Stock the power to veto a business combination which the holders of a majority
of the stock may believe to be desirable and beneficial.
LEGAL MATTERS
The validity of the shares of FirstMerit Common Stock to be issued by
FirstMerit under the Merger Agreement and certain federal tax matters relating
to the Merger have been passed upon for FirstMerit by its counsel, Brouse &
McDowell. Philip A. Lloyd II is a shareholder of Brouse & McDowell and a
director of FirstMerit. Kevin C. O'Neil is a shareholder of Brouse & McDowell.
Due to their involvement in this transaction, Messrs. Lloyd and O'Neil are
required to disclose their beneficial ownership of shares of FirstMerit Common
Stock, which is 320,771 and 3,022 shares, respectively. Certain legal matters in
connection with the Merger will be passed upon for CoBancorp by Silver, Freedman
& Taff, L.L.P. (a partnership including professional corporations).
EXPERTS
The consolidated financial statements of FirstMerit incorporated in
this Prospectus and Proxy Statement by reference to the FirstMerit Annual Report
on Form 10-K for the year ended December 31, 1996, as amended by the Form
10-K/A, have been so incorporated in reliance on the report of Coopers & Lybrand
L.L.P., independent accountants, given on the authority of said firm as experts
in auditing and accounting.
The consolidated financial statements of CoBancorp Inc. incorporated by
reference in CoBancorp Inc.'s Annual Report (Form 10-K) for the year ended
December 31, 1996, have been audited by Ernst & Young LLP, independent auditors,
as set forth in their report thereon incorporated by reference therein and
incorporated herein by reference. Such consolidated financial statements are
incorporated herein by reference in reliance upon such report given upon the
authority of such firm as experts in auditing and accounting.
Representatives of Ernst & Young LLP are expected to be present at the
CoBancorp Special Meeting. Such representatives will have the opportunity to
make a statement if they desire to do so and are expected to be available to
respond to appropriate questions.
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APPENDIX A
Agreement of Affiliation and Plan of Merger dated November 2, 1997,
by and between FirstMerit Corporation and CoBancorp Inc.
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AGREEMENT OF AFFILIATION AND PLAN OF MERGER DATED NOVEMBER 2, 1997 BY AND
BETWEEN FIRSTMERIT CORPORATION AND COBANCORP INC.
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AGREEMENT OF AFFILIATION
AND PLAN OF MERGER
THIS AGREEMENT OF AFFILIATION AND PLAN OF MERGER, dated as of November
2, 1997 (this "Agreement"), is made by and between FirstMerit Corporation, an
Ohio corporation ("FirstMerit"), and CoBancorp Inc., an Ohio corporation
("CoBancorp").
WHEREAS, the respective Boards of Directors of FirstMerit and CoBancorp
have each determined that it is in the best interests of their respective
shareholders for CoBancorp to merge with and into FirstMerit upon the terms and
subject to the conditions set forth herein;
WHEREAS, the respective Boards of Directors of FirstMerit and CoBancorp
have each approved the merger of CoBancorp with and into FirstMerit, upon the
terms and subject to the conditions set forth herein;
WHEREAS, the Board of Directors of FirstMerit intend to
contemporaneously with the merger of CoBancorp with and into FirstMerit, to
merge the wholly owned subsidiaries of CoBancorp, with and into a wholly owned
subsidiary of FirstMerit;
WHEREAS, the Board of Directors of FirstMerit will appoint to the
FirstMerit Board of Directors at the Effective Time, an individual to be
recommended by CoBancorp (subject to the approval of the FirstMerit Board of
Directors);
WHEREAS, as an inducement for FirstMerit to enter into this Agreement,
CoBancorp expects (but is not obligated) to provide FirstMerit with an option to
purchase up to 19.9 percent of the capital stock of CoBancorp, but only if
certain events occur, pursuant to the terms and conditions of the CoBancorp
Stock Purchase Option (as hereinafter defined);
WHEREAS, for Federal income tax purposes, it is intended that the
merger shall qualify as a reorganization under the provisions of Section 368 of
the Internal Revenue Code of 1986, as amended (the "Code"); and
WHEREAS, for accounting purposes, it is intended that the merger shall
be accounted for as a "purchase;"
NOW, THEREFORE, in consideration of the foregoing premises and the
representations, warranties and agreements contained herein, and subject to the
terms and conditions set forth herein, the parties hereto hereby agree as
follows:
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1. THE MERGER
1.1. MERGER.
1.1.1. MERGER. At the Effective Time (as hereinafter defined),
CoBancorp will be merged with and into FirstMerit (the "Merger") in accordance
with the provisions of Section 1701.78 of the Ohio General Corporation Law
("OGCL"). FirstMerit shall be the surviving corporation in the Merger and shall
continue after the Merger to be incorporated under the laws of the State of Ohio
(the "Surviving Corporation"). The Merger shall have the effects specified in
the OGCL. The name of the Surviving Corporation shall be "FirstMerit
Corporation."
1.1.2. EFFECTIVE TIME. As soon as practicable following the
Closing (as hereinafter defined), FirstMerit and CoBancorp (the "Constituent
Corporations") shall cause a certificate of merger complying with the
requirements of Section 1701.81 of the OGCL (the "Certificate of Merger") to be
filed with the Secretary of State of the State of Ohio. The form of Certificate
of Merger is attached hereto as Exhibit 1.1.2, which has attached to it the
Amended and Restated Articles of Incorporation of the Surviving Corporation. The
Merger will become effective at the time and date which the Certificate of
Merger is filed with the Secretary of State of the State of Ohio (the "Effective
Time").
1.1.3. CONSUMMATION OF MERGER. The closing of the Merger (the
"Closing") will take place (i) at 10:00 a.m. (local time) at the principal
executive offices of FirstMerit as promptly as practicable after the date on
which all of the conditions set forth in Article 6 are satisfied or duly waived,
or (ii) at such other time and place and on such other date as FirstMerit and
CoBancorp may agree.
1.1.4. ARTICLES OF INCORPORATION AND REGULATIONS. The Amended
and Restated Articles of Incorporation and Code of Regulations of FirstMerit,
attached hereto as Exhibit 1.1.4, in effect immediately prior to the Effective
Time will be the Amended and Restated Articles of Incorporation and Regulations
of the Surviving Corporation after the Effective Time, until duly amended in
accordance with their respective terms and the OGCL.
1.1.5. DIRECTORS AND OFFICERS. The directors and officers of
FirstMerit immediately prior to the Effective Time will be the directors and
officers, respectively, of the Surviving Corporation, until their successors
have been duly elected or appointed and qualified or until their earlier death,
resignation or removal in accordance with the terms of the Surviving
Corporation's Amended and Restated Articles of Incorporation and Code of
Regulations and the OGCL. Immediately following Closing, the Board of Directors
of FirstMerit will appoint to the FirstMerit Board of Directors, an individual
to be recommended by CoBancorp, but subject to the approval of the FirstMerit
Board of Directors, such individual to serve in the class whose terms expire in
2000.
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1.1.6. SERVICE OF PROCESS. B.&McD., Inc., whose address is 106
S. Main Street, Akron, Summit County, Ohio 44308, is the statutory agent upon
whom any process, notice or demand against FirstMerit, or the Surviving
Corporation may be served.
2. CONVERSION OF SHARES
2.1. CONVERSION OF SHARES. Subject to the provisions of this Agreement,
at the Effective Time, automatically by virtue of the Merger and without any
action on the part of any party or shareholder, each share of the common stock,
no par value per share, of CoBancorp (the "CoBancorp Common Stock"), issued and
outstanding immediately prior to the Effective Time (excluding (i) shares held
by CoBancorp or any of the CoBancorp Subsidiaries (as defined below) or by
FirstMerit or any of the FirstMerit Subsidiaries (as defined below), in each
case other than in a fiduciary capacity or as a result of debts previously
contracted ("Treasury Shares") and (ii) Dissenting Shares (as defined below)),
shall cease to be outstanding and shall be converted into and become the right
to receive, at the election of the holder thereof as provided in Section 2.2,
subject to Sections 2.3 and 2.4 hereof, either
(1) a number of shares of common stock, no par value per
share, of FirstMerit (the "FirstMerit Common Stock") equal to the
Exchange Ratio (as defined below)(and the associated rights under the
FirstMerit Rights Plan (as defined below))(the "Per Share Stock
Consideration"), or
(2) $44.50 in cash (the "Per Share Cash Consideration"),
in such proportions as the holder thereof shall elect or be deemed to have
elected as provided in Section 2.2 hereof (the aggregate amount of cash payable
and the number of shares of FirstMerit Common Stock issuable pursuant to the
Merger is sometimes referred to as the "Merger Consideration"); provided,
however, that the aggregate amount of cash payable pursuant to the Merger to
satisfy such elections shall not be less than 30% of the aggregate Market Value
of the Merger Consideration (as defined below) (the "Minimum Cash Consideration
Amount") nor exceed 49% of the aggregate Market Value of the Merger
Consideration (the "Maximum Cash Consideration Amount").
For purposes of this Section 2.2:
(i) The "Exchange Ratio" shall be 1.745 shares of FirstMerit
Common Stock, except that in the event the Average Closing
Price (as defined below) is:
(a) greater than $30.60, then the Exchange Ratio shall be
equal to $48.53 divided by the Average Closing Price,
or
(b) equal to or greater than $28.05 but less than or
equal to $30.60 per share, then the Exchange Ratio
shall be 1.586, or
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(c) greater than $22.95 but less than $28.05 per share,
then the Exchange Ratio shall be adjusted by
multiplying the Exchange Ratio by a factor equal to
$25.50 divided by the Average Closing Price, or
(d) equal to or less than $22.95, subject to Section
7.1(h), then the Exchange Ratio shall be 1.939,
in each event rounded to three decimal places;
(ii) "Average Closing Price" shall mean the average of the reported
daily closing prices of FirstMerit Common Stock on the Nasdaq
National Market during the period of ten consecutive trading
days ending on the tenth calendar day immediately prior to the
Effective Time; and
(iii) "Market Value of the Merger Consideration" shall mean the sum
of (a) the product of the number of shares of FirstMerit to be
issued pursuant to the Merger and the Average Closing Price
and (b) the aggregate amount of cash payable pursuant to the
Merger.
2.2. ELECTION PROCEDURES. An election form and other
appropriate and customary transmittal materials (which shall specify that
delivery shall be effected, and risk of loss and title to the certificates
theretofore representing CoBancorp Common Stock ("CoBancorp Certificates") shall
pass, only upon proper delivery of such CoBancorp Certificates to an exchange
agent designated by FirstMerit (the "Exchange Agent")) in such form as
FirstMerit and the CoBancorp shall mutually agree ("Election Form") shall be
mailed 25 days prior to the anticipated Effective Time or on such other date as
the CoBancorp and FirstMerit shall mutually agree ("Mailing Date") to each
holder of record of CoBancorp Common Stock as of five business days prior to the
Mailing Date ("Election Form Record Date"). FirstMerit shall determine the
anticipated Effective Time (the "Anticipated Effective Time") in its sole
discretion and the failure of the Effective Time to occur at the Anticipated
Effective Time for purposes of this Section 2.2 shall not affect the time
periods which are established for purposes of these election procedures.
Each Election Form shall permit a holder (or the beneficial owner
through appropriate and customary documentation and instructions) of CoBancorp
Common Stock to elect to receive only FirstMerit Common Stock with respect to
such holder's CoBancorp Common Stock ("Stock Election Shares"), to elect to
receive only cash with respect to such holder's CoBancorp Common Stock ("Cash
Election Shares"), to elect to receive FirstMerit Common Stock with respect to
those shares of CoBancorp Common Stock designated by the holder as Stock
Election Shares and cash with respect to the holder's remaining shares of
CoBancorp Common Stock or to indicate that such holder makes no election ("No
Election Shares"). For purposes of this Section 2.2, Dissenting Shares shall be
treated as Cash Election Shares but shall not be converted into the Per Share
Stock Consideration or the Per Share Cash Consideration except as provided in
Section 2.6.
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Any shares of CoBancorp Common Stock with respect to which the holder
(or the beneficial owner, as the case may be) shall not have submitted to the
Exchange Agent an effective, properly completed Election Form on or before 5:00
p.m. on the 20th day following the Mailing Date (or such other time and date as
FirstMerit and the CoBancorp may mutually agree) (the "Election Deadline") shall
be deemed to be "No Election Shares."
FirstMerit shall promptly make available one or more Election Forms as
may be reasonably requested by all persons who become holders (or beneficial
owners) of CoBancorp Common Stock between the Election Form Record Date and the
close of business on the business day prior to the Election Deadline, and
CoBancorp shall provide to the Exchange Agent all information reasonably
necessary for it to perform as specified herein.
Any such election shall have been properly made only if the Exchange
Agent shall have actually received a properly completed Election Form by the
Election Deadline. An Election Form shall be deemed properly completed only if
accompanied by one or more certificates (or customary affidavits and
indemnification regarding the loss or destruction of such certificates or the
guaranteed delivery of such certificates) representing all shares of the
CoBancorp Common Stock covered by such Election Form, together with duly
executed transmittal materials included in the Election Form. Any Election Form
may be revoked or changed by the person submitting such Election Form at or
prior to the Election Deadline. In the event an Election Form is revoked prior
to the Election Deadline, the shares of CoBancorp Common Stock represented by
such Election Form shall become No Election Shares and FirstMerit shall cause
the certificates representing CoBancorp Common Stock to be promptly returned
without charge to the person submitting the Election Form upon written request
to that effect from the person who submitted the Election Form.
Subject to the terms of this Agreement and of the Election Form, the
Exchange Agent shall have reasonable discretion to determine whether any
election, revocation or change has been properly or timely made and to disregard
immaterial defects in the Election Forms, and any good faith decisions of the
Exchange Agent regarding such matters shall be binding and conclusive. Neither
FirstMerit nor the Exchange Agent shall be under any obligation to notify any
person of any defect in an Election Form.
2.3. ALLOCATION PROCEDURES. Within five business days after the
Election Deadline, unless the Effective Time has not yet occurred, in which case
as soon thereafter as practicable, FirstMerit shall cause the Exchange Agent to
effect the allocation among the holders of CoBancorp Common Stock in accordance
with the Election Forms as follows:
(a) Cash Elections Less Than Minimum Cash Consideration Amount. If the
amount of cash that would be payable upon the conversion into cash of the Cash
Election Shares is less than the Minimum Cash Consideration Amount (as
determined by the Exchange Agent), then:
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(i) all Cash Election Shares shall be converted into the right
to receive the Per Share Cash Consideration.
(ii) the Exchange Agent shall select first from among the No
Election Shares on a pro rata basis and then (if necessary) from among
the Stock Election Shares on a pro rata basis, a sufficient number of
shares ("Cash Designated Shares") on a pro rata basis such that the
aggregate amount of the Per Share Cash Consideration that will be
payable pursuant to the Merger equals as closely as practicable the
Minimum Cash Consideration Amount, and all Cash Designated Shares shall
be converted into the right to receive the Per Share Cash
Consideration, and
(iii) the No Election Shares and the Stock Election Shares
which are not Cash Designated Shares shall be converted into the right
to receive the Per Share Stock Consideration; or
(b) Cash Elections More Than Maximum Cash Consideration Amount. If the
amount of cash that would be payable upon the conversion into cash of the Cash
Election Shares is greater than the Maximum Cash Consideration Amount (as
determined by the Exchange Agent), then:
(i) all Stock Election Shares and No Election Shares shall be
converted into the right to receive FirstMerit Common Stock,
(ii) the Exchange Agent shall select from among the Cash
Election Shares on a pro rata basis, a sufficient number shares ("Stock
Designated Shares") such that the amount of cash that will be payable
pursuant to the Merger equals as closely as practicable, but not in
excess of, the Maximum Cash Consideration Amount, and all Stock
Designated Shares shall be converted into the right to receive the Per
Share Stock Consideration, and
(iii) the Cash Election Shares which are not Stock Designated
Shares shall be converted into the right to receive the Per Share Stock
Consideration; or
(c) Cash Elections At Least Equal to Minimum Cash Consideration Amount
and No More Than Maximum Cash Consideration Amount. If the amount of cash that
would be payable upon the conversion into cash of the Cash Election Shares is at
least equal to the Minimum Cash Consideration Amount and is no more than the
Maximum Cash Consideration Amount (as determined by the Exchange Agent), then
subparagraphs (a) and (b) above and subparagraph (d) below shall not apply and
all Cash Election Shares shall be converted into the right to receive cash and
all Stock Election Shares and No Election Shares shall be converted into the
right to receive the Per Share Stock Consideration; and
(d) Notwithstanding anything to the contrary herein, any CoBancorp
shareholder who has acquired shares of CoBancorp Common Stock through the
exercise of stock options, and who elects to receive FirstMerit Common Stock
with respect to (all or a portion of) such shareholder's
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CoBancorp Common Stock, shall be entitled to the maximum amount of the Per Share
Stock Consideration exchanged for the shareholder's Stock Election Shares being
allocated to the shareholder's shares of CoBancorp Common Stock acquired through
the exercise of stock options, with any required Per Share Cash Consideration
being allocated first to shares of CoBancorp Common Stock acquired other than
through the exercise of stock options, unless otherwise specifically elected by
such shareholder.
2.4. FRACTIONAL SHARES. Notwithstanding any other provision hereof, no
fractional shares of FirstMerit Common Stock and no certificates or scrip
therefor, or other evidence of ownership thereof, will be issued in the Merger;
instead, FirstMerit shall pay to each holder of CoBancorp Common Stock who would
otherwise be entitled to a fractional share of FirstMerit Common Stock (after
taking into account all CoBancorp Certificates delivered by such holder) an
amount in cash (without interest) determined by multiplying such fraction by the
average of the last sale prices of FirstMerit Common Stock, as reported by the
Nasdaq/NMS reporting system (as reported in The Wall Street Journal or, if not
reported therein, in another authoritative source), for the five Nasdaq/NMS
trading days immediately preceding the Effective Date.
2.5. EXCHANGE PROCEDURES.
2.5.1. At or prior to the Effective Time, FirstMerit shall
deposit, or shall cause to be deposited, with the Exchange Agent, for the
benefit of the holders of CoBancorp Certificates, for exchange in accordance
with this Article 2, certificates representing the shares of FirstMerit Stock
("New Certificates") and an estimated amount of cash (such cash and New
Certificates, together with any dividends or distributions with respect thereto
(without any interest thereon), being hereinafter referred to as the "Exchange
Fund") to be paid pursuant to this Article 2 in exchange for outstanding shares
of CoBancorp Common Stock.
2.5.2. As promptly as practicable after the Effective Date,
FirstMerit shall send or cause to be sent to each former holder of record of
shares (other than Cash Election Shares, Treasury Shares or Dissenting Shares)
of CoBancorp Stock immediately prior to the Effective Time transmittal materials
for use in exchanging such shareholder's CoBancorp Certificates for the
consideration set forth in this Article 2. FirstMerit shall cause the New
Certificates into which shares of a shareholder's CoBancorp Common Stock are
converted on the Effective Date and/or any check in respect of the Per Share
Cash Consideration and any fractional share interests or dividends or
distributions which such person shall be entitled to receive to be delivered to
such shareholder upon delivery to the Exchange Agent of CoBancorp Certificates
representing such shares of CoBancorp Common Stock (or indemnity reasonably
satisfactory to FirstMerit and the Exchange Agent, if any of such certificates
are lost, stolen or destroyed) owned by such shareholder. No interest will be
paid on any such cash to be paid pursuant to this Article 2 upon such delivery.
2.5.3. Notwithstanding the foregoing, neither the Exchange
Agent nor any party hereto shall be liable to any former holder of CoBancorp
Common Stock for any amount properly delivered to a public official pursuant to
applicable abandoned property, escheat or similar laws.
2.5.4. No dividends or other distributions with respect to
FirstMerit Stock with a record date occurring after the Effective Time shall be
paid to the holder of any unsurrendered
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CoBancorp Certificate representing shares of CoBancorp Common Stock converted in
the Merger into shares of such FirstMerit Stock until the holder thereof shall
surrender such CoBancorp Certificate in accordance with this Article 2. After
the surrender of a CoBancorp Certificate in accordance with this Article 2, the
record holder thereof shall be entitled to receive any such dividends or other
distributions, without any interest thereon, which theretofore had become
payable with respect to shares of FirstMerit Stock represented by such CoBancorp
Certificate.
2.5.5. Any portion of the Exchange Fund that remains unclaimed
by the shareholders of CoBancorp for twelve months after the Effective Time
shall be paid to FirstMerit by the Exchange Agent. Any shareholders of CoBancorp
who have not theretofore complied with this Article 2 shall thereafter look only
to FirstMerit for payment of the shares of FirstMerit Stock, cash in lieu of any
fractional shares and unpaid dividends and distributions on the FirstMerit Stock
deliverable in respect of each share of CoBancorp Common Stock such shareholder
holds as determined pursuant to this Agreement, in each case, without any
interest thereon.
2.6. DISSENTERS' RIGHTS. To the extent provided by the OGCL, any holder
of record of the CoBancorp Common Stock as of the date fixed for the
determination of shareholders of CoBancorp entitled to notice of the CoBancorp
Meeting (as defined below), and who shall have filed with CoBancorp, not later
than ten (10) days after such meeting, a written demand for payment of the fair
cash value of such shares in compliance with Section 1701.85 of the OGCL, and
whose shares shall not have been voted in favor of the Merger or adoption of
this Agreement, and who comply with all of the relevant provisions of such
Section (the "Dissenting Shares"), shall cease at the Effective Time to have any
of the rights of a shareholder in respect of such shares, shall not be converted
into or be exchangeable for the right to receive the Merger Consideration
(unless and until such holders shall have failed to perfect or shall have
effectively withdrawn or lost their dissenters' rights under the OGCL), and
shall only have the right to be paid the fair cash value of such shares under
Sections 1701.84 and 1701.85 of the OGCL. Any former holder of CoBancorp Common
Stock who after the Effective Time (i) surrenders his certificates representing
shares of CoBancorp Common Stock for exchange pursuant to Section 2.3 hereof, or
(ii) validly withdraws his written demand for payment of fair cash value of such
shares pursuant to Sections 1701.84 and 1702.85 of the OGCL, will thereupon be
entitled to receive the Merger Consideration as of the Effective Time pursuant
to this Agreement. If any such holder shall have failed to perfect or shall have
effectively withdrawn or lost such dissenters' rights, such holder's shares of
CoBancorp Common Stock shall thereupon be converted into and become exchangeable
for the right to receive, as of the Effective Time, the Merger Consideration, as
applicable, without any interest thereon, as provided in Section 2.3.
CoBancorp shall give FirstMerit (i) prompt notice of any written
demands for payment for any CoBancorp Common Stock under Section 1701.85 of the
OGCL, attempted withdrawals of such demands, and any other instruments served
pursuant to the OGCL and received by CoBancorp relating to dissenters' rights,
and (ii) the opportunity to participate in all negotiations and proceedings with
respect to the exercise of dissenters' rights under the OGCL. CoBancorp shall
not, except with the prior written consent of the FirstMerit, voluntarily make
any payment with respect to any demands for payment for CoBancorp Common Stock
under the OGCL, offer to settle or settle any such demands or approve any
withdrawal of any such demands.
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2.7. ANTI-DILUTION PROVISIONS. In the event FirstMerit changes (or
establishes a record date for changing) the number of shares of FirstMerit
Common Stock issued and outstanding prior to the Effective Date as a result of a
stock split, stock dividend, recapitalization or similar transaction with
respect to the outstanding FirstMerit Common Stock and the record date therefor
shall be prior to the Effective Date, or exchanges FirstMerit Common Stock for a
different number or kind of shares or securities or is involved in any
transaction resulting in any of the foregoing, the Exchange Ratio shall be
proportionately adjusted.
2.8. TREASURY SHARES. Each of the shares of CoBancorp Stock held as
Treasury Shares immediately prior to the Effective Time shall be canceled and
retired at the Effective Time and no consideration shall be issued in exchange
therefor.
