AFFILIATION AGREEMENT
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This Affiliation Agreement ("Affiliation Agreement") dated as of January 13,
1998 is entered into by and between FIFTH THIRD BANCORP, a corporation
organized and existing under the corporation laws of the State of Ohio with
its principal office located in Cincinnati, Xxxxxxxx County, Ohio ("Fifth
Third"), and CITFED BANCORP., INC., a corporation organized and existing under
the corporation laws of the State of Delaware, with its principal office
located in Dayton, Xxxxxxxxxx County, Ohio ("CitFed Bancorp").
W I T N E S S E T H:
WHEREAS, Fifth Third is a registered bank holding company under the Bank
Holding Company Act of 1956, as amended, and CitFed Bancorp is a unitary
savings and loan holding company under Section 10 of the Home Owners Loan Act,
as amended ("HOLA"), and Fifth Third and CitFed Bancorp desire to effect a
merger under the authority and provisions of the corporation laws of the
States of Ohio and Delaware pursuant to which at the Effective Time (as herein
defined in Section IX) CitFed Bancorp will be merged into Fifth Third, with
Fifth Third to be and become the surviving corporation (the "Merger");
WHEREAS, CitFed Bancorp owns all of the outstanding stock of Citizens Federal
Bank, F.S.B. ("Thrift Subsidiary") which, at the Effective Time, will be
merged with and into Fifth Third's wholly-owned subsidiary The Fifth Third
Bank of Western Ohio, an Ohio banking corporation ("Fifth Third Bank") with
Fifth Third Bank to become the surviving corporation (the "Subsidiary
Merger");
WHEREAS, under the terms of this Agreement each of the issued and outstanding
shares of the common stock, $.01 par value per share, of CitFed Bancorp which
are issued and outstanding (excluding any treasury shares and preferred
shares) immediately prior to the Effective Time will at the Effective Time be
canceled and extinguished and in substitution therefor such CitFed Bancorp
shares will, at the Effective Time, be converted into the right to receive
shares of the common stock, without par value, of Fifth Third ("Fifth Third
Common Stock"), all as more fully provided in this Agreement; and
WHEREAS, as a condition and inducement to Fifth Third's willingness to enter
into this Agreement, CitFed Bancorp and Fifth Third are entering into a Stock
Option Agreement substantially in the form of Appendix B hereto (the "Stock
Option Agreement").
NOW, THEREFORE, in consideration of the mutual covenants herein contained,
Fifth Third and CitFed Bancorp, agree together as follows:
I. Mode of Effectuating Conversion of Shares
A. At the Effective Time (as defined in Article IX), all of the shares of
Fifth Third Common Stock that are issued and outstanding or held by Fifth
Third as treasury shares immediately prior to the Effective Time will remain
unchanged and will remain outstanding or as treasury shares, as the case may
be, of the Surviving Corporation (as defined in Section I.F.). Any stock
options, subscription rights, warrants or other securities outstanding
immediately prior to the Effective Time, entitling the holders to subscribe
for purchase of any shares of the capital stock of any class of Fifth Third,
and any securities outstanding at such time that are convertible into shares
of the capital stock of any class of Fifth Third will remain unchanged and
will remain outstanding, with the holders thereof entitled to subscribe for,
purchase or convert their securities into the number of shares of the class of
capital stock of Fifth Third to which they are entitled under the terms of the
governing documents.
B. Each of the shares of the common stock, $.01 par value per share, of
CitFed Bancorp ("CitFed Bancorp Common Stock") that is issued and outstanding
immediately prior to the Effective Time will, at the Effective Time, be
converted by virtue of the Merger and without further action, into the right
to receive .67 shares of Fifth Third Common Stock (the "Exchange Ratio"),
subject to adjustment as provided in Section I.E. herein. All issued and
outstanding shares of the preferred stock of CitFed Bancorp, if any, shall be
canceled at the Effective Time.
C. At the Effective Time, all of the shares of CitFed Bancorp Common
Stock, whether issued or unissued (including treasury shares), will be
canceled and extinguished and the holders of certificates for shares thereof
shall cease to have any rights as shareholders of CitFed Bancorp, except as
aforesaid, their sole rights as shareholders shall pertain to the Fifth Third
Common Stock and cash in lieu of fractional shares, if any (as described in
the immediately succeeding paragraph), into which their CitFed Bancorp Common
Stock shall have been converted by virtue of the Merger.
D. After the Effective Time, each holder of a certificate or certificates
for shares of CitFed Bancorp Common Stock, upon surrender of the same duly
transmitted to Fifth Third Trust Department, as Exchange Agent (or in lieu of
surrendering such certificates in the case of lost, stolen, destroyed or
mislaid certificates, upon execution of such documentation as may be
reasonably required by Fifth Third), shall be entitled to receive in exchange
therefor a certificate or certificates representing the number of whole shares
of Fifth Third Common Stock into which such holder's shares of CitFed Bancorp
Common Stock shall have been converted by the Merger, plus a cash payment for
any fraction of a share to which the holder is entitled, in lieu of such
fraction of a share, equal in amount to the product resulting from multiplying
such fraction by the per share closing price of Fifth Third Common Stock as
reported on the Nasdaq National Market on the date the Merger becomes
effective (the "Applicable Market Value Per Share of Fifth Third Common
Stock"). Within seven (7) business days after the Effective Time, the
Exchange Agent will send a notice and transmittal form to each CitFed Bancorp
shareholder of record at the Effective Time advising such shareholder of the
effectiveness of the Merger and the procedures for surrendering to the
Exchange Agent outstanding certificates formerly evidencing CitFed Bancorp
Common Stock in exchange for new certificates of Fifth Third Common Stock.
Until so surrendered, each outstanding certificate that prior to the Effective
Time represented shares of CitFed Bancorp Common Stock shall be deemed for all
corporate purposes to represent the right to receive the number of full shares
of Fifth Third Common Stock (and cash in lieu of fractional shares) into which
the same shall have been converted; provided, however, that dividends or
distributions otherwise payable with respect to shares of Fifth Third Common
Stock into which CitFed Bancorp Common Stock shall have been so converted
shall be paid with respect to such shares only when the certificate or
certificates evidencing shares of CitFed Bancorp Common Stock shall have been
so surrendered (or in lieu of surrendering such certificates in the case of
lost, stolen, destroyed or mislaid certificates, upon execution of such
documentation as may be reasonably required by Fifth Third) and thereupon any
such dividends and distributions shall be paid, without interest, to the
holder entitled thereto subject however to the operation of any applicable
escheat or similar laws relating to unclaimed funds.
E. The Exchange Ratio shall be adjusted so as to give the CitFed Bancorp
shareholders the economic benefit of any stock dividends, reclassifications,
recapitalizations, split-ups, exchanges of shares, distributions or
combinations or subdivisions of Fifth Third Common Stock effected between the
date of this Agreement and the Effective Time. In the event between the date
of this Agreement and the Effective Time, Fifth Third has engaged in either
the distribution of any of its assets (other than regular quarterly cash
dividends), or caused the distribution of capital stock in a company which
holds any asset(s) previously held by Fifth Third or in any affiliate thereof,
to the Fifth Third shareholders, then the Exchange Ratio shall be increased in
such amount so that the equivalent fair market value of such transaction shall
also be distributed to the CitFed Bancorp shareholders, as of the Effective
Time. Notwithstanding the provisions of this Section I.E., no adjustment to
the Exchange Ratio will be required in the event Fifth Third issues shares of
Fifth Third Common Stock in order to effect a pooling-of-interests transaction
or issue shares in another merger or acquisition transaction prior to the
Effective Time or is required to divest any of its assets as a condition to
obtaining any regulatory approval required to consummate the Merger or any
other merger or acquisition transaction.
F. When all necessary documents have been filed and recorded in accordance
with the laws of the States of Ohio and Delaware, and the Merger becomes
effective, the separate existence of CitFed Bancorp shall cease and CitFed
Bancorp shall be merged into Fifth Third (which will be the "Surviving
Corporation"), and which shall continue its corporate existence under the laws
of the State of Ohio under the name "Fifth Third Bancorp".
G. The Second Amended Articles of Incorporation, as amended, of Fifth
Third of record with the Secretary of State of Ohio as of the Effective Time
shall be the Articles of Incorporation of the Surviving Corporation, until
further amended as provided by law.
H. The Directors of Fifth Third who are in office at the Effective Time
shall be the directors of the Surviving Corporation, each of whom shall
continue to serve as a Director for the term for which he was elected, subject
to the Code of Regulations of the Surviving Corporation and in accordance with
law. The officers of Fifth Third who are in office at the time the Merger
becomes effective
shall be the officers of the Surviving Corporation, subject to the Code of
Regulations of the Surviving Corporation and in accordance with law.
I. The Code of Regulations of Fifth Third at the Effective Time shall be
the Code of Regulations of the Surviving Corporation, until amended as
provided therein and in accordance with law.
J. At the Effective Time, the effect of the Merger shall be as provided by
the applicable provisions of the laws of Ohio and Delaware. Without limiting
the generality of the foregoing, and subject thereto, at the Effective Time:
the separate existence of CitFed Bancorp shall cease; Fifth Third, as the
Surviving Corporation, shall possess all assets and property of every
description, and every interest therein, wherever located, and the rights,
privileges, immunities, powers, franchises and authority, of a public as well
as a private nature, of each of Fifth Third and CitFed Bancorp, and all
obligations owing by or due each of Fifth Third and CitFed Bancorp shall be
vested in, and become the obligations of, Fifth Third, as the Surviving
Corporation, without further act or deed; and all rights of creditors of each
of Fifth Third and CitFed Bancorp shall be preserved unimpaired, and all liens
upon the property of each of Fifth Third and CitFed Bancorp shall be preserved
unimpaired, on only the property affected by such liens immediately prior to
the Effective Time.
K. From time to time as and when requested by the Surviving Corporation,
or by its successors or assigns, the officers and Directors of CitFed Bancorp
in office at the Effective Time shall execute and deliver such instruments and
shall take or cause to be taken such further or other action as shall be
necessary in order to vest or perfect in the Surviving Corporation or to
confirm of record or otherwise, title to, and possession of, all the assets,
property, interests, rights, privileges, immunities, powers, franchises and
authority of CitFed Bancorp and otherwise to carry out the purposes of this
Agreement.
L. This Agreement shall be filed (only if necessary) and recorded along
with Articles or a Certificate of Merger in accordance with the requirements
of the laws of the States of Ohio and Delaware. This Agreement (if necessary)
or the applicable Articles or Certificate of Merger shall not be filed with
the Secretary of the State of Ohio and the Secretary of State of Delaware
until, but shall be filed promptly after, all of the conditions precedent to
consummating the Merger as contained in Article VI of this Agreement shall
have been fully met or effectively waived.
M. The Merger is intended to be a reorganization within the meaning of
Section 368(a) of the Internal Revenue Code of 1986, as amended (the "Code"),
and this Agreement is intended to be a "plan of reorganization" within the
meaning of the regulations promulgated under the code and for purposes of
Sections 354 and 361 of the Code.
N. The Merger is intended to qualify for pooling-of-interests accounting
treatment.
II. Representations and Warranties of CitFed Bancorp.
CitFed Bancorp represents and warrants to Fifth Third that as of the date
hereof or as of the indicated date, as appropriate, and except as otherwise
disclosed in Schedule 1 hereto delivered by CitFed Bancorp to Fifth Third
prior to the execution of this Agreement by Fifth Third:
A. CitFed Bancorp (i) is duly incorporated, validly existing and in good
standing as a corporation under the corporation laws of the State of Delaware
and is a registered unitary savings and loan holding company under the HOLA;
(ii) is duly authorized to conduct the business in which it is engaged; (iii)
has 20,000,000 shares, $.01 par value per share, of CitFed Bancorp Common
Stock and 5,000,000 shares, $.01 par value per share, of preferred stock
("CitFed Bancorp Preferred Stock") authorized pursuant to its Certificate of
Incorporation, which are the total number of shares CitFed Bancorp is
authorized to have outstanding; (iv) has no outstanding securities of any
kind, nor any outstanding options, warrants or other rights entitling another
person to acquire any securities of CitFed Bancorp of any kind, other than (a)
13,002,811 shares of CitFed Bancorp Common Stock, which presently are
authorized, duly issued and outstanding and fully paid and nonassessable, (b)
options to purchase a total of 520,155 shares of CitFed Bancorp Common Stock
which were granted to and are currently held by the employees, officers and
directors of CitFed Bancorp and/or its subsidiaries, (c) the option granted to
Fifth Third pursuant to the Stock Option Agreement, and (d) rights granted to
holders of CitFed Bancorp Common Stock (the "Rights") pursuant to the
Stockholder Protection Rights Agreement dated October 21, 1994 between the
Company and Chemical Bank (the "Rights Plan"), and (e) CitFed Bancorp's 8.25%
Subordinated Notes due September 1, 2003; (v)owns of record and beneficially
free and clear of all liens and encumbrances, all of the 4,025,000 outstanding
shares of the capital stock of the Thrift Subsidiary, $.01 par value per
share; (vi) owns of record and beneficially free and clear of all liens and
encumbrances, all of the 750 outstanding shares of the capital stock of CitFed
Mortgage Corporation of America ("CMCA"), no par value per share; (vii)
directly or through a subsidiary, owns of record and beneficially free and
clear of all liens and encumbrances, all of the 10 outstanding shares of the
capital stock of Dayton Financial Services, Inc. ("DFSI"), $50.00 par value
per share; (viii) directly or through a subsidiary, owns of record and
beneficially free and clear of all liens and encumbrances, all of the 75
outstanding shares of the capital stock of CF Property Management, Inc., doing
business as "CitFed Investment Group" ("CIG"), no par value per share; and
(ix) directly or through a subsidiary, owns of record and beneficially free
and clear of all liens and encumbrances, all of the 247 outstanding shares of
the Class B, non-voting common stock, no par value per share of CFX Insurance
Strategies Agency, Inc. ("CFX"). The following three individuals own one
share each of Class A voting common stock, no par value, each of which is
subject to a stock redemption agreement at a purchase price of $500.00 per
share: Xxxxx X. Xxxxx, Xxxxxx X. Xxxxxx and Xxxxx X. Xxxxx. Other than as set
forth herein or in Schedule 1, CitFed Bancorp does not own (other than in a
bona fide fiduciary capacity or in satisfaction of a debt previously
contracted) beneficially, directly or indirectly any shares of any equity
securities or similar interests of any person or any interest in a partnership
or joint venture of any kind (except for marketable securities and Federal
Home Loan Bank stock). CitFed Bancorp has no direct or
indirect subsidiaries other than Thrift Subsidiary, CMCA, DFSI, CIG and CFX (the
Thrift Subsidiary, CMCA, DFSI, CIG and CFX are collectively referred to herein
as the "Subsidiaries").
B. 1. Thrift Subsidiary is duly incorporated, validly existing and in
good standing as a federal savings bank under the laws of the United States,
and has all the requisite power and authority to conduct the banking business
as now conducted by it; and Thrift Subsidiary does not have any outstanding
securities of any kind, nor any outstanding options, warrants or other rights
entitling another person to acquire any securities of any of the Thrift
Subsidiary of any kind, other than 4,025,000 shares of the capital stock, $.01
par value per share, all owned of record and beneficially by CitFed Bancorp.
2. CMCA is duly incorporated, validly existing and in good standing
as a corporation under the laws of Ohio, and has all the requisite power and
authority to conduct the business as now conducted by it; and CMCA does not
have any outstanding securities of any kind, nor any outstanding options,
warrants or other rights entitling another person to acquire any securities
of CMCA of any kind, other than 750 shares of the capital stock, no par value
per share, all owned of record and beneficially by CitFed Bancorp or another
Subsidiary.
3. DFSI is duly incorporated, validly existing and in good standing
as a corporation under the laws of Ohio, and has all the requisite power and
authority to conduct the business as now conducted by it; and DFSI does not
have any outstanding securities of any kind, nor any outstanding options,
warrants or other rights entitling another person to acquire any securities of
DFSI of any kind, other than 10 shares of the capital stock, $50.00 par value
per share, all owned of record and beneficially by CitFed Bancorp or another
Subsidiary.
4. CIG is duly incorporated, validly existing and in good standing as
a corporation under the laws of Ohio, and has all the requisite power and
authority to conduct the business as now conducted by it; and CIG does not
have any outstanding securities of any kind, nor any outstanding options,
warrants or other rights entitling another person to acquire any securities of
CIG of any kind, other than 75 shares of the capital stock, no par value per
share, all owned of record and beneficially by CitFed Bancorp or another
Subsidiary.
5. CFX is duly incorporated, validly existing and in good standing as
a corporation under the laws of Ohio, and has all the requisite power and
authority to conduct the business as now conducted by it; and CFX does not
have any outstanding securities of any kind, nor any outstanding options,
warrants or other rights entitling another person to acquire any securities of
CFX of any kind, other than 247 shares of the Class B, non-voting common
stock, no par value per share, all owned of record and beneficially by CitFed
Bancorp or another Subsidiary, and three shares of the Class A voting common
stock, no par value per share, one share of which is owned of record and
beneficially by each of Xxxxx X. Xxxxx, Xxxxxx X. Xxxxxx and Xxxxx X. Xxxxx,
for purposes of complying with applicable insurance laws and regulations.
C. CitFed Bancorp has previously furnished to Fifth Third its audited,
consolidated balance sheets, statements of operations, statements of
stockholders' equity and cash flows as at March 31, 1995, 1996, and 1997 and
for the years ended on March 31, 1996 and 1997, together with the opinions of
its independent certified public accountants associated therewith. CitFed
Bancorp also has previously furnished to Fifth Third the Thrift Financial
Reports of the Thrift Subsidiary as at March 31, 1997 as filed with the Office
of Thrift Supervision ("OTS"). CitFed Bancorp also has furnished to Fifth
Third (i) its unaudited, consolidated financial statements as at June 30, 1997
and September 30, 1997, and for the three and six months then ended, and (ii)
the Thrift Financial Reports as filed with the OTS of the Thrift Subsidiary
for the quarters ended June 30, 1997 and September 30, 1997. Such audited and
unaudited consolidated financial statements of CitFed Bancorp fairly present
the consolidated financial condition of CitFed Bancorp as of the date thereof,
and for the years or periods covered thereby in conformity with generally
accepted accounting principles, consistently applied (except as stated therein
and except for the omission of notes to unaudited statements and year-end
adjustments to interim results). There are no material liabilities,
obligations or indebtedness of CitFed Bancorp or the Subsidiaries required to
be disclosed in the financial statements so furnished other than the
liabilities, obligations or indebtedness disclosed in such financial
statements (including footnotes). CitFed Bancorp shall furnish Fifth Third
with unaudited, consolidated financial statements as at December 31, 1997, and
for the quarter then ended as soon as practicable, and shall continue to
furnish such financial information for subsequent monthly and quarterly
periods to Fifth Third as soon as practicable until the Closing Date. In the
event that the Closing Date does not occur before March 31, 1998, CitFed
Bancorp shall furnish Fifth Third with its audited, consolidated financial
statements as at March 31, 1998 and for the year then ended as soon as they
are reasonably available.
D. CitFed Bancorp and the Subsidiaries have good and marketable title to
all of the material properties and assets reflected in their separate
statements of financial condition as at March 31, 1997, and which are still
owned by each and each has good and marketable title to all material
properties and assets acquired by it after such date and still owned by it,
subject to (i) any liens and encumbrances that do not materially adversely
impair the use of the property, (ii) statutory liens for taxes not yet due and
payable and (iii) minor defects and irregularities in title that do not
materially adversely impair the use of the property.
