<PAGE> 1
[SUMMIT BANCORP LETTERHEAD]
This Form of Prospectus is filed pursuant to Rule 424(b)(2) under the
Securities Act of 1933, as amended, and relates to Registration Statement No.
333-24707.
May 6, 1997
Dear Shareholder:
You are cordially invited to attend a Special Meeting of Shareholders
of Summit Bancorp on Thursday, June 12, 1997, at 10:00 a.m., local time, at
Fairlawn Country Club, 200 N. Wheaton Road, Akron, Ohio 44313- 3963. At the
meeting, holders of Summit's Common Stock will be asked to approve the merger of
Summit and FirstFederal Financial Services Corp. On the effective date of the
merger, each outstanding share of Summit Common Stock will be canceled and
exchanged for 1.87 shares (the "Exchange Ratio") of FirstFederal Common Stock,
subject to adjustment as described in the accompanying Proxy Statement/
Prospectus.
The merger will provide market liquidity to Summit's shareholders and
the potential for achieving a significant increase in long-term value. Summit
has received the opinion of McDonald & Company Securities, Inc. that, as of the
date of the accompanying Proxy Statement/Prospectus, the Exchange Ratio was fair
to the holders of Summit Common Stock from a financial point of view. A
discussion of the opinion, as well as additional information regarding the
merger, Summit and FirstFederal, is contained in the accompanying Proxy
Statement/Prospectus, which I urge you to read carefully.
Approval of the merger requires the affirmative vote of the holders
of at least a majority of the outstanding shares of Summit Common Stock. An
abstention or failure to vote will have the practical effect of a vote against
the merger; therefore, it is important that you execute and deliver the enclosed
proxy for receipt by Summit no later than the meeting date. If your Summit
shares are held in the name of a brokerage firm or nominee, only that firm or
nominee can execute a proxy on your behalf and only upon receipt of your voting
instructions on the enclosed form of proxy; thus, I encourage you to contact
today the person responsible for your account in order to ensure that your
shares are voted. Thank you.
Sincerely,
/s/ David C. Vernon
David C. Vernon
Chairman, Chief Executive
Officer and President
<PAGE> 2
SUMMIT BANCORP
2680 West Market Street
Akron, Ohio 44333
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
A special meeting of Shareholders of Summit Bancorp ("Summit") will
be held on Thursday, June 12, 1997, at 10:00 a.m. (local time) at Fairlawn
Country Club, 200 N. Wheaton Road, Akron, Ohio 44313-3963, for the following
purposes:
1. Approve the merger of Summit and FirstFederal Financial
Services Corp ("FirstFederal"), pursuant to that certain
Agreement of Affiliation and Plan of Merger dated December
30, 1996 (the "Merger Agreement"), by and between
FirstFederal and Summit; and
2. Transact such other business as may properly come before
the meeting or any adjournment or postponement thereof.
Summit shareholders of record as of the close of business on May 1,
1997, will be entitled to receive notice of and vote at the special meeting and
any adjournment(s) thereof.
The Merger Agreement provides for the merger of Summit with and into
FirstFederal, as described in the accompanying Proxy Statement/Prospectus, which
serves as a Prospectus for FirstFederal's Common Stock and a Proxy Statement
with respect to the Special Meeting of Summit's Shareholders. A copy of the
Merger Agreement is attached to the Proxy Statement/Prospectus as Appendix I.
Any proxy given by a shareholder may be revoked by submitting a duly
executed proxy or notice of revocation bearing a later date. Any shareholder
present at the special meeting may revoke his or her proxy and vote personally
on the merger and each other matter that may be considered at the special
meeting.
You are cordially invited to attend the meeting in person. Whether or
not you plan to attend the special meeting, you are urged to complete, date,
sign, and return the enclosed Proxy in the envelope provided as soon as
possible.
By Order of the Board of Directors
/s/ Deborah L. Jacob
Deborah L. Jacob,
Secretary
Akron, Ohio
May 6, 1997
<PAGE> 3
PROXY STATEMENT
OF
SUMMIT BANCORP
FOR THE SPECIAL MEETING OF SHAREHOLDERS
TO BE HELD ON JUNE 12, 1997
----------
PROSPECTUS
OF
FIRSTFEDERAL FINANCIAL SERVICES CORP
UP TO 605,000 SHARES OF COMMON STOCK,
PAR VALUE $1.00 PER SHARE
----------
This Proxy Statement/Prospectus relates to the proposed merger of
Summit Bancorp, an Ohio corporation ("Summit"), with FirstFederal Financial
Services Corp, an Ohio corporation ("FirstFederal"), as contemplated by the
Agreement of Affiliation and Plan of Merger, dated as of December 30, 1996 (the
"Merger Agreement"), by and among FirstFederal and Summit. The Merger Agreement
is included as Appendix I hereto and incorporated by reference herein.
This Proxy Statement/Prospectus is being furnished to the holders of
shares of common stock, no par value, of Summit ("Summit Common Stock") in
connection with the solicitation of proxies by the Board of Directors of Summit
(the "Summit Board") for use at a Special Meeting of Shareholders (the "Special
Meeting"), scheduled to be held at Fairlawn Country Club, located at 200 N.
Wheaton Road, Akron, Ohio, on June 12, 1997, at 11:00 a.m., local time, and at
any and all adjournments and postponements thereof.
At the Special Meeting, the holders of Summit Common Stock will
consider and vote on a proposal to approve the Merger Agreement and the
transactions contemplated thereby and any other matter that may properly come
before the Special Meeting or any adjournments or postponements thereof. The
Board of Directors of Summit (the "Summit Board") is not aware of any other
business to come before the Special Meeting.
Subject to the terms, conditions and procedures set forth in the
Merger Agreement, each share of Summit Common Stock issued and outstanding
immediately prior to the Merger (other than shares held by holders who perfect
appraisal rights and other excluded shares) will be converted into the right to
receive 1.87 shares of the common stock, par value $1.00 per share, of
FirstFederal ("FirstFederal Common Stock") for each share of Summit Common
Stock held (the "Exchange Ratio") at the Effective Time (as defined herein) of
the Merger, with cash paid in lieu of fractional share interests. The Merger
Agreement provides that in the event of a change in the number of shares of
FirstFederal Common Stock between the date of the Merger Agreement and the
Effective Time by reason of any reclassification, recapitalization, split-up,
combination or exchange of shares, or by stock dividend or stock split thereon,
an appropriate adjustment be made to the Exchange Ratio. Assuming the
occurrence of the five-for-four stock split in the form of a stock dividend
that has been declared by FirstFederal, payable on May 22, 1997 to holders of
record of FirstFederal Common Stock as of May 2, 1997, the Exchange Ratio at
the Effective Time will be 2.3375. As of December 30, 1996, the last trading
day preceding public announcement of the proposed Merger, the last reported
sale prices for FirstFederal Common Stock and Summit Common Stock were $38.875
and $40.00 respectively. Summit's financial advisor, McDonald & Company
Securities, Inc. ("McDonald & Company"), has rendered an opinion to the effect
that as of May 6, 1997, the Exchange Ratio was fair from a financial point of
view to the shareholders of Summit. The Merger is subject to certain
conditions, including the approval of the Merger Agreement and the Merger by
the shareholders of Summit. In addition, the Merger Agreement may be terminated
by either party prior to the Effective Time if certain events occur or do not
occur. For additional information regarding the Merger Agreement and the terms
of the Merger, see "The Merger."
This Proxy Statement/Prospectus also constitutes a prospectus of
FirstFederal, filed as part of the Registration Statement (defined below) with
respect to the shares of FirstFederal Common Stock to be issued upon
consummation of the Merger pursuant to the terms of the Merger Agreement.
This Proxy Statement/Prospectus, and the accompanying notice and form
of proxy, are first being mailed to shareholders of Summit on or about May 6,
1997.
<PAGE> 4
----------
THE SHARES OF FIRSTFEDERAL COMMON STOCK OFFERED HEREBY HAVE NOT BEEN
APPROVED OR DISAPPROVED BY THE SECURITIES AND EXCHANGE COMMISSION, THE FEDERAL
RESERVE BOARD, THE OHIO SUPERINTENDENT OF FINANCIAL INSTITUTIONS, ANY STATE
SECURITIES COMMISSION OR ANY OTHER GOVERNMENTAL AGENCY, AND NEITHER THE
SECURITIES AND EXCHANGE COMMISSION, THE OHIO SUPERINTENDENT OF FINANCIAL
INSTITUTIONS, THE FEDERAL RESERVE BOARD, ANY STATE SECURITIES COMMISSION NOR ANY
OTHER AGENCY HAS PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROXY
STATEMENT/PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
THE SHARES OF FIRSTFEDERAL COMMON STOCK OFFERED HEREBY ARE NOT
SAVINGS ACCOUNTS, DEPOSITS OR OTHER OBLIGATIONS OF ANY BANK OR SAVINGS
ASSOCIATION AND ARE NOT INSURED BY THE FEDERAL DEPOSIT INSURANCE CORPORATION,
THE BANK INSURANCE FUND, THE SAVINGS ASSOCIATION INSURANCE FUND OR ANY OTHER
GOVERNMENTAL AGENCY.
----------
The date of this Proxy Statement/Prospectus is May 6, 1997
ii
<PAGE> 5
AVAILABLE INFORMATION
FirstFederal and Summit are subject to the informational reporting
requirements of the Securities Exchange Act of 1934, as amended (the "Exchange
Act") and, in accordance therewith, file reports, proxy statements and other
information with the Securities and Exchange Commission (the "SEC"). Such
reports, proxy statements and other information filed by FirstFederal and Summit
can be obtained, upon payment of prescribed fees, from the Public Reference
Section of the SEC at Judiciary Plaza, 450 Fifth Street, N.W., Washington D.C.
20549. In addition, such information can be inspected and copied at the public
reference facilities of the SEC located at 450 Fifth Street, N.W., Room 1024,
Washington, D.C. 20549 and at the SEC's Regional Offices located at Citicorp
Center, Suite 1400, 500 West Madison Street, Chicago, Illinois 60661 and 7 World
Trade Center, 13th Floor, New York, New York 10048. In addition, the SEC
maintains a Web site that contains reports, proxy and information statements and
other information regarding FirstFederal's and Summit's electronic filings with
the SEC. The address of the SEC's Web site is "http://www.sec.gov."
FirstFederal has filed with the SEC a registration statement on Form
S-4 (together with all amendments, schedules, and exhibits thereto, the
"Registration Statement") under the Securities Act of 1933, as amended (the
"Securities Act"), with respect to the shares of FirstFederal Common Stock to be
issued pursuant to and as contemplated by the Merger Agreement. This Proxy
Statement/Prospectus does not contain all the information set forth in the
Registration Statement, certain parts of which have been omitted in accordance
with the rules and regulations of the SEC. The Registration Statement is
available for inspection and copying as set forth above. Statements contained in
this Proxy Statement/Prospectus or in any document incorporated by reference in
this Proxy Statement/Prospectus as to the contents of any contract or other
document are not necessarily complete, and in each instance reference is made to
the copy of such contract or other document filed as an exhibit to the
Registration Statement, each such statement being qualified in all respects by
such reference.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
THIS PROXY STATEMENT/PROSPECTUS INCORPORATES DOCUMENTS BY REFERENCE
WHICH ARE NOT PRESENTED HEREIN OR DELIVERED HEREWITH. SUCH DOCUMENTS (EXCLUDING
EXHIBITS NOT SPECIFICALLY INCORPORATED BY REFERENCE) ARE AVAILABLE, WITHOUT
CHARGE, TO ANY PERSON, INCLUDING ANY BENEFICIAL OWNER, TO WHOM THIS PROXY
STATEMENT/PROSPECTUS IS DELIVERED BY OR ON BEHALF OF FIRSTFEDERAL OR SUMMIT,
UPON THE WRITTEN OR ORAL REQUEST OF SUCH PERSON. SUCH REQUEST SHOULD BE MADE, IN
THE CASE OF DOCUMENTS RELATING TO FIRSTFEDERAL, TO L. DWIGHT DOUCE, EXECUTIVE
VICE PRESIDENT, SECRETARY AND CHIEF OPERATING OFFICER, FIRSTFEDERAL FINANCIAL
SERVICES CORP, 135 EAST LIBERTY STREET, WOOSTER, OHIO 44691, TELEPHONE (330)
264-8001; OR IN THE CASE OF DOCUMENTS RELATING TO SUMMIT, TO CORPORATE
SECRETARY, SUMMIT BANCORP, 2680 WEST MARKET STREET, AKRON, OHIO 44333, TELEPHONE
(330) 864-8080. IN ORDER TO ENSURE TIMELY DELIVERY OF THE DOCUMENTS PRIOR TO THE
SPECIAL MEETING, ANY REQUEST SHOULD BE MADE BY JUNE 5, 1997. PERSONS REQUESTING
COPIES OF EXHIBITS TO DOCUMENTS WHICH ARE NOT SPECIFICALLY INCORPORATED BY
REFERENCE IN SUCH DOCUMENTS MAY BE CHARGED THE COST OF REPRODUCTION AND MAILING.
The following documents previously filed with the SEC by
FirstFederal (File No. 0-17894) are hereby incorporated by reference in this
Proxy Statement/Prospectus:
1. The Annual Report on Form 10-K of FirstFederal for the fiscal
year ended December 31, 1996 (the "FirstFederal 1996 10-K").
2. The Current Report on Form 8-K of FirstFederal filed with the
SEC on January 8, 1997.
3. The Current Report on Form 8-K of FirstFederal filed with the
SEC on March 25, 1997.
4. The Current Report on Form 8-K of FirstFederal filed with the
SEC pursuant to SEC Release No. 34-90721 (together with the
following portions of FirstFederal's Registration Statement on
Form S-4 filed with the SEC on February 23, 1989 (File No.
33-27243), and of all Post-Effective Amendments to such
Registration Statement: "Market Prices and Dividends" and
"The Holding Company Merger and Reorganization--Comparison of
Stockholder Rights").
All documents filed by FirstFederal with the SEC pursuant to Sections
13(a), 13(c), 14 or 15(d) of the Exchange Act from the date of this prospectus
prior to the date of the Special Meeting shall be deemed to be incorporated by
reference herein and to be a part hereof from the date of filing such documents.
The Annual Report on Form 10-KSB of Summit for the fiscal year ended
December 31, 1996 (the "Summit 1996 10-KSB"), previously filed with the SEC by
Summit (File No. 33-29708), is hereby incorporated by reference in this Proxy
Statement/Prospectus. A copy of the Summit 1996 10-KSB accompanies this Proxy
Statement/Prospectus.
All documents filed by Summit with the SEC pursuant to Sections
13(a), 13(c), 14 or 15(d) of the Exchange Act from the date of this Proxy
Statement/Prospectus prior to the date of the Special Meeting shall be deemed to
be incorporated by reference herein and to be a part hereof from the date of
filing such documents.
iii
<PAGE> 6
Any statement contained in a document incorporated or deemed to be
incorporated by reference herein shall be deemed to be modified or superseded
for purposes of this Proxy Statement/Prospectus to the extent that a statement
contained herein or in any other subsequently filed document which also is
deemed to be incorporated by reference herein modifies or supersedes such
statement. Any statement so modified or superseded shall not be deemed, except
as so modified or superseded, to constitute a part of this Proxy
Statement/Prospectus.
----------
All information contained in this Proxy Statement/Prospectus with
respect to FirstFederal and its subsidiaries has been supplied by FirstFederal,
all information with respect to Summit and its subsidiaries has been supplied by
Summit, and all information with respect to McDonald & Company and its analyses
and opinion has been supplied by McDonald & Company.
No person is authorized to give any information or to make any
representation other than those contained or incorporated by reference in this
Proxy Statement/Prospectus, and, if given or made, such information or
representation should not be relied upon as having been authorized. This Proxy
Statement/Prospectus does not constitute an offer to sell, or a solicitation of
an offer to purchase, the securities offered by this Proxy Statement/Prospectus,
or the solicitation of a proxy, in any jurisdiction, to or from any person to
whom or from whom it is unlawful to make such offer, solicitation of an offer or
proxy solicitation in such jurisdiction.
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iv
<PAGE> 7
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
AVAILABLE INFORMATION................................................................................iii
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE......................................................iii
TABLE OF CONTENTS......................................................................................v
SUMMARY................................................................................................1
The Parties to the Merger...................................................................1
FirstFederal Financial Services Corp..............................................1
Summit Bancorp....................................................................1
The Special Meeting.........................................................................2
The Merger..................................................................................2
General...........................................................................2
Reasons for the Merger............................................................2
Merger Consideration..............................................................2
Treatment of Summit Stock Options and Stock Appreciation Rights...................3
Opinion of Financial Advisor......................................................3
Effective Time and Closing Date...................................................3
Appraisal Rights..................................................................3
Interests of Certain Persons in the Merger........................................4
Conditions to the Merger..........................................................4
Regulatory Approvals..............................................................4
Waiver and Amendment; Termination.................................................4
Conduct of Business Pending the Merger............................................5
Expenses; Break-up Fee............................................................5
Accounting Treatment..............................................................5
Certain Federal Income Tax Consequences of the Merger.............................5
Effect of the Merger on Rights of Shareholders....................................6
Nasdaq Listing....................................................................6
COMPARATIVE STOCK PRICE AND DIVIDEND INFORMATION.......................................................7
RECENT DEVELOPMENTS....................................................................................9
SELECTED CONSOLIDATED FINANCIAL AND OTHER DATA
OF FIRSTFEDERAL FINANCIAL SERVICES CORP.............................................................10
SELECTED CONSOLIDATED FINANCIAL AND OTHER DATA
OF SUMMIT BANCORP...................................................................................12
COMPARATIVE UNAUDITED PER SHARE DATA..................................................................13
FIRSTFEDERAL FINANCIAL SERVICES CORP..................................................................14
General....................................................................................14
Pending Structural Change..................................................................14
SUMMIT BANCORP........................................................................................16
General....................................................................................16
Pending Structural Change..................................................................17
THE SPECIAL MEETING...................................................................................17
Matters to be Considered at the Special Meeting............................................17
Record Date; Voting at the Special Meeting; Vote Required..................................18
Proxies....................................................................................18
THE MERGER............................................................................................19
General....................................................................................19
Background of the Merger...................................................................19
Reasons for the Merger.....................................................................20
Treatment of Summit Stock Options and Stock Appreciation Rights............................21
Merger Consideration.......................................................................21
Opinion of Financial Advisor...............................................................22
Effective Time and Closing Date............................................................25
Appraisal Rights...........................................................................25
Fractional Shares..........................................................................26
Exchange of Certificates...................................................................26
Interests of Certain Persons in the Merger.................................................27
Representations and Warranties.............................................................28
</TABLE>
v
<PAGE> 8
<TABLE>
<S> <C>
Conditions to the Merger...................................................................28
Regulatory Approvals.......................................................................29
Waiver and Amendment; Termination..........................................................30
Conduct of Business Pending the Merger.....................................................31
Expenses...................................................................................32
Break-Up Fee...............................................................................32
Accounting Treatment.......................................................................33
Resales of FirstFederal Common Stock by Affiliates.........................................34
Certain Federal Income Tax Consequences of the Merger......................................34
Nasdaq Listing.............................................................................35
MANAGEMENT AFTER THE MERGER...........................................................................36
DESCRIPTION OF FIRSTFEDERAL COMMON STOCK..............................................................36
General....................................................................................36
Dividends..................................................................................36
Voting Rights..............................................................................37
Preemptive Rights..........................................................................37
Liquidation Rights.........................................................................37
Assessment and Redemption..................................................................37
Classified Board...........................................................................37
Antitakeover Provisions....................................................................37
Fair Price Provision.......................................................................38
COMPARISON OF RIGHTS OF SHAREHOLDERS OF FIRSTFEDERAL FINANCIAL
SERVICES CORP AND SUMMIT BANCORP....................................................................39
Introduction...............................................................................39
Issuance of Capital Stock..................................................................39
Shareholder Action by Unanimous Consent....................................................39
Advance Notice Requirements for Nominations of Directors...................................40
Number and Term of Directors...............................................................40
Removal of Directors.......................................................................40
Cumulative Voting Not Permitted............................................................40
Limitations on Voting or Acquisitions of Capital Stock.....................................40
Approval of Mergers, Consolidations, Etc...................................................41
Amendment of Articles of Incorporation and Code of Regulations.............................42
LEGAL MATTERS.........................................................................................42
EXPERTS...............................................................................................42
SHAREHOLDER PROPOSALS.................................................................................43
INDEPENDENT ACCOUNTANTS...............................................................................43
OTHER MATTERS.........................................................................................43
APPENDICES
I. Agreement of Affiliation and Plan of Merger (omitting schedules and exhibits)
II. Fairness Opinion of McDonald & Company Securities, Inc.
III. Text of Section 1701.85 of Ohio Revised Code
</TABLE>
vi
<PAGE> 9
SUMMARY
The following is a brief summary of certain information contained
elsewhere or incorporated by reference in this Proxy Statement/Prospectus.
Certain capitalized terms used in this summary are defined elsewhere in this
Proxy Statement/Prospectus. This summary is not intended to be a complete
description of all material facts regarding FirstFederal, Summit and the matters
to be considered at the Special Meeting and is qualified in its entirety by, and
reference is made to, the more detailed information contained elsewhere in this
Proxy Statement/Prospectus, the accompanying Appendices and the documents
referred to and incorporated by reference herein.
THE PARTIES TO THE MERGER
FIRSTFEDERAL FINANCIAL SERVICES CORP
FirstFederal, an Ohio corporation, is a savings and loan holding
company which has as its primary wholly-owned subsidiaries First Federal Savings
and Loan Association of Wooster (the "Association") headquartered in Wooster,
Ohio, and Mobile Consultants, Inc. ("MCi"), headquartered in Alliance, Ohio. At
December 31, 1996, FirstFederal had assets of $1.1 billion, deposits of $671.9
million and shareholders' equity of $85.3 million. FirstFederal's executive
offices are located at 135 East Liberty Street, Wooster, Ohio 44691, and its
telephone number at that address is (330) 264-8001.
The business of the Association is to provide consumer, retail
mortgage and commercial lending in its primary market area, funded by checking
and savings deposits from the general public, as well as advances from the
Federal Home Loan Bank ("FHLB") of Cincinnati (of which the Association is a
member) and other borrowings, and to service the loans it originates. The
Association serves Ashland, Knox, Medina, Richland, Wayne, Stark, Tuscarawas and
Summit Counties, Ohio through its home office, 16 full service branch offices,
four limited service facilities and the operations of its subsidiaries.
MCi, a manufactured housing finance company which brokers
manufactured home loans to and on behalf of financial institutions, was acquired
by FirstFederal in April 1996. MCi facilitates the origination of primarily
non-mortgage, consumer loan contracts through 3,500 dealers of manufactured
homes located in 32 states, primarily in the northeastern, southeastern,
midwestern and southwestern regions of the United States. MCi also services the
collection and recovery of troubled loans on behalf of the financial
institutions which originate the loans.
For additional information regarding FirstFederal, see "FirstFederal
Financial Services Corp," "Selected Financial Data of FirstFederal Financial
Services Corp" and "Incorporation of Certain Documents by Reference."
SUMMIT BANCORP
Summit's principal business is to operate Summit Bank, a full service
commercial bank and a wholly-owned subsidiary of Summit. At December 31, 1996,
Summit had assets of $81.2 million, deposits of $67.8 million and shareholders'
equity of $7.2 million. Summit Bank is an independent community bank drawing
customers primarily from Summit County, Ohio. Summit Bank follows a
service-focused strategy to provide personal banking services to businesses,
professionals and other persons. Summit's executive offices are located at 2680
West Market Street, Akron, Ohio 44333, and its telephone number at that address
is (330) 864-8080.
For additional information regarding Summit, see "Summit Bancorp,"
"Selected Financial Data of Summit Bancorp," and "Incorporation of Certain
Documents by Reference."
1
<PAGE> 10
THE SPECIAL MEETING
The Special Meeting will be held on Thursday, June 12, 1997, at 10:00
a.m., local time, at Fairlawn Country Club, 200 N. Wheaton Road, Akron, Ohio
44313-3963.
At the Special Meeting, the shareholders of Summit will consider and
vote upon the Merger Agreement and the Merger. Pursuant to provisions of the
Ohio General Corporation Law and Summit's corporate governance documents,
approval of the Merger Agreement and the Merger requires the affirmative vote of
at least a majority of the outstanding shares of Summit Common Stock. Summit has
no other class of voting securities outstanding. See "Summit Shareholders
Special Meeting--Record Date; Voting at the Special Meeting; Vote
Required;--Proxies."
The close of business on Monday, May 1, 1997 is the record date for
determination of holders of Summit Common Stock entitled to vote at the Special
Meeting (the "Record Date"). As of that date, there were 234,891 shares of
Summit Common Stock outstanding and entitled to vote, and directors and
executive officers of Summit and Summit Bank, and their affiliates, beneficially
owned approximately 24.62% of the outstanding shares of Summit Common Stock.
As of the Record Date, the directors, executive officers and affiliates of
FirstFederal beneficially owned no shares of Summit Common Stock. See "Summit
Shareholders Special Meeting--Record Date; Voting at the Special Meeting; Vote
Required"; and "Summit Securities and Beneficial Ownership of Management and
Principal Shareholders."
MANAGEMENT URGES EACH SHAREHOLDER TO VOTE, SINCE ANY ABSTENTION OR BROKER
NON-VOTE WILL HAVE THE PRACTICAL EFFECT OF A VOTE AGAINST THE MERGER.
THE MERGER
The following summary is qualified in its entirety by reference to
the full text of the Merger Agreement, which is attached hereto as Appendix I
and incorporated by reference herein.
GENERAL
The shareholders of Summit are being asked to consider and vote upon
a proposal to approve the Merger Agreement, pursuant to which Summit will be
merged with FirstFederal, with FirstFederal as the surviving corporation. The
name of the surviving entity following consummation of the Merger will be
"FirstFederal Financial Services Corp." See "The Merger--General."
REASONS FOR THE MERGER
After exploring various other strategic alternatives, the Summit
Board concluded that a sale of Summit to FirstFederal would provide market
liquidity and would offer the greatest potential for achieving long-term value
for Summit's shareholders. See "The Merger--Reasons for the Merger--Summit's
Reasons for the Merger."
In approving the Merger Agreement, the Board of Directors of
FirstFederal (the "FirstFederal Board") considered the strategic advantages to
be gained from acquiring Summit and the potential benefits to the shareholders
of FirstFederal. See "The Merger--Reasons for the Merger--FirstFederal's Reasons
for the Merger."
MERGER CONSIDERATION
Subject to the terms, conditions and procedures set forth in the
Merger Agreement, each share of Summit Common Stock issued and outstanding
immediately prior to the Merger (other than shares held by holders who perfect
appraisal rights and other excluded shares) will be converted into the right to
receive 1.87 shares of FirstFederal Common Stock. Each share of FirstFederal
Common Stock issued and outstanding at the Effective Time (as defined herein)
will remain outstanding and unchanged as a result of the Merger. See "The
Merger--Merger Consideration."
2
<PAGE> 11
TREATMENT OF SUMMIT STOCK OPTIONS AND STOCK APPRECIATION RIGHTS
Each option to purchase shares of Summit Common Stock outstanding
immediately prior to the Effective Time granted pursuant to (i) the Summit
Bancorp 1989 Stock Incentive Plan (the "Summit Plan") or (ii) pursuant to
certain agreements with the directors of Summit will, at the Effective Time, be
converted into the right to purchase the number of shares of FirstFederal Common
Stock (rounded up to the nearest whole share) that would have been received by
the holder of such option in the Merger had the option been exercised in full
immediately prior to the Effective Time. The exercise price under each new
option will be equal to the exercise price under the corresponding old option
divided by the Exchange Ratio.
Holders of stock appreciation rights granted under the Summit Plan
entitling such holders to receive payment of amounts determined pursuant to the
Summit Plan will, at the Effective Time, each be entitled to receive a number of
stock appreciation rights based upon FirstFederal Common Stock equal to the
number of stock appreciation rights based upon Summit Common Stock held by such
holder multiplied by the Exchange Ratio. The price of each new stock
appreciation right will be equal to the price of the corresponding old stock
appreciation right divided by the Exchange Ratio.
See "The Merger--Treatment of Summit Stock Options and Stock
Appreciation Rights."
OPINION OF FINANCIAL ADVISOR
Summit has retained McDonald & Company as its financial advisor in
connection with the Merger and requested that McDonald & Company render its
opinion with respect to the fairness to Summit shareholders of the Exchange
Ratio. McDonald & Company rendered its oral opinion to the Summit Board on
December 30, 1996, which it subsequently confirmed in writing, that as of the
date of such opinion, the Exchange Ratio was fair, from a financial point of
view, to the holders of Summit Common Stock. The fairness opinion sets forth a
description of assumptions made and matters considered by McDonald & Company,
and contains certain limitations and qualifications. The full text of the
fairness opinion, updated as of the date of this Proxy Statement/Prospectus, is
attached hereto as Appendix II, and the description set forth herein is
qualified in its entirety by reference to such opinion.
For additional information, see "The Merger--Opinion of Financial
Advisor" and the fairness opinion attached hereto as Appendix II.
EFFECTIVE TIME AND CLOSING DATE
The Merger will become effective at the time and on the date of the
filing of a certificate of merger with the Secretary of State of the State of
Ohio (the "Effective Time"). The consummation of the Merger will occur only
after the approval of the Merger Agreement and the Merger by the requisite vote
of Summit's shareholders and the satisfaction or waiver of all other conditions
to consummation of the Merger. The Merger Agreement provides that the Merger is
to close on or before July 31, 1997, or as soon as possible after regulatory
approval of the Merger is obtained, but in no event later than September 30,
1997 (the "Closing Date"). See "Effective Time and Closing Date." In the event
the Merger does not close by September 30, 1997, either Summit or FirstFederal
may terminate the Merger Agreement if the failure to consummate the Merger by
such date was not caused by a breach of the Merger Agreement by the terminating
party. See "The Merger--Waiver and Amendment; Termination."
APPRAISAL RIGHTS
Any Summit shareholder who does not vote in favor of the Merger has
the right, pursuant to Sections 1701.84 and 1701.85 of the Ohio Revised Code, to
demand payment from Summit of the fair value of his shares of Summit Common
Stock in lieu of converting such shares into shares of FirstFederal Common
Stock. Strict compliance with the procedures set forth in the statute is
required. See "The Merger--Appraisal Rights."
3
<PAGE> 12
INTERESTS OF CERTAIN PERSONS IN THE MERGER
Certain directors, officers and employees of Summit may be deemed to
have certain interests in the Merger in addition to their interests generally as
shareholders of Summit. It is anticipated that David C. Vernon, Chairman of the
Board, Chief Executive Officer and President of Summit and Summit Bank, will
continue to serve in such capacities for Summit Bank following the Merger
pursuant to an employment agreement with Summit Bank to be executed on the
Closing Date, and that he will be appointed to fill a newly-created directorship
on the FirstFederal Board. It is also anticipated that, on the Closing Date, Jon
W. Park, Vice President and Chief Financial Officer of Summit and Summit Bank,
will enter into an employment agreement with FirstFederal to serve as Treasurer
of FirstFederal. For additional information, see "The Merger--Interests of
Certain Persons in the Merger."
CONDITIONS TO THE MERGER
The respective obligations of the parties to consummate the Merger
are subject to the satisfaction or waiver of certain conditions specified in the
Merger Agreement, including, among other things, the receipt of the requisite
regulatory and shareholder approvals, the accuracy of the representations and
warranties contained therein, the performance of all obligations imposed thereby
and certain other conditions. See "The Merger--Conditions to the Merger."
REGULATORY APPROVALS
The Merger is subject to the approval of the Board of Governors of
the Federal Reserve System (the "FRB"). FirstFederal filed an application for
approval of the Merger with the FRB on April 15, 1997. FirstFederal anticipates
receiving the approval of the FRB in the second quarter of 1997. There can be
no assurance as to the receipt or timing of such approval. See "The
Merger--Regulatory Approvals."
As noted elsewhere in this Proxy Statement/Prospectus, Summit Bank
will submit an application to the Office of the Comptroller of the Currency
(the "OCC") to convert from a state-chartered bank to a national bank (the
"Summit Bank Conversion"). It is currently intended that the Summit Bank
Conversion will occur immediately prior to the Effective Time. There can be no
assurance as to the receipt or timing of the OCC's approval of the Summit Bank
Conversion. In the event the OCC does not approve the Summit Bank Conversion or
if FirstFederal and Summit decide to not effect the Summit Bank Conversion prior
to the Effective Time, the Merger will be subject to the approval of the Ohio
Superintendent of Financial Institutions (the "OSFI"), in addition to the
approval of the FRB. If approval of the Merger by the OSFI were sought, neither
the receipt nor the timing of such approval could be assured.
WAIVER AND AMENDMENT; TERMINATION
Either party to the Merger Agreement may waive compliance with any
provision of the Merger Agreement where such waiver is executed in writing by
the waiving party. The Merger Agreement may be amended by execution of the
amendment in writing by both Summit and FirstFederal.
The Merger Agreement may be terminated at any time, whether prior to
or after approval of the Merger Agreement and the Merger by Summit's
shareholders: (i) by the vote of a majority of the Board of Directors of each of
FirstFederal and Summit; (ii) by the vote of a majority of the Board of
Directors of either FirstFederal or Summit if the Merger shall not have been
consummated on or before July 31, 1997, unless the failure to consummate the
Merger by such date is related to the action or inaction of the appropriate
regulatory authorities and such action or inaction is not related to a breach of
the Merger Agreement by the terminating party; (iii) by the vote of a majority
of the Board of Directors of either FirstFederal or Summit if any regulatory
authority has denied approval of the Merger; (iv) prior to the closing of the
Merger, by Summit, in the event of a material misrepresentation or breach of
warranty or failure to disclose any other matter resulting in substantial
financial liability to FirstFederal and FirstFederal fails to cure such breach;
(v) prior to the closing of the Merger, by FirstFederal, in the event of a
material misrepresentation or breach of warranty or failure to disclose any
other matter resulting in substantial financial liability to Summit and Summit
fails to cure such breach; (vi) at any time after September 30, 1997, by Summit
or FirstFederal, if the closing of the Merger shall not have occurred on or
4
<PAGE> 13
before such date and the failure to consummate the Merger is not caused by a
breach of the Merger Agreement by the terminating party; (vii) by either party
if any bona fide action or proceeding shall be pending against either party on
the Closing Date that could result in an unfavorable judgment, decree, or order
that would prevent or make unlawful the carrying out of the Merger Agreement;
(viii) by either party after regulatory approval of the Merger is obtained if
the conditions to such party's obligations to close have not been satisfied or
waived; or (ix) by Summit, in the event of certain changes in the price per
share of FirstFederal Common Stock. See "The Merger--Waiver and Amendment;
Termination."
CONDUCT OF BUSINESS PENDING THE MERGER
Summit has agreed to conduct its business prior to the Effective Time
diligently and in substantially the same manner as it previously has been
carried out. Summit also has agreed to certain forbearances with respect to the
conduct of its business prior to the Effective Time. See "The Merger--Conduct of
Business Pending the Merger."
EXPENSES; BREAK-UP FEE
All expenses incurred or to be incurred in connection with the Merger
Agreement and the consummation of the transactions contemplated thereby are to
be paid by the party incurring such expenses, except that Summit may not incur
any such costs and expenses in excess of $150,000 in the aggregate, excluding
the fee payable to McDonald & Company for the issuance of the fairness opinion.
See "The Merger--Opinion of Financial Advisor." In addition, under the Merger
Agreement, Summit must pay FirstFederal a fee of $750,000 in the event the
Merger is not consummated and certain events occur. See "The Merger--Break-Up
Fee."
ACCOUNTING TREATMENT
The Merger is intended to be structured to allow FirstFederal to
account for the Merger under the pooling of interests method of accounting.
FirstFederal and Summit have each agreed to take no actions which would prevent
FirstFederal from utilizing the pooling of interests method. In addition, it is
a condition to FirstFederal's obligations under the Merger Agreement that
FirstFederal receive a letter from KPMG Peat Marwick LLP to the effect that the
Merger will qualify for pooling of interests accounting treatment. See "The
Merger--Conditions to the Merger--Resales of FirstFederal Common Stock by
Affiliates and --Accounting Treatment."
CERTAIN FEDERAL INCOME TAX CONSEQUENCES OF THE MERGER
FirstFederal has received an opinion of Critchfield, Critchfield &
Johnston, Ltd. to the effect that if the Merger were consummated on the date
hereof, the following federal income tax consequences would result:
(i) the Merger would qualify as a reorganization under
Section 368(a) of the Code;
(ii) no gain or loss would be recognized by FirstFederal
or Summit by reason of the Merger;
(iii) no gain or loss would be recognized by any Summit
shareholder upon the exchange of Summit Common Stock
solely for FirstFederal Common Stock in the Merger (except
in connection with the receipt of cash in lieu of a
fractional share of FirstFederal Common Stock or in
connection with the exercise of appraisal rights, as
discussed below);
(iv) the aggregate tax basis of the FirstFederal Common
Stock received by each shareholder of Summit who exchanged
Summit Common Stock for FirstFederal Common Stock in the
Merger would be the same as the aggregate tax basis of the
Summit Common Stock surrendered in exchange therefor
(subject to any adjustments required as the result of
receipt of cash in lieu of a fractional share of
FirstFederal Common Stock);
5
<PAGE> 14
(v) the holding period of the shares of FirstFederal Common
Stock received by a Summit shareholder in the Merger would
include the holding period of the Summit Common Stock
surrendered in exchange therefor (provided that such shares
of Summit Common Stock were held as a capital asset by such
shareholder at the Effective Time);
(vi) cash received in the Merger by a Summit shareholder in
lieu of a fractional share interest of FirstFederal Common
Stock would be treated as having been received as a
distribution in full payment in exchange for the fractional
share interest of FirstFederal Common Stock which such
shareholder would otherwise be entitled to receive, and
would qualify as capital gain or loss (assuming the Summit
Common Stock surrendered in exchange therefor were held as
a capital asset by such shareholder at the Effective Time);
and
(vii) a Summit shareholder who received only cash as a
result of the exercise of appraisal rights would realize
gain or loss for federal income tax purposes (determined
separately as to each block of Summit Common Stock
exchanged) in an amount equal to the difference between (x)
the amount of cash received by such shareholder, and (y)
such shareholder's tax basis for the shares of Summit
Common Stock surrendered in exchange therefor, provided
that the cash payment did not have the effect of the
distribution of a dividend. Any such gain or loss would be
recognized for federal income tax purposes and would be
treated as capital gain or loss (assuming the Summit Common
Stock surrendered in exchange therefor were held as a
capital asset by such shareholder at the Effective Time).
However, if the cash payment did have the effect of the
distribution of a dividend, the amount of taxable income
recognized would equal the amount of cash received; such
income generally would be taxable as a dividend and no loss
(or other recovery of such shareholder's tax basis for the
shares of Summit Common Stock surrendered in the exchange)
generally would be recognized by such shareholder. The
determination of whether a cash payment has the effect of
the distribution of a dividend would be made pursuant to
the provisions and limitations of Section 302 of the
Internal Revenue Code of 1986, as amended (the "Code"),
taking into account the constructive stock ownership rules
of Section 318 of the Code.
