SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the
Securities Exchange Act of 1934
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[X] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
[ ] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to [SECTION] 240.14a-12
FIRST FEDERAL BANCORP, INC.
- ---------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
- ---------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[ ] No fee required.
[X] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and O-11.
1) Title of each class of securities to which transaction applies:
Common shares, no par value
2) Aggregate number of securities to which transaction applies:
3,622,146 (including 3,286,221 shares outstanding, plus 335,925
shares subject to options for which payment will be received)
3) Per unit price or other underlying value of transaction
computed pursuant to Exchange Act Rule O-11 (Set forth the
amount on which the filing fee is calculated and state how it
was determined):
The purchase price is $13.25 in cash per share. There are
currently 3,286,221 shares outstanding, and options to purchase
335,925 shares have an aggregate exercise price of $2,055,035.
The aggregate payment for the options will equal $13.25 for
each share subject to an option, less the exercise price. The
maximum value of the transaction is, therefore, ($13.25 x
3,286,221) + ($13.25 x 335,925) - $2,055,035 = $45,938,399.
4) Proposed maximum aggregate value of transaction:
$45,938,399
5) Total fee paid:
$5,820.40
[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange
Act Rule O-11(a)(2) and identify the filing for which the offsetting
fee was paid previously. Identify the previous filing by registration
statement number, or the Form or Schedule and the date of its filing.
1) Amount Previously Paid:
______________________________________
2) Form, Schedule or Registration Statement No.:
______________________________________
3) Filing Party:
______________________________________
4) Date Filed:
______________________________________
[It is intended that these proxy materials will be released to shareholders
on or about October 6, 2004.]
FIRST FEDERAL BANCORP, INC.
505 Market Street
Zanesville, Ohio 43701
(740) 588-2222
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
Notice is hereby given that a special meeting of the shareholders of
First Federal Bancorp, Inc., an Ohio corporation ("Bancorp"), will be held
at the Holiday Inn at 4645 East Pike, Zanesville, Ohio 43701, on November
8, 2004, at 10:00 a.m., Eastern Standard Time, for the following purposes,
which are more completely set forth in the accompanying proxy statement:
1. To consider and vote upon the adoption of the Agreement and
Plan of Merger, dated as of August 2, 2004, by and among Park
National Corporation, an Ohio corporation ("Park"), Park Merger
Corp., an Ohio corporation and wholly-owned subsidiary of Park
("Merger Corp."), and Bancorp, as amended by the Amendment to
Agreement and Plan of Merger, dated as of September 15, 2004
(collectively, the "merger agreement"), pursuant to which
Merger Corp. will, upon the satisfaction of certain conditions,
merge with and into Bancorp in a transaction in which each
outstanding Bancorp share will be canceled and extinguished in
consideration and exchange for the right to receive $13.25
cash; and
2. To transact such other business as may properly come before the
special meeting or any adjournments thereof (including the
adjournment of the special meeting to allow for additional
solicitation of shareholder votes in order to obtain a quorum
or to obtain the required vote to adopt the merger agreement
and approve the transactions contemplated by the merger
agreement).
Only shareholders of Bancorp of record at the close of business on
September 23, 2004, will be entitled to receive notice of and to vote at
the special meeting and at any adjournments thereof. Whether or not you
expect to attend the special meeting, we urge you to consider the
accompanying proxy statement carefully and to SIGN, DATE AND PROMPTLY
RETURN THE ENCLOSED PROXY SO THAT YOUR SHARES MAY BE VOTED IN ACCORDANCE
WITH YOUR WISHES AND THE PRESENCE OF A QUORUM MAY BE ASSURED. The giving of
a proxy does not affect your right to vote in person in the event you
attend the special meeting.
By Order of the Board of Directors,
J. William Plummer, President
Zanesville, Ohio
September 28, 2004
FIRST FEDERAL BANCORP, INC.
505 Market Street
Zanesville, Ohio 43701
(740) 588-2222
PROXY STATEMENT
GENERAL INFORMATION
Subject to the satisfaction of the conditions set forth in the
Agreement and Plan of Merger, dated as of August 2, 2004, by and among Park
National Corporation, Park Merger Corp. and First Federal Bancorp, Inc., as
amended by the Amendment to Agreement and Plan of Merger, dated as of
September 15, 2004 (collectively the "merger agreement"), First Federal
Bancorp, Inc. ("Bancorp"), and Park National Corporation ("Park") have
agreed to merge a wholly-owned subsidiary of Park with and into Bancorp
with Bancorp being the surviving corporation. Immediately after this merger
becomes effective, the surviving corporation will be merged with and into
Park, after which First Federal Savings Bank of Eastern Ohio, a wholly-
owned subsidiary of Bancorp ("First Federal Savings Bank"), will convert
into a national bank and Century National Bank, a wholly-owned subsidiary
of Park, will be merged with and into First Federal Savings Bank. The name
of the resulting bank will be Century National Bank.
The merger cannot occur unless the holders of a majority of the
outstanding shares of Bancorp adopt the merger agreement. The Bancorp board
of directors has scheduled a special meeting of shareholders of Bancorp to
vote on the adoption of the merger agreement as follows:
November 8, 2004
10:00 a.m., Eastern Standard Time
Holiday Inn
4645 East Pike
Zanesville, Ohio
This document provides you with detailed information about the
proposed merger. Please see "WHERE YOU CAN FIND MORE INFORMATION" for
additional information about Bancorp and Park on file with the Securities
and Exchange Commission.
This document and the proxy are being mailed to shareholders of
Bancorp beginning on or about October 6, 2004.
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Neither the Securities and Exchange Commission nor any state
securities regulator has determined if this document is accurate or
adequate. Any representation to the contrary is a criminal offense.
You should be aware that this is a complicated transaction. We urge
Bancorp shareholders to read and consider carefully this document in its
entirety.
The date of this document is September 28, 2004.
FIRST FEDERAL BANCORP, INC.
PROXY STATEMENT
TABLE OF CONTENTS
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Page
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QUESTIONS AND ANSWERS ABOUT THE MERGER 1
SUMMARY 4
THE COMPANIES 8
First Federal Bancorp, Inc. 8
Park National Corporation 8
SPECIAL MEETING 9
Introduction 9
Matters to be considered 9
Board of directors' recommendation 9
Record date and voting 9
Revocability of proxies 10
Vote required 10
Solicitation of proxies 10
DISSENTERS' RIGHTS OF APPRAISAL 11
THE MERGER AND MERGER AGREEMENT 12
Introduction 12
Background and reasons for the merger 12
Opinion of Keefe, Bruyette & Woods, Inc. 15
Recommendation of the board of directors of Bancorp 19
Conduct of business if the merger is not consummated 19
Exchange of Bancorp shares 19
Representations, warranties and covenants 19
Conduct of business pending the merger 20
Conditions to the merger 22
Effective time 23
Termination 23
Surrender of certificates evidencing Bancorp shares 24
Federal income tax consequences 24
Interests of Bancorp directors and executive officers 25
Employee benefits 26
Accounting treatment 27
REGULATORY APPROVALS 27
VOTING SECURITIES AND OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
AND MANAGEMENT 27
SHAREHOLDER PROPOSALS 29
WHERE YOU CAN FIND MORE INFORMATION 29
ANNEX A Agreement and Plan of Merger and Amendment
ANNEX B Fairness Opinion
ANNEX C Dissenters' Rights, Ohio Revised Code Section 1701.85
i
QUESTIONS AND ANSWERS ABOUT THE MERGER
Q. WHY DO BANCORP AND PARK WANT TO MERGE?
A. Bancorp believes that the consideration offered to its shareholders is
fair and that Park is a sound merger partner. Park wants to serve its
customers in Bancorp's service areas more effectively and expand Park's
presence in those service areas.
Q. HOW WILL I BENEFIT?
A. The Bancorp board of directors believes that you will benefit by
receiving $13.25 in cash in exchange for each share of Bancorp that you own
upon the consummation of the merger.
Q. IF I DO NOT FAVOR THE TRANSACTION, WHAT ARE MY RIGHTS?
A. If you are a shareholder of Bancorp as of the record date and you do not
vote in favor of the adoption of the merger agreement, you will have the
right under Ohio Revised Code Section 1701.85 to demand the fair cash value
for your shares of Bancorp. The right to make this demand is generally
known as "dissenters' rights." To perfect your dissenters' rights, you must
deliver to Bancorp a written demand for payment of the fair cash value of
your shares and otherwise comply strictly with all of the requirements of
Ohio Revised Code Section 1701.85. You must state in your written demand
the amount that, in your opinion, is the fair cash value of your shares.
Your written demand must be delivered to Bancorp not later than ten days
after the special meeting of shareholders of Bancorp.
Q. WILL I OWE ANY FEDERAL INCOME TAX AS A RESULT OF THE MERGER?
A. For federal income tax purposes, you may have a gain with respect to the
cash payment you receive. The gain generally will be treated as capital
gain if the shares are held as capital assets.
Q. WHEN DO YOU EXPECT THE MERGER TO BE COMPLETED?
A. We plan to complete the transaction as soon as possible after the
special meeting, assuming the required shareholder approval is obtained.
The transaction is also subject to the approval of federal bank regulatory
authorities and the satisfaction of other closing conditions. We expect the
transaction to be completed in the fourth quarter of calendar year 2004.
Q. WHEN AND WHERE WILL THE SPECIAL MEETING TAKE PLACE?
A. The special meeting will be held at 10:00 a.m., Eastern Standard Time,
on November 8, 2004, at the Holiday Inn, 4645 East Pike, Zanesville, Ohio.
Q. WHAT DO I NEED TO DO NOW?
A. Just mail your completed, signed and dated proxy in the enclosed return
envelope as soon as possible so that your Bancorp shares will be
represented at the special meeting.
1
Q. WHAT IS THE DIFFERENCE BETWEEN HOLDING SHARES AS A SHAREHOLDER OF RECORD
AND AS A BENEFICIAL OWNER?
A. Many Bancorp shareholders hold their shares through a stockbroker, bank
or other nominee rather than directly in their own name. As summarized
below, there are some distinctions between shares held of record and those
owned beneficially.
Shareholder of Record
If your shares are registered directly in your name with Bancorp's
transfer agent, you are considered, with respect to those shares, the
shareholder of record and these proxy materials are being sent directly to
you by Bancorp. As a shareholder of record, you have the right to grant
your proxy directly to the individuals designated by Bancorp or to vote in
person at the special meeting. Bancorp has enclosed a proxy for your use.
Beneficial Owner
If your shares are held in a stock brokerage account or by a bank or
other nominee, you are considered the beneficial owner of the shares held
in street name and these proxy materials are being forwarded to you by your
broker or nominee who is considered, with respect to those shares, the
shareholder of record. As the beneficial owner, you have the right to
direct your broker on how to vote. Your broker or nominee has enclosed a
voting instruction card for your use. If you are a Bancorp shareholder
whose shares are not registered in your own name, you will need additional
documentation from your record holder to attend the special meeting and to
vote your shares at the special meeting.
Q. IF MY SHARES ARE HELD IN "STREET NAME" BY MY BROKER, WILL MY BROKER VOTE
MY SHARES FOR ME?
A. Your broker will vote your Bancorp shares with respect to the merger
agreement only if you provide instructions on how to vote. You should
follow the directions provided by your broker regarding how to instruct
your broker to vote your shares.
Q. MAY I CHANGE MY VOTE AFTER I HAVE MAILED MY SIGNED PROXY?
A. Yes. You can change your vote at any time before your proxy is voted at
the special meeting. If you are the record holder of the shares, you can do
this in three ways. First, you can send Bancorp a written statement that
you would like to revoke your proxy, if such written notice is received
prior to the date of the special meeting. Second, you can send Bancorp a
new signed and later-dated proxy, provided that such proxy is received
prior to the date of the special meeting. Third, you can attend the special
meeting and vote in person. However, your attendance alone will not revoke
your proxy.
For shares held beneficially by you, but not as record holder, you
may change your vote by submitting new voting instructions to your broker
or nominee.
Q. HOW CAN I VOTE MY SHARES IN PERSON AT THE MEETING?
A. Shares held directly in your name as the shareholder of record may be
voted in person at the special meeting. If you choose to attend, please
bring the enclosed proxy or proof of identification.
2
Q. HOW WILL MY SHARES BE VOTED IF I RETURN A BLANK PROXY?
A. If you are the record holder of the shares and you sign and send in your
proxy and do not indicate how you want to vote, your proxy will be counted
as a vote in favor of the merger agreement.
Q. WHAT WILL BE THE EFFECT IF I DO NOT VOTE?
A. Not voting will have the same effect as voting against the merger
agreement.
Q. SHOULD I SEND IN MY SHARE CERTIFICATE NOW?
A. No. If the merger is completed, you will receive written instructions
for exchanging your share certificates.
Q. WHO CAN ANSWER MY QUESTIONS ABOUT THE MERGER AND HOW I CAN SUBMIT MY
PROXY?
A. If you have more questions about the merger or how to submit your proxy,
please call J. William Plummer or Connie Ayres LaPlante at (740) 588-2222.
3
SUMMARY
This summary highlights certain information from this document. It
does not contain all of the information that is important to you. To
understand the merger agreement more fully and for a complete description
of the legal terms of the merger agreement, you should read carefully this
entire document and the documents to which we have referred you.
Throughout this document, the term "merger" refers to the proposed
merger of a wholly-owned subsidiary of Park with and into Bancorp with
Bancorp being the surviving corporation. Immediately after this merger
becomes effective, the surviving corporation will be merged with and into
Park, after which First Federal Savings Bank will be converted into a
national bank and Century National Bank will be merged with and into First
Federal Savings Bank. The term "merger agreement" refers to the Agreement
and Plan of Merger, dated as of August 2, 2004, by and among Park National
Corporation, Park Merger Corp. and First Federal Bancorp, Inc., as amended,
a copy of which is included at the end of this proxy statement as Annex A.
Introduction
On August 2, 2004, Bancorp, Park and Park Merger Corp. ("Merger
Corp.") entered into the merger agreement, which was amended by the parties
as of September 15, 2004. If the merger agreement is adopted by the
affirmative vote of the holders of a majority of the outstanding Bancorp
shares and if all other conditions to the consummation of the merger are
satisfied or waived, Merger Corp. will merge with and into Bancorp. On the
date on which the merger becomes effective, each outstanding Bancorp share
will be canceled and extinguished in consideration and exchange for the
right to receive $13.25 in cash.
The merger consideration was determined as a result of arm's-length
negotiations between the boards of directors of Park and Bancorp. Such
negotiations commenced when Park responded to Bancorp's request by making
an offer to Bancorp based upon the subjective consideration by Park of a
number of factors, including, but not limited to, the book value and
earnings per share of Bancorp, the asset quality of Bancorp and the amounts
paid in similar transactions.
On [September 14], 2004, there were [3,286,221] Bancorp shares
outstanding and [335,925] Bancorp shares subject to outstanding options. The
exercise price of each outstanding option ranged between $3.25 and $11.875,
with a weighted average of $6.12 per share. Each of the outstanding Bancorp
options not exercised before the effective date of the merger will be
canceled and extinguished in exchange for the right to receive an amount per
share subject to such options equal to $13.25 less the exercise price per
share.
Following the consummation of the merger, Bancorp will be a wholly-
owned subsidiary of Park. Immediately after the effective date, Bancorp
will merge with and into Park, as a result of which the separate corporate
existence of Bancorp will terminate. After the first two mergers, First
Federal Savings Bank of Eastern Ohio, a wholly-owned subsidiary of Bancorp,
will convert into a national bank, and Century National Bank will merge
with and into First Federal Savings Bank. The name of the resulting
national bank will be Century National Bank.
4
The companies (page 8)
First Federal Bancorp, Inc.
505 Market Street
Zanesville, OH 43701
(740) 588-2222
Bancorp is a unitary savings and loan holding company incorporated
under the laws of the State of Ohio and owns all of the issued and
outstanding shares of First Federal Savings Bank, a federally chartered
savings bank. Bancorp's activities have been limited primarily to holding
the common stock of First Federal Savings Bank.
First Federal Savings Bank conducts business from its main office at
505 Market Street in Zanesville, two full-service branches in Zanesville
and three full-service branch offices located in Roseville, Coshocton and
Newcomerstown, Ohio. First Federal Savings Bank is primarily engaged in the
business of attracting savings deposits from the general public and
investing such funds in loans secured by various types of real estate,
consumer loans and commercial loans, as well as government and agency
obligations, mortgage-backed securities and other investments.
Park National Corporation
50 North Third Street
Newark, OH 43055
(740) 349-8451
Park, an Ohio corporation, is a multi-bank holding company
headquartered in Newark, Ohio, with $5.1 billion in consolidated assets.
Through its banking subsidiaries, The Park National Bank, The Richland
Trust Company, Century National Bank, The First-Knox National Bank of Mount
Vernon, United Bank, N.A., Second National Bank, The Security National Bank
and Trust Co. and The Citizens National Bank of Urbana, Park is engaged in
a general commercial banking and trust business. As of September __, 2004,
Park affiliates operated 119 financial service offices and a network of 118
automated teller machines in 26 counties throughout Ohio.
Special meeting of Bancorp shareholders (page 8)
The special meeting will be held at 10:00 a.m., Eastern Standard Time,
on November 8, 2004, at the Holiday Inn at 4645 East Pike, Zanesville,
Ohio. At the special meeting, shareholders of Bancorp will be asked to
consider and act upon (i) the adoption of the merger agreement and (ii)
such other business as may properly come before the special meeting and any
adjournments thereof. In the event that a sufficient number of votes to
adopt the merger agreement is not received, the special meeting may be
adjourned for up to 30 days. Only the holders of record of Bancorp shares
outstanding on the record date will be entitled to receive notice of and to
vote at the special meeting and any adjournments thereof. As of the record
date, ______________ Bancorp shares were outstanding and entitled to vote
and held of record by approximately ____________ shareholders.
Vote required (page 10)
The affirmative vote of the holders of a majority of the outstanding
Bancorp shares, voting in person or by proxy, will be necessary to adopt the
merger agreement. The affirmative vote,
5
therefore, of the holders of ___________ Bancorp shares will be necessary to
adopt the merger agreement.
As of the record date, the directors and executive officers of
Bancorp had sole or shared voting power, in the aggregate, with respect to
__________ outstanding Bancorp shares, or _____% of the outstanding Bancorp
common shares.
Dissenters' rights of appraisal (page 10)
Any shareholder of Bancorp who does not vote in favor of the adoption
of the merger agreement and who delivers a written demand for payment of
the fair cash value of such shareholder's Bancorp shares not later than ten
days after the special meeting and in the manner provided by Ohio Revised
Code [SECTION]1701.85, a copy of which is attached hereto as Annex C, shall
be entitled, if and when the merger is consummated and upon strict compliance
with certain procedures set forth in Ohio Revised Code [SECTION]1701.85, to
receive the fair cash value of such Bancorp shares. A shareholder of Bancorp
who wishes to submit a written demand for payment of the fair cash value of
shares should deliver such demand to J. William Plummer, President, First
Federal Bancorp, Inc., 505 Market Street, Zanesville, Ohio 43701.
Reasons for the merger (page 12)
The boards of directors of Bancorp and Park have proposed the merger
because each believes the merger is in the best interests of its
corporation and its shareholders.
In deciding to approve the merger, Bancorp's board of directors
considered, among other things, the opinion of its financial advisor,
Keefe, Bruyette & Woods, Inc., that the financial consideration to be
received by Bancorp's shareholders in the merger is fair to the
shareholders of Bancorp from a financial point of view as of August 2,
2004. The written opinion of Keefe, Bruyette & Woods, affirming that
opinion as of the date of this proxy statement, is attached as Annex B to
this document. We encourage you to read the opinion in it entirety.
The merger (page 12)
In the merger, Merger Corp. will merge with and into Bancorp. Unless
you exercise your statutory dissenter's rights, you will receive $13.25 in
cash for each share of Bancorp you own. We encourage you to read the merger
agreement because it is the legal document that governs the merger.
Conditions to completing the merger (page 22)
Completion of the merger depends upon the satisfaction of a number of
conditions, including, among others, the following:
* Bancorp's shareholders must adopt the merger agreement by vote of
a majority of the outstanding shares; and
6
* the Board of Governors of the Federal Reserve System and the
Office of the Comptroller of the Currency must approve the merger,
the subsequent merger of Bancorp into Park, the conversion of
First Federal Savings Bank into a national bank and the merger of
Century National Bank into First Federal Savings Bank.
To the extent permitted by law, the merger agreement provides that
certain of the other closing conditions may be waived by the party entitled
to assert them. Bancorp's board of directors does not currently intend to
seek shareholder approval of any waiver of any condition.
Termination of the merger agreement (page 23)
The merger agreement may be terminated and the merger abandoned upon
the occurrence of certain events, including, but not limited to, the
following:
* mutual agreement of the parties;
* the uncured material breach of the merger agreement by either
party;
* the failure to satisfy or waive all conditions to the consummation
of the merger; or
* the failure to consummate the merger on or before June 30, 2005.
Federal income tax consequences (page 25)
Each Bancorp shareholder may recognize gain with respect to the cash
consideration received. The gain generally will be treated as capital gain
if the shares are held as capital assets. No ruling has been or will be
sought from the Internal Revenue Service as to the federal income tax
consequences of the merger. The tax consequences of the merger to you may
depend on the facts of your situation. You should consult your own tax
advisor to understand fully the tax consequences of the merger to you.
Interests of directors and executive officers (page 25)
Stock options held by directors, executive officers and employees
will be cashed out in the amount of the difference between $13.25 and the
exercise price for each option share.
The non-employee directors of Bancorp have been offered the
opportunity to serve on the board of directors of Century National Bank
following the consummation of the merger transactions. As directors of
Century National Bank, each director is expected to be paid $500 per monthly
board meeting attended and $25 for each committee meeting attended and to be
awarded 60 common shares of Park each year representing the annual retainer
payable to that director for the year. J. William Plummer, the President and
Chief Executive Officer of Bancorp, and Connie Ayres La Plante, the Treasurer
of Bancorp, will receive the severance pay and benefits to which they are
entitled under their existing employment agreements with Bancorp and First
Federal Savings Bank for termination in connection with a change in
control, as well as compensation for unused vacation and sick time. Mr.
Plummer will also be compensated pursuant to an agreement not to compete
among Bancorp, First Federal Savings Bank and Mr. Plummer.
7
THE COMPANIES
First Federal Bancorp, Inc.
Bancorp is a unitary savings and loan holding company organized under
Ohio law in 1992. Through its wholly-owned subsidiary, First Federal
Savings Bank of Eastern Ohio, Bancorp is engaged in the business of
accepting deposits and making loans in Ohio.
First Federal Savings Bank is a federally chartered stock savings
bank that has served the Zanesville, Ohio, area for over 100 years. First
Federal Savings Bank is engaged primarily in the business of attracting
savings deposits from the general public and investing those funds in loans
secured by one- to four-family residential real estate located primarily in
eastern Ohio. First Federal Savings Bank also originates consumer loans,
primarily direct and indirect loans for the purchase of automobiles. In
addition, First Federal Savings Bank originates loans for the purchase of
multifamily real estate (over four units) and nonresidential real estate,
other types of consumer loans, including home equity and home improvement
loans, secured and unsecured lines of credit, and commercial loans. First
Federal Savings Bank also invests in government and agency obligations,
deposits in other financial institutions, mortgage-backed securities and
other investments permitted by applicable law.
First Federal Savings Bank conducts business from its main office in
Zanesville and its five branches. Two of such branches are located in
Zanesville, and the other three are located in Roseville, Coshocton and
Newcomerstown, Ohio. First Federal Savings Bank's primary market area
consists of the counties of Muskingum, Coshocton and Tuscarawas, in which
its offices are located, and the adjacent county of Perry.
Park National Corporation
Park, an Ohio corporation, is a multi-bank holding company
headquartered in Newark, Ohio, with $5.1 billion in consolidated assets.
Through its banking subsidiaries, The Park National Bank, The Richland
Trust Company, Century National Bank, The First-Knox National Bank of Mount
Vernon, United Bank, N.A., Second National Bank, The Security National Bank
and Trust Co. and The Citizens National Bank of Urbana, Park is engaged in
a general commercial banking and trust business in small and medium
population Ohio communities. Park's banking subsidiaries provide the
following services: the acceptance of deposits for demand, savings and time
accounts and the servicing of those accounts; commercial, industrial,
consumer and real estate lending, including installment loans, credit
cards, home equity lines of credit and commercial and auto leasing; trust
services; cash management; safe deposit operations; electronic funds
transfers; online Internet banking with bill pay service; and a variety of
additional banking-related services tailored to the needs of individual
customers. As of September __, 2004, Park affiliates operated 116 financial
service offices and a network of 117 automated teller machines in 26
counties throughout Ohio. Park's banking subsidiaries deal with a wide
cross-section of businesses and corporations located primarily in Ashland,
Athens, Champaign, Clark, Coshocton, Crawford, Darke, Delaware, Fairfield,
Fayette, Franklin, Greene, Hamilton, Hocking, Holmes, Knox, Licking,
Madison, Marion, Mercer, Miami, Montgomery, Morrow, Muskingum, Perry and
Richland Counties in Ohio.
8
SPECIAL MEETING
Introduction
This proxy statement and the accompanying notice and proxy are
furnished to shareholders of Bancorp in connection with the solicitation of
proxies by the board of directors of Bancorp to be used at the special
meeting of shareholders to be held at the Holiday Inn, 4645 East Pike,
Zanesville, Ohio on November 8, 2004, at 10:00 a.m., Eastern Standard Time,
and at any adjournments thereof. Copies of this proxy statement and the
accompanying notice and proxy are first being mailed to shareholders on or
about October 6, 2004.
Matters to be considered
At the special meeting, shareholders of Bancorp will be asked to
consider and vote upon the following:
1. The adoption of the merger agreement, a copy of which is
attached hereto as Annex A, pursuant to which Merger Corp., a
wholly-owned subsidiary of Park, will, upon the satisfaction of
certain conditions, merge with and into Bancorp in a
transaction in which each outstanding Bancorp share will
be canceled and extinguished on the effective date of the
merger in consideration and exchange for the right to receive
$13.25 in cash; and
2. The transaction of such other business as may properly come
before the special meeting (including adjournment of the
special meeting in order to allow for additional solicitation
of shareholder votes in order to obtain a quorum or to obtain
the required vote to adopt the merger agreement and approve the
transactions contemplated by the merger agreement).
On August 2, 2004, the date preceding the public announcement of the
execution of the merger agreement, the closing bid and asked prices for
Bancorp's shares were $8.75 and $8.89 per share, respectively. On
_______________, 2004, the closing bid and asked prices for Bancorp's
common shares were $______ and $_______ per share, respectively.
Board of directors' recommendation
The board of directors believes that the adoption of the merger
agreement is in the best interests of Bancorp shareholders and
recommends, therefore, the adoption of the merger agreement.
Record date and voting
The close of business on September 23, 2004, has been fixed as the
record date for determining the shareholders entitled to receive notice of,
and to vote at, the special meeting. On the record date, there were
________ Bancorp shares outstanding. Bancorp has no class of securities
outstanding other than the shares.
All shares represented by each properly executed proxy received by the
board of directors pursuant to this solicitation will be voted in accordance
with the shareholder's directions as
9
specified on the proxy. If no directions are specified on the proxy, the
shares represented by the proxy will be voted in favor of the adoption of
the merger agreement and in favor of the adjournment of the special meeting,
if necessary.
Management knows of no other matters to be brought before the special
meeting. If any other matters are properly brought before the special
meeting, however, the persons named as proxies in the enclosed proxy will
vote in accordance with their best judgment on such matters.
Revocability of proxies
Without affecting any vote previously taken, a shareholder signing
and returning the accompanying proxy has the power to revoke the proxy at
any time before exercise (i) by giving notice to Bancorp in a writing
received by Ward D. Coffman, Secretary of Bancorp, at Bancorp's offices at
505 Market Street, Zanesville, Ohio 43701, (ii) by executing a later-dated
proxy received by Bancorp before the special meeting or (iii) by attending
the special meeting and giving notice of such revocation in person to the
inspectors of election at the special meeting. Attendance at the special
meeting will not, in and of itself, constitute a revocation of a proxy.
Vote required
The presence, in person or by proxy, of the holders of a majority of
the issued and outstanding Bancorp shares entitled to vote at the special
meeting is necessary to constitute a quorum at the special meeting. Each
shareholder is entitled to one vote for each share held. Under Ohio law,
shares that are held by a nominee for a beneficial owner and that are
represented in person or by proxy but are not voted with respect to the
adoption of the merger agreement ("non-votes") are counted as present for
purposes of establishing a quorum. The effect of an abstention or a non-
vote is the same as a vote against the adoption of the merger agreement.