2.9. STOCK OPTIONS. The CoBancorp Disclosure Letter (as hereinafter
defined) sets forth a list of each stock option outstanding on the date of this
Agreement (collectively, the "CoBancorp Stock Options"), to purchase Common
Stock heretofore granted pursuant to the CoBancorp option plans. Without the
written consent of FirstMerit, no additional CoBancorp Stock Options shall,
after the date of this Agreement, be granted. Each stock option to purchase
CoBancorp Common Stock not exercised prior to the Effective Date shall on or
immediately before the Effective Date pursuant to the terms of the plan, be
cashed out at a price equal to the difference between the option exercise price
and the Per Share Cash Consideration. CoBancorp will provide FirstMerit for
FirstMerit's review and approval (which approval will not be unreasonably
withheld) at least seven days prior to the Effective Date, a list of the options
to be cashed out, including information detailing the option, option exercise
price, total to be paid and the person to receive the payment.
3. REPRESENTATIONS AND WARRANTIES OF FIRSTMERIT
FirstMerit hereby represents and warrants to CoBancorp that:
3.1. CORPORATE ORGANIZATION. FirstMerit is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Ohio and is duly qualified to do business as a foreign corporation and is in
good standing in each jurisdiction in which its ownership or lease of property
or the nature of the business conducted by it makes such qualification
necessary, except for such jurisdictions in which the failure to be so qualified
would not have a Material Adverse Effect (as hereinafter defined) on FirstMerit.
FirstMerit is registered as a bank holding company under the Bank Holding
Company Act of 1956, as amended (the "BHCA"). FirstMerit has the requisite
corporate power and authority to own, lease and operate its properties and
assets and to carry on its business as it is now being conducted.
3.2. AUTHORITY. FirstMerit has the requisite corporate power and
authority to execute and deliver this Agreement and, except for any required
approval of the applicable Regulatory Authorities (as defined hereinafter), to
consummate the transactions contemplated hereby. The execution and delivery of
this Agreement and the consummation of the transactions contemplated hereby have
been duly authorized and approved by the Board of Directors of FirstMerit,
including provisions for the resolution of certain issues by management, and no
other corporate proceedings on the part of FirstMerit are necessary to authorize
this Agreement or to consummate the transactions
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so contemplated. This Agreement has been duly executed and delivered by, and
constitutes a valid and binding obligation of, FirstMerit, enforceable against
FirstMerit in accordance with its terms, except as enforceability hereof may be
limited by applicable bankruptcy, insolvency, reorganization, moratorium and
other similar laws affecting the enforcement of creditors' rights generally and
except that the availability of the equitable remedy of specific performance or
injunctive relief is subject to the discretion of the court before which any
proceedings may be brought.
3.3. CAPITALIZATION. The authorized capital stock of FirstMerit
consists of 80,000,000 shares of FirstMerit Common Stock and 7,000,000 shares of
preferred stock. As of September 30, 1997, (i) 62,093,698 shares of FirstMerit
Common Stock (excluding 5,895,322 treasury shares) were validly issued and
outstanding, fully paid and nonassessable and not issued in violation of any
preemptive right of any shareholder of FirstMerit, and (ii) no shares of
preferred stock were issued and outstanding. Since September 30, 1997 and
through the date of this Agreement, FirstMerit has not issued any additional
shares of FirstMerit Common Stock or preferred stock other than pursuant to the
exercise of employee stock purchase rights or stock options under FirstMerit
Option Plans (as hereinafter defined) outstanding on September 30, 1997. Except
as contemplated by this Agreement, the FirstMerit Rights Plan (as hereinafter
defined) or in the FirstMerit Disclosure Letter (which is a letter attached
hereto as Exhibit 3.3, dated the date of this Agreement, from FirstMerit to
CoBancorp, such letter being identified by CoBancorp executing a copy thereof),
as of the date of this Agreement, there are no shares of capital stock of
FirstMerit authorized, issued or outstanding and there are no outstanding
subscriptions, options, warrants, scrip, rights, calls, convertible securities
or any other similar agreements, arrangements or commitments of any character
relating to the issued or unissued capital stock or other securities of
FirstMerit obligating, or which may obligate, FirstMerit to issue, deliver or
sell, or cause to be issued, delivered or sold, additional shares of capital
stock of FirstMerit or obligating, or which may obligate, FirstMerit to grant,
extend or enter into any subscription, option, warrant, scrip, right, call,
convertible security or other similar agreement, arrangement or commitment.
Except as set forth in the FirstMerit Disclosure Letter, there are no voting
trusts or other similar agreements, arrangements or commitments to which
FirstMerit or any FirstMerit Subsidiary (as hereinafter defined) is a party with
respect to the voting of the capital stock of FirstMerit. All of the shares of
FirstMerit Common Stock issuable in exchange for the CoBancorp Common Stock at
the Effective Time in accordance with this Agreement will be, when so issued,
duly authorized, validly issued, fully paid and nonassessable and will not be
subject to preemptive rights. FirstMerit has reserved for issuance the number of
shares of FirstMerit Common Stock necessary to satisfy FirstMerit's obligations
under Section 2.1.
3.4. SUBSIDIARIES. The FirstMerit Disclosure Letter sets forth, as of
the date of this Agreement, the name and state of incorporation of each banking,
and each other significant subsidiary of FirstMerit (collectively, the
"FirstMerit Subsidiaries"). Except as set forth in the FirstMerit Disclosure
Letter, each of the FirstMerit Subsidiaries is a bank, or a corporation duly
organized, validly existing and in good standing under the laws of its
respective jurisdiction of incorporation or organization and is duly qualified
to do business as a foreign corporation in each jurisdiction in which its
ownership or lease of property or the nature of the business conducted by it
makes such qualification necessary, except for such jurisdictions in which the
failure to be so
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qualified would not have a Material Adverse Effect on FirstMerit. Each of the
FirstMerit Subsidiaries has the requisite corporate power and authority to own,
lease and operate its properties and assets and to carry on its businesses as
they are now being conducted.
Except as set forth in the FirstMerit Disclosure Letter, as of the date
of this Agreement, all outstanding shares of capital stock of each FirstMerit
Subsidiary are owned by FirstMerit or another FirstMerit Subsidiary and are
validly issued, fully paid and nonassessable, have not been issued in violation
of any preemptive right and are owned free and clear of all liens, claims,
charges, options, encumbrances or agreements with respect thereto. Except as set
forth in the FirstMerit Disclosure Letter, as of the date of this Agreement,
neither FirstMerit nor any FirstMerit Subsidiary owns beneficially more than 5%
of any class of equity securities or any similar interests of any corporation,
bank, business, trust, association or similar organization. There are, as of the
date of this Agreement, no outstanding subscriptions, options, warrants, scrip,
rights, calls, convertible securities or any other similar agreements,
arrangements or commitments of any character relating to the issued or unissued
capital stock or other securities of any FirstMerit Subsidiary obligating, or
which may obligate, any FirstMerit Subsidiary to issue, deliver or sell, or
cause to be issued, delivered or sold, additional shares of its capital stock or
obligating, or which may obligate, any FirstMerit Subsidiary to grant, extend or
enter into any subscription, option, warrant, scrip, right, call, convertible
security or other similar agreement, arrangement or commitment.
3.5. INFORMATION IN DISCLOSURE DOCUMENTS, REGISTRATION STATEMENT,
ETC.
(a) None of the information with respect to FirstMerit or any
FirstMerit Subsidiary provided by FirstMerit for inclusion in the registration
statement to be filed with the Securities and Exchange Commission (the
"Commission") by FirstMerit on Form S-4 (or any other appropriate form) under
the Securities Act of 1933, as amended (the "Securities Act") for the purpose of
registering the shares of FirstMerit Common Stock to be issued in the Merger
(the "Registration Statement") will, at the time it becomes effective and at the
time of the CoBancorp Meeting (as hereinafter defined), contain any untrue
statement of a material fact or omit to state any material fact required to be
stated therein or necessary in order to make the statements therein, in light of
the circumstances under which they are made, not misleading. None of the
information with respect to FirstMerit or any FirstMerit Subsidiary provided by
FirstMerit for inclusion in any prospectus/proxy statement or information
statement or notice of FirstMerit and CoBancorp, or any amendments or
supplements thereto, required to be mailed to CoBancorp's shareholders in
connection with the Merger (the "Proxy" or "Proxy Statement") will, at the time
of the mailing of the Proxy Statement, and at the time of the CoBancorp Meeting,
contain any statement which, at the time it is made and in light of the
circumstances under which it is made, is false or misleading with respect to any
material fact, or which omits to state any material fact necessary in order to
make the statements therein not false or misleading or necessary to correct any
statement in any earlier communication with respect to the solicitation of any
proxy for the CoBancorp Meeting which has become false or misleading. The
Registration Statement will comply as to form in all material respects with the
provisions of the Securities Act and the rules and regulations promulgated
thereunder. The Proxy Statement will comply as to form in all material respects
with the provisions of the Securities
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Exchange Act of 1934, as amended (the "Exchange Act"), and the rules and
regulations promulgated thereunder.
(b) All documents that FirstMerit is responsible for filing with any
Governmental Entity (as hereafter defined) will comply as to form in all
material respects with applicable law. None of the information with respect to
FirstMerit or any FirstMerit Subsidiary provided by FirstMerit for inclusion in
any document to be filed with any regulatory authority in connection with the
transactions contemplated hereby will contain any statement of a material fact
which is untrue as of the time that such statement is made.
3.6. CONSENTS AND APPROVALS; NO VIOLATION. Except as set forth in the
FirstMerit Disclosure Letter, neither the execution and delivery of this
Agreement by FirstMerit, nor the consummation by FirstMerit of the transactions
contemplated hereby, nor compliance by FirstMerit with any of the provisions
hereof will (a) conflict with or result in any breach of any provision of its
Amended and Restated Articles of Incorporation or Code of Regulations, (b)
violate, conflict with, constitute a default (or an event which, with notice or
lapse of time or both, would constitute a default) under, or result in the
termination of, or accelerate the performance required by, or result in a right
of termination or acceleration of, or result in the creation of any lien,
security interest, charge or other encumbrance upon any of the properties or
assets of FirstMerit or any of the FirstMerit Subsidiaries under, any of the
terms, conditions or provisions of any note, bond, mortgage, indenture, deed of
trust, license, lease, agreement or other instrument or obligation to which
FirstMerit or any FirstMerit Subsidiary is a party or to which they or any of
their respective properties or assets may be subject, except for such
violations, conflicts, breaches, defaults, terminations, accelerations or
creations of liens or other encumbrances, which, individually or in the
aggregate, will not have a Material Adverse Effect on FirstMerit, (c) violate
any judgment, ruling, order, writ, injunction, decree, statute, rule or
regulation applicable to FirstMerit or any FirstMerit Subsidiary or any of their
respective properties or assets, except for such violations which, individually
or in the aggregate, will not have a Material Adverse Effect on FirstMerit, or
(d) require any consent, approval, authorization or permit of or from, or filing
with or notification to, any court, governmental authority or other regulatory
or administrative agency or commission, domestic or foreign ("Governmental
Entity"), except (i) pursuant to the Exchange Act and the Securities Act, (ii)
filing the certificate of merger pursuant to the OGCL, (iii) filings required
under the securities or blue sky laws of the various states, (iv) filings with,
and approval by, the Board of Governors of the Federal Reserve System (the
"FRB"), (v) filings with, and approval by, the Office of the Comptroller of the
Currency (the "OCC"), (vi) filings with, and approval by, the Office of Thrift
Supervision ("OTS"), (vii) filings with, and approval by, the Ohio Division of
Financial Institutions ("Division"), (viii) filings and approvals pursuant to
any applicable state takeover laws ("State Takeover Approvals"), (ix) consents,
approvals, authorizations, permits, filings or notifications in connection with
compliance with applicable provisions of federal and state securities laws
relating to the regulation of broker-dealers, investment advisors, or stock
transfer agents, or (x) consents, approvals, authorizations, permits, filings or
notifications which have either been obtained or made prior to the Closing or
which, if not obtained or made, will neither, individually or in the aggregate,
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have a Material Adverse Effect on FirstMerit nor restrict FirstMerit's legal
authority to execute and deliver this Agreement and consummate the transactions
contemplated hereby.
3.7. REPORTS AND FINANCIAL STATEMENTS. Since December 31, 1996,
FirstMerit has filed all reports, registrations and statements, together with
any required amendments thereto, that it was required to file with the
Commission, including, but not limited to Forms 10-K, Forms 10-Q, Forms 8-K and
proxy statements (collectively, the "FirstMerit Reports"). FirstMerit has
previously made available or furnished, or, with respect to the FirstMerit
Reports filed after the date of this Agreement, will promptly furnish, CoBancorp
with true and complete copies of each of the FirstMerit Reports. As of their
respective dates (but taking into account any amendments filed prior to the date
of this Agreement), the FirstMerit Reports complied, or, with respect to
FirstMerit Reports filed after the date of this Agreement, will comply, in all
material respects with all the rules and regulations promulgated by the
Commission and did not contain, or, with respect to FirstMerit Reports filed
after the date of this Agreement, will not contain, any untrue statement of a
material fact or omit to state a material fact required to be stated therein or
necessary to make the statements therein, in light of the circumstances under
which they were made, not misleading. The audited consolidated financial
statements and unaudited interim financial statements of FirstMerit included in
the FirstMerit Reports (the "FirstMerit Financial Statements") have been
prepared in accordance with generally accepted accounting principles applied on
a consistent basis (except as may be indicated therein or in the notes thereto)
and fairly present the consolidated financial position of FirstMerit and the
FirstMerit Subsidiaries as at the dates thereof and the consolidated results of
operations and cash flows for the periods then ended subject, in the case of the
unaudited interim financial statements, to normal year-end audit adjustments,
any other adjustments described therein and the absence of footnotes.
3.8. TAXES. Except as set forth in the FirstMerit Disclosure Letter,
FirstMerit and each FirstMerit Subsidiary have prepared in good faith and duly
and timely filed, all federal, state, local and foreign income, franchise,
sales, real and personal property and other tax returns and reports required to
be filed by them on or before the date of this Agreement, except where the
failure to file would not have a Material Adverse Effect on FirstMerit. Except
as set forth in the FirstMerit Disclosure Letter, FirstMerit and each FirstMerit
Subsidiary have paid, or have adequately reserved or have made adequate accruals
(in accordance with generally accepted accounting principles) with respect to,
all taxes, interest and penalties shown to be owing on all such returns or
reports. There are no liens for federal, state, local or foreign taxes upon the
assets of FirstMerit or of any FirstMerit Subsidiary, except for statutory liens
for taxes and assessments not yet delinquent or the validity of which is being
contested in good faith by appropriate proceedings. As of the date of this
Agreement, except as set forth in the FirstMerit Disclosure Letter, neither
FirstMerit nor any of the FirstMerit Subsidiaries is a party to any action or
proceeding, nor is any such action or proceeding threatened, by any Governmental
Entity for the assessment or collection of taxes which are material in amount,
and no deficiency notices or reports have been received by FirstMerit or any of
the FirstMerit Subsidiaries in respect of any material deficiencies for any tax,
assessment or government charges.
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3.9. EMPLOYEE PLANS. All employee bonus, deferred compensation,
pension, retirement, profit sharing, stock option, stock purchase, employee
stock ownership, stock appreciation rights, savings, consulting, severance,
collective bargaining, group insurance, fringe benefit and other employee
benefit, incentive and welfare plans, policies, contracts and arrangements and
all trust agreements related thereto, now in effect and relating to any present
or former directors, officers or employees of FirstMerit or FirstMerit
Subsidiaries, whether or not described in Section 3(3) of Employee Retirement
Income Security Act of 1974, as amended ("ERISA"), are identified in the
FirstMerit Disclosure Letter ("FirstMerit Employee Plans"). All of the
FirstMerit employee plans have been maintained, operated and administered in
substantial compliance with their terms, and FirstMerit, all of the FirstMerit
Subsidiaries and all of the FirstMerit Employee Plans currently comply, and have
at all relevant times complied, in all material respects with ERISA, the Code,
and any other applicable laws. FirstMerit has previously delivered or made
available to CoBancorp copies of all FirstMerit Employee Plans, in each case as
in effect on the date of this Agreement.
3.10. MATERIAL CONTRACTS. Except as set forth in the FirstMerit
Disclosure Letter or disclosed in the FirstMerit Reports, neither FirstMerit nor
any FirstMerit Subsidiary is, as of the date of this Agreement, a party to, or
is bound by, (a) any material lease not made in the ordinary course of business
of FirstMerit, (b) any agreement, arrangement, or commitment not made in the
ordinary course of business which materially restricts the conduct of any line
of business of FirstMerit, (c) any material agreement, indenture or other
instrument not specifically disclosed in the FirstMerit Financial Statements
relating to the borrowing of money by FirstMerit or the guarantee by FirstMerit
of any such obligation (other than trade payables and instruments relating to
transactions entered into in the ordinary course of business), (d) any
agreement, arrangement or commitment with or to a labor union, or (e) any other
contract or agreement or amendment thereto that would be required to be filed as
an exhibit to a Form 10-K filed by FirstMerit with the Commission as of the date
of this Agreement (the "FirstMerit Contracts"). Neither FirstMerit nor any
FirstMerit Subsidiary is in default under any FirstMerit Contract, which default
is reasonably likely to have, either individually or in the aggregate, a
Material Adverse Effect on FirstMerit, and there has not occurred any event that
with the lapse of time or the giving of notice or both would constitute such a
default.
3.11. ABSENCE OF CERTAIN CHANGES OR EVENTS. Except as set forth in the
FirstMerit Disclosure Letter or disclosed in FirstMerit Reports filed by
FirstMerit with the Commission prior to the date of this Agreement, since
December 31, 1996 to the date of this Agreement, there has not been any change
in the financial condition, results of operations or business of FirstMerit and
the FirstMerit Subsidiaries that either individually or in the aggregate has had
a Material Adverse Effect on FirstMerit.
3.12. LITIGATION. Except as disclosed in the FirstMerit Disclosure
Letter or in FirstMerit Reports filed by FirstMerit with the Commission prior to
the date of this Agreement, there is no litigation, action, arbitration or
proceeding pending, or, to the best knowledge of FirstMerit, threatened against
or affecting FirstMerit or any FirstMerit Subsidiary which, either individually
or in the aggregate, is having, or insofar as reasonably can be foreseen, will
have, a Material Adverse Effect on FirstMerit, nor is there any judgment,
decree, injunction, rule or order of any
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Governmental Entity or arbitrator, outstanding against FirstMerit or any
FirstMerit Subsidiary having, or which, insofar as reasonably can be foreseen,
in the future would have, any such effect.
3.13. COMPLIANCE WITH LAWS AND ORDERS. Except as disclosed in the
FirstMerit Disclosure Letter or in FirstMerit Reports filed by FirstMerit with
the Commission prior to the date of this Agreement, the businesses of FirstMerit
and the FirstMerit Subsidiaries are not being conducted, and have not been
conducted since December 31, 1996, in violation of any law, ordinance,
regulation, judgment, order, decree, license or permit of any Governmental
Entity, except for possible violations which individually or in the aggregate do
not, and, insofar as reasonably can be foreseen, in the future will not, have a
Material Adverse Effect on FirstMerit. Except as set forth in the FirstMerit
Disclosure Letter, no investigation or review by any Governmental Entity with
respect to FirstMerit or any of the FirstMerit Subsidiaries outside the ordinary
course of business and not generally applicable to entities engaged in the same
business is pending or, to the knowledge of FirstMerit, threatened, and no
Governmental Entity has indicated an intention to conduct the same in each case
other than those the outcome of which will not have a Material Adverse Effect on
FirstMerit.
3.14. AGREEMENTS WITH BANK REGULATORS. As of the date of this
Agreement, except as set forth in the FirstMerit Disclosure Letter, neither
FirstMerit nor any FirstMerit Subsidiary is a party to any written agreement or
memorandum of understanding with, or a party to any commitment letter or similar
undertaking to, or is subject to any order or directive by, or is a recipient of
any extraordinary supervisory letter from, any Governmental Entity outside the
ordinary course of business and not generally applicable to entities engaged in
the same business, including, without limitation, cease and desist or other
orders of any bank regulatory authority, which restricts materially the conduct
of its business, or in any manner relates to its capital adequacy, its credit
policies or its management, nor has FirstMerit been advised by any Governmental
Entity that it is contemplating issuing, requiring or requesting (or is
considering the appropriateness of issuing, requiring or requesting) any such
order, directive, agreement, memorandum of understanding, extraordinary
supervisory letter, commitment letter or similar undertaking. Except as set
forth in the FirstMerit Disclosure Letter, there are no (i) material violations
or (ii) violations with respect to which refunds or restitutions which are
material in amount to FirstMerit and the FirstMerit Subsidiaries taken as a
whole may be required, cited in any compliance report to FirstMerit or any
FirstMerit Subsidiary as a result of an examination by any bank regulatory
authority.
3.15. FIRSTMERIT OWNERSHIP OF STOCK. Except as disclosed in the
FirstMerit Disclosure Letter, and except pursuant to Stock Purchase Option dated
November 3, 1997 (the "CoBancorp Stock Purchase Option"), a copy of which is
attached hereto as Exhibit 3.15, neither FirstMerit nor, to the best of its
knowledge, any of its affiliates or associates (i) beneficially owns, directly
or indirectly, or (ii) are parties to any agreement, arrangement or commitment
for the purpose of acquiring, holding, voting or disposing of, in each case,
shares of CoBancorp Common Stock (other than shares of CoBancorp Common Stock
held in a fiduciary, trust, custodial or agency capacity by a bank or trust
subsidiary of FirstMerit) which in the aggregate, represent 1% or more of the
outstanding shares of CoBancorp Common Stock.
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3.16. FEES. Except for the fees paid and payable to Goldman, Sachs &
Co., neither FirstMerit nor any FirstMerit Subsidiary has paid or become
obligated to pay any fee or commission to any broker, finder or intermediary in
connection with the transactions contemplated by this Agreement.
3.17. FIRSTMERIT ACTION. The Board of Directors of FirstMerit (at a
meeting duly called and held) has by the requisite vote (i) determined that the
Merger is advisable and in the best interests of FirstMerit and its
shareholders, (ii) authorized and approved this Agreement and the Stock Purchase
Option, and the transactions contemplated hereby and thereby, including the
Merger, and (iii) authorized and approved the Merger in accordance with Chapter
1704 of the Ohio Revised Code with the result that Chapter 1704 will not apply
to the consummation of the Merger and acquisition of shares of FirstMerit Common
Stock by the holders of CoBancorp Common Stock pursuant to this Agreement.
3.18. RIGHTS AGREEMENT. No person will become an "Acquiring Person" and
no "Shares Acquisition Date" or "Distribution Date" will occur under the
Shareholder Rights Agreement, as amended and restated, dated July 18, 1996,
between FirstMerit and FMBank, as rights agent (the "FirstMerit Rights Plan"),
and no holder of rights issued under the FirstMerit Rights Plan shall have any
rights under the FirstMerit Rights Plan as a result of the approval, execution
or delivery of this Agreement or the consummation of the Merger. No amendments
have been made prior to the date of this Agreement to the FirstMerit Rights Plan
except as specifically referred to in this Section.
3.19. ENVIRONMENTAL MATTERS. Except as set forth in the FirstMerit
Disclosure Letter, to the best of FirstMerit's knowledge: (i) neither FirstMerit
nor any of the FirstMerit Subsidiaries has been or is in violation of or liable
under any Environmental Law (as hereinafter defined), except for any such
violations or liabilities which would not reasonably be expected, individually
or in the aggregate, to have a Material Adverse Effect on FirstMerit; and (ii)
none of the Loan Portfolio Properties and Other Properties Owned (as hereinafter
defined) by FirstMerit or any of the FirstMerit Subsidiaries has been since such
properties have been owned, operated or managed by FirstMerit or any of the
FirstMerit Subsidiaries is in violation of under any Environmental Law, except
for any such violations which, individually or in the aggregate, would not
reasonably be expected to have a Material Adverse Effect on FirstMerit. Except
as set forth in the FirstMerit Disclosure Letter, there are no actions, suits,
demands, notices, claims, investigations or proceedings pending, or to the best
of FirstMerit's knowledge threatened, relating to the liability of the Loan
Portfolio Properties and Other Properties Owned by FirstMerit or the FirstMerit
Subsidiaries under any Environmental Law, including, without limitation, any
notices, demand letters or requests for information from any federal, state or
local environmental agency relating to any such liabilities under or violations
of Environmental Law.