The opinion is subject to various assumptions and qualifications,
including that the Merger will be consummated in the manner and in accordance
with the terms of the Merger Agreement. The opinion is based entirely upon the
Code, regulations currently in effect or proposed thereunder, current
administrative rulings and practice and judicial authority, all of which are
subject to change, possibly with retroactive effect.
Summit shareholders are urged to consult their tax advisors
concerning the specific tax consequences to them of the Merger, including the
applicability and effect of various state, local and foreign tax laws. For
further discussion of the opinion regarding the federal income tax consequences
of the Merger, as issued and delivered to the FirstFederal Board, see "The
Merger--Certain Federal Income Tax Consequences of the Merger."
EFFECT OF THE MERGER ON RIGHTS OF SHAREHOLDERS
As a result of the Merger, holders of Summit Common Stock will become
shareholders of FirstFederal. For a comparison of the respective rights of
shareholders of FirstFederal and Summit, as defined by Ohio law and the
respective corporate governance documents of FirstFederal and Summit, see
"Comparison of Rights of Shareholders of FirstFederal Financial Services Corp
and Summit Bancorp."
NASDAQ LISTING
FirstFederal Common Stock (symbol: FFSW) currently is quoted on the
Nasdaq National Market. FirstFederal will submit an application for listing on
the Nasdaq National Market the shares of FirstFederal Common Stock to be issued
to the shareholders of Summit in the Merger and to be reserved for issuance
pursuant to Summit Stock Options assumed by FirstFederal in the Merger.
6
<PAGE> 15
COMPARATIVE STOCK PRICE AND DIVIDEND INFORMATION
The FirstFederal Common Stock is quoted on the Nasdaq National Market
under the symbol "FFSW." There is currently no established market in which
shares of Summit Common Stock are regularly traded, nor are there any uniformly
quoted prices for such shares. Two brokerage firms currently maintain a work-out
market for Summit Common Stock. The last trade of shares of Summit Common Stock
known to the management of Summit occurred on March 7, 1997 at $65.00 per share.
The following table sets forth the comparative market prices for FirstFederal
Common Stock and Summit Common Stock and the quarterly cash dividends per share
declared, for the periods indicated. The market prices of the FirstFederal
Common Stock for the periods indicated represent closing prices of such stock as
quoted on the Nasdaq National Market. The market prices of the Summit Common
Stock represent the prices at which such stock traded in the work-out market.
The stock prices do not include retail mark-ups, mark-downs or commissions.
<TABLE>
<CAPTION>
FIRSTFEDERAL COMMON STOCK(1) Summit Common Stock(2)
------------------------------------ ------------------------------------
High Low Dividends High Low DIVIDENDS
------------ -------- ----------- --------- -------- ---------
<S> <C> <C> <C> <C> <C> <C>
1995 CALENDAR YEAR
First Quarter........................... 18.18 15.91 .10 30.50 30.13 ---
Second Quarter.......................... 19.09 15.80 .11 33.00 31.25 ---
Third Quarter........................... 19.09 18.18 .11 32.00 32.00 ---
Fourth Quarter.......................... 22.73 21.14 .11 33.25 32.50 ---
1996 CALENDAR YEAR
First Quarter........................... 23.41 21.82 .11 35.00 34.25 ---
Second Quarter.......................... 29.25 22.50 .12 35.75 33.25 ---
Third Quarter........................... 31.50 29.25 .12 37.00 36.00 ---
Fourth Quarter.......................... 40.00 30.25 .12 40.00 37.00 ---
1997 CALENDAR YEAR
First Quarter........................... 39.25 35.00 .12 65.00 55.00 ---
Second Quarter (through April 30, 1997). 37.50 33.50 .1375 --- (3) --- (3) ---
<FN>
(1) Market price and dividends per share information have been adjusted to reflect the 10% common stock dividends
effective May 22, 1996 and May 22, 1995.
(2) Summit has not paid any dividends since its incorporation.
(3) There have been no trades in Summit Common Stock during the second quarter of 1997 (through April 30, 1997).
</TABLE>
7
<PAGE> 16
The following table sets forth the last reported sale prices per
share of FirstFederal Common Stock and Summit Common Stock and the equivalent
per share price for Summit Common Stock giving effect to the Merger on (i)
December 30, 1996, the last trading day preceding public announcement of the
signing of the Merger Agreement; and (ii) April 30, 1997 the last practicable
date prior to the mailing of this Proxy Statement/Prospectus.
<TABLE>
<CAPTION>
FirstFederal Summit EQUIVALENT PRICE PER
Common Stock Common Stock(2) SUMMIT SHARE(1)
------------ --------------- ---------------------
<S> <C> <C> <C>
December 30, 1996.............................. $38.875 $40.00 $72.696
April 30, 1997................................. 36.500 65.00 68.255
<FN>
- ---------------------------
(1) The equivalent price per share of Summit Common Stock at each specified
date is an amount equal to 1.87 multiplied by the last reported sales
price for FirstFederal Common Stock on the date specified. The market
value of the Merger Consideration at the time of the Merger will depend on
the market value of a share of FirstFederal Common Stock at such time. See
"The Merger - Merger Consideration."
(2) Represents the price at which shares of Summit Common stock last traded on
or before such dates, to the knowledge of the management of Summit.
</TABLE>
As of April 30, 1997, the 3,716,490 outstanding shares of
FirstFederal Common Stock were held by approximately 1,362 record owners and the
234,891 outstanding shares of Summit Common Stock were held by approximately
320 record owners.
The timing and amount of the future dividends of FirstFederal will
depend upon earnings, cash requirements, FirstFederal's financial condition and
other factors deemed relevant by the FirstFederal Board. Dividends may also be
limited by certain regulatory restrictions.
8
<PAGE> 17
RECENT DEVELOPMENTS
PENDING ACQUISITION
On March 10, 1997, the Association entered into a definitive
agreement to acquire Alliance Corporate Resources Inc. ("Alliance"), an
originator of leases of information technology equipment. Under the terms of
the definitive agreement, the shareholders of Alliance will receive cash in
exchange for their shares of Alliance stock. At the closing of the transaction,
the Alliance shareholders will receive an aggregate payment of $2 million in
cash. In addition, the shareholders of Alliance will receive amounts annually
equal to 50% of the net income of Alliance for each of the calendar years
beginning January 1, 1997 through and including calendar year 2001, and will be
entitled to receive shares of FirstFederal Common Stock equal in value to $1.1
million if the aggregate net income of Alliance for the period between January
1, 1997 and December 31, 2001 exceeds $15 million. The shareholders of Alliance
approved the transaction at the time of execution of the definitive agreement.
The transaction is subject to the approval of certain regulatory authorities,
and is currently anticipated to be completed in the second or third quarter of
1997.
SUBORDINATED NOTES ISSUANCE
On March 19, 1997, in a private placement, FirstFederal issued $40.5
million of subordinated notes due March 15, 2004 at a rate of 9.125% (the
"Notes"). FirstFederal expects to use the net proceeds for general corporate
purposes, which may include the repayment of indebtedness, investment in or
extensions of credit to its subsidiaries and the financing of possible
acquisitions. The Notes are subject to terms and conditions, and to redemption
at the option of FirstFederal at any time on or after March 15, 2002, pursuant
to the note indenture. The Notes are unsecured obligations of FirstFederal and
are subordinate to all other indebtedness at FirstFederal and the Association.
Redeemable at the option of FirstFederal beginning on March 15, 2002, the Notes
are designed to qualify as Tier 2 capital under the regulations of the Board of
Governors of the Federal Reserve System (the "FRB").
9
<PAGE> 18
SELECTED CONSOLIDATED FINANCIAL AND OTHER DATA
OF FIRSTFEDERAL FINANCIAL SERVICES CORP
The following table sets forth, for the periods indicated, certain
summary historical data for FirstFederal. The information is derived in part
from, and should be read in conjunction with, the separate consolidated
financial statements and related notes included in the FirstFederal 1996 10-K,
which is incorporated herein by reference.
See "Incorporation of Certain Documents by Reference."
<TABLE>
<CAPTION>
AT OR FOR THE
YEARS ENDED DECEMBER 31,
-------------------------------------------------------------
1996 1995 1994 1993 1992
-------------------------------------------------------------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Interest and dividend income.............................. $73,559 $64,922 $51,987 $45,510 $40,061
Interest expense.......................................... 48,048 41,046 29,260 25,319 24,987
------- ------- ------- ------- -------
Net interest income..................................... 25,511 23,876 22,727 20,191 15,074
Provision for losses on loans............................. 360 --- 15 1,025 1,884
-------- --------- -------- ------- -------
Net interest income after provisions for losses on loans 25,151 23,876 22,712 19,166 13,190
Net gain on sale of loans................................. 3,836 1,451 890 3,908 2,488
Net gains on sales of investment and mortgage-backed
securities.............................................. 397 384 168 --- ---
Manufactured housing brokerage fees, net.................. 6,726 --- --- --- ---
Other operating income.................................... 6,970 2,332 1,857 2,093 1,936
SAIF assessment........................................... 3,341 --- --- --- ---
Other operating expenses.................................. 24,005 13,651 12,116 10,374 8,561
------- ------- ------- ------- -------
Earnings before income taxes............................ 15,734 14,392 13,511 14,793 9,053
Income tax provision...................................... 5,884 4,946 4,490 5,054 2,898
------- ------- ------- ------- -------
Net earnings............................................ $9,850 $9,446 $9,021 $9,739 $6,155
====== ====== ====== ====== ======
Net earnings applicable to Common Stock................ $8,154 $7,660 $7,657 $8,733 $6,010
====== ====== ====== ====== ======
Net earnings per share - primary(1) 2.28 2.31 2.32 2.66 1.85
======= ======= ======= ======= =======
- fully diluted(1) 1.78 1.78 1.79 2.09 1.70
======= ======= ======= ======= =======
STATEMENT OF FINANCIAL CONDITION DATA (PERIOD END):
Total assets.............................................. $1,080,383 $947,270 $835,667 $682,639 $570,949
Loans receivable, net of allowance for loan losses........ 669,697 544,396 474,051 328,631 282,828
Loans held for sale....................................... 87,071 36,664 4,525 52,610 30,496
Mortgage-backed securities................................ 172,522 261,121 281,952 231,828 194,211
Investment securities..................................... 54,010 45,748 32,726 27,250 25,210
Interest-bearing deposits in other financial institutions 9,000 8,862 1,097 3,935 3,072
Deposits.................................................. 671,918 574,041 502,527 453,821 429,421
Borrowings, including advances............................ 312,413 286,726 258,171 168,379 89,802
Shareholders' equity...................................... 85,287 76,533 69,246 53,673 45,780
OTHER STATISTICAL AND OPERATING DATA:
Return on average assets(2)............................... 0.95% 1.07% 1.21% 1.57% 1.26%
Return on average common shareholders' equity(2).......... 12.20 12.90 14.17 19.62 19.09
Net interest margin(3).................................... 2.60 2.78 3.17 3.40 3.22
Interest rate spread during period........................ 2.41 2.49 2.93 3.19 3.09
Cumulative one year gap as a percentage of total assets(4) 1.59 2.77 (5.79) 5.59 7.97
Efficiency ratio(2)(5).................................... 61.03 50.61 47.85 45.49 49.61
Total operating expenses to average total assets.......... 2.67 1.54 1.63 1.67 1.75
Interest-earning assets to interest-bearing liabilities... 103.96 106.19 105.98 104.93 103.84
Dividend payout ratio(6).................................. 34.20 33.73 32.17 20.20 13.00
</TABLE>
10
<PAGE> 19
<TABLE>
<CAPTION>
AT OR FOR THE
YEARS ENDED DECEMBER 31,
1996 1995 1994 1993 1992
----------------------------------------------------------
(Dollars in thousands)
<S> <C> <C> <C> <C> <C>
ASSET QUALITY RATIOS:
Total allowance for loan losses to nonperforming loans.... 76.10% 158.41% 89.62% 114.69% 78.24%
Total allowance for loan losses to total loans............ 0.39 0.55 0.67 1.18 1.25
Total nonperforming assets to total assets................ 0.37 0.20 0.43 0.58 0.88
Net charge-offs to average loans.......................... 0.06 0.04 0.32 0.13 0.08
CAPITAL RATIOS:
Shareholders' equity to total assets...................... 7.89% 8.08% 8.29% 7.86% 8.02%
Tangible capital(7)....................................... 6.42 6.60 7.42 7.11 6.95
Core capital(7)........................................... 6.42 6.60 7.42 7.11 6.95
Risk-based capital(7)..................................... 11.53 14.52 17.25 16.67 15.97
<FN>
(1) All per share common share amounts have been restated to reflect stock
dividends and stock splits effected prior to December 31, 1996.
(2) Ratios shown above includes the one-time assessment to recapitalize the
Savings Association Insurance Fund (the "SAIF"). Excluding the SAIF
assessment, return on average assets, return on average equity and the
efficiency ratio for the year ended December 31, 1996 would have been 1.16%,
14.72% and 53.54%, respectively.
(3) Net interest income divided by average interest-earning assets.
(4) Total amount of interest sensitive assets repricing within one year less
amount of interest sensitive liabilities scheduled to reprice within one
year, divided by total assets.
(5) Non-interest expense divided by the sum of net interest income (on a
fully-taxable equivalent basis) and non-interest income.
(6) Total dividends paid on common and convertible preferred stock divided by net
earnings.
(7) Regulatory capital ratios for the Association.
</TABLE>
11
<PAGE> 20
SELECTED CONSOLIDATED FINANCIAL AND OTHER DATA
OF SUMMIT BANCORP
The following table sets forth, for the periods indicated, certain
summary historical data for Summit. The information is derived in part from, and
should be read in conjunction with the separate consolidated financial
statements and related notes included in the Summit 1996 10-KSB which is
incorporated herein by reference, and a copy of which accompanies this Proxy
Statement/Prospectus.
<TABLE>
<CAPTION>
AT OR FOR THE
YEARS ENDED DECEMBER 31,
-------------------------------------------------------------
1996 1995 1994 1993 1992
-------------------------------------------------------------
<S> <C> <C>
STATEMENT OF OPERATIONS DATA:
Interest and dividend income..................................... $6,306,274 $5,346,465 $4,108,913 $3,308,874 $2,654,252
Interest expense................................................. 3,011,333 2,564,209 1,663,485 1,444,669 1,256,603
---------- ---------- ---------- ---------- ----------
Net interest income............................................ 3,294,941 2,782,256 2,445,428 1,864,205 1,397,649
Provision for losses on loans.................................... 185,000 100,000 154,380 440,606 140,567
---------- ---------- ---------- ---------- ----------
Net interest income after provision for losses on loans........ 3,109,941 2,682,256 2,291,048 1,423,599 1,257,082
Gain on sales of loans........................................... 922,121 766,811 788,330 1,328,697 885,747
Net security gains............................................... 45,547 14,923 (56,486) 43,754 4,706
Other operating income........................................... 336,010 255,989 190,879 222,608 126,315
Other operating expenses......................................... 3,208,118 2,762,936 2,555,992 2,603,980 2,071,500
---------- ---------- ---------- ---------- ----------
Earnings before income taxes................................... 1,205,501 957,043 657,779 414,678 202,350
Income tax provision............................................. 405,000 277,250 171,900 6,950 ---
---------- ---------- ---------- ---------- ----------
Net earnings .................................................. $ 800,501 $ 679,793 $ 458,879 $ 407,728 $ 202,350
========== ========== ========== ========== ==========
Net earnings per share ........................................ 3.43 2.79 1.93 1.75 .88
==== ===== ===== ===== =====
STATEMENT OF FINANCIAL CONDITION DATA (PERIOD END):
Total assets.....................................................$81,245,445 $74,565,322 $62,790,000 $54,792,715 $43,225,739
First mortgage and other loans, net.............................. 12,575,904 12,123,794 7,440,284 4,744,174 2,014,000
Other loans, net................................................. 42,601,589 36,453,160 31,216,362 24,260,958 22,532,706
First mortgage and other loans held for sale..................... 3,527,817 1,768,019 1,461,870 3,362,552 1,227,000
Securities available-for-sale at fair value...................... 18,073,130 18,949,702 14,085,570 16,480,678 13,189,984
Deposits......................................................... 67,761,925 61,596,763 51,455,944 46,206,255 37,895,947
Borrowings, including advances................................... 5,300,000 5,650,000 4,900,000 2,200,000 ---
Shareholders' equity............................................. 7,208,383 6,654,799 5,925,557 5,966,991 5,014,263
OTHER STATISTICAL AND OPERATING DATA:
Return on average assets......................................... 1.02% 1.01% 0.85% 0.85% 0.60%
Return on average equity......................................... 11.73 10.61 8.16 7.80 4.10
Net interest margin(1)........................................... 4.52 4.48 4.64 4.16 4.20
Interest spread during period ................................... 3.69 3.67 3.86 3.39 3.38
Cumulative one year gap as a percentage of total assets(2)....... 1.80 5.80 -1.34 -0.28 1.48
Efficiency ratio(3).............................................. 70.46 72.63 74.64 80.98 85.96
Total operating expenses to average total assets................. 4.16 4.11 4.47 5.43 5.95
Interest-earning assets to interest-bearing liabilities.......... 118.00 119.60 105.76 107.02 111.67
ASSET QUALITY RATIOS:
Total allowance for loan losses to non-performing loans.......... 234.00% 363.00% 363.99% 170.88% NM(4)
Total allowance for loan losses to total loans................... 1.50 1.50 1.54 1.49 1.14
Total non-performing assets to total assets...................... 0.44 0.27 0.27 0.52 0.00
Net charge-offs (recoveries) to average loans.................... 0.17 (0.05) 0.05 0.90 0.06
CAPITAL RATIOS:
Shareholders' equity to total assets(5).......................... 8.87% 8.92% 9.44% 10.89% 11.60%
Tier 1 capital (to risk weighted assets)(5)...................... 12.80 13.20 13.78 12.11 12.02
Tier 1 capital (to average assets)(5)............................ 9.40 9.80 10.08 10.84 13.58
Total capital (to risk weighted assets)(5)....................... 14.10 14.70 15.26 13.24 12.77
<FN>
(1) Net interest income divided by average interest-earning assets.
(2) Total amount of interest sensitive assets repricing within one year less
amount of interest sensitive liabilities scheduled to reprice within one
year, divided by total assets.
(3) Non-interest expense divided by the sum of net interest income (on a
fully-taxable equivalent basis) and non-interest income.
(4) Prior to 1993, there were no non-performing loans.
(5) Regulatory capital ratios for Summit.
</TABLE>
12
<PAGE> 21
COMPARATIVE UNAUDITED PER SHARE DATA
The following table shows unaudited comparative per share data for
FirstFederal and Summit Common Stock on a historical basis, and on a pro forma
combined basis and a pro forma equivalent basis for FirstFederal and Summit
giving effect to the Merger accounted for under the pooling of interests method
of accounting. See "The Merger--Accounting Treatment."
<TABLE>
<CAPTION>
HISTORICAL PRO FORMA
-------------------------- -----------------------------
Summit
Equivalent
FirstFederal Summit Combined Per Share
------------ ------ -------- ---------
<S> <C> <C> <C> <C>
Book value per share at:
December 31, 1996................................. $15.58 $30.68 $15.64(1) $29.25
Cash dividends declared per share:
Year ended December 31, 1994....................... .38 --- 0.38 0.71
Year ended December 31, 1995....................... .43 --- 0.43 0.80
Year ended December 31, 1996....................... .47 --- 0.47 0.88
Earnings per share:
Year ended December 31, 1994....................... 1.79 1.93 1.73 3.24
Year ended December 31, 1995....................... 1.78 2.79 1.75 3.27
Year ended December 31, 1996....................... 1.79(2) 3.43 1.79(2) 3.35(2)
<FN>
(1) Based on the combined stockholders' equity of FirstFederal and
Summit, including the effect of pro forma adjustments. The adjusted
stockholders' equity amounts are divided by the number of shares of
FirstFederal fully-diluted common stock outstanding at December 31,
1996, plus the product of the number of shares of Summit Common Stock
outstanding at December 31, 1996 and the Exchange Ratio (1.87, as of
the date hereof). The number of shares of FirstFederal Common Stock
outstanding at December 31, 1996 includes 1,847,015 common stock
equivalents attributable to FirstFederal's convertible preferred
stock Series A and B outstanding at December 31, 1996.
(2) Excluding the one-time SAIF assessment of $3.3 million ($2.2 million
after tax), FirstFederal's 1996 fully-diluted earnings per share were
$2.18; the Combined per share amount would be $2.15 and the Summit
Equivalent per share amount would be $4.02.
</TABLE>
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<PAGE> 22
FIRSTFEDERAL FINANCIAL SERVICES CORP
GENERAL
FirstFederal, an Ohio corporation, is a savings and loan holding
company which has as its primary wholly-owned subsidiaries First Federal Savings
and Loan Association of Wooster (the "Association"), headquartered in Wooster,
Ohio, and Mobile Consultants, Inc. ("MCi"), headquartered in Alliance, Ohio. As
a savings and loan holding company, FirstFederal is required to register and
file reports with the Office of Thrift Supervision (the "OTS") and is subject to
regulation and examination by the OTS. At December 31, 1996, FirstFederal had
assets of $1.1 billion, deposits of $671.9 million and shareholders' equity of
$85.3 million. Based on total assets as of September 30, 1996, FirstFederal was
the third largest publicly-traded thrift in Ohio and within the 100 largest
publicly-traded thrifts in the United States. FirstFederal's executive offices
are located at 135 East Liberty Street, Wooster, Ohio 44691 and its telephone
number at that address is (330) 264-8001.
Founded in 1905 as an Ohio chartered mutual thrift, the Association
converted to a federally chartered thrift in 1935 and converted from mutual to
stock form of ownership in 1987. The Association serves Ashland, Knox, Medina,
Richland, Wayne, Stark, Tuscarawas and Summit Counties, Ohio (its "Market Area")
through its home office, 16 full service branch offices, four limited service
facilities, and the operation of its subsidiaries, as described below. The
business of the Association is to provide consumer, retail mortgage and
commercial lending to customers in its Market Area, funded by checking and
savings deposits from the general public, as well as advances from the FHLB of
Cincinnati and other borrowings, and to service the loans it originates. The
Association offers a wide range of competitive consumer-oriented lending and
deposit products and services. The Association has achieved significant growth
in recent years through the expansion of its asset origination capabilities and
the acquisition of branches in its Market Area. Since July 1990, the Association
has acquired eight branches with an aggregate of $217.9 million of deposits.
As a federal savings association, the Association is subject to
examination and comprehensive regulation and oversight by the OTS and the
Federal Deposit Insurance Corporation (the "FDIC"). The Association is further
subject to regulations of the FRB with respect to reserves required to be
maintained against transaction accounts. The Association is a member of the FHLB
of Cincinnati, which is one of the 12 regional banks constituting the FHLB
system, and its savings deposits are insured by the Savings Association
Insurance Fund (the "SAIF"), administered by the FDIC, to the maximum extent
permitted by law.
The Association operates six subsidiaries: First Federal Mortgage
Services, a mortgage loan production company with offices in Canton and Stow,
Ohio; Professional Appraisal Services Corp, a company that provides real estate
appraisal services; Home Financial Services, which offers investment products;
H.F.S. Agency, Inc., which offers life insurance products; Venture Mortgage
Corp., a service corporation which owns a 50% interest in American Federal
Mortgage Company, a residential mortgage broker located in Mansfield, Ohio; and
FirstFed Corp, an operating subsidiary formed in the fourth quarter of 1996 for
the sole purpose of issuing securities backed by pools of manufactured housing
loans.
MCi, a manufactured housing finance company which brokers
manufactured home loans to and on behalf of financial institutions, was acquired
by FirstFederal in April 1996. MCi facilitates the origination of primarily
non-mortgage, consumer loan contracts through 3,500 dealers of manufactured
homes located in 32 states, primarily in the northeastern, southeastern,
midwestern and southwestern regions of the United States. MCi also services the
collection and recovery of troubled loans on behalf of the financial
institutions which originate the loans. MCi contributed approximately $3.1
million to FirstFederal's earnings for the year ended December 31, 1996. MCi is
anticipated to become a significant part of the operations of FirstFederal.
PENDING STRUCTURAL CHANGE
The Association has received conditional approval from the OCC to
convert from a federal savings association to a national bank (the "Bank
Conversion"). In order to retain its stock ownership in the Association after
the Bank Conversion, FirstFederal submitted an application to the FRB to become
a bank holding company (the "Holding
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<PAGE> 23
Company Conversion"). Upon becoming a bank holding company following the Bank
Conversion, FirstFederal will deregister with the OTS as a savings and loan
holding company. No assurance can be given whether the application submitted to
the FRB will be approved, or, if approved, whether the Bank Conversion and the
Holding Company Conversion will be consummated. Set forth below is a summary of
certain aspects of the regulation of bank holding companies.
General. Bank holding companies, such as Summit, are subject to
comprehensive regulation by the FRB under the Bank Holding Company Act of 1956,
as amended (the "BHCA"), and the regulations of the FRB. As a bank holding
company, FirstFederal will be required to file reports with the FRB and such
additional information as the FRB may require, and will be subject to regular
inspections by the FRB. The FRB 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 FRB policy, a bank holding company must serve as a source of
strength for its subsidiary banks. Under this policy the FRB may require, and
has required in the past, a holding company to contribute additional capital to
an undercapitalized subsidiary bank.
Under the BHCA, a bank holding company must obtain FRB approval
before: (i) acquiring, directly or indirectly, ownership or control of any
voting shares of another bank or bank holding company if, after such
acquisition, it would own or control more than 5% of such shares (unless it
already owns or controls the majority of such shares); (ii) acquiring all or
substantially all of the assets of another bank or bank holding company; or
(iii) merging or consolidating with another bank holding company.
As a savings and loan holding company, FirstFederal is generally not
subject to any activity restrictions, but as a bank holding company it will be
subject to the more restrictive activity limitations imposed on bank holding
companies. The BHCA prohibits a bank holding company, with certain exceptions,
from acquiring direct or indirect ownership or control of more than 5% of the
voting shares of any company which is not a bank or bank holding company, or
from engaging directly or indirectly in activities other than those of banking,
managing or controlling banks, or providing services for its subsidiaries. The
principal exceptions to these prohibitions involve certain non-bank activities
which, by statute or by FRB regulation or order, have been identified as
activities closely related to the business of banking or managing or controlling
banks. The list of activities permitted by the FRB includes, among other things,
operating a savings institution (such as the Association), mortgage company,
finance company, credit card company or factoring company; performing certain
data processing operations; providing certain investment and financial advice;
underwriting and acting as an insurance agent for certain types of
credit-related insurance; leasing property on a full-payout, non-operating
basis; selling money orders, travelers' checks and United States Savings Bonds;
real estate and personal property appraising; providing tax planning and
preparation services; and, subject to certain limitations, providing securities
brokerage services for customers. The scope of permissible activities may be
expanded from time to time by the FRB, and proposals to expand such activities
are pending. Such activities may also be affected by federal legislation.
Interstate Banking and Branching. In 1994, the Riegle-Neal Interstate
Banking and Branching Efficiency Act of 1994 (the "Riegle-Neal Act") was enacted
to ease restrictions on interstate banking. Effective September 29, 1995, the
Riegle-Neal Act allows the FRB 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 FRB 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 FRB 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.
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<PAGE> 24
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.
Additionally, beginning on June 1, 1997, the federal banking agencies
will be 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 may also permit such
transactions before such time by enacting authorizing legislation. Interstate
acquisitions of branches will be 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
requires the appropriate federal banking agencies to prescribe regulations by
June 1, 1997 which prohibit any out-of-state bank from using the interstate
branching authority primarily for the purpose of deposit production. These
regulations must 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.
As a federal thrift institution, the Association, subject to certain
conditions, has nationwide branching authority.
Dividends. The FRB has issued a policy statement on the payment of
cash dividends by bank holding companies, which expresses the FRB's view that a
bank holding company should pay cash dividends only to the extent that its net
income for the past year is sufficient to cover both the cash dividends and a
rate of earning retention that is consistent with the holding company's capital
needs, asset quality and overall financial condition. The FRB also indicated
that it would be inappropriate for a company experiencing serious financial
problems to borrow funds to pay dividends. Furthermore, under the prompt
corrective action regulations adopted by the FRB, the FRB may prohibit a bank
holding company from paying any dividends if the holding company's bank
subsidiary is classified as "undercapitalized."
Bank holding companies are required to give the FRB prior written
notice of any purchase or redemption of its outstanding equity securities if the
gross consideration for the purchase or redemption, when combined with the net
consideration paid for all such purchases or redemptions during the preceding 12
months, is equal to 10% or more of their consolidated net worth. The FRB may
disapprove such a purchase or redemption if it determines that the proposal
would constitute an unsafe or unsound practice or would violate any law,
regulation, FRB order, or any condition imposed by, or written agreement with,
the FRB. This notification requirement does not apply to any company that meets
the well-capitalized standard for commercial banks, has a safety and soundness
examination rating of at least a "2" and is not subject to any unresolved
supervisory issues.
Capital Requirements. The FRB has established capital requirements
for bank holding companies that generally parallel the capital requirements for
national banks and federal thrift institutions. As a thrift holding company,
FirstFederal is not subject to any minimum capital requirements.
SUMMIT BANCORP
GENERAL
Summit, a registered bank holding company, was incorporated under the
laws of the State of Ohio on November 7, 1988 as First Summit Capital
Corporation. Its name was changed to Summit Bancorp on July 10, 1989. Subsequent
to that date, the Ohio Division of Banks authorized the organization of Summit
Bank as a state-
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<PAGE> 25
chartered commercial bank, and the FRB authorized Summit to become a bank
holding company by acquiring all the voting shares of Summit Bank's capital
stock. As a bank holding company, Summit is subject to regulation under the
BHCA. The FRB regulates bank holding companies and may periodically examine or
inspect Summit and Summit Bank. At December 31, 1996, Summit had assets of $81.2
million, deposits of $67.8 million and stockholders' equity of $7.2 million.
Summit's principal business is to operate Summit Bank, a full service
commercial bank the deposits of which are insured by the Bank Insurance Fund,
administered by the FDIC, up to the maximum amount permitted by law. Summit Bank
is an independent community bank drawing customers primarily from Summit County,
Ohio. Summit Bank follows a service-focused strategy to provide personal banking
services to businesses, professionals and other persons. It offers its customers
traditional, commercial and consumer checking accounts, savings accounts,
certificates of deposit, Individual Retirement Accounts, Keough Accounts, direct
deposit, night depository, access to automated teller machine networks and
corporate cash management. Its lending services include commercial loans,
commercial and residential real estate loans, credit cards, letters of credit
and home equity and other consumer loans.
Summit Bank is regulated primarily by the Ohio Deputy Superintendent
for Banks. Summit Bank is a member of the Federal Reserve System and thus is
subject to regulation by the FRB. Both the Deputy Superintendent for Banks and
the FRB have authority to examine and inspect Summit Bank.
In 1996, Summit formed Summit Banc Investments Corporation ("SBIC")
to extend the range of services available to customers of Summit Bank. SBIC is
an Ohio corporation and a wholly-owned subsidiary of Summit. Generally, SBIC
provides financial planning and advisory services, including discount brokerage
services (buying and selling stocks, bonds and investment company shares),
portfolio investment advice and fixed and variable annuities, to Summit Bank's
customers. The decision to form SBIC to provide these services was made in
response to growing customer demand. Requisite approvals from various regulatory
agencies were obtained to allow the formation and operations of SBIC.
Summit's executive offices are located at 2680 West Market Street,
Akron, Ohio 44333, and the telephone number at that location is (330) 864-8080.
PENDING STRUCTURAL CHANGE
Prior to the Effective Time, Summit Bank will submit an application
to the OCC to convert from a state-chartered bank to a national bank. Upon
becoming a national bank, Summit Bank will cease to be regulated by the State of
Ohio and the FRB, and its primary regulator will be the OCC. Summit's management
believes that becoming a national bank will provide additional flexibility with
respect to certain product offerings and will lead to smoother integration and
communication with FirstFederal, whose other banking subsidiary, the
Association, is also expected to be a national bank. It is currently intended
that Summit will complete its conversion to a national bank immediately prior to
the Effective Time. In the event the Merger is not consummated, however, it is
possible that Summit Bank will not complete its conversion to a national bank.
THE SPECIAL MEETING
MATTERS TO BE CONSIDERED AT THE SPECIAL MEETING
At the Special Meeting, shareholders of record of Summit Common Stock
will be asked to consider and vote upon the Merger Agreement and the Merger.
Approval of the Merger Agreement and the Merger requires the affirmative vote of
the holders of at least a majority of the outstanding shares of Summit Common
Stock.
THE SUMMIT BOARD HAS DETERMINED THAT THE MERGER IS ADVISABLE AND IN THE BEST
INTERESTS OF THE SHAREHOLDERS OF SUMMIT, HAS APPROVED THE MERGER AGREEMENT AND
THE MERGER, AND RECOMMENDS A VOTE BY SUMMIT SHAREHOLDERS TO APPROVE THE MERGER
AGREEMENT AND THE MERGER.
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<PAGE> 26
RECORD DATE; VOTING AT THE SPECIAL MEETING; VOTE REQUIRED
The Summit Board has fixed May 1, 1997 as the Record Date for the
determination of the holders of Summit Common Stock entitled to receive notice
of and to vote at the Special Meeting. Summit has no other class of voting
securities outstanding. Only holders of record of Summit Common Stock on the
Record Date will be entitled to receive notice of and to vote at the Special
Meeting. As of the Record Date, there were 234,891 shares of Summit Common
Stock outstanding and entitled to vote. Each holder of Summit Common Stock, as
of the Record Date, is entitled to cast one vote per share, in person or by
properly executed and delivered proxy, on the Merger Agreement and the Merger
and on any other matter properly submitted for the vote of shareholders at the
Special Meeting or any adjournment or postponement thereof.
The presence, in person or by properly executed and delivered proxy,
of the holders of at least a majority of the outstanding shares of Summit Common
Stock entitled to vote at the Special Meeting is necessary to constitute a
quorum. Under Ohio law and Summit's corporate governance documents, approval of
the Merger Agreement and the Merger will require the affirmative vote of the
holders of at least a majority of the outstanding shares of Summit Common Stock.
The votes will be counted at the meeting by Summit's Chief Financial Officer,
who will be appointed Inspector of Elections.
ABSTENTIONS AND BROKER NON-VOTES WILL NOT BE COUNTED BUT EACH SUCH ABSTENTION OR
BROKER NON-VOTE WILL HAVE THE PRACTICAL EFFECT OF A VOTE AGAINST THE MERGER
PROPOSAL.
As of the Record Date, directors and executive officers of Summit and
Summit Bank, and their affiliates, beneficially owned approximately 24.62% of
the outstanding Summit Common Stock. As of the Record Date, the directors,
executive officers or affiliates of FirstFederal beneficially owned no shares
of Summit Common Stock. All directors and executive officers of Summit have
indicated an intention to vote or direct the voting of all shares of Summit
Common Stock over which such person has voting control in favor of the Merger
Agreement and the Merger.
Certain information regarding the ownership of shares of Summit
Common Stock by the directors and executive officers of Summit is contained in
Part III, Item 11 of the Summit 1996 10-KSB, incorporated by reference herein, a
copy of which accompanies this Proxy Statement/Prospectus.
PROXIES
All shares of Summit Common Stock that are entitled to vote and are
represented at the Special Meeting by properly executed and delivered proxies,
received prior to or at the Special Meeting, and not duly and timely revoked,
will be voted at the Special Meeting in accordance with the instructions given
on such proxies. If no instructions are given on a proxy, such proxy will be
voted FOR APPROVAL of the Merger Agreement and the Merger.
If any other matters are properly presented for consideration at the
Special Meeting (or at any adjournment or postponement thereof), including,
without limitation, consideration of a motion to adjourn or postpone the Special
Meeting to another time or place (for the purpose of soliciting additional
proxies, or otherwise), any person named in the enclosed form of proxy will have
discretion to vote on such matters in accordance with his best judgment;
provided, however, that any proxy voted against approval of the Merger Agreement
and the Merger will not be voted in favor of any adjournment or postponement of
the Special Meeting. The management and Summit Board have no information that
other matters will be brought before the Special Meeting. If, however, other
matters are properly presented, the accompanying proxy will be voted in
accordance with the best judgment of the proxy holders with respect to such
matters.
Any proxy given pursuant to this solicitation may be revoked by the
person giving it at any time before it is voted. A proxy may be revoked by (i)
filing a written notice of revocation, with a date later than the date of the
proxy, with the Secretary of Summit at or before the taking of the vote at the
Special Meeting or (ii) attending the Special Meeting and voting in person;
provided, however, that attendance at the meeting by itself will not constitute
revocation of a proxy. Any written notification of revocation of a proxy should
be sent or delivered to
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<PAGE> 27
Summit Bancorp, 2680 West Market Street, Akron, Ohio 44333, Attention: Corporate
Secretary, or hand-delivered to the Corporate Secretary of Summit at or before
the taking of the vote at the Special Meeting.
The accompanying proxy is being solicited by and on behalf of the
Summit Board. A Notice of Special Meeting is attached to this proxy statement.
The entire cost of soliciting proxies will be borne by Summit. In addition to
use of the mails, proxies may be solicited personally or by telephone by
officers, directors and other employees of Summit who will not be specially
compensated for such soliciting. Summit will, at its expense, upon the receipt
of a request from brokers and other custodians, nominees and fiduciaries,
forward proxy soliciting material to the beneficial owners of shares held of
record by such persons.
THE MERGER
The information in this Proxy Statement/Prospectus concerning the
terms of the Merger is qualified in its entirety by reference to the full text
of the Merger Agreement, which is attached hereto as Appendix I and incorporated
by reference herein. All shareholders are urged to read the Merger Agreement in
its entirety.
GENERAL
Pursuant to the Merger Agreement, Summit will be merged with and into
FirstFederal in accordance with the Ohio General Corporation Law, with
FirstFederal being the surviving entity (the "Merger"). On the closing date of
the Merger, FirstFederal and Summit will file a certificate of merger with the
Secretary of State of Ohio. The Merger will become effective at the time of
such filing.
At the Effective Time, each outstanding share of Summit Common Stock
(other than shares held by holders who perfect appraisal rights and other
excluded shares of Summit Common Stock held by FirstFederal or Summit) will be
converted into the right to receive 1.87 shares of FirstFederal Common Stock,
subject to adjustment as provided in the Merger Agreement. See "--Merger
Consideration." Each shareholder of Summit will then be entitled to exchange
Summit Common Stock certificates for FirstFederal Common Stock certificates and
thereupon cease to be a shareholder of Summit, and the separate existence and
corporate organization of Summit shall cease.
BACKGROUND OF THE MERGER
Over the past several years, Summit has evaluated various business
opportunities intended to improve return on shareholders' equity. Summit has
expanded through the establishment of a second office and has also considered
expansion through a "merger of equals" type of transaction that would involve
the merger of Summit with another independent Ohio financial institution of
similar size, and had preliminary discussions about this type of merger with
several independent Ohio banks. This type of merger was later abandoned due to a
number of factors, including the inability to resolve issues such as management
control and structure.