If, however, the accompanying proxy is signed and dated by the shareholder
but no vote is specified thereon, the shares held by such shareholder will
be voted FOR the adoption of the merger agreement and will not be
considered "non-votes."
If a quorum is not present at the special meeting, none of the
proposals will be acted upon, and the board of directors will adjourn the
special meeting to a later date in order to solicit additional proxies to
assure the presence of a quorum.
Solicitation of proxies
Bancorp will bear the cost of the solicitation of proxies from its
shareholders. In addition to the use of the mail, proxies may be solicited
by personal interview, telephone, telegram and telecopy by the directors
and officers of Bancorp, who will receive no additional compensation for
such services. Arrangements will be made with brokerage firms and other
custodians, nominees and fiduciaries for the distribution of solicitation
materials to the beneficial owners of Bancorp shares held of record by such
persons, and such brokers, custodians, nominees and fiduciaries will be
reimbursed for reasonable out-of-pocket expenses incurred by them in
connection with such distribution. Bancorp has retained Regan & Associates,
a professional proxy solicitation firm, to assist in the solicitation of
proxies. Bancorp will pay Regan & Associates a fee of $5,000.
10
DISSENTERS' RIGHTS OF APPRAISAL
Holders of Bancorp shares who so desire are entitled to relief as
dissenting shareholders under Ohio Revised Code [SECTION]1701.85. A
shareholder of Bancorp will be entitled to such relief, however, only if
the shareholder complies strictly with all of the procedural and other
requirements of [SECTION]1701.85. 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 Annex C.
A Bancorp 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 Bancorp shares
as to which he seeks relief on the record date;
(b) Must not have voted his Bancorp shares in favor of
adoption of the merger agreement; and
(c) Must deliver to Bancorp, not later than ten days after
the special meeting, a written demand for payment of the
fair cash value of the shares as to which he seeks
relief. Such 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 adoption of the merger agreement will not satisfy
the requirements of a written demand for payment. Any written demand for
payment should be mailed or delivered to: J. William Plummer, President,
First Federal Bancorp, Inc., 505 Market Street, Zanesville, Ohio 43701. As
the written demand must be delivered to Bancorp within the ten-day period
following the special meeting, it is recommended, although not required,
that a shareholder using the mails should use certified or registered mail,
return receipt requested, to confirm that he has made a timely delivery.
If Bancorp sends the dissenting shareholder, at the address specified
in his demand, a request for the certificate(s) representing his shares,
such dissenting shareholder must deliver the certificate(s) to Bancorp
within 15 days of the sending of such request. Bancorp may endorse the
certificate(s) with a legend to the effect that the shareholder has
demanded the fair cash value of the shares represented by the
certificate(s). Failure to deliver the certificate(s) within 15 days of the
request terminates the shareholder's rights as a dissenting shareholder.
Bancorp must notify the shareholder of its election to terminate his rights
as a dissenting shareholder within 20 days after the lapse of the 15-day
period.
Unless the dissenting shareholder and Bancorp agree on the fair cash
value per share of the Bancorp shares, either may, within three months after
the service of the written demand by the shareholder, file a petition in the
Court of Common Pleas of Muskingum 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
11
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 will make
a finding as to the fair cash value of a share and render judgment against
Bancorp, for its payment with interest at such rate and from such date as
the court considers equitable. The costs of proceedings will be assessed or
apportioned as the court considers equitable.
The rights of any dissenting shareholder will terminate if (a) the
dissenting shareholder has not complied with [SECTION]1701.85, unless
Bancorp, by its board of directors, waives such failure, (b) Bancorp
abandons or is finally enjoined or prevented from carrying out, or the
shareholders of Bancorp rescind their adoption of, the merger agreement,
(c) the dissenting shareholder withdraws his written demand with the
consent of Bancorp, by its board of directors, or (d) Bancorp and the
dissenting shareholder have not agreed upon the fair cash value per share
of the Bancorp shares and neither has timely filed or joined in a petition
in an appropriate court for a determination of the fair cash value of the
shares.
Because a proxy which does not contain voting instructions will be
voted for adoption of the merger agreement, a shareholder who wishes to
exercise dissenters' rights must either (i) not sign and return his proxy,
or (ii) if he signs and returns his proxy, vote against or abstain from
voting on the adoption of the merger agreement.
Bancorp shareholders who are not in favor of the merger but who do
not wish to exercise dissenters' rights may, in the alternative, attempt to
sell their shares in the open market at the then current market price.
THE MERGER AND MERGER AGREEMENT
This section of the proxy statement describes certain aspects of the
merger agreement, a copy of which is attached hereto as Annex A. The
following description does not purport to be complete and is qualified in
its entirety by reference to the merger agreement. All shareholders are
urged to read the merger agreement in its entirety.
Introduction
If the merger is consummated, Merger Corp., a wholly-owned subsidiary
of Park, will merge into Bancorp. Immediately after, Bancorp will merge
with and into Park, as a result of which the separate corporate existence
of Bancorp will terminate. First Federal Savings Bank will then be
converted into a national bank, and Century National Bank will merge with
and into First Federal Savings Bank. The name of the surviving bank will be
Century National Bank.
Background and reasons for the merger
Bancorp was organized in 1992 in connection with the conversion of
First Federal Savings Bank from the mutual form of ownership to the stock
form of ownership. In its annual long-range planning sessions each year
since Bancorp's formation, the board of directors of Bancorp consulted with
its advisors on the best ways to increase shareholder value in an
environment made increasingly competitive due to significant technological
change, the proliferation of alternate deposit products and independent
mortgage lenders and the increased consolidation of financial institutions
in general.
12
In March 2004, a strategic planning discussion focused on the current
and future effects of changes in interest rates, the growing competition
for loans and deposits and the economically uncertain environment in
Muskingum County. While the directors generally expressed the belief that
Bancorp could be managed successfully into the future as an independent
community bank, they recognized that the future was subject to risk due to
such economic uncertainty, competition and changes in interest rates.
To assist in the consideration and analysis of Bancorp's position in
view of the foregoing circumstances, the board of directors invited
representatives of Keefe, Bruyette & Woods to make a presentation at a
special March 12, 2004, meeting of the directors. With the assistance of
Keefe, Bruyette & Woods, the directors considered several strategic
alternatives for Bancorp, including remaining independent, an acquisition
of another institution, a "merger of equals" and a merger of Bancorp into a
much larger holding company in which Bancorp's independence would end.
The directors engaged in a lengthy review and debate of all of the
information presented by Keefe, Bruyette & Woods, including the required
capital to develop and offer competitive products and services, and factors
beyond their control, such as general and local economic conditions,
fluctuations in interest rates and the uncertainty of world events. The
directors also discussed personnel needs expected in the coming years.
Based on the analysis of current merger activity by Keefe, Bruyette &
Woods, the directors generally concluded that prices paid by holding
companies for thrift institutions were on the rise, as a result of which a
window of opportunity may be opened to provide shareholders a favorable
return on their investment through a merger with another large holding
company. Accordingly, the directors agreed to pursue the possibility of a
merger and to engage Keefe, Bruyette & Woods to assist with the process.
On April 20, 2004, representatives from Keefe, Bruyette & Woods met
with the board of directors. Fifteen potential merger partners were
identified on the basis of historic financial performance, relative size,
ability to acquire Bancorp, potential interest in Bancorp's market area,
compatibility of products and services of the institution to the products
and services of Bancorp and a variety of other factors. Following an
extensive discussion of the fifteen possibilities, the directors identified
eight bank and thrift holding companies that might have an interest in
pursuing a possible transaction with Bancorp. The directors then authorized
the President of Bancorp to work with Keefe, Bruyette & Woods to assemble a
confidential offering memorandum for distribution to such candidates upon
receipt of confidentiality agreements.
By May 26, 2004, the confidential offering memorandum had been
prepared and provided to seven potential acquirers, and four companies had
submitted indications of interest. The investment bankers for some of those
companies told Keefe, Bruyette & Woods that the companies wanted an
opportunity to increase their proposed prices if they would otherwise be
precluded from participating in further consideration by Bancorp. The
directors instructed Keefe, Bruyette & Woods to tell each of those four
companies that they needed to present their best possible price immediately
because some potential acquirers would be precluded from consideration
based upon those prices.
On June 1, 2004, the directors convened to review the revised non-
binding indications of interest. Keefe, Bruyette & Woods reported that of
the four companies submitting initial indications of interest, three
increased their proposed prices in response to Keefe, Bruyette & Woods'
suggestion that they submit their best possible price. Such indications of
interest were analyzed in relation to Bancorp's
13
financial statements and comparable transactions and with respect to the
type of consideration being offered.
The board of directors discussed at length each indication of
interest and analysis. During the discussion, the directors eliminated two
of the four on the basis that the value of each proposal was substantially
below the value of the other two. The two not eliminated, including Park,
were both bank holding companies. Based on extensive discussion of the
proposals, the board of directors instructed Keefe, Bruyette & Woods to
invite each of the two potential acquirers to perform a due diligence
analysis of the books and records of Bancorp and to coordinate with
management suitable times for such due diligence. The directors also
instructed Keefe, Bruyette & Woods to contact one other specific prospect
to determine its potential interest. When contacted, that prospect
indicated it was not in a position to consider a transaction at the time.
During June 2004, the two potential acquirers performed an extensive
due diligence review of the books and records of Bancorp. In addition, the
board of directors of Bancorp reviewed substantial information on each of
the two potential acquirers. After the completion of such due diligence,
the two potential acquirers presented final proposals in June 2004.
At a meeting on June 23, 2004, the board of directors considered each
acquisition proposal. Park's revised proposal provided for an exchange of
each share of Bancorp for $13.11 cash. The other revised proposal provided
for an exchange of each share of Bancorp for a combination of cash and
shares of stock of such bank holding company with a value slightly higher
than the $13.11 proposed by Park. Based on their review of the publicly
available information on the bank holding company that made the other
revised proposal, the directors expressed concerns about various aspects of
the financial condition of the other holding company, including the historic
and future stability of its stock price. In addition, the directors
considered the fact that the other holding company had just entered into a
merger agreement with another financial institution, which might slow the
processing of a transaction with Bancorp.
In view of the foregoing, the directors were inclined to focus
primarily on the Park offer, even though the cash price was slightly lower
than the other proposal's combined cash and stock value. The directors
recognized that the stock market in general had been very volatile for a
significant period of time. Because of the required shareholder and
regulatory approval of the merger, the directors noted that the time
between the execution of a merger agreement and the closing of a merger
would be four to six months. While the directors desired to obtain a fair
value for Bancorp, they did not wish to subject such value to the risks
inherent in a volatile market during the four to six months between the
execution of the merger agreement and the closing, particularly when they
had fundamental concerns about the stability of the other bank holding
company's stock. The directors believed that the cash offer eliminated any
market risk. Upon the conclusion of extensive discussion, the directors
asked Keefe, Bruyette & Woods to contact Park officials and attempt to
obtain an increase in its offer. Park agreed to increase its proposal to
$13.25, which matched the other potential acquirer's proposed price.
After further consideration of the two proposals, the board of
directors elected to negotiate an agreement with Park. On July 15, 2004,
the board of directors met to discuss the various drafts of the agreement
and the progress of negotiations. On August 2, 2004, the board of directors
met to consider the final merger agreement and other relevant documents. At
such meeting, Keefe, Bruyette & Woods delivered its opinion that the
financial consideration was fair, from a financial point of view, to the
holders of shares of Bancorp. After a thorough discussion of the
contemplated transactions, the
14
board of directors of Bancorp voted unanimously to approve the merger
agreement and authorized execution of the merger agreement and related
documents.
In the course of reaching its determination to approve the merger
agreement, the board of directors of Bancorp considered all factors it
deemed material. Such factors included:
* the factors discussed with Keefe, Bruyette & Woods at meetings
with the board of directors;
* the written opinion of Keefe, Bruyette & Woods that the
financial consideration to be received by the shareholders of
Bancorp pursuant to the merger agreement was fair from a
financial point of view;
* the ability of Park to pay the merger consideration;
* the type of business that Park conducts in the region, and the
expanded products, services and pricing capabilities that Park
may provide to the customers of both Park and Bancorp; and
* the likelihood of receiving the required approvals in a timely
manner.
The foregoing discussion of the information and factors considered by
the board of directors of Bancorp is not intended to be exhaustive, but
constitutes the material factors considered by the board of directors. In
reaching its determination to approve and recommend the merger agreement,
the board of directors did not assign any relative or specific weights to
the foregoing factors, and individual directors may have weighed factors
differently. The terms of the merger agreement were the product of arm's-
length negotiations between representatives of Bancorp and Park.
For the reasons set forth above, the board of directors of Bancorp
has unanimously approved the merger agreement as advisable and in the best
interests of Bancorp and its shareholders and recommends that the
shareholders of Bancorp vote for the adoption of the merger agreement.
Opinion of Keefe, Bruyette & Woods, Inc.
In March 2004, Keefe, Bruyette & Woods was retained by Bancorp to
evaluate Bancorp's strategic alternatives for increasing shareholder value
and, in certain circumstances, to act as its financial advisor in
connection with its ongoing consideration and implementation of such
alternatives. Keefe, Bruyette & Woods, as part of its investment banking
business, is continuously engaged in the evaluation of businesses and
securities in connection with mergers and acquisitions, negotiated
underwritings and distributions of listed and unlisted securities. Keefe,
Bruyette & Woods is familiar with the market for common stocks of publicly
traded Midwest-based banks, thrifts and bank and thrift holding companies.
The Bancorp board of directors selected Keefe, Bruyette & Woods on the
basis of the firm's reputation and its experience and expertise in
transactions similar to the merger and its prior work for and relationship
with Bancorp in connection with Bancorp's strategic planning.
Pursuant to its engagement, Keefe, Bruyette & Woods was asked to
render an opinion as to the fairness, from a financial point of view, of
the merger consideration to be paid to the shareholders of
15
Bancorp. Keefe, Bruyette & Woods has delivered its fairness opinion to the
Bancorp board of directors that as of August 2, 2004, and as of __________,
2004, the merger consideration is fair to the shareholders of Bancorp from
a financial point of view. No limitations were imposed by the Bancorp board
of directors upon Keefe, Bruyette & Woods with respect to the
investigations made or procedures followed in rendering its opinion. Keefe,
Bruyette & Woods has consented to the inclusion herein of the summary of
its opinion to the Bancorp board of directors and to the attachment of its
entire opinion hereto as Annex B.
The full text of the opinion of Keefe, Bruyette & Woods, updated as
of the date of this proxy statement, which sets forth certain assumptions
made, matters considered and limitations on the reviews undertaken, is
attached as Annex B to the proxy statement and should be read in its
entirety. The summary of the opinion of Keefe, Bruyette & Woods set forth
in this proxy statement is qualified in its entirety by reference to the
opinion.
In rendering its opinion, Keefe, Bruyette & Woods (i) reviewed the
merger agreement; (ii) reviewed Bancorp's annual reports to shareholders
and Annual Reports on Form 10-KSB for the fiscal years ended September 30,
2001, 2002 and 2003, and Bancorp's Quarterly Reports on Form 10-QSB for the
quarters ended December 31, 2003, and March 31, 2004; (iii) reviewed
Bancorp's proxy statements for its 2002, 2003 and 2004 annual shareholder
meetings; (iv) discussed with senior management of Bancorp the current and
prospective outlook for Bancorp; (v) considered historical quotations,
levels of activity and the prices of recorded transactions in Bancorp's
shares; (vi) reviewed the financial and stock market data of other thrifts
and the financial and structural terms of several other recent transactions
involving mergers and acquisitions of comparably situated companies; and
(vii) performed other analyses that Keefe, Bruyette & Woods considered
appropriate.
In rendering its opinion, Keefe, Bruyette & Woods assumed and relied
upon the accuracy and completeness of the information provided to it by
Bancorp. In its review, with the consent of Bancorp's board of directors,
Keefe, Bruyette & Woods did not undertake any independent verification of
the information provided to it, nor did it make any independent appraisal
or evaluation of the assets or liabilities and potential or contingent
liabilities of Bancorp.
Analysis of recent comparable acquisition transactions. In rendering
its opinion, Keefe, Bruyette & Woods analyzed certain comparable merger and
acquisition transactions of thrifts comparing the acquisition price
relative to book value, tangible book value, latest twelve months earnings,
and premium to core deposits. The analysis included a comparison of the
minimum, median and maximum of the above ratios for representative pending
acquisitions where the selling institution was a thrift, had assets between
$100 million and $1 billion and return on average equity between 5% and
14%. As a result of these transaction criteria, the following selling
thrifts were used in analyzing comparable transactions.
16
Selling Institution
-------------------
Trust Bancorp, Inc. DutchFork Bancshares, Inc.
EverTrust Financial Group, Inc. FSF Financial Corp.
Liberty Bancshares, Inc. Village Bank & Trust S.S.B.
Warwick Community Bancorp Western Ohio Financial Corp.
The transaction analysis resulted in a range of values for Bancorp
based upon comparable thrift merger and acquisition transactions. Keefe,
Bruyette & Woods derived the median pricing metrics of the aforementioned
comparable group and summarized the results of comparative thrift merger
and acquisition transactions and compared the range of values to the
consideration to be received by Bancorp shareholders. The comparable thrift
merger and acquisition statistics are as follows:
Price to
Price to Tangible Core
Book Value Book Value Price to Last Deposit
Ratio Ratio 12 Months Premium
(%) (%) Earnings (x) (%)
----------------------------------------------------
<s> <c> <c> <c> <c>
Minimum Value 142.2 142.2 12.9 12.6
Median Value 190.9 190.9 20.2 17.7
Maximum Value 268.5 268.5 27.0 23.0
-----------------------------------------------
$13.25 Park Offer 202.4 202.4 22.0 14.8
-----------------------------------------------
Keefe, Bruyette & Woods viewed the aforementioned comparable group as
the most appropriate in deriving a comparable transaction value based on
Bancorp's size and earnings. With the query based on the above criteria
producing eight transactions with reported pricing metrics in the
comparable group, Keefe, Bruyette & Woods viewed such transactions as being
statistically significant for the purposes of comparison. Keefe, Bruyette &
Woods viewed the four resulting metrics (price to book value, price to
tangible book value, price to last twelve months earnings and core deposit
premium) from the comparable transactions, on a median basis, as the key
metrics used to evaluate the fairness, from a financial point of view, of
the transaction.
Given that the value of the consideration on an aggregate basis to be
paid in the merger, as of the date of the opinion, is greater than the
median value of the range of comparable thrift transactions for price to
book value, price to tangible book value and price to latest twelve month
earnings, Keefe, Bruyette & Woods believes that this analysis supports the
fairness, from a financial point of view, to Bancorp and its shareholders
of the consideration to be paid in the merger.
Discounted cash flow analysis. Keefe, Bruyette & Woods performed a
discounted cash flow analysis of the forecasted financial performance of
Bancorp using a best case scenario whereby earnings grew at management's
estimates representing 17% average annual earnings growth rate. Keefe,
Bruyette & Woods applied transaction multiples to earnings of 15.25x,
16.25x, 17.25x, 18.25x and 19.25x. The terminal multiple range is based on
the terminal earnings multiple of completed transactions similar to this
transaction. The combined cash flows and terminal value were then
discounted back to present values using different discount ranges ranging
from 10% to 13%, chosen to reflect different assumptions regarding required
rates of return of holders or prospective buyers of Bancorp shares taking
into consideration such factors as current long-term interest rates, market
capitalization size, earnings
17
and liquidity of the shares. The results of Keefe, Bruyette & Woods'
analysis are set forth in the following table:
Sensitivity Analysis
Terminal Multiple
Discount Rate 15.25x 16.25x 17.25x 18.25x 19.25x
- ---------------------------------------------------------------
<s> <c> <c> <c> <c> <c>
13.0% $10.66 $11.30 $11.95 $12.59 $13.23
12.0% 11.13 11.80 12.47 13.14 13.81
11.7% 11.27 11.95 12.63 13.31 13.99
11.0% 11.62 12.33 13.03 13.73 14.43
10.0% 12.14 12.88 13.61 14.34 15.08
Based on the foregoing criteria and assumptions, Keefe, Bruyette &
Woods determined that the change-in-control present value of the Bancorp
shares ranged from $10.66 to $15.08 per share. Given that the value of the
consideration on a per share basis to be paid in the merger, as of the date
of the opinion, is in the middle part of the range derived from the
discounted cash flow analysis, Keefe, Bruyette & Woods believes that this
analysis supports the fairness, from a financial point of view, to Bancorp
and its shareholders of the consideration to be paid in the merger.
The discounted cash flow analysis of Bancorp does not necessarily
indicate actual values or actual future results and does not purport to
reflect the prices at which any securities may trade at the present or at
any time in the future. Discounted cash flow analysis is a widely used
valuation methodology, but the results of this methodology are highly
dependent upon numerous assumptions that must be made, including earnings
growth rates, dividend payout rates, terminal values, projected capital
structure, and discount rates.
The fairness opinion of Keefe, Bruyette & Woods is limited to the
fairness as of its date, from a financial point of view, of the
consideration to be paid in the merger and does not address the underlying
business decision to effect the merger (or alternatives thereto), nor does
it constitute a recommendation to any shareholder of Bancorp as to how such
shareholder should vote with respect to the merger agreement.
In preparing its analysis, Keefe, Bruyette & Woods made numerous
assumptions with respect to industry performance, business and economic
conditions and other matters, many of which are beyond the control of
Keefe, Bruyette & Woods and Bancorp. The analyses performed by Keefe,
Bruyette & Woods are not necessarily indicative of actual values or future
results, which may be significantly more or less favorable than suggested
by such analyses and do not purport to be appraisals or reflect the prices
at which a business may be sold.
Keefe, Bruyette & Woods will receive a fee of 1% of the total
transaction value for services rendered in connection with advising and
issuing a fairness opinion regarding the merger agreement. As of the date
of this proxy statement, Keefe, Bruyette & Woods has received $25,000 of
such fee; the remainder of the fee is due at the closing of the
transaction. Bancorp has also agreed to reimburse Keefe, Bruyette & Woods
for all reasonable out-of-pocket expenses and disbursements, which will not
exceed $3,000, incurred in connection with its engagement and to indemnify
Keefe, Bruyette & Woods and its affiliates and their respective directors,
officers, employees, agents, and controlling persons against certain
expenses and liabilities, including liabilities under securities laws.
18
Recommendation of the board of directors of Bancorp
The Bancorp board of directors believes that the terms of the merger
are fair to, and in the best interests of, Bancorp's shareholders and,
therefore, unanimously recommends that the shareholders of Bancorp vote FOR
the adoption of the merger agreement.
Conduct of business if the merger is not consummated
If the merger is not consummated, Bancorp will continue its current
operations. For reasons discussed under the caption, "THE MERGER AND MERGER
AGREEMENT - Background and reasons for the merger," Bancorp may continue to
explore strategic alternatives, including a business combination or sale of
Bancorp, if the merger with Park is not consummated.
Exchange of Bancorp shares
On the effective date of the merger, Merger Corp. will merge with and
into Bancorp. As a result of the consummation of the merger, each
outstanding Bancorp share will be canceled and extinguished in consideration
and exchange for the right to receive $13.25 in cash.
The First-Knox National Bank will serve as exchange agent for the
exchange of share certificates pursuant to the merger. Promptly following
the effective date of the merger, Park will cause the exchange agent to
mail or make available to each record holder of shares of Bancorp a notice
and letter of transmittal disclosing the effectiveness of the merger and the
procedure for exchanging each such record holder's shares. At the effective
date, Park shall make available to the exchange agent an amount of cash
sufficient to make payment of the merger consideration to each record holder
of shares of Bancorp. Bancorp shareholders will be required to follow the
instructions and surrender their certificates representing Bancorp shares,
together with the properly executed letter of transmittal and any other
required documents to the exchange agent. Such shareholders will then be
entitled to receive $13.25 in cash for each Bancorp share held.
Any holder of Bancorp shares who has properly exercised dissenters'
rights shall be entitled to payment for such shares pursuant to the Ohio
law. If, in accordance with the Ohio law, any holder of dissenting shares
shall forfeit such right to payment of the fair value of such shares, such
shares shall thereupon be deemed to have been converted into and to have
become exchangeable for, as of the effective time of the merger, the right
to receive $13.25 per share.
Representations, warranties and covenants
In the merger agreement, each of Bancorp and Park provide customary
representations and warranties relating to, among other things:
* organization, standing and authority
* corporate authority to enter into and perform the merger agreement
* conflicts with other agreements
* Securities and Exchange Commission ("SEC") filings and banking
regulatory reports
* changes in the party's business since the date of the most recent
financial statements
* share ownership
19
Bancorp also made additional representations and warranties relating
to, among other things:
* capital structure
* subsidiaries
* environmental matters
* financial statements
* tax matters
* compliance with laws
* legal proceedings
* employment agreements and employee benefit plans
* material contracts
* brokers and finders
* insurance matters
* title to property
* labor matters
* allowance for loan losses
* material interests of insiders
* fairness opinion
* indemnification issues relating to directors and officers
* loan portfolio
* investments
* corporate records
* interest rate risk management instruments
* certain operational matters
* waivers of contractual rights
* Community Reinvestment Act compliance
* affiliate transactions
Park represented and warranted that it has sufficient funds to
perform its obligations under the merger agreement.
Conduct of business pending the merger
Bancorp agreed that until the merger is effective, it will conduct,
and cause First Federal Savings Bank to conduct, their business in the
ordinary and usual course, consistent with past practice, and will seek to
preserve intact their business organization and goodwill and keep in full
force and effect all of their material rights. The merger agreement
provides that Bancorp shall not, and shall cause its subsidiaries not to,
unless in some cases consistent with past practice or with approval of
Park:
* sell, transfer, mortgage, pledge or encumber any of the assets of
Bancorp or any subsidiary of Bancorp, except in the ordinary
course for fair consideration;
* declare, set aside, make or pay any dividend or other
distribution, except for regular quarterly cash dividends not to
exceed $0.06 per share;
* issue any shares of capital stock, other than upon the exercise of
stock options; purchase any of Bancorp's common shares; or effect
any recapitalization, reclassification, stock dividend, stock
split or like change in capitalization;
20
* amend the governing documents of Bancorp or any of its
subsidiaries;
* waive any material right or cancel any material debt or claim,
other than in the ordinary course consistent with past practice;
* except for certain pre-announced amounts for employees, increase
the rate of compensation of any of its directors, officers or
employees;
* enter into or modify any employee benefit arrangement or any
employment agreement;
* originate any loan in excess of specified dollar amounts;
* enter into any agreement or transaction not in the ordinary course
of business or involving in excess of certain amounts;
* change its method of accounting or tax elections;
* borrow any funds, except borrowings that can be prepaid without
penalty and ordinary deposit-taking;
* acquire any real property, other than through foreclosure and
other specified exceptions, or take title to property without
certain environmental testing and reports;
* modify any of its lending or investment policies;
* make any capital expenditure exceeding $5,000 individually or
$10,000 in the aggregate;
* make any material investment other than in the ordinary course of
business;
* enter into any interest rate swaps or derivative or hedge
contracts;
* take any action that would result in any of the representations
and warranties made by Bancorp in the merger agreement not to be
true and correct in any material respect at the effective time of
the merger;
* increase or decrease the rate of interest paid on time deposits or
on certificates of deposit, except consistently with past practice
in relation to rates in the market area; or
* hire any full-time employee, other than replacements for positions
then existing.
In addition, Bancorp may not initiate or knowingly encourage any
proposals, offers or inquiries relating to the possible sale or other
disposition of 20% or more of Bancorp's or any of its subsidiaries' shares
or disposition of 20% or more of its or any of its subsidiaries' assets to,
or a merger or consolidation of Bancorp or any of its subsidiaries with, any
person, subject to the good faith exercise of the fiduciary duties of the
board of directors of Bancorp.
21
In the event that after receipt of an acquisition proposal the merger
agreement is terminated by the Bancorp board of directors or the
shareholders of Bancorp fail to approve the merger, and within one year
thereafter Bancorp's board of directors accepts an acquisition proposal or
an acquisition proposal is consummated, then Bancorp shall pay to Park a
fee of $1,920,000.
Conditions to the merger
Conditions to obligations of Bancorp and Park. The obligations of
Park and Bancorp to effect the merger are subject to the satisfaction or
waiver of the following conditions, among others:
* the merger agreement must be validly adopted by the requisite vote
of the shareholders of Bancorp;
* all necessary approvals, consents, authorizations, exemptions or
waivers (including any required by any federal or state
governmental body or agency) must be obtained without any
conditions, restrictions or requirements that Park reasonably
determines would be materially adverse to Park or would deprive
Park of the major portion of the economic benefits of the merger,
and all waiting periods required by law must have expired;
* none of the parties shall be subject to any statute, rule,
regulation, injunction or other order or decree which shall have
been enacted by any governmental authority which prohibits,
restricts or makes illegal the completion of the merger; and
* no proceeding initiated by any governmental entity seeking an
order, injunction or decree issued by any court or agency of
competent jurisdiction preventing the completion of the merger
shall be pending.