4.0 REPRESENTATIONS AND WARRANTIES OF COBANCORP
CoBancorp hereby represents and warrants to FirstMerit that:
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4.1. CORPORATE ORGANIZATION. CoBancorp is a corporation duly organized,
validly existing and in good standing under the laws of the State of Ohio and is
duly qualified to do business as a foreign corporation and is in good standing
in each jurisdiction in which its ownership or lease of property or the nature
of the business conducted by it makes such qualification necessary, except for
such jurisdictions in which the failure to be so qualified would not have a
Material Adverse Effect on CoBancorp. CoBancorp is registered as a bank holding
company under the BHCA. CoBancorp has the requisite corporate power and
authority to own, lease and operate its properties and assets and to carry on
its business as it is now being conducted. CoBancorp has delivered to FirstMerit
as attachments to the CoBancorp Disclosure Letter true and complete copies of
its Articles of Incorporation, as amended, and its Code of Regulations, as
amended (the "Corporate Governance Documents") as currently in effect.
4.2. AUTHORITY. CoBancorp has the requisite corporate power and
authority to execute and deliver this Agreement and, except for any required
approval of CoBancorp's shareholders and the approval of the applicable
Regulatory Authorities, to consummate the transactions contemplated hereby. The
execution and delivery of this Agreement and the consummation of the
transactions contemplated hereby have been duly authorized and approved by the
Board of Directors of CoBancorp and no other corporate proceedings on the part
of CoBancorp are necessary to authorize this Agreement or to consummate the
transactions so contemplated, except for approval by the shareholders of
CoBancorp as provided in Section 6.1(a). This Agreement has been duly executed
and delivered by, and constitutes a valid and binding obligation of, CoBancorp,
enforceable against CoBancorp in accordance with its terms, except as
enforceability hereof may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium and other similar laws affecting the enforcement of
creditors' rights generally and except that the availability of the equitable
remedy of specific performance or injunctive relief is subject to the discretion
of the court before which any proceedings may be brought, and except as
enforceability hereof may be limited by laws relating to the safety and
soundness of insured depository institutions as set forth in 12 U.S.C.
Section 18(b) or to the appointment of a conservator or receiver by the Federal
Deposit Insurance Corporation.
4.3. CAPITALIZATION. The authorized capital stock of CoBancorp consists
of 5,000,000 shares of CoBancorp Common Stock and no shares of serial preferred
stock. As of the date of this Agreement, (i) 3,453,824 shares of CoBancorp
Common Stock (with no treasury shares) were validly issued and outstanding,
fully paid and nonassessable and not issued in violation of any preemptive right
of any CoBancorp shareholder. As of the date of this Agreement, there were
outstanding CoBancorp Stock Options to purchase 129,044 shares of CoBancorp
Common Stock, all of which are currently exercisable. Except as contemplated by
this Agreement, the CoBancorp Stock Purchase Option or in the CoBancorp
Disclosure Letter (which is a letter attached hereto as Exhibit 4.3, dated the
date of this Agreement, from CoBancorp to FirstMerit, such letter being
identified by FirstMerit executing a copy thereof), there are no shares of
capital stock of CoBancorp authorized, issued or outstanding and there are no
outstanding subscriptions, options, warrants, scrip, rights, calls, convertible
securities or any other similar agreements, arrangements or commitments of any
character relating to the issued or unissued capital stock or other securities
of CoBancorp obligating, or which may obligate, CoBancorp to issue, deliver or
sell, or cause to be issued,
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delivered or sold, additional shares of capital stock of CoBancorp or
obligating, or which may obligate, CoBancorp to grant, extend or enter into any
subscription, option, warrant, scrip, right, call, convertible security or other
similar agreement, arrangement or commitment. Except as set forth in the
CoBancorp Disclosure Letter, there are no voting trusts or other similar
agreements, arrangements, or commitments to which CoBancorp or any CoBancorp
Subsidiary (as hereinafter defined) is a party with respect to the voting of the
capital stock of CoBancorp.
4.4. SUBSIDIARIES. The CoBancorp Disclosure Letter sets forth, as of
the date of this Agreement, the name and state of incorporation of each
subsidiary of CoBancorp (collectively, the "CoBancorp Subsidiaries") and the
authorized capital stock of each CoBancorp Subsidiary. Except as set forth in
the CoBancorp Disclosure Letter, each of the CoBancorp Subsidiaries is a bank,
savings association or a corporation, duly organized, validly existing and in
good standing under the laws of its respective jurisdiction of incorporation or
organization and is duly qualified to do business as a foreign corporation in
each jurisdiction in which its ownership or lease of property or the nature of
the business conducted by it makes such qualification necessary, except for such
jurisdictions in which the failure to be so qualified would not have a Material
Adverse Effect on CoBancorp. Each of the CoBancorp Subsidiaries has the
requisite corporate power and authority to own, lease and operate its properties
and assets and to carry on its businesses as they are now being conducted.
CoBancorp has delivered to FirstMerit as attachments to the CoBancorp Disclosure
Letter true and complete copies of the CoBancorp Subsidiaries' articles of
incorporation and code of regulations (constitution or bylaws), each as
currently in effect.
Except as set forth in the CoBancorp Disclosure Letter, as of the date
of this Agreement, all outstanding shares of capital stock of each CoBancorp
Subsidiary are owned by CoBancorp or another CoBancorp Subsidiary and are
validly issued, fully paid and nonassessable, have not been issued in violation
of any preemptive right and are owned free and clear of all liens, claims,
charges, options, encumbrances or agreements with respect thereto. Except as set
forth in the CoBancorp Disclosure Letter, as of the date of this Agreement,
neither CoBancorp nor any CoBancorp Subsidiary owns beneficially more than 5% of
any class of equity securities or any similar interests of any corporation,
bank, business, trust, association or similar organization. There are, as of the
date of this Agreement, no outstanding subscriptions, options, warrants, scrip,
rights, calls, convertible securities or any other similar agreements,
arrangements or commitments of any character relating to the issued or unissued
capital stock or other securities of any CoBancorp Subsidiary obligating, or
which may obligate, any CoBancorp Subsidiary to issue, deliver or sell, or cause
to be issued, delivered or sold, additional shares of its capital stock or
obligating, or which may obligate, any CoBancorp Subsidiary to grant, extend or
enter into any subscription, option, warrant, scrip, right, call, convertible
security or other similar agreement, arrangement or commitment.
4.5. INFORMATION IN DISCLOSURE DOCUMENTS, REGISTRATION STATEMENT,
ETC.
(a) None of the information with respect to CoBancorp or any CoBancorp
Subsidiary provided by CoBancorp for inclusion in the Registration Statement
will, at the time it becomes effective and at the time of the CoBancorp Meeting,
contain any untrue statement of a material fact or omit to state any material
fact required to be stated therein or necessary in order to make the statements
therein, in light of the circumstances under which they are made, not
misleading. None
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of the information with respect to CoBancorp or any CoBancorp Subsidiary
provided in writing by CoBancorp for inclusion in the Proxy Statement will, at
the time of the mailing of the Proxy Statement, and at the time of the CoBancorp
Meeting, contain any statement which, at the time it is made and in light of the
circumstances under which it is made, is false or misleading with respect to any
material fact, or which omits to state any material fact necessary in order to
make the statements therein not false or misleading or necessary to correct any
statement in any earlier communication with respect to the solicitation of any
proxy for the CoBancorp Meeting which has become false or misleading. The Proxy
Statement will comply as to form in all material respects with the provisions of
the Exchange Act, and the rules and regulations promulgated thereunder.
(b) All documents that CoBancorp is responsible for filing with any
Governmental Entity will comply as to form in all material respects with
applicable law. None of the information with respect to CoBancorp or any
CoBancorp Subsidiary provided by CoBancorp for inclusion in any document to be
filed with any Governmental Entity in connection with the transactions
contemplated hereby will contain any statement of a material fact which is
untrue as of the time that such statement is made.
4.6. CONSENT AND APPROVALS; NO VIOLATION. Except as set forth in the
CoBancorp Disclosure Letter, neither the execution and delivery of this
Agreement by CoBancorp, nor the consummation by CoBancorp of the transactions
contemplated hereby, nor compliance by CoBancorp with any of the provisions
hereof, will (a) conflict with or result in any breach of any provision of its
Corporate Governance Documents, (b) violate, conflict with, constitute a default
(or an event which, with notice or lapse of time or both, would constitute a
default) under, or result in the termination of, or accelerate the performance
required by, or result in a right of termination or acceleration of, or result
in the creation of any lien, security interest, charge or other encumbrance upon
any of the properties or assets of CoBancorp or any of the CoBancorp
Subsidiaries under, any of the terms, conditions or provisions of any note,
bond, mortgage, indenture, deed of trust, license, lease, agreement or other
instrument or obligation to which CoBancorp or any CoBancorp Subsidiary is a
party or to which they or any of their respective properties or assets may be
subject, except for such violations, conflicts, breaches, defaults,
terminations, accelerations or creations of liens or other encumbrances, that
are set forth in the CoBancorp Disclosure Letter or which, individually or in
the aggregate, will not have a Material Adverse Effect on CoBancorp, (c) violate
any judgment, ruling, order, writ, injunction, decree, statute, rule or
regulation applicable to CoBancorp or any CoBancorp Subsidiary or any of their
respective properties or assets, except for such violations which, individually
or in the aggregate, will not have a Material Adverse Effect on CoBancorp, or
(d) require any consent, approval, authorization or permit of or from, or filing
with or notification to, any Governmental Entity, except (i) pursuant to the
Exchange Act and the Securities Act, (ii) filing certificates of merger pursuant
to the OGCL, (iii) filings required under the securities or blue sky laws of the
various states, (iv) filings with, and approval by, the FRB, (v) filings with,
and approval by, the OCC, (vi) filings with, and approval by, the OTS, (vii)
filings with, and approval by the Division, (viii) filings and approvals
pursuant to any applicable State Takeover Approvals, or (ix) consents,
approvals, authorizations, permits, filings or notifications which have either
been obtained or made prior to the Closing or which, if not obtained or made,
will neither,
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individually or in the aggregate, have a Material Adverse Effect on CoBancorp
nor restrict CoBancorp's legal authority to execute and deliver this Agreement
and consummate the transactions contemplated hereby.
4.7. REPORTS AND FINANCIAL STATEMENTS. Since December 31, 1993,
CoBancorp has filed all reports, registrations and statements, together with any
required amendments thereto, that it was required to file with the Commission,
including, but not limited to Forms 10-K, Forms 10-Q, Forms 8-K and proxy
statements (collectively, the "CoBancorp Reports"). CoBancorp has previously
made available or furnished, or, with respect to CoBancorp Reports filed after
the date of this Agreement, will promptly furnish, FirstMerit with true and
complete copies of each of the CoBancorp Reports. As of their respective dates
(but taking into account any amendments filed prior to the date of this
Agreement), and except as stated in the CoBancorp Disclosure Letter, the
CoBancorp Reports complied, or, with respect to CoBancorp Reports filed after
the date of this Agreement, will comply, in all material respects with all the
rules and regulations promulgated by the Commission, and did not contain, or,
with respect to CoBancorp Reports filed after the date of this Agreement, will
not contain, any untrue statement of a material fact or omit to state a material
fact required to be stated therein or necessary to make the statements therein,
in light of the circumstances under which they were made, not misleading. The
audited consolidated financial statements and unaudited interim financial
statements of CoBancorp included in the CoBancorp Reports (the "CoBancorp
Financial Statements") have been prepared in accordance with generally accepted
accounting principles applied on a consistent basis (except as may be indicated
therein or in the notes thereto) and fairly present the consolidated financial
position of CoBancorp and the CoBancorp Subsidiaries as at the dates thereof and
the consolidated results of operations and cash flows for the periods then ended
subject, in the case of the unaudited interim financial statements, to normal
year-end audit adjustments, any other adjustments described therein and the
absence of footnotes.
4.8. TAXES. Except as set forth in the CoBancorp Disclosure Letter,
CoBancorp and each CoBancorp Subsidiary have prepared in good faith and duly and
timely filed, or caused to be duly and timely filed, all federal, state, local
and foreign income, franchise, sales, real and personal property and other tax
returns and reports required to be filed by them on or before the date of this
Agreement, except where the failure to file would not have a Material Adverse
Effect on CoBancorp. Except as set forth in the CoBancorp Disclosure Letter,
CoBancorp and each CoBancorp Subsidiary have paid, or have adequately reserved
or have made adequate accruals (in accordance with generally accepted accounting
principles) with respect to, all taxes, interest and penalties shown to be owing
on all such returns and reports. The CoBancorp Disclosure Letter sets forth, as
of the date of this Agreement, the following information with respect to
CoBancorp and each CoBancorp Subsidiary: (i) the most recent tax year through
which the Internal Revenue Service ("IRS") has completed its examination of such
corporation, (ii) whether there is an examination pending by the IRS with
respect to such corporation and, if so, the tax years involved, (iii) whether
such corporation has executed or filed with the IRS any agreement which is still
in effect extending the period for assessment and collection of any federal tax
and, if so, the tax years covered by such agreement and the expiration date of
such extension, and (iv) whether there are any existing material disputes as to
state, local or foreign taxes. Except as set forth in the CoBancorp Disclosure
Letter, there are no liens for federal, state, local or foreign taxes upon the
assets of CoBancorp or of any CoBancorp Subsidiary, except for statutory liens
for taxes and assessments not yet delinquent or the validity of
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which is being contested in good faith by appropriate proceedings. Except as set
forth in the CoBancorp Disclosure Letter, neither CoBancorp nor any of the
CoBancorp Subsidiaries is a party to any action or proceeding, nor is any such
action or proceeding threatened, by any Governmental Entity for the assessment
or collection of taxes which are material in amount, and no deficiency notices
or reports have been received by CoBancorp or any of the CoBancorp Subsidiaries
in respect of any material deficiencies for any tax, assessment, or government
charges. After the date of this Agreement, CoBancorp will promptly notify
FirstMerit of (i) the commencement or threat of any such action or proceeding
involving an amount of taxes material to CoBancorp and its subsidiaries taken as
a whole, and (ii) the receipt by CoBancorp or the CoBancorp Subsidiaries of any
such deficiency notices or reports in respect of any material deficiencies.
4.9. EMPLOYEE PLANS, EMPLOYEES. All employee bonus, deferred
compensation, pension, retirement, profit sharing, stock option, stock purchase,
employee stock ownership, stock appreciation rights, savings, consulting,
severance, collective bargaining, group insurance, fringe benefit and other
employee benefit, incentive and welfare plans, policies, contracts and
arrangements and all trust agreements related thereto, now in effect and
relating to any present or former directors, officers or employees of CoBancorp
or the CoBancorp Subsidiaries, whether or not described in Section 3(3) of ERISA
("CoBancorp Employee Plans"), are identified in the CoBancorp Disclosure Letter.
CoBancorp has previously delivered or made available to FirstMerit copies of all
CoBancorp Employee Plans, in each case as in effect on the date of this
Agreement.
All of CoBancorp Employee Plans have been maintained, operated and
administered in substantial compliance with their terms, and CoBancorp, all of
the CoBancorp Subsidiaries and all of the CoBancorp Employee Plans currently
comply, and have at all relevant times complied, in all material respects with
ERISA, the Code, and any other applicable laws. With respect to each CoBancorp
Employee Plan which is a pension plan (as defined in Section 3(2) of ERISA): (a)
except as set forth in the CoBancorp Disclosure Letter each pension plan as
amended (and any trust relating thereto) intended to be a qualified plan under
Section 401(a) of the Code either has been determined by the IRS to be so
qualified or is the subject of a pending application for such determination that
was timely filed, (b) except as set forth in the CoBancorp Disclosure Letter,
would be fully funded (calculated using the interest rate and other actuarial
assumptions mandated by the Pension Benefit Guaranty Corporation ("PBGC")) if
terminated at the Effective Time and there is no accumulated funding deficiency
(as defined in Section 302 of ERISA and Section 412 of the Code), whether or not
waived, and no waiver of the minimum funding standards of such sections has been
requested from the IRS, (c) no reportable event described in Section 4043 of
ERISA has occurred, (d) no defined benefit plan has been terminated, nor has the
PBGC instituted proceedings to terminate a defined benefit plan or to appoint a
trustee or administrator of a defined benefit plan, and no circumstances exist
that constitute grounds under Section 4042 of ERISA entitling the PBGC to
institute any such proceedings, and (e) no pension plan is a "multi-employer
plan" within the meaning of Section 3(37) of ERISA. With respect to any
qualified benefit plan which purports to be an employees stock ownership plan
(as defined in Section 4975(e)(7) of the Code) (an "ESOP Qualified Benefit
Plan"), such ESOP Qualified Benefit Plan satisfies the requirements of Section
4975(e)(7) of the Code and is in material compliance with the applicable
qualification requirements
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of Section 409 of the Code. The capital stock of CoBancorp acquired by the ESOP
Qualified Benefit Plan meets the definition of "employer securities" set forth
in Sections 409(l) and 4975 of the Code.
Except as set forth in the CoBancorp Disclosure Letter, no CoBancorp
Employee Plan provides benefits, including, without limitation, death or medical
benefits (whether or not insured), with respect to current or former employees
beyond their retirement or other termination of service (other than (i)
temporary coverage mandated by applicable law, (ii) death benefits or retirement
benefits under any "employee pension plan," as that term is defined in Section
3(2) of ERISA, (iii) deferred compensation benefits accrued as liabilities on
the books of CoBancorp or any CoBancorp Subsidiary, or (iv) benefits the full
cost of which are borne by the current or former employee (or his or her
beneficiary)).
Except as set forth in the CoBancorp Disclosure Letter, all employees
of CoBancorp and the CoBancorp Subsidiaries are "at will" and there are no
employment, consulting or like agreements, written or oral, expressed or
implied.
4.10. MATERIAL CONTRACTS. Except as set forth in the CoBancorp
Disclosure Letter or disclosed in the CoBancorp Reports, neither CoBancorp nor
any CoBancorp Subsidiary is, as of the date of this Agreement, a party to, or is
bound by, (a) any material lease not made in the ordinary course of business of
CoBancorp, (b) any agreement, arrangement, or commitment not made in the
ordinary course of business which materially restricts the conduct of any line
of business of CoBancorp, (c) any benefit agreements providing for aggregate
payments to any person in any calendar year in excess of $100,000, (d) any
material agreement, indenture or other instrument not specifically disclosed in
the CoBancorp Financial Statements relating to the borrowing of money by
CoBancorp or the guarantee by CoBancorp of any such obligation (other than trade
payables and instruments relating to transactions entered into in the ordinary
course of business), (e) any agreement, arrangement or commitment with or to a
labor union or (f) any other contract or agreement or amendment thereto that
would be required to be filed as an exhibit to a Form 10-K filed by CoBancorp
with the Commission (the agreements and other documents referred to in clauses
(a) through (e) of this sentence, collectively, the "CoBancorp Contracts").
Except as stated in the CoBancorp Disclosure Letter, neither CoBancorp nor any
CoBancorp Subsidiary is in default under any CoBancorp Contract, which default
is reasonably likely to have, either individually or in the aggregate, a
Material Adverse Effect on CoBancorp, and there has not occurred any event that
with the lapse of time or the giving of notice or both would constitute such a
default.
4.11. ABSENCE OF CERTAIN CHANGES OR EVENTS. Except as set forth in the
CoBancorp Disclosure Letter or disclosed in CoBancorp Reports filed by CoBancorp
with the Commission prior to the date of this Agreement, since December 31, 1993
to the date of this Agreement, there has not been any change in the financial
condition, results of operations or business of CoBancorp and the CoBancorp
Subsidiaries that either individually or in the aggregate has had a Material
Adverse Effect on CoBancorp.
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4.12. LITIGATION. Except as disclosed in the CoBancorp Disclosure
Letter or in CoBancorp Reports filed by the CoBancorp with the Commission prior
to the date of this Agreement, there is no litigation, action, arbitration or
proceeding pending, or, to the best knowledge of CoBancorp, threatened against
or affecting CoBancorp or any CoBancorp Subsidiary which, either individually or
in the aggregate, is having, or insofar as reasonably can be foreseen will have,
a Material Adverse Effect on CoBancorp, nor is there any judgment, decree,
injunction, rule or order of any Governmental Entity or arbitrator, outstanding
against CoBancorp or any CoBancorp Subsidiary having, or which, insofar as
reasonably can be foreseen, in the future would have, any such effect.
4.13. COMPLIANCE WITH LAWS AND ORDERS. Except as disclosed in the
CoBancorp Disclosure Letter or in CoBancorp Reports filed by CoBancorp with the
Commission prior to the date of this Agreement, the businesses of CoBancorp and
the CoBancorp Subsidiaries are not being conducted, and have not been conducted
since December 31, 1993, in violation of any law, ordinance, regulation,
judgment, order, decree, license or permit of any Governmental Entity
(including, without limitation, zoning ordinances, building codes, and
environmental, civil rights, and occupational health and safety laws and
regulations and, in the case of CoBancorp Subsidiaries that are savings and
loans or thrifts, all statutes, rules and regulations pertaining to the conduct
of such business), except for possible violations which individually or in the
aggregate do not, and, insofar as reasonably can be foreseen, in the future will
not, have a Material Adverse Effect on CoBancorp. Except as set forth in the
CoBancorp Disclosure Letter, no investigation or review by any Governmental
Entity with respect to CoBancorp or any of the CoBancorp Subsidiaries outside
the ordinary course of business and not generally applicable to entities engaged
in the same business is pending or, to the knowledge of CoBancorp, threatened,
nor has any Governmental Entity indicated an intention to conduct the same in
each case other than those the outcome of which will not have a Material Adverse
Effect on CoBancorp.
4.14. AGREEMENTS WITH REGULATORS. As of the date of this Agreement,
except as disclosed in the CoBancorp Disclosure Letter, neither CoBancorp nor
any CoBancorp Subsidiary is a party to any written agreement or memorandum of
understanding with, or a party to any commitment letter or similar undertaking
to, or is subject to any order or directive by, or is a recipient of any
extraordinary supervisory letter from, any Governmental Entity outside the
ordinary course of business and not generally applicable to entities engaged in
the same business, including, without limitation, cease and desist orders of any
regulatory authority, which restricts materially the conduct of its business, or
in any manner relates to its capital adequacy, its credit policies or its
management, nor has CoBancorp been advised by any Governmental Entity that it is
contemplating issuing, requiring, or requesting (or is considering the
appropriateness of issuing, requiring or requesting) any such order, directive,
agreement, memorandum of understanding, extraordinary supervisory letter,
commitment letter or similar undertaking. Except as set forth in CoBancorp
Disclosure Letter, there are no (i) material violations, or (ii) violations with
respect to which refunds or restitutions which are material in amount to
CoBancorp and the CoBancorp Subsidiaries taken as a whole may be required, cited
in any compliance report to CoBancorp or any CoBancorp Subsidiary as a result of
an examination by any regulatory authority.
4.15. COBANCORP OWNERSHIP OF STOCK. Except as disclosed in CoBancorp
Disclosure Letter, as of the date of this Agreement, neither CoBancorp nor, to
the best of its knowledge, any of
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its affiliates or associates (i) beneficially owns directly or indirectly, or
(ii) are parties to any agreement, arrangement or commitment for the purpose of
acquiring, holding, voting or disposing of, in each case, shares of FirstMerit
Common Stock (other than shares of FirstMerit Common Stock held in a fiduciary,
trust, custodial or agency capacity by a subsidiary of CoBancorp) which in the
aggregate, represent 1% or more of the outstanding shares of FirstMerit Common
Stock.
4.16. FEES. Except for fees paid and payable to Hovde Financial, Inc.
("Hovde"), neither CoBancorp nor any CoBancorp Subsidiary has paid or become
obligated to pay any fee or commission to any broker, finder or intermediary in
connection with the transactions contemplated by this Agreement.