Summit next evaluated expansion by merger with a larger financial
institution, and determined to focus on a transaction that would (i) increase
resources with which to offer financial services; (ii) significantly enhance
shareholder value; (iii) enhance Summit's prospects for future shareholder
value; and (iv) permit Summit to continue to serve its existing market. On this
basis, in September 1996, Summit began discussions with two Ohio financial
institutions that expressed a preliminary interest in acquiring Summit. On
September 20, 1996, Summit received a written letter of interest from one of
these institutions, and on November 1, 1996, an oral expression of preliminary
interest from the other institution. It became apparent to Summit that several
potential merger candidates might be seriously interested in a business
combination with Summit, and in November, 1996, Summit met with McDonald &
Company, an investment banking firm, to review strategic alternatives for a
merger of Summit with another financial institution.
Summit retained McDonald & Company to advise the Summit Board on the
possibility of pursuing a merger of Summit with another financial institution,
to assist Summit in evaluating the various forms and structures of a proposed
merger, and to conduct a confidential inquiry into the possible interest of
selected additional entities in pursuing a merger with Summit. Following the
completion of such inquiry by McDonald & Company, three
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<PAGE> 28
additional possible merger partners executed confidentiality agreements and
reviewed financial and other data provided by Summit. Following discussions with
Summit and certain due diligence review of Summit, two of the three additional
merger candidates submitted written indications of interest with respect to the
acquisition of Summit, one of which was FirstFederal. The third entity contacted
by McDonald & Company had expressed a preliminary interest only in a cash for
stock type of transaction with Summit, a proposal not pursued by Summit due to
the tax effects to shareholders associated with a cash transaction.
The four proposals received by Summit contemplated an exchange of
common stock for Summit Common Stock at various exchange ratios. Following
extensive review and discussion of the four proposals by the Summit Board with
McDonald & Company and legal counsel, and based upon a written analysis of the
four proposals prepared by McDonald & Company and presented to the Summit Board
at a meeting on December 16, 1996, the Summit Board decided to pursue
negotiations exclusively with FirstFederal, on the basis that such a merger
appeared to provide the greatest potential future earnings per share for Summit
shareholders. Such decision was also based on (i) the strength and continuity of
management at FirstFederal; (ii) the market liquidity of FirstFederal stock; and
(iii) the prospects for earnings per share growth based on FirstFederal's
diversification and expansion plans.
The Summit Board provided guidelines to senior management of Summit
for the negotiation with FirstFederal of certain terms and conditions of the
proposed Merger. During the period from December 16, 1996 to December 30, 1996,
senior management and representatives of Summit negotiated with senior
management and representatives of FirstFederal regarding the material terms of
the Merger Agreement. During the same period, each company conducted a due
diligence investigation of the other company. At a meeting held on December 30,
1996, the Summit Board, with the assistance of McDonald & Company and legal
counsel, reviewed in detail the terms and conditions contained in the form of
the proposed Merger Agreement and related transaction matters. After extensive
discussion among the directors, and after receiving the oral opinion of McDonald
& Company that, as of that date, the Exchange Ratio was fair to shareholders of
Summit from a financial point of view, the Summit Board concluded that the terms
and conditions contained in the Merger Agreement would provide for a transaction
which was fair to and in the best interest of the Summit shareholders.
Accordingly, the Summit Board approved the terms and conditions of the Merger
Agreement and authorized the execution of that document and any related
documents by the senior management of Summit.
REASONS FOR THE MERGER
Summit's Reasons for the Merger. During the past year, Summit
explored various options to provide market liquidity to its shareholders and
increase shareholder value. After arms-length negotiations between Summit and
FirstFederal and careful review and consideration, the Summit Board concluded
that the terms of the Merger were in the best interests of Summit shareholders.
In approving the Merger, the Summit Board considered numerous factors, including
(i) the price that could be obtained for Summit's Common Stock; (ii) future
appreciation in the value of its merger partner's capital stock; (iii) the
business operations, asset quality, and financial condition of its merger
partner; (iv) the ability to account for the transaction as a pooling of
interests; (v) the qualification of the merger as a tax-free reorganization;
(vi) the synergies between the business of Summit and that of its merger
partner; (vii) the willingness of its merger partner to allow Summit Bank to
continue to operate as an autonomous bank subsidiary serving customers and its
community as Summit Bank had prior to the merger; and (viii) the opinion
rendered by McDonald & Company to the effect that, as of December 30, 1996, the
Exchange Ratio was fair to the holders of Summit Common Stock from a financial
point of view. See "Opinion of Financial Advisor."
FirstFederal's Reasons for the Merger. In reaching its decision to
approve the Merger Agreement, the FirstFederal Board considered that the Merger
would enhance FirstFederal's strategic plan to be a super community bank. The
FirstFederal Board also considered that Summit Bank is an institution that is
well managed and possesses compatible management philosophies and cultures,
particularly a commitment to providing exceptional customer service.
FirstFederal's shareholders should realize the expected benefits of such an
alliance. Such benefits include, among others: the future prospects of the
combined company, the combined company's financial strength and an enhanced
ability to service existing customers and develop new products and services, the
potential for cross-marketing products and services to customers of the two
companies, and the opportunity to diversify earnings.
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With Summit's commercial banking offices located in the growing
Summit County, Ohio market, the Merger will allow FirstFederal a natural market
extension to its existing franchise, which includes the contiguous markets of
Wayne, Medina and Stark Counties, Ohio. The Merger will expand FirstFederal's
and Summit's abilities to serve the small business lending market while
diversifying FirstFederal's balance sheet, which has been concentrated in
residential mortgage loans. Further, Summit's private banking expertise can be
leveraged to continue FirstFederal's diversification efforts.
TREATMENT OF SUMMIT STOCK OPTIONS AND STOCK APPRECIATION RIGHTS
Each option to purchase shares of Summit Common Stock outstanding
immediately prior to the Effective Time granted pursuant to (i) the Summit Plan
or (ii) pursuant to certain agreements with the officers and directors of
Summit, will, at the Effective Time, be converted into the right to purchase the
number of shares of FirstFederal Common Stock (rounded up to the nearest whole
share) that would have been received by the holder of such option in the Merger
had the option been exercised in full immediately prior to the Effective Time.
The exercise price under each new option will be equal to the exercise price
under the corresponding old option divided by the Exchange Ratio.
Each holder of stock appreciation rights granted under the Summit
Plan entitling such holder to receive payment of amounts determined pursuant to
the Summit Plan will, upon the Effective Time, be entitled to receive a number
of stock appreciation rights based upon FirstFederal Common Stock equal to the
number of stock appreciation rights based upon Summit Common Stock held by such
holder multiplied by the Exchange Ratio. The price of each new stock
appreciation right will be equal to the price of the corresponding old stock
appreciation right divided by the Exchange Ratio.
MERGER CONSIDERATION
Subject to the terms, conditions and procedures set forth in the
Merger Agreement, each share of Summit Common Stock issued and outstanding
immediately prior to the Merger (other than shares held by holders who perfect
appraisal rights and other excluded shares) will be converted into the right to
receive 1.87 shares (the "Exchange Ratio") of FirstFederal Common Stock, subject
to adjustment as described below. The Exchange Ratio was determined through
arm's-length negotiations between FirstFederal and Summit, which was advised
during such negotiations by McDonald & Company, its financial advisor.
Each share of FirstFederal Common Stock issued and outstanding at the
Effective Time will remain outstanding and unchanged as a result of the Merger.
No fractional shares of FirstFederal Common Stock will be issued in the Merger,
and Summit shareholders who otherwise would be entitled to receive a fractional
share of FirstFederal Common Stock will receive a cash payment in lieu thereof.
See "--Fractional Shares."
As noted above, the number of shares of FirstFederal Common Stock to
be received for each share of Summit Common Stock has been fixed at 1.87. The
Merger Agreement provides that in the event of a change in the number of shares
of FirstFederal Common Stock between the date of the Merger Agreement and the
Effective Time by reason of any reclassification, recapitalization, split-up,
combination or exchange of shares, or by stock dividend or stock split thereon
an appropriate adjustment shall be made to the Exchange Ratio. Assuming the
occurrence of the five-for-four stock split in the form of a stock dividend
that has been declared by FirstFederal, payable on May 22, 1997 to holders of
record of FirstFederal Common Stock as of May 2, 1997, the Exchange Ratio at the
Effective Time will be 2.3375. Based on the last reported sale price for
FirstFederal Common Stock on the Nasdaq National Market on April 30, 1997
($36.50 per share), the value of 1.87 shares of FirstFederal Common Stock as of
that date would have been approximately $68.255. At the present time, there is
no established market in which shares of Summit Common Stock are regularly
traded, nor are there any uniformly quoted prices for such shares. The Ohio
Company and Sweeney Cartwright currently maintain a work-out market for Summit
Common Stock. The last trade of shares of Summit Common Stock known to the
management of Summit occurred on March 7, 1997 at $65.00 per share. The market
value of FirstFederal Common Stock to be received in the Merger is subject to
fluctuation. Fluctuations in the market price of FirstFederal Common Stock would
generally result in an increase or decrease in the value of the consideration to
be received by Summit shareholders in the Merger. An increase in the market
value of FirstFederal Common Stock would generally increase the value of the
consideration to be received by Summit shareholders in the Merger. A decrease in
the market value of FirstFederal Common Stock would generally have the opposite
effect.
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OPINION OF FINANCIAL ADVISOR
Summit has retained McDonald & Company to render its opinion with
respect to the fairness, from a financial point of view, of the Exchange Ratio
to the holders of Summit Common Stock. McDonald & Company rendered its oral
opinion to the Summit Board on December 30, 1996, which it subsequently
confirmed in writing, that, as of the date of such opinion, the Exchange Ratio
was fair, from a financial point of view, to the holders of Summit Common Stock.
The full text of the opinion of McDonald & Company, updated as of the
date of this Proxy Statement/Prospectus, which sets forth certain assumptions
made, matters considered and limitations on the reviews undertaken, is attached
as Appendix II to this Proxy Statement/Prospectus, and should be read in its
entirety. The summary of the opinion of McDonald & Company set forth in this
Proxy Statement/Prospectus is qualified in its entirety by reference to the
opinion. McDonald & Company's opinion is directed to the Summit Board and
addresses only the Exchange Ratio.
In arriving at its opinion, McDonald & Company reviewed, among other
things, the Merger Agreement, together with exhibits and schedules thereto,
certain publicly available information relating to the business, financial
condition and operations of Summit and FirstFederal, as well as certain other
non-public information, primarily financial in nature, furnished to it by Summit
and FirstFederal relating to the respective businesses, earnings, assets and
prospects of Summit and FirstFederal. McDonald & Company also held discussions
with members of senior management of Summit and FirstFederal concerning their
respective businesses, assets, financial forecasts and prospects. McDonald &
Company also reviewed certain publicly available information concerning the
trading of, and the trading market for, Summit Common Stock and FirstFederal
Common Stock and certain publicly available information concerning comparable
companies and transactions, all as set forth in McDonald & Company's opinion.
McDonald & Company was not engaged to and did not conduct a physical
inspection of any of the assets, properties, or facilities of either Summit or
FirstFederal and was not engaged to and has not made, obtained or been furnished
with any independent evaluation or appraisal of any of such assets, properties,
or facilities or any of the liabilities of Summit or FirstFederal. McDonald &
Company has assumed that all of the conditions to the Merger as set forth in the
Merger Agreement, including the tax-free treatment of the Merger to the holders
of Summit Common Stock, would be satisfied and that the Merger would be
consummated on a timely basis in the manner contemplated by the Merger
Agreement. No limitations were imposed by Summit upon McDonald & Company with
respect to the scope of McDonald & Company's investigation, nor were any
specific instructions given to McDonald & Company in connection with its
fairness opinion.
In connection with rendering its opinion dated December 30, 1996,
McDonald & Company considered a variety of financial analyses, which are
summarized below. McDonald & Company believes that its analyses must be
considered as a whole and that selecting portions of such analyses and of the
factors considered by McDonald & Company without considering all such analyses
and factors may create an incomplete view of the analytical process underlying
McDonald & Company's opinion. In its analyses, McDonald & Company made numerous
assumptions with respect to industry performance, business and economic
conditions and other matters. Any estimates contained in McDonald & Company's
analyses are not necessarily indicative of future results or values, which may
be significantly more or less favorable than such estimates.
The following is a summary of selected analyses considered by
McDonald & Company and discussed with the Summit Board in connection with
McDonald & Company's opinion dated December 30, 1996:
COMPARISON WITH SELECTED COMPANIES. McDonald & Company compared the
financial performance and stock market valuation of FirstFederal with
corresponding data for the following selected companies: D&N Financial Corp.,
First Indiana Corp., First Federal Capital Corp., Home Federal Bancorp, Maryland
Federal Bancorp, North American Savings Bank, Prime Bancorp, Inc., Progressive
Bank, Inc., Pulse Bancorp, Parkvale Financial Corp., Security First Corp., St.
Francis Capital Corp. and Green Tree Financial Corp. In addition, McDonald &
Company compared the same data of Summit with corresponding data for the
following selected companies: CSB Bancorp, Inc., Commerce National Bank,
Commerce Bank/Harrisburg N.A., Commercial
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Bancshares, Inc., Citizens Financial Services, Fidelity Deposit & Discount Bank,
Fentura Bancorp, Inc., First WV Bancorp Inc., Lake Ariel Bancorp, Inc., NSD
Bancorp, Inc., Oak Hill Financial, Inc., Orrstown Financial Services, Pocahontas
Bankshares Corp. and United Bancorp, Inc. At the time, none of the companies
listed above had announced a merger transaction or disclosed a possible interest
in pursuing a possible merger transaction which would have significantly
affected its stock market valuation.
CONTRIBUTION ANALYSIS. McDonald & Company analyzed the contribution
of each of Summit and FirstFederal to, among other things, the shareholders'
equity and after-tax income of the pro forma combined company. This analysis
showed that, among other factors, Summit would have contributed 7.8% of the
stated shareholders' equity of the pro forma combined company (or 8.7% of the
fully diluted book value of the pro forma combined company) as of September 30,
1996 and 6.5% of the pro forma net income for the combined company for the 12
months ended September 30, 1996, compared to a proposed ownership of 8.1% of the
combined company to be held by holders of Summit Common Stock.
PRO FORMA MERGER ANALYSIS. McDonald & Company analyzed certain pro
forma effects resulting from the Merger on the pro forma combined company over a
five year period from 1997 through 2001. This analysis, based upon the financial
forecasts of management of Summit and FirstFederal and including estimates of
cost savings provided by the management of Summit and FirstFederal, showed
approximately 3.3% dilution for FirstFederal in pro forma earnings per share in
1997 and approximately 3.1% dilution for FirstFederal in pro forma earnings per
share in 1998. McDonald & Company also analyzed the changes in the per share
amount of earnings, book value and indicated dividends represented by one share
of Summit Common after the Merger. The analysis was performed on the basis of
financial information for both companies as of and for the 12 month periods
ended December 31, 1993, 1994 and 1995 and the 12 month period ended September
30, 1996. The analysis indicated that, among other things, exchanging one share
of Summit Common Stock at the Exchange Ratio for shares of FirstFederal Common
Stock on a pro forma basis would have resulted in a 15.8% increase in earnings
per share for each share of Summit Common Stock for the 12 months ended
September 30, 1996, a 6.3% decrease in fully diluted book value per share for
each share of Summit Common Stock as of September 30, 1996 and a dividend
increase from no dividend to $0.90 per share of Summit Common Stock based on
FirstFederal's indicated annual dividend rate as of the date of the opinion.
ANALYSIS OF SELECTED MERGER TRANSACTIONS. McDonald & Company reviewed
five groups of selected pending bank acquisition transactions involving (i)
selling banks headquartered in the Midwest region of Iowa, Illinois, Indiana,
Kansas, Kentucky, Michigan, Minnesota, Missouri, North Dakota, Nebraska, Ohio,
Pennsylvania, South Dakota, West Virginia and Wisconsin, (ii) transactions in
which the deal value was between $10 million and $25 million, (iii) selling
banks with an equity to assets ratio of between 8.00% and 9.00%, (iv) selling
banks with a return on average assets ratio of between 0.90% and 1.10% and (v)
selling banks with a ratio of non-performing assets to total assets of less than
0.30%. McDonald & Company reviewed the ratios of the offer value to stated book
value and tangible book value, the multiple of the last 12 months earnings of
the acquired company, and the ratio of offer value to assets in each such
transaction, and computed the mean and median ratios and multiples of each
group. The calculations yielded ranges of median ratios of price to stated book
value and tangible book value of 179% to 205% and 184% to 206%, respectively.
Median multiples of earnings among the five groups ranged from 17.7x to 18.7x;
and median ratios of offer value to assets ranged from 17.3% to 18.8%. This
analysis showed an imputed reference range of $12.5 million to $15.3 million in
aggregate, or $53.32 to $65.17 per share of Summit Common Stock.
NO COMPANY OR TRANSACTION USED IN THE ABOVE ANALYSES AS A COMPARISON
IS IDENTICAL TO SUMMIT, FIRSTFEDERAL OR THE MERGER. ACCORDINGLY, AN ANALYSIS OF
THE RESULTS OF THE FOREGOING NECESSARILY INVOLVES COMPLEX CONSIDERATIONS AND
JUDGMENTS CONCERNING THE DIFFERENCES IN FINANCIAL AND OPERATING CHARACTERISTICS
OF THE COMPANIES TO WHICH THEY ARE BEING COMPARED. MATHEMATICAL ANALYSIS (SUCH
AS DETERMINING THE MEAN OR MEDIAN) IS NOT, IN ITSELF, A MEANINGFUL METHOD OF
USING COMPARABLE COMPANY OR COMPARABLE TRANSACTION DATA.
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DISCOUNTED CASH FLOW ANALYSIS. Using discounted cash flow analysis,
McDonald & Company estimated the present value of the future streams of
after-tax cash flows that Summit could produce over the five-year period from
1997 through 2001, under various assumptions, based upon Summit's management
forecasts. McDonald & Company then estimated the terminal value of Summit after
the five-year period by applying an estimated perpetual growth rate to the sixth
year's projected after-tax cash flow and then applied to this value multiples
ranging from 9.0x to 11.0x. The five-year cash flow streams and terminal values
were then discounted to present values using different discount rates chosen to
reflect different assumptions regarding the estimated required rates of return
of prospective buyers of Summit. On the basis of such varying assumptions, this
discounted cash flow analysis indicated a reference range of $49.90 to $61.85
per share of Summit Common Stock. This analysis was based upon management
forecasts which included adjustments to reflect the anticipated effects of
potential merger-related cost savings estimated by Summit and FirstFederal.
Management's forecasts are based upon many factors and assumptions, many of
which are beyond the control of Summit or FirstFederal. As indicated above, this
analysis is not necessarily indicative of actual values or actual future results
and does not purport to reflect the prices at which any securities may trade at
the present time or at any time in the future.
In performing its analyses, McDonald & Company made numerous
assumptions with respect to industry performance, general business and economic
conditions and other matters. The analyses performed by McDonald & Company are
not necessarily indicative of actual values, which may be significantly more or
less favorable than the values suggested by such analyses. Such analyses were
prepared solely as part of McDonald & Company's opinion.
The term "fair from a financial point of view" is a standard phrase
contained in investment banking fairness opinions and refers to the fact that
McDonald & Company's opinion as to the fairness of the Exchange Ratio is
addressed solely to the financial attributes of the Exchange Ratio. The analyses
do not purport to be appraisals or to reflect the prices at which a company
might actually be sold. In addition, as described above, McDonald & Company's
opinion and related presentation to the Summit Board were among many factors
taken into consideration by the Summit Board in making its determination to
approve the Merger Agreement. Consequently, the McDonald & Company analyses
described above should not be viewed as determinative of the Summit Board's
conclusions with respect to the value of Summit or of the decision of the Summit
Board to agree to the Exchange Ratio.
McDonald & Company's opinion is based on economic and market
conditions and other circumstances existing on, and information made available
as of, the date of the opinion. In addition, the opinion does not address the
underlying business decision to effect the Merger or any other terms of the
Merger. McDonald & Company's opinion does not represent its opinion as to what
the value of Summit Common Stock or FirstFederal Common Stock may be at the
Closing Date.
In connection with its opinion dated as of the date of this Proxy
Statement/Prospectus, McDonald & Company performed procedures to update certain
of its analyses and reviewed the assumptions on which such analyses were based
and the factors considered herewith.
McDonald & Company, as part of its investment banking business, is
customarily engaged in the valuation of businesses and their securities in
connection with mergers and acquisitions, negotiated underwritings, secondary
distributions of listed and unlisted securities, private placements and
valuations for estate, corporate and other purposes. McDonald & Company has
extensive experience with the valuation of financial institutions. The Summit
Board selected McDonald & Company as its financial advisor because of McDonald &
Company's industry expertise with respect to financial institutions and because
of its substantial experience in transactions similar to the Merger.
McDonald & Company is not affiliated with either Summit or FirstFederal.
In the ordinary course of business, McDonald & Company makes a market
in FirstFederal Common Stock, as well as both series of its cumulative
convertible preferred stock and may actively trade securities of FirstFederal
and Summit for its own account and for the accounts of its customers. At any
time and from time to time, McDonald & Company may hold a short or long position
in such securities. In addition, McDonald & Company has provided investment
banking services to FirstFederal in the past, including the March 1997 private
placement of subordinated notes, and may provide such services to FirstFederal
in the future. McDonald & Company has received customary fees for its investment
banking services.
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For its services as financial advisor, Summit has paid McDonald &
Company a retainer of $15,000 and a fee of $35,000 upon rendering of the oral
opinion. Assuming the consummation of the Merger and based upon the value of the
Merger assuming a per share merger price of $36.50, additional fees equal to
approximately $214,000 would be payable to McDonald & Company upon consummation
of the Merger. Summit has also agreed to reimburse McDonald & Company for its
reasonable out-of-pocket expenses and to indemnify McDonald & Company against
certain liabilities, including certain liabilities under federal securities
laws.
EFFECTIVE TIME AND CLOSING DATE
The Merger will become effective at the time and on the date of the
filing of a certificate of merger with the Secretary of State of Ohio (the
"Effective Time"). The consummation of the Merger will occur only after the
receipt of all requisite regulatory approvals, the approval of the Merger
Agreement and the Merger by the requisite vote of Summit's shareholders and the
satisfaction or waiver of all other conditions to the Merger. Under the Merger
Agreement, the closing of the Merger is to occur on or before July 31, 1997, or
as promptly as possible after regulatory approval is received, but in no event
later than September 30, 1997 (the "Closing Date").
APPRAISAL RIGHTS
Holders of the Summit Common Stock who so desire are entitled to
relief as dissenting shareholders under Section 1701.84 of the Ohio Revised
Code. A shareholder of Summit, 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 III.
A Summit 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 Summit Common Stock as to
which he seeks relief as of the Record Date;
(b) must not have voted his shares of Summit Common Stock in favor of
the Merger; and
(c) must deliver to Summit, not later than 10 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 of shares as to
which he seeks relief and the amount claimed as the fair cash value
thereof.
A vote against the Merger Agreement and the Merger will not satisfy
the requirements of a written demand for payment. Any written demand for payment
should be mailed or delivered to: Summit Bancorp, 2680 West Market Street,
Akron, Ohio 44333, Attention: Corporate Secretary. As the written demand must be
delivered within the 10-day period following the Special Meeting, it is
recommended, although not required, that a shareholder using the mails use
certified or registered mail, return receipt requested, to confirm that he has
made a timely delivery.
If Summit sends the dissenting shareholder, at the address specified
in his demand, a request for any certificate representing the shares as to which
he is dissenting, the shareholder must deliver the certificate within 15 days of
the sending of such request. Summit may endorse any such certificate with a
legend to the effect that the shareholder has demanded the fair cash value of
the shares represented by the certificate. A shareholder's failure to deliver a
certificate within 15 days of the request gives Summit the option to terminate
the shareholder's rights as a dissenting shareholder. Summit 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.
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Unless the dissenting shareholder and Summit shall agree on the fair
cash value per share of Summit Common Stock, either may, within three months
after service of the written demand by the shareholder, file a petition in the
Court of Common Pleas of Summit 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: (i) will be determined as of the day prior to the
Special Meeting, (ii) will be the amount a willing seller and willing buyer
would accept or pay with neither being under compulsion to sell or buy, (iii)
will not exceed the amount specified in the shareholder's written demand and
(iv) 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 Summit 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 Summit by its Board of Directors
waives such failure, (b) Summit abandons or is finally enjoined or prevented
from carrying out, or the shareholders of Summit rescind their adoption of, the
Merger, (c) the dissenting shareholder withdraws his written demand, with the
consent of Summit, by its Board of Directors, or (d) Summit and the dissenting
shareholder shall not have agreed upon the fair cash value per share of the
Summit Common Stock, 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.
Since a proxy which does not contain voting instructions will be
voted for adoption of the Merger Agreement and the Merger, a shareholder who
wishes to exercise his appraisal rights must either not sign and return his
proxy or, if he signs and returns his proxy, vote against the Merger Agreement
and the Merger or expressly abstain from voting with respect to the Merger
Agreement and the Merger.
FAILURE TO FOLLOW THE PROCEDURE SET FORTH IN SECTION 1701.85 OF THE OHIO REVISED
CODE, A COPY OF WHICH IS ATTACHED AS APPENDIX III HERETO, INCLUDING WITHOUT
LIMITATION TIMELY DELIVERY OF A WRITTEN DEMAND FOR PAYMENT WITH RESPECT TO ANY
SHARES OF SUMMIT COMMON STOCK AS TO WHICH THE SHAREHOLDER DISSENTS AND ANY
CERTIFICATE EVIDENCING OWNERSHIP OF SUCH SHARES, WILL CONSTITUTE A WAIVER OF ANY
RIGHT TO DISSENT WITH RESPECT TO SUCH SHARES.
FRACTIONAL SHARES
No certificates representing fractional shares of FirstFederal Common
Stock will be issued upon the surrender for exchange of certificates
representing Summit Common Stock, and such fractional share interests will not
entitle the owner thereof to vote or receive dividends or any rights of a
shareholder of FirstFederal. Each shareholder of Summit who otherwise would be
entitled to a fractional share of FirstFederal Common Stock in the Merger will
receive a cash payment in lieu thereof in an amount determined by multiplying
the fractional share interest to which shareholder would otherwise be entitled
by the average of the closing bid and ask prices of FirstFederal Common Stock as
reported on the Nasdaq National Market during the five consecutive trading days
ending on the third trading day prior to the Closing Date.
EXCHANGE OF CERTIFICATES
At and after the Effective Time, each holder of a certificate or
certificates representing outstanding shares of Summit Common Stock (a "Summit
Certificate") may surrender such Summit Certificate to the transfer agent of
FirstFederal for cancellation and be entitled upon such surrender to receive in
exchange therefor certificate(s) representing the number of shares of
FirstFederal Common Stock to which such holder is entitled under the Merger
Agreement (a "FirstFederal Certificate") and a check for the amount of cash to
be paid in lieu of any fractional share interests, to which such holder is
entitled. Until so surrendered, each Summit Certificate shall be deemed to
represent ownership of the number of shares of FirstFederal Common Stock into
which the shares represented
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by such Summit Certificates have been converted in the Merger. No dividends or
other distributions declared after the Effective Time with respect to
FirstFederal Common Stock will be paid to the holder of any unsurrendered Summit
Certificate until the holder surrenders such Summit Certificate. After a holder
surrenders a Summit Certificate, the holder will be entitled to receive any
dividends or other distributions, without interest, which theretofore had become
payable with respect to shares of FirstFederal Common Stock represented by such
Summit Certificate. After the Effective Time, holders of unsurrendered Summit
Certificates will be entitled to vote at any meeting of FirstFederal
shareholders, the number of whole shares of FirstFederal Common Stock
represented by such Summit Certificates, provided that no holder of
unsurrendered Summit Certificates may vote at any meeting of FirstFederal
shareholders that is held more than 30 days after the Effective Time. If any
FirstFederal Certificate is to be issued in a name other than that in which the
Summit Certificate surrendered for exchange is issued, the Summit Certificate so
surrendered shall be properly endorsed and otherwise in proper form for
transfer. Upon the Effective Time, the stock transfer books of Summit will be
closed and no transfer of Summit Common Stock may thereafter be made or
recognized.
INTERESTS OF CERTAIN PERSONS IN THE MERGER
Employment Agreements. It is anticipated that, on the Closing Date,
David C. Vernon, Chairman of the Board, Chief Executive Officer and President of
Summit and Summit Bank, will enter into an employment agreement with Summit Bank
for a period of at least five years, subject to earlier termination in
accordance with the provisions of such agreement, pursuant to which he will
continue to serve as Chairman of the Board, Chief Executive Officer and
President of Summit Bank. Beginning on the fifth anniversary of the date of Mr.
Vernon's employment agreement and on each anniversary thereafter, the term
thereof would be extended for an additional year, provided that neither Mr.
Vernon nor Summit Bank had given timely notice to the other that the term not be
extended.
Mr. Vernon would be entitled to receive an annual base salary of
$130,000, subject to increases at the discretion of the Board of Directors of
Summit Bank, and to bonuses pursuant to the existing Management Incentive Plan
of FirstFederal, at the discretion of the Board of Directors of Summit Bank. Mr.
Vernon would be entitled to participate in all stock option and other employee
benefit plans that are maintained for Summit Bank's executive officers and
employees generally (and to receive options to purchase a minimum of 5,000
shares of FirstFederal Common Stock during the first year of his employment
agreement), and to certain other fringe benefits. In the event Mr. Vernon were
"involuntarily terminated" (as defined in his employment agreement), he would
generally be entitled to receive payment of his base salary in effect at the
time of termination, through the remaining term of his employment agreement, in
the same manner as such salary would have been payable had his employment not
been terminated. In the event Mr. Vernon were involuntarily terminated in
connection with or within 12 months after a change in control of FirstFederal or
Summit Bank, he would be entitled to receive in a lump sum in cash 299% of his
"base amount" of compensation (as defined in Section 280G of the Code) and to
such health benefits as are maintained for the executive officers of Summit Bank
or substantially the same health benefits as Summit Bank maintained for its
executive officers immediately prior to the change in control during the
remaining term of his employment agreement .
It is anticipated that Mr. Vernon's employment agreement will contain
a covenant not to compete with Summit Bank, in the event of Mr. Vernon's
termination of employment, for a period of three years, if terminated for cause
or if Mr. Vernon voluntarily terminated his own employment. In addition, under
his employment agreement, Mr. Vernon would be entitled to receive additional
options to purchase shares of FirstFederal Common Stock if he were deemed
responsible for the agreement by any other company to be acquired by
FirstFederal.
It is expected that, on the Closing Date, Jon W. Park, Vice President
and Chief Financial Officer of Summit and Summit Bank, will enter into an
employment agreement with FirstFederal for a period of at least two years,
subject to earlier termination in accordance with the provisions of such
agreement, pursuant to which he will serve as Treasurer of FirstFederal.
Beginning on the second anniversary of the date of Mr. Park's employment
agreement and on each anniversary thereafter, the term thereof would be extended
for an additional year, provided that neither Mr. Park nor the Company had given
timely notice to the other that the term not be extended.
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Mr. Park would be entitled to receive an annual base salary of
$77,000, subject to increases at the discretion of the FirstFederal Board, and
to bonuses not to exceed 15% of his base salary pursuant to the existing
Management Incentive Plan of FirstFederal, at the discretion of the FirstFederal
Board. Mr. Park would be entitled to participate in all stock option and other
employee benefit plans that are maintained for the Association's executive
officers and employees generally (and to receive options to purchase a minimum
of 2,000 shares of FirstFederal Common Stock during the first year of his
employment agreement), and to certain other fringe benefits. In the event Mr.
Park were "involuntarily terminated" (as defined in his employment agreement),
he would be entitled to receive payment of his base salary in effect at the time
of termination, through the remaining term of his employment agreement, in the
same manner as such salary would have been payable had his employment not been
terminated.
It is anticipated that Mr. Park's employment agreement will contain a
covenant not to compete with the Company, in the event of Mr. Park's termination
of employment, for a period of one year, if terminated for cause or if Mr. Park
voluntarily terminated his own employment.
Appointment to FirstFederal Board. It is expected that, following the
Merger, the FirstFederal Board will appoint Mr. Vernon to fill a newly-created
directorship on the FirstFederal Board.
Other. In the event the Merger Agreement is approved by the
shareholders of Summit and by the appropriate regulatory authorities, the
restrictions on 2,800 shares of Summit Common Stock awarded to Mr. Vernon on
August 15, 1996 will lapse pursuant to the restricted stock agreement between
Summit and Mr. Vernon. Separately, Summit has agreed to pay to Mr. Vernon a
bonus equal to the amount of the total local, state and federal income and
withholding taxes payable by Mr. Vernon as a result of the inclusion in Mr.
Vernon's gross income of amounts attributable to the lapse of the restrictions
on the shares awarded on August 15, 1996.
Certain compensation and other information regarding Messrs. Vernon
and Park is incorporated herein by reference to Part III, Items 9, 10 and 12 of
the Summit 1996 10-KSB, a copy of which accompanies this Proxy Statement/
Prospectus.
REPRESENTATIONS AND WARRANTIES
Under the Merger Agreement, both Summit and FirstFederal have made
certain representations and warranties relating to, among other things, the
parties' respective organization, corporate authority relative to the Merger
Agreement, capital stock, the filing of regulatory reports, books and records,
financial statements, compliance with laws, employee benefit plans and real
property. For detailed information on such representations and warranties, see
Articles III and IV of the Merger Agreement attached hereto as Appendix I.
CONDITIONS TO THE MERGER
The obligations of FirstFederal under the Merger Agreement are
subject to the satisfaction or waiver prior to the closing of the Merger, of the
following conditions: (i) the representations and warranties of Summit were true
in all material respects when made and shall be true in all material respects as
of the Closing Date (as if made on the Closing Date), except for breaches which
would not have or would not reasonably be expected to have a material adverse
effect on the business, results of operations or financial condition (a
"Material Adverse Effect") of Summit, and Summit shall deliver at the closing of
the Merger a written certification thereof, (ii) performance by Summit of all
covenants, agreements and conditions under the Merger Agreement, except for
breaches which would not have, or would not reasonably be expected to have, a
Material Adverse Effect on Summit, (iii) prior to the Closing Date, there shall
not have been any material adverse change in the business or condition of Summit
nor any material loss or damage to the assets of Summit; (iv) approval of the
Merger Agreement by the shareholders of Summit and all other necessary corporate
actions relating to the Merger Agreement have been taken; (v) the obtainment by
Summit of all necessary third party consents; (vi) the execution of employment
agreements with David C. Vernon and Jon W. Park referred to elsewhere in this
Proxy Statement/Prospectus; (vii) the receipt by FirstFederal of a legal opinion
of Brouse & McDowell, counsel to Summit, as to certain matters relating to
Summit; (viii) the failure by FirstFederal, in conducting its due diligence
investigation of Summit, to discover any material misrepresentation
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or breach of warranty not previously disclosed to FirstFederal that would have a
Material Adverse Effect on Summit, (ix) all regulatory approvals required or
deemed necessary shall have been obtained and the Registration Statement shall
have been declared effective by the SEC; (x) the receipt by FirstFederal of a
letter from its independent public accountants to the effect that the Merger
will qualify for pooling of interests accounting treatment; (xi) the receipt by
FirstFederal of a letter from Summit's independent public accountants with
respect to certain financial information regarding Summit; (xii) the appointment
to the Board of Directors of Summit Bank by such Board of two individuals
recommended by FirstFederal; and (xiii) the delivery by Summit of an officer's
certificate to the effect that all conditions precedent to FirstFederal's
performance have been met or waived and all action required to be taken by
Summit have been taken.
The obligations of Summit under the Merger Agreement are subject to
the satisfaction or waiver prior to the closing of the Merger of the following
conditions: (i) the representations and warranties of FirstFederal in the Merger
Agreement are true in all material respects on and as of the Closing Date (as
though made on the Closing Date), except for breaches which would not have or
would not reasonably be expected to have a Material Adverse Effect on
FirstFederal (ii) the performance by FirstFederal of all covenants and
agreements and satisfaction of all conditions under the Merger Agreement, except
for breaches which would not have or reasonably be expected to have a material
adverse effect on FirstFederal; (iii) the receipt by Summit of a legal opinion
of Critchfield, Critchfield & Johnston, Ltd., counsel for FirstFederal, as to
certain matters relating to FirstFederal; (iv) the taking of all corporate
actions necessary to fulfill the obligations of FirstFederal under the Merger
Agreement; (v) the employment agreement with Jon W. Park referred to elsewhere
in this Proxy Statement/Prospectus shall have been executed and delivered by
FirstFederal; (vi) the appointment or nomination of David C. Vernon to the
FirstFederal Board; (vii) the receipt by Summit of the fairness opinion of
McDonald & Company, a copy of which is attached hereto as Appendix II; and
(viii) all regulatory approvals required or deemed necessary shall have been
obtained.
There can be no assurance that the conditions to each party's
obligations under the Merger Agreement will be satisfied or waived. In the event
the conditions to either party's obligations have not been satisfied or waived,
the other party may elect to terminate the Merger Agreement after regulatory
approval of the Merger is obtained. See "--Waiver and Amendment; Termination."
The above summary of the conditions to consummation of the Merger is qualified
entirely by the text of the Merger Agreement, attached hereto as Appendix I.
REGULATORY APPROVALS
The Merger is subject to the approval of the FRB. FirstFederal filed
an application for approval of the Merger with the FRB on April 15, 1997, and
anticipates receiving such approval during the second quarter of 1997. There can
be no assurance as to the receipt or timing of such approval.
It is a condition precedent to the consummation of the Merger that
all requisite regulatory approvals be obtained without the imposition of any
condition which, in the reasonable opinion of the FirstFederal Board, so
materially and adversely affects the anticipated economic and business benefits
to FirstFederal as to render consummation of the Merger inadvisable. There can
be no assurance that any such regulatory approval will not contain conditions or
requirements which will cause such approval to fail to satisfy such condition to
FirstFederal's obligation to consummate the Merger.
Under federal law, a period of 15 days must expire following approval
by the FRB within which period the Department of Justice may file objections to
the Merger under the federal antitrust laws. The Department of Justice could
take such action under the antitrust laws as it deems necessary or desirable in
the public interest, including seeking to enjoin the Merger, unless acceptable
accommodations are made. While the parties to the Merger Agreement believe that
the likelihood of such action by the Department of Justice is remote in this
case, there can be no assurance that the Department of Justice will not initiate
such a proceeding.
As noted elsewhere in this Proxy Statement/Prospectus, Summit Bank
will submit an application to the OCC to convert from a state-chartered bank to
a national bank (the "Summit Bank Conversion"). It is currently intended that
the Summit Bank Conversion will occur immediately prior to the Effective Time.
There can be no assurance as to the receipt or timing of the OCC's approval of
the Summit Bank Conversion. In the event the OCC
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does not approve the Summit Bank Conversion or if FirstFederal and Summit decide
to not effect the Summit Bank Conversion prior to the Effective Time, the Merger
will be subject to the approval of the Ohio Superintendent of Financial
Institutions (the "OSFI"), in addition to the approval of the FRB. If approval
of the Merger by the OSFI were sought, neither the receipt nor the timing of
such approval could be assured.
WAIVER AND AMENDMENT; TERMINATION
Either party to the Merger Agreement may waive compliance with any
provision of the Merger Agreement where such waiver is executed in writing by
the party making the waiver. The Merger Agreement may be amended by execution of
the amendment in writing by both FirstFederal and Summit.