Conditions to obligations of Bancorp. The obligations of Bancorp to
effect the merger shall be subject to the satisfaction or waiver of the
following conditions:
* the representations and warranties made by Park in the merger
agreement are true and correct in all material respects at the
time of the closing, except for those representations and
warranties that, by their terms, speak as of a specific date;
* Park shall have complied in all material respects with its
obligations under the merger agreement;
* Park shall have obtained all material required consents and
approvals; and
* Park shall have delivered to Bancorp certain certificates of
officers of Park certifying that all conditions to closing have
been satisfied or waived.
22
Conditions to obligations of Park. The obligations of Park to effect
the merger are subject to the satisfaction or waiver of the following
conditions:
* the representations and warranties made by Bancorp in the merger
agreement are true and correct in all material respects at the
time of the closing, except for those representations and
warranties that, by their terms, speak as of a specific date;
* Bancorp shall have complied in all material respects with its
obligations under the merger agreement;
* Bancorp shall have obtained all material required consents and
approvals;
* Bancorp shall have delivered to Park certain certificates of
officers of Bancorp certifying that all conditions to closing have
been satisfied or waived; and
* the consolidated net income of Bancorp for the period from April
1, 2004, to the month end immediately preceding the closing date,
excluding merger related expenses, is not less than $400,000.
Any of the conditions to closing except regulatory and shareholder
approvals may be waived by the party entitled to the benefits of the
condition.
Effective time
Following the satisfaction or waiver of all conditions set forth in
the merger agreement, a certificate of merger will be filed with the Ohio
Secretary of State, after which the merger will be consummated. It is
currently anticipated that the merger will be consummated in the fourth
quarter of 2004.
Termination
The merger agreement may be terminated in writing, either before or
after its adoption by the shareholders of Bancorp, at any time on or prior
to the effective date:
(a) By the written agreement of Bancorp and Park;
(b) By either Bancorp or Park, if the effective date has not
occurred on or before June 30, 2005;
(c) By either Bancorp or Park if any event has occurred that would
preclude satisfaction of the mutual conditions to closing;
(d) By Bancorp if Park has, or by Park if Bancorp has, breached in
any material respect any of the representations and warranties
or agreements contained in the merger agreement and such breach
is not cured within 30 days after written notice to cure such
breach is given by the non-breaching party; and
23
(e) By Bancorp if it has received an acquisition proposal from
someone other than Park and complied with the requirements of
the merger agreement with respect to such a proposal, including
making the required payment to Park.
In the event the merger agreement is terminated, the merger agreement
will become void and will have no effect, except that the parties will
continue to be bound by their agreements in the merger agreement with
respect to the payment of expenses and the confidentiality of information,
and a termination resulting from the uncured willful breach of a covenant
or agreement will not relieve the breaching party from liability for that
breach. If the board of directors of Bancorp receives an unsolicited
acquisition proposal, and either (a) the board of directors of Bancorp
terminates the merger agreement due to a determination that a
recommendation that the shareholders of Bancorp vote in favor of the
adoption of the merger agreement is reasonably likely to constitute a
breach of its fiduciary duties to the shareholders of Bancorp, or (b) the
shareholders of Bancorp fail to adopt the merger agreement, and if an
acquisition proposal is accepted by Bancorp or consummated within one year
after termination of the merger agreement or a vote by the Bancorp
shareholders against the adoption of the merger agreement, then Bancorp must
pay to Park $1,920,000.
Surrender of certificates evidencing Bancorp common shares
As soon as practicable after the consummation of the merger, the
exchange agent will mail to each holder of record of a certificate or
certificates that immediately before such consummation evidenced
outstanding Bancorp shares a form letter of transmittal. The letter of
transmittal will contain instructions for surrendering the certificates
in exchange for the merger consideration. Upon surrender of a certificate,
together with such letter of transmittal, duly executed, to the exchange
agent for exchange and cancellation, the holder of such certificate will be
entitled to receive the merger consideration to which such certificate
holder will have become entitled pursuant to the provisions of the merger
agreement. Any shareholder of Bancorp who has lost or misplaced a
certificate should immediately contact Debbie Daniels at (800) 837-5266,
extension 5208. A written statement detailing the procedures for replacing
the lost certificates will be mailed to the shareholder following such
contact.
If any check for the merger consideration is to be issued in a name
other than that in which the certificate for shares of Bancorp surrendered
for exchange is registered, the certificates so surrendered must be
properly endorsed or otherwise be in proper form for transfer and the
person requesting such exchange must pay to Bancorp or its agent any
applicable transfer or other taxes required by reason thereof. CERTIFICATES
FOR SHARES OF BANCORP SHOULD NOT BE SENT WITH YOUR PROXY.
On the effective date, holders of certificates representing shares of
Bancorp shall cease to have any rights with respect to such shares (except
such rights, if any, as such holders may have as dissenting shareholders),
and each such certificate will be deemed for all purposes to evidence the
right to receive the cash into which such Bancorp shares have been converted.
Federal income tax consequences
The following is a summary discussion of the material federal income
tax consequences of the merger. This summary does not purport to discuss
all aspects of federal income taxation that may be applicable to particular
categories of shareholders, some of which may be subject to special rules,
nor does it address any aspects of state, local or foreign tax laws. This
summary is based upon current
24
federal law, which is subject to change. Bancorp's shareholders are advised
to consult their own tax advisors as to the specific consequences to them
of the merger, including the applicability and effect of federal, state,
local and other tax laws.
Under current law, each holder of Bancorp shares who receives
cash for his or her Bancorp shares, either in the merger or pursuant
to the exercise of dissenters' rights, will recognize a gain or loss for
federal income tax purposes in an amount measured by the difference between
the cash received and such Bancorp shareholder's adjusted basis in the
Bancorp shares surrendered. Provided the shares surrendered for cash
qualify as capital assets in the hands of each Bancorp shareholder, the
gain or loss generally will be treated as capital gain or loss and will be
either long-term or short-term, depending upon whether at the effective
time of the merger such shareholder has held his or her Bancorp shares for
more than one year. The gain may be treated as ordinary income, however,
under certain special rules specific to an individual shareholder. For
federal income tax purposes, the merger of Merger Corp. into Bancorp will
be treated as a direct purchase by Park for cash of the Bancorp shares. The
merger of Bancorp into Park will be tax-free for Park and Bancorp under
Sections 332 and 337 of the Internal Revenue Code of 1986, as amended.
Interests of Bancorp directors and executive officers
Treatment of stock options. At the time the merger is effective, each
outstanding option to purchase Bancorp shares will be cancelled and
extinguished, and the holder of such option will be entitled to receive
cash from Park in the amount of the difference between (a) the product of
(i) the difference between $13.25 and the exercise price per share of such
option, multiplied by (ii) the number of common shares subject to the
unexercised portion of such option, less (b) applicable federal and state
tax withholding obligations of the holder of such stock option.
Directors' appointment to Century board of directors. The non-
employee directors of Bancorp have been offered the opportunity to serve on
the board of directors of Century National Bank following the consummation
of the merger transactions. As directors of Century National Bank, each
director is expected to be paid $500 per monthly board meeting attended and
$25 for each committee meeting attended and to be awarded 60 common shares
of Park each year representing the annual retainer payable to that director
for the year.
As of [September 14], 2004, options to purchase [335,925] shares were
outstanding, of which the directors and executive officers of Bancorp held
options to purchase a total of [216,480] shares. The exercise prices of the
options held by directors and executive officers of Bancorp as of such date
ranged from $[3.375]to $[9.970], with a weighted average price of $6.12 per
share.
Director and officer insurance and indemnification. Park will provide
director and officer liability insurance and indemnification to the former
directors and executive officers of Bancorp and First Federal Savings Bank
for three years after consummation of the merger. Such insurance and
indemnification will be similar to that in effect for such individuals
prior to the merger.
Employment and noncompete agreements. J. William Plummer, Connie
Ayres LaPlante and Larry W. Snode will receive from Park the severance
payments and benefits to which they are entitled upon termination in
connection with a change in control of Bancorp under their employment
agreements with First Federal Savings Bank and, with respect to Mr. Plummer
and Ms. LaPlante, Bancorp. Pursuant to such agreements, Mr. Plummer will
receive a cash payment and benefits estimated to have a total
25
value of approximately $626,135 at the effective time, Ms. LaPlante will
receive a cash payment and benefits estimated to have a total value of
approximately $395,738 at the effective time, and Mr. Snode will receive a
cash payment and benefits estimated to have a total value of approximately
$271,807 at the effective time of the merger.
Mr. Plummer will also receive a payment in the amount of $165,000
pursuant to a noncompete agreement among Mr. Plummer, Bancorp and First
Federal Savings Bank. The payment is in exchange for Mr. Plummer's
agreement, in general, (1) to protect confidential information; (2) for
three years from the termination of his employment with Bancorp and any
subsidiary of Bancorp, to refrain from (a) soliciting any employees of
Bancorp and First Federal Savings Bank to leave the employ of their
employers, (b) inducing customers and other third parties having a business
relationship with Bancorp or First Federal Savings Bank to discontinue
their relationship with Bancorp or First Federal Savings Bank, and (c)
accepting employment with a competitor of Bancorp or First Federal Savings
Bank in the states of Ohio, Pennsylvania and West Virginia; and (3) to
cooperate with Bancorp and First Federal Savings Bank in various respects,
such as providing information obtained by Mr. Plummer in the course of his
employment with Bancorp and First Federal Savings Bank.
Employee benefits
After the effective time of the merger, employees of First Federal
Savings Bank who are actively employed at the effective time and who do not
have an employment agreement with Bancorp or any Bancorp subsidiary may,
upon satisfactory review of employment files and subject to Park's employee
standards of performance, be offered continued employment with Century
National Bank or another subsidiary of Park. Each First Federal Savings
Bank non-officer employee immediately before the merger to whom Park does
not offer continued employment within 50 miles of the current main office
of First Federal Savings Bank will receive a severance payment as well as
payment for accrued and unused vacation and sick time, out-placement
consultation services for a period of six months and other benefits owed
the employee under First Federal Savings Bank's benefit plans and employee
handbook. The severance payment will be equal to the product of one week of
the employee's then current weekly salary multiplied by the number of total
complete years of service by that employee as a First Federal Savings Bank
employee.
Three officers of First Federal Savings Bank, other than Mr. Plummer
and Ms. LaPlante, currently have employment agreements with First Federal
Savings Bank. One of such officers will be paid his change-in-control
severance pay and benefits under his employment agreement. The other two
officers will be offered a new employment agreement with Park. If they
decline the new employment agreements, they will continue to be employed
pursuant to their existing agreements for the remaining terms of those
agreements. Each full-time employee of First Federal Savings Bank who
currently has no employment agreement and who remains employed after the
merger will receive payment for accrued and unused vacation and sick time
and other benefits owed the employee under First Federal Savings Bank's
benefit plans and employee handbook, and will also be eligible to
participate in all welfare and benefit plans that are available to full-
time employees of Park on the earliest date permitted by each such plan
with credit for years of service with First Federal Savings Bank for the
purpose of eligibility and vesting but not for the purpose of accrual of
benefits or the allocation of employer contributions.
26
Accounting treatment
The acquisition of Bancorp pursuant to the merger will be accounted
for pursuant to the purchase method of accounting. Under the purchase
method of accounting, the assets and liabilities of Bancorp will be
recorded on the books of Park at their respective fair values at the
effective time. Any excess of the value of the consideration paid by Park
over the fair value of Bancorp's identifiable net assets acquired will be
recorded as good will.
REGULATORY APPROVALS
The consummation of the merger of Merger Corp. into Bancorp, the
merger of Bancorp into Park, the conversion of First Federal Savings Bank
into a national bank and the merger of Century National Bank into First
Federal Savings Bank are subject to the receipt of approvals from the Board
of Governors of the Federal Reserve System and the Office of the
Comptroller of the Currency, applications for which have been submitted.
Neither Bancorp nor Park is aware of any governmental approvals or
actions that are required for consummation of the merger, except as
described above. Should any such approval or action be required, it is
presently contemplated that such approval or action would be sought. There
can be no assurance that any such approval or action, if needed, could be
obtained and would not be conditioned in a manner that would cause Park to
abandon the merger. There can be no assurance that no action would be
brought challenging the merger.
VOTING SECURITIES AND OWNERSHIP OF CERTAIN BENEFICIAL
OWNERS AND MANAGEMENT
The following table sets forth certain information with respect to
the number of shares of Bancorp beneficially owned by each director
of Bancorp and by all directors and executive officers of Bancorp as a
group as of [September 14], 2004. No person other than directors and
executive officers of Bancorp are known to own beneficially more than 5% of
the outstanding shares of Bancorp.
27
Amount and Nature of Percent of
Beneficial Ownership (2) Shares Outstanding
------------------------ ------------------
Name and Address (1) Sole Shared
- -------------------- ---- ------
<s> <c> <c> <c>
Ward D. Coffman, III 153,240(3) - 4.65%
Robert D. Goodrich, II 80,080(4) - 2.41%
Patrick L. Hennessey 139,480(5) - 4.22%
Connie Ayres LaPlante 97,440(6) 143,348 7.27%
John C. Matesich, III 67,480(7) 15,000 2.49%
Don R. Parkhill 51,234(8) 12,290 1.91%
J. William Plummer 115,935(9) 59,570 5.25%
All directors and executive officers 704,889 230,208(10) 26.70%
of Bancorp as a group (7 people)
<FN>
- --------------------
<F1> Each of the individuals listed in this table may be contacted at the
address of Bancorp, 505 Market Street, Zanesville, Ohio 43701.
<F2> Includes shares with respect to which the shareholder has sole or
shared voting or investment power as a fiduciary for a trust or
another person and shares held by certain family members.
<F3> Includes 7,000 shares subject to currently exercisable options
granted under the Bancorp's stock option plans.
<F4> Includes 30,000 shares subject to currently exercisable options
granted under Bancorp's stock option plans.
<F5> Includes 22,000 shares subject to currently exercisable options
granted under Bancorp's stock option plans.
<F6> Includes 24,000 shares subject to currently exercisable options
granted under Bancorp's stock option plans.
<F7> Includes 30,000 shares subject to currently exercisable options
granted under Bancorp's stock option plans.
<F8> Includes 47,480 shares subject to currently exercisable options
granted under Bancorp's stock option plans.
<F9> Includes 56,000 shares subject to currently exercisable options
granted under Bancorp's stock option plans.
</FN>
The directors and executive officers of Bancorp have expressed their
intention to vote all of the shares they beneficially own in favor of
adoption of the merger agreement.
28
SHAREHOLDER PROPOSALS
In accordance with the Securities Exchange Act of 1934, proposals by
Bancorp's shareholders for inclusion in Bancorp's proxy statement for
Bancorp's 2005 annual meeting of shareholders are required to be received
by Bancorp at its principal office not later than September 8, 2004. In
addition, if a shareholder intends to present a proposal at the 2005 annual
meeting and the proposal is not received by November 22, 2004, then the
proxies designated by the board of directors of Bancorp for the 2005 annual
meeting may vote in their discretion on any such proposal any shares for
which they have been appointed proxies without mention of such matter in
the proxy statement or on the proxy for such meeting. Because management of
Bancorp expects the merger to close before the end of 2004, no preparations
are currently being made for a 2005 annual meeting of shareholders. If an
annual meeting of shareholders should become necessary and the meeting will
be held later than March 20, 2005, shareholders will be notified and
provided the new date by which proposals must be received. Each proposal
submitted should be accompanied by the name and address of the shareholder
submitting the proposal, the number of shares of Bancorp owned and the date
such shares were acquired by the holder. If the proponent is not a
shareholder of record, proof of beneficial ownership also should be
submitted. The proponent should also state his intention to personally
appear at the annual meeting to present the proposal. The proxy rules of
the SEC govern the content and form of shareholder proposals. All proposals
must be a proper subject for action at the annual meeting.
WHERE YOU CAN FIND MORE INFORMATION
Bancorp and Park each file reports, proxy statements and other
information with the SEC. You may read and copy any reports, statements or
other information that Bancorp and Park file at the SEC's public reference
rooms in Washington, D.C., New York, New York, and Chicago, Illinois. (The
address of the public reference room in Washington, D.C. is 450 Fifth
Street, N.W., Washington, D.C. 20549). Please call the SEC at 1-800-SEC-
0330 for further information on the public reference rooms. Bancorp's and
Park's public filings are also available to the public from commercial
document retrieval services and at the Internet World Wide Web site
maintained by the SEC at http://www.sec.gov. Certain other reports and
other information regarding Bancorp and Park also may be inspected at the
offices of The Nasdaq Stock Market, 9801 Washingtonian Boulevard,
Gaithersburg, Maryland 20878, with respect to Bancorp, or at the offices of
the American Stock Exchange, 86 Trinity Place, New York, New York 10006,
with respect to Park.
If you would like to request any documents from Bancorp or Park,
please do so in writing or by telephone by November 1, 2004, to receive
them before the Bancorp special meeting, at the following addresses and
telephone numbers:
First Federal Bancorp, Inc.
505 Market Street
Zanesville, Ohio 43701
(740) 588-2222
Park National Corporation
50 North Third Street
Newark, Ohio 43055
(740) 349-8451
29
You should rely only on the information contained in this document to
vote your shares at the special meeting of shareholders of Bancorp. Neither
Bancorp nor Park has authorized anyone to provide you with information that
is different from what is contained in this document. You should not assume
that the information contained in this document is accurate as of any date
other than the date of this document, and the mailing of this document to
shareholders shall not create any implication to the contrary.
30
ANNEX A
AGREEMENT AND PLAN OF MERGER
dated as of
August 2, 2004
by and among
PARK NATIONAL CORPORATION
and
PARK MERGER CORP.
and
FIRST FEDERAL BANCORP, INC.
TABLE OF CONTENTS
Page
----
ARTICLE ONE -- THE MERGER 2
1.01. Merger; Surviving Corporation 2
1.02. Effective Time 2
1.03. Effects of the Merger 2
ARTICLE TWO -- CONVERSION OF SHARES; SURRENDER OF CERTIFICATES 3
2.01. Conversion of First Federal Shares 3
2.02. Surrender of Certificates 3
2.03. Merger Corp. Shares 6
ARTICLE THREE -- REPRESENTATIONS AND WARRANTIES OF FIRST FEDERAL 7
3.01. Corporate Status 7
3.02. Capitalization of First Federal 8
3.03. First Federal Subsidiaries 10
3.04. Corporate Proceedings 10
3.05. Authorized and Effective Agreement 11
3.06. Financial Statements of First Federal 11
3.07. Absence of Undisclosed Liabilities 12
3.08. Absence of Changes 12
3.09. Loan Documentation 13
3.10. Allowance for Loan Losses 13
3.11. Reports and Records 14
3.12. Taxes 14
3.13. Property and Title 15
3.14. Legal Proceedings 16
3.15. Regulatory Matters 16
3.16. No Conflict 16
3.17. Brokers, Finders and Others 17
3.18. Employment Agreements 17
3.19. Employee Benefit Plans 17
3.20. Compliance with Laws 21
3.21 Insurance 22
3.22. Governmental and Third-Party Proceedings 22
3.23. Contracts 24
3.24. Environmental Matters 24
3.25. Takeover Laws 26
3.26. Risk Management Instruments 26
3.27. Repurchase Agreements 26
3.28. Investment Securities 26
3.29. SEC Filings 27
3.30. Fiduciary Responsibilities 27
i
3.31. Intellectual Property 27
3.32. First Federal Books and Records 28
3.33. CRA Compliance 29
3.34. Ownership of Park Shares 29
3.35. Fairness Opinion 29
ARTICLE FOUR -- REPRESENTATIONS AND WARRANTIES OF PARK AND MERGER CORP. 29
4.01. Corporate Status 29
4.02. Corporate Proceedings 30
4.03. Authorized and Effective Agreement 30
4.04. No Conflict 30
4.05. SEC Filings 32
4.06. Brokers, Finders and Others 32
4.07. Governmental and Third-Party Proceedings 32
4.08. Financial Ability to Perform; Compliance with Regulations 32
4.09. Ownership of First Federal Shares 32
4.10. Absence of Changes 33
4.11. Takeover Law 33
ARTICLE FIVE -- FURTHER COVENANTS OF FIRST FEDERAL 33
5.01. Operation of Business 33
5.02. Notification 39
5.03. Acquisition Proposal 40
5.04. Delivery of Information 40
5.05. Takeover Laws 40
5.06. Merger of Subsidiaries 40
5.07. Accounting Policies 40
ARTICLE SIX -- FURTHER COVENANTS OF PARK 41
6.01. Access to Information 41
6.02. Employees; Employee Benefits 41
6.03. Notification 43
6.04. Officers' and Directors' Indemnification 44
6.05. Century Board of Directors 45
ARTICLE SEVEN -- FURTHER OBLIGATIONS OF THE PARTIES 45
7.01. Necessary Further Action 45
7.02. Press Releases 45
7.03. Proxy Statement; First Federal Meeting 45
7.04. Regulatory Applications 47
7.05. Confidentiality 47
7.06. No Conflicting Actions 48
ii
ARTICLE EIGHT -- CONDITIONS PRECEDENT TO THE OBLIGATIONS OF THE PARTIES 48
8.01. Conditions to the Obligations of Park and Merger Corp. 48
8.02. Conditions to the Obligations of First Federal 49
8.03. Mutual Conditions 50
ARTICLE NINE -- CLOSING 51
9.01. Closing 51
9.02. Closing Deliveries Required of Park and Merger Corp. 51
9.03. Closing Deliveries Required of First Federal 51
ARTICLE TEN -- NON-SURVIVAL OF REPRESENTATIONS, WARRANTIES AND COVENANTS 52
10.01. Non-Survival of Representations, Warranties and Covenants 52
ARTICLE ELEVEN -- TERMINATION 52
11.01. Termination 52
11.02. Effect of Termination 54
ARTICLE TWELVE -- MISCELLANEOUS 55
12.01. Notices 55
12.02. Counterparts 55
12.03. Entire Agreement 55
12.04. Successors and Assigns 55
12.05. Captions 56
12.06. Governing Law 56
12.07. Payment of Fees and Expenses 56
12.08. Amendment 56
12.09. Waiver 56
12.10. Disclosure Schedule 56
12.11. No Third Party Rights 58
12.12. Waiver of Jury Trial 58
12.13. Severability 58
iii
GLOSSARY OF DEFINED TERMS
The following terms, when used in this Agreement, have the meanings
ascribed to them in the corresponding Sections of this Agreement listed
below:
"Acquisition Proposal" -- Section 5.03
"Agreement" -- Preamble
"BHCA" -- Section 4.01
"CERCLA" -- Section 3.24
"CRA" -- Section 3.20(a)
"Cash Amount" -- Section 2.01(a)
"Century" -- Preamble
"Closing" -- Section 9.01
"Closing Date" -- Section 9.01
"Code" -- Section 3.12
"Compensation and Benefit Plans" -- Section 3.19(a)
"Constituent Corporations" -- Preamble
"Consultants" -- Section 3.19(a)
"Continuing Employees" -- Section 6.02(a)
"Costs" -- Section 6.04(a)
"DOL" -- Section 3.19(a)
"Directors" -- Section 3.19(a)
"ERISA" -- Section 3.19(a)
"ERISA Affiliate" -- Section 3.19(c)
"ERISA Affiliate Plan" -- Section 3.19(c)
"Effective Time" -- Section 1.02
"Employees" -- Section 3.19(a)
"Environmental Law" -- Section 3.24
"Exchange Act" -- Section 3.19(b)
"Exchange Agent" -- Section 2.02(a)
"Exchange Fund" -- Section 2.02(a)
"FDIC" -- Section 3.01(b)
"FFSB" -- Preamble
"FHLB" -- Section 3.01(b)
"First Federal" -- Preamble
"First Federal Balance Sheet Date" -- Section 3.06
"First Federal Certificates" -- Section 2.02(a)
"First Federal Disclosure Schedule" -- Preamble
"First Federal Dissenting Share" -- Section 2.02(i)
"First Federal Financial Statements" -- Section 3.06
"First Federal Meeting" -- Section 3.04(b)
"First Federal Real Estate Collateral" -- Section 3.24(b)
"First Federal Real Properties" -- Section 3.13
"First Federal Shares" -- Preamble
"First Federal Stock Option Plans" -- Section 3.02(a)
"First Federal Stock Options" -- Section 3.02(a)
"First Federal Subsidiaries" -- Section 3.01(b)
iv
"First Federal's Financial Advisors" -- Section 3.17
"GAAP" -- Section 3.06
"Governmental Authority" -- Section 3.16
"HOLA" -- Section 3.01(a)
"Hazardous Substances" -- Section 3.24
"IRS" -- Section 3.12
"Indemnified Party" -- Section 6.04(a)
"Information" -- Section 7.05
"Intellectual Property" -- Section 3.31
"knowledge" -- Section 3.08
"Loan Assets" -- Section 3.09
"Loan Documentation" -- Section 3.09
"material" -- Section 3.01(c)
"material adverse effect" -- Section 3.01(c)
"Merger" -- Preamble
"Merger Consideration" -- Section 2.01(a)
"Merger Corp." -- Preamble
"Merger Corp. Shares" -- Section 2.03
"OGCL" -- Section 1.01
"OTS" -- Section 3.01(b)
"Officers" -- Section 3.19(a)
"Ohio Secretary of State" -- Section 1.02
"Outside First Federal Director" -- Section 6.05
"PBGC" -- Section 3.19(c)
"PCBs" -- Section 3.24
"Park" -- Preamble
"Pension Plan" -- Section 3.19(b)
"Proxy Statement" -- Section 7.03(a)
"Regulatory Authorities" -- Section 3.15
"SEC" -- Section 3.03
"Securities Act" -- Section 3.19(b)
"Subsidiary" -- Section 3.03
"Surviving Corporation" -- Section 1.01
"Takeover Laws" -- Section 3.25
"Tax" -- Section 3.12
"Tax Returns" -- Section 3.12
"Updated First Federal Disclosure Schedule" -- Section 5.02
v
AGREEMENT AND PLAN OF MERGER
----------------------------
THIS AGREEMENT AND PLAN OF MERGER (the "Agreement"), dated as of
August 2, 2004, is made and entered into by and among Park National
Corporation, an Ohio corporation ("Park"); Park Merger Corp., an Ohio
corporation ("Merger Corp."); and First Federal Bancorp, Inc., an Ohio
corporation ("First Federal") (Merger Corp. and First Federal are sometimes
hereinafter collectively referred to as the "Constituent Corporations").
W I T N E S S E T H:
WHEREAS, the Boards of Directors of First Federal, Merger Corp. and
Park have each determined that it is in the best interests of their
respective corporations and shareholders for Merger Corp. to merge with and
into First Federal (the "Merger"), and immediately thereafter for the
surviving corporation to merge with and into Park, upon the terms and
subject to the conditions set forth in and pursuant to the terms of this
Agreement; and
WHEREAS, the Boards of Directors of First Federal, Merger Corp. and
Park have each approved this Agreement and the consummation of the
transactions contemplated hereby; and
WHEREAS, as a result of the Merger, in accordance with the terms of
this Agreement, Merger Corp. will cease to have a separate corporate
existence, Park will acquire all of the issued and outstanding shares of
First Federal as the surviving corporation and shareholders of First
Federal will receive from Park in exchange for each common share, without
par value, of First Federal (the "First Federal Shares"), an amount in cash
calculated in accordance with the terms of this Agreement; and
WHEREAS, promptly following the merger of the surviving corporation in the
Merger with and into Park, First Federal Savings Bank of Eastern Ohio, a
stock federal savings bank now wholly owned by First Federal ("FFSB"), will
merge with and into Century National Bank, a national banking association
wholly owned by Park ("Century"); and
WHEREAS, First Federal has previously provided to Park a schedule
disclosing additional information about First Federal (the "First Federal
Disclosure Schedule");
NOW, THEREFORE, in consideration of the premises and the respective
representations, warranties, covenants, agreements and conditions
hereinafter set forth, First Federal, Merger Corp. and Park, intending to
be legally bound hereby, agree as follows:
1
ARTICLE ONE
THE MERGER
1.01. Merger; Surviving Corporation
Upon the terms and subject to the conditions of this Agreement, at
the Effective Time (as defined in Section 1.02), Merger Corp. shall merge
with and into First Federal in accordance with the General Corporation Law
of the State of Ohio (the "OGCL"). First Federal shall be the continuing
and surviving corporation in the Merger, shall continue to exist under the
laws of the State of Ohio, and shall be the only one of the Constituent
Corporations to continue its separate corporate existence after the
Effective Time. As used in this Agreement, the term "Surviving Corporation"
refers to First Federal immediately after the Effective Time. As a result
of the Merger, the outstanding shares of capital stock and the treasury
shares of the Constituent Corporations shall be converted in the manner
provided in Article Two.