4.17. COBANCORP ACTION. The Board of Directors of CoBancorp (at a
meeting duly called and held) has by the requisite vote (i) determined that the
Merger is advisable and in the best interests of CoBancorp and its shareholders,
(ii) authorized and approved this Agreement, the CoBancorp Stock Purchase Option
and the transactions contemplated hereby and thereby, including the Merger,
(iii) directed that the Merger be submitted for consideration by CoBancorp's
shareholders entitled to vote thereon at the CoBancorp Meeting, and (iv)
authorized and approved the CoBancorp Stock Purchase Option and the Merger in
accordance with Chapter 1704 of the Ohio Revised Code with the result that
Chapter 1704 will not apply to the consummation of the Merger and the
acquisition by FirstMerit of shares of CoBancorp Common Stock pursuant to the
Merger, the CoBancorp Stock Purchase Option or any of the transactions
contemplated by this Agreement or the CoBancorp Stock Purchase Option. Hovde,
CoBancorp's financial advisor, has provided the Board of Directors of CoBancorp
with its opinion that, as of the date of such duly called meeting of the Board,
the Merger Consideration is fair, from a financial point of view, to the
shareholders of CoBancorp.
4.18. VOTE REQUIRED. The affirmative vote of the holders of a majority
of the outstanding shares of CoBancorp Common Stock entitled to vote thereon is
the only vote of the holders of any class or series of CoBancorp capital stock
necessary to approve this Agreement and the transactions contemplated hereby,
unless FirstMerit has exercised its rights to acquire the CoBancorp Common Stock
under the CoBancorp Stock Purchase Option.
4.19. CONDUCT OF COBANCORP TO DATE. Except as disclosed in CoBancorp
Disclosure Letter and in CoBancorp Reports filed with the Commission prior to
the date of this Agreement, from and after December 31, 1996, to the date of
this Agreement: (a) CoBancorp and the CoBancorp Subsidiaries have carried on
their respective businesses in the ordinary and usual course consistent with
their current practices, (b) CoBancorp has not issued or sold any of its capital
stock (except shares of CoBancorp Common Stock issued upon exercise of employee
stock options outstanding on or before December 31, 1996), or any corporate debt
securities which would be classified as long-term debt on the balance sheets of
CoBancorp, (c) CoBancorp has not granted any option for the purchase of its
capital stock (other than pursuant to the CoBancorp Stock Purchase Option),
effected any stock split, or otherwise changed its authorized capitalization,
(d) CoBancorp has not declared, set aside, or paid any dividend or other
distribution in respect of its capital stock, or,
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directly or indirectly, redeemed or otherwise acquired any of its capital stock,
except regular quarterly cash dividends (based upon historic precedent), (e)
CoBancorp has neither incurred nor prepaid any corporate debt securities or
instruments which are or would be classified as long-term debt on the balance
sheet of CoBancorp, (f) neither CoBancorp nor any CoBancorp Subsidiary has sold,
assigned, transferred, or otherwise disposed of to a third party (i) equity
securities in or issued by any CoBancorp Subsidiary, (ii) branch offices of any
CoBancorp Subsidiary, (iii) assets constituting any other line of business, or
(iv) any of its other material properties or assets other than for a fair
consideration in the ordinary course of business, (g) neither CoBancorp nor any
CoBancorp Subsidiary has purchased or otherwise acquired from a third party
equity securities in or issued by such third party other than in the ordinary
course of business, branch offices of such third party, assets constituting any
other line of business, or any other material properties or assets outside the
ordinary course of its business, (h) neither CoBancorp nor any CoBancorp
Subsidiary has: increased the rate of compensation of, or paid any bonus to, any
of its directors, officers, or other employees, except under existing plans and
policies, entered into any new, or amended or supplemented any existing, or
secured, collateralized, or funded any, employment, management, consulting,
deferred compensation, severance, or other similar contract, entered into,
terminated, or substantially modified any CoBancorp Employee Plan in respect of
any of its present or former directors, officers, or other employees, or agreed
to do any of the foregoing, (i) neither CoBancorp nor any CoBancorp Subsidiary,
has entered into any material transaction, contract, lease, agreement or
commitment requiring the approval of the Board of Directors of CoBancorp or any
CoBancorp Subsidiary, or amended, modified or terminated any contract, lease or
other agreement to which it is a party in a manner requiring the approval of the
Board of Directors of CoBancorp or any CoBancorp Subsidiary, and (j) no
CoBancorp Subsidiary has entered into any material transaction, contract, lease,
agreement or commitment outside the ordinary course of business requiring the
approval of the Board of Directors of such Subsidiary or amended, modified or
terminated outside the ordinary course of business any material contract, lease
or other agreement to which it is a party in a manner requiring the approval of
the Board of Directors of such Subsidiary.
4.20. ENVIRONMENTAL MATTERS. For purposes of this Agreement, the
following terms shall have the indicated meanings:
"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 (i) the
protection, preservation or restoration of the environment (including,
without limitation, air, water vapor, surface water, ground water,
drinking water supply, surface soil, subsurface soil, plant and animal
life or any other natural resource), and/or (ii) 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. Section 9601, et seq.; the Resource Conservation and Recovery
Act, as amended, 42 U.S.C. Section 6901, et seq.; the Clean Air Act, as
amended, 42 U.S.C. Section 7401, et seq.;
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the Federal Water Pollution Control Act, as amended, 33 U.S.C. Section
1251 et seq.; the Toxic Substances Control Act, as amended, 125 U.S.C.
Section 9601, et seq.; the Emergency Planning and Community Right to
Know Act, 42 U.S.C. Section 11001, et seq.; the Safe Drinking Water
Act, 42 U.S.C. Section 300f, et seq.; 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 obligations
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.
"Loan Portfolio Properties and Other Properties Owned" means
those properties owned, operated or managed (including those held in
trust) by CoBancorp, as the case may be, or any of their subsidiaries.
Except as set forth in CoBancorp Disclosure Letter, to the best of CoBancorp's
knowledge: (i) neither CoBancorp nor any of the CoBancorp Subsidiaries has been
or is in violation of or liable under any Environmental Law, except for any such
violations or liabilities which would not reasonably be expected, individually
or in the aggregate, to have a Material Adverse Effect on CoBancorp; and (ii)
none of the Loan Portfolio Properties and Other Properties Owned by CoBancorp or
any of the CoBancorp Subsidiaries has been since such properties have been
owned, operated or managed by CoBancorp or any of the CoBancorp Subsidiaries, is
in violation of any Environmental Law, except for any such violations which,
individually or in the aggregate, would not reasonably be expected to have a
Material Adverse Effect on CoBancorp. Except as set forth in CoBancorp
Disclosure Letter, there are no actions, suits, demands, notices, claims,
investigations or proceedings pending, or to the best of CoBancorp's knowledge
threatened, relating to the liability of the Loan Portfolio Properties and Other
Properties Owned by CoBancorp or the CoBancorp Subsidiaries under any
Environmental Law, including, without limitation, any notices, demand letters or
requests for information from any federal, state or local environmental agency
relating to any such liabilities under or violations of Environmental Law.
5. COVENANTS
5.1. ACQUISITION PROPOSALS AND NEGOTIATIONS. Each of CoBancorp and the
CoBancorp Subsidiaries shall not, directly or indirectly, and shall instruct and
otherwise use its diligent efforts to cause their respective officers,
directors, employees, agents and advisors not to, directly or indirectly,
solicit or initiate any proposals or offers from any person, or discuss or
negotiate with any such person, relating to any acquisition or purchase of all
or a material amount of the assets of, or any equity securities of, or any
merger, consolidation or business combination with, CoBancorp or
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any of the CoBancorp Subsidiaries (such transactions are referred to herein as
"Acquisition Transactions"), provided, however, that nothing contained in this
Section shall prohibit:
(i) CoBancorp or any CoBancorp Subsidiary, as the case may be,
from furnishing information to, or entering into discussions or negotiations
with, any person or entity that makes an unsolicited proposal of an Acquisition
Transaction if and to the extent that,
(a) the Board of Directors of CoBancorp, after
consultation with and based upon the written opinion of Silver, Freedman & Taff,
L.L.P. determines in good faith that such action is required for the directors
of CoBancorp to fulfill their fiduciary duties and obligations to the CoBancorp
shareholders and other constituencies under Ohio law, taking into consideration
the sale process engaged in connection with the transactions contemplated
hereby, and
(b) prior to furnishing such information to, or
entering into discussions or negotiations with, such person or entity, CoBancorp
provides immediate written notice to FirstMerit at least two business days prior
to furnishing information to, or entering into discussions or negotiations with,
such a person or entity, or
(ii) the Board of Directors of CoBancorp from failing to make,
withdrawing or modifying its recommendation referred to in Section 5.14
following receipt of a proposal for an Acquisition Transaction if the Board of
Directors of CoBancorp, after consultation with and based upon the written
opinion of Silver, Freedman & Taff, L.L.P. determines in good faith that such
action is required for the directors of CoBancorp to fulfill their fiduciary
duties and obligations to the CoBancorp shareholders and other constituencies
under Ohio law, taking into consideration the sale process engaged in connection
with the transactions contemplated hereby.
In the event CoBancorp or any officer, director or representative
thereof receives any contact, either oral or written, from a third party or its
representative regarding an Acquisition Transaction or any matter directly or
indirectly related thereto after the date of this Agreement, CoBancorp shall
immediately notify FirstMerit of such contact, and provide such information
requested by FirstMerit, including but not limited to the name of the party or
parties, and all details related thereto. CoBancorp shall have a continuing
obligation to provide information to FirstMerit regarding any additional or
continuing contacts. Any writings received by CoBancorp or any officer, director
or representative thereof, shall be immediately provided to FirstMerit,
regardless of such writing being marked confidential or otherwise.
In the event CoBancorp receives an opinion from Silver, Freedman &
Taff, L.L.P. pursuant to this Section 5.1, CoBancorp shall immediately provide a
copy of such opinion to FirstMerit.
5.2. INTERIM OPERATIONS OF COBANCORP. During the period from the date
of this Agreement to the Effective Time, except as specifically contemplated by
this Agreement, as required by law, as set forth in CoBancorp Disclosure Letter,
or as otherwise approved in writing by FirstMerit (which shall not be
unreasonably withheld):
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5.2.1. CONDUCT OF BUSINESS. CoBancorp shall, and shall cause
each of the CoBancorp Subsidiaries to, conduct their respective businesses only
in, and not take any action except in the ordinary course of business
substantially consistent with current practices (which practices include any
workout arrangements for troubled loans and real estate development assets).
CoBancorp shall use all diligent efforts to (i) maintain and preserve intact the
business organization of CoBancorp and each of the CoBancorp Subsidiaries, keep
available the services of its and their present officers and employees, and keep
the branch operations fully staffed with competent employees, (ii) preserve the
goodwill of those having business relationships with CoBancorp or the CoBancorp
Subsidiaries, (iii) maintain and keep its properties in as good repair and
condition as at present, except for depreciation due to ordinary wear and tear,
(iv) attempt to resolve such loans which FirstMerit has identified in writing to
CoBancorp as "troubled," in a workout arrangement which conditions and terms
shall be satisfactory to CoBancorp and FirstMerit, (v) keep in full force and
effect insurance and bonds comparable in amount and scope of coverage to that
now maintained by it, provided however, in the event that any such insurance
(including, without limitation, directors' and officers' liability insurance) is
canceled or not renewable at its expiration at current or standard rates,
CoBancorp shall consult with FirstMerit in order to determine whether to
exercise its right to extend the discovery period and in evaluating available
alternatives to replace the current insurance, (vi) perform in all material
respects all obligations required to be performed by each of CoBancorp and each
of the CoBancorp Subsidiaries under all material contracts, leases and documents
relating to or affecting its assets, properties, and business, and (vii) comply
with and perform in all material respects all obligations and duties imposed
upon it by all federal, state, municipal, and local laws, and all rules,
regulations and orders imposed by federal, state, municipal or local
governmental agencies.
5.2.2. NEGATIVE COVENANTS. CoBancorp shall not and shall not
permit any of the CoBancorp Subsidiaries to make any change or amendment to, or
to repeal, their respective articles of incorporation or codes of regulations
(or comparable governing instruments). Neither CoBancorp nor any CoBancorp
Subsidiary shall after the date of this Agreement enter into any loan or credit
commitment (including standby letters of credit) to, or invest (as a venture
capital or similar investment) or agree to invest (as a venture capital or
similar investment) in, any person or entity if such loan, commitment or
investment, would exceed $375,000 as a residential loan or investment, or
$750,000 as a commercial loan, without first consulting with FirstMerit;
provided, however, that nothing in this paragraph shall prohibit CoBancorp or
any CoBancorp Subsidiary from honoring any contractual obligation in existence
on the date of this Agreement. Neither CoBancorp nor any CoBancorp Subsidiary
shall after the date of this Agreement enter into any participatory agreements,
loans, commitments or investments involving collateral outside of Ohio, without
first consulting with FirstMerit, except that the following are excluded from
this restriction: (i) Small Business Association loans, (ii) agency rated asset
backed securities, and (iii) government obligations of the United States of
America, or a state or municipality within the United States of America.
Neither CoBancorp nor any CoBancorp Subsidiary shall sell,
assign, transfer or otherwise dispose of to a third party, (i) branch offices of
any CoBancorp Subsidiary, or (ii) any of
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its material properties or assets. Neither CoBancorp nor any CoBancorp
Subsidiary shall purchase or otherwise acquire from a third party, branch
offices of such third party, assets constituting any other line of business, or
any other material properties or assets outside the ordinary course of its
business. Neither CoBancorp nor any CoBancorp Subsidiary shall enter into any
transaction, contract, lease, agreement or commitment (or any amendment to any
transaction, contract, lease, agreement or commitment) outside of the ordinary
course of business which is material to CoBancorp and the CoBancorp Subsidiaries
taken as a whole.
5.2.3. CAPITAL STOCK. CoBancorp shall not, and shall not
permit any of the CoBancorp Subsidiaries to, issue or sell any shares of capital
stock or any other securities of any of them (other than pursuant to CoBancorp
Stock Options outstanding on the date of this Agreement, the CoBancorp Inc.
Dividend Reinvestment Plan ("DRIP") or the exercise by FirstMerit of its rights
under the CoBancorp Stock Purchase Option) or issue any securities convertible
into or exchangeable for, or options, warrants to purchase, scrip, rights to
subscribe for, calls or commitments of any character whatsoever relating to, or
enter into any contract, commitment or arrangement with respect to the issuance
of, any shares of capital stock or any other securities of any of them or enter
into any arrangement, contract or commitment with respect to the purchase or
voting of shares of their capital stock, or adjust, split, combine or reclassify
any of their capital stock or other securities or make any other changes in
their capital structures. Neither CoBancorp nor any CoBancorp Subsidiary shall
acquire beneficial ownership of any class of equity securities or any similar
interests of any corporation, bank, business, trust, association or similar
organization.
5.2.4. DIVIDENDS. CoBancorp shall not and shall not permit any
of the CoBancorp Subsidiaries to declare, set aside, pay or make any dividend or
other distribution or payment (whether in cash, stock or property) with respect
to, or purchase or redeem, any shares of the capital stock of any of them other
than (a) CoBancorp's regular quarterly cash dividends in the amount (subject to
the next paragraph) of $.22 per share (to the extent legally permitted), and (b)
dividends paid (to the extent legally permitted) by any CoBancorp Subsidiary to
another CoBancorp Subsidiary or CoBancorp with respect to such CoBancorp
Subsidiary's capital stock. From the date of this Agreement to the earlier of
the Effective Time or the termination of this Agreement, CoBancorp shall not,
without the prior written consent of FirstMerit, make any changes in its
practice of setting dividend record or dividend payment dates.
The parties agree to consult with respect to the last
quarterly dividend of CoBancorp payable prior to the Effective Time with the
object of assuring that the shareholders of CoBancorp receive an equitable
dividend distribution, taking into consideration the record and payment dates of
the last CoBancorp dividend distribution and the first FirstMerit dividend
distribution following the Merger. It is the intent of the parties that in the
event that the Effective Date will occur shortly after the record date for the
FirstMerit dividend, that the last CoBancorp dividend to be paid prior to such
time, will be grossed-up on an equitable basis so that the CoBancorp
shareholders receive the economic benefit of such dividend.
5.2.5. EMPLOYEE PLANS, COMPENSATION AND BONUSES; ESOP.
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(a) Except as is necessary to comply with the Code or as
contemplated in this Agreement, CoBancorp shall not, and shall not permit any of
CoBancorp Subsidiaries to: adopt or amend any bonus, profit sharing,
compensation, severance, termination, stock option, pension, retirement,
deferred compensation, employment or other employee benefit agreements, trusts,
plans, funds or other arrangements for the benefit or welfare of any present or
former director, officer or employee of CoBancorp or any CoBancorp Subsidiary;
increase the compensation or fringe benefits of any present or former director,
officer or employee, including the Senior Officers (as hereinafter defined); pay
any bonus, compensation or benefit not required by any existing plan or
arrangement (including, without limitation, the granting of stock options or
stock rights); take any action or grant any benefit not required under the terms
of any existing agreements, trusts, plans, funds or other such arrangements; or
enter into any contract, agreement, commitment or arrangement to do any of the
foregoing.
Notwithstanding the restrictions contained in this Section,
CoBancorp or the CoBancorp Subsidiaries may grant individual annual increases to
the non-Senior Officer employees in accordance with past practices up to a total
of 4% of the total annual compensation of all employees, excluding from such
total the aggregate of the compensation for the employees of CoBancorp and of
the CoBancorp Subsidiaries who are parties to an Employment Agreement (as
defined below) (the "Senior Officers").
John S. Kreighbaum will be entitled to purchase at the
Effective Time, the life insurance policy held by CoBancorp on his life, in
consideration for the payment of the then current cash surrender value of such
insurance.
CoBancorp may grant individual annual increases to the
Senior Officer employees in accordance with past practices up to an aggregate
amount of $50,000; and may pay bonuses to the eight executive employees,
including Senior Officers, but only to the extent the aggregate of such bonuses
does not exceed $200,000.
(b) CoBancorp represents there is no existing loan under the
CoBancorp Inc. Employee Stock Ownership Plan ("ESOP"). CoBancorp shall develop a
written description and timetable which shall be provided to and approved by
FirstMerit and its counsel, setting forth all actions necessary to: (i)
terminate the ESOP; and (ii) submit the ESOP to the IRS for a determination
letter that the ESOP, as terminated, continues to be a qualified retirement plan
and employee stock ownership plan under Sections 401(a) and 4975(e)(7) of the
Code.
Upon development and approval by FirstMerit of said written
description and timetable, CoBancorp shall take such actions as described
therein as are approved by FirstMerit. Distribution of the shares and any other
assets of the ESOP shall (i) not occur until after the receipt of the foregoing
IRS determination letter and (ii) occur prior to the Effective Time only with
the express written consent of FirstMerit, which shall not be unreasonably
withheld. The manner of distribution and the rights of participants to roll-over
said distributions shall be in accordance with the ESOP terms, and the laws and
regulations dealing therewith.
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In connection with the development of the written description
and timetables referred to above and resolution of the ESOP, the parties intend
that, to the extent not prohibited by applicable law, the ESOP shall be
maintained through the date of its final termination for the exclusive benefit
of individuals who had become ESOP participants on or before the Effective Time.
The parties further agree that counsel selected by CoBancorp
shall be responsible, before and after the Effective Time, both for securing a
determination letter from the IRS that the CoBancorp ESOP, is tax-qualified for
periods through its termination date and a determination letter or other
acceptable IRS approval effectuating the purposes of this paragraph, all subject
to the prior review and approval (which approval will not be unreasonably
withheld) of FirstMerit and its counsel of the filings with the IRS and notice
and opportunity to comment by FirstMerit with respect to any other actions;
provided that after the Effective Time FirstMerit may remove such counsel if
such counsel fails to carry out the directions of the parties in interest.
CoBancorp may at any time prior to the Effective Time make
amendments to the ESOP to assure that all ESOP benefits shall be fully vested in
the ESOP participants.
5.2.6. CONFORMING ACCOUNTING AND RESERVE POLICIES;
RESTRUCTURING EXPENSES.
(a) Notwithstanding that CoBancorp believes that it has
established all reserves and taken all provisions for possible loan losses
required by generally accepted accounting principles and applicable laws, rules
and regulations, CoBancorp recognizes that FirstMerit has adopted different
loan, accrual and reserve policies (including loan classifications and levels of
reserves for possible loan losses), subject to applicable laws, regulations, and
the requirements of Governmental Entities and generally accepted accounting
principles. From and after the date of this Agreement to the Effective Time,
CoBancorp and FirstMerit shall consult and cooperate with each other with
respect to conforming, as specified in a notice from FirstMerit to CoBancorp,
based upon such consultation, CoBancorp's loan, accrual and reserve policies to
those policies of FirstMerit.
(b) In addition, from and after the date of this Agreement to
the Effective Time, CoBancorp and FirstMerit shall consult and cooperate with
each other with respect to determining, as specified in a notice from FirstMerit
to CoBancorp, based upon such consultation, appropriate accruals, reserves and
charges to establish and take in respect of excess facilities and equipment
capacity, restructuring costs, severance costs, litigation matters, write-off or
write-down of various assets and other appropriate accounting adjustments taking
into account the Surviving Corporation's business plan following the Merger.
(c) CoBancorp and FirstMerit shall consult and cooperate with
each other with respect to determining, as specified in a notice from FirstMerit
to CoBancorp, based upon such consultation, the amount and the timing for
recognizing for financial accounting purposes the expenses of the Merger and the
restructuring charges related to or to be incurred in connection with the
Merger.
(d) At the request of FirstMerit, and in an amount and on a
basis satisfactory to CoBancorp, CoBancorp shall promptly establish and take
such reserves and accruals as FirstMerit
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shall request to conform, on a mutually satisfactory basis, CoBancorp's loan,
accrual and reserve policies to FirstMerit's policies, shall establish and take
such accruals, reserves and charges in order to implement such policies in
respect of excess facilities and equipment capacity, severance costs, litigation
matters, write-off or write-down of various assets and other appropriate
accounting adjustments, and to recognize for financial accounting purposes such
expenses of the Merger and restructuring charges related to or to be incurred in
connection with the Merger; provided, however, that it is the objective of
FirstMerit and CoBancorp that such reserves, accruals and charges be taken on or
before the Effective Time, but in no event later than immediately prior to the
Closing; and provided, further, that CoBancorp shall not be obligated to take
any such action pursuant to this Section 5.2.6 unless and until (i) FirstMerit
specifies its request in a writing delivered to CoBancorp, (ii) all conditions
to the obligations of CoBancorp and FirstMerit to consummate the Merger set
forth in Sections 6.1 through 6.3 have been waived or satisfied by the
appropriate party, and (iii) such reserves, accruals and charges conform with
generally accepted accounting principles, applicable laws, regulations, and the
requirements of Governmental Entities.
5.3. INTERIM OPERATIONS OF FIRSTMERIT. During the period from the date
of this Agreement to the Effective Time, except as specifically contemplated by
this Agreement, as required by law, or as otherwise approved in writing by
CoBancorp (which shall not be unreasonably withheld) FirstMerit shall, and shall
cause each of the FirstMerit Subsidiaries to, conduct their respective
businesses in such a manner so as not to materially interfere with the ability
to consummate the Merger, delay the Effective Time or have a Material Adverse
Effect upon the transactions contemplated by the Agreement.
5.4. EMPLOYMENT MATTERS.
(a) As of the Effective Time, CoBancorp will pay the financial
obligations of CoBancorp and the CoBancorp Subsidiaries, as applicable, with
regard to the employment and severance agreements with John S. Kreighbaum,
Timothy W. Esson and James R. Byden, as amended on or before the Effective Time,
as summarized and listed on Exhibit 5.4(a) ("Employment Agreements" or
"Employment Agreement"), and FirstMerit will assume and pay, to the extent such
obligations can be assumed or benefits thereunder provided as a matter of law,
but conditional upon receipt of a standard release of FirstMerit regarding
matters related to employment and termination of employment. FirstMerit
acknowledges that the consummation of the Merger will constitute a change in
status for the Senior Officers entitling each of them to terminate his
employment for good reason under his Employment Agreement. The parties listed
herein will not be provided any separation benefits under Section 5.4(b) or (c).