Except as noted below, the Merger Agreement may be terminated at any
time prior to the Effective Time, whether prior to or after approval of the
matters presented herein by Summit's shareholders; (i) by the vote of a majority
of the Board of Directors of each of FirstFederal and Summit; (ii) by the vote
of a majority of the Board of Directors of either FirstFederal or Summit if the
Merger shall not have been consummated on or before July 31, 1997, unless the
failure to consummate the Merger by such date is related to the action or
inaction of the regulatory authorities, and such action or inaction is not
directly related to the terminating party's breach of its representations and
warranties as set forth in the Merger Agreement; (iii) by the vote of a majority
of the Board of Directors of either FirstFederal or Summit if any regulatory
authority has denied approval of the Merger and neither Summit nor FirstFederal
has timely filed a request for a reconsideration or a petition seeking review of
such order; (iv) at any time before the closing of the Merger, by Summit, in the
event of a material misrepresentation or breach of warranty or failure to
disclose any other matter resulting in substantial financial liability to First
Federal if FirstFederal fails to cure such breach within 30 days following
notification thereof by Summit; (v) at any time before the closing of the
Merger, by FirstFederal, in the event of a material misrepresentation or breach
of warranty or failure to disclose any other matter resulting in substantial
financial liability to Summit if Summit fails to cure such breach within 30 days
following notification thereof by FirstFederal; (vi) at any time after September
30, 1997, by Summit or FirstFederal if the closing of the Merger shall not have
occurred on or before such date and such failure to consummate the Merger is not
caused by a breach of the Merger Agreement by the terminating party; (vii) by
either party if any bona fide action or proceeding shall be pending against
either party on the Closing Date that could result in an unfavorable judgment,
decree, or order that would prevent or make unlawful the carrying out of the
Merger Agreement; (viii) by FirstFederal after approval of the Merger by the
regulatory authorities is obtained if the conditions precedent to FirstFederal's
obligation to close have not been satisfied or waived; (ix) by Summit after
regulatory approval of the Merger is obtained if the conditions precedent to
Summit's obligation to close have not been satisfied or waived; or (x) by Summit
if (A) the average of the closing bid and ask price of FirstFederal Common Stock
on the Nasdaq National Market for the five consecutive trading days ending on
the third trading day prior to the Closing Date is more than 15% lower than the
average of the closing bid and ask price of FirstFederal Common Stock on the
Nasdaq National Market for the five consecutive trading days ending on the date
prior to the date of the Merger Agreement ($39.375 per share); and (B) the
change in the price per share of FirstFederal Common Stock referred to in clause
(A) above exceeds the change in the value of the SNL Securities National Bank
and Thrift Index for the comparable period by more than .1% (i.e., the change
from 268.033).
Under the Merger Agreement, Summit must pay to FirstFederal a fee of
$750,000 in the event the Merger is not consummated and certain events occur.
See "The Merger--Break-up Fee" and Section 5.1.13 of the Merger Agreement
attached hereto as Appendix I.
In the event of termination of the Merger Agreement pursuant to the
provisions described in the preceding paragraphs, the Merger Agreement will
become null and void and there will be no liability or obligation of
FirstFederal or Summit thereunder, except that (i) each party will remain liable
to the other for any breach of the Merger Agreement existing at time of
termination and (ii) FirstFederal and Summit will remain subject to the
provisions of confidentiality agreements entered into by such parties prior to
execution of the Merger Agreement.
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CONDUCT OF BUSINESS PENDING THE MERGER
Summit has agreed that, prior to the Effective Time, it will conduct
its business and will cause its
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subsidiaries to carry on their respective businesses and activities diligently
and in substantially the same manner as they previously have been carried out,
and will not institute any new methods of management, accounting or operation
that differ materially from existing methods. Summit has also agreed that it and
its subsidiaries will not, without the prior written consent of FirstFederal,
among other things: (i) amend their respective corporate charters or bylaws;
(ii) issue any shares of capital stock; (iii) issue any warrants, options or
other commitments under which any additional shares of capital stock may be
authorized; (iv) declare or pay any dividend or authorize any stock split or
make any other distribution in respect of their respective capital stock; (v)
purchase, redeem or otherwise acquire any shares of their respective capital
stock except as otherwise provided in the Merger Agreement; (vi) except in the
ordinary course of business and consistent with past practice or as otherwise
previously disclosed to FirstFederal, (A) grant any increase in salaries or
wages payable to any officer, employee, sales agent or representative or (B)
increase benefits payable under any bonus or pension plan or other contract or
commitment; (vii) enter or agree to enter into any agreement or transaction not
in the usual and ordinary course of business; (viii) except as otherwise
previously disclosed to FirstFederal, (A) modify, amend, cancel or terminate any
of its existing contracts, or become obligated to make any capital expenditures
in excess of $100,000, (B) enter into or renew any agreement for services to be
provided to Summit or Summit Bank or permit the automatic renewal of any such
agreement, except any agreement for services having a term of not more than
three months or requiring the expenditure of not more than $25,000, (C) apply to
the appropriate regulatory authorities to establish a new branch office or
expand any existing branch office or (D) acquire or enter into any agreement to
acquire any banking or non-banking company or any branch offices of any such
company.
In addition, Summit has agreed that it and its subsidiaries will not
directly or indirectly discuss with or solicit or initiate from any person, any
proposals or offers relating to the acquisition of a material amount of the
assets or equity securities of Summit or Summit Bank or any merger or other
business combination with Summit or Summit Bank (an "Acquisition Transaction"),
except that (i) Summit or Summit Bank may negotiate with and provide information
to any person or entity that makes an unsolicited proposal for an Acquisition
Transaction if (A) the Summit Board, upon the written advice of counsel,
determines in good faith that such action is necessary for the directors of
Summit to fulfill their fiduciary duties to the shareholders of Summit and other
constituencies under Ohio law and (B) prior to taking such action, Summit
provides written notice thereof to FirstFederal and (ii) the Summit Board may,
following receipt of a proposal for an Acquisition Transaction, elect not to
make, or if already made, withdraw its recommendation otherwise required to be
made under the Merger Agreement to the shareholders of Summit that the Merger
Agreement be approved, if the Summit Board, upon the written advice of counsel,
determines in good faith that such inaction or withdrawal is necessary for the
directors of Summit to fulfill their fiduciary duties to the shareholders of
Summit and other constituencies under Ohio law.
EXPENSES
All expenses incurred or to be incurred in connection with the Merger
Agreement and the consummation of the transactions contemplated thereby are to
be paid by the party incurring such expenses except that Summit may not incur
any such costs and expenses in excess of $150,000 in the aggregate, excluding
the fee payable to McDonald & Company for the rendering of financial advisory
services.
BREAK-UP FEE
Under the Merger Agreement, Summit must pay to FirstFederal a fee of
$750,000 promptly following termination of the Merger Agreement after the first
to occur of any of the following events:
(i) (A) the shareholders of Summit shall not have approved the Merger on
or before September 30, 1997 if, prior to such date or the
termination date of the Merger Agreement, whichever is earlier,
FirstFederal is not in breach of its material obligations under the
Merger Agreement, (B) any person (other than FirstFederal or any
affiliate thereof or any person acting in concert with FirstFederal
or any affiliate thereof (a "FirstFederal Entity")) shall have
commenced a tender offer or exchange offer to purchase shares of
Summit Common Stock such that, upon consummation of such offer, such
person would have or have the right to acquire beneficial ownership
of 25% or more of the voting power of Summit and (C) within 12 months
after the earliest to occur of the date of the Special Meeting, the
date on which the
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Merger Agreement is terminated or September 30, 1997, any person
(other than a FirstFederal Entity) shall have entered into a written
understanding in principle or an agreement to merge with Summit, to
acquire all or substantially all of Summit's assets or stock, or to
engage in a similar transaction;
(ii) (A) if, prior to the termination date of the Merger Agreement,
FirstFederal is not in breach of its obligations thereunder, and any
other person (other than a FirstFederal Entity) shall have acquired
or have the right to acquire beneficial ownership of 25% or more of
the voting power of Summit and (B) within 12 months after the
earliest to occur of the date of Special Meeting, the date on which
the Merger Agreement is terminated or September 30, 1997, any person
(other than a FirstFederal Entity) shall have entered into a written
understanding in principle or an agreement to merge with Summit, to
acquire all or substantially all of Summit's assets or stock, or to
engage in a similar transaction;
(iii) (A) the shareholders of Summit shall not have approved the Merger on
or before September 30, 1997 if, prior to such date or the
termination date of the Merger Agreement, whichever is earlier,
FirstFederal is not in breach of its material obligations under the
Merger Agreement and (B) subsequent to December 30, 1996, any person
(other than a FirstFederal Entity) shall have publicly announced an
interest in (x) acquiring Summit by merger, purchase of all or
substantially all of its assets or any other similar transaction or
(y) making a tender or exchange offer to purchase 25% or more of the
voting power of Summit Common Stock, and in either case, within 12
months after the earlier of the date of the Special Meeting or
September 30, 1997, such person shall have entered into a written
understanding in principle or agreement to merge with Summit, to
acquire all or substantially all of Summit's assets or stock, or to
engage in a similar transaction;
(iv) (A) the shareholders of Summit shall not have approved the Merger on
or before September 30, 1997 if, prior to such date or the
termination date of the Merger Agreement, whichever is earlier,
FirstFederal is not in breach of its material obligations under the
Merger Agreement, and (B) any person shall have publicly solicited
proxies or written consents or become a participant in any
solicitation in opposition to the Merger and within 12 months after
the earliest to occur of the date of the Special Meeting, the date on
which the Merger Agreement is terminated or September 30, 1997, such
person (other than a FirstFederal Entity) shall have entered into a
written understanding in principle or an agreement to merge with
Summit, to acquire all or substantially all of Summit's assets or
stock, or to engage in a similar transaction;
(v) unless FirstFederal is in breach of its obligations under the Merger
Agreement, (A) the Summit Board, other than as required in the
exercise of its fiduciary duties, fails to make, withdraws, or
modifies in a manner adverse to FirstFederal, its recommendation that
shareholders of Summit vote to approve the Merger and (B) Summit has
not terminated the Merger Agreement as it is otherwise permitted to
do under the Merger Agreement; or
(vi) unless FirstFederal is in breach of its obligations under the Merger
Agreement, at or prior to the Special Meeting or prior to the
termination date of the Merger Agreement, whichever is earlier, a
person (other than FirstFederal Entity) enters into a written
understanding in principle or an agreement to merge with Summit, to
acquire all or substantially all of Summit's assets or to engage in a
similar transaction.
ACCOUNTING TREATMENT
The Merger is intended to be structured to allow FirstFederal to
account for the Merger under the pooling of interests method of accounting.
Under this method of accounting, the historical cost basis of the assets and
liabilities of FirstFederal and Summit will be combined and carried forward at
their previously recorded amounts, and the shareholders' equity accounts of
FirstFederal and Summit will be combined on FirstFederal's consolidated balance
sheet. Income and other financial statements of FirstFederal issued after
consummation of the Merger will be restated retroactively to reflect the
consolidated operations of FirstFederal and Summit as if the Merger had taken
place prior to the periods covered by such financial statements. FirstFederal
and Summit have each agreed to take no actions which would prevent FirstFederal
from utilizing the pooling of interests method. In addition, it is a
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condition to FirstFederal's obligations under the Merger Agreement that
FirstFederal receive a letter from KPMG Peat Marwick LLP, FirstFederal
independent public accountants, to the effect that the Merger will qualify for
pooling of interests accounting treatment. See "--Conditions to the Merger" and
"Resales of FirstFederal Common Stock by Affiliates."
RESALES OF FIRSTFEDERAL COMMON STOCK BY AFFILIATES
The shares of FirstFederal Common Stock to be issued in the Merger
will be registered under the Securities Act and will be freely transferable
under the Securities Act, except for shares issued to any shareholder who may be
deemed to be an "affiliate" of FirstFederal or Summit under the Securities Act
as of the date of the Special Meeting. Affiliates of FirstFederal or Summit may
not sell their shares of FirstFederal Common Stock acquired in connection with
the Merger except pursuant to an effective registration statement under the
Securities Act covering such shares or in compliance with Rule 145 under the
Securities Act (with respect to affiliates of Summit) or Rule 144 under the
Securities Act (with respect to persons who are or become affiliates of
FirstFederal) or another applicable exemption from the registration requirements
of the Securities Act. Persons who may be deemed to be affiliates of
FirstFederal or Summit generally include individuals or entities that control,
are controlled by or under common control with FirstFederal or Summit, and may
include certain officers and directors of FirstFederal and Summit as well as
certain principal shareholders of FirstFederal and Summit.
SEC guidelines regarding qualifying for the pooling of interests
method of accounting also limit sales by affiliates of FirstFederal or Summit in
the Merger. SEC guidelines indicate that the pooling of interests method of
accounting generally will not be challenged on the basis of sales by affiliates
if they do not dispose of any of the shares of either combining company during
the period beginning 30 days before the Merger and ending when financial results
covering at least 30 days of post-merger operations of the surviving company
have been published.
FirstFederal and Summit will use their best efforts to cause each
person identified as an affiliate of FirstFederal or Summit to execute a written
agreement intended to ensure compliance with the Securities Act and to ensure
that the Merger will qualify for pooling of interests accounting treatment.
CERTAIN FEDERAL INCOME TAX CONSEQUENCES OF THE MERGER
Set forth below is a discussion of federal income tax consequences of
the Merger to FirstFederal, Summit and Summit shareholders who are citizens or
residents of the United States. THE FOLLOWING DISCUSSION CONSTITUTES THE OPINION
OF CRITCHFIELD, CRITCHFIELD & JOHNSTON, LTD., COUNSEL TO FIRSTFEDERAL, AS TO THE
MATERIAL FEDERAL INCOME TAX CONSEQUENCES OF THE MERGER, AS ISSUED AND DELIVERED
TO THE FIRSTFEDERAL BOARD. THE DISCUSSION DOES NOT PURPORT TO BE A COMPLETE
ANALYSIS OR LISTING OF ALL POTENTIAL TAX EFFECTS RELEVANT TO A DECISION WHETHER
TO VOTE IN FAVOR OF APPROVAL OF THE MERGER AGREEMENT AND THE TRANSACTIONS
CONTEMPLATED THEREBY. FURTHER, THE DISCUSSION DOES NOT ADDRESS THE TAX
CONSEQUENCES THAT MAY BE RELEVANT TO A PARTICULAR SUMMIT SHAREHOLDER SUBJECT TO
SPECIAL TREATMENT UNDER CERTAIN FEDERAL INCOME TAX LAWS, SUCH AS DEALERS IN
SECURITIES, BANKS, INSURANCE COMPANIES, TAX-EXEMPT ORGANIZATIONS, NON-UNITED
STATES SHAREHOLDERS AND PERSONS WHO ACQUIRED THEIR SHARES AS COMPENSATION, NOR
ANY CONSEQUENCES ARISING UNDER THE LAWS OF ANY STATE, LOCALITY OR FOREIGN
JURISDICTION. THE DISCUSSION IS BASED UPON THE CODE, TREASURY REGULATIONS
THEREUNDER AND ADMINISTRATIVE RULINGS AND COURT DECISIONS AS OF THE DATE HEREOF.
ALL OF THE FOREGOING ARE SUBJECT TO CHANGE AND ANY SUCH CHANGE COULD AFFECT THE
CONTINUING VALIDITY OF THIS DISCUSSION.
HOLDERS OF SUMMIT COMMON STOCK ARE URGED TO CONSULT THEIR TAX
ADVISERS AS TO THE PARTICULAR EFFECT OF THEIR OWN PARTICULAR FACTS AND
CIRCUMSTANCES ON THE FEDERAL INCOME TAX CONSEQUENCES OF THE MERGER TO THEM, AND
ALSO TO THE EFFECT OF ANY STATE, LOCAL, FOREIGN AND OTHER FEDERAL TAX LAWS.
Under current federal income tax law, and assuming that the Merger is
consummated in the manner set forth in the Merger Agreement, the following
material federal income tax consequences would result:
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(i) the Merger would qualify as a reorganization under Section 368(a)
of the Code;
(ii) no gain or loss would be recognized by FirstFederal or Summit by
reason of the Merger;
(iii) no gain or loss would be recognized by any Summit shareholder
upon the exchange of Summit Common Stock solely for FirstFederal
Common Stock in the Merger (except in connection with the receipt of
cash in lieu of a fractional share of FirstFederal Common Stock or in
connection with the exercise of dissenter's rights, as discussed
below);
(iv) the aggregate tax basis of the FirstFederal Common Stock
received by each shareholder of Summit who exchanged Summit Common
Stock for FirstFederal Common Stock in the Merger would be the same
as the aggregate tax basis of the Summit Common Stock surrendered in
exchange therefor (subject to any adjustments required as the result
of receipt of cash in lieu of a fractional share of FirstFederal
Common Stock);
(v) the holding period of the shares of FirstFederal Common Stock
received by a Summit shareholder in the Merger would include the
holding period of the Summit Common Stock surrendered in exchange
therefor (provided that such shares of Summit Common Stock were held
as a capital asset by such shareholder at the Effective Time);
(vi) cash received in the Merger by a Summit shareholder in lieu of a
fractional share interest of FirstFederal Common Stock would be
treated as having been received as a distribution in full payment in
exchange for the fractional share interest of FirstFederal Common
Stock which such shareholder would otherwise be entitled to receive,
and would qualify as capital gain or loss (assuming the Summit Common
Stock surrendered in exchange therefor were held as a capital asset
by such shareholder at the Effective Time); and
(vii) a Summit shareholder who received only cash as a result of the
exercise of appraisal rights would realize gain or loss for federal
income tax purposes (determined separately as to each block of Summit
Common Stock exchanged) in an amount equal to the difference between
(x) the amount of cash received by such shareholder, and (y) such
shareholder's tax basis for the shares of Summit Common Stock
surrendered in exchange therefor, provided that the cash payment did
not have the effect of the distribution of a dividend. Any such gain
or loss would be recognized for federal income tax purposes and would
be treated as capital gain or loss. However, if the cash payment did
have the effect of the distribution of a dividend, the amount of
taxable income recognized generally would equal the amount of cash
received; such income generally would be taxable as a dividend and no
loss (or other recovery of such shareholder's tax basis for the
shares of Summit Common Stock surrendered in the exchange) generally
would be recognized by such shareholder. The determination of whether
a cash payment has the effect of the distribution of a dividend would
be made pursuant to the provisions and limitations of Section 302 of
the Code, taking into account the constructive stock ownership rules
of Section 318 of the Code.
The opinion of Critchfield, Critchfield & Johnston, Ltd. is subject
to various assumptions and qualifications, including that the Merger will be
consummated in the manner contemplated by and in accordance with the terms of
the Merger Agreement. The opinion is based entirely upon the Code, regulations
currently in effect or proposed thereunder, current administrative rulings and
practice and judicial authority, all of which are subject to change, possibly
with retroactive effect.
No ruling has been or will be requested from the Internal Revenue
Service ("IRS"), including any ruling as to federal income tax consequences of
the Merger to FirstFederal, Summit or Summit shareholders. Unlike a ruling from
the IRS, an opinion of counsel or independent certified accountants is not
binding on the IRS. There can be no assurance that the IRS will not take a
position contrary to the positions reflected in such opinion or that such
opinion would be upheld by a court if challenged.
NASDAQ LISTING
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FirstFederal Common Stock currently is quoted on the Nasdaq National
Market under the symbol "FFSW." FirstFederal will submit an application for
listing on the Nasdaq National Market the shares of FirstFederal Common Stock to
be issued to the shareholders of Summit in the Merger and to be reserved for
issuance pursuant to Summit Stock options assumed by FirstFederal in the Merger.
MANAGEMENT AFTER THE MERGER
It is anticipated that, following consummation of the Merger, the
FirstFederal Board will consist of the current members of such Board and the
executive officers of FirstFederal will be the current executive officers of
FirstFederal, except that at the Effective Time, the FirstFederal Board will
appoint David C. Vernon, currently Chairman of the Board, President and Chief
Executive Officer of Summit and Summit Bank, to a newly-created directorship on
the FirstFederal Board and Jon W. Park, currently Vice President and Chief
Financial Officer of Summit and Summit Bank, will serve as Treasurer of
FirstFederal pursuant to an employment agreement to be executed on the Closing
Date. In addition, at the Effective Time, the Board of Directors of Summit Bank
will appoint to such Board, two individuals recommended by FirstFederal (and
approved by the Board of Directors of Summit Bank), and after the Effective
Time, Mr. Vernon will continue to serve as Chairman of the Board, President and
Chief Executive Officer of Summit Bank pursuant to an employment agreement to be
executed on the Closing Date. See "The Merger--Interests of Certain Persons in
the Merger." Certain information regarding the business experience of and
compensation paid to Messrs. Vernon and Park by Summit for the last three fiscal
years is contained in Part III of the Summit 1996 10-KSB, incorporated by
reference herein, a copy of which accompanies this Proxy Statement/Prospectus.
DESCRIPTION OF FIRSTFEDERAL COMMON STOCK
GENERAL
The Articles of Incorporation of FirstFederal (the "FirstFederal
Articles") authorize the issuance by FirstFederal of up to 20,000,000 shares of
FirstFederal Common Stock, par value $1.00 per share, of which 3,716,490 shares
were issued and outstanding as of April 30, 1997. The FirstFederal Common Stock
is quoted on the Nasdaq National Market under the symbol "FFSW." See
"Comparative Stock Prices and Dividend Information." Each share of FirstFederal
Common Stock has the same relative rights and is identical in all respects with
each other share of FirstFederal Common Stock.
DIVIDENDS
Subject to the rights of the holders of shares of the serial
preferred stock of FirstFederal, holders of the shares of FirstFederal Common
Stock are entitled to receive such dividends as are declared by the FirstFederal
Board out of funds legally available therefor. Unless all prior dividends on
FirstFederal's 7% Cumulative Convertible Series A Preferred Stock (the "Series A
Preferred Stock") and 6.5% Cumulative Convertible Series B Preferred Stock (the
"Series B Preferred Stock") have been paid in full, or a sum sufficient for
payment has been reserved (i) no cash dividend or distribution (other than in
shares of FirstFederal Common Stock or other securities ranking junior to the
Series A and B Preferred Stock, may be declared or paid on the FirstFederal
Common Stock, and (ii) FirstFederal may not purchase, retire or otherwise
acquire any shares of FirstFederal Common Stock.
There are various regulatory restrictions on the ability of
FirstFederal to pay dividends, including dividends funded by capital
distributions from the Association to FirstFederal. Under a Dividend Limitation
Agreement entered into with the Federal Home Loan Bank Board (predecessor to the
OTS) as of July 21, 1989, FirstFederal may not accept, nor may the Association
pay, any dividend that would cause the Association's regulatory capital to fall
below its required level. If the Association is in capital compliance, but not
fully phased-in compliance, the Dividend Limitation Agreement provides that
dividends from the Association are limited to 50% of the Association's
cumulative net income for the prior eight quarters (less dividends paid during
such time). Because the Association is in fully phased-in compliance with its
capital requirement, it may pay dividends under the Dividend Limitation
Agreement equal to 100% of its cumulative net income for the prior eight
quarters (less dividends paid during such time). The Dividend Limitation
Agreement expires on July 22, 1999. To the extent that the Dividend Limitation
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Agreement or the capital distribution regulation of the OTS is more restrictive
than the other, the Association must comply with the more restrictive
limitations. For additional information on the ability of FirstFederal to pay
dividends, see "FirstFederal Financial Services Corp--Pending Structural
Change--Dividends."
VOTING RIGHTS
Full voting rights are vested in the holders of FirstFederal Common
Stock, each share being entitled to one vote. Under the Codes of Regulations of
FirstFederal (the "FirstFederal Code"), unless otherwise provided in the
FirstFederal Articles or Code or required by law, a majority of the votes cast
by stockholders at a lawful meeting is sufficient to pass on a matter.
PREEMPTIVE RIGHTS
The holders of FirstFederal Common Stock have no right to purchase or
subscribe for any additional unissued shares or treasury shares of the capital
stock of FirstFederal.
LIQUIDATION RIGHTS
Subject to the rights of holders of the serial preferred stock of
FirstFederal and after satisfaction of FirstFederal's liabilities, in the event
of liquidation, dissolution or winding up of FirstFederal, holders of shares of
FirstFederal Common Stock are entitled to receive, pro rata, any remaining
assets available for distribution. In the event of liquidation, dissolution or
winding up of FirstFederal, holders of Series A and Series B Preferred Stock
will be entitled to receive, subject to the rights of creditors but before any
distribution or payment to the holders of FirstFederal Common Stock or any
shares subordinate to Series A and B Preferred Stock, a liquidation preference
of $25 per share, plus accrued and unpaid dividends to the date of distribution.
ASSESSMENT AND REDEMPTION
Shares of FirstFederal Common Stock are and will be, when issued,
fully paid and nonassessable. Such shares do not have any redemption provisions.
CLASSIFIED BOARD
The FirstFederal Board is currently comprised of nine directors
divided into three classes, with three directors in each class. Each director
serves a three-year term. Terms of office expire on a staggered basis and, as a
result, it would generally take two annual meetings to effect a change in
membership of a majority of the FirstFederal Board.
ANTITAKEOVER PROVISIONS
Certain of the provisions of the FirstFederal Articles summarized in
the succeeding paragraphs may be deemed to have an antitakeover effect and may
delay a tender offer or takeover attempt which a shareholder might consider in
such shareholder's best interest, including attempts which might result in the
payment to shareholders of a premium over the market price for FirstFederal's
shares.
The shares of FirstFederal Common Stock do not have cumulative voting
rights. As a result, the holders of more than 50% of the voting power of all
securities outstanding voting for the elections of directors can elect 100% of
the directors if they choose to do so. In such event, the holders of the
remaining voting power will not be able to elect any person or person to the
FirstFederal Board.
The FirstFederal Articles provide that all actions required or
permitted to be taken by the shareholders may be voted upon at any annual or
special meeting of the shareholders or by written consent of all the
shareholders entitled to vote thereon in lieu of a meeting, and specifies that
special meetings of the shareholders may be called by the Chairman of the Board,
the President, the Board of Directors by action at a meeting or a majority of
the directors acting without a meeting, and that special meetings will be called
upon written request of the holders of 50% of all the shares outstanding and
entitled to vote at the meeting.
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The rights of FirstFederal's shareholders are governed by the
FirstFederal Articles, the FirstFederal Code and Ohio law, including Chapter
1701 of the Ohio Revised Code (including the Ohio Control Share Acquisition
Statute), as each of the foregoing may from time to time be amended. Pursuant to
the Ohio Control Share Acquisition Statute, the purchase of shares with certain
levels of voting power of the Company (one-fifth or more, one-third or more or a
majority) can be made only with the prior authorization of (i) the holders of at
least a majority of the total voting power and (ii) the holders of at least a
majority of the total voting power held by shareholders other than the proposed
acquirer, officers of FirstFederal elected or appointed by the FirstFederal
Board and directors of FirstFederal who are also employees and excluding certain
shares that are transferred after the announcement of the proposed acquisition
and prior to the vote with respect to the proposed acquisition. The Ohio Control
Share Acquisition Statute applies to all Ohio corporations with significant Ohio
contacts, fifty or more shareholders and which do not have a provision in their
articles of incorporation or code of regulations to the effect that it does not
apply. Since neither the FirstFederal Articles nor the FirstFederal Code contain
such a provision, the Ohio Control Share Acquisition Statute applies to
FirstFederal.
Chapter 1704 of the Ohio Revised Code, among other things, prohibits
certain mergers, sales of assets, issuances or purchases of securities,
liquidation or dissolution, or reclassification of the then outstanding shares
of an Ohio corporation involving, or for the benefit of, certain holders of
stock representing 10% or more of the voting power (other than current 10%
shareholders who do not increase their present proportional interest), unless
(a) such transactions are approved by the directors of such corporation prior to
the 10% shareholder becoming such, or (b) the acquisition of 10% of the voting
power is approved by the directors of such corporation prior to the 10%
shareholder becoming such, or (c) the transaction involves a 10% shareholder
which has been such for at least three years and is approved by holders of
two-thirds of the voting power of the company and the holders of a majority of
the voting power not owned by the 10% shareholder or certain minimum price and
form of consideration requirements are met; and Section 1707.043 of the Ohio
Revised Code provides Ohio corporations, or in certain circumstances the
shareholders of an Ohio corporation, a cause of action to recover profits
realized under certain circumstances by persons who dispose of securities of a
corporation within 18 months of proposing to acquire such corporation. The
Control Share Acquisition Statute and Chapter 1704 and Section 1707.043 of the
Ohio Revised Code may have the effect of deterring certain potential
acquisitions of FirstFederal which might be beneficial to FirstFederal's
shareholders.
Except for proposals to amend, repeal, alter or rescind (i) Article
Eighth, which among other things sets forth the circumstances under which
special meetings of the shareholders may be called, (ii) Article Ninth, which
among other things sets forth the range of the number of directors, procedures
upon the existence of vacancies, and classification requirements, (iii) Article
Tenth, which sets forth the procedure for removal of directors, (iv) Article
Eleventh, which among other things sets forth certain restrictions on the
acquisition by certain persons of shares of the Company and further sets forth
procedures in the event such restriction are violated, (v) Article Twelfth,
which contains a fair price provision and which, subject to certain exceptions,
requires the approval of a Business Combination (as defined therein) by
two-thirds or more of the shares entitled to vote in an election of directors,
and (vi) Article Fifteenth, which requires the affirmative vote of not less than
two-thirds of the voting power of the Company to amend, repeal, alter or rescind
it or any of the above-stated articles, any amendment, repeal, alteration or
rescission of the remaining articles of the FirstFederal Articles may be
authorized from time to time by the affirmative vote of not less than a majority
of the voting power of FirstFederal.
The FirstFederal Code may be repealed, altered, amended or rescinded
by the shareholders of FirstFederal by the vote of the holders of not less than
a majority of the voting power of FirstFederal entitled to vote at a meeting of
shareholders called for that purpose.
FAIR PRICE PROVISION
The FirstFederal Articles contain a provision (the "Fair Price
Provision") which, in certain circumstances, requires a Business Combination
between FirstFederal and a Related Person (as defined therein) or certain
persons affiliated with the Related Person to meet specified criteria as to
price and procedural requirements which may have the effect of making a Business
Combination prohibitively expensive for an acquiring company, and thus may have
38
<PAGE> 47
an antitakeover effect. The discussion herein of the Fair Price provision is
qualified in its entirety by reference to the FirstFederal Articles.
The FirstFederal Articles require that any "Business Combination"
involving a "Related Person" (which generally includes any person or entity
owning or controlling more than 10% of the outstanding voting stock), must be
approved by the holders of at least two-thirds of the outstanding shares
entitled to vote, unless the Business Combination has been approved in advance
by two-thirds of the "Continuing Directors" (as defined therein). In the event
the requisite approval of the FirstFederal Board is obtained, the vote required
under applicable Ohio law would apply or, for certain transactions, no
shareholder vote would be necessary.
The two-thirds shareholder vote generally required to approve a
Business Combination may have the effect of foreclosing mergers and other
business combinations which a majority of FirstFederal shareholders deem
desirable and place the power to prevent such a merger or combination in the
hands of a minority of shareholders.
COMPARISON OF RIGHTS OF SHAREHOLDERS OF FIRSTFEDERAL FINANCIAL
SERVICES CORP AND SUMMIT BANCORP
INTRODUCTION
Upon consummation of the Merger, holders of the common stock of
Summit, an Ohio corporation, whose rights are currently governed by the Ohio law
and Summit's Third Amended and Restated Articles of Incorporation (the "Summit
Articles") and Amended and Restated Code of Regulations (the "Summit Code"),
will become shareholders of FirstFederal, also an Ohio corporation. Upon
becoming shareholders of FirstFederal, the rights of Summit shareholders will
continue to be governed by Ohio law, and will also be governed by the
FirstFederal Articles and the FirstFederal Code. Although both FirstFederal and
Summit are Ohio corporations, certain differences exist between their respective
articles of incorporation and codes of regulation. The following discussion is
not intended to be a complete statement of all differences affecting the rights
of shareholders and is qualified in its entirety by reference to the Summit
Articles and Code and FirstFederal Articles and Code and Ohio law. See
"Available Information."
ISSUANCE OF CAPITAL STOCK
The Summit Articles authorize the issuance of 3,000,000 shares of
common stock, no par value and 300,000 shares of Serial Preferred Stock, no par
value. At April 30, 1997, 234,891 shares of Summit Common Stock were issued
and outstanding, and no shares of preferred stock were issued and outstanding.
The FirstFederal Articles authorize the issuance of 20,000,000 shares of common
stock, par value $1.00 per share, and 1,500,000 shares of serial preferred
stock, no par value. At April 30, 1997, 3,716,490 shares of FirstFederal Common
Stock were issued and outstanding, 497,987 shares of the Series A Preferred
Stock were issued and outstanding and 454,797 shares of the Series B Preferred
Stock were issued and outstanding. Summit and FirstFederal are authorized to
issue additional shares of capital stock up to the amount authorized under their
respective Articles without shareholder approval. It is currently anticipated
that the FirstFederal Board will authorize FirstFederal to redeem the Series A
Preferred Stock on or about December 17, 1997. Due to the currently favorable
conversion ratio applicable to the Series A Preferred Stock, it is anticipated
that virtually all Series A holders will elect to convert their shares to
FirstFederal Common Stock. Based on the 497,987 shares of Series A Preferred
Stock outstanding as of April 30, 1997 (and assuming the occurrence of the
five-for-four stock split in the form of a stock dividend that has been declared
by FirstFederal, payable on May 22, 1997 to holders of FirstFederal Common Stock
as of May 2, 1997), approximately 1,501,779 shares of FirstFederal Common Stock
will be created assuming that the holders of Series A Preferred Stock elect to
convert their shares to FirstFederal Common Stock.
SHAREHOLDER ACTION BY UNANIMOUS CONSENT
The FirstFederal Articles provide that any action required or
permitted to be taken at a meeting of shareholders may be taken without a
meeting if consents in writing, setting forth the action so taken, are signed by
all of the shareholders entitled to vote thereon. Though neither the Summit
Articles nor the Summit Code address shareholder action without a meeting, under
Ohio law, Summit shareholders may take any action required or
39
<PAGE> 48
permitted to be taken without a meeting if the unanimous written consent of all
shareholders entitled to vote on the matter is obtained.
ADVANCE NOTICE REQUIREMENTS FOR NOMINATIONS OF DIRECTORS
The Summit Code provides that nominations for the election of
directors may be made by any shareholder entitled to vote generally in the
election of directors by following certain procedures set forth therein. In
order for a shareholder of Summit to make a nomination, he or she must give
notice in writing to the Secretary of Summit not fewer than 60 days or more than
90 days prior to the meeting; provided, however, that if notice or public
disclosure of the meeting to the Summit shareholders is effected fewer than 75
days before the meeting, such written notice must be delivered or mailed to the
Secretary of Summit not later than the close of business on the tenth day
following the date on which notice or public disclosure of the meeting was made.
The FirstFederal Code provides that FirstFederal shareholders may
make nominations for the election of directors by delivering written notice of
such nominations to the Secretary of FirstFederal not less than 30 days prior to
the date of the annual meeting of shareholders. In the event that less than 40
days notice of the date of the meeting is given to shareholders, notice of
nomination by the shareholder must be received no later than ten business days
following the date on which notice of the meeting was mailed. Furthermore, if
the FirstFederal Board fails to nominate candidates for the board at least 20
days prior to the annual meeting, then nominations may be made at the meeting by
any shareholder entitled to vote.
NUMBER AND TERM OF DIRECTORS
The Summit Board currently consists of eight directors. The Summit
Code provides that the number of directors may be changed by the vote of 67% of
the shares outstanding and entitled to vote generally in the election of
directors or by the affirmative vote of a majority of the then-current members
of the Summit Board. Under the Summit Code, the number of directors may not be
fewer than five or more than 20. The Summit Board is divided into two classes,
with five directors in one class and three in the other class. The term of each
director is two years.
The FirstFederal Board currently consists of nine directors, divided
into three classes of three members each. The term of each director is three
years. The FirstFederal Articles provide that the number of directors may be
changed by the approval of two-thirds of the then-current members of the First
Federal Board. Under the First Federal Articles, the number of directors may not
be fewer than six nor more than 15 (exclusive of two directors which may be
elected by the holders of all series of preferred stock in the event
FirstFederal is in default in payment of full dividends on any series of
preferred stock for six dividend payment periods). Pursuant to the Merger
Agreement, David C. Vernon, Chairman, President and Chief Executive Officer of
Summit and Summit Bank will join the FirstFederal Board following consummation
of the Merger. See "Management After the Merger" and "The Merger -- Interests of
Certain Persons in the Merger."
REMOVAL OF DIRECTORS
The Summit Code provides that one or more directors may be removed at
a annual meeting or any special meeting called expressly for that purpose, with
or without cause, upon the affirmative vote of the holders of at least 67% of
the outstanding shares entitled to vote generally in the election of directors
present in person or represented by proxy. The FirstFederal Articles provides
that no director may be removed without cause and may be removed for cause only
by the affirmative vote of the holders of a majority of the outstanding shares
entitled to vote generally in the election of directors.
CUMULATIVE VOTING NOT PERMITTED
The Summit and FirstFederal Articles each provide that shareholders
may not cumulate their votes in the election of directors.
LIMITATIONS ON VOTING OR ACQUISITIONS OF CAPITAL STOCK
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The Summit Articles contain a "Control Share Acquisition" article
providing that a person who after any acquisition of shares of Summit, when
added to all other shares of Summit over which such person has voting control,
would have voting control of the percentage of outstanding shares of Summit
within any one of the following ranges, must obtain shareholder approval prior
to such acquisition: (i) one-fifth or more but less than one-third; (ii)
one-third or more but less than a majority; or (iii) a majority or more. For
these purposes, shareholder approval will be deemed to have occurred upon (i)
the affirmative vote of a majority of the outstanding shares of Summit Common
stock represented at the meeting and (ii) approval by a majority of the
outstanding shares of Summit Common stock represented at the meeting other than
"Interested Shares." Interested Shares are shares are shares over which any one
of the following has voting control: (i) the acquiring person; (ii) any officer
of Summit; or (iii) any director of Summit who is also an employee of Summit. If
shareholder approval is not obtained prior to the control share acquisition, the
acquiring person loses the right to vote and receive dividends on the shares
acquired in the control share acquisition.
The FirstFederal Articles do not contain a control share acquisition
provision. However, FirstFederal is subject to Ohio's Control Share Acquisition
Statute, which is similar to the control share acquisition provision contained
in the Summit Articles. See "Description of FirstFederal Common
Stock--Antitakeover Provisions." The FirstFederal Articles also provide that if
any person, without obtaining the requisite regulatory approval, acquires ten
percent or more of the voting power of the outstanding shares entitled to vote
generally in the election of directors, such person loses the right to vote,
receive dividends on and take actions otherwise authorized for shareholders to
take with respect to the shares in excess of ten percent of the outstanding
shares.
APPROVAL OF MERGERS, CONSOLIDATIONS, ETC.