1.02. Effective Time
The Merger shall become effective upon the later of: (a) the filing
of the appropriate certificate of merger with the Secretary of State of the
State of Ohio (the "Ohio Secretary of State") or (b) such time thereafter
as is agreed to in writing by Park, Merger Corp. and First Federal and so
provided in the certificate of merger. The date and time at which the
Merger shall become effective is referred to in this Agreement as the
"Effective Time."
1.03. Effects of the Merger
At the Effective Time:
(a) the articles of incorporation, as amended, of First Federal as
in effect immediately prior to the Effective Time shall be the
articles of incorporation of the Surviving Corporation;
(b) the amended and restated code of regulations of First Federal
as in effect immediately prior to the Effective Time shall be
the regulations of the Surviving Corporation, except that the
number of directors of the Surviving Corporation shall be three
and each such individual shall serve as a director of the
Surviving Corporation for a term expiring at the next annual
meeting of the shareholders of the Surviving Corporation to be
held after the Effective Time;
(c) the directors of the Surviving Corporation shall be the
directors of Merger Corp. immediately prior to the Effective
Time;
(d) each individual who is an officer of Merger Corp. immediately
prior to the Effective Time shall be an officer of the
Surviving Corporation holding the same office as held with
Merger Corp. immediately prior to the Effective Time and no
other individual shall be an officer of the Surviving
Corporation after the Effective Time; and
2
(e) the Merger shall have the effects prescribed in the OGCL.
ARTICLE TWO
CONVERSION OF SHARES; SURRENDER OF CERTIFICATES
2.01. Conversion of First Federal Shares
At the Effective Time, by virtue of the Merger and without any action
on the part of the holder thereof:
(a) Purchase Price. Subject to Section 2.02, each First Federal
Share issued and outstanding immediately prior to the Effective
Time (except for First Federal Dissenting Shares) shall be
converted into the right to receive in cash $13.25 (the "Cash
Amount"). The "Merger Consideration" shall be equal to the
product of:
(i) $13.25; and
(ii) the number of First Federal Shares issued and outstanding
immediately prior to the Effective Time.
(b) Cancellation of Shares. After the Effective Time, all such
First Federal Shares shall no longer be outstanding and each
certificate previously representing any First Federal Shares
shall be surrendered for the Cash Amount in consideration
therefor in accordance with Section 2.02, without interest.
(c) Stock Options. All First Federal Stock Options outstanding
immediately before the Effective Time shall be cancelled and
extinguished and converted into the right to receive an amount
of cash equal to the product of (i) (A) $13.25 minus (B) the
exercise price of the First Federal Stock Option, multiplied by
(ii) the number of First Federal Shares subject to the
unexercised portion of such First Federal Stock Option.
2.02. Surrender of Certificates
(a) Exchange Agent. At or prior to the Effective Time, Park shall
deposit, or shall cause to be deposited, with The First-Knox
National Bank of Mount Vernon (the "Exchange Agent"), for the
benefit of the holders of certificates which immediately prior
to the Effective Time evidenced First Federal Shares (the
"First Federal Certificates"), for exchange in accordance with
this Article Two, cash in the amount of the Merger
Consideration calculated in accordance with Section 2.01 (such
cash being hereinafter referred to as the "Exchange Fund")
payable pursuant to Section 2.01 in substitution and exchange
for such First Federal Shares.
3
(b) Surrender Procedures. As soon as reasonably practicable after
the Effective Time, Park shall cause the Exchange Agent to mail
to each holder of record of First Federal Shares immediately
prior to the Effective Time, (i) a letter of transmittal (which
shall specify that delivery shall be effected, and risk of loss
and title to the First Federal Certificates shall pass, only
upon delivery of such First Federal Certificates to the
Exchange Agent, and which shall be in such form and have such
other provisions as Park may reasonably specify) and (ii)
instructions for use in effecting the surrender of the First
Federal Certificates in exchange for the Cash Amount. Upon
surrender by such holder of a First Federal Certificate or
Certificates evidencing all First Federal Shares standing in
such holder's name for cancellation to the Exchange Agent
together with such letter of transmittal, duly executed, the
holder of such First Federal Certificate or Certificates shall
be entitled to receive in exchange therefor the Cash Amount by
a check, which such holder has the right to receive in respect
of the First Federal Certificate or Certificates surrendered
pursuant to the provisions of this Article Two (after taking
into account all First Federal Shares then held by such
holder), and the First Federal Certificate or Certificates so
surrendered shall forthwith be canceled. Park shall cause the
Exchange Agent to mail the exchange check by U.S. mail, postage
prepaid, within seven days following receipt of all required
documentation. In the event of a transfer of ownership of First
Federal Shares which is not registered in the transfer records
of First Federal, a check in respect of the Cash Amount may be
issued to a transferee if the First Federal Certificate
representing such First Federal Shares is presented to the
Exchange Agent, accompanied by all documents required to
evidence and effect such transfer and by evidence that any
applicable share transfer taxes have been paid. Until
surrendered as contemplated by this Section 2.02, each First
Federal Certificate shall be deemed at any time after the
Effective Time for all corporate purposes (except as provided
in Section 2.02(c)) to represent only the right to receive upon
such surrender the Cash Amount as contemplated by this Section
2.02, without interest.
(c) No Further Ownership Rights in First Federal Shares. The Cash
Amount paid pursuant to this Section 2.02 shall be deemed to
have been issued in full satisfaction of all rights pertaining
to such First Federal Shares, subject, however, to the
Surviving Corporation's obligation to pay any dividends or make
any other distributions with a record date prior to the
Effective Time which may have been declared or made by First
Federal on such First Federal Shares in accordance with the
terms of this Agreement on or prior to the Effective Time and
which remain unpaid at the Effective Time. If, after the
Effective Time, First Federal Certificates are presented to
Park for any reason, they shall be canceled and exchanged as
provided in this Article Two.
4
(d) Termination of Exchange Fund. Any portion of the Exchange Fund
which remains undistributed to the shareholders of First
Federal for six months after the Effective Time shall be
delivered to Park, upon demand, and any shareholders of First
Federal who have not theretofore complied with this Article Two
shall thereafter look only to Park for payment of their claim
for the Cash Amount, in each case without interest.
(e) No Liability. None of Park, First Federal, the Exchange Agent
or the Surviving Corporation shall be liable to any former
holder of First Federal Shares for cash delivered to a public
official pursuant to any applicable abandoned property, escheat
or similar law.
(f) Share Transfer Books. Unless otherwise required by Section
1701.85 of the OGCL, after the Effective Time there shall be no
further registration of transfers on the share transfer books
of the Surviving Corporation of the First Federal Shares which
were outstanding immediately prior to the Effective Time.
(g) Lost Certificates. If there shall be delivered to the Exchange
Agent by any person who is unable to produce any First Federal
Certificate for First Federal Shares for surrender to the
Exchange Agent in accordance with this Section 2.02:
(i) Evidence to the satisfaction of the Surviving Corporation
or Park that such First Federal Certificate has been
lost, wrongfully taken or destroyed;
(ii) Such security or indemnity as may be requested by the
Surviving Corporation or Park to save them harmless
(which may include the requirement to obtain a third
party bond or surety); and
(iii) Evidence to the satisfaction of the Surviving Corporation
or Park that such person was the owner of the First
Federal Shares theretofore represented by each such First
Federal Certificate claimed by such person to be lost,
wrongfully taken or destroyed and that such person is the
person who would be entitled to present such First
Federal Certificate for exchange pursuant to this
Agreement;
then the Exchange Agent, in the absence of actual notice to it
that any First Federal Shares theretofore represented by any
such First Federal Certificate have been acquired by a bona
fide purchaser, shall deliver to such person the Cash Amount
that such person would have been entitled to receive upon
surrender of each such lost, wrongfully taken or destroyed
First Federal Certificate.
5
(h) Waiver. The Surviving Corporation or Park may from time to
time, in the case of one or more persons, waive one or more of
the rights provided to it in this Article Two to withhold
certain payments, deliveries and distributions; and no such
waiver shall constitute a waiver of the Surviving Corporation's
rights thereafter to withhold any such payment, delivery or
distribution in the case of any person.
(i) First Federal Shareholders' Dissenters' Rights. Anything
contained in this Agreement or elsewhere to the contrary
notwithstanding, if any holder of an outstanding First Federal
Share shall properly exercise dissenters' rights with respect
thereto in accordance with Section 1701.85 of the OGCL (a
"First Federal Dissenting Share"), then:
(i) Each such First Federal Dissenting Share shall
nevertheless be deemed to be extinguished at the
Effective Time as provided elsewhere in this Agreement;
and
(ii) Each person perfecting such dissenters' rights shall
thereafter have only such rights (and shall have such
obligations) as are provided in Section 1701.85 of the
OGCL, and neither Park nor the Surviving Corporation
shall be required to deliver any cash payments to such
person in substitution for each such First Federal
Dissenting Share in accordance with this Agreement;
provided, however, that, if any such person shall have
failed to perfect or shall withdraw or lose such holder's
rights under Division (D) of Section 1701.85 of the OGCL,
each such holder's First Federal Dissenting Shares shall
thereupon be deemed to have been converted as of the
Effective Time into the right to receive the Cash Amount,
without any interest thereon, pursuant to Section 2.01.
No holder of First Federal Dissenting Shares shall be entitled
to submit a letter of transmittal, and any letter of
transmittal submitted by a holder of First Federal Dissenting
Shares shall be invalid.
2.03. Merger Corp. Shares
Each common share of Merger Corp. ("Merger Corp. Shares") issued and
outstanding immediately prior to the Effective Time shall be converted into
and thereafter evidence one common share, without par value, of the
Surviving Corporation.
6
ARTICLE THREE
REPRESENTATIONS AND WARRANTIES OF FIRST FEDERAL
First Federal represents and warrants to Park that each of the
following statements is true and accurate:
3.01. Corporate Status
(a) First Federal is an Ohio corporation and a unitary savings and
loan holding company registered under the Home Owners' Loan
Act, as amended (the "HOLA"). First Federal is duly organized,
validly existing and in good standing under the laws of the
State of Ohio and has the full corporate power and authority to
own its property, to carry on its business as presently
conducted, and to enter into and, subject to the required
adoption of this Agreement by the First Federal shareholders
and the obtaining of appropriate approvals of Governmental
Authorities and Regulatory Authorities, perform its obligations
under this Agreement and consummate the transactions
contemplated by this Agreement. First Federal is not qualified
to do business in any other jurisdiction or required to be so
qualified to do business in any other jurisdiction except where
the failure to be so qualified individually or in the aggregate
would not reasonably be expected to have a material adverse
effect on First Federal. True and complete copies of the
articles of incorporation and amended and restated code of
regulations of First Federal, in each case as amended to the
date of this Agreement, have been delivered to Park by First
Federal in Section 3.01(a) of the First Federal Disclosure
Schedule.
(b) FFSB, Firstfedco Agency, Inc. ("Firstfedco") and MCT
Development Corporation ("MCT" and collectively with FFSB and
Firstfedco, the "First Federal Subsidiaries") are the only
Subsidiaries (as that term is defined in Section 3.03 below) of
First Federal. FFSB is a stock federal savings bank, is a
member of the Federal Home Loan Bank (the "FHLB") of Cincinnati
and is subject to regulation by the Office of Thrift
Supervision (the "OTS") and the Federal Deposit Insurance
Corporation (the "FDIC"). FFSB is duly organized, validly
existing and in good standing under the laws of the United
States of America and has full corporate power and authority to
own its property and to carry on its business as presently
conducted. Each of Firstfedco and MCT is an Ohio corporation;
is duly organized, validly existing and in good standing under
the laws of the State of Ohio; and has full corporate power and
authority to own its property and to carry on its business as
presently conducted. No First Federal Subsidiary has taken
action to qualify to do business in any other jurisdiction or
is required to be qualified to do business in any other
jurisdiction, except where the failure to be so qualified would
not reasonably be expected to have a material adverse effect on
such First Federal Subsidiary. Copies of the articles of
incorporation, code of
7
regulations, charter and bylaws of each First Federal
Subsidiary and all amendments thereto have been delivered to
Park in Section 3.01(b) of the First Federal Disclosure
Schedule.
(c) As used in this Agreement, (i) any reference to any event,
change, effect, development, circumstance or occurrence being
"material" with respect to any entity means an event, change,
effect, development, circumstance or occurrence that is or is
reasonably likely to be material in relation to the financial
condition, properties, assets, liabilities, businesses or
results of operations of such entity and its subsidiaries taken
as a whole, and (ii) the term "material adverse effect" means,
with respect to any entity, an event, change, effect,
development, circumstance or occurrence that, individually or
together with any other event, change, effect, development,
circumstance or occurrence, (A) has or would be reasonably
likely to have a material adverse effect on the business,
condition (financial or otherwise), capitalization, assets
(tangible or intangible), liabilities (accrued, contingent or
otherwise), operations, regulatory affairs, financial
performance or prospects of such entity and its subsidiaries,
taken as a whole, or (B) materially impairs the ability of such
entity to perform its obligations under this Agreement or to
consummate the Merger and the other transactions contemplated
by this Agreement; provided that "material adverse effect"
shall not be deemed to include the impact of (1) actions and
omissions of Park or Merger Corp., on the one hand, or First
Federal, on the other, taken with the prior written consent of
the other in contemplation of the transactions contemplated
hereby; (2) the direct effects of compliance with this
Agreement on the operating performance or financial condition
of the parties, including expenses incurred by the parties in
consummating the transactions contemplated by this Agreement,
any modifications or changes to valuation policies and
practices in connection with the Merger to the extent requested
by Park, and restructuring charges requested by Park and taken
in connection with the Merger; (3) changes after the date of
this Agreement in banking and similar laws of general
applicability or interpretations thereof by any Regulatory
Authority or Governmental Authority; or (4) changes after the
date hereof affecting depository institutions generally,
including changes in general economic conditions or prevailing
interest or deposit rates (except to the extent that such
changes affect Park and its Subsidiaries or First Federal and
the First Federal Subsidiaries, as the case may be, in a manner
disproportionate to the effect on depository institutions
generally).
3.02. Capitalization of First Federal
(a) The authorized capital of First Federal consists solely of
(i) 9,000,000 First Federal Shares, of which 3,286,221 First
Federal Shares are issued and outstanding and 17,179 First
Federal Shares are held in treasury by First Federal; and
(ii) 1,000,000 preferred shares, $100 par value, none of
8
which is issued. All outstanding First Federal Shares have been
duly authorized and are validly issued, fully paid and non-
assessable, and were not issued in violation of the preemptive
rights of any person. All First Federal Shares issued have been
issued in compliance with all applicable federal and state
securities laws. As of the date of this Agreement, 335,925
First Federal Shares were reserved for issuance upon the
exercise of outstanding stock options (the "First Federal Stock
Options") granted under the First Federal Bancorp, Inc. 1992
Stock Option Plan for Officers and Key Employees, the First
Federal Bancorp, Inc. 1992 Stock Option Plan for Non-Employee
Directors, the First Federal Bancorp, Inc. 1994 Stock Option
Plan for Officers and Key Employees, the First Federal Bancorp,
Inc. 1994 Stock Option Plan for Non-Employee Directors, the
First Federal Bancorp, Inc. 1997 Performance Stock Option Plan
for Senior Executive Officers and Outside Directors and the
First Federal Bancorp, Inc. 2002 Stock Option and Incentive
Plan (collectively, the "First Federal Stock Option Plans").
First Federal has furnished to Park, as part of Section 3.02(a)
of the First Federal Disclosure Schedule, a true, complete and
correct copy of each of the First Federal Stock Option Plans,
and a list of all participants in each of the First Federal
Stock Option Plans as of the date of this Agreement, which list
identifies the number of First Federal Shares subject to First
Federal Stock Options held by each such participant, the
exercise price of each such First Federal Stock Option and the
dates each such First Federal Stock Option was granted, becomes
exercisable and expires.
(b) As of the date of this Agreement, except for this Agreement and
the First Federal Stock Options, there are no options,
warrants, calls, rights, commitments or agreements of any
character to which First Federal is a party or by which it is
bound, obligating First Federal to issue, deliver or sell, or
cause to be issued, delivered or sold, any additional First
Federal Shares or obligating First Federal to grant, extend or
enter into any such option, warrant, call, right, commitment or
agreement. As of the date of this Agreement, there are no
outstanding contractual obligations of First Federal to
repurchase, redeem or otherwise acquire any First Federal
Shares except for such obligations arising under the First
Federal Stock Option Plans.
(c) Except as disclosed in Section 3.02(c) of the First Federal
Disclosure Schedule, since September 30, 2003, First Federal
has not (i) issued or permitted to be issued any First Federal
Shares, or securities exercisable for or convertible into First
Federal Shares, other than upon exercise of the First Federal
Stock Options granted prior to the date hereof under the First
Federal Stock Option Plans; (ii) repurchased, redeemed or
otherwise acquired, directly or indirectly through any
Subsidiary or otherwise, any First Federal Shares; or
(iii) declared, set aside, made or paid to the
9
shareholders of First Federal dividends or other distributions
on or in respect of the outstanding First Federal Shares.
(d) As of the date of this Agreement, there are no bonds,
debentures, notes or other indebtedness of First Federal, and
no securities or other instruments or obligations of First
Federal, the value of which is in any way based upon or derived
from any capital or voting stock of First Federal, having the
right to vote (or convertible into, or exchangeable for,
securities having the right to vote) on any matters on which
First Federal shareholders may vote are issued or outstanding.
3.03. First Federal Subsidiaries
The First Federal Subsidiaries are the only Subsidiaries of First
Federal. First Federal owns beneficially and of record all of the issued
and outstanding equity securities of FFSB and FFSB owns beneficially and of
record all of the issued and outstanding equity securities of each of
Firstfedco and MCT. There are no options, warrants, calls, rights,
commitments or agreements of any character to which First Federal or any
First Federal Subsidiary is a party or by which any of them is bound
obligating any First Federal Subsidiary to issue, deliver or sell, or cause
to be issued, delivered or sold, any additional equity securities of any
First Federal Subsidiary (other than to First Federal or FFSB), or
obligating First Federal or any First Federal Subsidiary to grant, extend
or enter into any such option, warrant, call, right, commitment or
agreement. There are no contracts, commitments, understandings or
arrangements relating to First Federal's or FFSB's rights to vote or to
dispose of the equity securities of any First Federal Subsidiary which it
owns and all of the equity securities of the First Federal Subsidiaries
held by First Federal or FFSB are fully paid and non-assessable and are
owned by First Federal or FFSB free and clear of any charge, mortgage,
pledge, security interest, hypothecation, restriction, claim, option, lien,
encumbrance or interest of any persons whatsoever. Except as disclosed in
Section 3.03 of the First Federal Disclosure Schedule, First Federal does
not own of record or beneficially, directly or indirectly, any equity
securities or similar interests of any person, or any interest in a
partnership or joint venture of any kind, other than the First Federal
Subsidiaries.
For purposes of this Agreement, "Subsidiary" has the meaning ascribed
to such term in Rule 1-02 of Regulation S-X promulgated by the Securities
and Exchange Commission (the "SEC").
3.04. Corporate Proceedings
(a) This Agreement has been (i) duly executed and delivered by duly
authorized officers of First Federal and (ii) approved by the
board of directors of First Federal.
(b) The board of directors of First Federal has duly adopted
resolutions (i) declaring that it is in the best interests of
First Federal's shareholders that First Federal enter into this
Agreement and consummate the Merger
10
on the terms and subject to the conditions set forth in this
Agreement, (ii) confirming the intention on the date of such
adoption to recommend the adoption of this Agreement by the
shareholders of First Federal and (iii) directing the President
to call a Special Meeting of Shareholders for the purpose of
considering and acting upon a proposal to approve and adopt the
Merger Agreement (the "First Federal Meeting"), which
resolutions have not been subsequently rescinded, modified or
withdrawn in any way as of the date of execution of this
Agreement and which will not be subsequently rescinded,
modified or withdrawn in any way prior to the Closing Date,
except that the resolutions set forth in clauses (b)(i) and
(ii) above may be rescinded if and to the extent that the board
of directors of First Federal reasonably determines in good
faith after consultation with First Federal's Financial
Advisors and upon written advice of counsel to First Federal
that consummation of the transactions contemplated by this
Agreement could reasonably be expected to constitute a breach
of the board of directors' fiduciary duties to the shareholders
of First Federal.
(c) Subject to the adoption of this Agreement by the First Federal
shareholders (by a majority of the outstanding First Federal
Shares, unless the board of directors of First Federal
recommends against the adoption of this Agreement, in which
case, by 75% of the outstanding First Federal Shares) and to
the filing of all requisite applications with Regulatory
Authorities and the receipt of all requisite approvals by
Governmental Authorities and Regulatory Authorities, First
Federal has all requisite corporate power and authority to
enter into this Agreement and to perform all of its obligations
hereunder.
3.05. Authorized and Effective Agreement
Assuming the due authorization, execution and delivery by Park and
Merger Corp., this Agreement constitutes the legal, valid and binding
obligation of First Federal, enforceable against First Federal in
accordance with its terms, except as such enforceability may be limited by
bankruptcy, insolvency, reorganization, moratorium, fraudulent conveyance
and other similar laws relating to or affecting the enforcement of
creditors' rights generally, by general equitable principles (regardless of
whether enforceability is considered in a proceeding in equity or at law)
and by an implied covenant of good faith and fair dealing. First Federal
has the right, power, authority and capacity to execute and deliver this
Agreement and, subject to the required adoption of this Agreement by the
First Federal shareholders, the obtaining of appropriate approvals by
Regulatory Authorities and Governmental Authorities and the expiration of
applicable regulatory waiting periods, to perform its obligations under
this Agreement.
3.06. Financial Statements of First Federal
(a) The audited consolidated financial statements of First Federal
consisting of consolidated balance sheets as of September 30, 2003 and
2002, and the related consolidated
11
statements of income, stockholders' equity and cash flows for the years
ended September 30, 2003, 2002 and 2001, including the related notes and
the report thereon of BKD LLP and (b) the unaudited consolidated balance
sheet as of March 31, 2004 (the "First Federal Balance Sheet Date") and the
related unaudited consolidated statements of income and cash flows for the
three months and six months ended March 31, 2004, of First Federal
(collectively, all of such consolidated financial statements are referred
to as the "First Federal Financial Statements"), copies of which are
included in Annual Reports on Form 10-KSB and Quarterly Reports on Form 10-
QSB filed by First Federal with the SEC, comply as to form in all material
respects with applicable accounting requirements and have been prepared in
accordance with United States generally accepted accounting principles
("GAAP") applied on a consistent basis during the periods involved (except
as may be indicated in the notes thereto) and present fairly, in all
material respects, the consolidated financial condition of First Federal as
of the dates thereof and its consolidated results of operations and cash
flows for the periods then ended (subject, in the case of unaudited
statements, to normal year-end audit adjustments which are not expected to
be, individually or in the aggregate, materially adverse to First Federal
in the absence of full footnotes).
3.07. Absence of Undisclosed Liabilities
Except as set forth in the First Federal Financial Statements or in
Section 3.07 of the First Federal Disclosure Schedule and except as arising
under this Agreement, neither First Federal nor any First Federal
Subsidiary has any debts, liabilities, guarantees or obligations (whether
accrued, absolute, contingent or otherwise) as of the date hereof, other
than debts, liabilities, guarantees and obligations which, individually or
in the aggregate, do not exceed $10,000. Except as set forth in Section
3.07 of the First Federal Disclosure Schedule, all debts, liabilities,
guarantees and obligations of First Federal and the First Federal
Subsidiaries incurred since the First Federal Balance Sheet Date have been
incurred in the ordinary course of business and are usual and normal in
amount both individually and in the aggregate.
3.08. Absence of Changes
Except (a) as otherwise publicly disclosed in press releases issued
by First Federal, or (b) as set forth in Section 3.08 of the First Federal
Disclosure Schedule, since the First Federal Balance Sheet Date: (i) there
has not been any material adverse change in the business, operations,
assets or financial condition of First Federal and the First Federal
Subsidiaries taken as a whole and, to the knowledge of First Federal, no
fact or condition exists which First Federal believes will cause a material
adverse effect in the future; and (ii) First Federal has not taken or
permitted any of the actions described in Section 5.01(b) of this
Agreement. For purposes of this Agreement, an individual will be deemed to
have "knowledge" of a particular fact or other matter if:
(x) such individual is actually aware of such fact or other matter;
or
(y) a prudent individual would be expected to discover or otherwise
become aware of such fact or other matter in the course of
conducting a reasonably
12
comprehensive investigation concerning the existence of such
fact or other matter.
First Federal or Park will be deemed to have "knowledge" of a particular
fact or other matter if any individual who is serving as a director or
executive officer of such corporation or of a Subsidiary of such
corporation, has, or at any time had, knowledge of such fact or other
matter.
3.09. Loan Documentation
The documentation ("Loan Documentation") governing or relating to the
loan and credit-related assets ("Loan Assets") included in the loan
portfolio of each First Federal Subsidiary is legally sufficient for the
purposes intended thereby and creates enforceable rights of such First
Federal Subsidiary in accordance with the terms of such Loan Documentation,
subject to applicable bankruptcy, insolvency, reorganization, moratorium,
fraudulent conveyance and other similar laws relating to or affecting the
enforcement of creditors' rights generally, by general equitable principles
(regardless of whether enforceability is considered in a proceeding in
equity or at law) and by an implied covenant of good faith and fair
dealing, except to the extent such enforceability may be limited by laws
relating to safety and soundness of insured depository institutions as set
forth in 12 U.S.C. [SECTION] 1818(b) or by appointment of a conservator by
the FDIC, and except for such insufficiencies as would not reasonably be
expected to have a material adverse effect on First Federal and the First
Federal Subsidiaries taken as a whole. Except as set forth in Section 3.09
of the First Federal Disclosure Schedule, no debtor under any of the Loan
Documentation has asserted any claim or defense with respect to the subject
matter thereof. Except as set forth in Section 3.09 of the First Federal
Disclosure Schedule, none of the First Federal Subsidiaries is a party to a
loan, including any loan guaranty, with any director, executive officer or
5% shareholder of First Federal or any First Federal Subsidiary, or any
person, corporation or enterprise controlling, controlled by or under
common control with either First Federal or any First Federal Subsidiary.
To the knowledge of First Federal and FFSB, all loans and extensions of
credit that have been made by a First Federal Subsidiary comply with
applicable regulatory limitations and procedures.
3.10. Allowance for Loan Losses
Except as set forth in Section 3.10 of the First Federal Disclosure
Schedule, there is no loan which was made by any First Federal Subsidiary
and which is reflected as an asset of First Federal or any First Federal
Subsidiary on the First Federal Financial Statements that (a)(i) is 90 days
or more delinquent, (ii) has been classified by examiners (regulatory or
internal) as "Substandard," "Doubtful" or "Loss" or (iii) has been
designated by management of First Federal or such First Federal Subsidiary
as "special mention," and (b) the default by the borrower under which would
reasonably be expected to have a material adverse effect on First Federal
or FFSB. The allowance for loan losses reflected on the First Federal
Financial Statements was, as of each respective date, determined in
accordance with GAAP and in accordance with all rules and regulations
applicable to First Federal and the First Federal Subsidiaries and was
adequate as of the respective date thereof to provide for reasonably
anticipated losses on outstanding loans, except for such failures and
inadequacies that would not reasonably be expected to have a material
adverse effect on First Federal or FFSB.
13
3.11. Reports and Records
First Federal and the First Federal Subsidiaries have filed all
reports and maintained all books and records required to be filed or
maintained by them under the rules and regulations of the OTS, the FHLB of
Cincinnati, the FDIC and the SEC, except for such reports and records the
failure to file or maintain which would not reasonably be expected to have
a material adverse effect on First Federal. The books and records of First
Federal and the First Federal Subsidiaries have been fully, properly and
accurately maintained in all material respects and have been maintained in
accordance with sound business practices and the requirements of Section
13(b)(2) of the Exchange Act, there are no material inaccuracies or
discrepancies of any kind contained or reflected therein, and they fairly
reflect the substance of events and transactions included therein. All such
documents and reports complied in all material respects with other
applicable requirements of law and rules and regulations in effect at the
time such documents and reports were filed and contained in all material
respects the information required to be stated therein.