E. Except for events relating to the business environment in general: (i)
Since March 31, 1997, to the date hereof there have been no material adverse
changes in the financial condition, operations or business of CitFed Bancorp
and the Subsidiaries on a consolidated or separate basis; (ii) CitFed Bancorp
is not aware of any events which have occurred since March 31, 1997 to the
date hereof or which as of the date hereof are reasonably certain to occur in
the future and which reasonably can be expected to result in any material
adverse change in the financial condition, operations or business of CitFed
Bancorp and the Subsidiaries on a consolidated or separate basis; and (iii)
since March 31, 1997, to the date hereof there have been no material changes
in the methods of business operations of CitFed Bancorp and the Subsidiaries.
F. There are no actions, suits, proceedings, investigations or assessments
of any kind pending, or to the best knowledge of CitFed Bancorp, threatened
against CitFed Bancorp or any of the Subsidiaries which reasonably can be
expected to result in any material adverse change in the financial condition,
operations or business of CitFed Bancorp and the Subsidiaries on a
consolidated or separate basis.
G. Since March 31, 1997, to the date hereof CitFed Bancorp and each of the
Subsidiaries has been operated in the ordinary course of business, has not
made any changes in its respective capital or corporate structures, nor any
material changes in its methods of business operations and has not provided
any increases in employee salaries or benefits other than in the ordinary
course of business. Since March 31, 1997, to the date hereof CitFed Bancorp
has not declared or paid any dividends nor made any distributions of any other
kind to its shareholders other than its regular quarterly cash dividends.
H. CitFed Bancorp and each of the Subsidiaries have timely filed all
federal, state and local tax returns required to be filed (after giving effect
to all extensions) by them, respectively, and have paid or provided for all
tax liabilities shown to be due thereon or which have been assessed against
them, respectively. To the best knowledge of CitFed Bancorp, all tax returns
filed by CitFed Bancorp or the Subsidiaries through the date hereof constitute
complete and accurate representations of the tax liabilities of CitFed Bancorp
and each of the Subsidiaries for such years and accurately set forth all items
(to the extent required to be included or reflected in such returns) relevant
to its future tax liabilities, including the tax basis of its properties and
assets in all material respects. Neither CitFed Bancorp nor any of the
Subsidiaries is currently under audit nor has any of them been contacted for
an audit and neither CitFed Bancorp nor any of the Subsidiaries is engaged in
any appeal proceeding in connection with any state, Federal, or local tax
filing. As of the date hereof, neither CitFed Bancorp nor any of the
Subsidiaries has reason to believe that any condition exists with respect to
the business or operation of CitFed Bancorp or the Subsidiaries that might
prevent or impede the Merger from qualifying as a reorganization within the
meaning of Section 368(a) of the Code or for pooling-of-interests accounting
treatment.
I. Neither CitFed Bancorp nor any of the Subsidiaries is a party to (i)
any written employment contracts or written contracts of any other kind with
any of its officers, directors or employees or (ii) any material contract,
lease or agreement of any other kind which is not assignable as a result of
the merger provided for herein without the consent of another party, except
for contracts, leases or agreements which do not have terms extending beyond
six months from the date of this Agreement or contracts, leases or agreements
(excluding contracts, leases and agreements pursuant to which credit has been
extended by any of the Subsidiaries) which do not require the annual
expenditure of more than $250,000.00 thereunder.
J. Since March 31, 1997, to the date hereof none of the Subsidiaries has
incurred any unusual or extraordinary loan losses which are material to CitFed
Bancorp and the Subsidiaries on a consolidated basis; to the best knowledge of
CitFed Bancorp and in light of the Subsidiaries' historical loan loss
experience and the Subsidiaries' management's analysis of the quality and
performance of its loan portfolio, as of September 30, 1997, reserves for loan
losses were, in the opinion of CitFed Bancorp, adequate to absorb all known
and reasonably anticipated losses as of such date.
K. Neither CitFed Bancorp nor any of the Subsidiaries has, directly or
indirectly, dealt with any broker or finder in connection with this
transaction and none of them has incurred or will incur any obligation for
any broker's or finder's fee or commission in connection with the
transactions provided for in this Agreement. CitFed Bancorp shall be solely
responsible for payment of any fees to any broker or finder purporting to
represent CitFed Bancorp in the transactions provided for in this Agreement.
L. 1. The directors of CitFed Bancorp, by resolution adopted by the
unanimous vote of all directors present at a meeting duly called and held in
accordance with applicable law, (a) have duly approved this Agreement, the
Stock Option Agreement and the transactions contemplated herein and therein,
(b) have directed that this Agreement be submitted to a vote of CitFed
Bancorp's shareholders at the annual or a special meeting of the shareholders
to be called for that purpose, and (c) have approved, and taken all action
required by the terms of the Rights Plan, to authorize the redemption of such
Rights prior to or at the Effective Time subject only to the payment of $.01
per Right to each holder of a Right, all in accordance with and as required by
law and in accordance with the Certificate of Incorporation and Bylaws of
CitFed Bancorp, and with respect to clause (c), the Rights Plan..
2. CitFed Bancorp has the corporate power and authority to enter into
this Agreement and to carry out its obligations hereunder subject to certain
required regulatory and shareholder approvals. This Agreement, when executed
and delivered, will have been duly authorized and will constitute the valid
and binding obligation of CitFed Bancorp, enforceable against CitFed Bancorp
in accordance with its terms, except to the extent that (i) enforceability
thereof may be limited by insolvency, reorganization, liquidation, bankruptcy,
readjustment of debt or other laws of general application relating to or
affecting the enforcement of creditors' rights generally and (ii) the
availability of certain remedies may be precluded by general principles of
equity; subject, however, to the receipt of requisite regulatory approvals and
the approval of CitFed Bancorp's shareholders.
3. Neither the execution of this Agreement, nor the consummation of
the transactions contemplated hereby, (i) conflicts with, results in a breach
of, violates or constitutes a default under, CitFed Bancorp's Certificate of
Incorporation or Bylaws or, to the best knowledge of CitFed Bancorp, any
federal, state or local law, statute, ordinance, rule, regulation or court or
administrative order to which CitFed Bancorp or any of the Subsidiaries is
subject or bound; (ii) to the best knowledge of CitFed Bancorp, results in the
creation of or gives any person the right to create any material lien, charge,
encumbrance, or security agreement or any other material rights of others or
other material adverse interest upon any material right, property or asset
belonging to CitFed Bancorp or any of the Subsidiaries; (iii) conflicts with,
results in a breach of, violates or constitutes a default under, terminates or
gives any person the right to terminate, amend, abandon, or refuse to perform,
any material agreement, arrangement or commitment to which CitFed Bancorp or
any of the Subsidiaries is a party or by which CitFed Bancorp's or any of the
Subsidiaries' rights, properties or assets are subject or bound; or (iv) to
the best knowledge of CitFed Bancorp, accelerates or modifies, or gives any
party thereto the right to accelerate or modify, the time within which, or the
terms according to which, CitFed Bancorp or any of the Subsidiaries is to
perform any duties or obligations or receive any rights or benefits under any
material agreements, arrangements or commitments. For purposes of
subparagraphs (iii) and (iv) immediately preceding, material agreements,
arrangements or commitments exclude agreements, arrangements or commitments
having a term expiring less than six months from the date of this Agreement or
which do not require the annual expenditure of more than $250,000 (but shall
include all agreements, arrangements or commitments pursuant to which credit
has been extended by any of the Subsidiaries).
M. Complete and accurate copies of the (i) Certificate of Incorporation
and Bylaws of CitFed Bancorp and (ii) the Charter and Bylaws of the Thrift
Subsidiary in force as of the date hereof have been delivered to Fifth Third.
N. To the best knowledge of CitFed Bancorp, neither CitFed Bancorp nor any
of the Subsidiaries nor any employee, officer or director of any of them has
knowingly engaged in any activity or knowingly omitted to take any action
which, in any material way, has resulted or could result in the violation of
(i) any local, state or federal law (including without limitation the Bank
Secrecy Act, the Community Reinvestment Act, applicable consumer protection
and disclosure laws and regulations, including without limitation, Truth in
Lending, Truth in Savings and similar disclosure laws and regulations, and
equal employment and employment discrimination laws and regulations) or (ii)
any regulation, order, injunction or decree of any court or governmental body,
the violation of either of which could reasonably be expected to have a
material adverse effect on the financial condition of CitFed Bancorp or any of
the Subsidiaries. To the best knowledge of CitFed Bancorp and each of the
Subsidiaries possesses all licenses, franchises, permits and other
governmental authorizations necessary for the continued conduct of its
business without material interference or interruption.
O. To the best knowledge of CitFed Bancorp, neither this Agreement nor any
report, statement, list, certificate or other information furnished by CitFed
Bancorp or any of the Subsidiaries to Fifth Third or its agents pursuant to
this Agreement (including, without limitation, any information which shall be
supplied with respect to their business operations and financial condition for
inclusion in the proxy statement/prospectus and registration statement
relating to the merger) contains or shall contain (or, in the case of
information relating to the proxy statement/prospectus, at the time it is
mailed, in the case of the registration statement, at the time it becomes
effective and in the case of the proxy statement/prospectus and the
registration statement, at the time the annual or special meeting of
shareholders of CitFed Bancorp is held to consider the adoption of this
Agreement) an untrue statement of material fact or omits or shall omit to
state a material fact necessary to make
the statements contained herein or therein, in light of the circumstances in
which they are made, not misleading.
P. There are no actions, proceedings or investigations pending before any
environmental regulatory body, with respect to or threatened against or
affecting CitFed Bancorp or any of the Subsidiaries in respect to any
"facility" owned, leased or operated by any of them (but excluding any
"facility" as to which sole interest of CitFed Bancorp or any of the
Subsidiaries is that of a lienholder or mortgagee, but including any
"facility" to which title has been taken pursuant to mortgage foreclosure or
similar proceedings and including any "facility" in which CitFed Bancorp or
any of the Subsidiaries ever participated in the financial management of such
facility to a degree sufficient to influence, or have the ability to
influence, the facility's treatment of hazardous waste) under the
Comprehensive Environmental Response, Compensation and Liability Act of 1980,
as amended ("CERCLA"), or under any Federal, state, local or municipal statue,
ordinance or regulation in respect thereof, in connection with any release of
any toxic or "hazardous substance", pollutant or contaminant into the
"environment" which, if adversely determined, (a) would require the payment by
CitFed Bancorp or any of the Subsidiaries and/or require CitFed Bancorp or any
of the Subsidiaries to incur expenses of more than $2,000,000 (whether or not
covered by insurance) or (b) would otherwise have a material adverse effect on
CitFed Bancorp or any of the Subsidiaries, nor, to the best knowledge of
CitFed Bancorp after reasonable inquiry, is there any reasonable basis for the
institution of any such actions or proceedings or investigations which is
probable of assertion, nor are there any such actions or proceedings or
investigations in which CitFed Bancorp or any of the Subsidiaries is a
plaintiff or complainant. Neither CitFed Bancorp nor any of the Subsidiaries
is liable in any material respect under any applicable law for any release by
any of them or for any release by any other "person" of a hazardous substance
caused by the spilling, leaking, pumping, pouring, emitting, emptying,
discharging, injecting, escaping, leaching, dumping or disposing of hazardous
wastes or other chemical substances, pollutants or contaminants into the
environment, nor is CitFed Bancorp or any of the Subsidiaries liable for any
material costs (as a result of the acts or omissions of CitFed Bancorp or any
of the Subsidiaries or, to the best knowledge of CitFed Bancorp, as a result
of the acts or omissions of any other "person") of any remedial action
including, without limitation, costs arising out of security fencing,
alternative water supplies, temporary evacuation and housing and other
emergency assistance undertaken by any environmental regulatory body having
jurisdiction over CitFed Bancorp or any of the Subsidiaries to prevent or
minimize any actual or threatened release by CitFed Bancorp or any of the
Subsidiaries of any hazardous wastes or other chemical substances, pollutants
and contaminants into the environment which would endanger the public health
or the environment. To the best knowledge of CitFed Bancorp, no underground
storage tank presently is located on, nor has any such tank ever been located
on, any property owned by CitFed Bancorp or any of the Subsidiaries or any
"facility" where CitFed Bancorp or any of the Subsidiaries has exercised any
significant management role. All terms contained in quotation marks in this
paragraph and the paragraph immediately following shall have the meaning
ascribed to such terms, and defined in, CERCLA; in addition, toxic or
hazardous substances, as used in this paragraph and all paragraphs of this
Section II.P., shall mean any material or substance that is defined or
classified as a "hazardous substance" pursuant to section 101 of CERCLA or
Section 311 of the Federal Water Pollution Control Act (33 U.S.C. §1321);
a "hazardous waste" pursuant to Section 1004 or Section 3001 of the Resource
Conservation and Recovery Act (42 U.S.C. §§6803, 6921); a "toxic
pollutant" under Section 307(a)(1) of the Federal Water Pollution Control Act
(33 U.S.C. §1317(a)(1)); a "hazardous air pollutant" under Section 112 of
the Clean Air Act (42 U.S.C. §7412); a "pesticide" under Section 1 of the
Federal Insecticide, Fungicide, and Rodenticide Act (7 U.S.C. §136); or a
"hazardous material" under the Hazardous Materials Transportation Uniform
Safety Act of 1990 (49 U.S.C. App. §1802(4)).
To the best knowledge of CitFed Bancorp each "facility" owned, leased or
operated by CitFed Bancorp or any of the Subsidiaries (but excluding any
"facility" as to which the sole interest of CitFed Bancorp or any of the
Subsidiaries is that of a lienholder or mortgagee, but including any
"facility" to which title has been taken pursuant to mortgage foreclosure or
similar proceedings and including any "facility" in which CitFed Bancorp or
any of the Subsidiaries ever participated in the financial management of such
facility to a degree sufficient to influence, or have the ability to
influence, the facility's treatment of hazardous waste) is, in all material
respects, in compliance with all applicable Federal, state, local or municipal
statutes, ordinances, laws and regulations and all orders, rulings or other
decisions of any court, administrative agency or other governmental authority
relating to the protection of the environment, except to the extent a failure
to comply would not have a material adverse effect on the business, operations
and financial condition of CitFed Bancorp and the Subsidiaries taken as a
whole.
Q. 1. Benefit Plans. Schedule 1 lists the name and a short
description of each Benefit Plan (as herein defined), together with an
indication of its funding status (e.g., trust, insured or general company
assets). For purposes hereof, the term "Benefit Plan" shall mean any plan,
program, arrangement or system of employee or director benefits maintained by
CitFed Bancorp or any of the Subsidiaries for the benefit of employees, former
employees or Directors of CitFed Bancorp or any of the Subsidiaries and shall
include (a) any qualified retirement plan such as a pension, profit sharing,
stock bonus plan or employee stock ownership plan ("ESOP"), (b) any plan,
program or arrangement providing deferred compensation, bonus deferral or
incentive benefits, whether funded through trust or otherwise, and (c) any
welfare plan, program or policy providing vacation, severance, salary
continuation, supplemental unemployment, disability, life, health coverage,
retiree health, Voluntary Employees' Beneficiary Association, medical expense
reimbursement or dependent care assistance benefits, in any such foregoing
case without regard to whether the Benefit Plan constitutes an employee
benefit plan under Section 3(3) of the Employee Retirement Income Security Act
of 1974, as amended ("ERISA"), or the number of employees covered under such
Benefit Plan.
2. Plan Documents, Reports and Filings. Except as disclosed on
Schedule 1, CitFed Bancorp or the Subsidiaries has provided true, complete and
correct copies of all plan documents, if any, comprising each Benefit Plan,
together with, when applicable, (a) the most recent summary plan description,
(b) the most recent actuarial and financial reports and the most recent annual
reports filed with any governmental agency and (c) all Internal Revenue
Service ("IRS") or other
governmental agency rulings and determination letters or any open requests for
IRS rulings or letters with respect to Benefit Plans.
3. Qualified Retirement Plan Compliance. With respect to each
Benefit Plan which is an employee pension benefit plan (as defined in section
3(2) of ERISA) other than any such plan that meets the "top-hat" exception
under section 201(1) of ERISA (a "Qualified Benefit Plan"), except as
disclosed on Schedule 1: (a) the IRS has issued a determination letter which
determined that such Qualified Benefit Plan satisfied the requirements of
section 401(a) of the Internal Revenue Code of 1986, as amended through the
date hereof (the "Code"), as amended by all of the laws referred to in Section
1 of Revenue Procedure 93-39, such determination letter has not been revoked
or threatened to be revoked by the IRS, and the scope of such determination
letter is complete and does not exclude consideration of any of the
requirements or matters referred to in sections 4.02 through 4.04 of Revenue
Procedure 93-39; (b) to the best knowledge of CitFed Bancorp, such Qualified
Benefit Plan is in material compliance with all qualification requirements of
Section 401(a) of the Code; (c) to the best knowledge of CitFed Bancorp, such
Qualified Benefit Plan is in substantial compliance with all notice, reporting
and disclosure requirements of ERISA and the Code; (d) any Qualified Benefit
Plan which is an ESOP as defined in Section 4975(e)(7) of the Code (an "ESOP
Qualified Benefit Plan") is in material compliance with the applicable
qualification requirements of Section 409 of the Code; and (e) any previously
terminated Qualified Benefit Plan was terminated in material compliance with
the requirements of ERISA and the Code, has received a favorable determination
letter therefor, and the liabilities of such Qualified Benefit Plan and the
requirements of the Pension Benefit Guaranty Corporation ("PBGC") were fully
satisfied.
4. Welfare Plan Compliance. With respect to each Benefit Plan which
is an employee welfare benefit plan (as defined in Section 3(1) of ERISA) (a
"Welfare Benefit Plan"), except as noted on Schedule 1: (a) such Welfare
Benefit Plan, if it is intended to provide favorable tax benefits to plan
participants, has been, to the best knowledge of CitFed Bancorp, in
compliance with applicable Code provisions; (b) such Welfare Benefit Plan has
been, to the best knowledge of CitFed Bancorp, operated in substantial
compliance with all applicable notice, reporting and disclosure requirements
of ERISA and the Code; and (c) such Welfare Benefit Plan, if a group health
plan subject to the requirements of Section 4980B of the Code ("COBRA"), has
been, to the best knowledge of CitFed Bancorp, operated in substantial
compliance with such COBRA requirements.
5. Prohibited Transactions. To the best knowledge of CitFed Bancorp,
no prohibited transaction under Section 406 of ERISA and not exempt under
Section 408 of ERISA has occurred with respect to any Benefit Plan which would
result, with respect to any person, in (a) the imposition, directly or
indirectly, of a material excise tax under Section 4975 of the Code or (b)
material fiduciary liability under Section 409 of ERISA. No ESOP Qualified
Benefit Plan is leveraged.
6. Lawsuits or Claims. No material actions, suits or claims (other
than routine claims of benefits) are pending or, to the best knowledge of
CitFed Bancorp, threatened against any Benefit Plan or against CitFed Bancorp
or any of the Subsidiaries with respect to any Benefit Plan.