Summit's Articles generally require supermajority approval of the
shareholders prior to the consummation of a "Business Combination." A "Business
Combination" is defined in the Summit Articles to include sales, exchanges,
leases, transfers or other dispositions of assets, mergers or consolidations,
liquidations or dissolutions of Summit, involving Summit on the one hand and an
"Acquirer" or any affiliate or associate thereof on the other hand. An
"Acquirer" is defined as any person who (i) is the beneficial owner of 20% or
more of the outstanding shares of Summit entitled to vote generally in the
election of directors (a "20% beneficial owner"); (ii) is an affiliate or
associate of Summit and at any time within the previous two years was a 20%
beneficial owner; or (iii) an assignee or successor in interest to the
beneficial ownership of the shares that were at any time within the previous two
years beneficially owned by the Acquirer, if such assignment or succession did
not occur as part of a public offering within the meaning of the Securities Act
(other than transactions pursuant to Rule 144 under the Securities Act).
Generally, the approval of 80% of the outstanding shares of Summit
Common Stock and 67% of the outstanding shares of Summit Common Stock held by
persons other than the Acquirer or any affiliate or associate thereof, must be
obtained prior to any Business Combination. However, such supermajority vote
requirement does not apply to any Business Combination where: (i) (A) the terms
of such Business Combination satisfy certain fair price criteria and (B) a proxy
statement is mailed to the Summit shareholders at least 30 days prior to
consummation of the Business Combination setting forth therein any
recommendation as to the Business Combination made by the Summit Board and, if
deemed advisable by the Summit Board, an opinion as to the fairness of the terms
of the Business Combination to the Summit shareholders; or (ii) a majority of
the members of the Summit Board who are not affiliates or associates of the
Acquirer and were members of the Summit Board prior to the time that the
Acquirer became an Acquirer (the "Unrelated Directors") have approved the
Business Combination and determined that the terms of the Business Combination
are fair to the Summit shareholders.
The supermajority vote requirement under the Summit Articles for
Business Combinations does not apply to the Merger, which, as noted elsewhere in
this Proxy Statement/Prospectus, requires the approval of a majority of the
outstanding shares of Summit Common Stock.
The FirstFederal Articles contain a provision similar to the Summit
Articles for certain Business Combinations. However, under the FirstFederal
Articles, the general vote requirement for certain Business Combinations is
two-thirds of the outstanding shares entitled to vote in the election of
directors generally (as
41
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opposed to 80% of the outstanding shares and 67% of the shares not held by the
Acquirer, under the Summit Articles). In addition, under the FirstFederal
Articles, an exemption from the supermajority vote requirement may be obtained
by approval of two-thirds of the Unrelated Directors (as opposed to a majority,
under the Summit Articles). See "Description of FirstFederal Common Stock--Fair
Price Provision."
AMENDMENT OF ARTICLES OF INCORPORATION AND CODE OF REGULATIONS
Under Ohio law and the Summit Articles, the Summit Articles may be
amended by the affirmative vote of a majority of the outstanding shares of
Summit Common Stock, except that (i) the approval of 80% of the shares entitled
to vote is required to amend the article relating to certain Business
Combinations, unless such amendment is unanimously recommended to the
shareholders by the Summit Board and all of the members of the Summit Board are
Unrelated Directors; and (ii) the approval of 80% of the outstanding shares of
Summit Common Stock is required to amend the article relating to control share
acquisitions. The Summit Code may generally be amended by the affirmative vote
of a majority of the shares of Summit Common Stock present and entitled to vote
thereon at a meeting called for such purpose. However, the amendment of the
provisions of the Summit Code relating to (i) special meetings of shareholders,
(ii) the number of directors, (iii) procedures for nominations of directors,
(iv) classification, election and terms of directors, (v) indemnification of
directors and officers, and (vi) certain amendments to the Summit Code, requires
the affirmative vote of 67% of the voting power of Summit, unless the amendment
has been recommended by at least two-thirds of the members of the Summit Board.
The FirstFederal Articles may be amended by the affirmative vote of a
majority of the voting power of FirstFederal entitled to vote at the meeting
called for that purpose, except that amendments to the articles relating to (i)
shareholder consent in lieu of meeting; (ii) special meetings of shareholders;
(iii) number, election, classification and removal of directors; (iv)
acquisitions of control without regulatory approval; (v) certain business
combinations, and (vi) amendment of the FirstFederal Articles, require the
affirmative vote of two-thirds of the voting power of FirstFederal entitled to
vote at the meeting called for that purpose. However, the two-thirds vote
requirement does not apply to an amendment to the article relating to certain
business combinations if two-thirds of the entire FirstFederal Board recommends
the amendment to the shareholders. The FirstFederal Code may be amended by a
majority of the voting power of FirstFederal entitled to vote at a meeting
called for that purpose.
LEGAL MATTERS
The validity of the shares of FirstFederal Common Stock offered
hereby has been passed upon for FirstFederal by Critchfield, Critchfield &
Johnston, Ltd., Wooster, Ohio ("Critchfield"). Certain other legal matters in
connection with the Merger may be passed upon for FirstFederal by Critchfield
and by Silver, Freedman & Taff, L.L.P. (a limited liability partnership
including professional corporations), Washington, D.C., and will be passed upon
for Summit by Brouse & McDowell, a Legal Professional Association, Akron, Ohio.
Jerry F. Whitmer, a principal in Brouse & McDowell, is a director of Summit and
Summit Bank.
EXPERTS
The consolidated financial statements of FirstFederal as of December
31, 1996, and for the year then ended, included in the FirstFederal 1996 10-K
and incorporated by reference in this Proxy Statement/Prospectus, have been
incorporated by reference herein in reliance upon the report of KPMG Peat
Marwick LLP, independent certified public accountants, incorporated by reference
herein, and upon the authority of said firm as experts in accounting and
auditing.
The consolidated financial statements of FirstFederal as of December
31, 1995 and for each of the two years in the period then ended incorporated in
this Proxy Statement/Prospectus by reference from the FirstFederal 1996 10-K
have been audited by Deloitte & Touche LLP, independent auditors, as stated in
their report, which is incorporated herein by reference and have been so
incorporated in reliance upon the report of such firm given upon their authority
as experts in accounting and auditing.
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The consolidated financial statements of Summit as of December 31,
1996 and 1995 and for each of the years in the two year period ended December
31, 1996 included in the Summit 1996 Form 10-KSB (a copy of which accompanies
this Proxy Statement/Prospectus), and incorporated by reference in this Proxy
Statement/Prospectus, have been incorporated by reference herein in reliance
upon the report of the accounting firm of Crowe, Chizek & Company, LLP,
incorporated by reference herein, and upon the authority of said firm as experts
in accounting and auditing.
SHAREHOLDER PROPOSALS
Summit does not plan to hold a 1997 Annual Meeting of Shareholders if
the Merger is consummated as contemplated by the Merger Agreement. In the event
the Merger is not consummated as contemplated by the Merger Agreement, Summit
will hold an Annual Meeting of Shareholders prior to January 1, 1998. Any
shareholder proposal to take action at such meeting must be received at the main
office of Summit, 2680 West Market Street, Akron, Ohio 44333, a reasonable time
before the solicitation of proxies for such Annual Meeting is made. Any such
proposal shall be subject to the requirements of the proxy rules adopted under
the Exchange Act.
As disclosed in the proxy materials for FirstFederal's 1997 Annual
Meeting of Shareholders, in order to be eligible for inclusion in FirstFederal's
proxy materials for the 1998 Annual Meeting of Shareholders, any shareholder
proposal to take action at such meeting must be received at the main office of
FirstFederal, 135 East Liberty Street, Wooster, Ohio 44691, no later than
November 14, 1997. Any such proposal shall be subject to the requirements of the
proxy rules adopted under the Exchange Act.
INDEPENDENT ACCOUNTANTS
Representatives of Crowe, Chizek and Company, LLP, Summit's
independent accountants, are expected to be present at the Special Meeting. They
will be afforded the opportunity to make a statement if they desire to do so and
are expected to be available to respond to appropriate questions.
OTHER MATTERS
The Summit Board is not aware of any business to come before the
Special Meeting other than those matters described above in this Proxy
Statement/Prospectus. If any other matter should properly come before the
Special Meeting, it is intended that holders of the proxies will act in
accordance with their best judgment. However, proxies instructed to vote against
the proposal to approve the Merger Agreement and the Merger will not be voted
for a proposal to approve adjournment of the Special Meeting in the event that
there are not sufficient shares present in person or by proxy at the Special
Meeting to approve the Merger.
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APPENDIX I
AGREEMENT OF AFFILIATION AND
PLAN OF MERGER
BY AND AMONG
FIRSTFEDERAL FINANCIAL SERVICES CORP,
AND SUMMIT BANCORP
Dated December 30, 1996
<PAGE> 53
INDEX
<TABLE> -----
<CAPTION>
Page
----
<S> <C>
ARTICLE I Definitions.........................................................1
1.1 DEFINED TERMS................................................1
1.2 ACCOUNTING TERMS.............................................6
ARTICLE II Merger and Conversion of Shares.....................................6
2.1 THE MERGER...................................................6
2.2 EFFECTIVE TIME...............................................7
2.3 ARTICLES OF INCORPORATION AND REGULATIONS....................7
2.4 DIRECTORS AND OFFICERS.......................................7
2.5 CONVERSION AND EXCHANGE OF CAPITAL STOCK.....................7
2.6 STOCK OPTIONS................................................9
2.7 STOCK APPRECIATION RIGHTS....................................9
ARTICLE III Representations and Warranties of Summit Bancorp..................10
3.1 ORGANIZATION OF SUMMIT......................................10
3.2 AUTHORITY AND APPROVAL......................................10
3.3 CAPITAL STOCK...............................................11
3.4 SEC DOCUMENTS/REGULATORY FILINGS............................11
3.5 SUBSIDIARIES................................................12
3.6 AFFILIATE TRANSACTIONS......................................12
3.7 BOOKS AND RECORDS...........................................12
3.8 FINANCIAL STATEMENTS........................................12
3.9 ABSENCE OF CHANGES..........................................13
3.10 CONSENT.....................................................13
3.11 TAXES.......................................................13
3.12 LITIGATION..................................................14
3.13 COMPLIANCE WITH LAWS........................................14
3.14 BENEFIT PLANS...............................................15
3.15 REAL PROPERTY...............................................16
3.16 ASSETS......................................................17
3.17 INTELLECTUAL PROPERTY.......................................18
3.18 CONTRACTS...................................................18
3.19 POOLING OF INTERESTS........................................19
3.20 RESERVED....................................................20
3.21 LICENSES....................................................20
3.22 INSURANCE...................................................20
3.23 BROKERS AND FINDERS.........................................20
3.24 EMPLOYEES; LABOR RELATIONS..................................21
3.25 HAZARDOUS SUBSTANCES........................................21
3.26 LOANS.......................................................22
</TABLE>
<PAGE> 54
<TABLE>
<S> <C>
3.27 AGREEMENTS WITH REGULATORS..................................22
3.28 VOTE REQUIRED...............................................22
3.29 SECURITIES..................................................22
3.30 INDEMNIFICATION.............................................23
3.31 DISCLOSURE..................................................23
ARTICLE IV Representations and Warranties of FirstFederal Financial...........23
4.1 ORGANIZATION OF FIRSTFEDERAL................................23
4.2 AUTHORITY AND APPROVAL......................................24
4.3 CAPITAL STOCK...............................................24
4.4 SEC DOCUMENTS/REGULATORY FILINGS............................25
4.5 SUBSIDIARIES................................................25
4.6 AFFILIATE TRANSACTIONS......................................25
4.7 BOOKS AND RECORDS...........................................26
4.8 FINANCIAL STATEMENTS........................................26
4.9 ABSENCE OF CHANGES..........................................26
4.10 CONSENT.....................................................26
4.11 TAXES.......................................................27
4.12 LITIGATION..................................................27
4.13 COMPLIANCE WITH LAWS........................................28
4.14 BENEFIT PLANS...............................................29
4.15 REAL PROPERTY...............................................30
4.16 ASSETS......................................................31
4.17 INTELLECTUAL PROPERTY.......................................32
4.18 CONTRACTS...................................................32
4.19 POOLING OF INTERESTS........................................33
4.20 RESERVED....................................................33
4.21 LICENSES....................................................33
4.22 INSURANCE...................................................34
4.23 BROKERS AND FINDERS.........................................34
4.24 EMPLOYEES; LABOR RELATIONS..................................34
4.25 HAZARDOUS SUBSTANCES........................................35
4.26 LOANS.......................................................35
4.27 AGREEMENTS WITH REGULATORS..................................36
4.28 RESERVED....................................................36
4.29 SECURITIES..................................................36
4.30 DISCLOSURE..................................................36
ARTICLE V Covenants..........................................................37
5.1 Summit's Covenants..........................................37
5.1.1 ACCESS TO INFORMATION.......................................37
5.1.2 CONDUCT OF BUSINESS.........................................37
5.1.3 CORPORATE MATTERS...........................................37
5.1.4 DISTRIBUTION AND STOCK......................................37
5.1.5 INSURANCE...................................................38
5.1.6 EMPLOYEES...................................................38
</TABLE>
<PAGE> 55
<TABLE>
<S> <C>
5.1.7 NEW BUSINESS................................................38
5.1.8 AGREEMENTS .................................................38
5.1.9 BOOKS AND RECORDS...........................................38
5.1.10 COMPLIANCE WITH LAWS........................................38
5.1.11 SHAREHOLDERS' MEETING.......................................38
5.1.12 SOLICITATIONS...............................................39
5.1.13 BREAK-UP FEE................................................39
5.1.14 CONFIDENTIALITY.............................................41
5.1.15 RESTRICTED STOCK............................................42
5.2 FIRSTFEDERAL'S COVENANTS....................................42
5.2.1 LISTING ....................................................42
5.2.2 RESERVED....................................................42
5.2.3 EMPLOYEE BENEFIT PLANS......................................42
5.2.4 CONFIDENTIALITY ............................................42
5.3 MUTUAL COVENANTS............................................43
5.3.1 POOLING OF INTEREST.........................................43
5.3.2 PROXY STATEMENT; REGISTRATION STATEMENT.....................44
5.3.3 DISCLOSURE..................................................44
5.3.4 APPLICATIONS................................................44
5.3.5 MUTUAL INDEMNITY............................................44
5.3.6 BEST EFFORTS................................................45
5.3.7 DELIVERY OF SUPPLEMENTS TO DISCLOSURE SCHEDULES ............46
ARTICLE VI Conditions Precedent to FirstFederal's Performance................46
6.1 REPRESENTATIONS AND WARRANTIES TRUE.........................46
6.2 PERFORMANCE OF SUMMIT.......................................46
6.3 NO MATERIAL CHANGES.........................................46
6.4 CORPORATE APPROVAL..........................................46
6.5 CONSENTS....................................................46
6.6 EMPLOYMENT AGREEMENTS.......................................47
6.7 OPINION OF COUNSEL..........................................47
6.8 FIRSTFEDERAL'S DUE DILIGENCE................................47
6.9 REGULATORY APPROVAL.........................................47
6.10 POOLING OF INTEREST.........................................47
6.11 ACCOUNTANT'S LETTERS........................................47
6.12 BANK SUBSIDIARY BOARD OF DIRECTORS..........................47
6.13 OFFICER'S CERTIFICATES .....................................48
ARTICLE VII Conditions to Obligations of Summit..............................48
7.1 FIRSTFEDERAL'S WARRANTIES...................................48
7.2 FIRSTFEDERAL'S PERFORMANCE..................................48
7.3 OPINION OF FIRSTFEDERAL'S COUNSEL...........................48
7.4 CORPORATE APPROVAL..........................................48
7.5 EMPLOYMENT AGREEMENTS.......................................48
7.6 FIRSTFEDERAL BOARD OF DIRECTORS.............................48
7.7 FAIRNESS OPINION............................................48
</TABLE>
<PAGE> 56
<TABLE>
<S> <C>
ARTICLE VIII The Closing.....................................................49
8.1 TIME AND PLACE..............................................49
8.2 CLOSING ESCROW..............................................49
ARTICLE IX Costs and Publicity...............................................49
9.1 EXPENSES....................................................49
9.2 PUBLICITY...................................................49
ARTICLE X Form of Agreement and Parties......................................49
10.1 HEADINGS....................................................49
10.2 MODIFICATION AND WAIVER.....................................49
10.3 COUNTERPARTS................................................50
10.4 RIGHTS OF PARTIES...........................................50
10.5 ASSIGNMENT..................................................50
ARTICLE XI Termination.......................................................50
11.1 TERMINATION.................................................50
11.2 EFFECT OF TERMINATION.......................................51
ARTICLE XII Miscellaneous....................................................51
12.1 NOTICES.....................................................51
12.2 ENTIRE AGREEMENT............................................53
12.3 COSTS.......................................................53
12.4 FAIR INTERPRETATION.........................................53
12.5 SEVERABILITY................................................53
12.6 EFFECT OF CLOSING...........................................53
12.7 GOVERNING LAW...............................................53
</TABLE>
<PAGE> 57
AGREEMENT OF AFFILIATION AND PLAN OF MERGER
-------------------------------------------
This AGREEMENT OF AFFILIATION AND PLAN OF MERGER ("Merger Agreement")
dated as of December 30, 1996, is made and entered into by and between
FIRSTFEDERAL FINANCIAL SERVICES CORP, an Ohio corporation with its principal
office located in Wooster, Wayne County, Ohio, and SUMMIT BANCORP, an Ohio
corporation with its principal office located in Akron, Summit County, Ohio.
WHEREAS, FirstFederal and Summit desire to effect a merger under the
authority and provisions of the corporation laws of the State of Ohio pursuant
to which, at the effective time, Summit will be merged into FirstFederal with
FirstFederal to be and become the surviving corporation;
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 Code;
WHEREAS, for accounting purposes, it is intended that the merger be
accounted for as a "pooling of interests."
WHEREAS, FirstFederal presently intends to operate Summit Bank as an
autonomous wholly owned bank subsidiary of FirstFederal.
NOW, THEREFORE, in consideration of the mutual covenants and agreements
set forth in this Merger Agreement, and for other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, the
parties hereto agree as follows:
ARTICLE I
---------
DEFINITIONS
-----------
1.1 DEFINED TERMS. As used in this Merger Agreement, the following
terms have the following meanings unless the context clearly indicates otherwise
(terms defined in the singular to have the same meaning when used in the plural
and vice versa):
"ACQUISITION TRANSACTIONS" has the meaning set out in Section 5.1.12.
"AFFILIATE" means any Person that directly or indirectly controls or is
controlled by or is under common control with a Person.
"ASSETS" means all assets and properties of every kind, nature,
character and description (whether real, personal or mixed, whether tangible or
intangible, whether absolute, accrued, contingent, fixed or otherwise and
wherever situated), including the goodwill related thereto, operated, owned or
leased by Summit or FirstFederal, including without limitation cash, cash
equivalents, notes, securities, loans, chattel paper, documents, instruments,
general intangibles, real estate, equipment, goods and Intellectual Property,
regardless of whether such items appear on the Financial Statements.
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"BANK SUBSIDIARY" means Summit Bank, a state chartered bank under the
laws of the State of Ohio.
"BOOKS AND RECORDS" means all files, documents, instruments, papers,
books and records relating to the Business or Condition of Summit or
FirstFederal, as the case may be, including without limitation Financial
Statements, tax returns and related work papers and letters from accountants,
budgets, pricing guidelines, ledgers, journals, minute books, stock transfer
ledgers, Contracts, Licenses, loans, customer lists, computer files and
programs, retrieval programs, operating data and plans and environmental studies
and plans.
"BUSINESS OR CONDITION OF SUMMIT" means the business, condition
(financial or otherwise), results of operations, Assets and prospects of Summit
taken as a whole.
"BUSINESS OR CONDITION OF FIRSTFEDERAL" means the business, condition
(financial or otherwise), results of operations, Assets and prospects of
FirstFederal taken as a whole.
"CERTIFICATE" has the meaning set out in Section 2.5(e).
"CERTIFICATE OF MERGER" has the meaning set out in Section 2.2.
"CLOSING" AND "CLOSING DATE" shall be on or before July 31, 1997, or as
promptly as possible after Regulatory Approval is received, but in no event
later than September 30, 1997.
"CODE" means the Internal Revenue Code of 1986 and any amendments,
predecessor laws or successor laws, and all applicable interpretive authority
(including, but not limited to, regulations and revenue rulings).
"CONTRACT" means any agreement, lease, evidence of indebtedness,
mortgage, indenture, security agreement or other contract (whether written or
oral) to which Summit or FirstFederal is a party or bound other than as a
creditor in the ordinary course of business.
"DISCLOSURE SCHEDULE" means the record delivered to FirstFederal by
Summit and to Summit by FirstFederal herewith and dated as of the date hereof,
containing all lists, descriptions, exceptions and other information and
materials as are required to be included therein by Summit and FirstFederal
respectively pursuant to this Merger Agreement.
"EXCHANGE ACT" has the meaning set out in Section 5.1.13(i)(A).
"ERISA" has the meaning set out in Section 3.14(a).
"EFFECTIVE TIME" has the meaning set out in Section 2.2.
"EMPLOYEE BENEFIT PLANS" has the meaning set out in Section 3.14(a).
"EMPLOYMENT AGREEMENTS" means the agreements by and between Summit Bank
and David C. Vernon, and FirstFederal Financial and Jon W. Park in the form set
forth in Exhibits A-1 and A-2.
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"ENVIRONMENTAL LAW" means any law relating to human health, safety, or
protection of the environment or to omissions, discharges, releases, or
threatened releases of pollutants, contaminants, or hazardous substances in the
environment (including, without limitation, ambient air, surface water, ground
water, land surface, or subsurface strata) or otherwise relating to the
treatment, storage, disposal, transport, or handling of any hazardous substance.
"EXCHANGE RATIO" has the meaning set out in Section 2.5.
"FINANCIAL STATEMENTS" means the FirstFederal Financial Statements
and/or the Summit Financial Statements, as the case may be.
"FIRSTFEDERAL" means collectively FirstFederal Financial Services Corp
and each Subsidiary thereof, except in Articles II and XI, FirstFederal means
solely FirstFederal Financial Services Corp.
"FIRSTFEDERAL COMMON STOCK" means $1.00 par value common stock of
FirstFederal Financial Services Corp, of which 4,052,757 shares are issued and
outstanding as of September 30, 1996.
"FIRSTFEDERAL ENTITY" has the meaning set out in Section 5.1.13(i)(A).
"FIRSTFEDERAL FINANCIAL" means FirstFederal Financial Services Corp.
"FIRSTFEDERAL FINANCIAL STATEMENTS" means the consolidated balance
sheets of FirstFederal as of December 31, 1993, 1994, and 1995, and the related
consolidated statements of income, shareholders' equity and cash flows for the
years ending on those dates as audited by Deloitte & Touche, LLP, the
independent, certified public accountant for FirstFederal, including the reports
and letters of such accountant with respect to the Financial Statements.
Financial Statements also means the unaudited balance sheet as of September 30,
1996, and related statements of income, shareholders' equity and cash flows for
the period ending on such date. Said Statements are set out in Section 4.8 of
the Disclosure Schedule.
"FIRSTFEDERAL SHARE PRICE CHANGE" means a fraction expressed as a
percentage, the numerator of which is the difference between the average closing
Sales Price of FirstFederal Common Stock as recorded on Nasdaq for the 5
consecutive Trading Days ending on the Trading Day prior to the Trading Day this
Merger Agreement is executed by all parties and the average closing Sales Price
of FirstFederal Common Stock as recorded on Nasdaq for the 5 consecutive Trading
Days ending with the third Trading Day prior to the Closing Date and the
denominator of which is the average closing Sales Price of FirstFederal Common
Stock as recorded on Nasdaq for the 5 consecutive Trading Days ending on the
Trading Day prior to the Trading Day this Merger Agreement is executed by all
parties.
"GAAP" means American Institute of Certified Public Accountants'
generally accepted accounting principles, consistently applied.
"INTELLECTUAL PROPERTY" means all patents and patent rights, trademarks
and trademark rights, trade names and trade name rights, service marks and
service mark rights, service names
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and service name rights, brand names, inventions, processes, formulae,
copyrights and copyright rights, trade dress, business and product names, logos,
slogans, trade secrets, processes, designs, methodologies, computer programs
(including all source codes) and related documentation, and all pending
applications for and registrations of patents, trademarks, service marks and
copyrights licensed or owned by Summit.
"LIABILITIES" means all indebtedness, obligations, guarantees, and
other liabilities (whether absolute, accrued, contingent, fixed or otherwise,
liquidated or unliquidated, or whether due or to become due).
"LICENSES" means all licenses, permits, charters, trade association
memberships, certificates of authority, authorizations, approvals,
registrations, franchises and similar consents.
"LIEN" means any mortgage, pledge assessment, security interest, lease,
lien, adverse claim, levy, charge or other encumbrance of any kind, or any
conditional sale contract, title retention contract or other contract to convey
any of the foregoing.
"MATERIAL ADVERSE EFFECT" means with respect to FirstFederal or Summit,
as the case may be, a material adverse effect on the business, results of
operations, or financial condition of such party and its Subsidiaries taken as a
whole.
"MATERIAL ADVERSE IMPACT OF FIRSTFEDERAL" means a material
misrepresentation or breach of warranty by FirstFederal or any other matter not
adequately disclosed on the Disclosure Schedule by FirstFederal which, in the
aggregate, would have potential pre-tax liability to FirstFederal in excess of
$4,000,000 (excluding therefrom change in financial position resulting from
general market fluctuations in the value of FirstFederal's investment securities
and loans).
"MATERIAL ADVERSE IMPACT OF SUMMIT" means a material misrepresentation
or breach of warranty by Summit or any other matter not adequately disclosed on
the Disclosure Schedule by Summit which, in the aggregate, would have potential
pre-tax liability to Summit in excess of $350,000 (excluding therefrom change in
financial position resulting from general market fluctuations in the value of
Summit's investment securities and loans).
"MATERIAL CONTRACT" means any Contract that involves the payment or
potential payment, pursuant to the terms of any such contract, by or to Summit
of more than $25,000.00 or any Contract that cannot be terminated within 360
calendar days after giving notice of termination without resulting in any
material cost or penalty to Summit.
"MCDONALD" has the meaning set out in Section 3.23.
"MERGER" has the meaning set out in Section 2.1.
"MERGER AGREEMENT" means this Agreement of Affiliation and Plan of
Merger, Exhibits and Schedules hereto and all certificates and documents
delivered in accordance herewith.
"NASD" has the meaning set out in Section 5.2.1.
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"NASDAQ" means the Nasdaq National Market System.
"OGCL" has the meaning set out in Section 2.1.
"ORDER" means any writ, judgment, decree, injunction or similar order
of any governmental or regulatory authority (in each such case whether
preliminary or final).
"PBGC" has the meaning set out in Section 3.14(b).
"PERSON" means any natural person, corporation, general partnership,
trust, proprietorship, limited liability company or other business organization.
"REAL PROPERTY" means all interests in real estate wherever located and
owned or leased.
"REGISTRATION STATEMENT" means the original filing and subsequent
amendments under Form S-4 with the Securities and Exchange Commission (SEC)
pursuant to the Securities Act of 1933 referred to in Articles V and VI.
"REGULATORY APPROVAL" means the approval of this Merger Agreement by
the appropriate agencies, commissions, and other instrumentalities of the United
States and State of Ohio.
"SALES PRICE" means the average of the closing bid and ask price of
FirstFederal Common Stock, as reported on Nasdaq.
"SEC" means the Securities and Exchange Commission.
"SNL INDEX" means the value as of a given date of the SNL Securities
National Bank and Thrift Index as reported by SNL Securities, which represents a
market value weighted average of the companies composing such index.
"SNL INDEX PRICE CHANGE" means a fraction expressed as a percentage the
numerator of which is the difference between the average closing value of the
SNL Index for the 5 consecutive Trading Days ending on the Trading Day prior to
the Trading Day this Merger Agreement is executed by all parties and the average
closing value of the SNL Index ending on the Trading Day the third Trading Day
prior to the Closing Date and the denominator of which is the average closing
value of the SNL Index for the 5 consecutive Trading Days ending on the Trading
Day prior to the Trading Day this Merger Agreement is executed by all parties.
"STOCK APPRECIATION RIGHTS" means any stock appreciation rights granted
under the Stock Option Plan.
"STOCK OPTION" means any stock option granted under the Stock Option
Plan.
"STOCK OPTION PLAN" means Summit Bancorp 1989 Stock Incentive Plan and
certain stock option agreements with Summit Bancorp's directors as more fully
disclosed on Section 3.18(a)(i) of the Disclosure Schedule.
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"SUBSIDIARY" means any corporation or other entity in which Summit or
FirstFederal, as the case may be, directly or indirectly through Subsidiaries or
otherwise, beneficially owns any equity interests in, or the voting control of,
such corporation or other entity.
"SUMMIT" means collectively Summit Bancorp and each Subsidiary thereof,
except in Articles II and XI, Summit means solely Summit Bancorp.
"SUMMIT ARTICLES" has the meaning set out in Section 3.1(b).
"SUMMIT COMMON STOCK" means the common stock without par value of
Summit Bancorp, of which 234,916 shares are issued and outstanding as of the
date hereof.
"SUMMIT FINANCIAL STATEMENTS" means the consolidated balance sheets of
Summit as of December 31, 1993, 1994, and 1995, and the related consolidated
statements of income, shareholders' equity and cash flows for the years ending
on those dates as audited by Crowe, Chizek and Company, the independent,
certified public accountant for Summit, including the reports and letters of
such accountant with respect to the Financial Statements. Financial Statements
also means the unaudited balance sheet as of September 30, 1996, and related
statements of income, shareholder's equity and cash flows for the period ending
on such date. Said Statements are set out in Section 3.8 of the Disclosure
Schedule.
"SUMMIT REGULATIONS" has the meaning set out in Section 3.1(b).
"SURVIVING CORPORATION" has the meaning set out in Section 2.1.
"THRIFT SUBSIDIARY" means First Federal Savings and Loan Association of
Wooster, a federally chartered savings and loan association.
"TRADING DAY" means a day stock is exchanged on Nasdaq.
"TRANSFER AGENT" means Chemical Mellon Shareholder Services, LLC.
"VERNON" has the meaning set out in Section 5.1.15.
1.2 ACCOUNTING TERMS. All accounting terms used herein and not
expressly defined herein shall have the meanings given to them under GAAP. All
financial data supplied pursuant to this Merger Agreement shall be prepared in
accordance with such principles, unless otherwise noted.
ARTICLE II
MERGER AND CONVERSION OF SHARES
2.1 THE MERGER. At the Effective Time, upon the terms and subject to
the conditions of this Merger Agreement, Summit shall be merged (the "Merger")
with and into FirstFederal in accordance with the Ohio General Corporation Law
(the "OGCL"). FirstFederal shall be the surviving corporation in the Merger (the
"Surviving Corporation"), and the Surviving
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Corporation shall be an Ohio corporation. The Surviving Corporation's name shall
be FirstFederal Financial Services Corp. FirstFederal and Summit are sometimes
referred to herein as the "Constituent Corporations." As a result of the Merger,
the outstanding shares of capital stock of Summit shall be converted or canceled
in the manner provided in Section 2.5.
2.2 EFFECTIVE TIME. As soon as practicable following the Closing, the
Constituent Corporations shall cause a certificate of merger complying with the
requirements of Section 1701.81 of the OGCL (the "Certificate of Merger")
attached hereto as Exhibit C to be filed with the Secretary of State of the
State of Ohio. The Merger will become effective at the time and date the
Certificate of Merger is filed with the Secretary of the State of Ohio (the
"Effective Time").
2.3 ARTICLES OF INCORPORATION AND REGULATIONS. The amended Articles of
Incorporation and Code of Regulations of FirstFederal effective immediately
before the Effective Time will be the Articles of Incorporation and Regulations
of the Surviving Corporation, until duly amended in accordance with the OGCL and
their respective terms.
2.4 DIRECTORS AND OFFICERS. The directors and officers of FirstFederal
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 FirstFederal's amended
Articles of Incorporation and Code of Regulations and the OGCL. As provided in
Section 7.6, the Board of Directors of FirstFederal will appoint to the
FirstFederal Board of Directors, at the Effective Time, David C. Vernon.
2.5 CONVERSION AND EXCHANGE OF CAPITAL STOCK.
(a) At the Effective Time, by virtue of the Merger and without
any action on the part of the holder thereof, each then outstanding
share of common stock, no par value, of Summit Common Stock will, by
virtue of the Merger, automatically be canceled and extinguished in
consideration and exchange for the right to receive 1.87 shares
("Exchange Ratio") of FirstFederal Common Stock.
(b) All shares of Summit Common Stock that are owned by Summit
as treasury stock and any shares of Summit Common Stock owned by
FirstFederal shall be canceled and retired and shall cease to exist and
no consideration whatsoever shall be delivered in exchange therefor in
connection with the Merger.
(c) Each outstanding share of FirstFederal Common Stock prior
to the Effective Time shall continue to be an issued and outstanding
common share $1.00 par value of the Surviving Corporation and each
share of FirstFederal Common Stock held in treasury prior to the
Effective Time shall continue to be held in treasury by the Surviving
Corporation.
(d) If, between the date of this Merger Agreement and the
Effective Time, the shares of FirstFederal Common Stock shall be
changed into a different number of shares by reason of any
reclassification, recapitalization, split-up combination, or exchange
of
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shares, or by stock dividend or stock split thereon, declared with a
record date within said period, the applicable adjustment or
adjustments shall be made to the Exchange Ratio established by Section
2.5(a) and to the definition of "Sales Price".
(e) On and after the Effective Time, each holder of a
certificate or certificates theretofore representing outstanding shares
of Summit Common Stock (any such certificate being hereinafter referred
to as a "Certificate") may surrender the same to the Transfer Agent for
cancellation and each such holder shall be entitled upon such surrender
to receive in exchange therefor certificate(s) representing the number
of shares of FirstFederal Common Stock to which such holder is entitled
as provided herein and a check in an amount equal to the amount of cash
to be paid pursuant to subsection (f) of Section 2.5, without interest,
to which such holder is entitled. Until so surrendered, each
Certificate shall be deemed for all purposes to evidence ownership of
the number of shares of FirstFederal Common Stock into which the shares
represented by such Certificates have been changed or converted as
aforesaid. No dividends or other distributions declared after the
Effective Time with respect to FirstFederal Common Stock shall be paid
to the holder of any unsurrendered Certificate until the holder thereof
shall surrender such Certificate in accordance with this Section 2.5.
After the surrender of a Certificate in accordance with this Section
2.5, 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 FirstFederal
Common Stock represented by such Certificate. Holders of unsurrendered
Certificates shall be entitled to vote after the Effective Time, at any
meeting of FirstFederal shareholders, the number of whole shares of
FirstFederal Common Stock represented by such Certificates, regardless
of whether such holders have exchanged their Certificates; provided
that no holder of unsurrendered Certificates may vote at any meeting of
FirstFederal shareholders that is held more than 30 days after the
Effective Time. Certificates surrendered for exchange by any person who
is an "affiliate" of Summit for purposes of Rule 145(c) under the
Securities Act of 1933, as amended, shall not be exchanged for
certificates representing shares of FirstFederal Common Stock until
FirstFederal has received the written agreement of such person
contemplated by Section 5.19. If any certificate for shares of Summit
Common Stock is to be issued in a name other than that in which a
certificate surrendered for exchange is issued, the certificate so
surrendered shall be properly endorsed and otherwise in proper form for
transfer.
Upon the Effective Time, the stock transfer books of Summit
shall be closed and no transfer of Summit Common Stock shall thereafter
be made or recognized. Any other provision of this Merger Agreement
notwithstanding, neither FirstFederal or the Transfer Agent nor any
party to this Merger Agreement shall be liable to a holder of Summit
Common Stock for any amount paid or property delivered in good faith to
a public official pursuant to any applicable abandoned property,
escheat or similar law.
(f) Notwithstanding any other provision hereof, each holder of
shares of Summit Common Stock who would otherwise have been entitled to
receive a fraction of a share of FirstFederal Common Stock (after
taking into account all Certificates delivered by such holder) shall
receive, in lieu thereof, cash in an amount equal to such fractional
part of a share of FirstFederal Common Stock valued as follows: the
average closing
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Sales Price as recorded on Nasdaq for the five consecutive Trading Days
ending with the third Trading Day prior to the Closing Date. No such
holder shall be entitled to dividends, voting rights or any other
shareholder right in respect of any fractional share.
(g) To the extent provided by the OGCL, any holder of record
of Summit Common Stock as of the date fixed for the determination of
stockholders of Summit entitled to notice of the shareholders' meeting
called for the purposes of approving this Merger Agreement, and who
shall have filed with Summit, not later than ten (10) days after the
date on which the vote on such proposal was taken at 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 Merger
Agreement, shall cease at the Effective Time to have any of the rights
of a stockholder in respect of such shares 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 Summit Common
Stock who after the Effective Time (i) surrenders his certificates
representing shares of Summit Common Stock for exchange pursuant to
Section 2.5 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
FirstFederal Common Stock as of the Effective Time pursuant to this
Agreement.
2.6 STOCK OPTIONS. Stock Options outstanding immediately prior to the
Effective Time entitling the holders thereof to purchase shares of Summit Common
Stock will remain unchanged and will remain outstanding when the Merger becomes
effective, except that upon the Effective Time, (i) the holders thereof shall
become entitled to purchase the number of shares of FirstFederal Common Stock
(rounded up to the nearest whole share) to which such holders would have been
entitled to receive pursuant to Section 2.5(a) if immediately preceding the
Effective Time, such securities were converted into such number of shares of
Summit Common Stock to which the holders would be entitled under the terms of
the governing documents for such securities, disregarding for purposes of this
Section any limitations on exercise or vesting thereof; and (ii) the exercise
price of each respective Stock Option shall be divided by the Exchange Ratio.
2.7 STOCK APPRECIATION RIGHTS. Stock Appreciation Rights outstanding
immediately prior to the Effective Time entitling the holders thereof to receive
payment of an amount determined pursuant to the Stock Option Plan will remain
unchanged and will remain outstanding when the Merger becomes effective except
that upon the Effective Time: (i) the holders thereof shall become entitled to
Stock Appreciation Rights based upon FirstFederal Common Stock equal in number
to the product of the Stock Appreciation Rights for Summit Common Stock granted
immediately preceding the Effective Time times the Exchange Ratio rounded up to
the nearest whole share, disregarding for purposes of this Section any
limitations on exercise or vesting thereof; and (ii) the price fixed by the
Committee pursuant to the Stock Option Plan for each respective Stock
Appreciation Right shall be divided by the Exchange Ratio.
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ARTICLE III
-----------
REPRESENTATIONS AND WARRANTIES OF SUMMIT BANCORP
------------------------------------------------
REPRESENTATIONS AND WARRANTIES. In order to induce FirstFederal
Financial to enter into this Merger Agreement and to consummate the transactions
contemplated hereunder, Summit Bancorp makes the following representations,
warranties, covenants and agreements:
3.1 ORGANIZATION OF SUMMIT.
(a) Summit Bancorp is a corporation duly organized, validly
existing and in good standing under the laws of the State of Ohio, and
has all necessary corporate power and authority to conduct its business
as and to the extent now conducted and to own, use and lease its
Assets. Section 3.1 of the Disclosure Schedule lists all states in
which Summit is engaged in business, or owns, uses, or leases Assets.