(b) FirstMerit agrees to pay as separation monies to employees of
CoBancorp listed on Exhibit 5.4(b), and in the amounts listed thereon. An amount
will not be paid if the employee voluntarily terminates his employment without
good reason prior to the expiration of six months after the Effective Time. Any
payment due hereunder is conditioned upon receipt of a standard release of
FirstMerit regarding matters related to employment and termination of
employment. The parties listed herein will not be provided any separation
benefits under Section 5.4.
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(c) FirstMerit agrees to pay as separation monies to employees of
CoBancorp and the CoBancorp Subsidiaries, other than the persons with Employment
Agreements or covered in Section 5.4(a) or (b), in consideration for a standard
release of FirstMerit regarding matters related to employment and termination of
employment, who either at Closing do not become employees of FirstMerit or its
Subsidiaries or to persons who become employees of FirstMerit or its
Subsidiaries but whose employment is terminated during the 180-day period after
the Effective Time (except if such termination is for cause). The separation
monies will be calculated as indicated on Exhibit 5.4(c). Such employees will
also be entitled to any other benefits, if any, required by law.
FirstMerit is not required to hire any employees of CoBancorp or the
CoBancorp Subsidiaries, but may if it so desires. All persons employed by
FirstMerit and its Subsidiaries as of the Effective Time will remain "at will"
employees, meaning that their employment can be terminated for any or no reason.
Notwithstanding anything contained herein to the contrary, no third party shall
have a right to enforce the provisions of this Section 5.4(b) or assert any
claim hereunder.
(d) Following the Effective Time, the employee benefit programs to be
available and applicable to the persons who were employees of CoBancorp and the
CoBancorp Subsidiaries, and who become employees of FirstMerit and/or its
subsidiaries, are as follows:
(i) Defined Benefit Retirement and Pension Plans. At such time
on or after the Effective Time as FirstMerit shall deem appropriate, FirstMerit
will either (a) cause the merger of the CoBancorp pension plan into the
FirstMerit defined benefit plan, in which case (i) each CoBancorp employee shall
be credited with the service for eligibility and vesting purposes (but not for
benefit accrual purposes) with which he was credited under the CoBancorp pension
plan as of the date of such merger, (ii) each participant in the CoBancorp
pension plan shall be entitled to his benefit accrued under the CoBancorp plan
as of the date of such merger, but only to the extent such participant is
otherwise eligible therefor under the terms of the FirstMerit defined benefit
plan, and (iii) each CoBancorp employee who satisfies the age and service
eligibility requirements of the FirstMerit defined benefit plan (including the
past service credit referred to in (i) above) shall be eligible to participate
in the FirstMerit defined benefit plan and accrue benefits thereunder on and
after the date of such merger in accordance with the provisions thereof; or (b)
terminate the CoBancorp pension plan and provide benefits in accordance with the
terms thereof, and extend the FirstMerit defined benefit plan to CoBancorp
employees as of the effective date of the CoBancorp pension plan termination, in
which case such CoBancorp employees shall be credited with service for
eligibility and vesting purposes (but not for benefit accrual purposes) under
the FirstMerit defined benefit plan for periods of their CoBancorp employment.
CoBancorp may at any time prior to the Effective Time make amendments
to the CoBancorp pension plan to assure that all accrued pension plan benefits
shall be fully vested in the pension plan participants.
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(ii) Savings Plans. CoBancorp does not have in effect any
savings or similar type plan for its employees. FirstMerit maintains the
FirstMerit Corporation and Subsidiaries Employees' Salary Savings Retirement
Plan ("FirstMerit 401K Plan"). At the Effective Time, FirstMerit will credit the
CoBancorp employees who become employees of FirstMerit or any of its current
Subsidiaries, for purposes of the FirstMerit 401K Plan, with all service with
CoBancorp or any of the CoBancorp Subsidiaries for purposes of determining their
eligibility to participate in such plan and the vested portion of their
respective accrued benefits under such plan.
(iii) Health Care Plans. At such time on or after the
Effective Time as FirstMerit shall deem appropriate, FirstMerit and its
Subsidiaries will provide CoBancorp and CoBancorp Subsidiaries employees hired
by FirstMerit with such coverage under the FirstMerit health care plan as they
then provide their employees, with all service with CoBancorp or any of the
CoBancorp Subsidiaries credited for purposes of determining such employee's
eligibility to participate in such plan and without any "prior existing
condition" exclusion. The CoBancorp health care plans will be continued until
the employees so hired can participate in the FirstMerit health care plans.
No benefits currently provided CoBancorp or the CoBancorp
Subsidiaries employees, which exceed those provided by FirstMerit and its
subsidiaries, will be grandfathered or provided, except if required by law.
Other than otherwise expressly stated herein, FirstMerit shall not assume any
other health care benefit plans or benefits. FirstMerit, where such right
currently exists, retains the existing rights to amend or terminate any such
plan which have been reserved by the plan sponsor in the plan document or
otherwise.
(iv) SERP. CoBancorp has adopted and maintains Executive
Supplemental Income Agreements ("SERPs") for a limited number of employees. The
SERPs provide for (a) post retirement benefits to participants currently in
retirement status, (b) pre-retirement death benefits for active employee
participants and (c) post-termination benefits for active employee participants.
As of September 30, 1997, CoBancorp ceased accruing additional financial
obligations under the SERPs except for the actuarially calculated interest
component relating to post-retirement benefits to those participants currently
in pay status. Pending the Effective Time, CoBancorp shall utilize its best
efforts to secure agreements from those participants currently receiving
post-retirement benefits to accept a lump sum payment of the present value of
their post-retirement benefits (in amounts not in excess of the accrued
financial reporting obligation relating to such benefits on the books and
records of CoBancorp) in full satisfaction of such benefits. CoBancorp will
consult with FirstMerit and its employee benefit consultant relating to the
allocation of accrued post-termination benefits to active employee participants
in amounts that have been previously recorded as liabilities of CoBancorp for
financial reporting purposes. Consistent with the foregoing, CoBancorp will use
its diligent efforts to determine the appropriate manner in which to calculate
the accrued liabilities and benefits under the SERPs, and shall consult with
FirstMerit prior to taking any action which may increase the liabilities under
the SERPs above amounts recorded as liabilities for financial reporting
purposes. The amount of the accrued liabilities on the books and records of
CoBancorp with respect to posttermination benefits for active employee
participants shall be paid on or before the Effective Time to such participants
in exchange for a release from each of them discharging CoBancorp, its
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Subsidiaries and respective successors in interest from any and all obligations
under their respective SERPs, including but not limited to, any obligation on
the part of CoBancorp, its Subsidiaries or successors in interest to continue to
maintain pre-retirement death benefits. In addition to the foregoing, CoBancorp
or its applicable Subsidiaries shall take all appropriate action, to the extent
legally permissible, to terminate all the SERPs as of the Effective Time in a
manner that does not diminish vested benefits of participants thereunder.
(v) Directors Plan. CoBancorp has adopted and maintains the
Directors Deferred Income Plan ("Directors Plan") for its directors. CoBancorp
agrees that as of the date of this Agreement it will not amend or make any
changes to the terms or conditions of such Directors Plan. As of the Effective
Time, accruals under the Directors Plan shall cease other than earnings on
account balances, participants shall be vested in their accrued benefits as of
such date and FirstMerit agrees to assume the liabilities under the Directors
Plan as of such date.
(vi) Other Benefit Plans. At such time on or after the
Effective Time as FirstMerit shall deem appropriate, FirstMerit and its
Subsidiaries will provide former CoBancorp employees with such coverage under
the FirstMerit benefit plans and programs as are generally provided to all
employees of FirstMerit and its Subsidiaries. All service with CoBancorp or any
of the CoBancorp Subsidiaries shall be credited for purposes of vesting and
determining a former CoBancorp employee's eligibility to participate in such
other benefit plans. No benefits currently provided CoBancorp or the CoBancorp
Subsidiaries employees which exceed those provided by FirstMerit and its
subsidiaries will be grandfathered or provided, except if required by law,
unless otherwise specifically agreed to by FirstMerit in writing.
(vii) Dividend Reinvestment Plan. As of November 1, 1997, the
DRIP was suspended. On or before the Effective Date, the DRIP will be
terminated.
(viii) Restricted Stock Plan. CoBancorp has adopted and
maintains the Restricted Stock Plan ("Restricted Stock Plan") for three
executive officers. CoBancorp represents that as of the date of this Agreement
it has issued a total of 4,500 shares of CoBancorp Common Stock under such
Restricted Stock Plan, that it will not amend or make any changes to the terms
or conditions of such Plan, nor will it grant any additional shares or rights
under such Plan. Prior to the Effective Time, the Board of Directors of
CoBancorp shall by resolution cause the immediate vesting of all outstanding
shares of restricted stock under the Plan.
5.5. ACCESS, INFORMATION AND CONFIDENTIALITY. Upon reasonable notice,
CoBancorp and each of the CoBancorp Subsidiaries shall afford to FirstMerit and
its representatives (including, without limitation, directors, officers and
employees of FirstMerit, its counsel, accountants, environmental consultants and
other professionals retained by FirstMerit) full access during normal business
hours throughout the period prior to the Effective Time to the books, contracts,
records (including, without limitation, tax returns and work papers of
independent auditors), shareholder and customer information, properties,
personnel and such other information and documents of CoBancorp and each of the
CoBancorp Subsidiaries. FirstMerit shall have a right with the prior
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notice to CoBancorp to have environmental assessments conducted on any
properties owned, managed or controlled by CoBancorp and the CoBancorp
Subsidiaries. CoBancorp shall not be required to provide access to any such item
or information if the providing of such access (i) would be reasonably likely to
result in the loss or impairment of any privilege with respect to such
information, or (ii) would be precluded by any law, ordinance, regulation,
judgment, order, decree, license or permit of any Governmental Entity.
All information furnished by one party to another party in connection
with this Agreement and the transactions contemplated hereby which is regarded
by such furnishing party as confidential will be kept confidential by such other
party and its representatives (including, without limitation, directors,
officers and employees, its counsel, accountants and other professionals
retained by such party) and will be used only in connection with this Agreement
and the transactions contemplated hereby, and not in such party's business or by
its directors, officers and employees, its counsel, accountants and other
professionals retained by such party if the Merger is not consummated. Nothing
contained in this Section shall restrict or prohibit CoBancorp or FirstMerit
from disclosing information in any document filed with the Commission, FRB, OCC,
OTS, the Division and other Governmental Entities and bodies nor shall it in any
way restrict FirstMerit's right to exercise the CoBancorp Stock Purchase Option,
and so long as this Agreement has not been terminated pursuant to Article 7
hereof, FirstMerit may, notwithstanding this confidentiality provision, disclose
such information as it deems necessary or advisable in connection with
explaining or providing background information to security analysts and others
concerning the transactions contemplated by this Agreement, except that any such
information dealing with the areas of individual employees, their future
employment, reserves established for specific loans, matters related to
litigation and CoBancorp's business strategies, may only be disclosed with the
prior approval of CoBancorp, which approval shall not be unreasonably withheld.
It is the parties' intent to provide such analysts with accurate information
regarding the transaction in a light favorable to completion of the transactions
contemplated by this Agreement.
5.6. CERTAIN FILINGS; CONSENTS AND ARRANGEMENTS. FirstMerit and
CoBancorp shall (a) promptly file all reports and applications required to be
filed with the Commission, the FRB and such other Governmental Entities (the
"Regulatory Authorities") as may have jurisdiction for such approvals as may be
required to be obtained from such Governmental Entities in order to carry out
the transactions contemplated by this Agreement as soon as practicable between
the date of this Agreement and the Effective Time and each FirstMerit Subsidiary
or CoBancorp Subsidiary that is a bank or savings association shall also file
all reports required to be filed with the FRB, the OCC, the OTS and the Division
with respect to the Merger and the other transactions contemplated by this
Agreement, (b) cooperate with one another (i) in promptly determining whether
any other filings are required to be made or consents, approvals, permits or
authorizations are required to be obtained under any other federal, state or
foreign law or regulation, and (ii) in promptly making any such filings,
furnishing information required in connection therewith and seeking timely to
obtain any such consents, approvals, permits or authorizations, and (c) deliver
to the other party to this Agreement copies of all such applications and reports
promptly after they are filed. In no event, however, shall either party hereto
be liable for any untrue statement of a material fact or omission
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to state a material fact in any filing made with any Governmental Entity
pursuant to this Section made in reliance upon, and in conformity with, written
information concerning the other party hereto furnished by such other party
specifically for use in such filing. Each party hereto shall advise the other
party hereto promptly of the occurrence of any event which makes untrue any
statement of a material fact contained in any such filing or any amendment or
supplement thereto or that requires the making of a change in any such filing or
any amendment or supplement thereto in order to make any material statement
therein not misleading.
5.7. TAKEOVER STATUTES AND PROVISIONS. CoBancorp shall use its diligent
efforts to (i) exempt CoBancorp, this Agreement, the CoBancorp Stock Purchase
Option and the Merger from the requirements of any state takeover law (including
without limitation, statutes relating to business combinations, control share
acquisitions and merger moratoriums) and from any provisions under its Corporate
Governance Documents, as applicable, by action of CoBancorp's Board of Directors
or otherwise, and (ii) assist in any challenge by FirstMerit to the
applicability to the Merger of any state takeover law.
5.8. INDEMNIFICATION AND INSURANCE. Except as may be limited by
applicable law, for a period of six years after the Effective Time, FirstMerit
hereby agrees to honor the terms of the indemnification provisions of Article
II, Section 6 of CoBancorp's Code of Regulations, and all such provisions of the
CoBancorp Subsidiaries, copies of which are attached hereto as Exhibit 5.8,
which are provided to CoBancorp's and its subsidiaries' directors, officers and
employees, for matters occurring prior to the Effective Time. Moreover,
indemnification of directors, officers and employees of CoBancorp and CoBancorp
Subsidiaries following the Effective Time will be provided to the same extent it
is provided to other persons working in similar capacities for FirstMerit
following the Closing.
For a period of up to three years following the Effective Time,
FirstMerit will maintain in effect the current insurance policies maintained by
CoBancorp (or substitute policies with substantially the same coverage and
terms) covering directors' and officers' liability with respect to claims which
arise from factors or events which occurred before the Effective Time, except
that FirstMerit's obligation under this paragraph for the second and subsequent
years following the Effective Time will be based upon its ability to obtain such
insurance at a commercially reasonable cost. CoBancorp shall notify FirstMerit
prior to purchasing or continuing any insurance to cover the matters contained
herein, provided, however, it is the intent of FirstMerit that tail coverage
will be purchased if such is available. To the extent insurance is available
under any of the provisions in this Section to cover such claims and costs, such
insurance shall be the primary source of funding these obligations.
FirstMerit shall assume and honor Section 6.6 regarding indemnification
rights of the Agreement and Plan or Reorganization and Merger among CoBancorp,
Prime Savings Bank and Jefferson Savings Bank dated August 26, 1996.
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5.9. ADDITIONAL AGREEMENTS. Subject to the terms and conditions herein
provided, each of the parties hereto agrees to use its diligent efforts to take
promptly, or cause to be taken, all actions necessary, proper or advisable under
applicable laws to consummate the transactions contemplated by this Agreement.
In addition, without limitation, each party shall from time to time execute such
certificates as to factual matters necessary, proper or advisable in order to
receive the opinions contemplated by Article 6 of this Agreement.
If, at any time after the Effective Time, the Surviving Corporation
considers or is advised that any further deeds, bills of sale, assignments,
assurances or any other actions or things are necessary or desirable to vest,
perfect or confirm of record its right, title or interest in and to any of the
rights, properties or assets of CoBancorp acquired or to be acquired by the
Surviving Corporation, CoBancorp and its officers and directors shall be deemed
to have granted to the Surviving Corporation an irrevocable power of attorney to
execute and deliver all such deeds, bills of sale, assignments and assurances
and to take and do all such other actions and things as may be necessary or
desirable to vest, perfect or confirm any and all right, title and interest in
and to such rights, properties or assets in the Surviving Corporation.
5.10. COMPLIANCE WITH ANTITRUST LAWS. Each of FirstMerit and CoBancorp
shall use its diligent efforts to resolve such objections, if any, which may be
asserted with respect to the Merger by the FRB, the Department of Justice, or
any other Governmental Entity (including, without limitation, objections under
any antitrust laws and any applicable laws or regulations). In the event a suit
is threatened or instituted challenging the Merger as violative of the antitrust
laws, each of FirstMerit and CoBancorp shall use its diligent efforts to avoid
the filing of, resist or resolve such suit. FirstMerit and CoBancorp shall use
their diligent efforts to take such action as may be required: (a) by the FRB,
the Department of Justice, or any other Governmental Entity in order to resolve
such objections as any of them may have to the Merger, or (b) by any federal or
state court of the United States, in any suit brought by a private party or
Governmental Entity challenging the Merger as violative of any antitrust laws,
in order to avoid the entry of, or to effect the dissolution of, any injunction,
temporary restraining order or other order which has the effect of preventing
the consummation of the Merger.
5.11. PUBLICITY. The initial press release announcing this Agreement
shall be a joint press release in a form mutually agreed upon by the parties and
thereafter, except as required by law, CoBancorp and FirstMerit shall consult
with each other and provide a written copy to each other prior to issuing any
press releases, or otherwise making public statements, with respect to the
transactions contemplated hereby and in making any filings with any Governmental
Entity.
5.12. REGISTRATION STATEMENT, PROXY STATEMENT AND COMFORT LETTERS.
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(a) FirstMerit will, as soon as practicable, prepare and file with the
Commission the Registration Statement, and any required amendments thereto, will
use all reasonable efforts to have the Registration Statement declared effective
by the Commission as promptly as practicable and will maintain the effectiveness
of such Registration Statement. FirstMerit will also take any action required to
be taken under any applicable state blue sky or securities laws in connection
with the issuance of the FirstMerit Common Stock pursuant to the Merger.
CoBancorp shall promptly furnish FirstMerit all information concerning
CoBancorp, the CoBancorp Subsidiaries, and the holders of its capital stock and
shall promptly take any action as FirstMerit may reasonably request in
connection with any such action.
FirstMerit, with the direct assistance of CoBancorp, will as soon as
practicable prepare and file the Proxy Statement with the Commission, and take
such other action so that CoBancorp may promptly after the effectiveness of the
Registration Statement mail the Proxy Statement to CoBancorp's shareholders.
FirstMerit and CoBancorp shall cooperate and consult with each other in the
preparation of the Proxy Statement and CoBancorp shall promptly furnish
FirstMerit all information concerning CoBancorp, the CoBancorp Subsidiaries, and
the holders of its capital stock, and shall promptly take any action as
FirstMerit may reasonably request in connection with any such action.
(b) Each of FirstMerit and CoBancorp will cause its respective
independent auditors to issue a letter addressed to both FirstMerit and
CoBancorp, within three business days prior to the effectiveness of the
Registration Statement and also as of Closing, stating among other things, the
following: (i) such accountants are independent public accountants within the
meaning of the Securities Act and the rules and regulations promulgated
thereunder; (ii) in the opinion of such accountants, the financial statements
included in the Registration Statement and reported on therein by such
accountants comply as to form in all material respects with the applicable
accounting requirements of the Securities Act and the Rules and Regulations
promulgated thereunder; (iii) on the basis of specified limited procedures
(which procedures do not constitute an examination in accordance with generally
accepted auditing standards), including a reading of the latest available
unaudited financial statements, inquiries of officials responsible for financial
and accounting matters, nothing came to their attention which caused them to
believe that, during the period subsequent to December 31, 1996, to a specified
date not more than three business days prior to the effective date of the
Registration Statement and to a specified date not more than three business days
prior to Closing, there was any change in the shares of its capital stock or
long-term debt, if any, (other than changes due to payments in accordance with
the terms of such debt, or in the event of any such change in long-term debt,
the amount thereof) or any decrease (increase) in the total or per share amount
of its net income (net loss) as compared with the corresponding period in the
preceding year, except in all instances for changes or decreases (increases)
which the Registration Statement discloses have occurred or may occur; (iv) such
accountants have read the other data included in the Registration Statement with
respect to the financial condition and operations of their respective clients
and they find such data to be correctly computed and in agreement with their
respective books and records of FirstMerit and CoBancorp.
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(c) FirstMerit shall be responsible for all expenses incident to the
obtaining of the requisite regulatory approvals from Governmental Entities.
Without limiting the generality of the foregoing, the expenses to be assumed by
FirstMerit shall include (i) all expenses for its own legal counsel and other
expenses incurred by FirstMerit incident to the preparation and filing of
applications on its behalf and on behalf of CoBancorp and other requests for
regulatory consents and approvals with the appropriate regulatory agencies as
contemplated by this Agreement; (ii) all expenses for its own legal counsel and
all other expenses incurred in connection with the registration of the
FirstMerit Common Stock under the federal and state securities laws and (iii)
all printing and mailing expenses of the parties. The expenses to be assumed by
FirstMerit shall not include any legal, accounting or other expenses incurred by
CoBancorp in connection with its own corporate proceedings or incident to the
transactions contemplated by this Agreement.
5.13. AFFILIATES COMPLIANCE WITH THE SECURITIES ACT.
(a) Within 30 days after the date of this Agreement, each of CoBancorp
and FirstMerit shall identify to the other party all persons whom it reasonably
believes are its "affiliates" as that term is used in paragraphs (c) and (d) of
Rule 145 under the Securities Act and/or Accounting Series, Releases 130 and
135, as amended, of the Commission (the "Affiliates"). Thereafter and until the
Effective Time, each of CoBancorp and FirstMerit shall identify to the other
party each additional person whom it reasonably believes to have thereafter
become its Affiliate.
(b) Each of CoBancorp and FirstMerit shall use its diligent efforts to
cause each person who is identified as an Affiliate pursuant to clause (a) above
to deliver to FirstMerit not later than the date on which the Merger is
approved, a written agreement, substantially in the form of Exhibit 5.13(b)-1
(in the case of Affiliates of CoBancorp) and Exhibit 5.13(b)-2 (in the case of
Affiliates of FirstMerit).
5.14. COBANCORP SHAREHOLDER MEETING. CoBancorp shall take all action
necessary, in accordance with applicable law and its Corporate Governance
Documents to convene a special or regular meeting of the holders of Common Stock
(the "CoBancorp Meeting") as promptly as practicable after the effectiveness of
the Registration Statement for the purpose of considering and taking action upon
this Agreement and the transactions contemplated herein. Subject to the
fiduciary obligations and duties of the Board of Directors of CoBancorp under
Ohio law and to the provisions of Section 5.1 of this Agreement, the Board of
Directors of CoBancorp shall recommend that the holders of the Common Stock vote
in favor of and approve the Merger and adopt this Agreement at the CoBancorp
Meeting.
5.15. TAX-FREE REORGANIZATION TREATMENT. Neither FirstMerit nor
CoBancorp shall intentionally take or cause to be taken any action, whether
before or after the Effective Time, which would disqualify the Merger as a
"reorganization" within the meaning of Section 368(a) of the Code, other than
FirstMerit's exercise of its rights under the CoBancorp Stock Purchase Option.
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5.16. MERGERS OF SUBSIDIARIES. The Board of Directors of FirstMerit
intends, contemporaneously with the merger of CoBancorp with and into
FirstMerit, to merge the CoBancorp Subsidiaries with and into FirstMerit Bank,
N.A., a wholly owned subsidiary of FirstMerit.
CoBancorp shall cause such of the CoBancorp Subsidiaries as FirstMerit
may request to enter into definitive merger or consolidation agreements with
FirstMerit Bank, N.A., providing for the merger or consolidation of the
CoBancorp Subsidiaries with or into FirstMerit Bank, N.A.; provided, however,
that, in all cases, the obligation of CoBancorp to cause such merger or
consolidation shall be subject to the condition that the Merger be
simultaneously consummated; and provided further, notwithstanding anything to
the contrary in this Agreement, (i) the representations and warranties of
CoBancorp in this Agreement shall not be deemed to be untrue or breached, (ii)
CoBancorp shall not be deemed to have failed to perform any covenant or
obligation contained in this Agreement, and (iii) no condition to FirstMerit's
obligation to effect the Merger shall be deemed not to have been satisfied by or
as a result of any merger or consolidation consummated pursuant to this Section.