7. Disclosure of Unfunded Liabilities. All material Unfunded
Liabilities with respect to each Benefit Plan have been recorded and disclosed
on the most recent financial statement of CitFed Bancorp and the Subsidiaries
or, if not, in Schedule 1. For purposes hereof, the term "Unfunded
Liabilities" shall mean any amounts properly accrued to date under generally
accepted accounting principles in effect as of the date of this Agreement
(GAAP), or amounts not yet accrued for GAAP purposes but for which an
obligation (which has legally accrued and cannot legally be eliminated and
which is subject to reasonable estimate) exists for payment in the future
which is attributable to any Benefit Plan, including but not limited to (a)
severance pay benefits, (b) deferred compensation or unpaid bonuses, (c) any
liabilities on account of the change in control which will result from this
Agreement, including any potential 20% excise tax under Section 4999 of the
Code relating to excess parachute payments under Section 280G of the Code, (d)
any unpaid pension contributions for the current plan year or any accumulated
funding deficiency under Section 412 of the Code and related penalties under
Section 4971 of the Code, including unpaid pension contributions or funding
deficiencies owed by members of a controlled group of corporations which
includes CitFed Bancorp or any of the Subsidiaries and for which CitFed
Bancorp or any of the Subsidiaries is liable under applicable law, (e) any
authorized but unpaid profit sharing contributions or contributions under
Section 401(k) and Section 401(m) of the Code, (f) retiree health benefit
coverage and (g) unpaid premiums for contributions required under any group
health plan to maintain such plan's coverage through the Effective Time.
8. Defined Benefit Pension Plan Liabilities. CitFed Bancorp and each
of the Subsidiaries (or any pension plan maintained by any of them) have not
incurred any material liability to the PBGC or the IRS with respect to any
Benefit Plan which is a defined benefit pension plan, except for the payment
of PBGC premiums pursuant to Section 4007 of ERISA, all of which if due prior
to the date of this Agreement have been fully paid, and no PBGC reportable
event under Section 4043 of ERISA has occurred with respect to any such
pension plan. Except as otherwise disclosed in Schedule 1, the benefit
liabilities, as defined in Section 4001(a)(16) of ERISA, of each Benefit Plan
subject to Title IV of ERISA, using the actuarial assumptions that would be
used by the PBGC in the event of termination of such plan, do not exceed the
fair market value of the assets of such plan. Neither CitFed Bancorp, any of
the Subsidiaries nor any controlled group member of CitFed Bancorp or any of
the Subsidiaries participates in, or has incurred any liability under Sections
4201, 4063 or 4064 of ERISA for a complete or partial withdrawal from a
multiple employer plan or a multi-employer plan (as defined in Section 3(37)
of ERISA).
9. Independent Trustee. CitFed Bancorp and the Subsidiaries (a) have
not incurred any asserted or, to the best knowledge of CitFed Bancorp,
unasserted material liability for breach of duties assumed in connection with
acting as an independent trustee of any employee pension plan (as defined in
Section 3(2) of ERISA) which is intended to be qualified under Section 401(a)
of the Code and which is maintained by an employer unrelated in ownership to
CitFed Bancorp or any of the Subsidiaries, (b) have not authorized nor
knowingly participated in a material prohibited transaction under Section 406
of ERISA and not exempt under Section 408 of ERISA and (c) have not received
notice of any material actions, suits or claims (other than routine claims for
benefits) pending or threatened against the unrelated employer or against
them.
10. Retiree Benefits. Except as listed on Schedule 1 and identified
as "Retiree Liability", neither CitFed Bancorp nor any of the Subsidiaries
have any obligation to provide medical benefits, or life insurance benefits to
or with respect to retirees, former employees or any of their relatives.
11. Right to Amend and Terminate. Except as listed on Schedule 1,
CitFed Bancorp or one of the Subsidiaries has all power and authority
necessary to amend or terminate each Qualified Benefit Plan without incurring
any penalty or liability provided that, in the case of an employee pension
benefit plan (as defined in section 3(2) of ERISA), benefits accrued as of the
date of amendment or termination are not reduced.
R. The investment portfolios of CitFed Bancorp and each of the
Subsidiaries consist of securities in marketable form. Since March 31, 1997
to the date hereof neither CitFed Bancorp nor any of the Subsidiaries has
incurred any unusual or extraordinary losses in its investment portfolio, and,
except for events relating to the business environment in general, including
market fluctuations, CitFed Bancorp is not aware of any events which are
reasonably certain to occur in the future and which reasonably can be expected
to result in any material adverse change in the quality or performance of
CitFed Bancorp's and the Subsidiaries' investment portfolio on a consolidated
basis.
S. There are no actions, suits, claims, proceedings, investigations or
assessments of any kind pending, or to the best knowledge of CitFed Bancorp,
threatened against any of the directors or officers of CitFed Bancorp or any
of the Subsidiaries in their capacities as such, and no director or officer of
CitFed Bancorp or any of the Subsidiaries currently is being indemnified or
seeking to be indemnified by either CitFed Bancorp or any of the Subsidiaries
pursuant to applicable law or CitFed Bancorp's Certificate of Incorporation or
Bylaws or the Thrift Subsidiary's Charter or Bylaws, or the organization
documents of any of the other Subsidiaries.
T. There is no "business combination," "moratorium," "control share," or
other state anti-takeover statute or regulation or any agreement to which
CitFed Bancorp is a party which (i) prohibits or restricts CitFed Bancorp's
ability to perform its obligations under this Agreement, or its ability to
consummate the transactions contemplated hereby, (ii) would have the effect of
invalidating or voiding this Agreement, or any provisions hereof, or (iii)
would subject Fifth Third to any impediment or condition in connection with
the exercise of any of its rights under this Agreement.
U. CitFed Bancorp has taken all action required to be taken by it in order
to exempt this Agreement and the Stock Option Agreement (as hereinafter
defined) and the transactions contemplated hereby and thereby from, and this
Agreement and the Stock Option Agreement are exempt from the requirements of
any such law or regulation, including, without limitation, the laws of the
State of Delaware, including Section 203 of the General Corporation Law of the
State of Delaware.
V. All interest rate swaps, caps, floors and option agreements and other
interest rate risk management arrangements, whether entered into for CitFed
Bancorp's own account or for the account of one or more of the Subsidiaries or
their customers, were entered into (i) in accordance with prudent banking
practices and all applicable laws, rules, regulations and regulatory policies
and (ii) with counterparties believed to be financially responsible at the
time; and each of them constitutes the valid and legally binding obligation of
CitFed Bancorp or one of the Subsidiaries, enforceable in accordance with its
terms (except as such enforceability may be limited by applicable bankruptcy,
insolvency, reorganization, moratorium, fraudulent transfer and similar laws
of general applicability relating to or affecting creditors' rights or by
general equity principles), and are in full force and effect. Neither CitFed
Bancorp or any of the Subsidiaries, nor to CitFed Bancorp's knowledge any
other party thereto, is in breach of any of its obligations under any such
agreement or arrangement.
III. Representations and Warranties of Fifth Third
Fifth Third represents and warrants to CitFed Bancorp that as of the date
hereof or as of the indicated date, as appropriate:
A. Fifth Third is duly incorporated, validly existing and in good standing
as a corporation under the corporation laws of the State of Ohio, is a
registered bank holding company under the Bank Holding Company Act of 1956, as
amended, and is duly authorized to conduct the business in which it is
engaged, and The Fifth Third Bank is duly incorporated, validly existing and
in good standing as a corporation under the laws of the State of Ohio and is
duly authorized to conduct the business in which it is engaged.
B. Pursuant to Fifth Third's Second Amended Articles of Incorporation, as
amended, the total number of shares of capital stock it is authorized to have
outstanding is 300,500,000 of which 300,000,000 shares are classified as
Fifth Third Common Stock and 500,000 shares are classified as preferred stock
without par value ("Fifth Third Preferred Stock"). As of the close of
business on November 30, 1997, 155,163,554 shares of Fifth Third Common Stock
were issued and outstanding and 3,677,597 shares were held in its treasury.
As of the date of this Agreement, no shares of Fifth Third Preferred Stock
have been issued. Fifth Third does not have outstanding any stock options,
subscription rights, warrants or other securities entitling the holders to
subscribe for or purchase any shares of its capital stock other than options
granted and to be granted to employees and directors under its stock option
plans. At November 30, 1997, 7,059,640 shares of Fifth Third Common Stock
were reserved for issuance in connection with outstanding options granted
under its stock option plans and 2,116,683 shares were reserved for issuance
under options to be granted in the future.
C. All shares of Fifth Third Common Stock to be received by the
shareholders of CitFed Bancorp as a result of the Merger shall be, upon
transfer or issuance, validly issued, fully paid and non-assessable, and will
not, upon such transfer or issuance, be subject to the preemptive rights of
any shareholder of Fifth Third.
D. Fifth Third has furnished to CitFed Bancorp its audited consolidated
financial statements as at December 31, 1994, December 31, 1995 and December
31, 1996 and for the respective years then ended together with the opinions of
its independent public accountants associated therewith. Such consolidated
financial statements fairly present the consolidated financial condition of
Fifth Third as of their respective dates and for the respective periods
covered thereby in conformity with generally accepted accounting principles
consistently followed throughout the periods covered thereby. Neither Fifth
Third nor any significant subsidiaries of Fifth Third have any material
liabilities, obligations or indebtedness required to be disclosed in such
financial statements other than the liabilities, obligations and indebtedness
disclosed in such financial statements (including footnotes). Fifth Third
will furnish to CitFed Bancorp its audited consolidated financial statements
as at December 31, 1997 and for the year then ended together with the opinions
of its independent public accountants associated therewith as soon as such
statements are publicly available. Fifth Third has also furnished to CitFed
Bancorp its unaudited consolidated financial statements as at September 30,
1997, and for the nine (9) months then ended, and shall continue to furnish
information for subsequent calendar quarter periods to CitFed Bancorp as soon
as such becomes publicly available until the Closing Date.
E. Except for events relating to the business environment in general, the
effects of any acquisition transactions publicly announced by Fifth Third, and
the issuance by Fifth Third Capital Trust I of its 8.136% Capital Securities,
Series A and the related issuance by Fifth Third of its 8.136% Junior
Subordinated Deferrable Interest Debentures, Series A: (i) since December 31,
1996, to the date hereof there have been no material adverse changes in the
consolidated financial condition, operations or business of Fifth Third; (ii)
the chief executive officer and the chief financial officer of Fifth Third are
not aware of any events which have occurred since December 31, 1996, or which
are reasonably certain to occur in the future and which reasonably can be
expected to result in any material adverse change in the consolidated
financial condition, operations or business of Fifth Third; and (iii) since
December 31, 1996, to the date hereof there have been no material changes in
the methods of business operations of Fifth Third and its subsidiaries.
F. 1. The Executive Committee of the Board of Directors of Fifth
Third, by resolution adopted by the members present at a meeting duly called
and held, at which meeting a quorum was at all times present and acting, has
approved this Agreement, including reserving for issuance to CitFed Bancorp
shareholders in accordance with this Agreement, a sufficient number of shares
of Fifth Third Common Stock. Approval and adoption of this Agreement by the
shareholders of Fifth Third is not required under Ohio law or under the Second
Amended Articles of Incorporation, as amended, or Code of Regulations of Fifth
Third. No other corporate action is necessary or required, including but not
limited to approval of this Agreement or the transaction contemplated herein
by the Board of Directors of Fifth Third.
2. Fifth Third has corporate power and authority to enter into this
Agreement and to carry out its obligations hereunder subject to certain
required regulatory approvals. This Agreement, when executed and delivered,
will have been duly authorized and will constitute the valid and binding
obligation of Fifth Third, enforceable in accordance with its terms, except to
the extent that (i) enforceability thereof may be limited by insolvency,
reorganization, liquidation, bankruptcy, readjustment of debt or other laws of
general application relating to or affecting the enforcement of creditors'
rights generally and (ii) the availability of certain remedies may be
precluded by general principles of equity; subject, however, to the receipt of
requisite regulatory approvals.
3. Neither the execution of this Agreement nor the consummation of
the transactions contemplated hereby, (i) conflicts with, results in a breach
of, violates or constitutes a default under, Fifth Third's Second Amended
Articles of Incorporation, as amended, or Code of Regulations or, to the best
knowledge of its chief executive officer and chief financial officer, any
federal, foreign, state or local law, statute, ordinance, rule, regulation or
court or administrative orders to which Fifth Third is subject or bound; (ii)
to the best knowledge of the chief executive officer and chief financial
officer of Fifth Third, result in the creation of or give any person the right
to create any material lien, charge, encumbrance, security agreement or any
other material rights of others or other material adverse interest upon any
material right, property or asset belonging to Fifth Third or any of its
subsidiaries other than such rights as may be given the shareholders of CitFed
Bancorp pursuant to the provisions of Sections 1701.84 and 1701.85 of the Ohio
Revised Code; (iii) conflicts with, results in a breach of, violates or
constitutes a default under, terminate or give any person the right to
terminate, amend, abandon, or refuse to perform, any material agreement,
arrangement or commitment to which Fifth Third is a party or by which Fifth
Third's rights, properties or assets are subject or bound; or (iv) accelerate
or modify, or give any party thereto the right to accelerate or modify, the
time within which, or the terms according to which, Fifth Third is to perform
any duties or obligations or receive any rights or benefits under any material
agreement, arrangements or commitments.
G. Complete and accurate copies of (i) the Second Amended Articles of
Incorporation, as amended, and (ii) the Code of Regulations of Fifth Third in
force as of the date hereof have been delivered to CitFed Bancorp.
H. To the best knowledge of the chief executive officer and chief
financial officer of Fifth Third, neither Fifth Third nor any of its
subsidiaries, nor any employee, officer or director of any of them, has
knowingly engaged in any activity or omitted to take any action which, in any
material way, has resulted or could result in the violation of (i) any local,
state or federal law or (ii) any regulation, order, injunction or decree of
any court or governmental body, the violation of either of which could
reasonably be expected to have a material adverse effect on the financial
condition Fifth Third and its subsidiaries taken as a whole. To the best
knowledge of Fifth Third, Fifth Third and its subsidiaries possess all
licenses, franchises, permits and other governmental authorizations necessary
for the continued conduct of their businesses without material interference or
interruption.
I. 1. To the best knowledge of Fifth Third, neither this Agreement nor
any report, statement, list, certificate or other information furnished or to
be furnished by Fifth Third to CitFed Bancorp or its agents pursuant to this
Agreement (including, without limitation, any information which shall be
supplied with respect to its business operations and financial condition for
inclusion in the proxy statement/prospectus and registration statement
relating to the merger) contains or shall contain (in the case of information
relating to the proxy statement/prospectus, at the time it is mailed, and, in
the case of the registration statement, at the time it becomes effective and,
in the case of the proxy statement/prospectus and the registration statement,
at the time the annual or special meeting of shareholders of CitFed Bancorp is
held to consider the adoption of this Agreement) an untrue statement of a
material fact or omits or shall omit to state a material fact necessary to
make the statements contained herein or therein, in light of the circumstances
in which they are made, not misleading.
2. Fifth Third has furnished to CitFed Bancorp or its agents true and
complete copies (including all exhibits and all documents incorporated by
reference) of the following documents as filed by Fifth Third with the SEC:
a. Fifth Third's Annual Report on Form 10-K for the year ended
December 31, 1996;
b. Fifth Third's Quarterly Reports on From 10-Q for the
quarters ended March 31, 1997, June 30, 1997 and September 30,
1997;
c. any Current Report on Form 8-K with respect to any event
occurring after December 31, 1996, and prior to the date of this
Agreement, including, but not limited to, Fifth Third's Form 8-K
dated March 20, 1997;
d. any report filed by Fifth Third to amend or modify any of
the Reports described above; and
e. all proxy statements prepared in connection with meetings
of Fifth Third's shareholders held or to be held subsequent to
December 31, 1996.
The information set forth in the documents described in this Section III.I.2.
(including all exhibits thereto and all documents incorporated therein by
reference) did not, as of the dates on which such reports were filed with the
SEC and/or mailed to shareholders, (a) contain any untrue statement of a
material fact, (b) omit any material fact required to be stated therein or
necessary to make the statements contained therein, in light of the
circumstances under which they were made, not misleading, or (c) omit any
material exhibit required to be filed therewith. Prior to the date hereof no
event has occurred subsequent to September 30, 1997 which Fifth Third is
required to describe in a Current Report on Form 8-K other than the Current
Reports heretofore furnished by Fifth Third to CitFed Bancorp. Fifth Third
timely shall furnish CitFed Bancorp with copies of all reports filed by Fifth
Third with the SEC subsequent to the date of this Agreement and until the
Closing Date.
J. There are no actions, suits, proceedings, investigations or assessments
of any kind pending or, to the best knowledge of Fifth Third, threatened
against Fifth Third or any Fifth Third subsidiary, which reasonably can be
expected to result in any material adverse change in the consolidated
financial condition, operations or business of Fifth Third.
K. Since December 31, 1996, to the date hereof, none of Fifth Third's
banking subsidiaries and thrift subsidiaries has incurred any unusual or
extraordinary loan losses which would be material to Fifth Third on a
consolidated basis; and to the best knowledge and belief of the chief
executive officer and chief financial officer of Fifth Third, and in the light
of such banking subsidiaries' and thrift subsidiary's historical loan loss
experience and their managements' analysis of the quality and performance of
their respective loan portfolios, as of September 30, 1997, their consolidated
reserves for loan losses are adequate to absorb all known and reasonably
anticipated losses as of such date.
L. Fifth Third and its subsidiaries have filed all federal, state and
local tax returns required to be filed (after giving effect to all extensions)
by them, respectively, and have paid or provided for all tax liabilities shown
to be due thereon or which have been assessed against them, respectively. To
the best knowledge of Fifth Third, all tax returns filed by Fifth Third and
its subsidiaries through the date hereof constitute complete and accurate
representations of the tax liabilities of Fifth Third and each of such
subsidiaries for such years and accurately set forth all items (to the extent
required to be included or reflected in such returns) relevant to its future
tax liabilities, including the tax basis of its properties and assets in all
material respects. Neither Fifth Third nor any of its subsidiaries is
currently under audit nor has any of them been contacted for an audit and
neither Fifth Third nor any of its subsidiaries is engaged in any appeal
proceeding in connection with any state, Federal, or local tax filing, which
audit or appeal, if decided adversely to Fifth Third, would have a material
adverse affect on Fifth Third or any of its subsidiaries.
M. Except for dealings with Salomon Brothers Inc and Xxxxx Xxxxxx Inc.
(collectively doing business as "Xxxxxxx Xxxxx Barney"), Fifth Third has not,
directly or indirectly, dealt with any broker or finder in connection with
this transaction and has not incurred and will not incur any obligation for
any broker's or finder's fee or commission in connection with the transactions
provided for in this Agreement. Fifth Third shall be solely responsible for
payment to Xxxxxxx Xxxxx Xxxxxx of any fees incurred in connection with the
transactions provided for in this Agreement.
N. Fifth Third has no unfunded liabilities with respect to any Benefit
Plan (as such term is defined in Section II.Q.1. hereof, but applied to Fifth
Third, its subsidiaries and affiliates) that are material, either individually
or in the aggregate, to Fifth Third on a consolidated basis and that have not
been recorded and disclosed as required by generally accepted accounting
principles (GAAP) in the most recent year-end, audited financial statements of
Fifth Third supplied to CitFed Bancorp pursuant to Section III.D. hereof.
O. The investment portfolios of Fifth Third and its subsidiaries and
affiliates consist of securities in marketable form. Since December 31, 1996,
to the date hereof Fifth Third and its affiliates, on a consolidated basis,
have not incurred any unusual or extraordinary losses in their respective
investment portfolios, and, except for events relating to the business
environment in general, including market fluctuations, the management of Fifth
Third is not aware of any events which are reasonably certain to occur in the
future and which reasonably can be expected to result in any material adverse
change in the quality or performance of the investment portfolios of Fifth
Third and its affiliates on a consolidated basis.
P. As of the date hereof, Fifth Third has no reason to believe that any
condition exists with respect to the business or operation of Fifth Third that
might prevent or impede the Merger from qualifying as a reorganization within
the meaning of Section 368(a) of the Code or (other than the reissuance of
shares of Fifth Third Common Stock held as treasury shares) for
pooling-of-interests accounting treatment.