3.12. Taxes
Except as set forth in Section 3.12 of the First Federal Disclosure
Schedule, First Federal and the First Federal Subsidiaries have timely
filed all returns, statements, reports and forms (including, without
limitation, elections, declarations, disclosures, schedules, estimates and
information returns) (collectively, the "Tax Returns") with respect to all
federal, state, local and foreign income, gross income, gross receipts,
gains, premium, sales, use, ad valorem, transfer, franchise, profits,
withholding, payroll, employment, excise, severance, stamp, occupancy,
license, lease, environmental, customs, duties, property, windfall profits
and all other taxes (including, without limitation, any interest, penalties
or additions to tax with respect thereto, individually a "Tax," and
collectively, "Taxes") required to be filed with the appropriate tax
authority. Such Tax Returns were true, correct and complete in all material
respects. First Federal and the First Federal Subsidiaries have paid and
discharged all Taxes due (whether reflected on such Tax Returns or
otherwise), other than such Taxes that are adequately reserved as shown on
the First Federal Financial Statements (excluding any reserve for deferred
Taxes established to reflect timing differences between book and Tax
income) or have arisen in the ordinary course of business since the First
Federal Balance Sheet Date. Except as set forth in Section 3.12 of the
First Federal Disclosure Schedule, neither the Internal Revenue Service
(the "IRS") nor any other taxing agency or authority, domestic or foreign,
has asserted, is now asserting or, to the knowledge of First Federal, is
threatening to assert against First Federal or any First Federal Subsidiary
any deficiency or claim for additional Taxes. There are no unexpired
waivers by First Federal or any First Federal Subsidiary of any statute of
limitations with respect to Taxes. No extension of time within which to
file any Tax Return (for a period with respect to which the statute of
limitations has not expired) has been filed, or has been requested or
granted. The accruals and reserves for Taxes reflected in the First Federal
Financial Statements (excluding any reserve for deferred Taxes established
to reflect timing differences between book and Tax income) are adequate for
the periods covered. First Federal and the First Federal Subsidiaries have
withheld or collected and paid over to the appropriate Governmental
Authorities or are properly holding for such payment all Taxes required by
law to be withheld or collected. There are no liens for Taxes upon the
assets of First Federal or any First Federal
14
Subsidiary, other than liens for current Taxes not yet due and payable.
Neither First Federal nor any First Federal Subsidiary has agreed to make,
or is required to make, any adjustment under Section 481(a) of the Internal
Revenue Code of 1986, as amended (the "Code"). Except as set forth in
Section 3.12 of the First Federal Disclosure Schedule, neither First
Federal nor any First Federal Subsidiary is a party to any agreement,
contract, arrangement or plan that has resulted, or could result,
individually or in the aggregate, in the payment of "excess parachute
payments" within the meaning of Section 280G of the Code. Neither First
Federal nor any First Federal Subsidiary has ever been a member of an
affiliated group of corporations, within the meaning of Section 1504 of the
Code, other than an affiliated group of which First Federal is or was the
common parent corporation. Neither First Federal nor any First Federal
Subsidiary has any liability for the Taxes of any other person or entity
under Treasury Department Regulation Section 1.1502-6 (or any similar
provision of state, local or foreign law), as a transferee or successor, by
contract or otherwise. None of the assets of First Federal or any First
Federal Subsidiary is property which First Federal or the First Federal
Subsidiary is required to treat as being owned by any other person pursuant
to the so-called "safe harbor lease" provisions of former Section 168(f)(8)
of the Code. None of the assets of First Federal or any First Federal
Subsidiary directly or indirectly secures any debt the interest on which is
tax-exempt under Section 103(a) of the Code. None of the assets of First
Federal or any First Federal Subsidiary is "tax-exempt use property" within
the meaning of Section 168(h) of the Code. Neither First Federal nor any
First Federal Subsidiary is, and none have been, a United States real
property holding corporation (as defined in Section 897(c)(2) of the Code)
during the applicable period specified in Section 897(c)(1)(A)(ii) of the
Code. No Tax is required to be withheld pursuant to Section 1445 of the
Code as a result of the transactions contemplated by this Agreement.
Neither First Federal nor any First Federal Subsidiary is a party to any
joint venture, partnership or other entity, agreement or contract that
could be treated as a partnership for federal income tax purposes. First
Federal has not made, nor is it bound by, any election under Section 197 of
the Code. Neither First Federal nor any First Federal Subsidiary has any
excess loss account (as defined in Treasury Department Regulation Section
1.1502-19) with respect to the stock of any First Federal Subsidiary. First
Federal has disclosed on its federal income Tax Returns all positions taken
therein that could give rise to a substantial understatement of federal
income tax within the meaning of Section 6662 of the Code.
3.13. Property and Title
Section 3.13 of the First Federal Disclosure Schedule lists and
describes all real property, and any leasehold interest in real property,
owned or held by First Federal or any First Federal Subsidiary and used in
the business of First Federal or any First Federal Subsidiary
(collectively, the "First Federal Real Properties"). True and complete
copies of all leases of First Federal Real Properties to which First
Federal or any First Federal Subsidiary is a party have been provided to
Park in Section 3.13 of the First Federal Disclosure Schedule. Such
leasehold interests have not been assigned or subleased. All First Federal
Real Properties which are owned by First Federal or any First Federal
Subsidiary are free and clear of all mortgages, liens, security interests,
defects, encumbrances, easements, restrictions, reservations, conditions,
covenants, agreements, encroachments, rights of way and zoning laws, except
(a) those set forth in Section 3.13 of the First Federal Disclosure
Schedule; (b) easements, restrictions, reservations, conditions, covenants,
rights of way, zoning laws and other defects and irregularities in title
and
15
encumbrances which do not materially impair the use thereof for the
purposes for which they are held; and (c) liens for current Taxes not yet
due and payable. First Federal and the First Federal Subsidiaries own, and
are in rightful possession of, and have good title to, all of the other
assets indicated in the First Federal Financial Statements as being owned
by First Federal or any First Federal Subsidiary, free and clear of any
charge, mortgage, pledge, security interest, hypothecation, restriction,
claim, option, lien, encumbrance or interest of any persons whatsoever
except (x) those described in the Section 3.13 of the First Federal
Disclosure Schedule and (y) those assets disposed of in the ordinary course
of business consistent with past practices. All of the assets of First
Federal and the First Federal Subsidiaries are in good operating condition,
except for normal maintenance and routine repairs, and are reasonably
adequate to continue to conduct the respective businesses of First Federal
and the First Federal Subsidiaries as such businesses are presently being
conducted.
3.14. Legal Proceedings
Except as set forth in Section 3.14 of the First Federal Disclosure
Schedule, there are no actions, suits, proceedings, claims or
investigations pending or appealable or, to the knowledge of First Federal
and the First Federal Subsidiaries, threatened in any court, before any
governmental agency or instrumentality or in any arbitration proceeding
against or by First Federal or any First Federal Subsidiary.
3.15. Regulatory Matters
None of First Federal, the First Federal Subsidiaries and their
respective properties is a party to or subject to any order, judgment,
decree, agreement, memorandum of understanding or similar arrangement with,
or a commitment letter or similar submission to, or extraordinary
supervisory letter from, any court or federal or state governmental agency
or authority, including any such agency or authority charged with the
supervision or regulation of financial institutions (or their holding
companies) or issuers of securities or engaged in the insurance of deposits
(including, without limitation, the OTS, the FHLB of Cincinnati, the FDIC
and the SEC) or the supervision or regulation of First Federal or FFSB
(collectively, the "Regulatory Authorities"). Neither First Federal nor any
First Federal Subsidiary has been advised by any Regulatory Authority that
such Regulatory Authority is contemplating issuing or requesting (or is
considering the appropriateness of issuing or requesting) any such order,
judgment, decree, agreement, memorandum of understanding or similar
arrangement, commitment letter, supervisory letter or similar submission.
3.16. No Conflict
Except as set forth in Section 3.16 of the First Federal Disclosure
Schedule, subject to the required adoption of this Agreement by the
shareholders of First Federal, receipt of the required approvals of
Governmental Authorities and Regulatory Authorities and expiration of
applicable regulatory waiting periods, the execution, delivery and
performance of this Agreement, and the consummation of the transactions
contemplated hereby, by First Federal do not and will not (a) conflict
with, or result in a violation of, or result in the breach of or a default
(or which with notice or lapse of time would result in a default) under,
any provision of: (i) any
16
federal, state or local law, regulation, ordinance, order, rule or
administrative ruling of any administrative agency or commission or other
federal, state or local governmental authority or instrumentality (each, a
"Governmental Authority") applicable to First Federal or any First Federal
Subsidiary or any of their respective properties; (ii) the articles of
incorporation or amended and restated code of regulations of First Federal
or the governing instruments of any First Federal Subsidiary; (iii) any
material agreement, indenture or instrument to which First Federal or any
First Federal Subsidiary is a party or by which any of them or of their
respective properties or assets may be bound; or (iv) any order, judgment,
writ, injunction or decree of any court, arbitration panel or any
Governmental Authority applicable to First Federal or any First Federal
Subsidiary; (b) result in the creation or acceleration of any security
interest, mortgage, option, claim, lien, charge or encumbrance upon or
interest in any property of First Federal or any First Federal Subsidiary,
except to the extent that such creation or acceleration will not have a
material adverse effect on First Federal; or (c) violate the terms or
conditions of, or result in the cancellation, modification, revocation or
suspension of, any material license, approval, certificate, permit or
authorization held by First Federal or any First Federal Subsidiary.
3.17. Brokers, Finders and Others
Except for the fees paid or payable to Keefe, Bruyette & Woods, Inc.
("First Federal's Financial Advisors"), there are no fees or commissions of
any sort whatsoever claimed by, or payable by, First Federal or any First
Federal Subsidiary to, any broker, finder, intermediary, attorney,
accountant or any other similar person in connection with effecting this
Agreement or the transactions contemplated hereby, except for ordinary and
customary legal and accounting fees.
3.18. Employment Agreements
Except as disclosed in Section 3.18 of the First Federal Disclosure
Schedule, neither First Federal nor any First Federal Subsidiary is a party
to any employment, change in control, severance or consulting agreement not
terminable at will or obligated to pay any severance bonus or other
compensation as a result of the Merger. Neither First Federal nor any First
Federal Subsidiary is a party to, bound by or negotiating, any collective
bargaining agreement, nor are any of their respective employees represented
by any labor union or similar organization. First Federal and the First
Federal Subsidiaries are in compliance in all material respects with all
applicable laws respecting employment and employment practices, terms and
conditions of employment and wages and hours, and neither First Federal nor
any First Federal Subsidiary has engaged in any unfair labor practice,
other than practices that individually or in the aggregate would not
reasonably be expected to have a material adverse effect on First Federal.
3.19. Employee Benefit Plans
(a) Section 3.19(a) of the First Federal Disclosure Schedule
contains a complete and accurate list of all bonus, incentive,
deferred compensation, pension (including, without limitation,
Pension Plans as defined below), retirement, profit-sharing,
thrift, savings, employee stock ownership, stock
17
bonus, stock purchase, restricted stock, stock option,
severance, welfare (including, without limitation, "welfare
plans" within the meaning of Section 3(1) of the Employee
Retirement Income Security Act of 1974, as amended ("ERISA")),
fringe benefit plans, employment or severance agreements and
all similar practices, policies and arrangements maintained or
contributed to (currently or within the last six years), other
than those described in Department of Labor ("DOL") Reg.
[SECTIONS] 2510.3-1(b) through (k), 2510.3-2(d), 2510.3-3(b),
by (i) First Federal or any First Federal Subsidiary and in
which any employee or former employee (the "Employees"),
consultant or former consultant (the "Consultants"), officer or
former officer (the "Officers"), or director or former director
(the "Directors") of First Federal or any First Federal
Subsidiary participates or to which any such Employees,
Consultants, Officers or Directors are parties or (ii) any
ERISA Affiliate (as defined below) (collectively, the
"Compensation and Benefit Plans"). Neither First Federal nor
any First Federal Subsidiary has any commitment to create any
additional Compensation and Benefit Plan or to modify or change
any existing Compensation and Benefit Plan, except to the
extent required by applicable law.
(b) Except as described in Section 3.19(b) of the First Federal
Disclosure Schedule, each Compensation and Benefit Plan has
been operated and administered in all material respects in
accordance with its terms and with applicable law, including,
but not limited to, ERISA, the Code, the Securities Act of
1933, as amended (the "Securities Act"), the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), the Age
Discrimination in Employment Act, or any regulations or rules
promulgated thereunder, and all filings, disclosures and
notices required by ERISA, the Code, the Securities Act, the
Exchange Act, the Age Discrimination in Employment Act and any
other applicable law have been timely made. Each Compensation
and Benefit Plan which is an "employee pension benefit plan"
within the meaning of Section 3(2) of ERISA (a "Pension Plan")
and which is intended to be qualified under Section 401(a) of
the Code has received a favorable determination letter
(including a determination that the related trust under such
Compensation and Benefit Plan is exempt from tax under Section
501(a) of the Code) from the IRS and First Federal is not aware
of any circumstances likely to result in revocation of any such
favorable determination letter. There is no material pending
or, to the knowledge of First Federal, threatened, legal
action, suit or claim relating to the Compensation and Benefit
Plans other than routine claims for benefits thereunder.
Neither First Federal nor any First Federal Subsidiary has,
directly or indirectly, engaged in a transaction, or omitted to
take any action, with respect to any Compensation and Benefit
Plan that would reasonably be expected to subject First Federal
or any First Federal Subsidiary to a tax or penalty imposed by
either Section 4975 of the Code or Section 502 of ERISA.
18
(c) No liability (other than for payment of premiums to the Pension
Benefit Guaranty Corporation ("PBGC") which have been made or
will be made on a timely basis) under Title IV of ERISA has
been or is expected to be incurred by First Federal or any
First Federal Subsidiary with respect to any ongoing, frozen or
terminated "single-employer plan," within the meaning of
Section 4001(a)(15) of ERISA, currently or formerly maintained
by either of them, or any single-employer plan of any entity
(an "ERISA Affiliate Plan") which is considered one employer
with First Federal under Section 4001(a)(14) of ERISA or
Section 414(b), (c) or (m) of the Code (an "ERISA Affiliate").
None of First Federal, any First Federal Subsidiary or any
ERISA Affiliate has contributed, or has been obligated to
contribute, to a multiemployer plan under Subtitle E of Title
IV of ERISA (as defined in ERISA Sections 3(37)(A) and
4001(a)(3)) at any time since September 26, 1980. No notice of
a "reportable event", within the meaning of Section 4043 of
ERISA, for which the 30-day reporting requirement has not been
waived, has been required to be filed for any Compensation and
Benefit Plan or by any ERISA Affiliate Plan within the 12-month
period ending on the date hereof, and no such notice will be
required to be filed as a result of the transactions
contemplated by this Agreement. The PBGC has not instituted
proceedings to terminate any Pension Plan or ERISA Affiliate
Plan and, to First Federal's knowledge, no condition exists
that presents a material risk that such proceedings will be
instituted. There is no pending investigation or enforcement
action by the PBGC, the DOL, the IRS or any other Governmental
Authority with respect to any Compensation and Benefit Plan.
Under each Pension Plan and ERISA Affiliate Plan, as of the
date of the most recent actuarial valuation performed prior to
the date of this Agreement, the actuarially determined present
value of all "benefit liabilities", within the meaning of
Section 4001(a)(16) of ERISA (as determined on the basis of the
actuarial assumptions contained in such actuarial valuation of
such Pension Plan or ERISA Affiliate Plan), did not exceed the
then current value of the assets of such Pension Plan or ERISA
Affiliate Plan and since such date there has been neither an
adverse change in the financial condition of such Pension Plan
or ERISA Affiliate Plan nor any amendment or other change to
such Pension Plan or ERISA Affiliate Plan that would increase
the amount of benefits thereunder which reasonably could be
expected to change such result.
(d) All contributions required to be made under the terms of any
Compensation and Benefit Plan or ERISA Affiliate Plan have been
timely made or have been reflected on the First Federal
Financial Statements. Neither any Pension Plan nor any ERISA
Affiliate Plan has an "accumulated funding deficiency" (whether
or not waived) within the meaning of Section 412 of the Code or
Section 302 of ERISA and all required payments to the PBGC with
respect to each Pension Plan or ERISA Affiliate Plan have been
made on or before their due dates. None
19
of First Federal, any First Federal Subsidiary and/or any ERISA
Affiliate (i) has provided, or would reasonably be expected to
be required to provide, security to any Pension Plan or to any
ERISA Affiliate Plan pursuant to Section 401(a)(29) of the Code
and (ii) has taken any action, or omitted to take any action,
that has resulted, or would reasonably be expected to result,
in the imposition of a lien under Section 412(n) of the Code or
pursuant to ERISA.
(e) Except as disclosed in Section 3.19(e) of the First Federal
Disclosure Schedule, neither First Federal nor any First
Federal Subsidiary has any obligations to provide retiree
health or retiree life insurance or other retiree death
benefits under any Compensation and Benefit Plan, other than
benefits mandated by Section 4980B of the Code. Except as
disclosed in Section 3.19(e) of the First Federal Disclosure
Schedule, there has been no communication to Employees by First
Federal or any First Federal Subsidiary that would reasonably
be expected to promise or guarantee such Employees retiree
health or retiree life insurance or other retiree death
benefits on a permanent basis.
(f) First Federal and the First Federal Subsidiaries do not
maintain any Compensation and Benefit Plans covering foreign
Employees.
(g) With respect to each Compensation and Benefit Plan, if
applicable, First Federal has provided or made available to
Park, true and complete copies of: (i) the most recently
restated version of each plan document and all subsequent
amendments thereto; (ii) the most recently restated version of
each trust instrument and insurance contract and all subsequent
amendments thereto; (iii) the two most recent annual returns
(Forms 5500) and financial statements; (iv) the most recently
restated summary plan descriptions and all subsequent summaries
of material modifications; (v) forms filed with the PBGC within
the twelve consecutive months ending immediately before the
date hereof (other than for premium payments); (vi) the most
recent determination letter issued by the IRS with respect to
each Compensation and Benefit Plan that is intended to comply
with Code [SECTION] 401(a); (vii) any Form 5310, Form 5310A,
Form 5300 or Form 5330 filed with the IRS within the twenty-
four consecutive months ending immediately before the date
hereof; and (viii) the most recent nondiscrimination tests
performed under ERISA and the Code (including but not limited
to Code Section 401(k) and 401(m) tests).
(h) Except as disclosed in Section 3.19(h) of the First Federal
Disclosure Schedule, the consummation of the transactions
contemplated by this Agreement would not, directly or
indirectly (including, without limitation, as a result of any
termination of employment prior to or following the Effective
Time), reasonably be expected to (i) entitle any Employee,
Officer, Consultant or Director to any payment (including
severance pay
20
or similar compensation) or any increase in compensation, (ii)
result in the vesting or acceleration of any benefits under any
Compensation and Benefit Plan, except as required by law or
(iii) result in any material increase in benefits payable under
any Compensation and Benefit Plan.
(i) Except as disclosed on Section 3.19(i) of the First Federal
Disclosure Schedule, neither First Federal nor any First
Federal Subsidiary maintains any compensation plans, programs
or arrangements the payments under which would not reasonably
be expected to be deductible as a result of the limitations
under Section 162(m) of the Code and the regulations issued
thereunder.
(j) Except as disclosed on Section 3.19(j) of the First Federal
Disclosure Schedule, as a result, directly or indirectly, of
the transactions contemplated by this Agreement (including,
without limitation, as a result of any termination of
employment prior to or following the Effective Time), none of
First Federal, Park or the Surviving Corporation, or any of
their respective Subsidiaries will be obligated to make a
payment that would be characterized as an "excess parachute
payment" to an individual who is a "disqualified individual"
(as such terms are defined in Section 280G of the Code) of
First Federal on a consolidated basis, regardless of whether
such payment is reasonable compensation for personal services
performed or to be performed in the future.
3.20. Compliance with Laws
Except with respect to Environmental Laws and Taxes, each of First
Federal and the First Federal Subsidiaries:
(a) has been and is in compliance with all applicable federal,
state, local and foreign statutes, laws, regulations,
ordinances, rules, judgments, orders or decrees applicable
thereto or to the employees conducting such business,
including, without limitation, the Equal Credit Opportunity
Act, as amended, the Fair Housing Act, as amended, the Federal
Community Reinvestment Act, as amended ("CRA"), the Home
Mortgage Disclosure Act, as amended, and all other applicable
fair lending laws and other laws relating to discriminatory
business practices, except for failures to be in compliance
which, individually or in the aggregate, have not had or would
not reasonably be expected to have a material adverse effect on
First Federal and the First Federal Subsidiaries taken as a
whole. First Federal and the First Federal Subsidiaries have
taken all actions necessary to be in compliance with applicable
privacy regulations under the Gramm-Leach-Bliley Act of 1999
and any other laws relating to privacy practices;
(b) has all permits, licenses, authorizations, orders and approvals
of, and has made all filings, applications and registrations
with, all Governmental
21
Authorities and Regulatory Authorities that are required in
order to permit it to own or lease its properties and to
conduct its business as presently conducted, except where the
failure to obtain any of the foregoing or to make any such
filing, application or registration has not had or would not
reasonably be expected to have a material adverse effect on
First Federal or any First Federal Subsidiary; and all such
permits, licenses, certificates of authority, orders and
approvals are in full force and effect and no suspension or
cancellation of any of them has been threatened in writing; and
(c) has received no written notification or communication from any
Governmental Authority or Regulatory Authority, (i) asserting
that First Federal or any First Federal Subsidiary is not in
compliance with any of the statutes, regulations or ordinances
which such Governmental Authority or Regulatory Authority
enforces, except as set forth in examination reports of the
Regulatory Authorities; or (ii) threatening to revoke any
license, franchise, permit or governmental authorization, which
has not been resolved to the satisfaction of the Governmental
Authority or Regulatory Authority that sent such notification
or communication. There is no event which has occurred that, to
the knowledge of First Federal, would reasonably be expected to
result in the revocation of any such license, franchise, permit
or governmental authorization.
3.21 Insurance
(a) Section 3.21 of the First Federal Disclosure Schedule lists all
of the insurance policies, binders or bonds maintained by First
Federal or any First Federal Subsidiary and a description of
all claims filed by First Federal and the First Federal
Subsidiaries against the insurers of First Federal and the
First Federal Subsidiaries since October 1, 2000. First Federal
and the First Federal Subsidiaries are insured with reputable
insurers against such risks and in such amounts as the
management of First Federal and the First Federal Subsidiaries
reasonably have determined to be prudent in accordance with
industry practices. All such insurance policies are in full
force and effect, neither First Federal nor any First Federal
Subsidiary is in material default thereunder and all claims
thereunder have been filed in due and timely fashion.
(b) The savings accounts and deposits of FFSB are insured up to
applicable limits by the FDIC in accordance with the Federal
Deposit Insurance Act, and FFSB has paid all assessments and
filed all reports required by the Federal Deposit Insurance
Act.
3.22. Governmental and Third-Party Proceedings
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Except as set forth in Section 3.22 of the First Federal Disclosure
Schedule, no consent, approval, authorization of, or registration,
declaration or filing with, any court, Governmental Authority, Regulatory
Authority or any other third party is required to be made or obtained by
First Federal or any First Federal Subsidiary in connection with the
execution, delivery or performance by First Federal of this Agreement or
the consummation by First Federal of the transactions contemplated hereby,
except for: (a) filings of applications and notices, as applicable, with
and the approval of certain federal banking authorities; (b) the filing of
the appropriate certificate of merger with the Ohio Secretary of State
pursuant to the OGCL; and (c) the adoption of this Agreement by the First
Federal shareholders. As of the date hereof, First Federal is not aware of
any reason why the approvals set forth in Section 8.03(b) will not be
received without the imposition of a condition, restriction or requirement
of the type described in Section 8.03(b).
23
3.23. Contracts
Section 3.23 of the First Federal Disclosure Schedule sets forth a
true and complete list of all contracts, agreements, commitments,
arrangements or other instruments in existence as of the date of this
Agreement (other than those which have been performed completely and those
related to loans made by First Federal or any First Federal Subsidiary,
deposits in any First Federal Subsidiary, investment securities held by
First Federal or any First Federal Subsidiary, borrowings by First Federal
or any First Federal Subsidiary or contracts listed or referenced elsewhere
in the First Federal Disclosure Schedule): (a) which involve the payment by
or to First Federal or any First Federal Subsidiary of more than $25,000 in
connection with the purchase of property or goods or the performance of
services; or (b) which are not in the ordinary course of their respective
businesses. True, complete and correct copies of all such contracts have
been delivered to Park. Neither First Federal nor any First Federal
Subsidiary, nor, to the knowledge of First Federal, any other party
thereto, is in default under any such contract, agreement, commitment,
arrangement or other instrument to which it is a party, by which its
respective assets, business or operations may be bound or affected in any
way, or under which it or its respective assets, business or operations
receive benefits, and there has not occurred any event that, with the lapse
of time or the giving of notice or both, would constitute such a default.
3.24. Environmental Matters
Except as otherwise disclosed in Section 3.24 of the First Federal
Disclosure Schedule:
(a) First Federal and the First Federal Subsidiaries are and have
been at all times in compliance in all material respects with
all applicable Environmental Laws, and, to the knowledge of
First Federal, neither First Federal nor any First Federal
Subsidiary has engaged in any activity in violation of any
applicable Environmental Law;
(b)(i) to the knowledge of First Federal, no investigations,
inquiries, orders, hearings, actions or other proceedings by or
before any court, Governmental Authority or Regulatory
Authority are pending or have been threatened in writing in
connection with any activities of First Federal or any First
Federal Subsidiary or any First Federal Real Properties or
improvements thereon, and (ii) to the knowledge of First
Federal, no investigations, inquiries, orders, hearings,
actions or other proceedings by or before any court,
Governmental Authority or Regulatory Authority are pending or
threatened in writing in connection with any real properties in
respect of which any First Federal Subsidiary has foreclosed or
holds a mortgage or mortgages (hereinafter referred to as the
"First Federal Real Estate Collateral");
(c) to the knowledge of First Federal, no claims are pending or
threatened in writing by any third party against First Federal
or any First Federal
24
Subsidiary, or with respect to the First Federal Real
Properties or improvements thereon, or the First Federal Real
Estate Collateral or improvements thereon, relating to damage,
contribution, cost recovery, compensation, loss, injunctive
relief, remediation or injury resulting from any Hazardous
Substance which have not been resolved to the satisfaction of
the parties involved;
(d) no Hazardous Substances have been integrated into the First
Federal Real Properties or improvements thereon or any
component thereof, or, to the knowledge of First Federal, the
First Federal Real Estate Collateral or improvements thereon or
any component thereof in such manner or quantity as (i) may
reasonably be expected to or in fact would pose a threat to
human health or (ii) would reasonably be expect to have a
material adverse effect on First Federal;
(e) to the knowledge of First Federal, no portion of the First
Federal Real Properties or improvements thereon, or the First
Federal Real Estate Collateral or improvements thereon is
located within 500 feet of (i) a release of Hazardous
Substances which has been reported or is required to be
reported under any Environmental Law or (ii) the location of
any site used, in the past or presently, for the disposal of
any Hazardous Substance; and
(f) neither First Federal nor any First Federal Subsidiary has
knowledge that (i) any of the First Federal Real Properties or
improvements thereon or the First Federal Real Estate
Collateral or improvements thereon has been used for the
treatment, storage or disposal of Hazardous Substances or has
been contaminated by Hazardous Substances, (ii) any of the
business operations of First Federal or any First Federal
Subsidiary have contaminated lands, waters or other property of
others with Hazardous Substances, except routine, office-
generated solid waste, or (iii) any of the First Federal Real
Properties or improvements thereon, or the First Federal Real
Estate Collateral or improvements thereon have in the past or
presently contain underground storage tanks, friable asbestos
materials or PCB-containing equipment.
For purposes of this Agreement, (a) "Environmental Law" means the
Comprehensive Environmental Response, Compensation and Liability Act of
1980, as amended ("CERCLA"); the Resource Conservation and Recovery Act of
1976, as amended; the Hazardous Materials Transportation Act, as amended;
the Toxic Substances Control Act, as amended; the Federal Water Pollution
Control Act, as amended; the Safe Drinking Water Act, as amended; the Clean
Air Act, as amended; the Occupational Safety and Health Act of 1970, as
amended; the Hazardous & Solid Waste Amendments Act of 1984, as amended;
the Superfund Amendments and Reauthorization Act of 1986, as amended; the
regulations promulgated thereunder, and any other federal, state, county,
municipal, local or other statute, law, ordinance or regulation which may
relate to or deal with human health or the environment, as of the date of
this Agreement;
25
and (b) "Hazardous Substances" means, at any time: (i) any "hazardous
substance" as defined in [SECTION]101(14) of CERCLA or regulations
promulgated thereunder; (ii) any "solid waste," "hazardous waste," or
"infectious waste," as such terms are defined in any other Environmental
Law as of the date of this Agreement; and (iii) friable asbestos, urea-
formaldehyde, polychlorinated biphenyls ("PCBs"), nuclear fuel or material,
chemical waste, radioactive material, explosives, known carcinogens,
petroleum products and by-products, and other dangerous, toxic or hazardous
pollutants, contaminants, chemicals, materials or substances listed or
identified in, or regulated by, any Environmental Law.