Summit is qualified to do business and is in good standing in those
jurisdictions specified in Section 3.1 of the Disclosure Schedule,
which are the only jurisdictions in which such qualification is legally
required, except where the failure to be so qualified or in good
standing (considering all such failures together) does not and will not
have a Material Adverse Effect upon the Business or Condition of
Summit.
(b) The copies of Summit Bancorp's Third Amended and Restated
Articles of Incorporation as amended to date, certified by the
Secretary of State of Ohio ("Summit Articles"), and the Amended and
Restated Code of Regulations as amended to date, certified by Summit
Bancorp's Secretary ("Summit Regulations"), all of which have been
heretofore delivered to FirstFederal, are and at Closing will be
complete and correct. Further, the minute books and stock record books
of Summit are accurate and complete. Such minute books and stock record
books will be available for inspection at any reasonable time by
FirstFederal's duly authorized representatives, and copies of any
minutes of any meeting held or documents otherwise constituting
corporate action by Summit after the date of such inspection will be
furnished to FirstFederal promptly and in no event later than Closing.
3.2 AUTHORITY AND APPROVAL.
(a) Summit Bancorp has all requisite corporate power and
authority to enter into and perform all of its obligations under this
Merger Agreement. The execution and delivery of this Merger Agreement
and the consummation of the transactions contemplated hereby have been
duly and validly authorized by all necessary corporate action in
respect thereof on the part of Summit Bancorp.
(b) The consummation of the transactions contemplated hereby
and the compliance by Summit with the terms of this Merger Agreement do
not and will not conflict with, result in, or constitute any of the
following:
(i) A breach of any term or provision of this
Merger Agreement;
(ii) Except for the matters set out on Section
3.2 of the Disclosure
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Schedule, a default or an event that, with notice or lapse of
time, or both, would be a default, breach or violation of the
Summit Articles or Summit Regulations or any Contract,
License, commitment, or other agreement, instrument, or
arrangement to which Summit is a party or by which Summit or
its Assets are bound;
(iii) Except as to matters set out on Section 3.2 of
the Disclosure Schedule, an event that would permit any party
to terminate any agreement with Summit or to accelerate the
maturity of any obligation of Summit; or
(iv) The creation or imposition of any Lien on any
of its Assets.
3.3 CAPITAL STOCK. The authorized capital stock of Summit
Bancorp consists of:
(a) 3,000,000 shares of common stock, of which 234,916 shares
are issued and outstanding; and 21,274 shares are held in treasury.
(b) 300,000 shares of Serial Preferred Stock without par
value, none of which is issued and outstanding.
All issued and outstanding shares of Summit Common Stock are validly
issued, fully paid and nonassessable and were not issued in violation of any
preemptive right of any stockholder of Summit Bancorp. All of the issued and
outstanding shares of Summit Common Stock will be entitled to vote to approve
this Merger Agreement. As of the date hereof, no shares of Summit Common Stock
were reserved for issuance except that 25,000 shares were reserved for issuance
upon the exercise of options granted heretofore pursuant to the Stock Option
Plan. Options have been granted with respect to 23,150 shares, all of which are
presently held by the employees, officers, and directors of Bank Subsidiary.
There are no other outstanding subscriptions, options, rights, warrants,
convertible securities, or other agreements or commitments obligating Summit to
issue (or to transfer from treasury) any additional shares of its capital stock
of any class.
Summit has taken all action necessary so that the execution of this
Merger Agreement and the consummation of the transactions contemplated hereby do
not and will not result in the grant of any rights to any person under any
agreements or enable rights to any capital stock of Summit to be exercised,
distributed, or triggered, except as otherwise provided in this Merger
Agreement.
3.4 SEC DOCUMENTS/REGULATORY FILINGS. Summit Bancorp has filed all SEC
documents required by the security laws and such SEC documents complied as of
their respective dates of filing in all material respects with security laws.
Summit has filed all reports required by statute or regulation to be filed with
any federal or state banking regulatory agency except where the failure to so
file would not have a Material Adverse Effect on Summit, and such reports were
prepared in accordance with the applicable statutes, regulations, and
instructions in existence as of the date of filing of such reports in all
material respects.
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3.5 SUBSIDIARIES.
(a) Summit does not own, directly or indirectly, 5% or more of
the outstanding capital stock or other voting securities of any
corporation, bank, or other organization, except as disclosed on
Section 3.5 of the Disclosure Schedule. The outstanding shares of
capital stock of each Subsidiary are validly issued and outstanding,
fully paid and nonassessable, and all such shares are directly owned by
Summit, free and clear of all liens, claims, and encumbrances. No
Subsidiary has any outstanding securities of any kind, nor any
outstanding options, warrants, or other rights entitling another person
to acquire any securities of a Subsidiary of any kind other than the
shares of capital stock owned by Summit.
(b) Each Subsidiary is a duly organized corporation or banking
association validly existing and in good standing under applicable
laws. Each Subsidiary (i) has all requisite corporate power and
authority to carry on its business as now conducted; and (ii) is duly
licensed or qualified to do business in the states of the United States
where its ownership or leasing of property or the conduct of its
business requires such licensing or qualification and where failure to
be so licensed or qualified would have a Material Adverse Effect on
Summit. Each Subsidiary has all federal, state, and local governmental
authorizations necessary for it to own or lease its properties or
assets and to carry on its business as is now being conducted, except
where the failure to be so authorized would not have a Material Adverse
Effect on Summit.
3.6 AFFILIATE TRANSACTIONS. Except as disclosed in Section 3.6
of the Disclosure Schedule, as of the date of this Merger Agreement:
(i) There are no Liabilities between Summit,
on the one hand, and the officers and directors of Summit,
on the other hand;
(ii) No executive officer, director, or Affiliate of
a director or executive officer provides, provided, or caused
or causes to be provided any Assets, services, or facilities
to Summit or otherwise does business with Summit.
3.7 BOOKS AND RECORDS. The Books and Records of Summit fairly reflect
in all material respects the transactions to which it is a party and by which
its properties are subject or bound. Such Books and Records have been properly
kept and maintained in compliance in all material respects with GAAP and all
applicable legal requirements.
3.8 FINANCIAL STATEMENTS. The Summit Financial Statements, all
previously provided to FirstFederal, fairly present the consolidated financial
position of Summit Bancorp and its consolidated Subsidiaries as of the date
indicated, and the consolidated results of operations, changes in shareholders'
equity and cash flows of Summit Bancorp and its consolidated Subsidiaries for
the period then ended in conformity with GAAP. There are no material Liabilities
of Summit required to be disclosed in Summit's Financial Statements other than
the Liabilities disclosed in such Financial Statements (including footnotes).
All monetary Liabilities and material non-monetary Liabilities incurred after
the date of the Financial Statements were incurred in the ordinary course of
business consistent with past practices and
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in the aggregate are not material to Summit's business. Except for those
Subsidiaries listed in Section 3.8 of the Disclosure Schedule, the statements of
financial condition and results of operations of each Subsidiary are, and for
all periods referred to in this Section 3.8 have been, consolidated with those
of Summit Bancorp.
3.9 ABSENCE OF CHANGES. Since September 30, 1996: (i) there has not
been any material adverse change, or any event or development which,
individually or together with other such events, could reasonably be expected to
result in a material adverse change, in the Business or Condition of Summit;
(ii) neither Summit's chief executive officer nor its chief financial officer is
aware of any events which have occurred since September 30, 1996, or which are
reasonably certain to occur in the future and which reasonably can be expected
to result in any Material Adverse Effect in the Business or Condition of Summit;
and (iii) there have been no material changes in the methods of business
operation of Summit.
3.10 CONSENT. Except as set forth in Section 3.10 of the Disclosure
Schedule, no consent, approval, order or authorization of, or registration,
declaration or filing with, any federal or state governmental authority is
required by or with respect to Summit in connection with the execution and
delivery of this Merger Agreement or the consummation of the transactions
contemplated hereby.
3.11 TAXES.
(a) FILING OF TAX RETURNS. Except where properly extended,
within the times and in the manner prescribed by law, Summit has filed
all federal, state, and local tax returns required by law. Except as
disclosed in Section 3.11 of the Disclosure Schedule, the federal
income tax returns of Summit have not been audited or investigated by
the Internal Revenue Service for the preceding five years. Except as
reflected on Section 3.11 of the Disclosure Schedule, there are no
present disputes as to taxes payable by Summit. In addition, all tax
returns and reports required by applicable law or governmental
regulations have been filed by Summit, and such returns and reports are
(and as to such returns and reports not filed as of the date hereof,
will be) true, correct, and complete in all material respects and
present, fairly and accurately, the information required to be shown
therein. There are no tax deficiencies assessed against Summit that
would have a Material Adverse Effect on Summit, and there are no tax
deficiencies proposed or threatened, and no audit of Summit by any
federal, state or local authority is in progress, and Summit has not
received notice regarding any audit.
(b) PAYMENT OF TAXES. Except as disclosed in Section 3.11(b)
of the Disclosure Schedule, Summit has, within the time and in the
manner prescribed by law, paid in full (and until the Closing Date will
pay within the time and in the manner prescribed by law) payroll taxes
(including, but not limited to, Social Security taxes), franchise
taxes, sales and use taxes, personal property taxes, real estate taxes
and assessments, and local, state and federal income taxes. In
addition, Summit will pay or make timely provision for payment of all
such taxes thereafter payable by Summit so that no lien for any such
taxes will be placed (or attempted) upon any of the Assets, on or
following the Closing Date.
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(c) TAX RESERVES. Except as disclosed in Section 3.11(c) of
the Disclosure Schedule, the amounts established as accruals for taxes
on the Financial Statements and on the Books and Records of Summit are
reasonably expected to be sufficient for the payment of all taxes of
any kind, whether disputed or not, and whether accrued, due, absolute,
contingent or otherwise, which were or which may be payable by Summit
for any periods or fiscal years prior to or including the Closing Date,
including all taxes imposed before or after the Closing Date which are
attributable to any such period or fiscal year. No differences exist
between the amounts of the book basis and the tax basis of Assets (net
of Liabilities) that are not accounted for by an accrual on the books
for federal income tax purposes.
(d) EXTENSIONS AND WAIVERS. Except as disclosed in Section
3.11(d) of the Disclosure Schedule, Summit has not requested any
extension of time within which to file any tax return, which tax return
has not since been filed, nor has Summit executed any outstanding
waivers or comparable consents regarding the application of the statute
of limitations with respect to any taxes or tax returns.
3.12 LITIGATION. Except as disclosed in Section 3.12 of the
Disclosure Schedule:
(a) There is no pending or threatened litigation involving
Summit as defendant or plaintiff. There is no suit, action,
arbitration, or legal, administrative, or other proceeding, or
governmental investigation pending or threatened, against or affecting
Summit, or its business or Assets. The matters set forth in Section
3.12 of the Disclosure Schedule, if decided adversely to Summit, will
not result in a Material Adverse Effect on Summit. Summit is not in
default with respect to any Order of any federal, state, local or
foreign court, department, agency, or instrumentality.
(b) There are no facts or circumstances known to Summit that
could reasonably be expected to give rise to any claim that would be
required to be disclosed pursuant to clause (a) above.
3.13 COMPLIANCE WITH LAWS. Summit has complied with and is not in
violation of, applicable federal, state, or local statutes, laws and regulations
(including, without limitation, any applicable building, zoning, or other law,
ordinance, or regulation) affecting its properties or the operation of its
business, including without limitation the Real Estate Settlement Procedures
Act, Fair Debt Collection Practices Act, Fair Credit Reporting Act, Equal Credit
Opportunity Act, Truth in Lending Act, Occupational Safety and Health Act of
1970, the Fair Labor Standards Act of 1938, Title VII of the Civil Rights Act of
1964, the Rehabilitation Act of 1973, Federal Age Discrimination in Employment
Act of 1967, Consolidated Omnibus Budget Reconciliation Act of 1985, the Workers
Adjustment and Retraining Notification Act of 1988, Civil Rights Act of 1991,
Americans with Disabilities Act of 1991, the Family and Medical Leave Act of
1993, as all such have been amended, except 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 Summit. Except as disclosed in Section
3.13 of the Disclosure Schedule, no investigation or review by any governmental
entity with respect to Summit outside the ordinary course of business and not
generally applicable to entities engaged in the same business is pending or, to
the knowledge of Summit, threatened, nor has any governmental entity
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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 Summit. Further,
neither Summit nor any employee, officer, or director has knowingly engaged in
any activity or knowingly omitted to take any action which, in any material way,
has resulted or reasonably could be expected to result in the violation of (i)
any local, state or federal law (including without limitation the Bank Secrecy
Act, the Community Reinvestment Act, applicable consumer protection and
disclosure laws and regulations, including without limitation, Truth in Lending,
Truth in Savings and similar disclosure laws and regulations, and equal
employment and employment discrimination laws and regulations) or (ii) any
regulation, order, injunction or decree of any court or governmental body, the
violation of either of which could reasonably be expected to have a Material
Adverse Effect on Summit.
3.14 BENEFIT PLANS.
(a) Section 3.14 of the Disclosure Schedule contains a true
and complete list of all employee benefit plans within the meaning of
Section 3(3) of the Employee Retirement Income Security Act of 1974, as
amended ("ERISA") ("Employee Benefit Plans"), whether or not any such
Employee Benefit Plans are otherwise exempt from the provisions of
ERISA, established, maintained or contributed to or obligated to form a
fund by Summit (Summit shall include, for purposes of this Section 3.14
only, all employers, whether or not incorporated, which by reason of
common control are treated together with Summit as a single employer
within the meaning of Code Section 414(b) and (c) since September 2,
1974.)
(b) Summit does not maintain or contribute to any such
employee benefit plan subject to ERISA which is not in substantial
compliance with ERISA, or which has incurred any accumulated funding
deficiency within the meaning of Section 412 or 418B of ERISA, or which
has applied for or obtained a waiver from the Internal Revenue Service
of any minimum funding requirement under Section 412 of the Code.
Summit has not incurred any liability to the Pension Benefit Guaranty
Corporation ("PBGC") in connection with any employee benefit plan
covering any employees of Summit or ceased operations at any facility
or withdrawn from such plan in a manner which could subject it to
liability under Section 4062(e), 4063 or 4064 of ERISA, and knows of no
facts or circumstances which might give rise to any liability of Summit
to the PBGC under Title IV of ERISA. Summit has not incurred any
withdrawal liability within the meaning of Sections 4201 and 4204 of
ERISA, to any employee benefit plan which is a multiemployer plan (as
defined in Section 4001 of ERISA), and no event has occurred, and there
exists no condition or set of circumstances, which presents a material
risk of the occurrence of any withdrawal from or the partition,
termination, reorganization or insolvency of any multiemployer plan
which could result in any liability to Summit.
(c) Full payment has been made of all amounts which Summit is
required for any reason to have paid as contributions to any Employee
Benefit Plan as of the last day of the most recent fiscal year of such
Employee Benefit Plan ended prior to the final Closing Date. Summit has
made adequate provision for reserves to meet contributions that have
not been made because they are not yet due under the terms of any
Employee Benefit Plan or related agreements. Benefits under all
Employee Benefit Plans are as
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represented and have not been increased subsequent to the date as of
which documents have been provided.
(d) Each Employee Benefit Plan intended to be qualified under
Section 401(a) of the Code has been determined to be so qualified by
the Internal Revenue Service and nothing has occurred since the
effective date of the last such determination which resulted in or is
likely to result in the revocation of such determination.
(e) No reportable event (as defined in Section 4043 of ERISA)
has occurred with respect to any Employee Benefit Plan and Summit has
not engaged in any transaction with respect to the Employee Benefit
Plans which would subject Summit to a tax, penalty or liability for
prohibited transactions under ERISA or the Code nor have any of
Summit's directors, officers, or employees to the extent they or any of
them are fiduciaries with respect to such plans, breached any of their
responsibilities or obligations under Title I of ERISA.
(f) Summit has furnished FirstFederal with true and complete
copies of: (i) all Employee Benefit Plans as in effect, together with
all amendments thereto which will become effective at a later date;
(ii) the most recent Internal Revenue Service determination letter
issued with respect to each Employee Benefit Plan; and (iii) Form 5500
for the most recent completed fiscal year for each Employee Benefit
Plan required to file such form.
(g) There are no material actions, suits or claims pending
or threatened, against the Assets of any Employee Benefit Plan.
(h) The plans are qualified under Code Section 401 and the
associated trust funds are exempt from tax under Code Section 501.
(i) Each Employee Benefit Plan which Summit maintains has at
all times been administered in material compliance with all applicable
requirements of ERISA, including all reporting requirements, with
respect to the Internal Revenue Service, the Department of Labor and
the Pension Benefit Guaranty Corporation and including all disclosure
requirements with respect to plan participants and beneficiaries.
(j) Summit does not maintain nor is it under any obligation or
duty to establish any type of post retirement benefit, medical, or life
insurance plan for its employees.
3.15 REAL PROPERTY. In addition to the representations and warranties
contained in Section 3.16, Summit hereby makes the following additional
representations, warranties and covenants to and with FirstFederal regarding the
Real Property owned or leased by Summit as listed on Section 3.15 of the
Disclosure Schedule:
(a) Section 3.15(a) of the Disclosure Schedule contains a true
and correct list of (i) each parcel of Real Property owned by Summit,
(ii) each parcel of Real Property leased by Summit (as lessor or
lessee), and (iii) all Liens relating to or affecting any
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parcel of Real Property owned by Summit, and except as listed in
Section 3.15(a) of the Disclosure Schedule, such Real Property owned by
Summit is free and clear of all Liens, encumbrances, security
interests, pledges, equities, claims of others or restrictions
whatsoever, except:
(i) Zoning and building ordinances and regulations
which do not prohibit or restrict the present use of the
Real Property;
(ii) Real estate taxes and assessments, both
general and special, which may be a Lien but are not yet due
and payable as of the Closing Date;
(iii) Easements, covenants, agreements, encumbrances,
conditions, reservations, restrictions, of record or other
exceptions affecting the real estate, if any, which are
disclosed to FirstFederal and approved in writing by
FirstFederal prior to the Closing Date.
Summit has adequate rights of ingress and egress with respect to such
Real Property, buildings, structures, facilities, fixtures and other
improvements. Summit has not received any notice or has knowledge that
the Real Property, as currently used by Summit, is in violation of any
applicable federal, state or local statute, ordinance, order,
requirement, law, rule or regulation (including without limitation,
building, zoning or Environmental Laws) affecting the Real Property, or
that would have a Material Adverse Effect on the value of the Real
Property or its continued operation and use in the ordinary course of
business.
(b) The zoning of the Real Property permits the presently
existing improvements and the conduct and continuation of the business
presently being conducted on such Real Property.
(c) Summit has a valid and subsisting leasehold estate in and
the right to quiet enjoyment of the Real Property leased by it for the
full term of the lease thereof. Each lease is a legal, valid and
binding agreement, enforceable in accordance with its terms, of Summit
and of each other person that is a party thereto, and except as set
forth in Section 3.15(c) of the Disclosure Schedule, there is no, and
Summit has not received notice of any default (or any condition or
event which, after notice or lapse of time or both, would constitute a
default) thereunder. None of the leases will terminate or lapse by
reason of the transactions contemplated by this Merger Agreement.
(d) Except as disclosed in Section 3.15(d) of the Disclosure
Schedule, the improvements on the Real Property are structurally sound
and in good operating condition and in a state of good maintenance and
repair, are adequate and suitable for the purposes for which they are
presently being used and, to the knowledge of Summit, there are no
condemnation or appropriation proceedings pending or threatened against
any of such Real Property or the improvements thereon.
3.16 ASSETS. With respect to the Assets:
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(a) Except as listed on Section 3.16(a) of the Disclosure
Schedule, Summit has not received any notice nor does it have any
knowledge of any information that there has been any violation of any
statute, law, ordinance, or regulation of any governmental entity
affecting its Assets with respect to health, safety and environmental
and pollution control, including the disposition of hazardous or toxic
waste materials or emissions into the air, soil or water, or any form
of contamination that would have a Material Adverse Effect on the value
of the Assets or the continued use of the Assets by Summit in the
ordinary course of business.
(b) Except as provided in Section 3.16(b) of the Disclosure
Schedule, Summit has good and marketable title to the Assets, free and
clear of all Liens, encumbrances, security interests, pledges,
equities, claims of others or restrictions whatsoever.
(c) All equipment owned by Summit and used in its business is
now in good working condition and, as of the Closing Date, will be in
good working condition with no material defects other than those items
identified to FirstFederal in Section 3.16(c) of the Disclosure
Schedule, and except as disclosed in Section 3.16(c) of the Disclosure
Schedule, no expenditures in excess of $10,000.00 are planned for the
routine, normal maintenance of such equipment. Except as stated in
Section 3.16(c) of the Disclosure Schedule, no personal property used
by Summit in connection with its business is held under any lease,
security agreement, conditional sales contract, or other title
retention or security arrangement, or is other than in the possession
and under the control of Summit. The tangible personal property
reflected in those Books and Records constitutes all such tangible
personal property necessary for the conduct by Summit of its business
as now conducted.
3.17 INTELLECTUAL PROPERTY. Except as disclosed in Section 3.17 of the
Disclosure Schedule, Summit owns the entire right, title and interest in and to,
or has valid Licenses with respect to, all of the Intellectual Property
necessary in all material respects to conduct the business and operations of
Summit as presently conducted, except where the failure to do so would not,
individually or in the aggregate, have a Material Adverse Effect on Summit. None
of such Intellectual Property is subject to any outstanding order, decree,
judgment, stipulation, settlement, lien, charge, encumbrance or attachment,
which order, decree, judgment, stipulation, settlement, lien, charge,
encumbrance or attachment would have a Material Adverse Effect on Summit.
3.18 CONTRACTS.
(a) Section 3.18(a) of the Disclosure Schedule (with paragraph
references corresponding to those set forth below) contains a true and
complete list of all material Contracts of Summit including, but not
limited to, the following:
(i) Contracts and other agreements with any current
or former officer, director, shareholder, affiliate,
employee, consultant, or agent;
(ii) Contracts with any person containing any
provision or covenant prohibiting or limiting the ability
of Summit to engage in any business activity or
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compete with any person, or prohibiting or limiting the
ability of any person to compete with Summit;
(iii) Contracts relating to the future disposition
or acquisition of any Assets, other than dispositions or
acquisitions in the ordinary course of business consistent
with past practice;
(iv) Contracts under which Summit agrees to
indemnify any person;
(v) Contracts and other agreements relating to the
borrowing of money other than federally insured deposits,
creation of Liens, issuance of letters of credit, or the
guarantee of the payment of Liabilities or performance of
obligations by Summit;
(vi) powers of attorney;
(vii) other contracts and other agreements made
outside the ordinary course of business; and
(viii) Material Contracts.
(b) Each Contract required to be disclosed in Section 3.18(a)
of the Disclosure Schedule is in full force and effect and constitutes
a legal, valid and binding agreement, enforceable in accordance with
its terms, of each party thereto; and except as disclosed in Section
3.18(b) of the Disclosure Schedule neither Summit, nor, to the
knowledge of Summit, any other party to such Contract, is or has
received notice that it is, in violation or breach of or default under
any such Contract (or with notice or lapse of time or both, would be in
violation or breach of or default under any such Contract). None of the
Contracts disclosed in Section 3.18(a) of the Disclosure Schedule will
terminate or lapse by reason of the transactions contemplated by this
Merger Agreement.
(c) Except as disclosed in Section 3.18(c) of the Disclosure
Schedule, Summit is not a party to or bound by any Contract that has
been or could reasonably be expected to have, individually or in the
aggregate with any other such Contracts, a Materially Adverse Effect on
Summit.
(d) Except as disclosed in Section 3.18(d) of the Disclosure
Schedule attached hereto, there are no Contracts, commitments, leases,
permits or other instruments necessary to hold the Assets by Summit, as
and where now held by Summit, or to conduct the business of Summit, as
and where now operated by Summit, or related to the operation or
management of the Assets.
3.19 POOLING OF INTERESTS. As of the date of this Merger Agreement,
Summit knows of no reason relating to it which would reasonably cause it to
believe that the Merger will not qualify as a pooling of interests for financial
accounting purposes.
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3.20 RESERVED.
3.21 LICENSES. Section 3.21 of the Disclosure Schedule contains a true
and complete list of all Licenses used in and material to the business or
operations of Summit, setting forth the owner, the function and the expiration
and renewal date of each. Prior to the execution of this Merger Agreement,
Summit has delivered to FirstFederal true and complete copies of all such
Licenses. Except as disclosed in Section 3.21 of the Disclosure Schedule:
(i) Summit owns or validly holds all Licenses
that are material to its business or operations;
(ii) each License listed in Section 3.21 of the
Disclosure Schedule is valid, binding and in full force and
effect; and
(iii) Summit has not received any notice that it is
in default (or with the giving of notice or lapse of time or
both, would be in default) under any such License.
None of the Licenses disclosed in Section 3.21 of the Disclosure Schedule will
terminate or lapse by reason of the transactions contemplated by this Merger
Agreement.
3.22 INSURANCE. Section 3.22 of the Disclosure Schedule lists all of
the insurance policies held by Summit concerning its business and Assets
(including the names and addresses of the insurers, the expiration dates
thereof, the annual premiums and payment terms thereof and a brief description
of the interests insured thereby). All these policies are in the respective
principal amounts set forth in Section 3.22 of the Disclosure Schedule. To the
best of Summit's knowledge, Summit has maintained and now maintains (i)
insurance on all its Assets of a type customarily insured, covering property
damage and loss of income by fire or other casualty including, but not limited
to, occurrence-based general liability insurance, and (ii) adequate insurance
protection against all Liabilities, claims and risks against which it is
customary to insure. To the best of Summit's knowledge after due inquiry, except
as disclosed in Section 3.22 of the Disclosure Schedule, there is no breach or
default with respect to any material provision contained in any policy or binder
described in this provision, and there has not been any failure to give any
notice or present any claim under any such policy or binder in due or timely
fashion. There are no outstanding unpaid premiums, and there are no provisions
for retrospective or retroactive premium adjustments except as set forth in
Section 3.22 of the Disclosure Schedule, and Summit has not received notice of
any cancellations or nonrenewal or disallowance of any claims under any such
policy or binder. Finally, except as disclosed in Section 3.22 of the Disclosure
Schedule, there has not been any instance since the formation of Summit where
there has not been in full force and effect insurance policies providing the
types of insurance as described above. The insurance coverage provided by the
policies described in this section will not terminate or lapse by reason of the
transactions contemplated by this Merger Agreement.
3.23 BROKERS AND FINDERS. Neither Summit nor any of its
respective officers, directors or employees, has employed any broker, finder
or financial advisor or incurred any liability for any fees or commissions in
connection with the transactions contemplated herein,
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except for Summit Bancorp's retention of McDonald & Company Securities, Inc.
("McDonald") to perform certain financial advisory services. The fee associated
with McDonald's retention is equal to 1.50% of the "total aggregate fair market
value" received as of the Closing of this Merger as that term is defined in
Section 3(F) of the engagement letter by and between McDonald and Summit
Bancorp.
3.24 EMPLOYEES; LABOR RELATIONS.
(a) Section 3.24 of the Disclosure Schedule is a list of all
severance contracts, employee handbooks or manuals, and settlements,
bonus, stock option, medical, dental or legal reimbursement plans, or
hospitalization or insurance plans, or other agreements or arrangements
providing for employee remuneration to which Summit is a party or by
which Summit is bound; all these contracts and arrangements are in full
force and effect, and neither Summit nor any other party is in default
thereunder.
(b) Except as disclosed on Section 3.24 of the Disclosure
Schedule, the employees of Summit are not represented by any labor
union, and Summit is not and has not been involved in any
representative election, negotiations of a labor agreement, labor
dispute or grievance by any employee nor has it committed any act or
taken any action which is claimed or charged to have constituted an
unfair labor practice. There is no pending or threatened labor dispute,
strike, or work stoppage affecting the business.
(c) Except as disclosed in the Disclosure Schedule, all
employees of Summit are employed at will by Summit.
3.25 HAZARDOUS SUBSTANCES. Except as disclosed in Section 3.25 of
the Disclosure Schedule: (i) none of the Real Property or property previously
owned or occupied by Summit or in which Summit has or had any interest, legal
or equitable, is contaminated with any hazardous substance; (ii) Summit has, in
compliance with all applicable laws of federal, state or local governments,
arranged for the disposal of hazardous substances removed from the Real
Property and any real property previously owned or occupied by Summit or in
which Summit had any interest, legal or equitable through utilization of
qualified licensed waste disposal transporters and receivers; (iii) Summit has
not caused and will not cause, and to the best of its knowledge, after diligent
investigation and inquiry, there never has occurred, the release of any
hazardous substance on the Real Property or any real property previously owned
or occupied by Summit or in which Summit had any interest, legal or equitable;
(iv) the Real Property or any real property previously owned or occupied by
Summit or in which Summit had any interest, legal or equitable, is not subject
to any federal, state or local "superfund" lien, proceedings, claim, liability
or action; (v) Summit is under no threat or likelihood thereof for the cleanup,
removal, or remediation of any such hazardous substance from the Real Property
or any real property previously owned or occupied by Summit or in which Summit
had any interest, legal or equitable; (vi) there is no asbestos on the Real
Property; (vii) there is no underground storage tank on the Real Property. The
terms "hazardous substance," "release," and "removal" as used herein shall have
the same meanings and definitions as set forth in paragraphs (14), (22), and
(23), respectively, of Title 42 U.S.C. Section 9601 provided, however, that the
term "hazardous substance" as used herein also shall include "hazardous waste"
as defined in paragraph (5) of 42 U.S.C. Section 6903 and "petroleum" as
defined in paragraph (8) of 42 U.S.C. Section 6991.
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The term "superfund" as used herein means the Comprehensive Environmental
Response, Compensation and Liability Act, as amended, being Title 42 U.S.C.
Section 9601, ET SEQ., as amended, and any similar state statute or local
ordinance applicable to the property, including, without limitation, all rules
and regulations promulgated, administered and enforced by any governmental
agency or authority pursuant thereto. The term "underground storage tank" as
used herein shall have the same meaning and definition as set forth in paragraph
(1) of 42 U.S.C. Section 6991.
There have been no environmental investigations, studies, audits,
tests, reviews or other analyses conducted by, or which are in the possession
of, Summit in relation to any property or facility now or previously owned or
leased by Summit which have not been delivered to FirstFederal prior to the
execution of this Merger Agreement.
3.26 LOANS. Each loan reflected as an Asset in the Summit Financial
Statements (i) is evidenced by notes, agreements, or other evidences of
indebtedness which are true, genuine and what they purport to be, (ii) to the
extent secured, has been secured by valid Liens and security interests which
have been perfected, and (iii) is the legal, valid and binding obligation of the
obligor named therein, enforceable in accordance with its terms, subject to
bankruptcy, insolvency, fraudulent conveyance and other laws of general
applicability relating to or affecting creditors' rights and to general equity
principles, in each case other than loans as to which the failure to satisfy the
foregoing standards would not have a Material Adverse Effect on Summit.
3.27 AGREEMENTS WITH REGULATORS. Summit is not 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 Summit 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 Section 3.27 of the Disclosure Schedule, Summit has not been cited in
any compliance report to Summit, as a result of an examination by any regulatory
authority for (i) material violations, or (ii) violations with respect to which
refunds or restitutions (which are material in amount to Summit, taken as a
whole) may be required.
3.28 VOTE REQUIRED. The affirmative vote of the holders of a majority
of the issued and outstanding shares of Summit Common Stock entitled to vote
thereon is the only vote of the holders of any class or series of Summit capital
stock necessary to approve this Merger Agreement and the transactions
contemplated hereby.
3.29 SECURITIES. The investment portfolios of Bank Subsidiary consist
of securities in marketable form. Except as disclosed in Section 3.29 of the
Disclosure Schedule, since September 30, 1996, to the date hereof, Bank
Subsidiary has not incurred any unusual or extraordinary losses in its
investment portfolio, and, except for events relating to the business
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environment in general, including market fluctuations, the executive officers of
Summit are not aware of any events which are reasonably certain to occur in the
future and which reasonably can be expected to result in any material adverse
change in the quality or performance of Bank Subsidiary's investment portfolio
on a consolidated basis.
3.30 INDEMNIFICATION. To the best knowledge of Summit, except as set
forth in Section 3.30 of the Disclosure Schedule, no action or failure to take
action by any director, officer, employee or agent of Summit has occurred which
would give rise to a claim or a potential claim by any such person for
indemnification from Summit under the corporate indemnification provisions of
the Summit Articles or Summit Regulations applicable to Summit Bancorp on the
date of this Merger Agreement.
3.31 DISCLOSURE. To the best of Summit's knowledge after due inquiry,
all material facts relating to the business of Summit have been disclosed to
FirstFederal in this Merger Agreement. No representation or warranty contained
in this Merger Agreement, and no statement contained in the Disclosure Schedule
or in any certificate, memorandum, list or other writing provided or furnished
to FirstFederal pursuant to any provision of this Merger Agreement (including
without limitation the Summit Financial Statements), by Summit on its behalf,
contains or will contain any untrue statement of a material fact or omits any
material fact, the omission of which would be misleading.
ARTICLE IV
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REPRESENTATIONS AND WARRANTIES OF FIRSTFEDERAL FINANCIAL
--------------------------------------------------------
REPRESENTATIONS AND WARRANTIES. In order to induce Summit Bancorp to
enter into this Merger Agreement and to consummate the transactions contemplated
hereunder, FirstFederal Financial makes the following representations,
warranties, covenants and agreements:
4.1 ORGANIZATION OF FIRSTFEDERAL.
(a) FirstFederal Financial is a corporation duly organized,
validly existing and in good standing under the laws of the State of
Ohio, and has all necessary corporate power and authority to conduct
its business as and to the extent now conducted and to own, use and
lease its Assets. Section 4.1 of the Disclosure Schedule lists all
states in which FirstFederal is engaged in business, or owns, uses, or
leases Assets. FirstFederal is qualified to do business and is in good
standing in those jurisdictions specified in Section 4.1 of the
Disclosure Schedule, which are the only jurisdictions in which such
qualification is legally required, except where the failure to be so
qualified or in good standing (considering all such failures together)
does not and will not have a Material Adverse Effect upon the Business
or Condition of FirstFederal.
(b) The copies of FirstFederal Financial's Articles of
Incorporation as amended to date, certified by the Secretary of State
of Ohio, and the Code of Regulations as amended to date, certified by
FirstFederal Financial's Secretary, all of which have been heretofore
delivered to Summit, are and at Closing will be complete and correct.
Further, the minute books and stock record books of FirstFederal are
accurate and complete. Such minute books and stock record books will be
available for inspection at
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any reasonable time by Summit's duly authorized representatives, and
copies of any minutes of any meeting held or documents otherwise
constituting corporate action by FirstFederal after the date of such
inspection will be furnished to Summit promptly and in no event later
than Closing.
4.2 AUTHORITY AND APPROVAL.
(a) FirstFederal Financial has all requisite corporate power
and authority to enter into and perform all of its obligations under
this Merger Agreement. The execution and delivery of this Merger
Agreement and the consummation of the transactions contemplated hereby
have been duly and validly authorized by all necessary corporate action
in respect thereof on the part of FirstFederal Financial.
(b) The consummation of the transactions contemplated hereby
and the compliance by FirstFederal with the terms of this Merger
Agreement do not and will not conflict with, result in, or constitute
any of the following:
(i) A breach of any term or provision of this
Merger Agreement;
(ii) Except for the matters set out on Section 4.2 of
the Disclosure Schedule, a default or an event that, with
notice or lapse of time, or both, would be a default, breach
or violation of the Articles of Incorporation or Code of
Regulations of FirstFederal or any Contract, License,
commitment, or other agreement, instrument, or arrangement to
which FirstFederal is a party or by which FirstFederal or its
Assets are bound;
(iii) Except as to matters set out on Section 4.2 of
the Disclosure Schedule, an event that would permit any party
to terminate any agreement with FirstFederal or to accelerate
the maturity of any obligation of FirstFederal; or
(iv) The creation or imposition of any Lien on any
of its Assets.
4.3 CAPITAL STOCK. The authorized capital stock of FirstFederal
Financial consists of:
(a) 20,000,000 shares of FirstFederal Common Stock, of which
4,052,757 shares are issued and outstanding; and 440,408 shares are
held in treasury as of September 30, 1996.
(b) 1,500,000 shares serial preferred stock, no par value, of
which (i) 500,094 shares of 7% Cumulative Convertible Series A are
outstanding and (ii) 480,977 shares of 6.5% Cumulative Convertible
Series B are outstanding as of September 30, 1996.
All issued and outstanding shares of FirstFederal Common Stock are
validly issued and outstanding, fully paid and nonassessable and were not issued
in violation of any preemptive right of any stockholder of FirstFederal. As of
the date hereof, no shares of FirstFederal Common Stock were reserved for
issuance except that 526,389 shares were reserved for issuance upon the exercise
of options granted heretofore pursuant to FirstFederal's stock option plan.
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Options have been granted with respect to 410,349 shares, all of which are
presently held by the employees, officers, and directors of Thrift Subsidiary.
As of the date hereof, there are no other outstanding subscriptions, options,
rights, warrants, convertible securities, or other agreements or commitments
obligating FirstFederal to issue (or to transfer from treasury) any additional
shares of its capital stock of any class.
FirstFederal has taken all action necessary so that the execution of
this Merger Agreement and the consummation of the transactions contemplated
hereby do not and will not result in the grant of any rights to any person under
any agreements or enable rights to any capital stock of FirstFederal to be
exercised, distributed, or triggered, except as otherwise provided in this
Merger Agreement.
4.4 SEC DOCUMENTS/REGULATORY FILINGS. FirstFederal Financial has
filed all SEC documents required by the security laws and such SEC documents
complied as of their respective dates of filing in all material respects with
security laws. FirstFederal has filed all reports required by statute or
regulation to be filed with any federal or state banking or thrift regulatory
agency except where the failure to so file would not have a Material Adverse
Effect on FirstFederal, and such reports were prepared in accordance with the
applicable statutes, regulations, and instructions in existence as of the date
of filing of such reports in all material respects.
4.5 SUBSIDIARIES.
(a) FirstFederal does not own, directly or indirectly, 5% or
more of the outstanding capital stock or other voting securities of any
corporation, thrift, or other organization, except as disclosed on
Section 4.5 of the Disclosure Schedule. The outstanding shares of
capital stock of each Subsidiary are validly issued and outstanding,
fully paid and nonassessable, and all such shares are directly owned by
FirstFederal, free and clear of all liens, claims, and encumbrances. No
Subsidiary has any outstanding securities of any kind, nor any
outstanding options, warrants, or other rights entitling another person
to acquire any securities of a Subsidiary of any kind other than the
shares of capital stock owned by FirstFederal.
(b) Each Subsidiary is a duly organized corporation or savings
and loan association validly existing and in good standing under
applicable laws. Each Subsidiary (i) has all requisite power and
authority to carry on its business as now conducted; and (ii) is duly
licensed or qualified to do business in the states of the United States
where its ownership or leasing of property or the conduct of its
business requires such licensing or qualification and where failure to
be so licensed or qualified would have a Material Adverse Effect on
FirstFederal. Each Subsidiary has all federal, state, and local
governmental authorizations necessary for it to own or lease its
properties or assets and to carry on its business as is now being
conducted, except where the failure to be so authorized would not have
a Material Adverse Effect on FirstFederal.