Q. There is no "business combination," "moratorium," "control share," or
other state anti-takeover statute or regulation or any agreement to which
Fifth Third is a party which (i) prohibits or restricts Fifth Third's ability
to perform its obligations under this Agreement, or its ability to consummate
the transactions contemplated hereby, (ii) would have the effect of
invalidating or voiding this Agreement, or any provisions hereof, or (iii)
would subject CitFed Bancorp to any impediment or condition in connection with
the exercise of any of its rights under this Agreement.
R. Fifth Third and its subsidiaries have good and marketable title to all
of the material properties and assets reflected in their separate statements
of financial condition as at December 31, 1996, and which are still owned by
each and each has good and marketable title to all material properties and
assets acquired by it after such date and still owned by it, subject to (i)
any liens and encumbrances that do not materially adversely impair the use of
the property, (ii) statutory liens for taxes not yet due and payable and (iii)
minor defects and irregularities in title that do not materially adversely
impair the use of the property.
S. There are no actions, proceedings or investigations pending before any
environmental regulatory body, with respect to or threatened against or
affecting Fifth Third or any of its subsidiaries in respect to any "facility"
owned, leased or operated by any of them (but excluding any "facility" as to
which sole interest of Fifth Third or any of its subsidiaries is that of a
lienholder or mortgagee, but including any "facility" to which title has been
taken pursuant to mortgage foreclosure or similar proceedings and including
any "facility" in which Fifth Third or any of its subsidiaries ever
participated in the financial management of such facility to a degree
sufficient to influence, or have the ability to influence, the facility's
treatment of hazardous waste) under the Comprehensive Environmental Response,
Compensation and Liability Act of 1980, as amended ("CERCLA"), or under any
Federal, state, local or municipal statue, ordinance or regulation in respect
thereof, in connection with any release of any toxic or "hazardous substance",
pollutant or contaminant into the "environment" which, if adversely
determined, (a) would require the payment by Fifth Third or any of its
Subsidiaries and/or require Fifth Third or any of its subsidiaries to incur
expenses of more than $2,000,000 (whether or not covered by insurance) or (b)
would otherwise have a material adverse effect on Fifth Third or any of its
Subsidiaries, nor, to the best knowledge of Fifth Third after reasonable
inquiry, is there any reasonable basis for the institution of any such actions
or proceedings or investigations which is probable of assertion, nor are there
any such actions or proceedings or investigations in which Fifth Third or any
of its subsidiaries is a plaintiff or complainant. Neither Fifth Third nor
any of its subsidiaries is liable in any material respect under any applicable
law for any release by any of them or for any release by any other "person" of
a hazardous substance caused by the spilling, leaking, pumping, pouring,
emitting, emptying, discharging, injecting, escaping, leaching, dumping or
disposing of hazardous wastes or other chemical substances, pollutants or
contaminants into the environment, nor is Fifth Third or any of its
subsidiaries liable for any material costs (as a result of the acts or
omissions of Fifth Third or any of its subsidiaries or, to the best knowledge
of Fifth Third, as a result of the acts or omissions of any other "person") of
any remedial action including, without limitation, costs arising out of
security fencing, alternative water supplies, temporary evacuation and housing
and other emergency assistance undertaken by any environmental regulatory body
having jurisdiction over Fifth Third or any of its subsidiaries to prevent or
minimize any actual or threatened release by Fifth Third or any of its
subsidiaries of any hazardous wastes or other chemical substances, pollutants
and contaminants into the environment which would endanger the public health
or the environment. To the best knowledge of Fifth Third, no underground
storage tank presently is located on, nor has any such tank ever been located
on, any property owned by Fifth Third or any of its subsidiaries or any
"facility" where Fifth Third or any of its subsidiaries has exercised any
significant management role. All terms contained in quotation marks in this
paragraph and the paragraph immediately following shall have the meaning
ascribed to such terms, and defined in, CERCLA; in addition, toxic or
hazardous substances, as used in this paragraph and all paragraphs of this
Section II.P., shall mean any material or substance that is defined or
classified as a "hazardous substance" pursuant to section 101 of CERCLA or
Section 311 of the Federal Water Pollution Control Act (33 U.S.C. §1321);
a "hazardous waste" pursuant to Section 1004 or Section 3001 of the Resource
Conservation and Recovery Act (42 U.S.C. §§6803, 6921); a "toxic
pollutant" under Section 307(a)(1) of the Federal Water Pollution Control Act
(33 U.S.C. §1317(a)(1)); a "hazardous air pollutant" under Section 112 of
the Clean Air Act (42 U.S.C. §7412); a "pesticide" under Section 1 of the
Federal Insecticide, Fungicide, and Rodenticide Act (7 U.S.C. §136); or a
"hazardous material" under the Hazardous Materials Transportation Uniform
Safety Act of 1990 (49 U.S.C. App. §1802(4)).
To the best knowledge of Fifth Third each "facility" owned, leased or
operated by Fifth Third or any of its subsidiaries (but excluding any
"facility" as to which the sole interest of Fifth Third or any of its
subsidiaries is that of a lienholder or mortgagee, but including any
"facility" to which title has been taken pursuant to mortgage foreclosure or
similar proceedings and including any "facility" in which Fifth Third or any
of its subsidiaries ever participated in the financial management of such
facility to a degree sufficient to influence, or have the ability to influence,
the facility's treatment of hazardous waste) is, in all material respects, in
compliance with all applicable Federal, state, local or municipal statutes,
ordinances, laws and regulations and all orders, rulings or other decisions of
any court, administrative agency or other governmental authority relating to
the protection of the environment, except to the extent a failure to comply
would not have a material adverse effect on the business, operations and
financial condition of Fifth Third and its subsidiaries taken as a whole.
T. All representations and warranties contained in this Section III shall
expire at the Effective Time, and thereafter, neither Fifth Third nor any
officer or Director of Fifth Third shall have any further liability or
obligation with respect thereto, except for any misrepresentations, breaches
of warranties or violations of covenants that were made with intent to
defraud.
IV. Obligations of CitFed Bancorp Between the Date of this Agreement and
the Effective Time.
A. CitFed Bancorp, in consultation with Fifth Third, will take all actions
necessary to call and hold its annual or a special meeting of its shareholders
as soon as practicable after the Fifth Third registration statement relating
to the shares of Fifth Third Common Stock to be issued in the Merger has been
declared effective by the SEC and under all applicable state securities laws
for the purpose of adopting this Agreement and any other documents or actions
necessary to the consummation of the Merger provided for herein pursuant to
law. The Board of Directors of CitFed Bancorp intends to inform the
shareholders of CitFed Bancorp in the proxy materials relating to the annual
or special meeting that all directors of CitFed Bancorp presently intend to
vote all shares of CitFed Bancorp Common Stock which they own of record in
favor of approving this Agreement and any such other necessary documents or
actions, and all Directors will recommend approval of this Agreement to the
other shareholders of CitFed Bancorp, subject only to such Directors'
fiduciary obligations, receipt of an updated fairness opinion from Xxxxx,
Xxxxxxxx & Xxxxx, Inc. dated as of the date immediately prior to the date of
the Proxy Statement, and their review of Fifth Third's registration statement
to be filed with the SEC as set forth in Section V herein, and their
reasonable satisfaction with the information set forth therein.
B. (i) The Merger is intended to be structured to qualify for
treatment under present accounting rules as a pooling of interests and CitFed
Bancorp agrees to take no action which would disqualify the Merger for such
treatment under generally accepted accounting principles. Consistent with
generally accepted accounting principles, CitFed Bancorp agrees that on or
before the Effective Time based on a review of the Subsidiaries loan losses,
current classified assets and commercial, multi-family and residential
mortgage loans and investment portfolio, CitFed Bancorp will work with Fifth
Third with the goal of establishing collection procedures, internal valuation
reviews, credit policies and practices and general valuation allowances which
are consistent with the guidelines used within the Fifth Third holding company
system (collectively, "Fifth Third Procedures"), and CitFed Bancorp agrees to
work with Fifth Third after the execution of this Agreement and prior to the
Effective Time so that the Fifth Third Procedures can be implemented by CitFed
Bancorp, after all conditions to closing the Merger have been satisfied, so as
to be in place on the Effective Time. Fifth Third shall provide such
assistance and direction to CitFed Bancorp as is necessary in conforming to
such polices, practices, procedures and asset dispositions which are mutually
agreeable between the date of this Agreement until the Effective Time; and
(ii) from the date of this Agreement until the Effective Time, CitFed Bancorp
and the Subsidiaries each will be operated in the ordinary course of business,
and none of them will, without the prior written consent of Fifth Third, which
consent shall not be unreasonably withheld: make any changes in its
Certificate of Incorporation, Bylaws, capital or corporate structures (other
than to redeem the outstanding Rights); issue any additional shares of its
Common Stock other than pursuant to the exercise of options granted prior to
the date hereof or pursuant to the Stock Option Agreement; issue any other
equity securities, other than pursuant to the exercise of options granted
prior to the date hereof; or, issue as borrower any long term debt (other than
Federal Home Loan Bank advances having maturities not exceeding one year) or
convertible or other securities of any kind, or right to acquire any of its
securities; make any material changes in its method of business operations;
make, enter into any agreement to make, or become obligated to make, any
capital expenditures in excess of the amounts set forth in CitFed Bancorp's
capital expenditures budget as delivered to Fifth Third prior to the date
hereof; make, enter into or renew any agreement for services to be provided to
CitFed Bancorp or the Subsidiaries or permit the automatic renewal of any such
agreement, except any agreement for services in the ordinary course of
business consistent with past practices, provided that CitFed Bancorp will
consult with Fifth Third prior to the renewal of any such agreement requiring
the annual expenditure of more than $150,000 (for this purpose the phrase
"permit the automatic renewal" includes the failure to send a notice of
termination of such contract if such failure would constitute a renewal); open
for business any branch office which has been approved by the appropriate
regulatory authorities but not yet opened or apply to the appropriate
regulatory authorities to establish a new branch office or expand any existing
branch office; acquire, become obligated to acquire, or enter into any
agreement to acquire, any banking or non-banking company or any branch offices
of any such companies; make, declare, pay or set aside for payment any cash
dividends on its own stock other than normal and customary cash dividends not
to exceed $0.09 per quarter through June 30, 1998, and $0.10 per quarter
thereafter, paid in such amounts and at such times as CitFed Bancorp
historically has done on its common stock, provided this covenant shall only
apply to CitFed Bancorp and provided further that notwithstanding anything to
the contrary herein, Fifth Third and CitFed Bancorp shall cooperate in
selecting the Effective Time to ensure that the holders of CitFed Bancorp
Common Stock do not become entitled to receive both a dividend in respect of
their CitFed Bancorp Common Stock and a dividend in respect of the Fifth Third
Common Stock or fail to be entitled to receive any dividend with respect to
any quarterly period or portion thereof in which the Effective Time occurs;
make, declare, pay or set aside for payment any stock dividends or make any
other distributions on its stock other than cash dividends as described in the
immediately preceding clause; change or otherwise amend any Benefit Plans
other than as required by law or as contemplated herein; and provide any
increases in employee salaries or benefits other than in the ordinary course
of business. CitFed Bancorp agrees that it will not sell or otherwise dispose
of or encumber any of the shares of the capital stock of any of the
Subsidiaries which are now owned by it.
C. Except as required by applicable law or regulation, CitFed Bancorp and
the Subsidiaries shall not (a) implement or adopt any material change in their
interest rate risk management policies, procedures or practices; (b) fail to
follow its existing policies or practices with respect to managing their
exposure to interest rate risk; or (c) fail to use commercially reasonable
means to avoid any material increase in their aggregate exposure to interest
rate risk.
D. Not later than the 15th day prior to the mailing of CitFed Bancorp's
proxy statement with respect to the Merger, CitFed Bancorp shall deliver to
Fifth Third a list of each person that, to the best of its knowledge, is or is
reasonably likely to be, as of the date of the annual or special meeting
called to approve the Merger, deemed an "affiliate" of it as that term is used
in Rule 145 under the Securities Act of 1933, as amended, or SEC Accounting
Series Releases 130 and 135 (the "CitFed Affiliates"). CitFed Bancorp shall
use its best efforts to cause each CitFed Affiliate to execute and deliver to
Fifth Third on or before the mailing of such proxy statement an agreement in
the form of Appendix IV.D hereto.
V. Cooperation and Other Obligations and Other Covenants
A. Fifth Third will prepare and cause to be filed at its expense such
applications and other documents with the Board of Governors of the Federal
Reserve System, the Federal Deposit Insurance Corporation, the Ohio Division
of Banks, the OTS, and any other governmental agencies as are required to
secure the requisite approval of such agencies to the consummation of the
transactions provided for in this Agreement, and the parties shall cooperate
in the preparation of an appropriate registration statement, including the
prospectus, proxy statement, and such other documents necessary to comply with
all federal and state securities laws relating to the registration and
issuance of the shares of Fifth Third Common Stock to be issued to the
shareholders of CitFed Bancorp in this transaction (the expenses thereof,
other than accounting, legal, investment banking, financial consulting and
associated expenses of CitFed Bancorp and its affiliates, to be paid by Fifth
Third), and any other laws applicable to the transactions provided for in this
Agreement. Fifth Third shall use all reasonable efforts to file all
regulatory applications within forty-five (45) days of the date of this
Agreement and the Registration/Proxy Statement within sixty(60) days of the
date of this Agreement, and to secure all such approvals as promptly as
practicable. CitFed Bancorp agrees that it will, as promptly as practicable
after request and at its own expense, provide Fifth Third with all information
and documents concerning CitFed Bancorp and the Subsidiaries, as shall be
required in connection with preparing such applications, registration
statements and other documents and in connection with securing such
approvals. Prior to filing any such applications or other documents with the
applicable governmental agencies, Fifth Third shall provide copies thereof to
CitFed Bancorp. CitFed Bancorp shall have the right to review, comment on and
approve the proxy statement and any amendments thereto included in the
registration statement in an appropriate manner prior to being filed. CitFed
Bancorp also shall have the right to review and comment on all regulatory
applications and responses in an appropriate manner prior to being filed.
Fifth Third agrees that it will, as promptly as practicable after request and
at its own expense, provide CitFed Bancorp with all information and documents
concerning Fifth Third and its subsidiaries as shall be required in connection
with preparing such applications, registration statements and other documents
which are to be prepared and filed by CitFed Bancorp and in connection with
approvals required to be obtained by CitFed Bancorp hereunder. Prior to
filing any such applications, statements or other documents with the
applicable governmental agency, CitFed Bancorp shall provide copies thereof to
Fifth Third.
B. Fifth Third will take no action or omit to take any action that could
(i) delay consummation of the Merger, (ii) diminish the likelihood of the
Merger receiving all regulatory approvals or otherwise being consummated; or
(iii) prevent the Merger from qualifying as a reorganization under Section
368(a) of the Code or for treatment under present accounting rules as a
pooling-of-interests.
C. Each of the parties hereto agrees to use its best efforts and to
cooperate with the other party in all reasonable respects in order to carry
out and consummate the transactions contemplated by this Agreement at the
earliest practicable time including, without limitation, the filing of
applications, notices and other documents with, and obtaining approval from,
appropriate governmental regulatory agencies.
D. CitFed Bancorp agrees to permit Fifth Third, its officers, employees,
accountants, agents and attorneys, and Fifth Third agrees to permit CitFed
Bancorp, its officers, employees, accountants, agents and attorneys, to have
reasonable access during business hours to their respective books, records and
properties, and those of their respective subsidiaries, for the purpose of
making a detailed examination, or updating and amplifying prior examinations,
of the financial condition, assets, liabilities, legal compliance, affairs and
the conduct of the business of CitFed Bancorp and the Subsidiaries or Fifth
Third and its subsidiaries, as the case may be, prior to the Effective Time,
and also to permit the monitoring of the foregoing on an ongoing basis (such
rights of examination and monitoring to be subject to the confidentiality
obligations set forth in Section VII.D. hereof); provided, however, that any
such examination by Fifth Third or CitFed Bancorp shall not relieve Fifth
Third or CitFed Bancorp from any responsibility or liability for any material
misrepresentation or material breach of warranty hereunder discovered in the
course of or subsequently to such examination and prior to the Effective Time.
E. All outstanding stock options under the CitFed Bancorp stock option
plan as of the Effective Time (the "Existing Stock Options") shall be amended
to provide that (i) upon exercise such holder shall receive that number of
shares of Fifth Third Common Stock determined by multiplying the Exchange
Ratio by the number of shares of CitFed Bancorp Common Stock subject to the
Existing Stock Option, and (ii) the exercise price under such Existing Stock
Option will be determined by dividing the exercise price per share under the
Existing Stock Option in effect immediately prior to the Effective Time by the
Exchange Ratio, and rounding the exercise price thus determined to the nearest
whole cent (a half-cent shall be rounded to the next higher whole cent). All
other terms and conditions of the Existing Stock Options shall remain in full
force and effect, except as the context may require the substitution of Fifth
Third for CitFed Bancorp. Fifth Third shall continue the separate existence
of the CitFed Stock Option Plan, provided, however, that Fifth Third may, in
its sole discretion, combine the CitFed Bancorp Stock Option Plan as a
separate and distinct part of any other stock based employee incentive plan
that Fifth Third may utilize from time to time. All such actions shall be
taken consistent with Section 424(a) of the Code and the applicable
regulations thereunder.
F. (1) CitFed Bancorp and its Subsidiaries, if applicable, shall take
all actions necessary to freeze the CitFed defined benefit pension plan as of
the Effective Time. In conjunction therewith, CitFed Bancorp and its
Subsidiaries, if applicable, may at any time make amendments to the CitFed
defined benefit pension plan to adjust the formula and qualifications for
determining benefits thereunder in a manner selected by it to assure that any
excess funding in such plan as of the Effective Time (calculated on a plan
termination basis and as agreed to by Fifth Third's actuaries) inures solely
to the benefit of participants in such plan or their beneficiaries and to
fully vest all benefits of participants as of the Effective Time, provided
that such changes are undertaken in a manner that does not adversely affect
the qualified status of such plan. Excess funding shall be determined as of
the Effective Time disregarding and without reduction for cash balance credits
implemented at the request of Fifth Third pursuant to Section V.F.5 below.
(2) Neither CitFed Bancorp nor any of its Subsidiaries, without the
advance written consent of Fifth Third shall (1) except to the extent
necessary to carry out the terms of this Agreement, or as required by
applicable law, adopt any amendments to the Qualified Benefit Plans after the
date of this Agreement; or (2) make any contributions to any Qualified Benefit
Plan after the date of this Agreement, except in the ordinary course of
business consistent with past practices.
(3) CitFed Bancorp or one or more of the Subsidiaries shall provide
to Fifth Third at least sixty (60) days prior to the Effective Time,
documentation reasonably satisfactory to Fifth Third demonstrating that the
requirements of Sections 404, 412, 415, 401(k) and (m) of the Code have been
satisfied by all of its Qualified Benefit Plans.
(4) With respect to any Benefit Plan that provides for vesting of
benefits, there shall be no discretionary acceleration of vesting without
Fifth Third's consent whether or not such discretionary acceleration of
vesting is provided under the terms of the Benefit Plan; provided that a
Benefit Plan which pursuant to its terms provides for an acceleration of
vesting upon a change of control of CitFed Bancorp shall not be deemed to
involve a discretionary acceleration of vesting and vesting thereunder shall
accelerate as of the Effective Time.
(5) If Fifth Third so requests, CitFed Bancorp or one or more of the
Subsidiaries shall have amended CitFed Bancorp's defined benefit plan in the
manner directed by Fifth Third in order to provide for employees of CitFed
Bancorp and the Subsidiaries such cash balance credits as Fifth Third
determines would approximate the projected profit sharing plan contributions
such employees would receive after closing under the Fifth Third Bancorp
Master Profit Sharing Plan for a number of years determined by Fifth Third.