3.25. Takeover Laws
Unless Park is an "interested shareholder" within the meaning of OGCL
Chapter 1704, no action is required to be taken by First Federal in order
to comply with any "moratorium", "control share", "fair price", "affiliate
transaction", "business combination" or other anti-takeover laws or
regulations of Ohio (collectively, "Takeover Laws") with respect to this
Agreement and the transactions contemplated hereby.
3.26. Risk Management Instruments
None of First Federal nor the First Federal Subsidiaries has any
material interest rate swaps, caps, floors, option agreements, futures and
forward contracts or other similar risk management arrangements, whether
entered into for First Federal's own account, or for the account of any
First Federal Subsidiary or any of their respective customers. Neither
First Federal nor any First Federal Subsidiary, nor to First Federal's
knowledge any other party thereto, is in breach of any of its obligations
under any interest rate swap, cap, floor, option agreement, futures or
forward contract or other similar risk management arrangement as to which
First Federal or a First Federal Subsidiary has any interest.
3.27. Repurchase Agreements
None of First Federal nor any First Federal Subsidiary has purchased
securities subject to an agreement to resell.
3.28. Investment Securities
Except as disclosed in Section 3.28 of the First Federal Disclosure
Schedule, each of First Federal and the First Federal Subsidiaries has good
title to all securities held by it (except securities sold under repurchase
agreement or held in any fiduciary or agency capacity), free and clear of
any charge, mortgage, pledge, security interest, hypothecation,
restriction, claim, option, lien, encumbrance or interest of any person or
persons whatsoever, except to the extent such securities are pledged in the
ordinary course of business consistent with prudent banking practices to
secure the obligations of First Federal or any First Federal Subsidiary or
as collateral for public funds. Such securities are valued on the books of
First Federal and the First Federal Subsidiaries in accordance with GAAP.
26
3.29. SEC Filings
The First Federal Shares are registered with the SEC pursuant to
Section 12(g) of the Exchange Act. First Federal has filed all reports and
proxy statements required to be filed by it with the SEC pursuant to the
Exchange Act. All such filings, at the time of filing, complied in all
material respects as to form and included all exhibits required to be filed
under the applicable rules of the SEC. None of such documents, when filed,
contained any untrue statement of a material fact or omitted to state a
material fact required to be stated therein or necessary in order to make
the statements therein, in light of the circumstances under which they were
made, not misleading.
3.30. Fiduciary Responsibilities
To First Federal's knowledge, during the applicable statute of
limitations period, (a) each First Federal Subsidiary has properly
administered all accounts (if any) for which it acts as a fiduciary or
agent, including, but not limited to, accounts for which it serves as a
trustee, agent, custodian, personal representative, guardian or conservator
in accordance with the terms of the governing documents and applicable
state and federal law and regulation and common law, and (b) neither any
First Federal Subsidiary nor any Director, Officer or Employee of any First
Federal Subsidiary acting on behalf of such First Federal Subsidiary has
committed any breach of trust with respect to any such fiduciary or agency
account and the accountings of each such fiduciary or agency account are
true and correct and accurately reflect the assets of such fiduciary or
agency account. Neither First Federal nor any First Federal Subsidiary has
acted as an investor advisor. To the knowledge of First Federal, there is
no investigation or inquiry by any Regulatory Authority pending or
threatened against or affecting any First Federal Subsidiary relating to
the compliance by such First Federal Subsidiary with sound fiduciary
principles and applicable regulations.
3.31. Intellectual Property
Except as set forth in Section 3.31 of the First Federal Disclosure
Schedule, (a) First Federal and the First Federal Subsidiaries own, or have
all rights necessary to use (in each case, free and clear of any liens,
obligations for royalties or transfer restrictions, except for licenses for
commonly available software and licenses to use interfaces or data that are
contained in services agreements), all Intellectual Property (as defined
below) used in or necessary for the conduct of their respective businesses
as currently conducted, except to the extent that such failure to own or
have all rights necessary to use would not reasonably be expected to have a
material adverse effect on First Federal; (b) with respect to each item of
Intellectual Property owned or used by First Federal or any First Federal
Subsidiary immediately prior to the Effective Time: (i) such item is not,
to First Federal's knowledge, subject to any outstanding injunction,
judgment, order, decree, ruling, or charge to which First Federal or any
First Federal Subsidiary is a party; (ii) to First Federal's knowledge, no
action, suit, proceeding, hearing, investigation, charge, complaint, claim
or demand to which First Federal or any First Federal Subsidiary is a party
or of which First Federal or any First Federal Subsidiary has knowledge is
pending, or, to
27
the knowledge of First Federal or any First Federal Subsidiary, is
threatened, claimed or asserted which challenges the legality, validity,
enforceability, use or ownership of such item; and (iii) neither First
Federal nor any First Federal Subsidiary has agreed to indemnify any person
for or against any interference, infringement, misappropriation or other
conflict with respect to such item, excluding agreements to indemnify under
licenses for commonly available software and pertaining to licenses to use
interfaces or data that are contained in services agreements; and (c) to
First Federal's knowledge, no Intellectual Property owned by First Federal
or any First Federal Subsidiary is being used or enforced in a manner that
would result in the abandonment, cancellation or unenforceability of such
Intellectual Property.
To the extent that any Intellectual Property is held by First Federal
or any First Federal Subsidiary pursuant to any license, sublicense,
agreement or permission (excluding licenses for commonly available software
and licenses to use interfaces or data that are contained in services
agreements): (A) such license, sublicense, agreement or permission covering
the item is legal, valid, binding, enforceable and in full force and
effect; and (B) to First Federal's knowledge, no event has occurred which
with notice or lapse of time would constitute a breach or default or permit
termination, modification or acceleration thereunder.
With respect to all Intellectual Property of First Federal or any
First Federal Subsidiary which constitutes trade secrets: First Federal and
the First Federal Subsidiaries have taken all reasonable security
precautions to prevent disclosure or misuse of the item.
To First Federal's knowledge, neither First Federal nor any First
Federal Subsidiary has interfered with, infringed upon, misappropriated or
otherwise violated any Intellectual Property rights of third parties, and
none of the Directors, Officers or Employees of First Federal or any First
Federal Subsidiary has received since October 1, 2000, any written charge,
complaint, claim, demand or notice alleging any such interference,
infringement, misappropriation or violation (including without limitation
any claim that First Federal and the First Federal Subsidiaries must
license or refrain from using any Intellectual Property right of any
party).
Neither First Federal nor FFSB has granted any material license or
other permission to any third party to use any of its Intellectual
Property.
For purposes of this Agreement, "Intellectual Property" shall mean
trademarks and service marks, the goodwill associated with the foregoing
and registrations in any jurisdiction of, and applications in any
jurisdiction to register, the foregoing, including any extension,
modification or renewal of any such registration or application; inventions
and discoveries that may be patentable, in any jurisdiction; patents,
applications for patents (including, without limitation, divisions,
continuations, continuations in part and renewal applications), and any
renewals, extensions or reissues thereof, in any jurisdiction; trade
secrets; copyrightable works; and registrations or applications for
registration of copyrights in any jurisdiction, and any renewals or
extensions thereof.
3.32. First Federal Books and Records
28
True and complete copies of all documents listed in the First Federal
Disclosure Schedule have been made available or provided to Park. The books
of account, stock record books and other financial and corporate records of
First Federal and the First Federal Subsidiaries, all of which have been
made available to Park, are complete and correct in all material respects,
except for portions of records of various meetings that relate specifically
to the consideration of the transactions contemplated by this Agreement.
3.33. CRA Compliance
Neither First Federal nor any First Federal Subsidiary has received
any notice of non-compliance with the applicable provisions of CRA and the
regulations promulgated thereunder, and FFSB has received a CRA rating of
satisfactory or better from the OTS as a result of its most recent CRA
examination. Neither First Federal nor any First Federal Subsidiary knows
of any fact or circumstance or set of facts or circumstances which would be
reasonably likely to cause First Federal or any First Federal Subsidiary to
receive any notice of non-compliance with such provisions or cause the CRA
rating of First Federal or FFSB to fall below satisfactory.
3.34. Ownership of Park Shares
As of the date hereof, except as otherwise disclosed in Section 3.34
of the First Federal Disclosure Schedule, neither First Federal nor any
First Federal Subsidiary nor, to the knowledge of First Federal, any of
their affiliates or associates (as such terms are defined under the
Exchange Act), (a) beneficially owns, directly or indirectly, any shares of
Park or (b) is a party to any agreement, arrangement or understanding for
the purpose of acquiring, holding, voting or disposing of any shares of
Park.
3.35. Fairness Opinion
The board of directors of First Federal has received the opinion of
First Federal's Financial Advisors dated the date of this Agreement to the
effect that the consideration to be received by the First Federal
shareholders in the Merger is fair, from a financial point of view, to the
First Federal shareholders, and such opinion has not been withdrawn or
modified.
ARTICLE FOUR
REPRESENTATIONS AND WARRANTIES OF PARK AND MERGER CORP.
Each of Park and Merger Corp. hereby represents and warrants to First
Federal that:
4.01. Corporate Status
Park is an Ohio corporation and a bank holding company registered
under the Bank Holding Company Act of 1956, as amended ("BHCA"). Merger
Corp. is an Ohio corporation. Each of Park and Merger Corp. is duly
organized, validly existing and in good standing under the laws of the
State of Ohio and has the full corporate power and authority to
29
own its property, to carry on its business as presently conducted and to
enter into and, subject to the obtaining of appropriate approvals of
Governmental Authorities and Regulatory Authorities, perform its
obligations under this Agreement and consummate the transactions
contemplated by this Agreement.
4.02. Corporate Proceedings
All corporate proceedings of Park and Merger Corp. necessary to
authorize the execution, delivery and performance of this Agreement, and
the consummation of the transactions contemplated by this Agreement, have
been duly and validly taken. This Agreement has been duly executed and
delivered by duly authorized officers of each of Park and Merger Corp.
4.03. Authorized and Effective Agreement
Assuming the due authorization, execution and delivery by First
Federal, this Agreement constitutes the legal, valid and binding obligation
of each of Park and Merger Corp., enforceable against them in accordance
with its terms, except as such enforceability may be limited by bankruptcy,
insolvency, reorganization, moratorium, fraudulent conveyance and other
similar laws relating to or affecting the enforcement of creditors' rights
generally, by general equitable principles (regardless of whether
enforceability is considered in a proceeding in equity or at law) and by an
implied covenant of good faith and fair dealing. Each of Park and Merger
Corp. has the right, power, authority and capacity to execute and deliver
this Agreement and, subject to the obtaining of appropriate approvals by
Governmental Authorities and Regulatory Authorities and the expiration of
applicable regulatory waiting periods, to perform their obligations under
this Agreement.
4.04. No Conflict
Subject to the receipt of the required approvals of Governmental
Authorities and Regulatory Authorities and the expiration of applicable
regulatory waiting periods, the execution, delivery and performance of this
Agreement, and the consummation of the transactions contemplated hereby, by
Park and Merger Corp. do not and will not (a) conflict with, or result in a
violation of, or result in the breach of or a default (or which with notice
or lapse of time would result in a default) under, any provision of: (i)
any federal, state or local law, regulation, ordinance, order, rule or
administrative ruling of any Governmental Authority applicable to Park or
Merger Corp. or any of their respective properties; (ii) the articles of
incorporation or code of regulations of Park or Merger Corp.; (iii) any
material agreement, indenture or instrument to which Park or Merger Corp.
is a party or by which either or them or their respective properties or
assets may be bound; or (iv) any order, judgment, writ, injunction or
decree of any court, arbitration panel or any Governmental Authority
applicable to Park or Merger Corp.; (b) result in the creation or
acceleration of any security interest, mortgage, option, claim, lien,
charge or encumbrance upon or interest in any property of Park or Merger
Corp., except to the extent that such creation or acceleration will not
have a material adverse effect on Park; or (c) violate the terms or
conditions of, or result in the cancellation, modification,
30
revocation or suspension of, any material license, approval, certificate,
permit or authorization held by Park or Merger Corp.
31
4.05. SEC Filings
Park has filed all reports and proxy materials required to be filed
by it with the SEC pursuant to the Exchange Act. All such filings, at the
time of filing, complied in all material respects as to form and included
all exhibits required to be filed under the applicable rules of the SEC.
None of such documents, when filed, contained any untrue statement of a
material fact or omitted to state a material fact required to be stated
therein or necessary in order to make the statements therein, in light of
the circumstances under which they were made, not misleading.
4.06. Brokers, Finders and Others
There are no fees or commissions of any sort whatsoever claimed by,
or payable by Park or Merger Corp. to, any broker, finder, intermediary,
attorney, accountant or any other similar person in connection with
effecting this Agreement or the transactions contemplated hereby, except
for ordinary and customary legal and accounting fees.
4.07. Governmental and Third-Party Proceedings
No consent, approval, authorization of, or registration, declaration
or filing with, any court, Governmental Authority, Regulatory Authority or
any other third party is required to be made or obtained by Park or Merger
Corp. in connection with the execution, delivery or performance by Park or
Merger Corp. of this Agreement or the consummation by Park or Merger Corp.
of the transactions contemplated hereby, except for: (a) filings of
applications or notices, as applicable, with and the approval of certain
federal banking authorities; and (b) the filing of the appropriate
certificate of merger with the Ohio Secretary of State pursuant to the
OGCL. As of the date hereof, Park and Merger Corp. are not aware of any
reason why the approvals set forth in Section 8.03(b) will not be received
without the imposition of a condition, restriction or requirement of the
type described in Section 8.03(b).
4.08. Financial Ability to Perform; Compliance with Regulations
Park and Merger Corp. have the financial wherewithal to perform their
respective obligations under this Agreement. To Park's knowledge, Park and
Merger Corp. are, and will be immediately following the transactions
contemplated by this Agreement, in compliance with all applicable capital,
debt, financial and non-financial regulations of federal and state banking
agencies having primary regulatory jurisdiction over them, except where
failure to comply would not have a material adverse effect on Park.
4.09. Ownership of First Federal Shares
As of the date hereof, neither Park nor Merger Corp., nor to the
knowledge of Park or any of Park's affiliates or associates (as such terms
are defined under the Exchange Act), (a) beneficially owns, directly or
indirectly, any First Federal Shares or (b) is a party to any agreement,
arrangement or understanding for the purpose of acquiring, holding, voting
or disposing of any First Federal Shares.
32
4.10. Absence of Changes
Except as otherwise publicly disclosed in press releases issued by
Park before the date of this Agreement, since March 31, 2004, there has not
been any material adverse change in the business, operations, assets or
financial condition of Park and, to the knowledge of Park, no fact or
condition exists that Park believes will cause such a material adverse
change before the Closing.
4.11. Takeover Laws
Park has taken all action necessary to be taken by Park in order to
comply with any applicable Takeover Laws in connection with this Agreement
and the transactions contemplated hereby.
ARTICLE FIVE
FURTHER COVENANTS OF FIRST FEDERAL
5.01. Operation of Business
First Federal covenants to Park that, throughout the period from the
date of this Agreement to and including the Closing:
(a) Conduct of Business. First Federal's business, and the business
of the First Federal Subsidiaries, will be conducted only in
the ordinary and usual course consistent with past practice.
Without the written consent of Park, First Federal will not,
and will cause the First Federal Subsidiaries not to, take any
action that would be inconsistent with any representation or
warranty of First Federal set forth in this Agreement or which
would cause a breach of any such representation or warranty if
made at or immediately following such action, except as may be
required by applicable law or regulation;
(b) Changes in Business and Capital Structure. Except as provided
for by this Agreement, set forth in the First Federal
Disclosure Letter or as otherwise approved expressly in writing
by Park, First Federal will not, and will cause the First
Federal Subsidiaries not to:
(i) sell, transfer, mortgage, pledge or subject to any lien
or otherwise encumber any of the assets of First Federal
or any First Federal Subsidiary, tangible or intangible,
except in the ordinary course of business for full and
fair consideration actually received;
(ii) make any capital expenditure or capital additions or
improvements which individually exceed $5,000 or exceed
$10,000 in the aggregate;
33
(iii) become bound by or enter into any material contract,
commitment or transaction which is other than in the
ordinary course of its business or which is not
terminable by First Federal or the relevant First Federal
Subsidiary without penalty or which would impair the
ability of First Federal to perform its obligations under
this Agreement or prevent or materially delay the
consummation of the transactions contemplated by this
Agreement;
(iv) declare, pay or set aside for payment any dividends or
make any distributions on First Federal Shares other than
quarterly cash dividends in an amount not to exceed $.06
per First Federal Share and consistent with First
Federal's historical dividend payment practices;
(v) purchase, redeem, retire or otherwise acquire any of its
capital shares;
(vi) issue, or grant any option or right to acquire, any of
its capital shares other than the issuance of First
Federal Shares pursuant to the exercise of First Federal
Stock Options outstanding as of the date of this
Agreement;
(vii) effect, directly or indirectly, any share split,
recapitalization, combination, exchange of shares,
readjustment or other reclassification;
(viii) amend or propose to amend any of the governing documents
of First Federal or any First Federal Subsidiary except
as otherwise expressly contemplated by this Agreement;
(ix) acquire any real property or all or any portion of the
assets, business, deposits or properties of any other
entity other than in the ordinary and usual course of
business consistent with past practice (A) by way of
foreclosures or (B) by acquisitions of control in a bona
fide fiduciary capacity or in satisfaction of debts
previously contracted in good faith;
(x) enter into, establish, adopt or amend any pension,
retirement, stock option, stock purchase, savings,
profit-sharing, deferred compensation, consulting, bonus,
group insurance or other employee benefit, incentive or
welfare contract, plan or arrangement, or any trust
agreement (or similar arrangement) related thereto, in
respect of any Director, Officer, Consultant or Employee
of First Federal or any First Federal Subsidiary, or take
any action to accelerate the vesting or exercisability of
stock options, restricted stock or other compensation or
benefits payable thereunder; provided, however,
34
that First Federal or a First Federal Subsidiary may (A)
take such actions in order to satisfy either applicable
law or contractual obligations, including those arising
under its benefit plans, existing as of the date hereof
and disclosed in the First Federal Disclosure Schedule,
or regular annual renewals of insurance contracts; (B)
terminate its defined contribution retirement plan at any
time before the Effective Time, with benefit
distributions deferred until the IRS issues a favorable
determination with respect to the terminating plan's tax-
qualified status upon termination and with First Federal
(or the relevant First Federal Subsidiary) and Park to
cooperate in good faith to apply for such approval and to
agree upon associated plan termination amendments that
shall, among other things, provide for the application of
all assets of a terminating plan for its participants,
and allow plan participants not only to receive lump-sum
distributions of their benefits but also to transfer
those benefits to a qualified retirement plan maintained
by Park; and (C) terminate any of its welfare benefit
plans at any time before the Effective Time;
(xi) hire any full-time employee, other than replacement
employees for positions then existing, announce or pay
any general wage or salary increase or bonus, or enter
into or amend or renew any employment, consulting,
severance or similar agreements or arrangements with any
Officer, Director or Employee of First Federal or any
First Federal Subsidiary, except, in each case, for
changes that are required by applicable law, to satisfy
contractual obligations existing as of the date hereof
that are disclosed in the First Federal Disclosure
Schedule, or to pay pre-announced compensation set forth
in the First Federal Disclosure Schedule;
(xii) except for amounts as may be obtained with the right of
prepayment at any time without penalty or premium,
borrowings on an overnight or daily basis, and deposit
taking in the ordinary course of its business, borrow or
agree to borrow any funds, including but not limited to
repurchase transactions, or indirectly guarantee or agree
to guarantee any obligations of others;
(xiii) enter into or terminate any contract, other than a loan
or deposit contract, requiring the payment or receipt of
$25,000 or more in any 12-month period or $50,000 in the
aggregate or amend or modify in any material respect any
of its existing material contracts, except as set forth
in the First Federal Disclosure Schedule;
(xiv) implement or adopt any change in its accounting
principles, practices or methods, other than as may be
required by GAAP;
35
(xv) waive or cancel any right of material value or material
debts, except in the ordinary course of business
consistent with past practices;
(xvi) make or change any Tax election or Tax accounting method,
file any federal income Tax Return or any amended Tax
Return, settle any Tax claim or assessment or consent to
the extension or waiver of any statute of limitations
with respect to Taxes;
(xvii) originate or issue a commitment to originate (A) any
loan secured by one- to four-family residential real
estate in a principal amount of $350,000 or more, (B) any
loan secured by nonresidential real estate that causes
the aggregate amount outstanding to a single borrower to
equal $350,000 or more or (C) any other loan in a
principal amount of $50,000 or more;
(xviii) establish any new lending programs or make any changes
in its policies concerning which persons may approve
loans;
(xix) enter into any securities transactions for its own
account or purchase or otherwise acquire any investment
security for its own account, other than investments in
money-market funds and investments in securities
permissible by law to secure public funds as such
investments need to be made in the ordinary course of
securing such deposits;
(xx) enter into any interest rate swaps or derivative or hedge
contracts;
(xxi) increase or decrease the rate of interest paid on time
deposits or certificates of deposits, except in a manner
and consistent with past practices in relation to rates
prevailing in the relevant First Federal Subsidiary's
market;
(xxii) foreclose upon or otherwise take title to or possession
or control of any real property without first obtaining a
Phase I environmental report thereon which indicates that
the property is free of pollutants, contaminants or
hazardous or toxic waste materials including asbestos and
petroleum products; provided, however, that the relevant
First Federal Subsidiary shall not be required to obtain
such a report with respect to single-family, non-
agriculture residential property of one acre or less to
be foreclosed upon unless it has reason to believe such
property may contain any such pollutants, contaminants,
waste materials including asbestos or petroleum products;
(xxiii) take any action that would result in (A) any of its
representations or warranties contained in this Agreement
being or becoming
36
untrue in any material respect at any time at or prior to
the Effective Time, (B) any of the conditions to the
Merger set forth in Article Eight not being satisfied or
(C) a violation of any provision of this Agreement
except, in each case, as may be required by applicable
law or regulation;
(xxiv) cause any material adverse change in the amount or
general composition of deposit liabilities other than in
the ordinary course of business;
(xxv) make any material investment other than in the ordinary
course of business; or
(xxvi) enter into any agreement to do any of the foregoing.
(c) Maintenance of Property. First Federal and the First Federal
Subsidiaries will use their commercially reasonable efforts to
maintain and keep their respective properties and facilities in
their present condition and working order, ordinary wear and
tear excepted.
(d) Performance of Obligations. First Federal and the First Federal
Subsidiaries will perform all of their respective obligations
under all material agreements relating to or affecting their
respective properties, rights and businesses.
(e) Maintenance of Business Organization. First Federal will, and
will cause the First Federal Subsidiaries to, use their
commercially reasonable efforts to maintain and preserve their
respective business organizations intact; to retain present key
Employees; and to maintain the respective relationships of
customers, suppliers and others having business relationships
with them. First Federal will not, and will cause the First
Federal Subsidiaries not to, take any action or omit to take
any action which would terminate or enable any Employee of
First Federal or any First Federal Subsidiary to terminate such
Employee's employment or employment agreement without cause and
continue thereafter to receive compensation.
(f) Insurance. First Federal and the First Federal Subsidiaries
will maintain insurance coverage with reputable insurers, which
in respect of amounts, premiums, types and risks insured, were
maintained by them at the First Federal Balance Sheet Date, and
upon the renewal or termination of such insurance, First
Federal and the First Federal Subsidiaries will use their
commercially reasonable efforts to renew or replace such
insurance coverage with reputable insurers, in respect of the
amounts, premiums, types and risks insured or maintained by
them at the First Federal Balance Sheet Date.
37
(g) Access to Information. Following the public announcement of
this Agreement made jointly by First Federal and Park, First
Federal will, and will cause the First Federal Subsidiaries,
to: (i) take all action reasonably necessary to afford to Park
and to its officers, employees, attorneys, accountants and
other advisors and representatives reasonable and prompt access
during normal business hours and any other mutually agreeable
times during the period prior to the Effective Time or the
termination of this Agreement to all of their respective
properties, and, to the extent First Federal or any First
Federal Subsidiary has or may provide such access, to First
Federal Real Estate Collateral (including for purposes of
inspection and investigation for soil and groundwater tests),
books, records, Tax Returns and reports, financial statements,
contracts and commitments, and any work papers relating to any
of the foregoing; (ii) furnish to Park any and all documents,
copies of documents, and information (A) concerning compliance
and/or noncompliance with Environmental Laws and with respect
to the past, present or suspected future presence of Hazardous
Substances on the First Federal Real Properties and First
Federal Real Estate Collateral, including but not limited to
environmental audit and Phase I environmental reports, and (B)
concerning First Federal's and the First Federal Subsidiaries'
affairs as Park may reasonably request; (iii) afford full
access to Park to First Federal's and the First Federal
Subsidiaries' Officers, Directors, Employees and agents in
order that Park may have full opportunity to make such
investigation as it shall desire to make of the business and
affairs of First Federal and the First Federal Subsidiaries;
and (iv) authorize Park's representatives to inquire of
Government Authorities, and inspect the files of those
Governmental Authorities, with respect to the environmental
conditions on and about the First Federal Real Properties and
First Federal Real Estate Collateral.
During the period from the date of this Agreement to the
Effective Time, First Federal will promptly furnish Park with
copies of all monthly and other interim financial statements
produced in the ordinary course of business as the same will
become available. Notwithstanding any other provisions of this
Section 5.01(g), (x) neither Park nor any of its subsidiaries
or officers, employees, attorneys, accountants, other advisors
or representatives shall unreasonably interfere with the
business operations of First Federal or any of the First
Federal Subsidiaries; (y) First Federal and the First Federal
Subsidiaries may, in their reasonable discretion, limit the
access of Park to the Employees of First Federal and the First
Federal Subsidiaries whose work product First Federal
reasonably wishes to keep confidential, provided that, in any
event, Century or another bank Subsidiary of Park may conduct
such interviews of the Employees of First Federal and the First
Federal Subsidiaries as are reasonable, necessary and
appropriate under all applicable laws to allow Century or such
other bank Subsidiary of Park to determine whether to offer
employment to any of such Employees; and (z) First Federal
shall not provide access to minutes
38
of meetings or portions of minutes and other records that
relate specifically to the consideration of the transactions
contemplated by this Agreement.
(h) Payment of Taxes. First Federal will, and will cause the First
Federal Subsidiaries to, timely file all Tax Returns required
to be filed on or before the Effective Time, and accrue for and
pay any Tax shown on such Tax Returns to be due.
(i) Risk Management. Except as required by applicable law or
regulation or by the OTS or the FDIC, neither First Federal nor
any First Federal Subsidiary will (i) implement or adopt any
material change in its interest rate risk management and other
risk management policies, procedures or practices; (ii) fail to
follow its existing policies or practices with respect to
managing its exposure to interest rate and other risks; or
(iii) fail to use commercially reasonable means to avoid any
material increase in its aggregate exposure to interest rate
risk.
(j) Exercise of First Federal Stock Options. First Federal will
take the action reasonably necessary to enable each holder of
unexercised First Federal Stock Options under the First Federal
Stock Option Plans to exercise such First Federal Stock Options
before the Effective Time.
5.02. Notification
Between the date of this Agreement and the Closing Date, First
Federal will promptly notify Park in writing if First Federal becomes aware
of any fact or condition that (a) causes or constitutes a breach of any of
First Federal's representations and warranties or (b) would (except as
expressly contemplated by this Agreement) cause or constitute a breach of
any such representation or warranty had such representation or warranty
been made as of the time of occurrence or discovery of such fact or
condition. Should any such fact or condition require any change in the
First Federal Disclosure Schedule, First Federal will promptly deliver to
Park a supplement to the First Federal Disclosure Schedule specifying such
change ("Updated First Federal Disclosure Schedule"); provided, however,
that the disclosure of such change in the Updated First Federal Disclosure
Schedule shall not be deemed to constitute a cure of any breach of any
representation or warranty made pursuant to this Agreement unless consented
to in writing by Park. During the same period, First Federal will promptly
notify Park of (i) the occurrence of any uncured breach of any of the
covenants of First Federal contained in this Agreement, (ii) the occurrence
of any event that may make the satisfaction of the conditions in this
Agreement impossible or unlikely or (iii) the occurrence of any event that
is reasonably likely, individually or taken with all other facts, events or
circumstances known to First Federal, to result in a material adverse
effect with respect to First Federal. In addition, if at any time prior to
the Effective Time, any event or circumstance relating to First Federal or
any of its Officers or Directors should be discovered which should be set
forth in a supplement to the Proxy Statement, First Federal shall promptly
inform Park.