4.6 AFFILIATE TRANSACTIONS. Except as disclosed in Section 4.6
of the Disclosure Schedule, as of the date of this Merger Agreement:
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(i) There are no Liabilities between FirstFederal,
on the one hand, and the officers and directors of
FirstFederal, on the other hand, that were not incurred on
an arm's length basis;
(ii) No executive officer, director, or Affiliate of
a director or executive officer provides, provided, or caused
or causes to be provided any Assets, services, or facilities
to FirstFederal or otherwise does business with FirstFederal,
other than on an arm's length basis.
4.7 BOOKS AND RECORDS. The Books and Records of FirstFederal fairly
reflect in all material respects the transactions to which it is a party and by
which its properties are subject or bound. Such Books and Records have been
properly kept and maintained in compliance in all material respects with GAAP
and all applicable legal requirements.
4.8 FINANCIAL STATEMENTS. The FirstFederal Financial Statements, all
previously provided to Summit, fairly present the consolidated financial
position of FirstFederal Financial and its consolidated Subsidiaries as of the
date indicated, and the consolidated results of operations, changes in
shareholders' equity and cash flows of FirstFederal Financial and its
consolidated Subsidiaries for the period then ended in conformity with GAAP.
There are no material Liabilities of FirstFederal required to be disclosed in
FirstFederal's Financial Statements other than the Liabilities disclosed in such
Financial Statements (including footnotes). All monetary Liabilities and
material non-monetary Liabilities incurred after the date of the Financial
Statements were incurred in the ordinary course of business consistent with past
practices and in the aggregate are not material to FirstFederal's business.
Except for those Subsidiaries listed in Section 4.8 of the Disclosure Schedule,
the statements of financial condition and results of operations of each
Subsidiary are, and for all periods referred to in this Section 4.8 have been,
consolidated with those of FirstFederal Financial.
4.9 ABSENCE OF CHANGES. Since September 30, 1996: (i) there has not
been any material adverse change, or any event or development which,
individually or together with other such events, could reasonably be expected to
result in a material adverse change, in the Business or Condition of
FirstFederal; (ii) neither FirstFederal's chief executive officer nor its chief
financial officer is aware of any events which have occurred since September 30,
1996, or which are reasonably certain to occur in the future and which
reasonably can be expected to result in any Material Adverse Effect in the
Business or Condition of FirstFederal; and (iii) there have been no material
changes in the methods of business operation of FirstFederal.
4.10 CONSENT. Except as set forth in Section 4.10 of the Disclosure
Schedule, no consent, approval, order or authorization of, or registration,
declaration or filing with, any federal or state governmental authority is
required by or with respect to FirstFederal in connection with the execution and
delivery of this Merger Agreement or the consummation of the transactions
contemplated hereby.
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4.11 TAXES.
(a) FILING OF TAX RETURNS. Except where properly extended,
within the times and in the manner prescribed by law, FirstFederal has
filed all federal, state, and local tax returns required by law. Except
as disclosed in Section 4.11(a) of the Disclosure Schedule, the federal
income tax returns of FirstFederal have not been audited or
investigated by the Internal Revenue Service for the preceding five
years. Except as reflected on Section 4.11 of the Disclosure Schedule,
there are no present disputes as to taxes payable by FirstFederal. In
addition, all tax returns and reports required by applicable law or
governmental regulations have been filed by FirstFederal, and such
returns and reports are (and as to such returns and reports not filed
as of the date hereof, will be) true, correct, and complete in all
material respects and present, fairly and accurately, the information
required to be shown therein. There are not and will not be any tax
deficiencies assessed against FirstFederal that would have a Material
Adverse Effect on FirstFederal, and there are no tax deficiencies
proposed or threatened, and no audit of FirstFederal by any federal,
state or local authority is in progress, and FirstFederal has not
received notice regarding any audit.
(b) PAYMENT OF TAXES. FirstFederal has, within the time and in
the manner prescribed by law, paid in full (and until the Closing Date
will pay within the time and in the manner prescribed by law) payroll
taxes (including, but not limited to, Social Security taxes), franchise
taxes, sales and use taxes, personal property taxes, real estate taxes
and assessments, and local, state and federal income taxes. In
addition, FirstFederal will pay or make timely provision for payment of
all such taxes thereafter payable by FirstFederal so that no Lien for
any such taxes will be placed (or attempted) upon any of the Assets, on
or following the Closing Date.
(c) TAX RESERVES. Except as disclosed in Section 4.11(c) of
the Disclosure Schedule, the amounts established as accruals for taxes
on the Financial Statements and on the Books and Records of
FirstFederal are reasonably expected to be sufficient for the payment
of all taxes of any kind, whether disputed or not, and whether accrued,
due, absolute, contingent or otherwise, which were or which may be
payable by FirstFederal for any periods or fiscal years prior to or
including the Closing Date, including all taxes imposed before or after
the Closing Date which are attributable to any such period or fiscal
year. No differences exist between the amounts of the book basis and
the tax basis of Assets (net of Liabilities) that are not accounted for
by an accrual on the books for federal income tax purposes.
(d) EXTENSIONS AND WAIVERS. Except as disclosed in Section
4.11(d) of the Disclosure Schedule, FirstFederal has not requested any
extension of time within which to file any tax return, which tax return
has not since been filed, nor has FirstFederal executed any outstanding
waivers or comparable consents regarding the application of the statute
of limitations with respect to any taxes or tax returns.
4.12 LITIGATION. Except as disclosed in Section 4.12 of the
Disclosure Schedule:
(a) There is no material pending or threatened
litigation involving FirstFederal
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as defendant or plaintiff. There is no suit, action, arbitration, or
legal, administrative, or other proceeding, or governmental
investigation pending or threatened, against or affecting FirstFederal,
or its business or Assets that if decided adversely to FirstFederal,
would result in a Material Adverse Effect on FirstFederal. FirstFederal
is not in default with respect to any Order of any federal, state,
local or foreign court, department, agency, or instrumentality.
(b) There are no facts or circumstances known to FirstFederal
that could reasonably be expected to give rise to any claim that would
be required to be disclosed pursuant to clause (a) above.
4.13 COMPLIANCE WITH LAWS. FirstFederal has complied with and is not in
violation of, applicable federal, state, or local statutes, laws and regulations
(including, without limitation, any applicable building, zoning, or other law,
ordinance, or regulation) affecting its properties or the operation of its
business, including without limitation the Real Estate Settlement Procedures
Act, Fair Debt Collection Practices Act, Fair Credit Reporting Act, Equal Credit
Opportunity Act, Truth in Lending Act, Occupational Safety and Health Act of
1970, the Fair Labor Standards Act of 1938, Title VII of the Civil Rights Act of
1964, the Rehabilitation Act of 1973, Federal Age Discrimination in Employment
Act of 1967, Consolidated Omnibus Budget Reconciliation Act of 1985, the Workers
Adjustment and Retraining Notification Act of 1988, Civil Rights Act of 1991,
Americans with Disabilities Act of 1991, the Family and Medical Leave Act of
1993, as all such have been amended, except 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 FirstFederal. Except as disclosed in
Section 4.13 of the Disclosure Schedule, no investigation or review by any
governmental entity with respect to FirstFederal outside the ordinary course of
business and not generally applicable to entities engaged in the same business
is pending or, to the knowledge of FirstFederal, 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 FirstFederal.
Further, neither FirstFederal nor any employee, officer, or director
has knowingly engaged in any activity or knowingly omitted to take any action
which, in any material way, has resulted or reasonably could be expected to
result in the violation of i) any local, state or federal law including without
limitation the Bank Secrecy Act, the Community Reinvestment Act, applicable
consumer protection and disclosure laws and regulations, including without
limitation, Truth in Lending, Truth in Savings and similar disclosure laws and
regulations, and equal employment and employment discrimination laws and
regulations) or ii) any regulation, order, injunction or decree of any court or
governmental body, the violation of either of which could reasonably be expected
to have a Material Adverse Effect on FirstFederal.
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4.14 BENEFIT PLANS.
(a) Section 4.14 of the Disclosure Schedule contains a true
and complete list of all employee benefit plans within the meaning of
Section 3(3) of ERISA ("Employee Benefit Plans"), whether or not any
such Employee Benefit Plans are otherwise exempt from the provisions of
ERISA, established, maintained or contributed to or obligated to form a
fund by FirstFederal (FirstFederal shall include, for purposes of this
Section 4.14 only, all employers, whether or not incorporated, which by
reason of common control are treated together with FirstFederal as a
single employer within the meaning of Code Section 414(b) and (c) since
September 2, 1974.)
(b) FirstFederal does not maintain or contribute to any such
employee benefit plan subject to ERISA which is not in substantial
compliance with ERISA, or which has incurred any accumulated funding
deficiency within the meaning of Section 412 or 418B of ERISA, or which
has applied for or obtained a waiver from the Internal Revenue Service
of any minimum funding requirement under Section 412 of the Code.
FirstFederal has not incurred any liability to the Pension Benefit
Guaranty Corporation ("PBGC") in connection with any employee benefit
plan covering any employees of FirstFederal or ceased operations at any
facility or withdrawn from such plan in a manner which could subject it
to liability under Section 4062(e), 4063 or 4064 of ERISA, and knows of
no facts or circumstances which might give rise to any liability of
FirstFederal to the PBGC under Title IV of ERISA. FirstFederal has not
incurred any withdrawal liability within the meaning of Sections 4201
and 4204 of ERISA, to any employee benefit plan which is a
multiemployer plan (as defined in Section 4001 of ERISA), and no event
has occurred, and there exists no condition or set of circumstances,
which presents a material risk of the occurrence of any withdrawal from
or the partition, termination, reorganization or insolvency of any
multiemployer plan which could result in any liability to FirstFederal.
(c) Full payment has been made of all amounts which
FirstFederal is required for any reason to have paid as contributions
to any Employee Benefit Plan as of the last day of the most recent
fiscal year of such Employee Benefit Plan ended prior to the final
Closing Date. FirstFederal has made adequate provision for reserves to
meet contributions that have not been made because they are not yet due
under the terms of any Employee Benefit Plan or related agreements.
Benefits under all Employee Benefit Plans are as represented and have
not been increased subsequent to the date as of which documents have
been provided.
(d) Each Employee Benefit Plan intended to be qualified under
Section 401(a) of the Code has been determined to be so qualified by
the Internal Revenue Service and nothing has occurred since the
effective date of the last such determination which resulted in or is
likely to result in the revocation of such determination.
(e) No reportable event (as defined in Section 4043 of ERISA)
has occurred with respect to any Employee Benefit Plan and FirstFederal
has not engaged in any transaction with respect to the Employee Benefit
Plans which would subject FirstFederal to a tax, penalty or liability
for prohibited transactions under ERISA or the Code nor
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have any of FirstFederal's directors, officers, or employees to the
extent they or any of them are fiduciaries with respect to such plans,
breached any of their responsibilities or obligations under Title I of
ERISA.
(f) FirstFederal has furnished Summit with true and complete
copies of: (i) all Employee Benefit Plans as in effect, together with
all amendments thereto which will become effective at a later date;
(ii) the most recent Internal Revenue Service determination letter
issued with respect to each Employee Benefit Plan; and (iii) Form 5500
for the most recent completed fiscal year for each Employee Benefit
Plan required to file such form.
(g) There are no material actions, suits or claims pending
or threatened, against the Assets of any Employee Benefit Plan.
(h) The plans are qualified under Code Section 401 and the
associated trust funds are exempt from tax under Code Section 501.
(i) Each Employee Benefit Plan which FirstFederal maintains
has at all times been administered in material compliance with all
applicable requirements of ERISA, including all reporting requirements,
with respect to the Internal Revenue Service, the Department of Labor
and the Pension Benefit Guaranty Corporation and including all
disclosure requirements with respect to plan participants and
beneficiaries.
(j) FirstFederal does not maintain nor is it under any
obligation or duty to establish any type of post retirement benefit,
medical, or life insurance plan for its employees.
4.15 REAL PROPERTY. In addition to the representations and warranties
contained in Section 4.16, FirstFederal hereby makes the following additional
representations, warranties and covenants to and with Summit regarding the Real
Property owned or leased by FirstFederal as listed on Section 4.15 of the
Disclosure Schedule:
(a) Section 4.15(a) of the Disclosure Schedule contains a true
and correct list of (i) each parcel of Real Property owned by
FirstFederal, (ii) each parcel of Real Property leased by FirstFederal
(as lessor or lessee), and (iii) all Liens relating to or affecting any
parcel of Real Property owned by FirstFederal, and except as listed in
Section 4.15(a) of the Disclosure Schedule, such Real Property owned by
FirstFederal is free and clear of all Liens, encumbrances, security
interests, pledges, equities, claims of others or restrictions
whatsoever, except:
(i) Zoning and building ordinances and
regulations which do not prohibit or restrict the present
use of the Real Property;
(ii) Real estate taxes and assessments, both
general and special, which may be a Lien but are not yet due
and payable as of the Closing Date;
(iii) Easements, covenants, agreements,
encumbrances, conditions,
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reservations, restrictions, of record or other exceptions
affecting the real estate, if any, which are disclosed to
Summit and approved in writing by Summit prior to the Closing
Date.
FirstFederal has adequate rights of ingress and egress with respect to
such Real Property, buildings, structures, facilities, fixtures and
other improvements. FirstFederal has not received any notice or has
knowledge that the Real Property, as currently used by FirstFederal, is
in violation of any applicable federal, state or local statute,
ordinance, order, requirement, law, rule or regulation (including
without limitation, building, zoning or Environmental Laws) affecting
the Real Property, or that would have a Material Adverse Effect on the
value of the Real Property or its continued operation and use in the
ordinary course of business.
(b) The zoning of the Real Property permits the presently
existing improvements and the conduct and continuation of the business
presently being conducted on such Real Property.
(c) FirstFederal has a valid and subsisting leasehold estate
in and the right to quiet enjoyment of the Real Property leased by it
for the full term of the lease thereof. Each lease is a legal, valid
and binding agreement, enforceable in accordance with its terms, of
FirstFederal and of each other person that is a party thereto, and
except as set forth in Section 4.15(c) of the Disclosure Schedule,
there is no, and FirstFederal has not received notice of any default
(or any condition or event which, after notice or lapse of time or
both, would constitute a default) thereunder. None of the leases will
terminate or lapse by reason of the transactions contemplated by this
Merger Agreement.
(d) Except as disclosed in Section 4.15(d) of the Disclosure
Schedule, the improvements on the Real Property are structurally sound
and in good operating condition and in a state of good maintenance and
repair, are adequate and suitable for the purposes for which they are
presently being used and, to the knowledge of FirstFederal, there are
no condemnation or appropriation proceedings pending or threatened
against any of such Real Property or the improvements thereon.
4.16 ASSETS. With respect to the Assets:
(a) Except as listed on Section 4.16(a) of the Disclosure
Schedule, FirstFederal has not received any notice nor does it have any
knowledge of any information that there has been any violation of any
statute, law, ordinance, or regulation of any governmental entity
affecting its Assets with respect to health, safety and environmental
and pollution control, including the disposition of hazardous or toxic
waste materials or emissions into the air, soil or water, or any form
of contamination that would have a Material Adverse Effect on the value
of the Assets or the continued use of the Assets by FirstFederal in the
ordinary course of business.
(b) Except as provided in Section 4.16(b) of the Disclosure
Schedule, FirstFederal has good and marketable title to the Assets,
free and clear of all Liens, encumbrances, security interests, pledges,
equities, claims of others or restrictions
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whatsoever.
(c) All equipment owned by FirstFederal is now in good working
condition and, as of the Closing Date, will be in good working
condition with no material defects other than those items identified to
Summit in Section 4.16(c) of the Disclosure Schedule, and except as
disclosed in Section 4.16(c) of the Disclosure Schedule, no
expenditures in excess of $100,000.00 are planned for the routine,
normal maintenance of such equipment. Except as stated in Section
4.16(c) of the Disclosure Schedule, no personal property used by
FirstFederal in connection with its business is held under any lease,
security agreement, conditional sales contract, or other title
retention or security arrangement, or is other than in the possession
and under the control of FirstFederal. The tangible personal property
reflected in those Books and Records constitutes all such tangible
personal property necessary for the conduct by FirstFederal of its
business as now conducted.
4.17 INTELLECTUAL PROPERTY. Except as previously disclosed,
FirstFederal or a Subsidiary owns the entire right, title and interest in and
to, or has valid licenses with respect to, all of the Intellectual Property
necessary in all material respects to conduct the business and operations of
FirstFederal and the FirstFederal Subsidiaries as presently conducted, except
where the failure to do so would not, individually or in the aggregate, have a
Material Adverse Effect on FirstFederal. None of such Intellectual Property is
subject to any outstanding order, decree, judgment, stipulation, settlement,
lien, charge, encumbrance or attachment, which order, decree, judgment,
stipulation, settlement, lien, charge, encumbrance or attachment would have a
Material Adverse Effect on FirstFederal.
4.18 CONTRACTS.
(a) Section 4.18(a) of the Disclosure Schedule (with paragraph
references corresponding to those set forth below) contains a true and
complete list of all Material Contracts of FirstFederal including, but
not limited to, the following:
(i) Contracts and other agreements with any
current or former officer, director, shareholder, affiliate,
employee, consultant, or agent;
(ii) Contracts with any person containing any
provision or covenant prohibiting or limiting the ability of
FirstFederal to engage in any business activity or compete
with any person, or prohibiting or limiting the ability of any
person to compete with FirstFederal;
(iii) Contracts relating to the future disposition
or acquisition of any Assets, other than dispositions or
acquisitions in the ordinary course of business consistent
with past practice;
(iv) Contracts under which FirstFederal agrees to
indemnify any person;
(v) Contracts and other agreements relating to the
borrowing of money
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other than federally insured deposits, creation of Liens,
issuance of letters of credit, or the guarantee of the payment
of Liabilities or performance of obligations by FirstFederal;
(vi) Contracts and other agreements relating to
provision of services which are not cancelable without
penalty in thirty (30) or fewer days' notice;
(vii) powers of attorney;
(viii) other contracts and other agreements made
outside the ordinary course of business; and
(ix) all other contracts that involve the payment
or potential payment, pursuant to the terms of any such
contract, by or to FirstFederal of more than $250,000 and
cannot be terminated within 360 calendar days after giving
notice of termination without resulting in any material cost
or penalty to FirstFederal or any Subsidiary.
(b) Each Contract required to be disclosed in Section 4.18(a)
of the Disclosure Schedule is in full force and effect and constitutes
a legal, valid and binding agreement, enforceable in accordance with
its terms, of each party thereto; and except as disclosed in Section
4.18(b) of the Disclosure Schedule neither FirstFederal, nor, to the
knowledge of FirstFederal, any other party to such Contract, is or has
received notice that it is, in violation or breach of or default under
any such Contract (or with notice or lapse of time or both, would be in
violation or breach of or default under any such Contract). None of the
Contracts disclosed in Section 4.18(a) of the Disclosure Schedule will
terminate or lapse by reason of the transactions contemplated by this
Merger Agreement.
(c) Except as disclosed in Section 4.18(c) of the Disclosure
Schedule, FirstFederal is not a party to or bound by any Contract that
has been or could reasonably be expected to have, individually or in
the aggregate with any other such Contracts, a Materially Adverse
Effect on FirstFederal.
(d) Except as disclosed in Section 4.18(d) of the Disclosure
Schedule and any other Section of the Disclosure Schedule, there are no
Contracts, commitments, leases, permits or other instruments necessary
to hold the Assets by FirstFederal, as and where now held by
FirstFederal, or to conduct the business of FirstFederal, as and where
now operated by FirstFederal, or related to the operation or management
of the Assets.
4.19 POOLING OF INTERESTS. As of the date of this Merger Agreement,
FirstFederal knows of no reason relating to it which would reasonably cause it
to believe that the Merger will not qualify as a pooling of interests for
financial accounting purposes.
4.20 RESERVED.
4.21 LICENSES. Except as disclosed in Section 4.21 of the
Disclosure Schedule:
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(i) FirstFederal owns or validly holds all
Licenses that are material to its business or operations;
(ii) each License of FirstFederal is valid,
binding and in full force and effect; and
(iii) FirstFederal has not received any notice that
it is in default (or with the giving of notice or lapse of
time or both, would be in default) under any such License.
None of the Licenses of FirstFederal will terminate or lapse by reason of the
transactions contemplated by this Merger Agreement.
4.22 INSURANCE. To the best of FirstFederal's knowledge, FirstFederal
has maintained and now maintains (i) insurance on all its Assets of a type
customarily insured, covering property damage and loss of income by fire or
other casualty including, but not limited to, occurrence-based general liability
insurance, and (ii) adequate insurance protection against all Liabilities,
claims and risks against which it is customary to insure. To the best of
FirstFederal's knowledge after due inquiry, except as disclosed in Section 4.22
of the Disclosure Schedule, there is no breach or default with respect to any
material provision contained in any policy or binder described in this provision
and there has not been any failure to give any notice or present any claim under
any such policy or binder in due or timely fashion. There are no outstanding
unpaid premiums, and there are no provisions for retrospective or retroactive
premium adjustments except as set forth in Section 4.22 of the Disclosure
Schedule, and FirstFederal has not received notice of any cancellations or
nonrenewal or disallowance of any claims under any such policy or binder.
Finally, except as disclosed in Section 4.22 of the Disclosure Schedule, there
has not been any instance since the formation of FirstFederal where there has
not been in full force and effect insurance policies providing the types of
insurance as described above. The insurance coverage provided by the policies
described in this section will not terminate or lapse by reason of the
transactions contemplated by this Merger Agreement.
4.23 BROKERS AND FINDERS. Neither FirstFederal nor any of its
respective officers, directors or employees, has employed any broker, finder or
financial advisor or incurred any liability for any fees or commissions in
connection with the transactions contemplated herein.
4.24 EMPLOYEES; LABOR RELATIONS.
(a) Section 4.24 of the Disclosure Schedule is a list of all
severance contracts, employee handbooks or manuals, and settlements,
bonus, stock option, medical, dental or legal reimbursement plans, or
hospitalization or insurance plans, or other agreements or arrangements
providing for employee remuneration to which FirstFederal is a party or
by which FirstFederal is bound; all these contracts and arrangements
are in full force and effect, and neither FirstFederal nor any other
party is in default thereunder.
(b) Except as disclosed on Section 4.24 of the Disclosure
Schedule, the employees of FirstFederal are not represented by any
labor union, and FirstFederal is not and has not been involved in any
representative election, negotiations of a labor
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agreement, labor dispute or grievance by any employee nor has it
committed any act or taken any action which is claimed or charged to
have constituted an unfair labor practice. There is no pending or
threatened labor dispute, strike, or work stoppage affecting the
business.
(c) Except as disclosed in the Disclosure Schedule, all
employees of FirstFederal and its Subsidiaries are employed at will
by FirstFederal or such Subsidiaries.
4.25 HAZARDOUS SUBSTANCES. FirstFederal represents that, except as
disclosed in Section 4.25 of the Disclosure Schedule: (i) none of the Real
Property or property previously owned or occupied by FirstFederal or in which
FirstFederal has or had any interest, legal or equitable, is contaminated with
any hazardous substance; (ii) FirstFederal has, in compliance with all
applicable laws of federal, state or local governments, arranged for the
disposal of hazardous substances removed from the Real Property and any real
property previously owned or occupied by FirstFederal or in which FirstFederal
had any interest, legal or equitable through utilization of qualified licensed
waste disposal transporters and receivers; (iii) FirstFederal has not caused and
will not cause, and to the best of its knowledge, after diligent investigation
and inquiry, there never has occurred, the release of any hazardous substance on
the Real Property or any real property previously owned or occupied by
FirstFederal or in which FirstFederal had any interest, legal or equitable; (iv)
the Real Property or any real property previously owned or occupied by
FirstFederal or in which FirstFederal had any interest, legal or equitable, is
not subject to any federal, state or local "superfund" lien, proceedings, claim,
liability or action; (v) FirstFederal is under no threat or likelihood thereof
for the cleanup, removal, or remediation of any such hazardous substance from
the Real Property or any real property previously owned or occupied by
FirstFederal or in which FirstFederal had any interest, legal or equitable; (vi)
there is no asbestos on the Real Property; (vii) there is no underground storage
tank on the Real Property. The terms "hazardous substance," "release," and
"removal" as used herein shall have the same meaning and definition as set forth
in paragraphs (14), (22), and (23), respectively, of Title 42 U.S.C. Section
9601 provided, however, that the term "hazardous substance" as used herein also
shall include "hazardous waste" as defined in paragraph (5) of 42 U.S.C. Section
6903 and "petroleum" as defined in paragraph (8) of 42 U.S.C. Section 6991. The
term "superfund" as used herein means the Comprehensive Environmental Response,
Compensation and Liability Act, as amended, being Title 42 U.S.C. Section 9601,
ET SEQ., as amended, and any similar state statute or local ordinance applicable
to the property, including, without limitation, all rules and regulations
promulgated, administered and enforced by any governmental agency or authority
pursuant thereto. The term "underground storage tank" as used herein shall have
the same meaning and definition as set forth in paragraph (1) of 42 U.S.C.
Section 6991.
There have been no environmental investigations, studies, audits,
tests, reviews or other analyses conducted by, or which are in the possession
of, FirstFederal in relation to any property or facility now or previously owned
or leased by FirstFederal which have not been delivered to Summit prior to the
execution of this Merger Agreement.
4.26 LOANS. Each loan reflected as an Asset in the FirstFederal
Financial Statements (i) is evidenced by notes, agreements, or other evidences
of indebtedness which are true, genuine and what they purport to be, (ii) to the
extent secured, has been secured by valid Liens and
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security interests which have been perfected, and (iii) is the legal, valid and
binding obligation of the obligor named therein, enforceable in accordance with
its terms, subject to bankruptcy, insolvency, fraudulent conveyance and other
laws of general applicability relating to or affecting creditors' rights and to
general equity principles, in each case other than loans as to which the failure
to satisfy the foregoing standards would not have a Material Adverse Effect on
FirstFederal.
4.27 AGREEMENTS WITH REGULATORS. FirstFederal is not 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
FirstFederal 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 Section 4.27 of the Disclosure
Schedule, FirstFederal has not been cited in any compliance report to
FirstFederal, as a result of an examination by any regulatory authority for (i)
material violations, or (ii) violations with respect to which refunds or
restitutions (which are material in amount to FirstFederal, taken as a whole)
may be required.
4.28 RESERVED.
4.29 SECURITIES. The investment portfolios of Thrift Subsidiary consist
of securities in marketable form. Except as disclosed in Section 4.29 of the
Disclosure Schedule, since September 30, 1996, to the date hereof, Thrift
Subsidiary has not incurred any unusual or extraordinary losses in its
investment portfolio, and, except for events relating to the business
environment in general, including market fluctuations, the executive officers of
FirstFederal are not aware of any events which are reasonably certain to occur
in the future and which reasonably can be expected to result in any material
adverse change in the quality or performance of Thrift Subsidiary's investment
portfolio on a consolidated basis.
4.30 DISCLOSURE. To the best of FirstFederal's knowledge after due
inquiry, all material facts relating to the business of FirstFederal have been
disclosed to Summit in this Merger Agreement. No representation or warranty
contained in this Merger Agreement, and no statement contained in the Disclosure
Schedule or in any certificate, memorandum, list or other writing provided or
furnished to Summit pursuant to any provision of this Merger Agreement
(including without limitation the FirstFederal Financial Statements), by
FirstFederal on its behalf, contains or will contain any untrue statement of a
material fact or omits any material fact, the omission of which would be
misleading.
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ARTICLE V
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COVENANTS
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5.1 SUMMIT'S COVENANTS. Summit Bancorp covenants and agrees with
FirstFederal Financial that, at all times from and after the date of this Merger
Agreement until the Effective Time, Summit will comply with all covenants and
provisions of this Section 5.1, except to the extent FirstFederal Financial may
otherwise consent in writing.
5.1.1 ACCESS TO INFORMATION. FirstFederal and its counsel, accountants,
and other representatives shall have full access during normal business hours to
all Books and Records of Summit. Summit shall furnish to FirstFederal and its
representatives all data and information concerning the business and Assets of
Summit that may reasonably be requested. Further, during the period from the
date of this Merger Agreement until the Effective Time each of Summit and
FirstFederal 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 other 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 threat of
material litigation involving such parties and will keep the other party fully
informed of such events. During such period, FirstFederal and Summit shall
promptly provide the other with monthly unaudited financial statements as soon
as they are available, and each shall promptly provide the other with copies of
all the reports filed by it with any regulatory authority after the date of this
Merger Agreement through the Effective Time. Each of Summit and FirstFederal
agrees to keep the information contained in the monthly unaudited financial
statements strictly confidential.
5.1.2 CONDUCT OF BUSINESS. Summit shall carry on its business and
activities diligently and in substantially the same manner as they previously
have been carried out, and shall not make or institute any unusual or novel
methods of management, accounting, or operation that will vary materially from
those methods used by Summit as of the date of this Merger Agreement.
5.1.3 CORPORATE MATTERS. Summit will not (i) amend its Articles of
Incorporation, Code of Regulations or other charter documents, (ii) issue any
shares of its capital stock, (iii) issue or create any warrants, obligations,
subscriptions, options, convertible securities, or other commitments under which
any additional shares of its capital stock of any class might be directly or
indirectly authorized, issued, or transferred from treasury, or (iv) agree to do
any of the acts listed above.
5.1.4 DISTRIBUTION AND STOCK. Summit shall not:
(a) Declare, set aside, or pay any dividend, or authorize a
stock split, or make any distribution in respect of its capital stock;
(b) Directly or indirectly purchase, redeem, or otherwise
acquire any shares of its capital stock except that Summit Bancorp
shall be entitled to purchase its common stock for the purpose of
making a contribution of such common stock to its 401(k) profit sharing
plan provided that the cost of such common stock does not exceed
$35,000;
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(c) Enter into any agreement obligating it to do any of the
foregoing prohibited acts.
5.1.5 INSURANCE. Summit will continue to carry its existing insurance,
subject to variations in amounts required by the ordinary operations of its
business. At the request of FirstFederal and at FirstFederal's sole expense, the
amount of insurance against fire and other casualties which Summit carries on
any of its properties or in respect of its operations shall be increased by such
amount or amounts as FirstFederal shall specify.
5.1.6 EMPLOYEES. Except as disclosed in the Disclosure Schedule or
except in the ordinary course of business and consistent with past practice,
Summit will not do, or agree to do, any of the following acts: (i) grant any
increase in salaries or wages payable or to become payable to any officer,
employee, sales agent, or representative, or (ii) increase benefits payable to
any officer, employee, sales agent, or representative under any bonus or pension
plan or other Contract or commitment.
5.1.7 NEW BUSINESS. Summit will not, without FirstFederal's
written consent, do or agree to enter into any Contract, commitment, or
transaction not in the usual and ordinary course of business.
5.1.8 AGREEMENTS. Except as disclosed in the Disclosure Schedule,
Summit will not modify, amend, cancel, or terminate any of its existing
Contracts, or agree to do any of those acts nor enter into any agreement to
make, or become obligated to make, any capital expenditures in excess of
$25,000; make, enter into or review any agreement for services to be provided to
Summit Bancorp or Bank Subsidiary or permit the automatic renewal of any such
agreement, except any agreement for services having a term of not more than
three months or requiring the expenditure of not more than $25,000; apply to the
appropriate regulatory authorities to establish a new branch office or expand
any existing branch office; or acquire, become obligated to acquire, or enter
into any agreement to acquire, any banking or non-banking company or any branch
offices of any such companies.
5.1.9 BOOKS AND RECORDS. Except to the extent required by applicable
law, Summit shall: (i) cause Summit's Books and Records to be maintained in the
usual, regular and ordinary manner, and (ii) not permit any material change in
any pricing, investment, hedging, accounting, financial or managerial accounting
or reporting, credit or allowance or in any method of calculating any
contingency or other reserve of Summit Bancorp or any Subsidiary for accounting,
financial reporting or tax purposes.
5.1.10 COMPLIANCE WITH LAWS. Summit shall comply, in all material
respects, with all laws, rules, regulations, and Orders applicable to the
business of Summit and promptly, following receipt thereof, give FirstFederal
copies of any notice received alleging any violation of any such law or Order.
5.1.11 SHAREHOLDERS' MEETING. Summit Bancorp, after consultation with
FirstFederal, will take all action necessary to call and hold its annual or a
special meeting of its shareholders for the purpose of approving this Merger
Agreement, and any other documents or actions necessary to the consummation of
the Merger provided for herein pursuant to law.
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Subject only to (i) Summit Bancorp's Board of Directors' review of FirstFederal
Financial's Registration Statement to be filed with the SEC described in this
subparagraph and its reasonable satisfaction with the information set forth
therein and (ii) the exercise of their fiduciary duties, the Board of Directors
of Summit Bancorp intends to inform the shareholders of Summit Bancorp in the
proxy materials relating to the annual or special meeting that a majority of
directors of Summit Bancorp intend to vote all shares of Summit Common Stock
which they own of record or have voting control over in favor of approving this
Merger Agreement and any such other necessary documents or actions, and the
requisite number of directors under Summit's Articles will recommend approval of
this Merger Agreement to the other shareholders of Summit Bancorp. Summit shall
cooperate with FirstFederal in the preparation of such proxy materials which
shall be included and filed with, as a part of, FirstFederal Financial's
Registration Statement filed with the SEC for the registration of the Shares.
Neither Summit nor its officers, directors, and representatives will, without
FirstFederal's prior written consent, send or deliver any written communications
to Summit Bancorp's shareholders in their role as shareholders.
5.1.12 SOLICITATIONS. Summit shall not, directly or indirectly, and
shall cause their respective executive 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, Summit Bancorp or the Bank Subsidiary (such
transactions are referred to herein as "Acquisition Transactions"), provided,
however, that nothing contained in this Section shall prohibit (i) Summit
Bancorp or the Bank 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 Summit Bancorp, after consultation with and
based upon the written advice of legal counsel, determines in good faith that
such action is required for the directors of Summit Bancorp to fulfill their
fiduciary duties and obligations to the Summit Bancorp stockholders and other
constituencies under OGCL, taking into consideration the bidding procedures
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, Summit Bancorp provides immediate written notice to
FirstFederal to the effect that it is furnishing information to, or entering
into discussions or negotiations with, such person or entity, or (ii) the Board
of Directors of Summit Bancorp from failing to make, withdrawing or modifying
its recommendation referred to in Section 5.11 following receipt of a proposal
for an Acquisition Transaction if the Board of Directors of Summit Bancorp,
after consultation with and based upon the written advice of legal counsel,
determines in good faith that such action is required for the directors of
Summit Bancorp to fulfill their fiduciary duties and obligations to the Summit
Bancorp stockholders and other constituencies under Ohio law, taking into
consideration the bidding procedures engaged in connection with the transactions
contemplated hereby.
5.1.13 BREAK-UP FEE.
(a) Summit Bancorp shall pay FirstFederal a fee of $750,000
promptly following termination of this Merger Agreement after the first
to occur of any of the following events:
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(i) (A) the shareholders of Summit Bancorp shall not
have approved the Merger on or before September 30,
1997 if, prior thereto or the termination date of
this Merger Agreement, whichever is earlier,
FirstFederal is not in breach of its material
obligations, and (B) any person (other than
FirstFederal Financial or any affiliate of
FirstFederal Financial or any person or entity acting
in concert with FirstFederal Financial or such
affiliate (a "FirstFederal Entity")) shall have
"commenced" (as such term is defined in Rule 14d-2
under the Securities Exchange Act of 1934 (the
"Exchange Act")) a tender offer or exchange offer to
purchase shares of Summit Common Stock such that,
upon consummation of such offer, such person would
have Beneficial Ownership (as defined below) or the
right to acquire Beneficial Ownership of twenty-five
percent (25%) or more of the voting power of Summit
and (C) within twelve (12) months after the earliest
of the date of Summit Bancorp shareholders' meeting
at which the Merger is submitted for approval and
voted upon, the date this Agreement is terminated or
September 30, 1997, any person (other than a
FirstFederal Entity) shall have entered into a
written understanding in principle or an agreement to
consolidate or merge with Summit, to acquire all or
substantially all of Summit's assets or stock, or to
engage in a similar transaction;
(ii) (A) if, prior to the termination date of this
Merger Agreement, FirstFederal Financial is not in
breach of its obligations hereunder, and any person
(other than a FirstFederal Entity) shall have
acquired Beneficial Ownership or the right to acquire
Beneficial Ownership of twenty-five percent (25%) or
more of the voting power of Summit and (B) within
twelve (12) months after the earliest of the date of
Summit Bancorp's shareholders' meeting at which the
Merger is submitted for approval and voted upon, the
date this Merger Agreement is terminated or September
30, 1997, any person (other than a FirstFederal
Entity) shall have entered into a written
understanding in principle or an agreement to
consolidate or merge with Summit, to acquire all or
substantially all of Summit's assets or stock, or to
engage in a similar transaction;
(iii) (A) the shareholders of Summit Bancorp shall
not have approved the Merger on or before September
30, 1997, if, prior thereto or the termination date
of this Merger Agreement, whichever is earlier,
FirstFederal Financial is not in breach of its
obligations hereunder, and (B) subsequent to the date
hereof any person (other than a FirstFederal Entity)
shall have publicly announced a bona fide interest in
(x) acquiring Summit by merger, consolidation,
purchase of all or substantially all of its assets or
any other similar transaction or (y) making an offer
described in clause (i) above and in either such
case, within twelve (12) months after the earlier of
the date of Summit Bancorp shareholders' meeting at
which the Merger is submitted for approval and voted
upon or September 30, 1997, such person (other than
a FirstFederal Entity) shall have entered into a
written understanding in principle or an agreement
to consolidate or merge
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with Summit, to acquire all or substantially all of
Summit's assets or stock, or to engage in a similar
transaction;
(iv) (A) the shareholders of Summit Bancorp shall
not have approved the Merger on or before September
30, 1997, if, prior thereto or the termination date
of this Merger Agreement, whichever is earlier,
FirstFederal Financial is not in breach of its
obligations hereunder, and (B) any person, with
respect to Summit Common Stock, shall have publicly
solicited proxies or written consents or become a
"participant" in any "solicitation" (as such terms
are defined in Regulation 14A under the Exchange
Act) in opposition to the Merger and within twelve
(12) months after the earlier of the date of Summit
Bancorp's shareholders' meeting at which the Merger
is submitted for approval and voted upon or
September 30, 1997, such person (other than a
FirstFederal Entity) shall have entered into a
written understanding in principle or an agreement
to consolidate or merge with Summit, to acquire all
or substantially all of Summit's assets or stock, or
to engage in a similar transaction;
(v) unless FirstFederal Financial is in breach of its
obligations hereunder, the Board of Directors of
Summit Bancorp, other than as required in the
exercise of its fiduciary duties (as determined in
good faith by such directors), fails to make,
withdraws, or modifies in a manner adverse to
FirstFederal Financial, its recommendation that
shareholders of Summit Bancorp vote to approve the
Merger before the date of Summit Bancorp's
shareholders' meeting at which the Merger is to be
submitted for approval and voted upon and where
Summit Bancorp has not terminated this Merger
Agreement pursuant to the provisions of Section
5.1.11 hereof; or
(vi) unless FirstFederal Financial is in breach of
its obligations hereunder, at or prior to Summit
Bancorp's shareholders' meeting at which the Merger
is submitted for approval and voted upon or prior to
the termination date of this Agreement, whichever is
earlier, a person (other than a FirstFederal Entity)
enters into a written understanding in principle or
an agreement to consolidate or merge with Summit, to
acquire all or substantially all of Summit's assets
or to engage in a similar transaction.