VI. Conditions Precedent to Closing.
A. Conditions to the Obligations of Each of the Parties:
The obligation of each of the parties hereto to consummate the transactions
provided for herein is subject to the fulfillment on or prior to the Effective
Time of each of the following conditions:
1. The shareholders of CitFed Bancorp shall have duly adopted this
Agreement in accordance with and as required by law and in accordance with its
Certificate of Incorporation and Bylaws.
2. All necessary governmental and regulatory orders, consents,
clearances and approvals and requirements shall have been secured and
satisfied for the consummation of such transactions, including without
limitation, those of the Federal Reserve System, the Ohio Division of Banks,
the OTS and the Federal Deposit Insurance Corporation to the extent required.
3. Prior to or at the Effective Time, no material investigation by
any state or federal agency shall have been threatened or instituted seeking
to enjoin or prohibit, or enjoining or prohibiting, the transactions
contemplated hereby and no material governmental action or proceeding shall
have been threatened or instituted before any court or government body or
authority, seeking to enjoin or prohibit, or enjoining or prohibiting, the
transactions contemplated hereby other than investigations, actions and
proceedings which have been withdrawn prior to or at the Effective Time
without material adverse effect to Fifth Third or CitFed Bancorp and other
than regularly-scheduled regulatory examinations.
4. Any waiting period mandated by law in respect of the final
approval by any applicable Federal regulator(s) of the transaction
contemplated herein shall have expired.
B. Conditions to the Obligations of Fifth Third:
The obligation of Fifth Third to consummate the transactions provided for
herein is subject to the fulfillment at or prior to the Effective Time of each
of the following conditions unless waived by Fifth Third in a writing
delivered to CitFed Bancorp which specifically refers to the condition or
conditions being waived:
1. All of the representations and warranties of CitFed Bancorp set
forth in Section II of this Agreement shall be true and correct in all
material respects as of the date of this Agreement and at and as of the
Closing Date (as hereinafter defined) as if each such representation and
warranty was given on and as of the Closing Date, except (i) for any such
representations and warranties made as of a specified date, which shall be
true and correct in all material respects as of such date and (ii) for
inaccuracies of representations and warranties which would not have, or would
not reasonably be expected to have, a material adverse effect on the business
or operations of CitFed Bancorp or the Subsidiaries taken as a whole.
2. CitFed Bancorp shall have performed all of the obligations
required of it under the terms of this Agreement in all material respects,
except for breaches of obligations which would not have, or would not
reasonably be expected to have, any material adverse effect on the business or
operations of CitFed Bancorp and the Subsidiaries taken as a whole.
3. Silver, Xxxxxxxx & Xxxx, L.L.P., counsel for CitFed Bancorp and
the Subsidiaries, shall have delivered an opinion addressed to Fifth Third in
substantially the form appended hereto as Appendix A.
4. The aggregate amount of consolidated shareholders' equity
(including Common Stock, Additional Paid-In Capital and Retained Earnings and
excluding Treasury Stock) of CitFed Bancorp immediately prior to the Effective
Time, as shown by and reflected in its books and records of accounts on a
consolidated basis in accordance with generally accepted accounting
principles, consistently applied, shall not be less than $212,000,000. For
purposes of this paragraph VI.B.4., any expenses or accruals after the date
hereof relating to (i) the adjustments contemplated by paragraph IV.B. of this
Agreement, (ii) expenses associated with this Agreement or the Merger; or
(iii) expenses or losses associated with the valuing of CitFed Bancorp or the
Subsidiaries' investments at current market value as required by generally
accepted accounting principles (including without limitation the requirement
of accounting rule SFAS 115) shall be excluded for purposes of calculation of
CitFed Bancorp's shareholders' equity as contemplated herein.
5. Fifth Third's independent certified public accountants shall have
reviewed the unaudited consolidated financial statements of CitFed Bancorp as
at the end of the month immediately preceding the Effective Time, as well as
the unaudited separate financial statements of the Subsidiaries as of the same
date, performed such other auditing procedures as may be requested by Fifth
Third and reported in good faith that they are not aware of any material
modifications which would have a material adverse effect on the financial
condition of CitFed Bancorp or any of the Subsidiaries that should be made in
order for such financial statements to (i) be in conformity with generally
accepted accounting principles, consistently applied, excluding the
presentation of footnotes, and (ii) accurately state the financial condition
and results of operations of CitFed Bancorp and each of the Subsidiaries, and
such modifications, in either case, would have a material adverse effect on
the financial condition of CitFed Bancorp or any of the Subsidiaries.
6. The receipt of a certificate from CitFed Bancorp and each of the
Subsidiaries, executed by the chief executive officer and chief financial
officer of each, dated the Closing Date, certifying to their best knowledge
and belief that: (i) all of the representations and warranties set forth in
Section II hereof were true and correct as of the date of this Agreement and
as of the Closing Date in all material respects, except (y) for any such
representations and warranties made as of a specified date, which shall be
true and correct in all material respects as of such date and (z) for
inaccuracies of representations and warranties which would not have, or would
not reasonably be expected to have, a material adverse effect on the business
or operations of CitFed Bancorp and the Subsidiaries taken as a whole; and
(ii) it has met and fully complied in all material respects with all of the
obligations required of it under the terms of this Agreement, except for
breaches of obligations which would not have, or would not reasonably be
expected to have, any material adverse effect on the business or operations of
CitFed Bancorp and the Subsidiaries taken as a whole.
7. The total issued and outstanding shares of CitFed Bancorp Common
Stock shall not exceed 13,522,966 shares on a fully diluted basis , including
shares that may be issued upon the exercise of the Existing Stock Options.
8. Fifth Third shall have received a letter from Deloitte & Touche,
LLP, as Fifth Third's independent public accountant, and CitFed shall have
received a letter from Deloitte & Touche, LLP, as CitFed's independent public
accountant, to the effect that the Merger will qualify for "pooling of
interest" accounting treatment.
9. Simultaneously with the execution of this Agreement, CitFed
Bancorp shall have executed and delivered to Fifth Third the Stock Option
Agreement granting Fifth Third a stock option to acquire 19.9% of shares of
CitFed Bancorp Common Stock in accordance with the terms thereof.
10. CitFed Bancorp shall have redeemed the Rights at a price of $.01
per Right, in the manner required by the Rights Plan.
C. Conditions to the Obligations of CitFed Bancorp:
The obligation of CitFed Bancorp to consummate the transactions provided for
herein is subject to the fulfillment at or prior to the Effective Time of each
of the following conditions unless waived by CitFed Bancorp in a writing
delivered to Fifth Third which specifically refers to the condition or
conditions being waived:
1. All of the representations and warranties of Fifth Third set forth
in Section III of this Agreement shall be true and correct in all material
respects as of the date of this Agreement and at and as of the Closing Date as
if each such representation and warranty was given on and as of the Closing
Date, except (i) for any such representations and warranties made as of a
specified date, which shall be true and correct in all material respects as of
such date and (ii) for inaccuracies of representations and warranties which
would not have, or would not reasonably be expected to have, a material
adverse effect on the consolidated business or operations of Fifth Third.
2. Fifth Third shall have performed all of the obligations required
of it under the terms of this Agreement in all material respects, except for
breaches of obligations which would not have, or would not reasonably be
expected to have, any material adverse effect on the consolidated business or
operations of Fifth Third.
3. Xxxx X. Xxxxxxxx, counsel for Fifth Third, shall have delivered an
opinion addressed to CitFed Bancorp in substantially the form appended hereto
as Appendix C.
4. The receipt of a certificate from Fifth Third, executed by its
chief executive officer and chief financial officer, dated the Closing Date,
certifying to their best knowledge and belief that: (i) all of the
representations and warranties set forth in Section III were true and correct
as of the date of this Agreement and as of the Closing Date, except (y) for
any such representations and warranties made as of a specified date, which
shall be true and correct in all material respects as of such date and (z) for
inaccuracies of representations and warranties which would not have, or would
not reasonably be expected to have, a material adverse effect on the
consolidated business or operations of Fifth Third; and, (ii) Fifth Third has
met and fully complied in all material respects with all of the obligations
required of it under the terms of this Agreement, except for breaches of
obligations which would not have, or would not reasonably be expected to have,
any material adverse effect on the business or operations of Fifth Third.
5. Fifth Third shall have registered its shares of Common Stock to be
issued to the CitFed Bancorp shareholders hereunder with the SEC pursuant to
the Securities Act of 1933, as amended, and with all applicable state
securities authorities. The registration statement with respect thereto shall
have been declared effective by the SEC and all applicable state securities
authorities and no stop order shall have been issued. The shares of Fifth
Third Common Stock to be issued to the CitFed Bancorp shareholders hereunder
shall have been authorized for trading on the Nasdaq National Market upon
official notice of issuance.
6. Fifth Third shall have executed and delivered the Fifth Third
Employment Contracts (as defined in Section VII.B.4 below) and provide, or
make provision for payment of any and all severance payments described in
Section VII below.
VII. Additional Covenants
A. The Thrift Subsidiary shall be merged with and into Fifth Third Bank,
to be effective the Effective Time. The parties hereto agree to cooperate
with one another to effect the Subsidiary Merger. Upon consummation of the
Subsidiary Merger, the separate corporate existence of the Thrift Subsidiary
shall cease by operation of law.
B. 1. (a) Fifth Third intends (but is not obligated) to employ at
Fifth Third or other Fifth Third subsidiaries or affiliates as many of the
CitFed Bancorp and the Subsidiaries employees who desire employment within the
Fifth Third holding company system as possible, to the extent of available
positions and consistent with Fifth Third's standard staffing levels and
personnel policies; provided that such continuing employees will not be
subject to any exclusion or penalty for pre-existing conditions that were
covered under the Subsidiaries' health and welfare plan immediately prior to
the Effective Time or any waiting period relating to coverage under Fifth
Third's health and welfare plan. Except as provided in (b) below, each
employee of CitFed Bancorp and the Subsidiaries who becomes an employee of
Fifth Third or any of its subsidiaries or affiliates at or immediately
subsequent to the Merger shall be entitled to participate in all employee
benefit plans sponsored by Fifth Third or its subsidiaries or affiliates on
the same terms and to the same extent as similarly situated employees. Fifth
Third shall merge the CitFed Federal Savings Bank 401(k) Profit Sharing Plan
into the Fifth Third Bancorp Master Profit Sharing Plan on or as soon as
reasonably practicable after the Effective Time if Fifth Third determines in
good faith that such merger will not jeopardize the tax exempt status of the
Fifth Third Bancorp Master Profit Sharing Plan. Except as provided in (b)
below, if the CitFed Federal Savings Bank 401(k) Profit Sharing Plan is merged
into the Fifth Third Bancorp Master Profit Sharing Plan, then upon said
merger, service taken into account under the CitFed Federal Savings Bank
401(k) Profit Sharing Plan shall count as service taken into account for all
purposes under the Fifth Third Bancorp Master Profit Sharing Plan. If the
CitFed Federal Savings Bank 401(k) Profit Sharing Plan is not merged into the
Fifth Third Bancorp Master Profit Sharing Plan as of the Effective Time, it
shall either (i) be continued on a separate plan basis to the extent
permissible under the Code and ERISA until a subsequent merger of such plans
takes place and the CitFed Federal Savings Bank 401(k) Profit Sharing Plan
shall in such case be amended as of the Effective Time so as to provide
employer contribution levels on a comparable and equivalent basis to the
benefits being provided under the Fifth Third Bancorp Master Profit Sharing
Plan but subject to the provisions of Section V.F.5 hereof, or (ii) be
terminated retroactive to the Effective Time and all continuing employees of
CitFed Bancorp and its Subsidiaries shall become participants in the Fifth
Third Bancorp Master Profit Sharing Plan at or as soon as practicable after
the Effective Time and shall be given credit for past service for eligibility
and vesting but not for benefit accrual purposes but subject to the provisions
of Section V.F.5 hereof. Employees shall receive past service credit under
the Fifth Third Bancorp Master Retirement Plan for eligibility and vesting but
not for benefit accrual purposes. For all other purposes other than the
qualified benefit plans discussed above, prior service with CitFed Bancorp or
any of the Subsidiaries shall be taken into account for purposes of
determining eligibility and vesting, if applicable, of benefits and the level
or amount of benefits in the case of vacation, sick pay and other benefits
generally available to employees within the Fifth Third holding company system
on a uniform or classification basis.
(b) If, in accordance with Section V.F.5, Fifth Third requests
CitFed Bancorp or one or more of the Subsidiaries to amend the CitFed Bancorp
defined benefit plan, employees of CitFed Bancorp and the Subsidiaries who
become employees of Fifth Third or any of its subsidiaries or affiliates at or
immediately subsequent to the Merger shall be subject to reduced employer
contribution levels under the Fifth Third Bancorp Master Profit Sharing Plan
or the continuing CitFed Federal Savings Bank 401(k) Profit Sharing Plan for
such period of time as Fifth Third determines such employees have received
cash balance credits under the CitFed Bancorp defined benefit plan to
equitably adjust for the value of such cash balance credits.
2. Any officer of CitFed Bancorp or any of the Subsidiaries who has
an employment or severance agreement with CitFed Bancorp or any of the
Subsidiaries (each a "Contract Officer") shall receive as of the Effective
Time, the severance or termination payments provided for in their respective
employment agreements as of December 18, 1997 ("Contract Payments") as their
sole severance payments from CitFed Bancorp and Fifth Third in connection with
the Merger and in the case of officers with employment agreements, in the
amounts set forth in Appendix VII.B.2(b). As a condition to receiving their
Contract Payments each Contract Officer shall sign and deliver to Fifth Third
a termination and release agreement, except as to any obligation of Fifth
Third to make future payments under such agreements. All such agreements
shall be in the form attached hereto as Appendix VII.B.2(a).
3. Subject to normal credit evaluation and standard loan guidelines,
a Fifth Third subsidiary bank will provide financing to qualified option
holders to allow them to fully exercise all outstanding options as set forth
herein.
4. Fifth Third agrees to enter into an employment contract effective
as of the Effective Time with each of Xxxxx X. Xxxxx, Xxxxxxx X. Xxxxxxx, Xxxx
X. Xxxxxxx, Xxxx X. Xxxx, Xxxxxx X. Xxxxxx, Xxxxxxxxx X. Xxxxxxxx, Xxxxx X.
Xxxxxxx and Xxxxxxx X. Xxxx in the form of Appendices VII.B.4(a), (b), (c),
(d), (e), (f), (g) and (h), respectively, providing for the payments described
therein (each a "Fifth Third Employment Contract" and collectively, the "Fifth
Third Employment Contracts").
5. Fifth Third agrees (a) to offer to appoint each of Xxxxx X. Xxxxx
and Xxxxx X. Xxxx to the Fifth Third Board of Directors and, if such person's
initial term on the Fifth Third Board of Directors expires prior to the Fifth
Third annual meeting of stockholders in the year 2001, to nominate such
person for a second term on the Board of Directors, and (b) to offer to
appoint Xxxxx X. Xxxxx as the Chairman of the Board of Fifth Third Bank of
Western Ohio.
6. Those employees of CitFed Bancorp and the Subsidiaries who do not
have an employment or severance agreement and who are not to be employed by
Fifth Third or its subsidiaries, or who are terminated or voluntarily resign
after being notified that as a condition of employment such employee must work
at a location more than thirty (30) miles from such employee's former location
of employment or that such employee's salary will be decreased, in any case
and in both cases, within six months after the Effective Time, and who sign
and deliver a termination and release agreement in the form attached as
Appendix VII.B.6 hereto, shall be entitled to severance pay in accordance with
the applicable written policy of CitFed Bancorp or the applicable Subsidiary
as in effect on the date hereof.
7. Fifth Third agrees to allow CitFed Bancorp to renew the severance
agreements with Messrs. Xxxxxxx, Weeks and Hilt on April 1, 1998 for a period
of one year, such renewed agreements to be on the same terms and conditions as
are currently in place other than for the expiration date.
8. Fifth Third agrees that it will honor, assume and perform the
obligations of CitFed Bancorp and/or its Subsidiaries under supplemental
retirement agreements or plans dated December 28, 1993 including Amendments
No. 1 thereto between CitFed Bancorp and the Thrift Subsidiary or another
Subsidiary with each of Xxxxx X. Xxxxx, Xxxxxxx X. Xxxxxxx, Xxxx X.
Xxxxxx-Xxxxxxx, Xxxx X. Xxxx, Xxxxxxx Xxxx and Xxxxxx X. Xxxxxx (the "SERPs")
and the associated Executive Insurance Agreements dated December 28, 1993 and
the First Amendments thereto, and in the case of retirees Xxxxx X.
Xxxxxxxxxxxx and Xxxxxx X. Xxxxx their respective Amended and Restated
Supplemental Benefits Agreement and Amended and Restated Insurance Agreement,
each dated December 19,1997. Final Average Compensation under the SERPs shall
be calculated as of March 31, 1998, and Compensation applicable to the period
after March 31, 1998 shall not be taken into account for purposes of
calculating Final Average Compensation. Years of Service for purposes of
increasing benefit percentage accruals under the SERPs shall not be taken into
account after March 31, 1998. The parties will cooperate with each other to
assure that payments under the SERPs do not result in an "excess parachute
payment" (as defined in Section 280G of the Code) and to diminish the
likelihood of any payments under the SERPs result in a "parachute payment" (as
defined in Section 280G of the Code) in connection with or arising from the
Merger. CitFed Bancorp and/or its Subsidiaries may amend the Executive Life
Insurance Agreements to provide for post employment termination death benefits
provided any such amendment does not result in an additional financial expense
and does not violate the covenants of CitFed Bancorp contained in the first
sentence of Section IV.B.(i). Capitalized terms used in this paragraph that
are not otherwise defined in this Agreement shall have the meaning ascribed to
them under the SERPs.
C. (i) From and after the Effective Time, Fifth Third shall assume the
obligations of CitFed Bancorp and the Subsidiaries arising under applicable
Delaware and Federal law in existence as of the date hereof or as amended
prior to the Effective Time and under the CitFed Bancorp Certificate of
Incorporation and Bylaws; the Thrift Subsidiary Charter or Bylaws; and the
organizational documents of any of the other Subsidiaries, as in effect on
the date hereof to indemnify, defend and hold harmless each person who is now,
or has been at any time prior to the date hereof or who become, prior to the
Effective Time, an officer, director or employee of CitFed Bancorp, or any of
the Subsidiaries (the "Indemnified Parties") against losses, claims, damages,
costs, expenses (including reasonable attorneys' fees), liabilities or
judgements or amounts that are paid in settlement (which settlement shall
require the prior written consent of Fifth Third) of or in connection with any
claim, action, suit, proceeding or investigation (a "Claim") in which an
Indemnified Party is, or is threatened to be made, a party or a witness based
in whole or in part on or arising in whole or in part out of the fact that
such person is or was a director or officer of CitFed Bancorp, of any of the
Subsidiaries if such Claim pertains to any matter or fact arising, existing or
occurring prior to the Effective Time (including, without limitation, the
Merger and the transactions contemplated by this Agreement), regardless of
whether such Claim is asserted or claimed prior to, at or after the Effective
Time. Fifth Third's assumption of the indemnification obligations of CitFed
Bancorp, or any of the Subsidiaries as provided herein shall continue for a
period of five years after the Effective Time or, in the case of claims
asserted prior to the fifth anniversary of the Effective Time until such
matters are finally resolved. Any Indemnified Party wishing to claim
indemnification under this provision, upon learning of any Claim shall notify
Fifth Third (but the failure to so notify Fifth Third shall not relieve Fifth
Third from any liability which Fifth Third may have under this section except
to the extent Fifth Third is materially prejudiced thereby). Notwithstanding
the foregoing, the Indemnified Parties as a group may retain only one law firm
to represent them with resect to each matter under this section unless there
is, under applicable standards of professional conduct, a conflict on any one
significant issue between the positions of any two or more Indemnified
parties.