39
5.03. Acquisition Proposal
From and after the date hereof, First Federal will not, directly or
indirectly, through any of its Officers, Directors, Employees, agents or
advisors solicit, initiate or knowingly encourage, including by means of
furnishing information, any proposals, offers or inquiries from any person
or entity, or discuss or negotiate with any such person or entity,
regarding any acquisition or purchase of 20% or more of the outstanding
shares of any class of voting securities, or 20% or more of the assets or
deposits of, First Federal or any First Federal Subsidiary, or any merger,
tender or exchange offer, consolidation or business combination involving,
First Federal or any First Federal Subsidiary (collectively, "Acquisition
Proposals"). The foregoing sentence shall not apply, however, to the
consideration, negotiation and consummation of an Acquisition Proposal not
solicited or initiated by First Federal or any First Federal Subsidiary or
any of their respective Officers, Directors, agents or affiliates if, and
to the extent that, the board of directors of First Federal determines in
good faith after consultation with First Federal's Financial Advisors and
upon written advice of legal counsel to First Federal that failure to
consider such Acquisition Proposal could reasonably be expected to
constitute a breach of its fiduciary duties to the First Federal
shareholders under Ohio law; provided, however, that First Federal shall
give Park prompt notice of any such Acquisition Proposal and keep Park
promptly informed regarding the substance thereof and the response of the
First Federal board of directors thereto. First Federal shall immediately
cease and cause to be terminated any activities, discussions or
negotiations conducted prior to the date of this Agreement with any parties
other than Park with respect to any Acquisition Proposal and shall use its
reasonable best efforts to enforce any confidentiality or similar agreement
relating to an Acquisition Proposal.
5.04. Delivery of Information
First Federal shall furnish to Park promptly after such documents are
available (a) all reports, proxy statements or other communications by
First Federal to its shareholders generally and (b) all press releases
relating to any transactions.
5.05. Takeover Laws
First Federal shall take all necessary steps to (a) comply with (or
continue to comply with) the requirements of any applicable Takeover Law
and provisions under its articles of incorporation and amended and restated
code of regulations, as applicable, by action of the board of directors of
First Federal or otherwise, and (b) assist in any challenge by Park to the
validity, or applicability to the Merger, of any Takeover Law.
5.06. Merger of Subsidiaries
In the event that Park shall request, First Federal shall take such
actions, and shall cause FFSB to take such actions, as may reasonably be
required in order to effect, at or after the Effective Time, the merger of
FFSB with and into Century; provided, however, that such merger shall not
take effect until after (a) the Merger and (b) the merger of the Surviving
Corporation with and into Park.
5.07. Accounting Policies
40
After the shareholders of First Federal have approved the Merger and
after the receipt of necessary regulatory approvals, on or before the
Effective Time and at the request of Park, First Federal shall cause the
First Federal Subsidiaries to promptly (a) establish and take such reserves
and accruals to conform the First Federal Subsidiaries' loan, accrual and
reserve policies to Century's policies; (b) establish and take such
accruals, reserves and charges in order to implement such policies in
respect of excess facilities and equipment capacity, severance costs,
litigation matters, write-off or writedown of various assets and other
appropriate accounting adjustments; and (c) recognize for financial
accounting purposes such expenses of the Merger and restructuring charges
related to or to be incurred in connection with the Merger, to the extent
permitted by law and consistent with GAAP and the fiduciary duties of the
Officers and Directors of First Federal and the First Federal Subsidiaries;
provided, however, that neither First Federal nor any First Federal
Subsidiary shall be obligated to make any such changes or adjustments until
the satisfaction of all unwaived conditions set forth in Sections 8.02 and
8.03, and further provided that no basis for termination of this Agreement
by any party pursuant to Article Eleven is then extent.
ARTICLE SIX
FURTHER COVENANTS OF PARK
6.01. Access to Information
Park shall furnish to First Federal promptly after such documents are
available (a) all reports, proxy statements or other communications by Park
to its shareholders generally and (b) all press releases relating to any
transactions.
6.02. Employees; Employee Benefits
(a) All Employees of First Federal or any First Federal Subsidiary
as of the date of this Agreement who are actively employed at the Effective
Time and who are offered employment by Century or another bank Subsidiary
of Park ("Continuing Employees") at the Effective Time and who are not
currently covered by a written employment or severance agreement with First
Federal or any First Federal Subsidiary, shall be employed as at will
employees of Century or such other bank Subsidiary of Park. Continuing
Employees will be eligible to participate in Park's benefit plans on the
earliest date permitted by each such plan, with credit for years of
service, for purposes of eligibility and vesting (but not for the purpose
of accrual of benefits or the allocation of employer contributions), with
(i) First Federal or the relevant First Federal Subsidiary and, (ii) to the
extent credit would have been given by First Federal or the relevant First
Federal Subsidiary for years of service with a predecessor (including any
business organization acquired by First Federal or the relevant First
Federal Subsidiary), years of service with a predecessor of First Federal
or the relevant First Federal Subsidiary. Park shall use its best efforts
to cause any and all pre-existing condition limitations (to the extent such
limitation did not apply to a pre-existing condition under First Federal's
or any First Federal Subsidiary's equivalent plan) and eligibility waiting
period under group health plans with respect to Continuing Employees and
their eligible dependents to be waived. Immediately prior to the Effective
Time, Continuing Employees will be paid in cash for any accrued and unused
sick leave and vacation to which such Continuing Employees are entitled
under First Federal's or the
41
relevant First Federal Subsidiary's relevant policies, and, following the
Effective Time, such Continuing Employees will be subject to Park's
policies with respect to sick leave and vacation. Employees of First
Federal or any First Federal Subsidiary who are actively employed at the
Effective Time and who have loans from First Federal or a First Federal
Subsidiary on which the interest rate is reduced while the Employee
continues to be employed by First Federal or the relevant First Federal
Subsidiary shall from and after the Effective Time and until the repayment
of such loans, whether such Employees of First Federal or any First Federal
Subsidiary are terminated or become Continuing Employees, receive the
reduction in the interest rate on such loans which is equivalent to the
reduction in interest rate received by employees of Century on loans which
they have with Century; provided, however, that if (i) at any time after
the Effective Time, a Continuing Employee voluntarily terminates his or her
employment with Century or the other bank Subsidiary of Park employing the
Continuing Employee or (ii) a Continuing Employee's employment is
terminated for cause, such Continuing Employee will no longer receive the
interest rate reduction provided for in this sentence from and after the
date of termination of employment. The foregoing covenants shall survive
the Merger, and Park shall before the Effective Time adopt resolutions that
amend its tax-qualified retirement plans to provide for the First Federal
or the relevant First Federal Subsidiary service credits referenced herein.
(b) Any Employee of First Federal or any First Federal Subsidiary
immediately before the Effective Time who is not currently covered by a
written employment or severance agreement with First Federal or a First
Federal Subsidiary and who is not offered employment by Century or another
bank Subsidiary of Park immediately at the Effective Time on terms and
conditions substantially comparable to the terms and conditions of the
employee's employment by First Federal or a First Federal Subsidiary and at
an office located within 50 miles of the main office of FFSB shall receive:
(i) a severance payment equal to the product of one week of the Employee's
then current salary multiplied by the number of total years of service as
an Employee of First Federal or a First Federal Subsidiary; (ii) payment
for vacation and sick time that is unused and accrued consistent with the
terms of First Federal's or the relevant First Federal Subsidiary's
vacation and sick pay policies in effect on the date of this Agreement;
(iii) outplacement consultation services for a period of six months
following the Effective Time; and (iv) any other benefits or payments to
which the Employee is entitled under the terms of any Compensation and
Benefit Plan or under FFSB's Employee Handbook or as otherwise protected or
required by law.
(c) Messrs. J. William Plummer and Larry W. Snode and Ms. Connie
Ayres LaPlante will be treated as having been terminated for other than
Just Cause (as defined in their current employment agreements) at the
Effective Time and shall receive (i) the severance and other payments and
benefits contemplated by Section 4(a)(ii) of their current employment
agreements, (ii) payment for vacation and sick pay that are unused and
accrued consistent with the terms of First Federal's or the relevant First
Federal Subsidiary's vacation and sick pay policies in effect on the date
of this Agreement and (iii) any other benefits or payments to which they
are entitled under the terms of any Compensation and Benefit Plan or under
FFSB's Employee Handbook or as otherwise protected or required by law.. Any
Employee of First Federal or any First Federal Subsidiary entitled to a
payment under this Section 6.02(c) shall be entitled to elect to defer
receipt of such payment until January 1, 2005. Park shall also honor the
42
Agreement Not to Compete among First Federal, FFSB and J. William Plummer
dated May 19, 2004.
(d) Prior to the Effective Time, Messrs. Thomas N. Sulens and Jack
W. Imes will each be offered a new employment agreement with Century or
another bank Subsidiary of Park to be effective as of the Effective Time,
which new employment agreement will replace and supersede his current
employment agreement and will contain substantially the same terms and
conditions as are provided under his current employment agreement with
FFSB, provided that the term of the new employment agreement will end on
the second anniversary of the Closing Date. In the event that Mr. Sulens or
Mr. Imes does not enter into a new employment agreement with Century or
another bank Subsidiary as contemplated by the foregoing sentence, he will
continue to be employed under the terms of his current employment agreement
for the remaining term of such agreement.
(e) Park shall also cause continuation coverage in accordance with
Section 4980B of the Code to be available to all eligible employees (and,
if applicable, their eligible dependents) of First Federal and/or the First
Federal Subsidiaries who were covered under a First Federal or First
Federal Subsidiary group health plan and who cease to be employees of First
Federal or any First Federal Subsidiary as of the Effective Time, and all
former eligible employees (and, if applicable, their eligible dependents)
who are receiving or are eligible to receive, upon election, such
continuation coverage under a First Federal or First Federal Subsidiary
group health plan as of the Effective Time.
(f) If amounts payable or available to any Employee of First
Federal or any First Federal Subsidiary under this Agreement or on account
of events associated with the effect of this Agreement are to be reduced
under the Employee's current employment agreement to avoid penalties under
Sections 280G and 4999 of the Internal Revenue Code, the Employee will be
entitled to elect the payment, benefit or benefits (or combination of
payments, benefit or benefits) against which the reduction will be applied
and Park, Century and all Park Subsidiaries will be bound by that election.
This election will be based on information provided by Park and
calculations performed, at Park's expense, by Crowe Chizek and Company LLP,
or such other independent accounting or compensation consulting company
selected by Park, subject to review by the Employee, and must be made, in
writing, no later than 30 days after the date the information and
calculations described in this sentence are provided to the Employee.
(g) The covenants in this Section 6.02 shall survive the Merger.
6.03. Notification
Between the date of this Agreement and the Closing Date, Park will
promptly notify First Federal in writing if Park becomes aware of any fact
or condition that (a) causes or constitutes a breach of any of the
representations and warranties of Park and Merger Corp. or (b) would
(except as expressly contemplated by this Agreement) cause or constitute a
breach of any such representation or warranty had such representation or
warranty been made as of the time of occurrence or discovery of such fact
or condition. During the same period, Park will promptly notify First
Federal of (i) the occurrence of any material incurred breach of any of the
43
covenants of Park or Merger Corp. contained in this Agreement, (ii) the
occurrence of any event that may make the satisfaction of the conditions in
this Agreement impossible or unlikely or (iii) the occurrence of any event
or circumstance relating to Park or any of its officers or directors which
is required by applicable law or regulation to be set forth in a supplement
to the Proxy Statement.
6.04. Officers' and Directors' Indemnification
(a) For a period of three years after the Effective Time, Park
shall, to the fullest extent permitted by applicable law, and consistent
with the terms and conditions of the articles of incorporation and amended
and restated code of regulations of First Federal or the governing
documents of the relevant First Federal Subsidiary, indemnify, defend and
hold harmless, and provide advancement of expenses to, each individual who
is a current or former Director or Officer of First Federal or any First
Federal Subsidiary (each, an "Indemnified Party") against all costs or
expenses (including reasonable attorneys' fees), judgments, fines, losses,
claims, damages or liabilities (collectively, "Costs") incurred in
connection with any claim, action, suit, proceeding or investigation,
whether civil, criminal, administrative or investigative, arising out of
actions or omissions of such Director or Officer in the course of his or
her duties as a Director or Officer of First Federal or any First Federal
Subsidiary occurring prior to the Effective Time; provided that Park shall
not be obligated to indemnify a Director or Officer for acts or omissions
of such Director or Officer that were beyond the scope of the duties of
such Director or Officer as a Director or Officer of First Federal or any
First Federal Subsidiary. Any determination required to be made with
respect to whether an Indemnified Party's conduct complies with the
standards set forth under applicable law for indemnification shall be made
by the court in which the claim, action, suit or proceeding was brought or
by independent counsel (which shall not be counsel that provides material
services to Park) selected by Park and reasonably acceptable to such
Indemnified Party. As a condition to receiving such indemnification, the
Indemnified Party shall assign to Park, by separate writing, all right,
title and interest in and to the proceeds of the Indemnified Party's
applicable insurance coverage, if any, including insurance maintained or
provided by Park, First Federal or the relevant First Federal Subsidiary to
the extent of such indemnity. No Indemnified Party shall be entitled to
such indemnification with respect to a claim (i) if such Indemnified Party
fails to cooperate in the defense and investigation of such claim as to
which indemnification may be made, (ii) made by such Indemnified Party
against Park, any Subsidiary of Park, First Federal or any First Federal
Subsidiary arising out of or in connection with this Agreement, the
transactions contemplated hereby or the conduct of the business of Park,
the Subsidiary of Park, First Federal or any First Federal Subsidiary, or
(iii) if such person fails to deliver such notices as may be required under
any applicable directors' and officers' liability insurance policy to
preserve any possible claims of which the Indemnified Party is aware, to
the extent such failure results in the denial of payment under such policy.
(b) Park shall designate one of the following two alternatives for
providing directors' and officers' liability coverage for the Directors and
Officers of First Federal and the First Federal Subsidiaries: (i) First
Federal shall obtain extended reporting or "tail" coverage for three years
under the director and officer liability policy currently maintained by
First Federal and the First Federal Subsidiaries or (ii) subject to First
Federal and the First Federal
44
Subsidiaries providing all requested information and representations to
Park's directors' and officers' liability insurance carrier, Park shall add
a rider, to be effective at the Effective Time, to Park's existing
directors' and officers' liability insurance policy covering the acts and
omissions of the Officers and Directors of First Federal and the First
Federal Subsidiaries occurring prior to the Effective Time and to continue
such rider for a period of three years.
6.05. Century Board of Directors
Park agrees to take all action, consistent with applicable laws and
regulations, necessary to appoint each of the directors of First Federal
who is not, currently or at the Effective Time, an Employee of either First
Federal or any First Federal Subsidiary (an "Outside First Federal
Director"), to the board of directors of Century, effective as of the
Effective Time.
ARTICLE SEVEN
FURTHER OBLIGATIONS OF THE PARTIES
7.01. Cooperative and Necessary Further Action
Subject to the terms and conditions of this Agreement, each of First
Federal, Merger Corp. and Park agrees to use its reasonable best efforts in
good faith to satisfy all conditions to this Agreement and to cause the
consummation of the transactions contemplated by this Agreement, and to
take, or cause to be taken, all necessary actions and to execute all
additional documents, agreements and instruments that may be reasonably
required, in the opinion of counsel for First Federal and counsel for Park,
to satisfy all legal requirements of the State of Ohio and of the United
States, so that this Agreement and the transactions contemplated hereby
will become effective as promptly as practicable.
7.02. Press Releases
Each of Park, Merger Corp. and First Federal shall not make any press
release or other public announcement concerning the transactions
contemplated by this Agreement without the consent of the other party
hereto as to the form and contents of such press release or public
announcement, except to the extent that such press release or public
announcement may be required by law or the rules of the American Stock
Exchange or The Nasdaq Stock Market to be made before such consent can be
obtained.
7.03. Proxy Statement; First Federal Meeting
(a) As promptly as reasonably practical following the date hereof,
First Federal shall prepare, in consultation with Park and with
Park's cooperation, and file with the SEC mutually acceptable
proxy materials (including all amendments or supplements
thereto, the "Proxy Statement") relating to the matters to be
submitted to the First Federal shareholders at the First
Federal Meeting. First Federal shall promptly notify Park upon
the receipt of any comments from the SEC or its staff or any
request from the SEC or its staff for amendments or supplements
to
45
the Proxy Statement and shall promptly provide Park with copies
of all correspondence between First Federal and its
representatives, on the one hand, and the SEC and its staff, on
the other hand. Notwithstanding the foregoing, prior to filing
or mailing the Proxy Statement (or any amendment or supplement
thereto), or responding to any comments of the SEC with respect
thereto, First Federal (i) shall provide Park with a reasonable
opportunity to review and comment on such document or response,
(ii) shall include in such document or response all comments
reasonably proposed by Park, and (iii) shall not file or mail
such document or respond to the SEC prior to receiving Park's
approval, which approval shall not be unreasonably withheld or
delayed.
(b) Each of First Federal and Park agrees, as to itself and its
Subsidiaries, that none of the information to be supplied by it
for inclusion or incorporation by reference in the Proxy
Statement and any amendment or supplement thereto will, as of
the date such Proxy Statement is mailed to shareholders of
First Federal and up to and including the date of the First
Federal Meeting, contain any untrue statement of a material
fact or omit to state any material fact required to be stated
therein or necessary to make the statements therein in light of
the circumstances under which they were made not misleading.
All information about First Federal and the First Federal
Subsidiaries included in the Proxy Statement will be deemed to
have been supplied by First Federal. All information about Park
and its Subsidiaries included in the Proxy Statement will be
deemed to have been supplied by Park.
(c) Each of First Federal and Park agrees, if it shall become aware
prior to the Effective Time of any information furnished by it
that would cause any of the statements in the Proxy Statement
to be false or misleading with respect to any material fact, or
to omit to state any material fact necessary to make the
statements therein not false or misleading, to promptly inform
the other party thereof and to cooperate in taking the
necessary steps to correct the Proxy Statement.
(d) First Federal shall, as promptly as practicable following the
date of this Agreement, establish a record date for, duly call,
give notice of, convene and hold the First Federal Meeting,
regardless of whether the board of directors of First Federal
determines at any time that this Agreement or the Merger is no
longer advisable or recommends that the shareholders of First
Federal reject this Agreement or the Merger. The First Federal
board of directors shall recommend to its shareholders that
they adopt this Agreement, and shall include such
recommendation in the Proxy Statement, unless the board of
directors of First Federal reasonably determines in good faith
after consultation with First Federal's Financial Advisors and
upon written advice of counsel to First Federal that such a
46
recommendation would constitute a breach of its fiduciary
duties to the shareholders of First Federal.
7.04. Regulatory Applications
Park and First Federal and their respective Subsidiaries shall
cooperate and use their respective reasonable best efforts to prepare all
documentation, to timely effect all filings not later than 30 days after
the date of this Agreement and to obtain all permits, consents, approvals
and authorizations of all third parties and Governmental Authorities and
Regulatory Authorities necessary to consummate the transactions
contemplated by this Agreement. Each of Park and First Federal shall
provide all information required from them in order to enable the other to
make necessary filings. Such information shall be delivered within five
business days of a written request for such information. Each of Park and
First Federal shall have the right to review in advance, and to the extent
practicable, each will consult with the other, in each case subject to
applicable laws relating to the exchange of information, with respect to,
and shall be provided in advance so as to reasonably exercise its right to
review in advance, all material written information submitted to any third
party or any Governmental Authority or Regulatory Authority in connection
with the transactions contemplated by this Agreement. In exercising the
foregoing right, each of the parties hereto agrees to act reasonably and as
promptly as practicable. Each party hereto agrees that it will consult with
the other party hereto with respect to the obtaining of all material
permits, consents, approvals and authorizations of all third parties and
Governmental Authorities and Regulatory Authorities necessary or advisable
to consummate the transactions contemplated by this Agreement and each
party will keep the other apprised of the status of material matters
relating to completion of the transactions contemplated hereby. Each party
agrees, upon request, to furnish the other party with all information
concerning itself, its Subsidiaries, directors, officers and shareholders
and such other matters as may be reasonably necessary or advisable in
connection with any filing, notice or application made by or on behalf of
such other party or of its Subsidiary to any third party or Governmental or
Regulatory Authority.
7.05. Confidentiality
The parties to this Agreement acknowledge the confidential and
proprietary nature of the information as hereinafter described which has
heretofore been exchanged and which will be received from each other
hereunder (the "Information") and agree to hold and keep the same
confidential. Such Information will include any and all financial,
technical, commercial, marketing, customer or other information concerning
the business, operations and affairs of a party that may be provided to the
other, irrespective of the form of the communications, by such party's
employees or agents. Such Information shall not include information that is
or becomes generally available to the public other than as a result of a
disclosure by a party or its representatives in violation of this
Agreement, or Information which is required to be furnished or used in
connection with legal proceedings. The parties agree that the Information
will be used solely for the purposes contemplated by this Agreement and
that such Information will not be disclosed to any person other than
employees and agents of a party who are directly involved in evaluating the
transaction. The Information shall not be used in any way detrimental to a
party, including use directly or indirectly in the conduct of the other
party's
47
business or enterprise in which such party may have an interest, now or in
the future, and whether or not now in competition with such other party.
Upon the written request of the disclosing party, upon termination of this
Agreement, the other parties will promptly return or destroy Information in
their possession and certify to the disclosing party that the party has
done so.
7.06. No Conflicting Actions
Park shall not enter into any agreement or transaction, undertake any
obligation, indebtedness or liability, or take any acts or actions that are
reasonably likely to materially impair or preclude Park's ability to obtain
the Governmental Authority or Regulatory Authority to consummate the
transactions contemplated by this Agreement without the imposition of a
condition, restriction or requirement of the type described in Section
8.03(b).
ARTICLE EIGHT
CONDITIONS PRECEDENT TO THE OBLIGATIONS OF THE PARTIES
8.01. Conditions to the Obligations of Park and Merger Corp.
The obligations of Park and Merger Corp. under this Agreement shall
be subject to the satisfaction, or written waiver by Park and Merger Corp.
prior to the Closing Date, of each of the following conditions precedent:
(a) The representations and warranties of First Federal set forth
in this Agreement (without giving effect to any material
adverse effect, materiality or similar qualifiers) shall be
true and correct in all material respects as of the date of
this Agreement and as of the Closing Date as though such
representations and warranties were also made as of the Closing
Date, except (i) that those representations and warranties
which by their terms speak as of a specific date shall be true
and correct as of such date; and (ii) where the failure to be
so true and correct would not, individually or in the
aggregate, have or be reasonably likely to have a material
adverse effect on First Federal or any First Federal
Subsidiary; and Park and Merger Corp. shall have received a
certificate, dated the Closing Date, signed on behalf of First
Federal by the chief executive officer and the chief financial
officer of First Federal to such effect.
(b) First Federal shall have performed in all material respects all
of its covenants and obligations under this Agreement to be
performed by it on or prior to the Closing Date, including
those relating to the Closing and the closing deliveries
required by Section 9.03 of this Agreement; and Park and Merger
Corp. shall have received a certificate, dated the Closing
Date, signed on behalf of First Federal by the chief executive
officer and the chief financial officer of First Federal to
such effect.
48
(c) First Federal shall have obtained the consent or approval of
each person (other than Governmental Authorities and Regulatory
Authorities) whose consent or approval shall be required in
connection with the transactions contemplated hereby under any
loan or credit agreement, note, mortgage, indenture, lease,
license or other agreement or instrument, except those for
which failure to obtain such consents and approvals would not,
individually or in the aggregate, have a material adverse
effect, after the Effective Time, on the Surviving Corporation,
Merger Corp. or Park.
(d) The consolidated net income of First Federal, excluding any
merger related expenses (including, without limitation,
payments under employment contracts, severance agreements,
investment banking fees and legal and accounting fees), for the
period from April 1, 2004 through the month-end immediately
preceding the Closing Date shall be not less than $400,000.
8.02. Conditions to the Obligations of First Federal
The obligations of First Federal under this Agreement shall be
subject to satisfaction, or written waiver by First Federal prior to the
Closing Date, of each of the following conditions precedent:
(a) The representations and warranties of Park and Merger Corp. set
forth in this Agreement (without giving effect to any material
adverse effect, materiality or similar qualifiers) shall be
true and correct in all material respects as of the date of
this Agreement and as of the Closing Date as though such
representations and warranties were also made as of the Closing
Date, except that (i) representations and warranties which by
their terms speak as of a specific date shall be true and
correct as of such date; and (ii) where the failure to be so
true and correct would not, individually or in the aggregate,
have or be reasonably likely to have a material adverse effect
on Park and its Subsidiaries; and First Federal shall have
received a certificate, dated the Closing Date, signed on
behalf of Park and Merger Corp. by the chief executive officer
and the chief financial officer of each of Park and Merger
Corp. to such effect.
(b) Each of Park and Merger Corp. shall have performed in all
material respects all of their covenants and obligations under
this Agreement to be performed by them on or prior to the
Closing Date, including those related to the Closing and the
closing deliveries required by Section 9.02 of this Agreement;
and First Federal shall have received a certificate, dated the
Closing Date, signed on behalf of Park and Merger Corp. by the
chief executive officer and the chief financial officer of each
of Park and Merger Corp. to such effect.
49
(c) Park and Merger Corp. shall have obtained the consent or
approval of each person (other than Governmental Authorities
and Regulatory Authorities) whose consent or approval shall be
required in connection with the transactions contemplated
hereby under any loan or credit agreement, note, mortgage,
indenture, lease, license or other agreement or instrument,
except those for which failure to obtain such consents and
approvals would not, individually or in the aggregate, have a
material adverse effect, after the Effective Time, on Park.
(d) First Federal shall have received from First Federal's
Financial Advisors an opinion reasonably acceptable to First
Federal dated as of the date of the Proxy Statement to the
effect that the consideration to be received by the holders of
the First Federal Shares in the Merger is fair to the holders
of the First Federal Shares from a financial point of view.
8.03. Mutual Conditions
The obligations of First Federal, Park and Merger Corp. under this
Agreement shall be subject to the satisfaction, or written waiver by First
Federal, Park and Merger Corp. prior to the Closing Date, of each of the
following conditions precedent:
(a) The shareholders of First Federal shall have duly adopted this
Agreement by the required vote.
(b) All approvals of Governmental Authorities and Regulatory
Authorities required to consummate the transactions
contemplated by this Agreement shall have been obtained and
shall remain in full force and effect and all statutory waiting
periods in respect thereof shall have expired and no such
approvals or statute, rule or order shall contain any
conditions, restrictions or requirements which Park reasonably
determines would either before or after the Effective Time (i)
have a material adverse effect on Park and its Subsidiaries
taken as a whole after giving effect to the consummation of the
Merger; or (ii) prevent Park from realizing the major portion
of the economic benefits of the Merger and the transactions
contemplated thereby which Park currently anticipates
obtaining.
(c) No temporary restraining order, preliminary or permanent
injunction or other order issued by a court of competent
jurisdiction or other legal restraint or prohibition preventing
the consummation of the Merger shall be in effect. No
Governmental Authority or Regulatory Authority of competent
jurisdiction shall have enacted, issued, promulgated, enforced,
deemed applicable, threatened, commenced a proceeding with
respect to or entered any statute, rule, regulation, judgment,
decree, injunction or other order prohibiting consummation of
the transactions contemplated by this Agreement or making the
Merger illegal.
50
ARTICLE NINE
CLOSING
9.01. Closing
The closing of the transactions contemplated by this Agreement (the
"Closing") shall be held at the offices of Park, 50 North Third Street,
Newark, Ohio 43055, (a) on a date and at a time mutually agreeable to the
parties, which date shall not be earlier than the third business day to
occur after the last of the conditions set forth in Article Eight shall
have been satisfied or waived in accordance with the terms of this
Agreement (excluding conditions that, by their terms, cannot be satisfied
until the Closing Date) or later than the last business day of the month in
which such third business day occurs, provided no such election shall cause
the Closing to occur on a date after that specified in Section 11.01(b)(i)
of this Agreement or after the date or dates on which any Governmental
Authority or Regulatory Authority approval or any extension thereof
expires; or (b) such other date to which the parties agree in writing. The
date of the Closing is sometimes herein called the "Closing Date."