CoBancorp shall cause the CoBancorp Subsidiaries to fully cooperate with
FirstMerit in consummating these mergers or consolidations, including
cooperating in the filing of any necessary regulatory applications.
5.17. CURRENT INFORMATION. During the period from the date of this
Agreement to the Effective Time, each of CoBancorp and FirstMerit will promptly
notify the other of (i) any material change in the normal course of its
business, (ii) any governmental complaints, investigations or hearings (or
communications indicating that the same may be contemplated), or receipt of any
memorandum or understanding or cease and desist order from a regulatory
authority, or (iii) the institution or the threat of material litigation
involving such party and will keep the other party fully informed of such
events. During such period, FirstMerit and CoBancorp shall promptly provide the
other with monthly unaudited financial statements as soon as they are available
and each shall promptly provide the other with a copy of all Reports filed by it
after the date of this Agreement through the Effective Time. Each of FirstMerit
and CoBancorp agrees to keep the foregoing information strictly confidential.
5.18. INTEGRATION OF OPERATIONS. Subject to applicable laws,
regulations and the requirements of Governmental Entities, during the period
from the date of this Agreement to the Effective Time, the parties will consult
and cooperate fully with each other to do all things advisable to prepare for
and facilitate the integration of CoBancorp and the applicable CoBancorp
Subsidiaries operations into and with FirstMerit's operations as rapidly and
effectively as possible as of the Effective Time, including, without limitation,
preparation for the integration of such branch operations, if any (including,
without limitation, the preparation for the necessary installation of all of
FirstMerit's or its subsidiaries hardware and software systems), management
information systems, financial and accounting operations, employee compensation
and benefit matters and similar matters, and employee training, as requested by
FirstMerit; provided that all such integration prior to the Effective Time shall
be subject to the concurrence of CoBancorp and that all communications from
FirstMerit to CoBancorp regarding such integration shall be made through John S.
Kreighbaum and Timothy Esson.
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5.19. NASD LISTING. FirstMerit will file an additional listing
application with the National Association of Securities Dealers, Inc. (the
"NASD") for the FirstMerit Common Stock to be issued in the Merger at the time
prescribed by applicable rules and regulations. In addition, FirstMerit will use
its best efforts to maintain its listing on the Nasdaq/NMS.
5.20. ENVIRONMENTAL REMEDIATION. In addition to other rights which
FirstMerit has to conduct environmental investigations of CoBancorp properties
under Section 5.5, FirstMerit will retain an environmental consulting firm
within 20 days after execution of this Agreement. FirstMerit's consulting firm
will provide FirstMerit with a "Phase I," and if FirstMerit deems reasonably
necessary, a "Phase II" report, on the 49 South Main Street, Oberlin, Ohio
property (the "Property") currently owned by a CoBancorp Subsidiary.
If the Phase I report indicates that further testing, monitoring and/or
remediation will be required, then FirstMerit's environmental consulting firm
and CoBancorp's environmental consulting firm will promptly meet to agree on the
monitoring and testing methodologies, including conducting joint testing or
taking separate samples for processing at different labs, prior to beginning the
Phase II process.
In addition to providing a Phase II report to FirstMerit, the
consulting firm will provide FirstMerit with an estimation of the costs and
expenses which such firm believes in its best estimate will be necessary to
remediate the property (including providing detail on any assumptions made in
reaching the estimate). The estimate will be such to bring the property into
full compliance with the applicable federal, state and local environmental
standards for property of this type (which compliance standard will be at least
to a level to place the property in a condition without significant diminution
in value related to its environmental condition) ("Estimated Costs"). Within
seven business days from the receipt of a Phase II report, FirstMerit will
provide CoBancorp with a copy of the Phase II report ("Phase II Report"), but
will not be required to deliver the report on the Estimated Costs.
Upon receipt of the Phase II Report, CoBancorp's environmental firm
will promptly review and prepare its own estimation of the Estimated Costs.
Within seven business days from the receipt of a Phase II report, CoBancorp will
provide FirstMerit with a copy of the Phase II report, but will not be required
to deliver any report on the Estimated Costs.
The two firms will then meet to review and agree upon the Estimated
Costs, which will be a single figure and not a range ("Final Estimated Costs").
If the firms cannot agree, but if the estimations are within 15% of each other,
the two amounts will be averaged to arrive at the Final Estimated Costs.
Otherwise the two firms will choose a third firm to review the reports of each
firm, and other information which the third firm may request, and the third firm
will promptly provide a
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written report to FirstMerit and CoBancorp with the Final Estimated Costs
("Final Report"). The determination of the Final Estimated Costs by either the
averaging method, or the determination method, shall be binding upon both
parties.
It is assumed by the parties that no amounts will be expended for the
Final Estimated Costs prior to the Effective Time. The Final Estimated Costs
will be allocated between the parties as follows: the Final Estimated Costs, on
an after-tax basis (based on the highest federal marginal tax rate), up to and
including $600,000 in the aggregate shall be borne by FirstMerit ("FirstMerit
Amount"), and amounts in excess of this amount, on an after-tax basis (based on
the highest federal marginal tax rate), shall be borne by CoBancorp; provided
that if such after-tax costs exceed $2.4 million (being the aggregate of
FirstMerit's $600,000 and CoBancorp's $1.8 million, both aftertax)("Excess
Amount"), CoBancorp will have a right upon written notice to FirstMerit to
either terminate this Agreement, or assume the Excess Amount ("CoBancorp
Notice"). CoBancorp will have 14 days after receipt of the Final Report to
deliver the CoBancorp Notice.
Upon receipt of the CoBancorp Notice that it has elected to terminate
the Agreement, FirstMerit will have two business days to notify CoBancorp in
writing that FirstMerit either waives the termination and that FirstMerit will
agree to assume the Excess Amount, or accepts the termination conditioned upon
CoBancorp's prompt payment to FirstMerit of all of FirstMerit's reasonable third
party and out of pocket expenses, including but not limited to registration
fees, printing costs, the costs and expenses related to its environmental
consultant and its preparation of the various reports, attorney fees, and
accounting fees and costs. No reimbursement would be due for any commission to
Goldman, Sachs & Co.
To the extent that CoBancorp is responsible for the Final Estimated
Costs and the Excess Amount, and such amounts exceed the FirstMerit Amount, they
shall be paid by CoBancorp at the Effective Time through a reduction of the
Merger Consideration in the amount of the after-tax cost of such excess by an
appropriate adjustment to the Exchange Ratio; provided that the reduction shall
be only up to an amount, on an after-tax basis, that FirstMerit shall certify to
CoBancorp, as of the Effective Time, as the estimated amount of the cost of the
remediation of the property that FirstMerit in good faith actually intends to
incur.
Prior to the Effective Time, CoBancorp will have a right to sell the
Property upon terms which are acceptable to FirstMerit. FirstMerit has right to
deem terms unacceptable if the terms require FirstMerit to assume or be subject
to any liability or obligation which it deems in good faith to be greater or
different than that under this Section 5.20.
Each party will be responsible for the costs associated with hiring its
own environmental consulting firm during the time between the execution of this
Agreement and the Effective Time. All of these costs and expenses will be
considered part of the Estimated Costs.
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6. CONDITIONS
6.1. CONDITIONS TO EACH PARTY'S OBLIGATIONS TO EFFECT THE MERGER. The
respective obligations of each party to effect the Merger shall be subject to
the fulfillment or waiver at or prior to the Closing of the following
conditions:
(a) The Merger and this Agreement shall have been approved and adopted
by the requisite vote of the holders of CoBancorp's Common Stock.
(b) All authorizations, consents, orders or approvals, lack of any
injunctive actions by the Department of Justice or any state anti-trust agency,
of the FRB, OCC, OTS, Division and any other Governmental Entity (collectively,
"Consents") which are necessary for the consummation of the Merger (other than
immaterial Consents, the failure to obtain which would not involve criminal
liability, any material civil penalties or fines, or would not have or
reasonably be expected to have a Material Adverse Effect on the combined
businesses, financial condition, or results of operations of FirstMerit,
CoBancorp, the FirstMerit Subsidiaries and the CoBancorp Subsidiaries taken as a
whole), shall have been obtained or shall have occurred and shall be in full
force and effect, and all applicable waiting periods shall have expired, at the
Effective Time. A material Consent shall not be deemed to have been obtained if
the Consent shall include any conditions or requirements which, in the
reasonable opinion of the Board of Directors of FirstMerit, would have a
Material Adverse Effect on the anticipated economic and business benefits to
FirstMerit of the transactions contemplated by this Agreement, taken as a whole.
(c) The Registration Statement shall have become effective in
accordance with the provisions of the Securities Act and shall not be subject to
a stop order suspending the effectiveness of the Registration Statement.
(d) No temporary restraining order, preliminary or permanent
injunction or other order by any federal or state court or agency in the United
States which enjoins or prohibits the consummation of the Merger shall have been
issued and remain in effect.
(e) FirstMerit shall have obtained an opinion of its counsel,
reasonably satisfactory in form and substance to FirstMerit and dated as of
Closing, to the effect that the Merger will constitute a tax-free reorganization
within the meaning of Section 368(a)(1)(A) of the Code.
6.2. CONDITIONS TO OBLIGATION OF COBANCORP TO EFFECT THE MERGER. The
obligation of CoBancorp to effect the Merger shall be subject to the fulfillment
or waiver at or prior to the Closing of the additional following conditions:
(a) FirstMerit shall have performed in all material respects all of
its obligations contained in this Agreement required to be performed at or prior
to the Closing.
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(b) The representations and warranties of FirstMerit contained in this
Agreement shall be true and correct both: (i) on the date of this Agreement, and
(ii) as of the Effective Time as if made at and as of such time, (x) except,
both on the date of this Agreement and at the Effective Time, as expressly
contemplated or permitted by this Agreement, (y) except, as of the Effective
Time, for representations and warranties relating to a time or times other than
the Effective Time, and (z) except, both on the date of this Agreement and at
the Effective Time, to the extent that the untruthfulness or inaccuracy of the
representations or warranties of FirstMerit, individually or in the aggregate,
shall not have a Material Adverse Effect on FirstMerit.
(c) FirstMerit shall have furnished CoBancorp a Certificate dated the
date of the Closing, signed on behalf of FirstMerit by the Chief Executive
Officer or President, and the Chief Financial Officer of FirstMerit, that to the
best of their knowledge and belief, the conditions set forth in Sections 6.2(a),
(b) and (e) have been satisfied.
(d) CoBancorp shall have received the opinion of legal counsel for
FirstMerit, dated as of Closing, substantially to the effect set forth in
Exhibit 6.2(d) hereto, and such certificates from the appropriate persons and/or
authorities regarding FirstMerit's board resolutions, form of corporate
governance documents and good standing.
(e) Since the date of this Agreement, there shall have not been any
change in the financial condition, results of operations or business of
FirstMerit and the Subsidiaries of FirstMerit that would have a Material Adverse
Effect on FirstMerit.
6.3. CONDITIONS TO OBLIGATION OF FIRSTMERIT TO EFFECT THE MERGER. The
obligation of FirstMerit to effect the Merger shall be subject to the
fulfillment or waiver at or prior to the Closing of the additional following
conditions:
(a) CoBancorp shall have performed in all material respects all of its
obligations contained in this Agreement required to be performed at or prior to
the Closing.
(b) The representations and warranties of CoBancorp contained in this
Agreement shall be true and correct both: (i) on the date of this Agreement, and
(ii) as of the Effective Time as if made on and as of such time, (x) except,
both on the date of this Agreement and at the Effective Time, as expressly
contemplated or permitted by this Agreement, (y) except, as of the Effective
Time, for representations and warranties relating to a time or times other than
the Effective Time, and (z) except, both on the date of this Agreement and at
the Effective Time, to the extent that the untruthfulness or inaccuracy of the
representations or warranties of CoBancorp, individually or in the aggregate,
shall not have a Material Adverse Effect on CoBancorp.
(c) Since the date of this Agreement there shall not have been any
change in the financial condition, results of operations or business of
CoBancorp and the subsidiaries of CoBancorp that either individually or in the
aggregate would have a Material Adverse Effect on CoBancorp, other than change
as a result of action taken under Section 5.2.6 and the second paragraph of
Section 5.6, and the responses thereto by CoBancorp and the impact thereof on
the operating performance of CoBancorp.
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(d) CoBancorp shall have furnished FirstMerit a certificate dated the
date of the Closing signed on behalf of CoBancorp by the Chief Executive Officer
or President, and Chief Financial Officer of CoBancorp, that to the best of
their knowledge and belief, the conditions set forth in Sections 6.3(a), (b) and
(c) have been satisfied. In addition, CoBancorp shall have furnished FirstMerit
certificates, one dated the effective date of the Registration Statement and
Proxy, and one as of the Closing, signed on behalf of CoBancorp by the Chief
Executive Officer or President, and Chief Financial Officer of CoBancorp, that
to the best of their knowledge and belief, that CoBancorp participated in the
preparation of the Registration Statement and the Proxy Statement, including
review and discussion of the contents thereof, and nothing came to the attention
of CoBancorp that caused it to believe that the Registration Statement or the
Proxy Statement at the time such documents became effective, and as of the date
of Closing, contained any untrue statement of a material fact or omitted to
state any material fact required to be stated therein or necessary in order to
make the statements therein, in light of the circumstances under which they are
made, not misleading.
(e) FirstMerit shall have received the opinion of legal counsel for
CoBancorp dated as of Closing, substantially to the effect set forth in Exhibit
6.3(e) hereto, and such certificates from the appropriate persons and/or
authorities regarding CoBancorp's and its subsidiaries' board resolutions, forms
of corporate governance documents and good standing.
7. MISCELLANEOUS
7.1. TERMINATION. Notwithstanding any other provision of this
Agreement, this Agreement may be terminated at any time prior to the Effective
Time, whether before or after approval of this Agreement by the shareholders of
FirstMerit and CoBancorp:
(a) by mutual agreement of the parties by the vote of a majority of the
Board of Directors of each of FirstMerit and CoBancorp;
(b) by the vote of a majority of the Board of Directors of either
FirstMerit or CoBancorp if the Merger shall not have been consummated on or
before September 1, 1998, unless the failure to consummate by such date is
related to the action or inaction of the Governmental Entities and such action
or inaction is not directly related to either FirstMerit's or CoBancorp's breach
of their respective obligations under Sections 5.6 or 5.12(a), then on or before
November 1, 1998 (provided that the terminating party is not in material breach
of any representation, warranty, covenant or other agreement contained herein);
(c) by the vote of a majority of the Board of Directors of CoBancorp if
any of the conditions specified in Sections 6.1 and 6.2 have not been met or
waived by CoBancorp at such time as such condition can no longer be satisfied;
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(d) by the vote of a majority of the Board of Directors of FirstMerit
if any of the conditions specified in Sections 6.1 and 6.3 have not been met or
waived by FirstMerit at such time as such condition can no longer be satisfied;
(e) by the vote of a majority of the Board of Directors of either
FirstMerit or CoBancorp if any regulatory agency has denied approval of the
Merger and such denial has become final and non-appealable (regardless of
whether CoBancorp is deemed to be a "party" to an application with respect to
the Merger);
(f) by the vote of a majority of the Board of Directors of either
FirstMerit or CoBancorp in the event of a material breach by the other party of
any representation, warranty, covenant or agreement, which breach is not cured,
or cannot be cured, within 30 days after written notice thereof is given to the
party committing such breach;
(g) at any time prior to November 5, 1997, by FirstMerit if CoBancorp
shall not have executed and delivered the CoBancorp Stock Purchase Option;
(h) by the vote of a majority of the Board of Directors of CoBancorp
(with written notice thereof to FirstMerit which notice is final and may not be
withdrawn) at any time during the fourth and fifth full trading days immediately
prior to the Effective Time, if (x) the Average Closing Price is less than
$20.40 (subject to adjustment pursuant to Section 2.7), and (y) FirstMerit shall
not have given written notice to CoBancorp on the second or third full trading
day immediately prior to the Effective Time which notice indicates that
FirstMerit agrees that the Exchange Ratio shall be calculated by multiplying
1.939 by a factor equal to $20.40 divided by the Average Closing Price; and
(i) by the vote of a majority of the Board of Directors of CoBancorp
pursuant to and in accordance with the provisions of Section 5.20.
7.2. NON-SURVIVAL OF REPRESENTATIONS, WARRANTIES; EFFECT OF
TERMINATION. The representations and warranties or covenants in this Agreement
will terminate at the Effective Time or the earlier termination of this
Agreement pursuant to Section 7.1, as the case may be: provided however, that if
the Merger is consummated, Sections 1.1.5, 2.1 through 2.9, 5.4, 5.5, 5.8, 5.9,
5.10, 5.12(c), 5.13, 5.15, 5.16, 5.19 and 7.2 will survive the Effective Time to
the extent contemplated by such Sections; provided, further in the event of the
termination of this Agreement, this Agreement shall become void and of no effect
except that the first sentence in the second paragraph of Section 5.5, and all
of Sections 5.12(c) and 7.11, will in all events survive any termination of this
Agreement.
7.3. WAIVER. Either party hereto may, by written notice to the other
party hereto, (a) extend the time for the performance of any of the obligations
or other actions of such other party under this Agreement, (b) waive any
inaccuracies in the representations or warranties of such other party contained
in this Agreement or in any document delivered pursuant to this Agreement, (c)
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waive compliance with any of the conditions or covenants of such other party
contained in this Agreement, or (d) waive or modify performance of any of the
obligations of such other party under this Agreement. Except as provided in the
preceding sentence, no action taken pursuant to this Agreement, including,
without limitation, any investigation by or on behalf of either party, shall be
deemed to constitute a waiver by the party taking such action of compliance with
any of the representations, warranties, covenants, conditions, or agreements
contained in this Agreement. The waiver by either party hereto of a breach of
any provision of this Agreement shall not operate or be construed as a waiver of
any subsequent breach.
7.4. AMENDMENT. This Agreement may be amended or supplemented by the
parties hereto, by action taken by or on behalf of their respective Boards of
Directors, at any time before or after approval of this Agreement by the
shareholders of CoBancorp, provided however, that any such amendment or
supplement to this Agreement made subsequent to the adoption of this Agreement
by the shareholders of CoBancorp shall not (a) alter the amount or change the
form of the consideration contemplated by this Agreement, (b) alter or change
any term of the Amended and Restated Articles of Incorporation of the Surviving
Corporation to be affected by the Merger, or (c) alter or change the
qualification of the Merger as a tax-free reorganization under the provisions of
Section 368 of the Code.
7.5. ENTIRE AGREEMENT. This Agreement and the CoBancorp Stock Purchase
Option, and the agreements referenced and contemplated therein and thereby,
contain the entire agreement among FirstMerit and CoBancorp with respect to the
Merger and the other transactions contemplated hereby and thereby, and supersede
all prior agreements among the parties with respect to such matters.
7.6. APPLICABLE LAW. This Agreement will be governed by and construed
in accordance with the laws of the State of Ohio, without giving effect to the
principles of conflicts of law thereof.
7.7. CERTAIN DEFINITIONS.
(a) For purposes of this Agreement, the term:
(i) "affiliate" and "associate" shall have the respective
meanings ascribed to such terms in Rule 12b-2 of the General Rules and
Regulations under the Exchange Act, as in effect on the date hereof;
(ii) "control" (including the terms "controlled by" and "under
common control with") means the possession, directly or indirectly or
as trustee or executor, of the power to direct or cause the direction
of the management or policies of a person, whether through the
ownership of stock, as trustee or executor, by contract or credit
arrangement or otherwise;
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(iii) "person" means an individual, corporation, partnership,
association, trust or unincorporated organization; and
(iv) "Material Adverse Effect" on CoBancorp or FirstMerit
means a material adverse effect (other than as a result of changes (x)
in banking laws or regulations of general applicability or
interpretations thereof by court or governmental entities, and (y) in
generally accepted accounting principles) on the respective condition
(financial and otherwise), results of operations, or business of
CoBancorp and its Subsidiaries, or FirstMerit and its Subsidiaries, as
the case may be, taken as a whole, or on the ability of CoBancorp or
FirstMerit, as the case may be, to consummate the transactions
contemplated hereby.
The effect of any action taken by CoBancorp at the written
request of FirstMerit pursuant to Section 5.2.6 shall not be taken into
consideration in determining whether any Material Adverse Effect has
occurred.
7.8. NOTICES. All notices and other communications hereunder will be in
writing and will be deemed to have been duly given or delivered, if delivered
personally or delivered by a recognized commercial courier, to each of the
parties at the following addresses:
<TABLE>
<CAPTION>
TO COBANCORP: TO FIRSTMERIT:
<S> <C>
John S. Kreighbaum, Chairman, John R. Cochran, President and
President and Chief Executive Officer Chief Executive Officer
CoBancorp Inc. FirstMerit Corporation
1530 West River Road, North III Cascade Plaza, 7th Floor
Elyria, Ohio 44035 Akron, Ohio 44308
WITH A COPY TO: WITH COPIES TO:
Barry P. Taff, P.C. Terry E. Patton, Senior Vice President
Christopher R. Kelly, P.C. and Secretary
Silver, Freedman & Taff, L.L.P. FirstMerit Corporation
1100 New York Ave., N.W. III Cascade Plaza, 7th Floor
Suite 700 Akron, Ohio 44308
Washington, D.C. 20005
Philip A. Lloyd II
and Kevin C. O'Neil
Brouse & McDowell
500 First National Tower
Akron, Ohio 44308
</TABLE>
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or to such other address as any party may have furnished to the other parties in
writing in accordance with this Section 7.8.
7.9. COUNTERPARTS; EXHIBITS. This Agreement may be executed in any
number of counterparts, each of which will be deemed to be an original but all
of which together will constitute but one agreement. Any exhibits or schedules
referenced herein and attached hereto shall be incorporated by reference herein
as if fully written out in this Agreement.
7.10. PARTIES IN INTEREST. This Agreement is not intended to nor will
it confer upon any other person any rights or remedies, except as expressly
stated herein.
7.11. EXPENSES. Except as otherwise set forth in this Agreement, each
party shall be responsible for the costs and expenses incurred by it in
connection with the transactions contemplated by this Agreement. If this
Agreement is terminated by CoBancorp or FirstMerit pursuant to 7.1(f) because of
the material breach by the other party of any representation, warranty,
covenant, undertaking or restriction contained in this Agreement, if the
terminating party is not in material breach of any representation, warranty,
covenant, undertaking or restriction contained in this Agreement, then the
breaching party shall pay all costs and expenses of the terminating party,
including but not limited to printing, mailing and related fees, as well as fees
for financial advisors, accountants and legal counsel; provided, however, that
if this Agreement is terminated under circumstances other than those described
in this Section 7.11, all costs and expenses incurred in connection with this
Agreement and the transactions contemplated hereby will be paid by the party
incurring such costs and expenses.
7.12. ENFORCEMENT OF THE AGREEMENT. The parties hereto agree that
irreparable damage would occur in the event that any of the provisions of this
Agreement were not performed in accordance with their specific terms or were
otherwise breached, that it is impossible to measure in money the damages that
would result to a party by reason of the failure of any of the parties to
perform any of the obligations of this Agreement and that money damages would be
an inadequate remedy in this instance. It is accordingly agreed that the parties
hereto will be entitled to an injunction or injunctions to prevent breaches of
this Agreement and to enforce specifically the terms and provisions hereof in
any court of the United States or any state having jurisdiction, this being in
addition to any other remedy to which they are entitled at law or in equity. In
addition, it is agreed and that if any party should institute an action or
proceeding seeking specific enforcement of this Agreement, the party against
which such action or proceeding is brought hereby waives the claim or defense
that the party instituting such action or proceeding has an adequate remedy at
law and hereby agrees not to assert in any such action or proceeding the claim
or defense that such a remedy at law exists and shall waive or not assert any
requirement to post bond in connection with seeking specific performance.
Notwithstanding anything to the contrary herein, and in addition to any rights
set forth in Section 7.11, a party may seek monetary damages against a breaching
party for any willful breach of this Agreement.