(ii) From and after the Effective Time, the directors, officers and
employees of CitFed Bancorp and its Subsidiaries who become directors,
officers or employees of Fifth Third or any of its subsidiaries, except for
the indemnification rights set forth in subparagraph (i) above, shall have
indemnification rights with prospective application only. The prospective
indemnification rights shall consist of such rights to which directors,
officers or employees of Fifth Third or the subsidiary by which such person is
employed are entitled under the provisions of the Articles of Incorporation of
Fifth Third or similar governing documents of Fifth Third or its applicable
subsidiaries, as in effect from time to time after the Effective Time, as
applicable, and provisions of applicable law as in effect form time to time
after the Effective Time.
(iii) The obligations of Fifth Third provided under this Section VII.C.
are intended to benefit, and be enforceable against Fifth Third directly by,
the Indemnified parties, and shall be binding on all respective successors of
Fifth Third.
(iv) Fifth Third shall also purchase and keep in force for a three year
period, a policy of directors' and officers' liability insurance to provide
coverage for acts or omissions of the type currently covered by CitFed
Bancorp's existing directors' and officers' liability insurance for acts or
omission occurring on or prior to the Effective Time, but only to the extent
such insurance may be purchased or kept in full force on commercially
reasonable terms taking into account the cost thereof and the benefits
provided thereby. It is agreed that such costs shall be commercially
reasonable so long as the annual cost does not exceed 150% of the annual cost
currently paid for such coverage by CitFed Bancorp and its Subsidiaries.
D. Fifth Third will not disclose to others, shall not use in respect of
its (or any of its subsidiaries) business operations, and will hold in
confidence, to the extent legally permissible, any non-public, confidential
information disclosed to it by CitFed Bancorp concerning CitFed Bancorp or the
Subsidiaries. CitFed Bancorp will not disclose to others, shall not use in
respect of its (or any of its subsidiaries) business operations, and will hold
in confidence, to the extent legally permissible, any non-public, confidential
information disclosed to it concerning Fifth Third or any of its affiliates.
In the event the Merger is not completed, all non-public financial statements,
documents and materials, and all copies thereof, shall be returned to CitFed
Bancorp or Fifth Third, as the case may be, and shall not be used by Fifth
Third or CitFed Bancorp, as the case may be, in any way detrimental to CitFed
Bancorp or Fifth Third.
E. All notices under this Agreement shall be in writing and shall be
sufficient in all respects if delivered in person or mailed by certified mail,
return receipt requested, with postage prepaid and addressed, if to CitFed
Bancorp to Xxxxx X. Xxxxx, Chairman, President and Chief Executive Officer,
CitFed Bancorp, Inc., Xxx Xxxxxxxx Xxxxxxx Xxxxxx, Xxxxxx, Xxxx 00000, with a
copy to Silver, Xxxxxxxx & Xxxx, L.L.P., Attention: Xxxxx X. Xxxxxxxxx, Esq.
and Xxxxx X. Xxxx, Esq.; if to Fifth Third, to Xx. Xxxxxx X. Xxxxxxxx, Xx.,
President and Chief Executive Officer, Fifth Third Bancorp, 00 Xxxxxxxx Xxxxxx
Xxxxx, Xxxxxxxxxx, Xxxx 00000, with a copy to Xxxx X. Xxxxxxxx, Esq., Vice
President and General Counsel, Fifth Third Bank, Legal Division, 00 Xxxxxxxx
Xxxxxx Xxxxx, 0xx Xxxxx, Xxxxxxxxxx, Xxxx 00000. Such notices shall be
deemed to be received when delivered in person or when deposited in the mail
by certified mail, return receipt requested with postage prepaid.
F. This Agreement, together with the written instruments specifically
referred to herein and such other written agreements delivered by Fifth Third
or CitFed Bancorp to each other pursuant hereto constitute the entire
agreement between the parties with regard to the transactions contemplated
herein and supersede any prior agreements, whether oral or in writing,
including all prior letters and summary term sheets. This Agreement may be
hereafter amended only by a written instrument executed by each of the parties
pursuant to Section X hereof.
G. During the period from the date of this Agreement to the Effective
Time, except with the prior approval of Fifth Third, CitFed Bancorp shall not,
and shall not permit its representatives to, directly or indirectly, subject
to the exercise by the directors of CitFed Bancorp of their fiduciary duties,
initiate, solicit, negotiate with, encourage discussions with, provide
information to, or agree to a transaction with, any corporation, partnership,
person or other entity or group concerning any merger of either CitFed Bancorp
or any of the Subsidiaries or any sale of substantial assets, sale of shares
of capital stock (or securities convertible or exchangeable into or otherwise
evidencing, or any agreement or instrument evidencing, the right to acquire
capital stock) or similar transaction involving CitFed Bancorp or any of the
Subsidiaries (any such transaction being referred to herein as an "Acquisition
Transaction"). CitFed Bancorp shall immediately cease and cause to be
terminated any activities, discussions or negotiations concerning, or provide
any confidential information to, or have any discussion with, any person
relating to any Acquisition Transaction. CitFed Bancorp promptly shall
communicate to Fifth Third the terms of any proposal which it may receive in
respect of an Acquisition Transaction and any request by or indication of
interest on the part of any third party with respect to initiation of any
Acquisition Transaction or discussions with respect thereto.
H. Fifth Third and CitFed Bancorp shall each indemnify and hold the other
harmless for any claim, liability or expense (including reasonable attorneys'
fees) arising from a misstatement or omission in the applications submitted to
regulatory agencies for approval of the transaction contemplated by this
Agreement relating to the indemnifying party which is based or made in
reliance upon any representation, warranty, or covenant of such party in this
Agreement or any certification, document, or other information furnished or to
be furnished by such party pursuant to this Agreement. From and after Closing
Date, this Section VII.H. shall be of no further force or effect.
I. Following the satisfaction of all conditions to closing the Merger,
other than the expiration of any waiting period required by any regulatory
agency after its approval of the Merger is issued before the transaction may
be consummated and conditions which are only capable of being satisfied at
closing, upon the request of Fifth Third and at the sole option of Fifth
Third, CitFed Bancorp and the Subsidiaries shall execute and deliver to
Midwest Payment Systems, Inc. ("MPS") an agreement to convert all electronic
funds transfer ("EFT") related services to MPS and the Xxxxxx® system.
Such Agreement shall provide that MPS will be the exclusive provider of such
services to CitFed Bancorp and the Subsidiaries for a period of five (5) years
from the date such agreements are executed. Fifth Third agrees that the cost
of the conversion of CitFed Bancorp and the Subsidiaries to EFT provided by
MPS and conversion to the Xxxxxx® system (including, without limitation,
the cost of all card reissue, signage and penalties relating to terminating
its current EFT relationships) will be paid by Fifth Third. Fifth Third
further agrees that the costs and fees to CitFed Bancorp and the Bank
Subsidiaries for the Xxxxxx® service shall not exceed those charged by the
current EFT service provider of CitFed Bancorp and the Subsidiaries, subject
to any increases in such costs and fees which would otherwise be permitted
under their current EFT processing agreements. In no event shall CitFed
Bancorp or the Subsidiaries be required to take any actions pursuant to this
Section VII.I. or otherwise under this Agreement that are contrary to any
applicable law, regulation, rule or order or which constitute a breach of the
fiduciary duties of the directors of CitFed Bancorp or the Subsidiaries.
J. Following the satisfaction of all conditions to closing the Merger,
other than the expiration of any waiting period required by any regulatory
agency after its approval of the Merger is issued before the transaction may
be consummated and conditions which are only capable of being satisfied at
closing, (a) CitFed Bancorp and the Subsidiaries shall deliver an agreement
with Fifth Third or an affiliate of Fifth Third which will provide the
transfer to any such entity of the performance of any and all data processing
services, including, without limitation, items processing and application
processing, and (b) at Fifth Third's discretion, CitFed Bancorp and the
Subsidiaries shall notify any and all vendors currently providing such
services of such transfer. CitFed Bancorp and the Subsidiaries shall fully
cooperate with Fifth Third in the preparation for such transfer. In the event
that Fifth Third determines that a third party should provide such services to
CitFed Bancorp and/or the Subsidiaries, CitFed Bancorp and the Subsidiaries,
as applicable, agree to have such services provided after the Effective Time
by the third party recommended for such purposes by Fifth Third. In the event
this Agreement is terminated pursuant to Section VIII hereof for any reason
except a material breach or default by CitFed Bancorp, and if, in such
instance, CitFed Bancorp desires to convert to another provider of data
processing services, including, without limitation, item processing and
application processing, Fifth Third shall pay all costs and expenses
associated with such conversion.
K. Fifth Third and CitFed Bancorp shall agree with each other as to the
form and substance of any press release related to this Agreement or the
transactions contemplated hereby, and shall consult with each other as to the
form and substance of other public disclosures related thereto, provided,
however, that nothing contained herein shall prohibit either party from making
any disclosure which its counsel deems required by law.
L. Each party hereto shall bear and pay all costs and expenses incurred by
it in connection with the transactions contemplated by this Agreement,
including, without limitation, fees, costs and expenses of its own financial
consultants, investment bankers, accountants and counsel, without reduction or
modification in the number of shares of Fifth Third Common Stock to be issued
hereunder. The expenses of printing and mailing the prospectus/proxy
statement shall be paid by Fifth Third.
M. 1. Between the date hereof and the Closing Date, CitFed Bancorp
shall promptly advise Fifth Third in writing of any fact that, if existing or
known at the date hereof, would have been required to be set forth or
disclosed in or pursuant to this Agreement or of any fact that, if existing or
known at the date hereof, would have made any of the representations contained
herein untrue to any material extent, and which in each case, would be likely
to have a material adverse effect on CitFed Bancorp and its Subsidiaries,
taken as a whole; provided, however, that no information so disclosed to Fifth
Third shall be deemed an admission by CitFed Bancorp that such fact would be
likely to have a material adverse effect on CitFed Bancorp and its
Subsidiaries, taken as a whole, nor shall such information so disclosed to
Fifth Third be deemed an exception to any representation, warranty or covenant
made by CitFed Bancorp herein unless Fifth Third, in its sole discretion,
agrees in writing to accept such an exception.
2. Between the date hereof and the Closing Date, Fifth Third shall
promptly advise CitFed Bancorp in writing of any fact that, if existing or
known at the date hereof, would have been required to be set forth or
disclosed in or pursuant to this Agreement or of any fact that, if existing or
known at the date hereof, would have made any of the representations contained
herein untrue to any material extent, and which in each case, would be likely
to have a material adverse effect on CitFed Bancorp and its subsidiaries,
taken as a whole; provided, however, that no information so disclosed to Cit
Fed Bancorp shall be deemed an admission by Fifth Third that such fact would
be likely to have a material adverse effect on Fifth Third and its
subsidiaries, taken as a whole, nor shall such information so disclosed to
CitFed Bancorp shall be deemed an exception to any representation, warranty or
covenant made by Fifth Third unless CitFed Bancorp, in its sole discretion,
agrees in writing to accept such an exception.
VIII. TERMINATION
A. This Agreement may be terminated at any time prior to the Effective
Time by written notice delivered by Fifth Third to CitFed Bancorp or by CitFed
Bancorp to Fifth Third in the following instances:
1. By Fifth Third or CitFed Bancorp, if there has been to the extent
contemplated in Section VI.B.1. and 2. and Section VI.C.1. and 2. herein, a
material misrepresentation, a material breach of warranty or a material
failure to comply with any covenant on the part of the other party with
respect to the representations, warranties, and covenants set forth herein and
such misrepresentations, breach or failure to comply has not been cured (if
capable of cure) within thirty (30) days after receipt of written notice,
provided, the party in default shall have no right to terminate for its own
default.
2. By Fifth Third or CitFed Bancorp if the business or assets or
financial condition of the other party, in each case taken as a whole, shall
have materially and adversely changed from that in existence at September 30,
1997, other than any such change attributable to or resulting from any change
in law, regulation or generally accepted accounting principles, changes in
interest rates, economic, financial or market conditions affecting the banking
or thrift industry generally or changes that may occur as a consequence of
actions or inactions that either party hereto is expressly obligated to take
under this Agreement (including without limitation the payment by either party
of its transaction expenses related to the actions contemplated by this
Agreement).
3. By Fifth Third or CitFed Bancorp, if the merger transaction
contemplated herein has not been consummated by September 30, 1998, provided
the terminating party is not in material breach or default of any
representations, warranty or covenant contained herein on the date of such
termination.
4. By the mutual written consent of Fifth Third and CitFed Bancorp.
5. By Fifth Third if any event occurs which renders impossible of
satisfaction in any material respect one or more of the conditions to the
obligations of Fifth Third to effect the Merger set forth in Sections VI.A.
and B. herein and non-compliance is not waived by Fifth Third.
6. By CitFed Bancorp if any event occurs which renders impossible of
satisfaction in any material respect one or more of the conditions to the
obligations of CitFed Bancorp to effect the Merger as set forth in Sections
VI.A. and C. herein and non-compliance is not waived by CitFed Bancorp.
7. By CitFed Bancorp if it determines by a vote of the majority of
the members of its Board of Directors, and notifies Fifth Third, at any time
during the five (5) day period commencing two (2) business days after the
Determination Date and if both of the following conditions are satisfied:
(i) the Average Closing Price of Fifth Third Common Stock is less
than $64.40 (adjusted as set forth in the last sentence of
this paragraph VIII.A.7.); and
(ii) (x) the number obtained by dividing the Average Closing Price
on the Determination Date by the Starting Price (such number
being referred to herein as the "Fifth Third Ratio") shall be
less than (y) the number obtained by dividing the Index Price
on the Determination Date by the Index Price on the Starting
Date and subtracting 0.20 from the quotient in this clause
(ii)(y) (such number being referred to herein as the "Index
Ratio");
If CitFed Bancorp elects to terminate this Agreement pursuant to this
Section VIII.A.7., it shall give notice to Fifth Third within the
aforementioned five (5) day period, provided such notice may be withdrawn at
any time. During the five (5) day period commencing with its receipt of such
notice, Fifth Third shall have the option of adjusting the Exchange Ratio to
equal the lesser of (i) a number equal to a quotient (rounded to the nearest
one-thousandth), the numerator of which is the product of $64.40 multiplied by
the Exchange Ratio (as then in effect) and the denominator of which is the
Average Closing Price, and (ii) a number equal to a quotient (rounded to the
nearest one-thousandth), the numerator of which is the Index Ratio multiplied
by the Exchange Ratio (as then in effect) and the denominator of which is the
Fifth Third Ratio. If Fifth Third makes an election contemplated by the
preceding sentence, within such five-day period, it shall give prompt written
notice to CitFed Bancorp of such election and the revised Exchange Ratio,
whereupon no termination shall have occurred pursuant to this Section VIII.A.7
and this Agreement shall remain in effect in accordance with its terms (except
as the Exchange Ratio shall have been so modified), and any references in this
Agreement to "Exchange Ratio" shall thereafter be deemed to refer to the
Exchange Ratio as adjusted pursuant to this Section VIII.A.7.
For purposes of this Paragraph VIII.A.7, the following terms shall have
the meaning indicated:
"Average Closing Price" shall mean the average of the per share closing
prices of the Fifth Third Common Stock as reported on the NASDAQ National
Market System for the 20 consecutive trading days ending on the
Determination Date as reported by The Wall Street Journal, expressed in
decimal figures carried to five figures.
"Determination Date" means the tenth (10th) trading day prior to the
Closing Date.
"Index Group" means the nineteen (19) bank holding companies listed
below, the common stock of all of which shall be publicly traded and as to
which there shall not have been a publicly announced proposal since the
Starting Date and before the Determination Date for any such company to be
acquired or for such company to acquire another company or companies in
transactions with a value exceeding 25% of the acquiror's market
capitalization. In the event that any such company is removed from the
Index Group, the weights (which shall be determined based upon the number
of outstanding shares of common stock) shall be redistributed
proportionately for purposes of determining the Index Price. The nineteen
(19) bank holding companies and the weights attributed to them are as
follows:
Bank Holding Company Shares Outstanding Weighting %
of
of 9/30/97
Northern Trust Corp. 109,139.3 4.89
Star Banc Corp. 85,296.2 3.82
First Tennessee National Corp. 64,059.8 2.87
State Street Corp. 160,808.0 7.20
Xxxxxxxx & Xxxxxx Corp. 88,872.4 3.98
BB&T Corporation 134,308.5 6.02
Mercantile Bancorp 130,289.0 5.83
First American Corp. 58,379.1 2.61
Summit Bancorp 175,735.2 7.87
South Trust Corp. 99,793.6 4.47
First Security Corp. 115,838.0 5.19
Comerica Inc. 105,239.7 4.71
AmSouth Bancorporation 80,706.2 3.61
Union Planters Corp. 67,211.6 3.01
Regions Financial Corp. 136,320.5 6.11
Firstar Corporation 144,655.2 6.48
Crestar Financial Corp. 110,188.1 4.93
Synovus Financial Corp. 174,984.1 7.84
Huntington Bancshares, Inc. 191,133.7 8.56
100.00%
"Index Price," on a given date, means the weighted average (weighted in
accordance with the Weighing Factors above, which were calculated with
reference to the outstanding shares listed above) of the closing prices on
such date of the common stock of the companies comprising the Index Group.
"Starting Date" means January 13, 1998.
"Starting Price" means $80.50 per share.
If Fifth Third or any company belonging to the Index Group declares or
effects a stock dividend, reclassification, recapitalization, split-up,
combination, exchange of shares or similar transaction between the Starting
Date and the Determination Date, the prices for the common stock of such
company shall be appropriately adjusted for the purposes of applying this
Paragraph VIII.A.7.
B. If CitFed Bancorp shareholders, acting at a meeting held for the
purpose of voting upon this Agreement, fail to adopt the Agreement in the
manner required by law, then this Agreement shall be deemed to be
automatically terminated, provided that CitFed Bancorp must be in compliance
with Section IV.A.
C. Upon termination as provided in this Section, this Agreement, except
for the provisions of Sections VII.D., H., J. and K. hereof shall be void and
of no further force or effect, and, except as provided in Section VII.H.
hereof, neither party hereto not in material breach or default of its
representations, warranties and covenants hereunder shall have any liability
of any kind to the other party including but not limited to liability for
expenses incurred by the other party in connection with this transaction;
provided that no such termination shall relieve a breaching party from
liability for any uncured willful breach of a covenant, undertaking,
representation or warranty giving rise to such termination.
D. Fifth Third and CitFed Bancorp agree that irreparable damage would
occur and that neither Fifth Third nor CitFed Bancorp would have any adequate
remedy at law in the event that any of the provisions of this Agreement are
not performed in accordance with their specific terms or were otherwise
breached. If any action is brought by either party to enforce this Agreement,
the other party shall waive the defense that there is an adequate remedy at
law. It is accordingly agreed that the parties shall be entitled to an
injunction or injunctions to prevent breaches of this Agreement and to enforce
specifically the terms and provisions of this Agreement in any federal court
located in the State of Ohio or in Ohio state court, this being in addition to
any other remedy to which they are entitled at law or in equity.