9.02. Closing Deliveries Required of Park and Merger Corp.
At the Closing, Park and Merger Corp. shall cause all of the
following to be delivered to First Federal:
(a) A certificate of merger duly executed by Merger Corp. in
accordance with Section 1701.81 of the OGCL and in appropriate
form for filing with the Ohio Secretary of State.
(b) The certificates of Park and Merger Corp. contemplated by
Section 8.02(a) and (b) of this Agreement.
(c) Copies of all resolutions adopted by the directors of Park and
Merger Corp. and by the shareholders of Merger Corp. approving
and adopting this Agreement and authorizing the consummation of
the transactions described herein, accompanied by a certificate
of the secretary or the assistant secretary of Park and Merger
Corp., dated as of the Closing Date, and certifying (i) the
date and manner of adoption of each such resolution; and (ii)
that each such resolution is in full force and effect, without
amendment or repeal, as of the Closing Date.
9.03. Closing Deliveries Required of First Federal
At the Closing, First Federal shall cause all of the following to be
delivered to Park:
(a) A certificate of merger duly executed by First Federal in
accordance with Section 1701.81 of the OGCL and in appropriate
form for filing with the Ohio Secretary of State.
51
(b) The certificates of First Federal contemplated by Sections
8.01(a) and (b) of this Agreement.
(c) Copies of all resolutions adopted by the directors and the
shareholders of First Federal approving and adopting this
Agreement and authorizing the consummation of the transactions
described herein, accompanied by a certificate of the secretary
or the assistant secretary of First Federal, dated as of the
Closing Date, and certifying (i) the date and manner of the
adoption of each such resolution; and (ii) that each such
resolution is in full force and effect, without amendment or
repeal, as of the Closing Date.
(d) A statement issued by First Federal pursuant to Treasury
Department Regulation Section 1.897-2(h), in a form reasonably
acceptable to Park, dated not more than 30 days prior to the
Closing Date, certifying that the First Federal Shares are not
a U.S. real property interest.
ARTICLE TEN
NON-SURVIVAL OF REPRESENTATIONS, WARRANTIES AND COVENANTS
10.01. Non-Survival of Representations, Warranties and Covenants
The representations, warranties and covenants of Park, Merger Corp.
and First Federal set forth in this Agreement, or in any document delivered
pursuant to the terms hereof or in connection with the transactions
contemplated hereby, shall not survive the Closing and the consummation of
the transactions referred to herein, other than covenants which by their
terms are to survive or be performed after the Effective Time (including,
without limitation, those set forth in Article Six, this Article Ten,
Article Eleven and Article Twelve); except that no such representations,
warranties or covenants shall be deemed to be terminated or extinguished so
as to deprive Park or First Federal (or any director, officer or
controlling person thereof) of any defense in law or equity which otherwise
would be available against the claims of any person, including, without
limitation, any shareholder or former shareholder of either First Federal
or Park.
ARTICLE ELEVEN
TERMINATION
11.01. Termination
This Agreement may be terminated, and the Merger may be abandoned, at
any time prior to the Effective Time, whether prior to or after this
Agreement has been adopted by the shareholders of First Federal:
(a) By mutual written agreement of First Federal, Merger Corp. and
Park duly authorized by action taken by or on behalf of their
respective boards of directors;
52
(b) By either First Federal or Park and Merger Corp., duly
authorized by action taken by or on behalf of their respective
boards of directors, upon written notification to the non-
terminating party by the terminating party, if:
(i) at any time after June 30, 2005, the Merger shall not
have been consummated on or prior to such date and such
failure to consummate the Merger is not caused by a
breach of this Agreement by the terminating party; or
(ii) any event occurs which, in the reasonable opinion of
either Park and Merger Corp. or First Federal, would
preclude satisfaction of any of the conditions set forth
in Section 8.03 of this Agreement;
(c) By Park and Merger Corp., duly authorized by action taken by or
on behalf of their boards of directors, by providing written
notice to First Federal, if:
(i) prior to the Closing Date, any representation and
warranty of First Federal shall have become untrue such
that the condition set forth at Section 8.01(a) would not
be satisfied and which breach has not been cured within
30 days following receipt by First Federal of written
notice of breach or is incapable of being cured during
such time period; or
(ii) First Federal shall have failed to comply in any material
respect with any covenant or agreement on the part of
First Federal contained in this Agreement required to be
complied with prior to the date of such termination,
which failure to comply shall not have been cured within
30 days following receipt by First Federal of written
notice of such failure to comply or is incapable of being
cured during such time period.
(d) By First Federal, duly authorized by action taken by or on
behalf of its board of directors, by providing written notice
to Park and Merger Corp.:
(i) if, prior to the Closing Date, any representation and
warranty of Park or Merger Corp. shall have become untrue
such that the condition set forth at Section 8.02(a)
would not be satisfied and which breach has not been
cured within 30 days following receipt by Park and Merger
Corp. of written notice of breach or is incapable of
being cured during such time period;
(ii) if Park or Merger Corp. shall have failed to comply in
any material respect with any covenant or agreement on
the part of Park or Merger Corp. contained in this
Agreement required to be complied with prior to the date
of such termination, which failure to comply
53
shall not have been cured within 30 days following
receipt by Park and Merger Corp. of written notice of
such failure to comply or is incapable of being cured
during such time period; or
(iii) if an Acquisition Proposal has been made, provided First
Federal made the determination as set forth in Section
5.03 and complied with its obligations under Section
5.03, and provided further that First Federal's ability
to terminate pursuant to this subsection (d)(iii) is
conditioned upon the payment by First Federal to Park of
any amounts owed by First Federal to Park pursuant to
Section 11.02(b).
11.02. Effect of Termination
(a) If this Agreement is validly terminated by either First Federal
or Park pursuant to Section 11.01, this Agreement will
forthwith become null and void and there will be no liability
or obligation on the part of either First Federal or Park,
except (i) that the provisions of Sections 5.03, 7.04, 7.07 and
12.07 and this Section 11.02 will continue to apply following
any such termination, (ii) that nothing contained herein shall
relieve any party hereto from liability for breach of its
representations, warranties, covenants or agreements contained
in this Agreement and (iii) as provided in paragraph (b) below.
(b) In the event that any person or group shall have made an
Acquisition Proposal prior to termination, and (i) after
receipt of such Acquisition Proposal this Agreement is
terminated by the First Federal board of directors or the
shareholders of First Federal fail to approve the Merger and
(ii) within one year thereafter any Acquisition Proposal is
accepted by the First Federal board of directors or an
Acquisition Proposal is consummated, then First Federal shall
pay to Park, by wire transfer of same day funds, within two
business days thereafter, a termination fee of $1,920,000.
After such payment, neither Park nor Merger Corp. shall have
any further right to payment from First Federal or any First
Federal Subsidiary in connection with this Agreement.
(c) In the event any action, suit, proceeding or claim is commenced
or asserted by a party against another party and/or any
director or officer of such other party relating, directly or
indirectly, to this Agreement, it is expressly agreed that no
party shall be entitled to obtain any punitive, exemplary,
treble or consequential damages of any type under any
circumstances in connection with such action, suit, proceeding
or claim, regardless of whether such damages may be available
under law, the parties hereby waiving their rights, if any, to
recover any such damages in connection with any such action,
suit, proceeding or claim.
54
ARTICLE TWELVE
MISCELLANEOUS
12.01. Notices
All notices, requests, demands and other communications required or
permitted to be given under this Agreement shall be given in writing and
shall be deemed to have been duly given (a) on the date of delivery if
delivered by hand or by telecopy or telefacsimile, upon confirmation of
receipt, (b) on the first business day following the date of dispatch if
delivered by a recognized next-day courier service, or (c) on the third
business day following the date of mailing if sent by certified mail,
postage prepaid, return receipt requested. All notices thereunder shall be
delivered to the following addresses:
If to First Federal, to:
First Federal Bancorp, Inc.
505 Market Street
Zanesville, Ohio 43701
Attn: J. William Plummer, President and Chief Executive
Officer
Facsimile Number: (740) 453-9257
If to Park or Merger Corp., to:
Park National Corporation
50 North Third Street
Newark, Ohio 43055
Attn: C. Daniel DeLawder, President and Chief Executive
Officer
Facsimile Number: (740) 349-3765
Any party to this Agreement may, by notice given in accordance with this
Section 12.01, designate a new address for notices, requests, demands and
other communications to such party.
12.02. Counterparts
This Agreement may be executed in one or more counterparts, each of
which shall be deemed to be a duplicate original, but all of which taken
together shall be deemed to constitute a single instrument.
12.03. Entire Agreement
This Agreement (including the exhibits, documents and instruments
referred to herein) constitutes the entire agreement, and supersedes all
prior agreements and understandings, both written and oral, among the
parties with respect to the subject matter of this Agreement.
12.04. Successors and Assigns
55
This Agreement shall inure to the benefit of and be binding upon the
respective successors and assigns (including successive, as well as
immediate, successors and assigns) of the parties hereto. This Agreement
may not be assigned by any party hereto without the prior written consent
of the other parties.
12.05. Captions
The captions contained in this Agreement are included only for
convenience of reference and do not define, limit, explain or modify this
Agreement or its interpretation, construction or meaning and are in no way
to be construed as part of this Agreement.
12.06. Governing Law
This Agreement shall be governed by, and construed in accordance
with, the laws of the State of Ohio without giving effect to principles of
conflicts or choice of laws (except to the extent that mandatory provisions
of federal law are applicable).
12.07. Payment of Fees and Expenses
Except as otherwise agreed in writing, each party hereto shall pay
all of its own costs and expenses, including legal and accounting fees, and
all expenses relating to its performance of, and compliance with, its
undertakings herein. All fees to be paid to Governmental Authorities and
Regulatory Authorities in connection with the transactions contemplated by
this Agreement shall be borne by Park.
12.08. Amendment
From time to time and at any time prior to the Effective Time, this
Agreement may be amended only by an agreement in writing executed in the
same manner as this Agreement, after authorization of such action by the
boards of directors of each of the Constituent Corporations and Park;
except that after the First Federal Meeting, this Agreement may not be
amended if it would violate the OGCL.
12.09. Waiver
The rights and remedies of the parties to this Agreement are
cumulative and not alternative. Neither the failure nor any delay by any
party in exercising any right, power or privilege under this Agreement or
the documents referred to in this Agreement will operate as a waiver of
such right, power or privilege, and no single or partial exercise of any
such right, power or privilege will preclude any other or further exercise
of such right, power or privilege or the exercise of any other right, power
or privilege.
12.10. Disclosure Schedule
In the event of any inconsistency between the statements in the body
of this Agreement and those in the First Federal Disclosure Schedule (other
than an exception expressly
56
set forth in the First Federal Disclosure Schedule with respect to a
specifically identified representation or warranty), the statements in the
body of this Agreement will control.
57
12.11. No Third-Party Rights
Except as specifically set forth herein, nothing expressed or
referred to in this Agreement will be construed to give any person other
than the parties to this Agreement any legal or equitable right, remedy or
claim under or with respect to this Agreement or any provision of this
Agreement. This Agreement and all of its provisions and conditions are for
the sole and exclusive benefit of the parties to this Agreement and their
successors and assigns.
12.12. Waiver of Jury Trial
Each of the parties hereto irrevocably waives any and all right to
trial by jury in any legal proceeding arising out of or related to this
Agreement or the transactions contemplated hereby.
12.13. Severability
If any provision of this Agreement is held invalid or unenforceable
by any court of competent jurisdiction, the other provisions of this
Agreement will remain in full force and effect. Any provision of this
Agreement held invalid or unenforceable only in part or degree will remain
in full force and effect to the extent not held invalid or unenforceable.
[Remainder of page intentionally left blank; signatures on following page]
58
IN WITNESS WHEREOF, this Agreement and Plan of Merger has been
executed on behalf of Park, Merger Corp. and First Federal to be effective
as of the date set forth in the first paragraph above.
ATTEST: PARK NATIONAL CORPORATION
/s/ Brenda L. Kutan By: /s/ C. Daniel DeLawder
- ------------------------- ----------------------
Printed Name: C. Daniel DeLawder
------------------
Title: President
---------
ATTEST: PARK MERGER CORP.
/s/ Brenda L. Kutan By: /s/ C. Daniel DeLawder.
- ------------------------- -----------------------
Printed Name: C. Daniel DeLawder
------------------
Title: President
---------
ATTEST: FIRST FEDERAL BANCORP, INC.
/s/ Ward D. Coffman By: /s/ J. William Plummer
- ------------------------- ----------------------
Printed Name: J. William Plummer
------------------
Title: President/CEO
-------------
59
AMENDMENT TO
AGREEMENT AND PLAN OF MERGER
----------------------------
THIS AMENDMENT (this "Amendment") to the Agreement and Plan of Merger,
dated as of August 2, 2004 (the "Agreement"), by and among Park National
Corporation ("Park"), Park Merger Corp. ("Merger Corp.") and First Federal
Bancorp, Inc. ("First Federal"), is made and entered into as of September
15, 2004, by and among Park, Merger Corp. and First Federal.
WITNESSETH:
WHEREAS, Park has determined that, for certain desirable business
purposes, after the merger of Merger Corp. with and into First Federal (the
"Merger") and the subsequent merger of the surviving corporation of the
Merger with and into Park, it will be more beneficial to merge (the
"Subsidiary Merger") Century National Bank ("Century") with and into First
Federal Savings Bank of Eastern Ohio ("FFSB") rather than merging FFSB into
Century and to have converted FFSB to a national banking association
charter immediately prior to the Subsidiary Merger so that the surviving
entity in the Subsidiary Merger will be a national banking association; and
WHEREAS, Section 12.08 of the Agreement provides that the Agreement
may be amended only by an agreement in writing executed in the same manner
as the Agreement, after authorization of such action by the boards of
directors of each of the parties thereto; and
WHEREAS, the Boards of Directors of each of the parties to the
Agreement have authorized the execution of this Amendment;
NOW, THEREFORE, in consideration of the premises and the respective
representations, warranties, covenants, agreements and conditions set forth
hereinafter and in the Agreement, Park, Merger Corp. and First Federal,
intending to be legally bound hereby, agree as follows:
1. The fourth "WHEREAS" clause on page one of the Agreement shall
be replaced in its entirety with the following:
"WHEREAS, promptly following the merger of the surviving
corporation in the Merger with and into Park, Century National
Bank, a national banking association wholly owned by Park
("Century"), will merge with and into First Federal Savings
Bank of Eastern Ohio, a stock federal savings bank now wholly
owned by First Federal ("FFSB") which, immediately prior to the
merger with Century, will have converted to a national banking
association charter so that the surviving entity in the merger
of Century with and into FFSB will be a national banking
association; and"
2. Section 5.06 of the Agreement shall be replaced in its entirety
with the following:
"5.06. Merger of Subsidiaries
In the event that Park shall request, First Federal shall take such
actions, and shall cause FFSB to take such actions, as may reasonably be
required in order to effect, at or after the Effective Time, the merger of
Century with and into FFSB and, immediately prior to such merger, the
conversion of FFSB to a national banking association charter so that the
surviving entity in the merger of Century with and into FFSB is a national
banking association; provided, however, that such merger of Century with
and into FFSB and conversion of FFSB to a national banking association
charter shall not take effect until after (a) the Merger and (b) the merger
of the Surviving Corporation with and into Park."
IN WITNESS WHEREOF, this Amendment has been executed on behalf of
Park, Merger Corp. and First Federal to be effective as of the date set
forth in the first paragraph above.
ATTEST: PARK NATIONAL CORPORATION
Cindy M. Kosik By: /s/ C. Daniel DeLawder
- ------------------------- ----------------------
Printed Name: C. Daniel DeLawder
------------------
Title: President
---------
ATTEST: PARK MERGER CORP.
Cindy M. Kosik By: /s/ C. Daniel DeLawder
- ------------------------- ----------------------
Printed Name: C. Daniel DeLawder
------------------
Title: President
---------
ATTEST: FIRST FEDERAL BANCORP, INC.
A. B. DeWitt By: /s/ J. William Plummer
- ------------------------- ----------------------
Printed Name: J. William Plummer
------------------
Title: President, CEO
--------------
ANNEX B
KEEFE, BRUYETTE & WOODS
_______________, 2004
Board of Directors
First Federal Bancorp, Inc.
505 Market Street
Zanesville, OH 43702
Dear Board Members:
You have requested our opinion as an independent investment banking firm
regarding the fairness, from a financial point of view, to the shareholders
of First Federal Bancorp, Inc. ("First Federal"), of the consideration to
be paid to First Federal shareholders in the merger (the "Merger") between
First Federal and Park National Corporation, an Ohio corporation ("Park").
We have not been requested to opine as to, and our opinion does not in any
manner address, First Federal's underlying business decision to proceed
with or effect the Merger.
Pursuant to the Agreement and Plan of Merger, dated August 2, 2004, by and
among First Federal and Park (the "Agreement"), at the effective time of
the Merger, Park will acquire all of First Federal's issued and outstanding
common shares. First Federal shareholders will receive $13.25 in cash per
share.
Keefe, Bruyette & Woods, Inc., as part of its investment banking business,
is regularly engaged in the evaluation of businesses and securities in
connection with mergers and acquisitions, negotiated underwritings, and
distributions of listed and unlisted securities. We are familiar with the
market for common stocks of publicly traded banks, savings institutions and
bank and savings institution holding companies.
In connection with this opinion we reviewed certain financial and other
business data supplied to us by First Federal, including (i) the Agreement
(ii) Annual Reports for the years ended September 30, 2001, 2002 and 2003
(iii) Proxy Statements for the years ended September 30, 2001, 2002 and
2003 (iv) unaudited financial statements for the two quarters that will
comprise the first half of the 2004 audit year: December 31, 2003 and March
31, 2004 (v) and other information we deemed relevant. We also discussed
with senior management and directors of First Federal the current position
and prospective outlook for First Federal. We reviewed financial and stock
market data of other savings institutions and the financial and structural
terms of several other recent transactions involving mergers and
acquisitions of savings institutions or proposed changes of control of
comparably situated companies.
Keefe, Bruyette & Woods * 211 Bradenton Ave. * Dublin, OH 43017
614.766.8400 * Fax 614.766.8406
Board of Directors
First Federal Bancorp, Inc.
August 2, 2004
Page 2
For Park, we reviewed (i) Annual Reports for the years ended December 31,
2001, 2002 and 2003, (ii) unaudited financial statements for the quarter
ended March 31, 2004 (iii) and other information we deemed relevant. We
also discussed with members of the senior management team of Park, the
current position and prospective outlook for Park.
For purposes of this opinion we have relied, without independent
verification, on the accuracy and completeness of the material furnished to
us by First Federal and the material otherwise made available to us,
including information from published sources, and we have not made any
independent effort to verify such data. With respect to the financial
information, including forecasts and asset valuations we received from
First Federal, we assumed (with your consent) that they had been reasonably
prepared reflecting the best currently available estimates and judgment of
First Federal's management. In addition, we have not made or obtained any
independent appraisals or evaluations of the assets or liabilities, and
potential and/or contingent liabilities of First Federal. We have further
relied on the assurances of management of First Federal that they are not
aware of any facts that would make such information inaccurate or
misleading. We express no opinion on matters of a legal, regulatory, tax or
accounting nature or the ability of the Merger, as set forth in the
Agreement, to be consummated.
In rendering our opinion, we have assumed that in the course of obtaining
the necessary approvals for the Merger, no restrictions or conditions will
be imposed that would have a material adverse effect on the contemplated
benefits of the Merger to Park or the ability to consummate the Merger. Our
opinion is based on the market, economic and other relevant considerations
as they exist and can be evaluated on the date hereof.
Consistent with the engagement letter with you, we have acted as financial
advisor to First Federal in connection with the Merger and will receive a
fee for such services. In addition, First Federal has agreed to indemnify
us for certain liabilities arising out of our engagement by First Federal
in connection with the Merger.
Based upon and subject to the foregoing, as outlined in the foregoing
paragraphs and based on such other matters as we considered relevant, it is
our opinion that as of the date hereof, the consideration to be paid by
Park in the Merger is fair, from a financial point of view, to the
shareholders of First Federal.
Board of Directors
First Federal Bancorp, Inc.
August 2, 2004
Page 3
This opinion may not, however, be summarized, excerpted from or otherwise
publicly referred to without our prior written consent, although this
opinion may be included in its entirety in the proxy statement of First
Federal used to solicit shareholder approval of the Merger. It is
understood that this letter is directed to the Board of Directors of First
Federal in its consideration of the Agreement, and is not intended to be
and does not constitute a recommendation to any shareholder as to how such
shareholder should vote with respect to the Merger.
Very truly yours,
/s/ Keefe, Bruyette & Woods, Inc.
Keefe, Bruyette, & Woods, Inc.
ANNEX C
[SECTION] 1701.85 Dissenting shareholder's demand for fair cash value of
shares.
(A)(1) A shareholder of a domestic corporation is entitled to relief
as a dissenting shareholder in respect of the proposals in sections
1701.74, 1701.76, and 1701.84 of the Revised Code, only in compliance with
this section.
(2) If the proposal must be submitted to the shareholders of the
corporation involved, the dissenting shareholder shall be a record holder
of the shares of the corporation as to which he seeks relief as of the date
fixed for the determination of shareholders entitled to notice of a meeting
of the shareholders at which the proposal is to be submitted, and such
shares shall not have been voted in favor of the proposal. Not later than
ten days after the date on which the vote on the proposal was taken at the
meeting of the shareholders, the dissenting shareholder shall deliver to
the corporation a written demand for payment to him of the fair cash value
of the shares as to which he seeks relief, which demand shall state his
address, the number and class of such shares, and the amount claimed by him
as the fair cash value of the shares.
(3) The dissenting shareholder entitled to relief under division (C)
of section 1701.84 of the Revised Code in the case of a merger pursuant to
section 1701.80 of the Revised Code and a dissenting shareholder entitled
to relief under division (E) of section 1701.84 of the Revised Code in the
case of a merger pursuant to section 1701.801 [1701.80.1] of the Revised
Code shall be a record holder of the shares of the corporation as to which
he seeks relief as of the date on which the agreement of merger was adopted
by the directors of that corporation. Within twenty days after he has been
sent the notice provided in section 1701.80 or 1701.801 [1701.80.1] of the
Revised Code, the dissenting shareholder shall deliver to the corporation a
written demand for payment with the same information as that provided for
in division (A)(2) of this section.
(4) In the case of a merger or consolidation, a demand served on the
constituent corporation involved constitutes service on the surviving or
the new entity, whether the demand is served before, on, or after the
effective date of the merger or consolidation.
(5) If the corporation sends to the dissenting shareholder, at the
address specified in his demand, a request for the certificates
representing the shares as to which he seeks relief, the dissenting
shareholder, within fifteen days from the date of the sending of such
request, shall deliver to the corporation the certificates requested so
that the corporation may forthwith endorse on them a legend to the effect
that demand for the fair cash value of such shares has been made. The
corporation promptly shall return such endorsed certificates to the
dissenting shareholder. A dissenting shareholder's failure to deliver such
certificates terminates his rights as a dissenting shareholder, at the
option of the corporation, exercised by written notice sent to the
dissenting shareholder within twenty days after the lapse of the fifteen-
day period, unless a court for good cause shown otherwise directs. If
shares represented by a certificate on which such a legend has been
endorsed are transferred, each new certificate issued for them shall bear a
similar legend, together with the name of the original dissenting holder of
such shares. Upon receiving a demand for payment from a dissenting
shareholder who is the record holder of uncertificated securities, the
corporation shall make an appropriate notation of the demand for payment in
its shareholder records. If uncertificated shares for which payment has
been demanded are to be transferred, any new certificate issued for the
shares shall bear the legend required for certificated
C-1
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 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 apportioned as
the court considers equitable. The proceeding is a special proceeding, and
final orders in it may be vacated, modified, or reversed on appeal pursuant
to the Rules of Appellate Procedure and, to the extent not in conflict with
those rules, Chapter 2505 of the Revised Code. If, during the pendency of
any proceeding instituted under this section, a suit or proceeding is or
has been instituted to enjoin or otherwise to prevent the carrying out of
the action as to which the shareholder has dissented, the proceeding
instituted under this section shall be stayed until the final determination
of the other suit or proceeding. Unless any provision in division (D) of
this section is applicable, the fair cash value of the shares that is
agreed upon by the parties or fixed under this section shall be paid within
thirty days after the date of final determination of such value under this
division, the effective date of the amendment to the articles, or the
consummation of the other action involved, whichever occurs last. Upon the
occurrence of the last such event, payment shall be made immediately to a
holder of uncertificated securities entitled to such payment. In the case
of holders of shares represented by certificates, payment shall be made
only upon and simultaneously with the surrender to the corporation of the
certificates representing the shares for which 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 [1701.80.1] of the Revised Code, fair cash value as to
C-2
shareholders of a constituent subsidiary corporation shall be determined as
of the day before the adoption of the agreement of merger by the directors
of the particular subsidiary corporation. The fair cash value of a share
for the purposes of this section is the amount that a willing seller who is
under no compulsion to sell would be willing to accept and that a willing
buyer who is under no compulsion to purchase would be willing to pay, but
in no event shall the fair cash value of a share exceed the amount
specified in the demand of the particular shareholder. In computing such
fair cash value, any appreciation or depreciation in market value resulting
from the proposal submitted to the directors or to the shareholders shall
be excluded.
(D)(1) The right and obligation of a dissenting shareholder to
receive such fair cash value and to sell such shares as to which he seeks
relief, and the right and obligation of the corporation to purchase such
shares and to pay the fair cash value of them terminates if any of the
following applies:
(a) The dissenting shareholder has not complied with this
section, unless the corporation by its directors waives such failure;
(b) The corporation abandons the action involved or is finally
enjoined or prevented from carrying it out, or the shareholders rescind
their adoption of the action involved;
(c) The dissenting shareholder withdraws his demand, with the
consent of the corporation by its directors;
(d) The corporation and the dissenting shareholder have not
come to an agreement as to the fair cash value per share, and neither the
shareholder nor the corporation has filed or joined in a complaint under
division (B) of this section within the period provided 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 the shares by the corporation, all rights of the holder shall
be restored and all distributions which, except for the suspension, would
have been made shall be made to the holder of record of the shares at the
time of termination.
C-3
REVOCABLE PROXY
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF
FIRST FEDERAL BANCORP, INC.
FIRST FEDERAL BANCORP, INC.
SPECIAL MEETING OF SHAREHOLDERS
NOVEMBER 8, 2004
The undersigned shareholder of First Federal Bancorp, Inc.
("Bancorp"), hereby constitutes and appoints John C. Matesich, III and
Don R. Parkhill, or either of them, as the proxy or proxies of the
undersigned with full power of substitution and resubstitution, to vote at
the Special Meeting of Shareholders of Bancorp to be held at the Holiday
Inn, 4645 East Pike, Zanesville, Ohio, on November 8, 2004, at 10:00 a.m.,
Eastern Standard Time (the "Special Meeting"), all of the shares of Bancorp
that the undersigned is entitled to vote at the Special Meeting, or at any
adjournment thereof, on each of the following proposals, which are
described in the accompanying Proxy Statement:
1. The adoption and approval of the Agreement and Plan of Merger dated
August 2, 2004, by and among Park National Corporation, Park Merger
Corp. and First Federal Bancorp, Inc., as amended, and the
transactions contemplated by that amended agreement:
[ ] FOR [ ] AGAINST [ ] ABSTAIN
2. In their discretion, upon such other business as may properly come
before the Special Meeting and any adjournment or postponement of the
Special Meeting (including adjournment of the Special Meeting to
allow for additional solicitation of shareholder votes in order to
obtain a quorum or to obtain the required vote to adopt the Agreement
and Plan of Merger and to approve the transactions contemplated by
the Agreement and Plan of Merger, including the merger).
The Board of Directors recommends a vote "FOR" proposal 1.
This Proxy, when properly executed, will be voted in the manner
directed herein by the undersigned shareholder. If this Proxy is executed
and returned but no box is marked, the shares will be voted FOR proposal 1.
All Proxies previously given by the undersigned are hereby revoked.
Receipt of the Notice of the Special Meeting of Shareholders of Bancorp and
of the accompanying Proxy Statement is hereby acknowledged.
Please sign exactly as your name appears on your Stock
Certificate(s). Executors, Administrators, Trustees, Guardians, Attorneys
and Agents should give their full titles.
_______________________________ _______________________________
Signature Signature
_______________________________ _______________________________
Print or Type Name Print or Type Name
Dated: ________________________ Dated: ________________________
PLEASE DATE, SIGN AND RETURN THIS PROXY PROMPTLY IN THE ENCLOSED ENVELOPE.
NO POSTAGE IS REQUIRED FOR MAILING IN THE USA.