(b) As used in this Section, Beneficial Ownership shall have
the meaning ascribed to it in Rule 13d-3 under the Exchange Act.
5.1.14 CONFIDENTIALITY. Except as may be required by law, Summit
agrees that unless and until the Closing has been consummated, Summit, its
officers, directors, and other representatives, will hold in strict confidence
and will not use to the detriment of FirstFederal any data or information
contained in connection with this transaction or Merger Agreement with respect
to FirstFederal's business. If the transactions contemplated by this Merger
Agreement are not consummated, Summit will return to FirstFederal all such data
and information that FirstFederal may reasonably request that was made
available to Summit in connection with this
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transaction.
5.1.15 RESTRICTED STOCK. Prior to the Closing Date but subsequent to
both Regulatory Approval, and approval of this Merger Agreement by Summit's
shareholders; Summit Bancorp shall (i) take all action necessary to cause the
release and lapse of the restrictions set forth in the Restricted Stock Award
Agreement dated August 15, 1996, by and between Summit Bancorp and David C.
Vernon ("Vernon") on the restricted Summit Common Shares owned by Vernon; and
(ii) notwithstanding any other provision to the contrary, pay a bonus to Vernon
in an amount not greater than $290,000 (the total local, state and federal
income and related withholding taxes payable by Vernon as a result of the
inclusion in his gross income of amounts attributable to the lapse of the
restrictions set forth in the Restricted Stock Award Agreement). In the event
the bonus is to be greater than $290,000, Summit Bancorp shall request that
FirstFederal Financial provide written consent prior to the authorization or
payment of such bonus.
5.2 FIRSTFEDERAL'S COVENANTS. FirstFederal Financial covenants and
agrees with Summit Bancorp that, at all times from and after the date of this
Merger Agreement until the Effective Time, FirstFederal will comply with all
covenants and provisions of this Section 5.2, except to the extent Summit
Bancorp may otherwise consent in writing.
5.2.1 LISTING. FirstFederal Financial will file the appropriate form
with the National Association of Securities Dealers, Inc. ("NASD") at the time
prescribed by applicable rules and regulations. In addition, FirstFederal
Financial will use its best efforts to maintain its listing on Nasdaq.
5.2.2 RESERVED.
5.2.3 EMPLOYEE BENEFIT PLANS. All Bank Subsidiary's employees retained
by FirstFederal shall receive the standard package of FirstFederal employee
welfare benefits which are in place throughout the FirstFederal holding company
system. These benefits include group health and major medical insurance, group
life insurance, and profit sharing participation, and other customary benefits.
Summit's employees shall be entitled to participate immediately following the
Closing Date in all employee benefit plans sponsored by FirstFederal on the same
terms and to the same extent as similarly situated employees. Such employees
shall receive credit for their period of service to Summit for purposes of
determining participation and vesting in all FirstFederal employee benefit
plans. An employee's entitlement to benefits under such FirstFederal plans shall
be subject to the limits set out in Section 415 of the Code.
5.2.4 CONFIDENTIALITY. Except as may be required by law, FirstFederal
agrees that unless and until the Closing has been consummated, FirstFederal, its
officers, directors, and other representatives, will hold in strict confidence
and will not use to the detriment of Summit any data or information obtained in
connection with this transaction or Merger Agreement with respect to Summit's
business. If the transactions contemplated by this Merger Agreement are not
consummated, FirstFederal will return to Summit all such data and information
that Summit may reasonably request that was made available to FirstFederal in
connection with this transaction.
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5.3 MUTUAL COVENANTS. Summit Bancorp and FirstFederal Financial
covenant and agree with each other that, at all times from and after
the date of this Merger Agreement until the Effective Time, each will
comply with all covenants and provisions of this Section 5.3, except
to the extent the other party may otherwise consent in writing.
5.3.1 POOLING OF INTEREST.
(a) The merger between Summit Bancorp and FirstFederal
Financial is intended to be structured to qualify for treatment under
present accounting rules as a pooling of interests, and Summit and
FirstFederal agree to take no action which would disqualify this
treatment under GAAP.
(b) Consistent with GAAP, Summit Bancorp agrees that, on or
before the Effective Time, based on a review of Bank Subsidiary's loan
losses, current classified assets and commercial, multi-family and
residential mortgage loans, Summit will work with FirstFederal with a
goal of establishing collection procedures, internal valuation reviews,
credit policies and practices and general valuation allowances which
are consistent with guidelines used within the FirstFederal holding
company system to the extent permitted by law and consistent with the
fiduciary duties of the directors and other officers of Summit Bancorp
and Bank Subsidiary at such times as reasonably requested by
FirstFederal; provided, however, that neither Summit Bancorp nor Bank
Subsidiary shall be obligated to make any such changes or adjustments
until the following conditions have been satisfied: (i) each of the
conditions precedent to Closing specified in Articles VI and VII of
this Agreement shall have been satisfied and (ii) FirstFederal
Financial shall certify to Summit Bancorp in writing that, as of the
date as of which such request is being made, FirstFederal is aware of
no facts or circumstances which would permit FirstFederal to terminate
this Agreement pursuant to Article XI of this Merger Agreement.
FirstFederal shall provide such assistance and direction to Summit as
is necessary in conforming to such policies, practices and procedures.
(c) FirstFederal and Summit shall cooperate and use their best
efforts to identify those persons who may be deemed to be "affiliates"
of FirstFederal or Summit within the meaning of Rule 145 promulgated by
the SEC under the Securities Act and for purposes of qualifying the
Merger for "pooling of interests" accounting treatment. FirstFederal
and Summit shall use its respective best efforts to cause each person
so identified to deliver to FirstFederal or Summit, as the case may be,
no later than 30 days prior to the Effective Time, a written agreement
(which agreement shall be mutually satisfactory to counsel for
FirstFederal and Summit). Shares of Summit Common Stock issued to such
FirstFederal and Summit affiliates in exchange for FirstFederal Common
Stock or previously owned by them shall not be transferable until such
time as financial results covering at least 30 days of combined
operations of FirstFederal Financial and Summit Bancorp have been
published within the meaning of Section 201.01 of the SEC's
Codification of Financial Reporting Policies, regardless of whether
each such affiliate has provided the written agreement referred to in
this section.
(d) FirstFederal Financial shall use its best efforts to
publish no later than ninety (90) days after the end of the first month
after the Effective Time in which there
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are at least thirty (30) days of post-Merger combined operations
(which month may be the month in which the Effective Time occurs),
combined sales and net income figures as contemplated by and in
accordance with the terms of SEC Accounting Series Release No. 135.
5.3.2 PROXY STATEMENT; REGISTRATION STATEMENT. As promptly as
practicable after the date hereof, Summit and FirstFederal shall cooperate in
the preparation of the proxy statement to be mailed to the shareholders of
Summit Bancorp in connection with the Merger and the transactions contemplated
hereby and to be filed by FirstFederal Financial as part of the Registration
Statement. FirstFederal will advise Summit, promptly after it receives notice
thereof, of the time when the Registration Statement or any post-effective
amendment thereto has become effective or any supplement or amendment has been
filed, of the issuance of any stop order, of the suspension of qualification of
the FirstFederal Common Stock issuable in connection with the Merger for
offering or sale in any jurisdiction, or the initiation or threat of any
proceeding for any such purpose, or of any request by the SEC for the amendment
or supplement of the Registration Statement or for additional information.
FirstFederal shall take all actions necessary to register or qualify the shares
of FirstFederal Common Stock to be issued in the Merger pursuant to all
applicable state "blue sky" or securities laws and shall maintain such
registrations or qualifications in effect for all purposes hereof.
5.3.3 DISCLOSURE. None of the information supplied by Summit for
inclusion in the proxy statement or in the Registration Statement, will, in the
case of the proxy statement or any amendments thereof, at the time of the Summit
Bancorp shareholders' meetings or, in the case of the Registration Statement, at
the time it becomes effective and at the Effective Time, contain any untrue
statement of a material fact or omit to state any material fact necessary in
order to make the statements therein, in light of the circumstances under which
they were made, not misleading.
5.3.4 APPLICATIONS. As promptly as practicable after the date hereof,
Summit and FirstFederal shall cooperate in the preparation and submission of any
requisite applications for prior approval of the transactions contemplated
herein, including applications and/or notices from the Office of Thrift
Supervision, Office of Comptroller of the Currency, Federal Reserve Board,
Department of Justice, and the Ohio Department of Commerce, Division of
Financial Institutions, as may be appropriate, and each of the parties hereto
shall, and they shall cause their respective Subsidiaries to, submit any
applications, notices or other filings to any other state or federal government
agency, department or body, the approval of which is required for consummation
of the Merger. FirstFederal Financial and Summit Bancorp each represents and
warrants to the other that all information concerning it and its directors,
officers, shareholders and Subsidiaries included (or submitted for inclusion) in
any such application and furnished by it shall be true, correct and complete in
all material respects. Further, each party shall provide such information and
communication as may be requested as part of such filings as promptly as
possible and shall cooperate with each other in connection with resolving any
investigation or other inquiry concerning the transactions contemplated by this
Merger Agreement commenced by any regulatory authority.
5.3.5 MUTUAL INDEMNITY. FirstFederal Financial and Summit Bancorp shall
each indemnify and hold the other harmless for any claim, liability or expense
(including reasonable
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attorneys' fees) arising from a misstatement or omission in the applications
submitted to regulatory agencies for approval of the transaction contemplated
by this Merger Agreement relating to the indemnifying party which is based or
made in reliance upon any representation, warranty, or covenant of such party
in this Merger Agreement or any certification, document, or other information
furnished or to be furnished by such party pursuant to this Merger Agreement.
From and after Closing Date, this section shall be of no further force or
effect.
5.3.6 BEST EFFORTS.
(a) FirstFederal Financial and Summit Bancorp shall each use
its best efforts in good faith, and each of them shall cause its
Subsidiaries to use their best efforts in good faith, to (i) furnish
such information as may be required in connection with the preparation
of the documents referred to in Sections 5.3.2 and 5.3.4 above, and
(ii) take or cause to be taken all action necessary or desirable on its
part so as to permit consummation of the Merger at the earliest
possible date, including, without limitation (1) obtaining the consent
or approval of each individual, partnership, corporation, association
or other business or professional entity whose consent or approval is
required for consummation of the transactions contemplated hereby,
provided that Summit Bancorp shall not agree to make any payments or
modifications to agreements in connection therewith without the prior
written consent of FirstFederal Financial, which consent shall not be
unreasonably withheld and (2) requesting the delivery of appropriate
opinions, consents and letters from its counsel and independent
auditors. No party hereto shall take or fail to take, or cause or
permit its Subsidiaries to take or fail to take, or to the best of its
ability permit to be taken or omitted to be taken by any third persons,
any action that would substantially impair the prospects of completing
the Merger pursuant to this Merger Agreement, that would materially
delay such completion, or that would adversely affect the qualification
of the Merger for pooling of interests accounting treatment or as a
reorganization within the meaning of Section 368(a) of the Code. In the
event that either party has taken any action, whether before, on or
after the date hereof, that would adversely affect such qualification,
each party shall take such action as the other party may reasonably
request to cure such effect to the extent curable without a Material
Adverse Effect on either of the parties within 30 days of such request.
(b) Summit Bancorp shall give prompt notice to FirstFederal
Financial, and FirstFederal Financial shall give prompt notice to
Summit Bancorp, of (i) the occurrence, or failure to occur, of any
event which occurrence or failure would be likely to cause any
representation or warranty contained in this Agreement to be untrue or
inaccurate in any material respect at any time from the date hereof to
the Closing Date and (ii) any material failure of FirstFederal or
Summit, as the case may be, to comply with or satisfy any covenant,
condition or agreement to be complied with or satisfied by it
hereunder, and each party shall use all reasonable efforts to remedy
such failure.
(c) Each party shall provide and shall request its auditors to
provide the other party with such historical financial information
regarding it (and related audit reports and consents and certificates)
as the other party may reasonably request for any securities disclosure
purposes.
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5.3.7 DELIVERY OF SUPPLEMENTS TO DISCLOSURE SCHEDULES. Five (5)
business days prior to the Effective Time, each party will supplement or amend
its Disclosure Schedule with respect to any matter hereafter arising which, if
existing or occurring at or prior to the date of this Merger Agreement, would
have been required to be set forth or described in such Disclosure Schedule or
which is necessary to correct any information in the Disclosure Schedule.
ARTICLE VI
----------
CONDITIONS PRECEDENT TO FIRSTFEDERAL'S PERFORMANCE
--------------------------------------------------
The obligations of FirstFederal Financial under this Merger Agreement
are subject to the satisfaction, at or before the Closing, of all the conditions
set out below in this Article VI. FirstFederal Financial may waive any or all of
these conditions in whole or in part without prior notice; provided, however,
that no such waiver of a condition shall constitute a waiver by FirstFederal
Financial of any of its other rights or remedies, at law or in equity, if Summit
Bancorp shall be in default of any of its representations, warranties, or
covenants under this Merger Agreement.
6.1 REPRESENTATIONS AND WARRANTIES TRUE. The representations and
warranties of Summit Bancorp contained in this Merger Agreement were true when
made in all material respects, and shall be true in all material respects as of
the Closing Date (after giving effect to any changes contemplated or provided
for in this Merger Agreement) with the same force and effect as if made at and
as at the time of the Closing Date, except for breaches of representations and
warranties which would not have or would not reasonably be expected to have a
Material Adverse Effect on Summit, and Summit Bancorp shall deliver at Closing a
written certification thereof.
6.2 PERFORMANCE OF SUMMIT. Summit Bancorp shall have performed,
satisfied, and complied with all covenants, agreements, and conditions required
by this Merger Agreement to be performed or complied with by it on or before the
Closing Date, except for breaches of obligations which would not have, or would
not reasonably be expected to have, any Material Adverse Effect on Summit.
6.3 NO MATERIAL CHANGES. During the period from September 30, 1996, to
the Closing Date, there shall not have been any material adverse change in the
Business or Condition of Summit, and Summit shall not have sustained any
material loss or damage to its Assets, whether or not insured, that has a
Material Adverse Effect on Summit.
6.4 CORPORATE APPROVAL. The execution and delivery of this Merger
Agreement by Summit Bancorp and the performance of its covenants and obligations
under it shall have been duly authorized by all necessary corporate and
shareholder action, and FirstFederal Financial shall have received copies of all
resolutions pertaining to that authorization certified by the Secretary of
Summit Bancorp.
6.5 CONSENTS. All necessary agreements and consents of any parties to
the consummation of the transactions contemplated by this Merger Agreement, or
otherwise pertaining to the matters covered by it, shall have been obtained by
Summit Bancorp and
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delivered to FirstFederal Financial.
6.6 EMPLOYMENT AGREEMENTS. The Employment Agreements with David C.
Vernon and Jon W. Park in the form set forth in Exhibits A-1 and A-2, dated
the Closing Date, shall have been executed and delivered by the parties as
called for therein.
6.7 OPINION OF COUNSEL. FirstFederal Financial shall have received the
opinion of Brouse & McDowell, counsel to Summit, dated the Closing Date,
substantially in the form and to the effect of Exhibit E hereto, and to such
further effect as FirstFederal Financial may reasonably request.
6.8 FIRSTFEDERAL'S DUE DILIGENCE. Based upon FirstFederal's due
diligence from the date of the execution of this Merger Agreement to the Closing
Date, FirstFederal has not discovered any material misrepresentation or breach
of warranty or any other matters not adequately disclosed on the Disclosure
Schedule, that would have a Material Adverse Effect on Summit.
6.9 REGULATORY APPROVAL.
(a) FirstFederal shall have received all regulatory approvals required
or deemed necessary in connection with the transactions contemplated by this
Merger Agreement, all notice periods and waiting periods required after the
granting of any such approvals shall have passed and all conditions contained in
any such approval required to have been satisfied prior to consummation of such
transactions shall have been satisfied, provided, however, that no such approval
shall have imposed any condition or requirement which, in the reasonable opinion
of the Board of Directors of FirstFederal Financial so materially and adversely
affects the anticipated economic and business benefits to FirstFederal, of the
transactions contemplated by this Agreement as to render consummation of such
transaction inadvisable;
(b) The Registration Statement (including any post-effective amendment
thereto) shall be effective under the Securities Act, and no proceeding shall be
pending or to the knowledge of FirstFederal threatened by the SEC to suspend the
effectiveness of such Registration Statement, and FirstFederal shall have
received all state securities or "Blue Sky" permits or other authorizations, or
confirmations as to the availability of an exemption from registration
requirements as may be necessary.
6.10 POOLING OF INTEREST. FirstFederal Financial shall have received
a letter from KPMG Peat Marwick, LLP, FirstFederal Financial's independent
public accountants, to the effect that the Merger will qualify for pooling of
interest accounting treatment.
6.11 ACCOUNTANT'S LETTERS. FirstFederal Financial shall have received
from Crowe, Chizek and Company letters dated not more than five days prior to
(i) the effective date of the Registration Statement and (ii) the Closing Date,
with respect to certain financial information regarding Summit, each in form and
substance which is customary in transactions of the nature contemplated by this
Agreement.
6.12 BANK SUBSIDIARY BOARD OF DIRECTORS. Bank Subsidiary's Board of
Directors will
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appoint to the Bank Subsidiary's Board of Directors at the Effective Time two
individualS to be recommended by FirstFederal Financial but subject to the
approval of the Bank Subsidiary's Board of Directors.
6.13 OFFICER'S CERTIFICATES. Summit Bancorp shall deliver at Closing an
officer's certificate to the effect that all conditions precedent to
FirstFederal Financial's performance have been met or waived and that all action
required to be taken by Summit to consummate the transactions contemplated
herein has been taken.
ARTICLE VII
-----------
CONDITIONS TO OBLIGATIONS OF SUMMIT
-----------------------------------
The obligations of Summit Bancorp hereunder are subject to the
fulfillment, at or before the Closing, of each of the following conditions (all
or any of which may be waived in whole or in part by Summit Bancorp in its sole
discretion):
7.1 FIRSTFEDERAL'S WARRANTIES. All representations and warranties by
FirstFederal Financial contained in this Merger Agreement or in any written
statement delivered by FirstFederal Financial under this Merger Agreement shall
be true in all material respects on and as of the Closing as though such
representations and warranties were made on and as of that date, except for
breaches of representations and warranties which would not or would not
reasonably be expected to have a Material Adverse Effect on FirstFederal.
7.2 FIRSTFEDERAL'S PERFORMANCE. FirstFederal Financial shall have
performed and complied with all covenants and agreements, satisfied all
conditions that it is required by this Merger Agreement to perform, comply with,
or satisfy, before or at the Closing Date, except for breaches of obligations
which would not have, or would not reasonably be expected to have, any Material
Adverse Effect on FirstFederal.
7.3 OPINION OF FIRSTFEDERAL'S COUNSEL. FirstFederal Financial shall
have furnished Summit Bancorp with an opinion, dated the Closing Date, of
Critchfield, Critchfield & Johnston, Ltd., counsel for FirstFederal, in form and
substance as set forth in Exhibit F.
7.4 CORPORATE APPROVAL. The Board of Directors of FirstFederal
Financial shall have duly authorized and approved the execution and delivery of
this Merger Agreement and all corporate action necessary or proper to fulfill
the obligations of FirstFederal Financial to be performed under this Merger
Agreement on or before the Closing Date.
7.5 EMPLOYMENT AGREEMENTS. The Employment Agreement with Jon W. Park
in the form set forth in Exhibit A-2 dated the Closing Date, shall have been
executed and delivered by FirstFederal Financial.
7.6 FIRSTFEDERAL BOARD OF DIRECTORS. FirstFederal Financial's Board
of Directors will appoint or nominate to the FirstFederal Financial Board of
Directors at the Effective Time, David C. Vernon.
7.7 FAIRNESS OPINION. Summit Bancorp shall have received from McDonald
a written
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fairness opinion, dated on or about the date on which the proxy statement is
distributed to Summit Bancorp's stockholders, to the effect that the Exchange
Ratio is fair to Summit Bancorp's stockholders from a financial point of view.
ARTICLE VIII
------------
THE CLOSING
-----------
8.1 TIME AND PLACE. The Closing shall occur at 10:00 a.m. at the
offices of Critchfield, Critchfield & Johnston, as promptly as practicable after
the date on which all of the conditions set forth in Articles VI and VII are
satisfied or duly waived, or at such other time and place and on such other date
as the parties hereto may agree.
8.2 CLOSING ESCROW. All documents to be delivered by Summit Bancorp
shall be delivered to counsel for FirstFederal in escrow and such documents
shall not be released by counsel for FirstFederal until receiving written
authorization from counsel for Summit. All documents to be delivered by
FirstFederal Financial to Summit shall be delivered to counsel for Summit in
escrow and not be released by counsel for Summit until receiving written
authority from counsel for FirstFederal.
ARTICLE IX
----------
COSTS AND PUBLICITY
-------------------
9.1 EXPENSES. Each of the parties shall pay all costs and expenses
incurred or to be incurred by it in negotiation and preparation of this Merger
Agreement and in closing and carrying out the transactions contemplated by this
Merger Agreement provided that Summit shall not incur any such costs and
expenses in excess of $150,000 in the aggregate; excluding therefrom the fee
payable to McDonald as more fully disclosed in Section 3.23 hereof.
9.2 PUBLICITY. All notices to third parties, employees of Summit and
FirstFederal and all other publicity concerning the transactions contemplated by
this Merger Agreement shall be jointly planned and coordinated by and between
FirstFederal Financial and Summit Bancorp. None of the parties shall act
unilaterally in this regard without the prior written approval of the others;
however, this approval shall not be unreasonably withheld.
ARTICLE X
---------
FORM OF AGREEMENT AND PARTIES
-----------------------------
10.1 HEADINGS. The subject headings of the paragraphs and subparagraphs
of this Merger Agreement are included for purposes of convenience only, and
shall not affect the construction or interpretation of any of its provisions.
10.2 MODIFICATION AND WAIVER. This Merger Agreement constitutes the
entire agreement between the parties pertaining to the subject matter hereof and
supersedes all prior and contemporaneous agreements, representations, and
understandings of the parties. No supplement, modification, or amendment of this
Merger Agreement shall be binding unless
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executed in writing by all the parties. No waiver of any of the provisions of
this Merger Agreement shall be deemed, or shall constitute, a waiver of any
other provision, whether or not similar, nor shall any waiver constitute a
continuing waiver. No waiver shall be binding unless executed in writing by
the party making the waiver.
10.3 COUNTERPARTS. This Merger Agreement may be executed simultaneously
in one or more counterparts, each of which shall be deemed an original, but all
of which together shall constitute one and the same instrument.
10.4 RIGHTS OF PARTIES. Nothing in this Merger Agreement, whether
express or implied, is intended to confer any rights or remedies under or by
reason of this Merger Agreement on any persons other than the parties to it and
their respective successors and assigns, nor is anything in this Merger
Agreement intended to relieve or discharge the obligation or liability of any
third persons to any party to this Merger Agreement, nor shall any provision
give any third persons any right of subrogation or action over or against any
party to this Merger Agreement.
10.5 ASSIGNMENT. Neither Summit Bancorp nor FirstFederal Financial
may assign its rights or obligations under this Merger Agreement.
ARTICLE XI
----------
TERMINATION
-----------
11.1 TERMINATION. This Merger Agreement may be terminated, and the
transactions contemplated hereby may be abandoned:
(a) By the vote of a majority of the Board of Directors of
each of FirstFederal and Summit;
(b) By the vote of a majority of the Board of Directors of
either FirstFederal or Summit if the Merger shall not have been
consummated on or before July 31, 1997, unless the failure to
consummate by such date is related to the action or inaction of the
regulatory authorities, and such action or inaction is not directly
related to either FirstFederal's or Summit's breach of their respective
obligations under Articles III and IV;
(c) By the vote of a majority of the Board of Directors of
either FirstFederal or Summit if any regulatory agency has denied
approval of the Merger and neither Summit nor FirstFederal has timely
filed a request for a reconsideration or a petition seeking review of
such order;
(d) At any time before the Closing, by Summit, in the event of
the occurrence of a Material Adverse Impact of FirstFederal if
FirstFederal fails to cure such Material Adverse Impact thirty (30)
days following notification thereof by Summit;
(e) At any time before the Closing, by FirstFederal, in the
event of the occurrence of a Material Adverse Impact of Summit if
Summit fails to cure such Material
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Adverse Impact within thirty (30) days following notification thereof
by FirstFederal;
(f) At any time after September 30, 1997, by Summit or
FirstFederal, upon notification of the non-terminating party by the
terminating party if the Closing shall not have occurred on or before
such date and such failure to consummate is not caused by a breach of
this Merger Agreement by the terminating party;
(g) By either party if any bona fide action or proceeding
shall be pending against either party on the Closing Date that could
result in an unfavorable judgment, decree, or order that would prevent
or make unlawful the carrying out of this Merger Agreement;
(h) By FirstFederal after Regulatory Approval if the
conditions precedent to FirstFederal's obligation to close as contained
in Article VI have not been satisfied or waived;
(i) By Summit after Regulatory Approval if the conditions
precedent to Summit's obligation to close as contained in Article VII
have not been satisfied or waived;
(j) By Summit if all of the following occur: (i) the
FirstFederal Share Price Change is greater than 15%; (ii) the
FirstFederal Share Price Change is greater than the SNL Share Price
Change by more than .1%; and (iii) the FirstFederal Share Price Change
is a positive number.
11.2 EFFECT OF TERMINATION. If this Merger Agreement is validly
terminated pursuant to Section 11.1, this Merger Agreement will forthwith become
null and void, and there will be no liability or obligation on the part of
Summit or FirstFederal (or any of their respective officers, directors,
employees, agents or other representatives of Affiliates), except as provided in
the next succeeding sentence and except that the provisions of the
Confidentiality Agreements entered into by Summit and FirstFederal on December
13, 1996, and November 27, 1996, respectively, will continue to apply following
any such termination. Notwithstanding any other provision in this Merger
Agreement to the contrary, upon termination of this Merger Agreement pursuant to
Section 11.1, Summit will remain liable to FirstFederal for any breach of this
Merger Agreement by Summit existing at the time of such termination, and
FirstFederal will remain liable to Summit for any breach of this Merger
Agreement by FirstFederal existing at the time of such termination, and Summit
or FirstFederal may seek such remedies, including damages, and fees of
attorneys and investment bankers, against the other with respect to any such
breach as are provided in this Merger Agreement or as are otherwise available
at law or in equity.
ARTICLE XII
-----------
MISCELLANEOUS
-------------
12.1 NOTICES. All notices, requests and other communications hereunder
must be in writing and will be deemed to have been duly given only if delivered
personally or by facsimile
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transmission or mailed (first class postage prepaid) to the parties at the
following addresses or facsimile numbers:
If to FirstFederal, to:
FirstFederal Financial Services Corp
135 E. Liberty St.
Wooster, OH 44691
Facsimile No.: (216) 262-1057
Attn: Gary G. Clark, Chief Executive Officer
with a copy to:
Critchfield, Critchfield & Johnston, Ltd.
225 N. Market Street
Wooster, OH 44691
Facsimile No.: (216) 263-9278
Attn: Daniel H. Plumly
If to Summit, to:
Summit Bancorp
2680 West Market Street
Akron, OH 44333
Attn: David C. Vernon
with a copy to:
Brouse & McDowell
500 First National Tower
Akron, OH 44308-1471
Facsimile No.: (330) 253-8601
Attn: Jerry F. Whitmer
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<PAGE> 109
All such notices, requests and other communications will (i) if delivered
personally to the address as provided in this Section, be deemed given upon
delivery, (ii) if delivered by facsimile transmissions to the facsimile number
as provided in this Section, be deemed given after receipt of confirmation of
such transmission, and (iii) if delivered by mail in the manner described above
to the address as provided in this Section, be deemed given within three days
following the mailing thereof. Any party from time to time may change its
address, facsimile number or other information for the purpose of notices to
that party by giving notice specifying such change to the other party hereto.
12.2 ENTIRE AGREEMENT. This Merger Agreement supersedes all prior
discussions and agreements between the parties with respect to the subject
matter hereof and thereof, including without limitation that certain letter of
interest from FirstFederal Financial to Summit Bancorp dated December 4, 1996,
and contains the sole and entire agreement between the parties hereto with
respect to the subject matter hereof and thereof.
12.3 COSTS. If any legal action or other proceeding is brought for the
enforcement of this Merger Agreement, or because of an alleged dispute, breach,
default, or misrepresentation in connection with any of the provisions of this
Merger Agreement, the successful or prevailing party or parties shall be
entitled to recover reasonable attorneys' fees and other costs incurred in that
action or proceeding, in addition to any other relief to which it or they may be
entitled.
12.4 FAIR INTERPRETATION. Every covenant, term, and provision of this
Merger Agreement shall be construed simply according to its fair meaning and
not strictly for or against either party.
12.5 SEVERABILITY. Every provision of this Merger Agreement is intended
to be severable. If any term or provision thereof is illegal or invalid for any
reason whatsoever, such illegality or invalidity shall not affect the validity
or legality of the remainder of this Merger Agreement.
12.6 EFFECT OF CLOSING. No representations, warranties, covenants,
and agreements of the parties contained in this Merger Agreement shall survive
the Closing.
12.7 GOVERNING LAW. This Merger Agreement shall be governed by and
construed in accordance with the laws of the State of Ohio.
[Balance of Page Intentionally Left Blank]
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IN WITNESS WHEREOF, this Merger Agreement has been duly executed and
delivered by the duly authorized officer of each party hereto as of the date
first above written.
FIRSTFEDERAL FINANCIAL SERVICES
CORP
By /s/ Gary G. Clark
------------------------------
Name: Gary G. Clark
Title: Chief Executive Officer
SUMMIT BANCORP
By /s/ David C. Vernon
------------------------------
Name: David C. Vernon
Title: Chairman of the Board,
President and Chief
Executive Officer
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<PAGE> 111
[McDonald & Company Securities, Inc. Letterhead]
APPENDIX II
May 6, 1997
Board of Directors
Summit Bancorp
2680 West Market Street
Akron, OH 44333
Gentlemen and Madam:
You have requested our opinion with respect to the fairness, from a
financial point of view, as of the date hereof, to the holders of common stock,
no par value ("Summit Common"), of Summit Bancorp of the financial consideration
as set forth in Section 2.5 (a) of the Agreement of Affiliation and Plan of
Merger dated December 30, 1996 (the "Agreement"), by and between FirstFederal
Financial Services Corp ("FirstFederal") and Summit.
The Agreement provides for the merger (the "Merger") of Summit with
and into FirstFederal, pursuant to which, among other things, at the Effective
Time (as defined in the Agreement), outstanding shares of Summit Common will be
exchanged for 1.87 shares of common stock, $1.00 par value ("FirstFederal
Common") of FirstFederal as set forth in Section 2.5 (a) of the Agreement (the
"Exchange Ratio"). The Agreement provides that in the event of a change in the
number of shares of FirstFederal Common between the date of the Agreement and
the Effective Time by reason of any reclassification, recapitalization,
split-up, combination or exchange of shares, or by stock dividend or stock split
thereon, an appropriate adjustment be made to the Exchange Ratio. Assuming the
occurrence of the five-for-four stock split in the form of a stock dividend that
has been declared by FirstFederal, payable on May 22, 1997 to holders of record
of FirstFederal Common as of May 2, 1997, the Exchange Ratio at the Effective
Time will be 2.3375. The terms and conditions of the merger are more fully set
forth in the Agreement.
McDonald & Company Securities, Inc., as part of its investment banking
business, is customarily engaged in the valuation of businesses and their
securities in connection with mergers and acquisitions, negotiated
underwritings, secondary distributions of listed and unlisted securities,
private placements and valuations for estate, corporate and other purposes.
We have acted as Summit's financial advisor in connection with, and
have participated in certain negotiations leading to, the execution of the
Agreement. In connection with rendering our opinion set forth herein, we have
among other things:
<PAGE> 112
Board of Directors
May 6, 1997
Page Two
(i) Reviewed Summit's Annual Reports to Shareholders and Annual
Reports on Form 10-K for each of the years ended December 31,
1996, December 31, 1995 and December 31, 1994, including the
audited financial statements contained therein, and Summit's
unaudited financial statements for the three months ended
March 31, 1997;
(ii) Reviewed FirstFederal's Annual Reports to Shareholders and
Annual Reports on Form 10-K for each of the years ended
December 31, 1996, December 31, 1995 and December 31, 1994,
including the audited financial statements contained therein,
and FirstFederal's unaudited financial statements for the
three months ended March 31, 1997;
(iii) Reviewed certain other public and non-public information,
primarily financial in nature, relating to the respective
businesses, earnings, assets and prospects of Summit and
FirstFederal provided to us or publicly available;
(iv) Participated in meetings and telephone conferences with
members of senior management of Summit and FirstFederal
concerning the financial condition, business, assets,
financial forecasts and prospects of the respective companies,
as well as other matters we believed relevant to our inquiry;
(v) Reviewed certain stock market information for Summit Common
and FirstFederal Common, and compared it with similar
information for certain companies, the securities of which are
publicly traded;
(vi) Compared the results of operations and financial condition of
Summit and FirstFederal with that of certain companies which
we deemed to be relevant for purposes of this opinion;
(vii) Reviewed the financial terms, to the extent publicly
available, of certain acquisition transactions which we deemed
to be relevant for purposes of this opinion;
(viii) Reviewed the Agreement and its schedules and exhibits and
certain related documents;
(ix) Performed such other reviews and analyses as we have deemed
appropriate.
<PAGE> 113
Board of Directors
May 6, 1997
Page Three
In our review and analysis and in arriving at our opinion, we have
assumed and relied upon the accuracy and completeness of all of the financial
and other information reviewed by us and have relied upon the accuracy and
completeness of the representations, warranties and covenants of Summit and
FirstFederal contained in the Agreement. We have not been engaged to undertake,
and have not assumed any responsibility for, nor have we conducted, an
independent investigation or verification of such matters. We have not been
engaged to and we have not conducted a physical inspection of any of the assets,
properties or facilities of either Summit or FirstFederal, nor have we made or
obtained or been furnished with any independent valuation or appraisal of any of
such assets, properties or facilities or any of the liabilities of either Summit
or FirstFederal. With respect to financial forecasts used in our analysis, we
have assumed that such forecasts have been reasonably prepared by management of
Summit and FirstFederal, as the case may be, on a basis reflecting the best
currently available estimates and judgments of the management of Summit and
FirstFederal, as to the future performance of Summit, FirstFederal, and Summit
and FirstFederal combined, as the case may be. We have not been engaged to and
we have not assumed any responsibility for, nor have we conducted any
independent investigation or verification of such matters, and we express no
view as to such financial forecasts or the assumptions on which they are based.
We have also assumed that all of the conditions to the consummation of the
Merger, as set forth in the Agreement, would be satisfied and that the Merger
would be consummated on a timely basis in the manner contemplated by the
Agreement.
We will receive a fee for our services as financial advisor to Summit,
a substantial portion of which is contingent upon closing of the Merger.
In the ordinary course of business, we may actively trade securities of
Summit and FirstFederal for our own account and for the accounts of customers
and, accordingly, we may at any time hold a long or short position in such
securities. In addition, McDonald & Company has provided investment banking
services to FirstFederal in the past, including a March 1997 private placement
of subordinated notes, and may provide such services in the future.
This opinion is based on economic and market conditions and other
circumstances existing on, and information made available as of, the date
hereof. In addition, our opinion is, in any event, limited to the fairness, as
of the date hereof, from a financial point of view, of the Exchange Ratio, to
the holders of Summit Common, and does not address the underlying business
decision by Summit's Board of Directors to effect the Merger, does not compare
or discuss the relative merits of any competing proposal or any other terms of
the Merger, and does not constitute a recommendation to any Summit shareholder
as to how such shareholder should vote with respect to the Merger. This opinion
does not represent an opinion as to what the value of Summit Common or
FirstFederal Common may be at the Effective Time of the Merger or as to the
prospects of Summit's business or FirstFederal's business.
<PAGE> 114
Board of Directors
May 6,1997
Page Four
This opinion has been prepared solely for the confidential use of the
Board of Directors of Summit and will not be reproduced, summarized, described
or referred to or given to any other person without our prior written consent.
Notwithstanding the foregoing, this opinion may be included in the proxy
statement to be mailed to the holders of Summit Common in connection with the
Merger, provided that this opinion will be reproduced in such proxy statement in
full, and any description of or reference to us or our actions, or any summary
of the opinion in such proxy statement, will be in a form acceptable to us and
our counsel.
Based upon and subject to the foregoing, it is our opinion that, as of
the date hereof, the Exchange Ratio is fair to the holders of Summit Common from
a financial point of view.
Very truly yours,
/s/McDonald & Company Securities, Inc.
MCDONALD & COMPANY SECURITIES, INC.
<PAGE> 115
APPENDIX III
OHIO GENERAL CORPORATION LAW
1701.85 RELIEF FOR DISSENTING SHAREHOLDER; QUALIFICATION;
PROCEDURES.--(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 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 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 shareholding 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
<PAGE> 116
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 dissenting shareholder or the
corporation, which in the case of a merger or consolidation may be the surviving
or 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 the 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 approportioned 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 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
<PAGE> 117
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 the 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 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
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;
(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 filed or joined in a complaint under division
(B) of this section within the period provided in that division.
(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 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.
<PAGE> 118
REVOCABLE PROXY
SUMMIT BANCORP
SPECIAL MEETING OF SHAREHOLDERS
JUNE 12, 1997
The undersigned hereby appoints the Board of Directors of Summit
Bancorp ("Summit"), and its survivor, with full power of substitution,
to act as attorneys and proxies for the undersigned to vote all shares
of common stock of Summit which the undersigned is entitled to vote at
the Special Meeting of Shareholders (the "Meeting"), to be held on
Thursday, June 12, 1997, at Fairlawn Country Club, located at 200 N.
Wheaton Road, Akron, Ohio at 10:00 a.m., local time, as follows:
The approval of the Agreement of Affiliation and Plan of Merger,
dated as of December 30, 1996, by and among FirstFederal
Financial Services Corp ("FirstFederal") and Summit, and the
merger of Summit with and into FirstFederal.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
In their discretion, the proxies are authorized to vote on any other
business that may properly come before the Meeting.
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.
(continued, and to be signed, on other side)
(continued from other side)
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
This Proxy may be revoked any time before it is voted by (i) filing a
written notice of revocation, with a date later than the date of this
Proxy, with the Secretary of Summit at or before the taking of the
vote at the Special Meeting or (ii) attending the Special Meeting and
voting in person; provided, however, that attendance at the meeting by
itself will not constitute revocation of this Proxy. If this Proxy is
properly revoked as described above, then the power of such attorneys
and proxies shall be deemed terminated and of no further force and
effect.
The undersigned acknowledges receipt from Summit, prior to the
execution of this Proxy, of Notice of the Meeting and a Proxy
Statement/Prospectus.
Dated:
_____________________________
Print Name of Stockholder
_____________________________
Signature of Stockholder
_____________________________
Print Name of Stockholder
_____________________________
Signature of Stockholder
Please sign exactly as your name
appears 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