IX. CLOSING AND EFFECTIVE TIME
The consummation of the transactions contemplated by this Agreement shall take
place at a closing to be held at the offices of Fifth Third in Cincinnati,
Ohio on a Friday which is as soon as is reasonably possible following the date
that all of the conditions precedent to closing set forth in Section VI
hereof, including the waiting period required by any banking or bank holding
company regulatory agency after its approval of the Merger is issued before
the transaction may be consummated, have been fully met or effectively waived
(the "Closing Date"). Fifth Third agrees that upon the satisfaction of such
conditions, it will not willfully delay the closing to a date after Fifth
Third's next dividend record date, provided, however, Fifth Third shall not be
required to take any extraordinary action to effect such closing nor to effect
such closing at a time that Fifth Third reasonably believes would be adverse
to the interests of Fifth Third and its stockholders. Pursuant to the filing
of articles or a certificate of merger (which shall be acceptable to CitFed
Bancorp and Fifth Third) with the Secretaries of the States of Ohio and
Delaware in accordance with law and this Agreement, the Merger provided for
herein shall become effective at the close of business on said day (the
"Effective Time"). By mutual agreement of the parties, the closing may be
held at any other time or place or on any other date and the effectiveness of
the Merger (and the Effective Time) may be changed by such mutual agreement.
None of the representations, warranties and agreements in this Agreement or in
any instrument delivered pursuant to this Agreement shall survive the
Effective Time, except for agreements of the parties which by their terms are
intended to be performed after the Effective Time.
X. AMENDMENT
This Agreement may be amended, modified or supplemented by the written
agreement of CitFed Bancorp and Fifth Third upon the authorization of each
company's respective Board of Directors at any time before or after adoption
of this Agreement by the shareholders of CitFed Bancorp, but after any such
adoption by the shareholders of CitFed Bancorp no amendment shall be made
(without further shareholder action) which changes in any manner adverse to
such shareholders the form or amount of consideration to be provided to such
shareholders pursuant to this Agreement, or the tax characterization of the
transactions as structured pursuant to this Agreement.
XI. GENERAL
This Agreement was made in the State of Ohio and shall be interpreted under
the laws of the United States and the State of Ohio. This Agreement and all
of the provisions hereof shall be binding upon and inure to the benefit of the
parties hereto and their respective successors and permitted assigns but
except as specifically set forth herein or as contemplated in Sections V.D.,
V.E.1, and VII, none of the provisions hereof shall be binding upon and inure
to the benefit of any other person, firm or corporation whomsoever. Neither
this Agreement nor any of the rights, interests or obligations hereunder shall
be assigned or transferred by operation of law or otherwise by any party
hereto without the prior written consent of the other party hereto; provided,
however, that the merger or consolidation of Fifth Third shall not be deemed
an assignment hereunder if Fifth Third is the surviving corporation in such
merger or consolidation and its Common Stock shall thereafter continue to be
publicly traded and issuable to CitFed Bancorp shareholders pursuant to the
terms of this Agreement.
XII. COUNTERPARTS
This Agreement may be executed in any number of counterparts, each of which
shall be deemed an original for all purposes but such counterparts taken
together shall constitute one and the same instrument.
[Signatures on Next Page]
IN WITNESS WHEREOF, the parties hereto have executed this Affiliation
Agreement as of the date hereinabove set forth.
FIFTH THIRD BANCORP
(SEAL)
By: /s/ Xxxxxx X. Xxxxxxxx, Xx.
--------------------------------------
Xxxxxx X. Xxxxxxxx, Xx.
President and Chief Executive Officer
Attest: /s/ Xxxx X. Xxxxxxxx
--------------------------------------
Xxxx X. Xxxxxxxx
Assistant Secretary
CITFED BANCORP, INC.
(SEAL)
By: /s/ Xxxxx X. Xxxxx
--------------------------------------
Name: Xxxxx X. Xxxxx
Title: Chairman and Chief Executive
Officer
Attest: /s/ Xxxx X. Xxxx
--------------------------------------
Name: Xxxx X. Xxxx
Title: Senior Vice President and Legal
Counsel
APPENDIX B
STOCK OPTION AGREEMENT
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STOCK OPTION AGREEMENT, dated as of January 13, 1998, between CITFED
BANCORP., INC., a corporation organized and existing under the corporation
laws of the State of Delaware ("Issuer"), and FIFTH THIRD BANCORP, an Ohio
corporation ("Grantee").
W I T N E S S E T H:
WHEREAS, Grantee and Issuer have entered into an Affiliation Agreement
(the "Merger Agreement");
WHEREAS, as an inducement to the willingness of Grantee to continue to
pursue the transactions contemplated by the Merger Agreement, Issuer has
agreed to grant Grantee the Option (as hereinafter defined); and
WHEREAS, the Board of Directors of Issuer has approved the grant of the
Option and the Merger Agreement prior to the date hereof;
NOW, THEREFORE, in consideration of the foregoing and the mutual
covenants and agreements set forth herein and in the Merger Agreement, the
parties hereto agree as follows:
1. (a) Issuer hereby grants to Grantee an unconditional, irrevocable
option (the "Option") to purchase, subject to the terms hereof, up to an
aggregate of 3,230,411 fully paid and nonassessable shares of the common
stock, par value $.01 per share, of Issuer ("Common Stock") at a price per
share equal to the last reported sale price per share of Common Stock as
reported on the NASDAQ National Market System on January 13, 1998; provided,
however, that in the event Issuer issues or agrees to issue any shares of
Common Stock (other than shares of Common Stock issued pursuant to stock
options granted prior to the date hereof) at a price less than such price per
share (as adjusted pursuant to subsection (b) of Section 5), such price shall
be equal to such lesser price (such price, as adjusted if applicable, the
"Option Price"); provided, further, that in no event shall the number of
shares for which this Option is exercisable exceed 19.9% of the issued and
outstanding shares of Common Stock. The number of shares of Common Stock that
may be received upon the exercise of the Option and the Option Price are
subject to adjustment as herein set forth.
(b) In the event that any additional shares of Common Stock are
issued or otherwise become outstanding after the date of this Agreement (other
than pursuant to this Agreement and other than pursuant to an event described
in Section 5(a) hereof), the number of shares of Common Stock subject to the
Option shall be increased so that, after such issuance, such number together
with any shares of Common Stock previously issued pursuant hereto, equals
19.9% of the number of shares of Common Stock then issued and outstanding.
Nothing contained in this Section l(b) or elsewhere in this Agreement shall be
deemed to authorize Issuer to issue shares in breach any provision of the
Merger Agreement.
2. (a) The Holder (as hereinafter defined) may exercise the Option,
in whole or part, if, but only if, both an Initial Triggering Event (as
hereinafter defined) and a Subsequent Triggering Event (as hereinafter
defined) shall have occurred prior to the occurrence of an Exercise
Termination Event (as hereinafter defined), provided that the Holder shall
have sent the written notice of such exercise (as provided in subsection (e)
of this Section 2) within six (6) months following such Subsequent Triggering
Event (or such later period as provided in Section 10). Each of the following
shall be an Exercise Termination Event: (i) the Effective Time of the Merger;
(ii) termination of the Merger Agreement in accordance with the provisions
thereof if such termination occurs prior to the occurrence of an Initial
Triggering Event except a termination by Grantee pursuant to Section
VIII(A)(1) of the Merger Agreement (but only if the breach giving rise to the
termination was willful) (a "Listed Termination"); or (iii) the passage of
eighteen (18) months (or such longer period as provided in Section 10) after
termination of the Merger Agreement if such termination follows the occurrence
of an Initial Triggering Event or is a Listed Termination. The term "Holder"
shall mean the holder or holders of the Option. Notwithstanding anything to
the contrary contained herein, the Option may not be exercised at any time
when Grantee shall be in material breach of the Merger Agreement such that
Issuer shall be entitled to terminate the Merger Agreement pursuant to Section
VIII(A)(1) thereof and (ii) this Agreement shall automatically terminate upon
the proper termination of the Merger Agreement by Issuer pursuant to either
(x) Section VIII(A)(1) thereof as a result of the material breach by Grantee
or (y) Section VIII.A.7.
(b) The term "Initial Triggering Event" shall mean any of the
following events or transactions occurring on or after the date hereof:
(i) Issuer or any Significant Subsidiary (as defined in Rule 1-02 of
Regulation S-X promulgated by the Securities and Exchange Commission (the
"SEC")) (an "Issuer Subsidiary"), without having received Grantee's prior
written consent, shall have entered into an agreement to engage in an
Acquisition Transaction (as hereinafter defined) with any person (the term
"person" for purposes of this Agreement having the meaning assigned thereto
in Sections 3(a)(9) and 13(d)(3) of the Securities Exchange Act of 1934,
as amended (the "1934 Act"), and the rules and regulations thereunder)
other than Grantee or any of its Subsidiaries (each a "Grantee
Subsidiary") or Board of Directors of Issuer (the "Issuer Board") shall
have recommended that the shareholders of Issuer approve or accept any
Acquisition Transaction other than as contemplated by the Merger
Agreement. For purposes of this Agreement, (a) "Acquisition Transaction"
shall mean (x) a merger or consolidation, or any similar transaction,
involving Issuer or any Issuer Subsidiary (other than mergers,
consolidations or similar transactions (i) involving solely Issuer
and/or one or more wholly-owned (except for directors' qualifying shares
and a de minimis number of other shares) Subsidiaries of the Issuer,
provided, any such transaction is not entered into in violation of the
terms of the Merger Agreement or (ii) in which the shareholders of Issuer
immediately prior to the completion of such transaction own at least 50%
of the Common Stock of the Issuer (or the resulting or surviving entity
in such transaction) immediately after completion of such transaction,
provided any such transaction is not entered into in violation of the
terms of the Merger Agreement), (y) a purchase, lease or other
acquisition of all or any substantial part of the assets or deposits of
Issuer or any Issuer Subsidiary, or (z) a purchase or other acquisition
(including by way of merger, consolidation, share exchange or otherwise)
of securities representing 10% or more of the voting power of Issuer or
any Issuer Subsidiary and (b) "Subsidiary" shall have the meaning set
forth in Rule 12b-2 under the 1934 Act;
(ii) Any person other than the Grantee or any Grantee Subsidiary
shall have acquired beneficial ownership or the right to acquire
beneficial ownership of 10% or more of the outstanding shares of Common
Stock (the term "beneficial ownership" for purposes of this Agreement
having the meaning assigned thereto in Section 13(d) of the 1934 Act,
and the rules and regulations thereunder);
(iii) The shareholders of Issuer shall have voted and failed to
adopt the Merger Agreement at a meeting which has been held for that
purpose or any adjournment or postponement thereof, or such meeting shall
not have been held in violation of the Merger Agreement or shall have
been cancelled prior to termination of the Merger Agreement if, prior to
such meeting (or if such meeting shall not have been held or shall have
been cancelled, prior to such termination), it shall have been publicly
announced that any person (other than Grantee or any of its Subsidiaries)
shall have made, or publicly disclosed an intention to make, a proposal
to engage in an Acquisition Transaction;
(iv) The Issuer Board shall have withdrawn or modified (or
publicly announced its intention to withdraw or modify) in any manner
adverse in any respect to Grantee its recommendation that the shareholders
of Issuer approve the transactions contemplated by the Merger Agreement,
or Issuer or any Issuer Subsidiary shall have authorized, recommended,
proposed (or publicly announced its intention to authorize, recommend or
propose) an agreement to engage in an Acquisition Transaction with any
person other than Grantee or a Grantee Subsidiary;
(v) Any person other than Grantee or any Grantee Subsidiary
shall have filed with the SEC a registration statement or tender offer
materials with respect to a potential exchange or tender offer that would
constitute an Acquisition Transaction (or filed a preliminary proxy
statement with the SEC with respect to a potential vote by its
shareholders to approve the issuance of shares to be offered in such an
exchange offer);
(vi) Issuer shall have willfully breached any covenant or obligation
contained in the Merger Agreement in anticipation of engaging in an
Acquisition Transaction, and following such breach Grantee would be
entitled to terminate the Merger Agreement (whether immediately or after
the giving of notice or passage of time or both);
(vii) Any person other than Grantee or any Grantee Subsidiary shall
have filed an application or notice with the Office of Thrift
Supervision (the "OTS") or other federal or state bank regulatory or
antitrust authority, which application or notice has been accepted for
processing, for approval to engage in an Acquisition Transaction; or
(viii) Any person other than Grantee or any Grantee Subsidiary
shall have made a proposal to Issuer or its shareholders to engage in an
Acquisition Transaction and such proposal shall have been publicly
announced.
(c) The term "Subsequent Triggering Event" shall mean any of the
following events or transactions occurring after the date hereof:
(i) The acquisition by any person (other than Grantee or any
Grantee Subsidiary) of beneficial ownership of 25% or more of the then
outstanding Common Stock; or
(ii) The occurrence of the Initial Triggering Event described in
clause (i) of subsection (b) of this Section 2, except that the
percentage referred to in clause (z) of the second sentence thereof shall
be 25%.
(d) Issuer shall notify Grantee promptly in writing of the occurrence
of any Initial Triggering Event or Subsequent Triggering Event (together, a
"Triggering Event"), it being understood that the giving of such notice by
Issuer shall not be a condition to the right of the Holder to exercise the
Option.
(e) In the event the Holder is entitled to and wishes to exercise the
Option (or any portion thereof), it shall send to Issuer a written notice (the
date of which being herein referred to as the "Notice Date") specifying (i)
the total number of shares it will purchase pursuant to such exercise and (ii)
a place and date not earlier than three business days nor later than 60
business days from the Notice Date for the closing of such purchase (the
"Closing Date"); provided, that if prior notification to or approval of the
OTS or any other regulatory or antitrust agency is required in connection with
such purchase, the Holder shall promptly file the required notice or
application for approval, shall promptly notify Issuer of such filing, and
shall expeditiously process the same and the period of time that otherwise
would run pursuant to this sentence shall run instead from the date on which
any required notification periods have expired or been terminated or such
approvals have been obtained and any requisite waiting period or periods shall
have passed. Any exercise of the Option shall be deemed to occur on the
Notice Date relating thereto.
(f) At the closing referred to in subsection (e) of this Section 2,
the Holder shall (i) pay to Issuer the aggregate purchase price for the shares
of Common Stock purchased pursuant to the exercise of the Option in
immediately available funds by wire transfer to a bank account designated by
Issuer and (ii) present and surrender this Agreement to Issuer at its
principal executive offices, provided that the failure or refusal of the
Issuer to designate such a bank account or accept surrender of this Agreement
shall not preclude the Holder from exercising the Option .
(g) At such closing, simultaneously with the delivery of immediately
available funds as provided in subsection (f) of this Section 2, Issuer shall
deliver to the Holder a certificate or certificates representing the number of
shares of Common Stock purchased by the Holder and, if the Option should be
exercised in part only, a new Option evidencing the rights of the Holder
thereof to purchase the balance of the shares purchasable hereunder.
(h) Certificates for Common Stock delivered at a closing hereunder
may be endorsed with a restrictive legend that shall read substantially as
follows:
"The transfer of the shares represented by this certificate is
subject to certain provisions of an agreement, dated as of January 13,
1998, between the registered holder hereof and Issuer and to resale
restrictions arising under the Securities Act of 1933, as amended. A
copy of such agreement is on file at the principal office of Issuer and
will be provided to the holder hereof without charge upon receipt by
Issuer of a written request therefor."
It is understood and agreed that: (i) the reference to the resale restrictions
of the Securities Act of 1933, as amended (the "1933 Act") in the above legend
shall be removed by delivery of substitute certificate(s) without such
reference if the Holder shall have delivered to Issuer a copy of a letter from
the staff of the SEC, or an opinion of counsel, in form and substance
reasonably satisfactory to Issuer, to the effect that such legend is not
required for purposes of the 1933 Act; (ii) the reference to the provisions of
this Agreement in the above legend shall be removed by delivery of substitute
certificate(s) without such reference if the shares have been sold or
transferred in compliance with the provisions of this Agreement and under
circumstances that do not require the retention of such reference in the
opinion of Counsel to the Holder; and (iii) the legend shall be removed in its
entirety if the conditions in the preceding clauses (i) and (ii) are both
satisfied. In addition, such certificates shall bear any other legend as may
be required by law.
(i) Upon the giving by the Holder to Issuer of the written notice of
exercise of the Option provided for under subsection (e) of this Section 2 and
the tender of the applicable purchase price in immediately available funds,
the Holder shall be deemed subject to the receipt of any necessary regulatory
approvals to be the holder of record of the shares of Common Stock issuable
upon such exercise, notwithstanding that the stock transfer books of Issuer
shall then be closed or that certificates representing such shares of Common
Stock shall not then be actually delivered to the Holder. Issuer shall pay
all expenses, and any and all United States federal, state and local taxes and
other charges that may be payable in connection with the preparation, issue
and delivery of stock certificates under this Section 2 in the name of the
Holder or its assignee, transferee or designee.
3. Issuer agrees: (i) that it shall at all times maintain, free from
preemptive rights, sufficient authorized but unissued or treasury shares of
Common Stock so that the Option may be exercised without additional
authorization of Common Stock after giving effect to all other options,
warrants, convertible securities and other rights to purchase Common Stock;
(ii) that it will not, by charter amendment or through reorganization,
consolidation, merger, dissolution or sale of assets, or by any other
voluntary act, avoid or seek to avoid the observance or performance of any of
the covenants, stipulations or conditions to be observed or performed
hereunder by Issuer; (iii) promptly to take all action as may from time to
time be required (including (x) complying with all applicable premerger
notification, reporting and waiting period requirements specified in 15 U.S.C.
Section 18a and regulations promulgated thereunder and (y) in the event, under
the Savings and Loan Holding Company Act ("SLHCA"), or the Change in Bank
Control Act of 1978, as amended, or any state or other federal banking law,
prior approval of or notice to the OTS or to any state or other federal
regulatory authority is necessary before the Option may be exercised,
cooperating fully with the Holder in preparing such applications or notices
and providing such information to the OTS or such state or other federal
regulatory authority as they may require) in order to permit the Holder to
exercise the Option and Issuer duly and effectively to issue shares of Common
Stock pursuant hereto; and (iv) promptly to take all action provided herein to
protect the rights of the Holder against dilution.
4. This Agreement (and the Option granted hereby) are exchangeable,
without expense, at the option of the Holder, upon presentation and surrender
of this Agreement at the principal office of Issuer, for other Agreements
providing for Options of different denominations entitling the holder thereof
to purchase, on the same terms and subject to the same conditions as are set
forth herein, in the aggregate the same number of shares of Common Stock
purchasable hereunder. The terms "Agreement" and "Option" as used herein
include any Agreements and related Options for which this Agreement (and the
Option granted hereby) may be exchanged. Upon receipt by Issuer of evidence
reasonably satisfactory to it of the loss, theft, destruction or mutilation of
this Agreement, and (in the case of loss, theft or destruction) of reasonably
satisfactory indemnification, and upon surrender and cancellation of this
Agreement, if mutilated, Issuer will execute and deliver a new Agreement of
like tenor and date. Any such new Agreement executed and delivered shall
constitute an additional contractual obligation on the part of Issuer, whether
or not the Agreement so lost, stolen, destroyed or mutilated shall at any time
be enforceable by anyone.
5. In addition to the adjustment in the number of shares of Common
Stock that are purchasable upon exercise of the Option pursuant to Section 1
of this Agreement, the number of shares of Common Stock purchasable upon the
exercise of the Option and the Option Price shall be subject to adjustment
from time to time as provided in this Section 5.