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7.13. SEVERABILITY. If any term or other provision of this Agreement is
invalid, illegal or incapable of being enforced by any rule of law or public
policy, all other terms and provisions of this Agreement will nevertheless
remain in full force and effect so long as the economic or legal substance of
the transactions contemplated hereby is not affected in any manner adverse to
any party hereto. Upon any such determination that any term or other provision
is invalid, illegal or incapable of being enforced and does not adversely affect
the substance of these transactions in a material way, the parties hereto will
negotiate in good faith to modify this Agreement so as to effect the original
intent of the parties as closely as possible in an acceptable manner to the end
that the transactions contemplated by this Agreement are consummated to the
extent possible.
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IN WITNESS WHEREOF, CoBancorp and FirstMerit have caused this Agreement
to be signed by their respective officers thereunto duly authorized, all as of
the day and year first written above.
FirstMerit Corporation
Attest:
/S/ TERRY E. PATTON By: /S/ JOHN R. COCHRAN
- ---------------------------- -----------------------------
Terry E. Patton, Secretary John R. Cochran, President and
Chief Executive Officer
[KCO:MERGER.WPD]
ACKNOWLEDGMENT
STATE OF OHIO )
) SS:
COUNTY OF SUMMIT )
BE IT REMEMBERED that on this 2nd day of November, 1997, personally
came before me, a Notary Public in and for the State and County aforesaid, John
R. Cochran, President and Chief Executive Officer, and Terry E. Patton, Senior
Vice President and Secretary of FirstMerit Corporation, an Ohio corporation, and
they duly executed the Agreement of Affiliation and Plan of Merger before me and
acknowledged it to be their act and deed and the act and deed of said
Corporation.
IN WITNESS WHEREOF, I have hereunto set my hand and seal this 2nd day
of November, 1997.
/S/ KEVIN C. O'NEIL
---------------------------------
Kevin C. O'Neil, Notary Public
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CoBancorp Inc.
Attest:
/S/ LOIS E. GUNNING By: /S/ JOHN S. KREIGHBAUM
- ---------------------------- ----------------------------------
Lois E. Gunning, Secretary John S. Kreighbaum, Chairman,
President and Chief Executive Officer
ACKNOWLEDGMENT
STATE OF OHIO )
) SS:
COUNTY OF LORAIN )
BE IT REMEMBERED that on this 2nd day of November, 1997, personally
came before me, a Notary Public in and for the State and County aforesaid, John
S. Kreighbaum, Chairman, President and Chief Executive Officer and Lois E.
Gunning, Secretary of CoBancorp Inc., an Ohio corporation, and they duly
executed the Agreement of Affiliation and Plan of Merger before me and
acknowledged it to be their act and deed and the act and deed of said
Corporation.
IN WITNESS WHEREOF, I have hereunto set my hand and seal this 2nd day
of November, 1997.
/S/ LINDA B. PAVLICK
------------------------------
Notary Public
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EXHIBITS TO
AGREEMENT OF AFFILIATION AND PLAN OF MERGER
FIRSTMERIT CORPORATION
AND
COBANCORP INC.
<TABLE>
<S> <C>
Form of Certificate of Merger Exhibit 1.1.2
Articles and Regulations of Surviving Corporation Exhibit 1.1.4
FirstMerit Disclosure Letter Exhibit 3.3
CoBancorp Stock Purchase Option Exhibit 3.15
CoBancorp Disclosure Letter Exhibit 4.3
Employment Agreements Exhibit 5.4(a)
Executive Severance Payments Exhibit 5.4(b)
Severance Payments Exhibit 5.4(c)
Indemnification Provisions Exhibit 5.8
Form of Affiliates Agreement for CoBancorp Exhibit 5.13(b)-1
Form of Affiliates Agreement for FirstMerit Exhibit 5.13(b)-2
Form of Legal Opinion of Brouse & McDowell Exhibit 6.2(d)
Form of Legal Opinion of Silver, Freedman & Taff, L.L.P. Exhibit 6.3(e)
</TABLE>
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APPENDIX B
Hovde Financial, Inc.
Investment Bankers & Financial Advisors
1826 Jefferson Place, N.W.
Washington, DC 20036
November 2, 1997
Board of Directors
CoBancorp Inc.
1530 West River Road North
Elyria, OH 44036
Members of the Board:
We have reviewed the Agreement and Plan of Merger dated as of the date
hereof between FirstMerit Corp., ("FirstMerit"), and CoBancorp, Inc.,
("CoBancorp") pursuant to which, among other things, CoBancorp shall be merged
with and into FirstMerit. As is set forth in the Merger Agreement ("Agreement"),
all of the issued and outstanding shares of CoBancorp, including options,
warrants or other rights with respect thereto, shall be exchanged for a mixture
of FirstMerit stock and cash ("Merger Consideration"), subject to election and
adjustment as provided for in the Agreement.
Hovde Financial, Inc. ("Hovde") specializes in providing investment
banking and financial advisory services to commercial bank and thrift
institutions. Our principals are experienced in the independent valuation of
securities in connection with negotiated underwritings, subscription and
community offerings, private placements, merger and acquisition transactions and
recapitalizations. Pursuant to a Consulting Agreement dated 3 September 1997
between CoBancorp and Hovde, Hovde was engaged to assist CoBancorp in exploring
various strategic options, including a potential affiliation of CoBancorp with a
larger financial institution. Therefore, we are familiar with CoBancorp, having
acted as its financial advisor in connection with the proposed transaction, and
having participated in the negotiations leading to the Agreement.
During the course of our engagement, we reviewed and analyzed material
bearing upon the financial and operating conditions of CoBancorp and FirstMerit,
and material prepared in connection with the proposed transaction, including the
following: the Agreement; certain publicly available information concerning
CoBancorp and FirstMerit, including consolidated financial statements for each
of the three years ended December 31, 1996, respectively, as well as subsequent
quarterly statements for the periods ended June 30, 1997 for CoBancorp and
FirstMerit, respectively; the nature and terms of recent sale and merger
transactions involving banks and bank holding companies that we consider
relevant; historical and current market data for the common stock of CoBancorp
and FirstMerit; and financial and other publicly available information provided
to us by the managements of CoBancorp and FirstMerit.
In addition, we have conducted meetings with members of the senior
management of CoBancorp and FirstMerit for the purpose of reviewing the future
prospects of both companies. In this regard, we considered the net present value
of future cash flows attributable to each share of CoBancorp and compared this
to the per share value of the Merger Consideration. We also took into account
our assessment of general economic, market
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and financial conditions and our experience in other similar transactions, as
well as our overall knowledge of the banking industry and our general
experience in securities valuations.
In rendering this opinion, we have assumed, without independent
verification, the accuracy and completeness of the financial and other
information and representations contained in the publicly available materials
provided to us by CoBancorp and FirstMerit, and in the discussions with
CoBancorp's management.
Based on the foregoing and our experience as investment bankers, we are
of the opinion that, as of the date hereof, the Merger Consideration to be
received by the shareholders of CoBancorp as described in the Agreement is fair
from a financial point of view.
Sincerely,
/s/ Hovde Financial, Inc.
HOVDE FINANCIAL, INC.
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APPENDIX C
OHIO DISSENTERS' RIGHTS STATUTE
RELIEF TO DISSENTING SHAREHOLDER
OF DOMESTIC CORPORATION
OHIO REVISED CODE 1701.85
(A) (1) A shareholder of a domestic corporation is entitled to relief as a
dissenting shareholder in respect of the proposals described in sections
1701.74, 1701.76, and 1701.84 of the Revised Code, only in compliance with this
section.
(2) If the proposal must be submitted to the shareholders of the
corporation involved, the dissenting shareholder shall be a record holder of the
shares of the corporation as to which he seeks relief as of the date fixed for
the determination of shareholders entitled to notice of a meeting of the
shareholders at which the proposal is to be submitted, and such shares shall not
have been voted in favor of the proposal. Not later than ten days after the date
on which the vote on the proposal was taken at the meeting of the shareholders,
the dissenting shareholder shall deliver to the corporation a written demand for
payment to him of the fair cash value of the shares as to which he seeks relief,
which demand shall state his address, the number and class of such shares, and
the amount claimed by him as the fair cash value of the shares.
(3) The dissenting shareholder entitled to relief under division (C) of
section 1701.84 of the Revised Code in the case of a merger pursuant to section
1701.80 of the Revised Code and a dissenting shareholder entitled to relief
under division (E) of section 1701.84 of the Revised Code in the case of a
merger pursuant to section 1701.801 [1701.80.1] of the Revised Code shall be a
record holder of the shares of the corporation as to which he seeks relief as of
the date on which the agreement of merger was adopted by the directors of that
corporation. Within twenty days after he has been sent the notice provided in
section 1701.80 or 1701.801 [1701.80.1] of the Revised Code, the dissenting
shareholder shall deliver to the corporation a written demand for payment with
the same information as that provided for in division (A)(2) of this section.
(4) In the case of a merger or consolidation, a demand served on the
constituent corporation involved constitutes service on the surviving or the new
entity, whether the demand is served before, on, or after the effective date of
the merger or consolidation.
(5) If the corporation sends to the dissenting shareholder, at the
address specified in his demand, a request for the certificates representing the
shares as to which he seeks relief, the dissenting shareholder, within fifteen
days from the date of the sending of such request, shall deliver to the
corporation the certificates requested, so that the corporation may forthwith
endorse on them a legend to the effect that demand for the fair cash value of
such shares has been made. The corporation promptly shall return such endorsed
certificates to the dissenting shareholder. A dissenting shareholder's failure
to deliver such certificates terminates his rights as a dissenting shareholder,
at the option of the corporation, exercised by written notice sent to the
dissenting shareholder, within twenty days after the lapse of the fifteen-day
period, unless a court for good cause shown otherwise directs. If shares
represented by a certificate on which such a legend has been endorsed are
transferred, each new certificate issued for them shall bear a similar legend,
together with the name of the original dissenting holder of such shares. Upon
receiving a demand for payment from a dissenting shareholder who is the record
holder of uncertificated securities, the corporation shall make an appropriate
notation of the demand for payment in its shareholder records. If uncertificated
shares for which payment has been demanded are to be transferred, any new
certificate issued for the shares shall bear the legend required for
certificated securities as provided in this paragraph. A transferee of the
shares so endorsed, or of uncertificated securities where such notation has been
made, acquires only such rights in the corporation as the original dissenting
holder of such shares had immediately after the service of a demand for payment
of the fair cash value of the shares. A request under this paragraph by the
corporation is not an admission by the corporation that the shareholder is
entitled to relief under this section.
(B) Unless the corporation and the dissenting shareholder have come to an
agreement on the fair cash value per share of the shares as to which the
dissenting shareholder seeks relief, the shareholder or the corporation, which
in case of a merger or
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consolidation may be the surviving or the new entity, within three months after
the service of the demand by the dissenting shareholder, may file a complaint in
the court of common pleas of the county in which the principal office of the
corporation that issued such shares is located, or was located when the proposal
was adopted by the shareholders of the corporation, or, if the proposal was not
required to be submitted to the shareholders, was approved by the directors.
Other dissenting shareholders, within that three month period, may join as
plaintiffs, or may be joined as defendants in any such proceeding, and any two
or more such proceedings may be consolidated. The complaint shall contain a
brief statement of the facts, including the vote and the facts entitling the
dissenting shareholder to the relief demanded. No answer to such a complaint is
required. Upon the filing of such a complaint, the court, on motion of the
petitioner, shall enter an order fixing a date for a hearing on the complaint,
and requiring that a copy of the complaint and a notice of the filing and of the
date for hearing be given to the respondent or defendant in the manner in which
summons is required to be served or substituted service is required to be made
in other cases. On the day fixed for the hearing on the complaint or any
adjournment of it, the court shall determine from the complaint and from such
evidence as is submitted by either party whether the dissenting shareholder is
entitled to be paid the fair cash value of any shares and, if so, the number and
class of such shares. If the court finds that the dissenting shareholder is so
entitled, the court may appoint one or more persons as appraisers to receive
evidence and to recommend a decision on the amount of the fair cash value. The
appraisers have such power and authority as is specified in the order of their
appointment. The court thereupon shall make a finding as to the fair cash value
of a share, and shall render judgment against the corporation for the payment of
it, with interest at such rate and from such date as the court considers
equitable. The costs of the proceeding, including reasonable compensation to the
appraisers to be fixed by the court, shall be assessed or apportioned as the
court considers equitable. The proceeding is a special proceeding, and final
orders in it may be vacated, modified, or reversed on appeal pursuant to the
rules of appellate procedure and, to the extent not in conflict with those
rules, Chapter 2505 of the Revised Code. If, during the pendency of any
proceeding instituted under this section, a suit or proceeding is or has been
instituted to enjoin or otherwise to prevent the carrying out of the action as
to which the shareholder has dissented, the proceeding instituted under this
section shall be stayed until the final determination of the other suit or
proceeding. Unless any provision in division (D) of this section is applicable,
the fair cash value of the shares that is agreed upon by the parties or as fixed
under this section shall be paid within thirty days after the date of final
determination of such value under this division, the effective date of the
amendment to the articles, or the consummation of the other action involved,
whichever occurs last. Upon the occurrence of the last such event, payment shall
be made immediately to a holder of uncertificated securities entitled to such
payment. In the case of holders of shares represented by certificates, payment
shall be made only upon and simultaneously with the surrender to the corporation
of the certificates representing the shares for which such payment is made.
(C) If the proposal was required to be submitted to the shareholders of the
corporation, fair cash value as to those shareholders shall be determined as of
the day prior to the day on which the vote by the shareholders was taken and, in
the case of a merger pursuant to section 1701.80 or 1701.801 [1701.80.1] of the
Revised Code, fair cash value as to shareholders of a constituent subsidiary
corporation shall be determined as of the day before the adoption of the
agreement of merger by the directors of the particular subsidiary corporation.
The fair cash value of a share for the purposes of this section is the amount
that a willing seller, who is under no compulsion to sell, would be willing to
accept, and that a willing buyer, who is under no compulsion to purchase, would
be willing to pay, but in no event shall the fair cash value of a share exceed
the amount specified in the demand of the particular shareholder. In computing
such fair cash value, any appreciation or depreciation in market value resulting
from the proposal submitted to the directors or to the shareholders shall be
excluded.
(D) (1) The right and obligation of a dissenting shareholder to receive such
fair cash value and to sell such shares as to which he seeks relief, and the
right and obligation of the corporation to purchase such shares and to pay the
fair cash value of them terminates if any of the following applies:
(a) The dissenting shareholder has not complied with this section,
unless the corporation by its directors waives such failure;
(b) The corporation abandons the action involved or is finally
enjoined or prevented from carrying it out, or the shareholders rescind their
adoption of the action involved;
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(c) The dissenting shareholder withdraws his demand, with the consent
of the corporation by its directors;
(d) The corporation and the dissenting shareholder have not come to
an agreement as to the fair cash value per share, and neither the shareholder
nor the corporation has filed or joined in a complaint under division (B) of
this section within the period provided.
(2) For purposes of division (D)(1) of this section, if the merger or
consolidation has become effective and the surviving or new entity is not a
corporation, action required to be taken by the directors of the corporation
shall be taken by the general partners of a surviving or new partnership or the
comparable representatives of any other surviving or new entity.
(E) From the time of the dissenting shareholder's giving of the demand, until
either the termination of the rights and obligations arising from it or the
purchase of the shares by the corporation, all other rights accruing from such
shares, including voting and dividend or distribution rights, are suspended. If
during the suspension, any dividend or distribution is paid in money upon shares
of such class, or any dividend, distribution, or interest is paid in money upon
any securities issued in extinguishment of or in substitution for such shares,
an amount equal to the dividend, distribution, or interest which, except for the
suspension, would have been payable upon such shares or securities, shall be
paid to the holder of record as a credit upon the fair cash value of the shares.
If the right to receive fair cash value is terminated other than by the purchase
of the shares by the corporation, all rights of the holder shall be restored and
all distributions which, except for the suspension, would have been made shall
be made to the holder of record of the shares at the time of termination.
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PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 20. INDEMNIFICATION OF DIRECTORS AND OFFICERS
Pursuant to Article Sixth of the Amended and Restated Articles of
Incorporation of FirstMerit, FirstMerit may indemnify any director or officer,
any former director or officer of FirstMerit and any person who is or has served
at the request of FirstMerit as a director, officer or trustee of another
corporation, partnership, joint venture, trust or other enterprise (and his
heirs, executors and administrators) against expenses, including attorneys'
fees, judgments, fines and amounts paid in settlement, actually and reasonably
incurred by him by reason of the fact that he is or was such director, officer
or trustee in connection with any threatened, pending or completed action, suit
or proceeding, whether civil, criminal, administrative or investigative, to the
full extent permitted by applicable law, as the same may be in effect from time
to time. The indemnification provided for therein is not deemed to restrict the
right of FirstMerit to (i) indemnify employees, agents and others as permitted
by such law, (ii) purchase and maintain insurance or provide similar protection
on behalf of directors, officers or such other persons against liabilities
asserted against them or expenses incurred by them arising out of their service
to FirstMerit, and (iii) enter into agreements with such directors, officers,
employees, agents or others indemnifying them against any and all liabilities
(or such lesser indemnification as may be provided in such agreements) asserted
against them or incurred by them arising out of their service to FirstMerit.
The rights provided in Article Sixth are in addition to any rights
provided by contract or as a matter of law. Ohio Revised Code Section 1701.13(E)
includes indemnification provisions similar to Article Sixth. Section 1701.13(E)
of the Ohio Revised Code provides that a corporation may indemnify or agree to
indemnify any person who was or is a party, or is threatened to be made a party,
to any threatened, pending, or completed action, suit, or proceeding, whether
civil, criminal, administrative, or investigative, other than an action by or in
the right of the corporation, by reason of the fact that he is or was a
director, officer, employee, or agent of the corporation, or is or was serving
at the request of the corporation as a director, trustee, officer, employee,
member, manager, or agent of another corporation, domestic or foreign, nonprofit
or for profit, a limited liability company, or a partnership, joint venture,
trust, or other enterprise, against expenses, including attorney's fees,
judgments, fines, and amounts paid in settlement actually and reasonably
incurred by him in connection with such action, suit, or proceeding, if he acted
in good faith and in a manner he reasonably believed to be in or not opposed to
the best interests of the corporation, and, with respect to any criminal action
or proceeding, if he had no reasonable cause to believe his conduct was
unlawful. The termination of any action, suit, or proceeding by judgment, order,
settlement, or conviction, or upon a plea of nolo contendere or its equivalent,
shall not, of itself, create a presumption that the person did not act in good
faith and in a manner he reasonably believed to be in or not opposed to the best
interests of the corporation, and, with respect to any criminal action or
proceeding, that he had reasonable cause to believe that his conduct was
unlawful. Section 1701.13(E)(2) further specifies that a corporation may
indemnify or agree to indemnify any person who was or is a party, or is
threatened to be made a party, to any threatened, pending, or completed action
or suit by or in the right of the corporation to procure a judgment in its
favor, by reason of the fact that he is or was a director, officer, employee, or
agent of the corporation, or is or was serving at the request of the corporation
as a director, trustee, officer, employee, member, manager, or agent of another
corporation, domestic or foreign, nonprofit or for profit, a limited liability
company, or a partnership, joint venture, trust, or other enterprise, against
expenses, including attorney's fees, actually and reasonably incurred by him in
connection with the defense or settlement of such action or suit, if he acted in
good faith and in a manner he reasonably believed to be in or not opposed to the
best interests of the corporation, except that no indemnification shall be made
in respect of (a) any claim, issue, or matter as to which such person shall have
been adjudged to be liable for negligence or misconduct in the performance of
his duty to the corporation unless, and only to the extent, that the court of
common pleas or the court in which such action or suit was brought determines,
upon application, that, despite the adjudication of liability, but in view of
all the circumstances of the case, such person is fairly and reasonably entitled
to indemnity for such expenses as the court of common pleas or such other court
shall deem proper, and (b) any action or suit in which the only liability
asserted against a director is pursuant to Section 1701.95 of the Ohio Revised
Code concerning unlawful loans, dividends and distribution of assets. In
addition, Section 1701.13(E) requires a corporation to pay any
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expenses, including attorney's fees, of a director in defending an action, suit,
or proceeding referred to above as they are incurred, in advance of the final
disposition of the action, suit, or proceeding, upon receipt of an undertaking
by or on behalf of the director in which he agrees to both (i) repay such amount
if it is proved by clear and convincing evidence that his action or failure to
act involved an act or omission undertaken with deliberate intent to cause
injury to the corporation or undertaken with reckless disregard for the best
interests of the corporation and (ii) reasonably cooperate with the corporation
concerning the action, suit, or proceeding.
Section 1701.13(E) further authorizes a corporation to enter into
contracts regarding indemnification and to purchase and maintain insurance on
behalf of any director, trustee, officer, employee or agent for any liability
asserted against him or arising out of his status as such. FirstMerit presently
has contracts with each of its directors and key officers and maintains
insurance for the benefit of persons entitled to indemnification.
ITEM 21. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
(a) Exhibits. See the Exhibit Index.
(b) Financial Statement Schedules. Not Applicable.
(c) Reports, Opinions or Appraisals. Furnished as Appendix B to
the Prospectus and Proxy Statement
ITEM 22. UNDERTAKINGS
(a) The undersigned registrant hereby undertakes:
(1) 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. Notwithstanding the foregoing, any increase or
decrease in volume of securities offered (if the total dollar
value of securities offered would not exceed that which was
registered) and any deviation from the low or high end of the
estimated maximum offering range may be reflected in the form
of prospectus filed with the Commission pursuant to Rule
424(b) if, in the aggregate, the changes in volume and price
represent no more than a 20% change in the maximum aggregate
offering price set forth in the "Calculation of Registration
Fee" table in the effective registration statement; and
(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.
(2) 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.
(3) 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.
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(b) The undersigned registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act of 1933, each filing of
FirstMerit'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 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 that time shall be deemed to be the initial bona fide offering thereof.
(c) The undersigned registrant hereby undertakes as follows: that prior
to any public reoffering of the securities registered hereunder through use of a
prospectus which is a part of this Registration Statement, by any person or
party who is deemed to be an underwriter within the meaning of Rule 145(c), the
issuer undertakes that such reoffering prospectus will contain the information
called for by the applicable registration form with respect to reofferings by
persons who may be deemed underwriters, in addition to the information called
for by the other Items of the applicable form.
(d) FirstMerit undertakes that every prospectus (i) that is filed
pursuant to paragraph (c) immediately preceding, or (ii) that purports to meet
the requirements of Section 10(a)(3) of the Act and is used in connection with
an offering of securities subject to Rule 415, will be filed as part of an
amendment to the Registration Statement and will not be used until such
amendment is effective, and that, for purposes of determining any liability
under the Securities Act of 1933, each such post-effective amendment shall be
deemed to be a new registration statement relating to the securities and at that
time shall be deemed to be the initial bona fide offering thereof.
(e) Insofar as indemnification for liabilities arising under the
Securities Act of 1933 may be permitted to directors, officers and controlling
persons of FirstMerit pursuant to the foregoing provisions, or otherwise,
FirstMerit 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 FirstMerit of expenses
incurred or paid by a director, officer or controlling person of FirstMerit 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, FirstMerit 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.
(f) The undersigned registrant hereby undertakes to supply by means of
a post-effective amendment all information concerning a transaction, and the
company being acquired involved therein, that was not the subject of and
included in the Registration Statement when it became effective.
(g) The undersigned registrant hereby undertakes to respond to requests
for information that is incorporated by reference into the prospectus pursuant
to Items 4, 10(b), 11, or 13 of this Form, within one business day of receipt of
such request, and to send the incorporated documents by first class mail or
other equally prompt means. This includes information contained in documents
filed subsequent to the effective date of the Registration Statement through the
date of responding to the request.
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 Akron,
State of Ohio, on the 9th day of January, 1998.
FirstMerit Corporation
By: John R. Cochran*
-------------------------------------
John R. Cochran, President and
Chief Executive Officer
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<PAGE> 136
Pursuant to the requirements of the Securities Exchange Act of 1933,
this registration statement has been signed on the 9th day of January, 1998, by
the following persons (including a majority of the Board of Directors of the
registrant) in the capacities indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE
<S> <C>
John R. Cochran* President and Chief Executive Officer
- ----------------------- (Principal Executive Officer) and Director
John R. Cochran
Jack R. Gravo* Executive Vice President, Finance and
- ----------------------- Administration
Jack R. Gravo (Principal Financial Officer and
Principal Accounting Officer)
Karen S. Belden* Director
- -----------------------
Karen S. Belden
R. Cary Blair* Director
- -----------------------
R. Cary Blair
John C. Blickle* Director
- -----------------------
John C. Blickle
Robert W. Briggs* Director
- -----------------------
Robert W. Briggs
Elizabeth A. Dalton* Director
- -----------------------
Elizabeth A. Dalton
Terry L. Haines* Director
- -----------------------
Terry L. Haines
Clifford J. Isroff* Director
- -----------------------
Clifford J. Isroff
Philip A. Lloyd II* Director
- -----------------------
Philip A. Lloyd II
Robert G. Merzweiler* Director
- -----------------------
Robert G. Merzweiler
Stephen E. Myers* Director
- -----------------------
Stephen E. Myers
Roger T. Read* Director
- -----------------------
Roger T. Read
</TABLE>
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<PAGE> 137
<TABLE>
<S>` <C>
Justin T. Rogers, Jr.* Director
- --------------------------
Justin T. Rogers, Jr.
Del Spitzer* Director
- ---------------------------
Del Spitzer
</TABLE>
*The undersigned, by signing his name hereto, does sign and execute
this registration statement on behalf of each of the indicated officers and
directors of FirstMerit Corporation pursuant to a Power of Attorney executed by
each such officer and director and filed with this registration statement.
Dated: January 9, 1998 /s/ Kevin C. O'Neil
---------------------------
Kevin C. O'Neil
Attorney-in-Fact
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<PAGE> 138
EXHIBIT INDEX
EXHIBIT NUMBER
2.1 Agreement of Affiliation and Plan of Merger by and between
FirstMerit Corporation and CoBancorp Inc. dated November 2,
1997 (incorporated by reference from Exhibit 1 to the Form
8-K filed by the registrant on November 12, 1997)
2.2 CoBancorp Inc. Stock Purchase Option by and between
FirstMerit Corporation and CoBancorp Inc. dated November 3,
1997 (incorporated by reference from Exhibit 2 to the Form
8-K filed by the registrant on November 12, 1997)
3.1 Amended and Restated Articles of Incorporation of FirstMerit
Corporation (incorporated by reference from Exhibit 3(i) to
the Form 8-K filed by the registrant on April 27, 1995)
3.2 Code of Regulations, as amended, of FirstMerit Corporation
(incorporated by reference from Exhibit 3(b) to the Form
10-K filed by the registrant on February 25, 1997)
4.1 Shareholders Rights Agreement dated October 21, 1993,
between FirstMerit Corporation and FirstMerit Bank, N.A., as
amended and restated July 18, 1996 (incorporated by
reference from Exhibit 4 to the Form 8-A/A filed by the
registrant on July 18, 1996)
5 Opinion Regarding Legality
8 Opinion Regarding Certain Tax Matters
10.1 1982 Incentive Stock Option Plan of FirstMerit Corporation
(incorporated by reference from Exhibit 4.2 to the Form S-8
(No. 33-7266) filed by the registrant on July 15, 1986)
10.2 Amended and Restated 1992 Stock Option Program of FirstMerit
Corporation (incorporated by reference from Exhibit 10(b) to
the Form 10-K filed by the registrant on February 25, 1997)
10.3 1992 Directors Stock Option Program (incorporated by
reference from Exhibit 10(c) to the Form
10-K filed by the registrant on February 25, 1997)
10.4 FirstMerit Corporation 1995 Restricted Stock Plan
(incorporated by reference from Exhibit (10)(d) to the Form
10-Q for the fiscal quarter ended March 31, 1995, filed by
the registrant on May 15, 1995)
10.5 1998 Stock Option Program of FirstMerit Corporation
(incorporated by reference from Exhibit 10(e) to the Form
10-K filed by the registrant on February 25, 1997)
10.6 1985 FirstMerit Corporation Stock Plan (CV) (incorporated
by reference from Exhibit (10)(a) to the Form S-8 (No.
33-57557) filed by the registrant on February 1, 1995)
10.7 1993 FirstMerit Corporation Stock Plan (CV) (incorporated
by reference from Exhibit (10)(b) to the Form S-8 (No.
33-57557) filed by the registrant on February 1, 1995)
10.8 Amended and Restated FirstMerit Corporation Executive
Deferred Compensation Plan (incorporated by reference from
Exhibit 10(h) to the Form 10-K filed by the registrant on
February 25, 1997)
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10.9 Amended and Restated FirstMerit Corporation Director
Deferred Compensation Plan (incorporated by reference from
Exhibit 10(i) to the Form 10-K filed by the registrant on
February 25, 1997)
10.10 FirstMerit Corporation Executive Supplemental Retirement
Plan (incorporated by reference from Exhibit 10(d) to the
Form 10-K filed by the registrant on March 15, 1996)
10.11 FirstMerit Corporation Unfunded Supplemental Benefit Plan
(incorporated by reference from Exhibit 10(j) to the Form
10-K filed by the registrant on March 16, 1992)
10.12 First Amendment to the FirstMerit Corporation Unfunded
Supplemental Benefit Plan (incorporated by reference from
Exhibit 10(v) to the Form 10-K filed by the registrant on
March 2, 1995)
10.13 Supplemental Pension Agreement of John R. Macso
(incorporated by reference from Exhibit 10(r) to the Form
10-K filed by the registrant on March 16, 1992)
10.14 FirstMerit Corporation Executive Committee Life Insurance
Program Summary (incorporated by reference from Exhibit
10(w) to the Form 10-K filed by the registrant on March 2,
1995)
10.15 Long Term Disability Plan (incorporated by reference from
Exhibit 10(x) to the Form 10-K filed by the registrant on
March 2, 1995)
10.16 Employment Agreement of John R. Cochran (incorporated by
reference from Exhibit 10(a) to the Form 10-Q filed by the
registrant on May 15, 1995)
10.17 Restricted Stock Award Agreement of John R. Cochran
(incorporated by reference from Exhibit 10(e) to the Form
10-Q filed by the registrant on May 15, 1995)
10.18 Form of FirstMerit Corporation Termination Agreement
(incorporated by reference from Exhibit 10(r) to the Form
10-K filed by the registrant on February 25, 1997)
10.19 Form of Director and Officer Indemnification Agreement and
Undertaking (incorporated by reference from Exhibit 10(s) to
the Form 8-K/A filed by the registrant on April 27, 1995)
10.20 Distribution Agreement, by and among FirstMerit Corporation,
FirstMerit Bank, N.A. and the Agents (incorporated by
reference from Exhibit (10)(ii) to the Form 8-K/A filed by
the registrant on April 27, 1995)
10.21 Form of FirstMerit Bank, N.A. Global Bank Note (Fixed Rate)
(incorporated by reference from Exhibit (10)(iii) to the
Form 8-K/A filed by the registrant on April 27, 1995)
10.22 Form of FirstMerit Bank, N.A. Global Bank Note (Floating
Rate) (incorporated by reference from Exhibit (10)(iv) to
the Form 8-K/A filed by the registrant on April 27, 1995)
21 Subsidiaries of FirstMerit Corporation
23.1 Consent of Ernst & Young LLP (relating to the audited
financial statements of CoBancorp Inc.)
23.2 Consent of Coopers & Lybrand, L.L.P. (relating to the
audited financial statements of the Registrant)
23.3 Consent of Brouse & McDowell (included in Exhibits 5 and 8)
II-7
<PAGE> 140
23.4 Consent of Hovde Financial, Inc.
24 Power of Attorney
99 Form of Proxy - CoBancorp Inc. (to be filed by amendment)
II-8
<PAGE> 141
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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
--------------------
FORM S-4 REGISTRATION STATEMENT
UNDER THE SECURITIES ACT OF 1933
--------------------
FIRSTMERIT CORPORATION
(EXACT NAME OF ISSUER AS SPECIFIED IN ITS CHARTER)
---------------
EXHIBITS
---------------
<PAGE> 1
EXHIBIT 5
BROUSE & MCDOWELL
A LEGAL PROFESSIONAL ASSOCIATION
500 FIRST NATIONAL TOWER
AKRON, OHIO 44308
January 9, 1998
FirstMerit Corporation
III Cascade Plaza, 7th Floor
Akron, Ohio 44308
Gentlemen:
We have acted as legal counsel to you with regard to the Agreement of
Affiliation and Plan of Merger dated November 2, 1997, between FirstMerit
Corporation, an Ohio corporation ("FirstMerit" or "Company") and CoBancorp Inc.
("CoBancorp) ("Merger Agreement").
In providing our opinions herein, reference is made to: (a) the
registration statement on Form S-4 dated as of the date of this opinion, and any
amendments thereto (the"Registration Statement"), and filed with the Securities
and Exchange Commission ("Commission"); and (b) the terms of the Merger
Agreement between FirstMerit and CoBancorp; all as described in the Registration
Statement.
Unless otherwise defined in this letter, all capitalized terms have the
same meanings as set forth in the Merger Agreement. Our opinion is provided to
you as a legal opinion only, and not as a guaranty or warranty, and is limited
to the specific transactions, documents and matters described above.
In connection with this opinion, we have examined and are familiar with
originals or copies, certified or otherwise identified to our satisfaction, of
(a) the Merger Agreement, (b) the CoBancorp Inc. Stock Purchase Option dated
November 3, 1997, (c) the Registration Statement, and (d) such other agreements,
certificates and documents as we have deemed necessary or appropriate in order
to enable us to render the opinions below.
In our examination, we have assumed the genuineness of all signatures,
the legal capacity of all natural persons, the authority of all persons signing
documents, the authenticity of all documents submitted to us as originals, the
conformity to original documents of all documents submitted to us as certified,
conformed or photostatic copies and the authenticity of the originals of such
copies. In rendering the opinions set forth below, we have relied upon certain
statements, representations and covenants of CoBancorp and FirstMerit contained
in the Merger Agreement and in documents related thereto. We have made no
independent investigation with regard to statements, representations or
covenants made or to be made in the Merger Agreement and in documents related
thereto. We assume that all such statements and representations are, and will be
at the Effective Time, true and complete, but we express no opinion as to their
accuracy or completeness. We also assume that the transactions described in the
Merger Agreement and in the Registration Statement will be carried out in
accordance with its terms.
We are of the opinion that:
1. The Company is a corporation organized and existing in good standing
under the laws of the State of Ohio.
2. The Shares that may be issued or transferred and sold pursuant to
the Registration Statement are duly authorized, and will be, when issued or
transferred and sold in accordance with the Registration Statement and the
prospectus comprising a part thereof, validly issued, fully paid and
nonassessable.
Our opinion is based on the law, judicial decisions, and such other
legal authorities as we have deemed necessary
<PAGE> 2
or appropriate for purposes of our opinion, as each exists as of the date of
this opinion. Existing laws may be changed by legislation or promulgation of
regulations or may be interpreted differently than they are at present by
courts, and such changes may alter the conclusions reached in this opinion. No
opinion is rendered with respect to any issue or matter not expressly stated
herein. In addition, our conclusions are based upon the law currently in effect,
which is subject to change on a prospective or retroactive basis. If any
assumption or representation described above or contained in the Merger
Agreement or related documents is not true, correct and complete, or in the
event of a change in law adversely affecting the conclusions reached in this
letter, our opinion shall be void and of no force or effect.
We disclaim any undertaking to advise you of changes which thereafter
may be brought to our attention, including any change in the law, whether by
legislative or regulatory action, judicial interpretation or otherwise, or of
any change of facts as they presently exist.
We hereby consent to the filing of this opinion as Exhibit 5 to the
Registration Statement filed by the Company to effect the registration of the
Shares and any amendments thereto, and to the reference to this firm under the
caption "Legal Opinion" in the prospectus comprising a part of the Registration
Statement.
Very truly yours,
BROUSE & McDOWELL
/s/ Brouse & McDowell
<PAGE> 1
EXHIBIT 8
BROUSE & MCDOWELL
A LEGAL PROFESSIONAL ASSOCIATION
500 FIRST NATIONAL TOWER
AKRON, OHIO 44308
January 9, 1998
FirstMerit Corporation
III Cascade Plaza, 7th Floor
Akron, Ohio 44308
Gentlemen:
We have acted as legal counsel to you with regard to the Agreement of
Affiliation and Plan of Merger dated November 2, 1997, between FirstMerit
Corporation, an Ohio corporation ("FirstMerit" or "Company") and CoBancorp Inc.
("CoBancorp) ("Merger Agreement"). This opinion is rendered pursuant to the
requirements of the Merger Agreement and pursuant to the requirements of Item
21(a) of Form S-4 under the Securities Act of 1933, as amended.
In providing our opinions herein, reference is made to: (a) the
registration statement on Form S-4 dated as of the date of this opinion, and any
amendments thereto (the"Registration Statement"), and filed with the Securities
and Exchange Commission ("Commission") in connection with the registration for
issuance by FirstMerit of up to 4,300,000 shares of the Company's common stock,
no par value ("Shares"); (b) the terms of the Merger Agreement between
FirstMerit and CoBancorp; and (c) the provisions for the issuance of the Shares;
all as described in the Registration Statement.
Unless otherwise defined in this letter, all capitalized terms have the
same meanings as set forth in the Merger Agreement. Our opinion is provided to
you as a legal opinion only, and not as a guaranty or warranty, and is limited
to the specific transactions, documents and matters described above.
In connection with this opinion, we have examined and are familiar with
originals or copies, certified or otherwise identified to our satisfaction, of
(a) the Merger Agreement, (b) the CoBancorp Inc. Stock Purchase Option dated
November 3, 1997, (c) the Registration Statement, and (d) such other
certificates and documents as we have deemed necessary or appropriate in order
to enable us to render the opinions below. In our examination, we have assumed
the genuineness of all signatures, the legal capacity of all natural persons,
the authority of all persons signing documents, the authenticity of all
documents submitted to us as originals, the conformity to original documents of
all documents submitted to us as certified, conformed or photostatic copies and
the authenticity of the originals of such copies. In rendering the opinions set
forth below, we have relied upon certain statements, representations and
covenants of CoBancorp and FirstMerit contained in the Merger Agreement and in
documents related thereto. We have made no independent investigation with regard
to statements, representations or covenants made or to be made in the Merger
Agreement and in documents related thereto. We assume that all such statements
and representations are, and will be at the Effective Time, true and complete,
but we express no opinion as to their accuracy or completeness. We also assume
that the transactions described in the Merger Agreement and in the Registration
Statement will be carried out in accordance with its terms.
<PAGE> 2
In rendering our opinion, we have assumed that (a) the proposed merger
of CoBancorp with and into FirstMerit will qualify as a statutory merger under
the Ohio General Corporation Law, and (b) CoBancorp and FirstMerit will satisfy
all of the terms of the Merger Agreement and the respective covenants and
agreements set forth therein.
Based upon and subject to the foregoing, our opinion, as delineated in
the discussion set forth in the prospectus contained in the Registration
Statement under the heading "The Merger -- Material U.S. Federal Income Tax
Consequences," accurately describes the material federal income tax consequences
generally applicable to the Merger.
No opinion is rendered on any federal, state or local tax matter except
those expressly stated herein. Accordingly, this opinion should not be construed
as applying in any manner to any tax aspect of the Merger other than set forth
above. In addition, no opinion may be implied or inferred beyond that which is
expressly stated herein.
This opinion is based upon the current provisions of the Code, the
Treasury Regulations promulgated thereunder, and the interpretations thereof by
the Internal Revenue Service and those courts having jurisdiction over such
matters as of the date hereof, all of which are subject to change either
prospectively or retroactively. Existing laws may be changed by legislation or
promulgation of regulations or may be interpreted differently than they are at
present by courts, and such changes may alter the conclusions reached in this
opinion. No opinion is rendered with respect to the effect, if any, of any
pending or future legislation or administrative regulation or ruling which may
have a bearing on any of the foregoing.
We disclaim any undertaking to advise you of changes which thereafter
may be brought to our attention, including any change in the law, whether by
legislative or regulatory action, judicial interpretation or otherwise, or of
any change of facts as they presently exist.
We consent to the filing of this opinion as an exhibit to the
Registration Statement and to the reference to this firm under the caption
"Legal Matters" in the prospectus comprising a part of the Registration
Statement.
Very truly yours,
BROUSE & McDOWELL
/s/ Brouse & McDowell
<PAGE> 1
EXHIBIT 21
<TABLE>
<CAPTION>
SUBSIDIARIES OF FIRSTMERIT CORPORATION
<S> <C>
Citizens National Bank National Banking Association
FirstMerit Bank, N.A. National Banking Association
Peoples National Bank National Banking Association
Peoples Bank, N.A. National Banking Association
Citizens Savings Corporation of Stark County Ohio corporation
Citizens Investment Corporation Ohio corporation
FirstMerit Community Development Corporation Ohio corporation
FirstMerit Credit Life Insurance Company Arizona corporation
</TABLE>
<PAGE> 1
EXHIBIT 23.1
Consent of Ernst & Young LLP
We consent to the reference to our firm under the caption "Experts" and to the
incorporation by reference in the Proxy Statement of CoBancorp Inc., that is
made a part of the Registration Statement (Form S-4, No. 333-00000) and
Prospectus of FirstMerit Corporation for the registration of 4,300,000 shares of
its common stock, of our report dated January 21, 1997, with respect to the
consolidated financial statements of CoBancorp Inc., incorporated by reference
in its Annual Report (Form 10-K) for the year ended December 31, 1996, filed
with the Securities and Exchange Commission.
/s/ Ernst & Young LLP
Cleveland, Ohio
January 8, 1998
<PAGE> 1
EXHIBIT 23.2
Consent of Coopers & Lybrand, L.L.P.
We consent to incorporation by reference in Registration Statement (Form S-4),
of our report dated January 16, 1997, relating to the consolidated balance
sheets of FirstMerit Corporation and subsidiaries as of December 31, 1996 and
1995, and the related consolidated statements of income, shareholders' equity,
and cash flows for each of the years in the three year period ended December 31,
1996, which report appears in the 1996 Annual Report on Form 10-K of FirstMerit
Corporation, as amended by Form 10-K/A filed on April 30, 1997. We also consent
to the reference to our firm under the caption "Expert."
/s/ Coopers & Lybrand L.L.P.
Akron, Ohio
January 8, 1998
<PAGE> 1
EXHIBIT 23.3
Consent of Hovde Financial, Inc.
We consent to the inclusion in this Registration Statement on Form S-4 of
FirstMerit Corporation of our opinion set forth as Appendix B to the Prospectus
and Proxy Statement, which is part of the Registration Statement, and to the
reference to our firm and summarization of our opinion in the Prospectus and
Proxy Statement under the captions "Opinion of CoBancorp's Financial Advisor."
/s/ Hovde Financial, Inc.
Hovde Financial, Inc.
Washington, D.C.
January 8, 1998
<PAGE> 1
EXHIBIT 24
FIRSTMERIT CORPORATION
LIMITED POWER OF ATTORNEY
REGISTRATION STATEMENT ON FORM S-4
The undersigned directors and officers of FirstMerit Corporation (the
"Company") hereby constitute and appoint Terry E. Patton, and/or Kevin C.
O'Neil, and each of them, with full power of substitution and resubstitution, as
attorneys or attorney of the undersigned, to execute and file under the
Securities Act of 1933 a Registration Statement on Form S-4 relating to the
registration of shares of the Common Stock of the Company relating to the
acquisition of CoBancorp Inc., and any and all amendments and exhibits thereto,
including pre-and post-effective amendments, and any and all applications or
other documents to be filed with the Securities and Exchange Commission,
National Association of Securities Dealers and any state securities agencies
pertaining to such registration, with full power and authority to do and perform
any and all acts and things whatsoever necessary, appropriate or desirable to be
done in the premises, or in the name, place and stead of the said directors and
officers, hereby ratifying and approving the acts of said attorneys and any of
them and any such substitute.
Effective the 18th day of December, 1997, unless otherwise indicated
below.
<TABLE>
<S> <C>
/s/ John R. Cochran /s/ Jack R. Gravo
- ------------------------------------- -----------------------------------------------------
John R. Cochran Jack R. Gravo
President and Chief Executive Officer Executive Vice President, Finance and Administration
(Chief Financial Officer and Chief Accounting Officer)
/s/ Karen S. Belden /s/ R. Cary Blair
- ------------------------------------- -----------------------------------------------------
Karen S. Belden, Director R. Cary Blair, Director
/s/ John C. Blickle /s/ Robert W. Briggs
- ------------------------------------- -----------------------------------------------------
John C. Blickle, Director Robert W. Briggs, Director
/s/ Elizabeth A. Dalton /s/ Terry L. Haines
- ------------------------------------- -----------------------------------------------------
Elizabeth A. Dalton, Director Terry L. Haines, Director
/s/ Clifford J. Isroff /s/ Philip A. Lloyd, II
- ------------------------------------- -----------------------------------------------------
Clifford J. Isroff, Director Philip A. Lloyd, II, Director
/s/ Robert G. Merzweiler /s/ Stephen E. Myers
- ------------------------------------- -----------------------------------------------------
Robert G. Merzweiler, Director Stephen E. Myers, Director
/s/ Del Spitzer /s/ Roger T. Read
- ------------------------------------- -----------------------------------------------------
Del Spitzer, Director Roger T. Read, Director
/s/ Justin T. Rogers
- -------------------------------------
Justin T. Rogers, Director
</TABLE>
<PAGE> 1
EXHIBIT 99
COBANCORP INC. REVOCABLE PROXY
SPECIAL MEETING OF STOCKHOLDERS
______, 1998
The undersigned hereby appoints the Board of Directors of CoBancorp Inc.
(the "Company"), and the survivor of them, with full powers of substitution, to
act as attorney and proxies for the undersigned to vote all shares of common
stock of the Company which the undersigned is entitled to vote at the Special
Meeting of Stockholders (the "Meeting"), to be held on ____, 1998 at 10:30 A.M.,
and at any and all adjournments thereof, as follows:
I. The adoption of the Agreement of Affiliation and Plan of Merger dated
November 2, 1997, by and between FirstMerit Corporation and CoBancorp Inc.
/ / FOR / / WITHHELD
In their discretion, the proxies are authorized to vote on such other
matters as may properly come before the Meeting or any adjournment thereof.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE LISTED PROPOSAL.
THIS PROXY WILL BE VOTED AS DIRECTED, BUT IF NO INSTRUCTIONS ARE SPECIFIED, THIS
PROXY WILL BE VOTED FOR THE PROPOSAL STATED. IF ANY OTHER BUSINESS IS PRESENTED
AT SUCH MEETING, THIS PROXY WILL BE VOTED BY THOSE NAMED IN THIS PROXY IN THEIR
BEST JUDGMENT. AT THE PRESENT TIME, THE BOARD OF DIRECTORS KNOWS OF NO OTHER
BUSINESS TO BE PRESENTED AT THE MEETING.
<PAGE> 2
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
Should the undersigned be present and elect to vote at the Meeting or any
adjournment thereof, and after notification to the Secretary of the Company at
the Meeting of the stockholder's decision to terminate this Proxy, then the
power of such attorneys and proxies shall be deemed terminated and of no
further force and effect.
The undersigned acknowledges receipt from the Company, prior to the
execution of this Proxy, of Notice to the Meeting and a Prospectus and Proxy
Statement dated________, 1998.
Dated:
________________
-----------------------------
SIGNATURE OF STOCKHOLDER
-----------------------------
SIGNATURE OF STOCKHOLDER
Please sign exactly as your name(s) appear(s) above on this card. When signing
as attorney, executor, administrator, trustee or guardian, please give your full
title. If shares are held jointly, each holder should sign.
PLEASE PROMPTLY COMPLETE, DATE, SIGN AND MAIL THIS PROXY
IN THE ENCLOSED POSTAGE-PAID ENVELOPE