(a) In the event of any change in, or distributions in respect of,
the Common Stock by reason of stock dividends, split-ups, mergers,
recapitalizations, combinations, subdivisions, conversions, exchanges of
shares or the like, the type and number of shares of Common Stock purchasable
upon exercise hereof shall be appropriately adjusted and proper provision
shall be made so that, in the event that any additional shares of Common Stock
are to be issued or otherwise become outstanding as a result of any such
change (other than pursuant to an exercise of the Option), the number of
shares of Common Stock that remain subject to the Option shall be increased so
that, after such issuance and together with shares of Common Stock previously
issued pursuant to the exercise of the Option (as adjusted on account of any
of the foregoing changes in the Common Stock), it equals 19.9% of the number
of shares of Common Stock then issued and outstanding.
(b) Whenever the number of shares of Common Stock purchasable upon
exercise hereof is adjusted as provided in this Section 5, the Option Price
shall be adjusted by multiplying the Option Price by a fraction, the numerator
of which shall be equal to the number of shares of Common Stock purchasable
prior to the adjustment and the denominator of which shall be equal to the
number of shares of Common Stock purchasable after the adjustment.
6. Upon the occurrence of a Subsequent Triggering Event that occurs
prior to an Exercise Termination Event, Issuer shall, at the request of
Grantee delivered within twelve (12) months (or such later period as provided
in Section 10) of such Subsequent Triggering Event (whether on its own behalf
or on behalf of any subsequent holder of this Option (or part thereof) or any
of the shares of Common Stock issued pursuant hereto), promptly prepare, file
and keep current a registration statement under the 1933 Act covering any
shares issued and issuable pursuant to this Option and shall use its
reasonable best efforts to cause such registration statement to become
effective and remain current in order to permit the sale or other disposition
of any shares of Common Stock issued upon total or partial exercise of this
Option ("Option Shares") in accordance with any plan of disposition requested
by Grantee. Issuer will use its reasonable best efforts to cause such
registration statement promptly to become effective and then to remain
effective for such period not in excess of 180 days from the day such
registration statement first becomes effective or such shorter time as may be
reasonably necessary to effect such sales or other dispositions. Grantee
shall have the right to demand two such registrations. The Issuer shall bear
the costs of such registrations (including, but not limited to, Issuer's
attorneys' fees, printing costs and filing fees, except for underwriting
discounts or commissions, brokers' fees and the fees and disbursements of
Grantee's counsel related thereto). The foregoing notwithstanding, if, at the
time of any request by Grantee for registration of Option Shares as provided
above, Issuer is in registration with respect to an underwritten public
offering by Issuer of shares of Common Stock, and if in the good faith
judgment of the managing underwriter or managing underwriters, or, if none,
the sole underwriter or underwriters, of such offering the offer and sale of
the Option Shares would interfere with the successful marketing of the shares
of Common Stock offered by Issuer, the number of Option Shares otherwise to be
covered in the registration statement contemplated hereby may be reduced;
provided, however, that after any such required reduction the number of Option
Shares to be included in such offering for the account of the Holder shall
constitute at least 25% of the total number of shares to be sold by the Holder
and Issuer in the aggregate; and provided further, however, that if such
reduction occurs, then Issuer shall file a registration statement for the
balance as promptly as practicable thereafter as to which no reduction
pursuant to this Section 6 shall be permitted or occur and the Holder shall
thereafter be entitled to one additional registration and the twelve (12)
month period referred to in the first sentence of this section shall be
increased to twenty-four (24) months. Each such Holder shall provide all
information reasonably requested by Issuer for inclusion in any registration
statement to be filed hereunder. If requested by any such Holder in
connection with such registration, Issuer shall become a party to any
underwriting agreement relating to the sale of such shares, but only to the
extent of obligating itself in respect of representations, warranties,
indemnities and other agreements customarily included in such underwriting
agreements for Issuer. Upon receiving any request under this Section 6 from
any Holder, Issuer agrees to send a copy thereof to any other person known to
Issuer to be entitled to registration rights under this Section 6, in each
case by promptly mailing the same, postage prepaid, to the address of record
of the persons entitled to receive such copies. Notwithstanding anything to
the contrary contained herein, in no event shall the number of registrations
that Issuer is obligated to effect be increased by reason of the fact that
there shall be more than one Holder as a result of any assignment or division
of this Agreement.
7. (a) At any time after the occurrence of a Repurchase Event (as
defined below) (i) at the request of the Holder, delivered prior to an
Exercise Termination Event (or such later period as provided in Section 10),
Issuer (or any successor thereto) shall repurchase the Option from the Holder
at a price (the "Option Repurchase Price") equal to the amount by which (A)
the market/offer price (as defined below) exceeds (B) the Option Price,
multiplied by the number of shares for which this Option may then be exercised
and (ii) at the request of the owner of Option Shares from time to time (the
"Owner"), delivered prior to an Exercise Termination Event (or such later
period as provided in Section 10), Issuer (or any successor thereto) shall
repurchase such number of the Option Shares from the Owner as the Owner shall
designate at a price (the "Option Share Repurchase Price") equal to the
market/offer price multiplied by the number of Option Shares so designated.
The term "market/offer price" shall mean the highest of (i) the price per
share of Common Stock at which a tender or exchange offer therefor has been
made, (ii) the price per share of Common Stock to be paid by any third party
pursuant to an agreement with Issuer, (iii) the highest closing price for
shares of Common Stock within the six-month period immediately preceding the
date the Holder gives notice of the required repurchase of this Option or the
Owner gives notice of the required repurchase of Option Shares, as the case
may be, or (iv) in the event of a sale of all or any substantial part of
Issuer's assets or deposits, the sum of the net price paid in such sale for
such assets or deposits and the current market value of the remaining net
assets of Issuer as determined by a nationally recognized investment banking
firm selected by the Holder or the Owner, as the case may be, and reasonably
acceptable to Issuer, divided by the number of shares of Common Stock of
Issuer outstanding at the time of such sale. In determining the market/offer
price, the value of consideration other than cash shall be determined by a
nationally recognized investment banking firm selected by the Holder or Owner,
as the case may be, and reasonably acceptable to Issuer.
(b) The Holder and the Owner, as the case may be, may exercise its
right to require Issuer to repurchase the Option and any Option Shares
pursuant to this Section 7 by surrendering for such purpose to Issuer, at its
principal office, a copy of this Agreement or certificates for Option Shares,
as applicable, accompanied by a written notice or notices stating that the
Holder or the Owner, as the case may be, elects to require Issuer to
repurchase this Option and/or the Option Shares in accordance with the
provisions of this Section 7. As promptly as practicable, and in any event
within five business days after the surrender of the Option and/or
certificates representing Option Shares and the receipt of such notice or
notices relating thereto, Issuer shall deliver or cause to be delivered to the
Holder the Option Repurchase Price and/or to the Owner the Option Share
Repurchase Price therefor or the portion thereof that Issuer is not then
prohibited under applicable law and regulation from so delivering.
(c) To the extent that Issuer is prohibited under applicable law or
regulation, or as a consequence of administrative policy, from repurchasing
the Option and/or the Option Shares in full, Issuer shall immediately so
notify the Holder and/or the Owner and thereafter deliver or cause to be
delivered, from time to time, to the Holder and/or the Owner, as appropriate,
the portion of the Option Repurchase Price and the Option Share Repurchase
Price, respectively, that it is no longer prohibited from delivering, within
five business days after the date on which Issuer is no longer so prohibited;
provided, however, that if Issuer at any time after delivery of a notice of
repurchase pursuant to paragraph (b) of this Section 7 is prohibited under
applicable law or regulation, or as a consequence of administrative policy,
from delivering to the Holder and/or the Owner, as appropriate, the Option
Repurchase Price and the Option Share Repurchase Price, respectively, in full
(and Issuer hereby undertakes to use its reasonable best efforts to obtain all
required regulatory and legal approvals and to file any required notices as
promptly as practicable in order to accomplish such repurchase), the Holder or
Owner may revoke its notice of repurchase of the Option and/or the Option
Shares whether in whole or to the extent of the prohibition, whereupon, in the
latter case, Issuer shall promptly (i) deliver to the Holder and/or the Owner,
as appropriate, that portion of the Option Repurchase Price and/or the Option
Share Repurchase Price that Issuer is not prohibited from delivering; and (ii)
deliver, as appropriate, either (A) to the Holder, a new Agreement evidencing
the right of the Holder to purchase that number of shares of Common Stock
obtained by multiplying the number of shares of Common Stock for which the
surrendered Agreement was exercisable at the time of delivery of the notice of
repurchase by a fraction, the numerator of which is the Option Repurchase
Price less the portion thereof theretofore delivered to the Holder and the
denominator of which is the Option Repurchase Price, and/or (B) to the Owner,
a certificate for the Option Shares it is then so prohibited from
repurchasing. If an Exercise Termination Event shall have occurred prior to
the date of the notice by Issuer described in the first sentence of this
subsection (c), or shall be scheduled to occur at any time before the
expiration of a period ending on the thirtieth day after such date, the Holder
shall nonetheless have the right to exercise the Option until the expiration
of such 30-day period.
(d) For purposes of this Section 7, a "Repurchase Event" shall be
deemed to have occurred upon the occurrence of any of the following events or
transactions after the date hereof:
(i) the acquisition by any person (other than Grantee or any
Grantee Subsidiary) of beneficial ownership of 50% or more of the then
outstanding Common Stock; or
(ii) the consummation of any Acquisition Transaction described
in Section 2(b)(i) hereof, except that the percentage referred to in
clause (z) shall be 50%.
8. (a) In the event that prior to an Exercise Termination Event,
Issuer shall enter into an agreement (i) to consolidate with or merge into any
person, other than Grantee or a Grantee Subsidiary, or engage in a plan of
exchange with any person, other than Grantee or a Grantee Subsidiary and
Issuer shall not be the continuing or surviving corporation of such
consolidation or merger or the acquiror in such plan of exchange, (ii) to
permit any person, other than Grantee or a Grantee Subsidiary, to merge into
Issuer or be acquired by Issuer in a plan of exchange and Issuer shall be the
continuing or surviving or acquiring corporation, but, in connection with such
merger or plan of exchange, the then outstanding shares of Common Stock shall
be changed into or exchanged for stock or other securities of any other person
or cash or any other property or the then outstanding shares of Common Stock
shall after such merger or plan of exchange represent less than 50% of the
outstanding shares and share equivalents of the merged or acquiring company,
or (iii) to sell or otherwise transfer all or a substantial part of its or the
Issuer Subsidiary's assets or deposits to any person, other than Grantee or a
Grantee Subsidiary, then, and in each such case, the agreement governing such
transaction shall make proper provision so that the Option shall, upon the
consummation of any such transaction and upon the terms and conditions set
forth herein, be converted into, or exchanged for, an option (the "Substitute
Option"), at the election of the Holder, of either (x) the Acquiring
Corporation (as hereinafter defined) or (y) any person that controls the
Acquiring Corporation.
(b) The following terms have the meanings indicated:
(i) "Acquiring Corporation" shall mean (i) the continuing or
surviving person of a consolidation or merger with Issuer (if other than
Issuer), (ii) the acquiring person in a plan of exchange in which Issuer
is acquired, (iii) the Issuer in a merger or plan of exchange in which
Issuer is the continuing or surviving or acquiring person, and (iv) the
transferee of all or a substantial part of Issuer's assets or deposits
(or the assets or deposits of the Issuer Subsidiary).
(ii) "Substitute Common Stock" shall mean the common stock
issued by the issuer of the Substitute Option upon exercise of the
Substitute Option.
(iii) "Assigned Value" shall mean the market/offer price, as
defined in Section 7.
(iv) "Average Price" shall mean the average closing price of a
share of the Substitute Common Stock for one year immediately preceding
the consolidation, merger or sale in question, but in no event higher
than the closing price of the shares of Substitute Common Stock on the
day preceding such consolidation, merger or sale; provided that if Issuer
is the issuer of the Substitute Option, the Average Price shall be
computed with respect to a share of common stock issued by the person
merging into Issuer or by any company which controls or is controlled by
such person, as the Holder may elect.
(c) The Substitute Option shall have the same terms as the Option,
provided that if the terms of the Substitute Option cannot, for legal reasons,
be the same as the Option, such terms shall be as similar as possible and in
no event less advantageous to the Holder. The issuer of the Substitute Option
shall also enter into an agreement with the then Holder or Holders of the
Substitute Option in substantially the same form as this Agreement (after
giving effect for such purpose to the provisions of Section 9), which
agreement shall be applicable to the Substitute Option.
(d) The Substitute Option shall be exercisable for such number of
shares of Substitute Common Stock as is equal to the Assigned Value multiplied
by the number of shares of Common Stock for which the Option was exercisable
immediately prior to the event described in the first sentence of Section
8(a), divided by the Average Price. The exercise price of the Substitute
Option per share of Substitute Common Stock shall then be equal to the Option
Price multiplied by a fraction, the numerator of which shall be the number of
shares of Common Stock for which the Option was exercisable immediately prior
to the event described in the first sentence of Section 8(a) and the
denominator of which shall be the number of shares of Substitute Common Stock
for which the Substitute Option is exercisable.
(e) In no event, pursuant to any of the foregoing paragraphs, shall
the Substitute Option be exercisable for more than 19.9% of the shares of
Substitute Common Stock outstanding prior to exercise of the Substitute
Option. In the event that the Substitute Option would be exercisable for more
than 19.9% of the shares of Substitute Common Stock outstanding prior to
exercise but for this clause (e), the issuer of the Substitute Option (the
"Substitute Option Issuer") shall make a cash payment to Holder equal to the
excess of (i) the value of the Substitute Option without giving effect to the
limitation in this clause (e) over (ii) the value of the Substitute Option
after giving effect to the limitation in this clause (e). This difference in
value shall be determined by a nationally recognized investment banking firm
selected by the Holder.
(f) Issuer shall not enter into any transaction described in
subsection (a) of this Section 8 unless the Acquiring Corporation and any
person that controls the Acquiring Corporation assume in writing all the
obligations of Issuer hereunder.
9. (a) At the request of the holder of the Substitute Option (the
"Substitute Option Holder"), the issuer of the Substitute Option (the
"Substitute Option Issuer") shall repurchase the Substitute Option from the
Substitute Option Holder at a price (the "Substitute Option Repurchase Price")
equal to the amount by which (i) the Highest Closing Price (as hereinafter
defined) exceeds (ii) the exercise price of the Substitute Option, multiplied
by the number of shares of Substitute Common Stock for which the Substitute
Option may then be exercised, and at the request of the owner (the "Substitute
Share Owner") of shares of Substitute Common Stock (the "Substitute Shares"),
the Substitute Option Issuer shall repurchase the Substitute Shares at a price
(the "Substitute Share Repurchase Price") equal to the Highest Closing Price
multiplied by the number of Substitute Shares so designated. The term
"Highest Closing Price" shall mean the highest closing price for shares of
Substitute Common Stock within the six-month period immediately preceding the
date the Substitute Option Holder gives notice of the required repurchase of
the Substitute Option or the Substitute Share Owner gives notice of the
required repurchase of the Substitute Shares, as applicable.
(b) The Substitute Option Holder and the Substitute Share Owner, as
the case may be, may exercise its respective rights to require the Substitute
Option Issuer to repurchase the Substitute Option and the Substitute Shares
pursuant to this Section 9 by surrendering for such purpose to the Substitute
Option Issuer, at its principal office, the agreement for such Substitute
Option (or, in the absence of such an agreement, a copy of this Agreement)
and/or certificates for Substitute Shares accompanied by a written notice or
notices stating that the Substitute Option Holder or the Substitute Share
Owner, as the case may be, elects to require the Substitute Option Issuer to
repurchase the Substitute Option and/or the Substitute Shares in accordance
with the provisions of this Section 9. As promptly as practicable and in any
event within five business days after the surrender of the Substitute Option
and/or certificates representing Substitute Shares and the receipt of such
notice or notices relating thereto, the Substitute Option Issuer shall deliver
or cause to be delivered to the Substitute Option Holder the Substitute Option
Repurchase Price and/or to the Substitute Share Owner the Substitute Share
Repurchase Price therefor or the portion thereof which the Substitute Option
Issuer is not then prohibited under applicable law and regulation from so
delivering.
(c) To the extent that the Substitute Option Issuer is prohibited
under applicable law or regulation, or as a consequence of administrative
policy, from repurchasing the Substitute Option and/or the Substitute Shares
in part or in full, the Substitute Option Issuer shall immediately so notify
the Substitute Option Holder and/or the Substitute Share Owner and thereafter
deliver or cause to be delivered, from time to time, to the Substitute Option
Holder and/or the Substitute Share Owner, as appropriate, the portion of the
Substitute Option Repurchase Price and/or the Substitute Share Repurchase
Price, respectively, which it is no longer prohibited from delivering, within
five (5) business days after the date on which the Substitute Option Issuer is
no longer so prohibited; provided, however, that if the Substitute Option
Issuer is at any time after delivery of a notice of repurchase pursuant to
subsection (b) of this Section 9 prohibited under applicable law or
regulation, or as a consequence of administrative policy, from delivering to
the Substitute Option Holder and/or the Substitute Share Owner, as
appropriate, the Substitute Option Repurchase Price and the Substitute Share
Repurchase Price, respectively, in full (and the Substitute Option Issuer
shall use its reasonable best efforts to receive all required regulatory and
legal approvals as promptly as practicable in order to accomplish such
repurchase), the Substitute Option Holder and/or Substitute Share Owner may
revoke its notice of repurchase of the Substitute Option or the Substitute
Shares either in whole or to the extent of prohibition, whereupon, in the
latter case, the Substitute Option Issuer shall promptly (i) deliver to the
Substitute Option Holder or Substitute Share Owner, as appropriate, that
portion of the Substitute Option Repurchase Price or the Substitute Share
Repurchase Price that the Substitute Option Issuer is not prohibited from
delivering; and (ii) deliver, as appropriate, either (A) to the Substitute
Option Holder, a new Substitute Option evidencing the right of the Substitute
Option Holder to purchase that number of shares of the Substitute Common Stock
obtained by multiplying the number of shares of the Substitute Common Stock
for which the surrendered Substitute Option was exercisable at the time of
delivery of the notice of repurchase by a fraction, the numerator of which is
the Substitute Option Repurchase Price less the portion thereof theretofore
delivered to the Substitute Option Holder and the denominator of which is the
Substitute Option Repurchase Price, and/or (B) to the Substitute Share Owner,
a certificate for the Substitute Option Shares it is then so prohibited from
repurchasing. If an Exercise Termination Event shall have occurred prior to
the date of the notice by the Substitute Option Issuer described in the first
sentence of this subsection (c), or shall be scheduled to occur at any time
before the expiration of a period ending on the thirtieth day after such date,
the Substitute Option Holder shall nevertheless have the right to exercise the
Substitute Option until the expiration of such 30-day period.
10. The 30-day, 6-month, 12-month, 18-month or 24-month periods for
exercise of certain rights under Sections 2, 6, 7, 9, 12 and 14 shall be
extended: (i) to the extent necessary to obtain all regulatory approvals for
the exercise of such rights (for so long as the Holder, Owner, Substitute
Option Holder or Substitute Share Owner, as the case may be, is using
commercially reasonable efforts to obtain such regulatory approvals), and for
the expiration of all statutory waiting periods; and (ii) to the extent
necessary to avoid liability under Section 16(b) of the 1934 Act by reason of
such exercise.
11. Issuer hereby represents and warrants to Grantee as follows:
(a) Issuer has full corporate power and authority to execute and
deliver this Agreement and to consummate the transactions contemplated
hereby. The execution and delivery of this Agreement and the consummation of
the transactions contemplated hereby have been duly and validly authorized by
the Issuer Board prior to the date hereof and no other corporate proceedings
on the part of Issuer are necessary to authorize this Agreement or to
consummate the transactions so contemplated. This Agreement has been duly and
validly executed and delivered by Issuer.
(b) Issuer has taken all necessary corporate action to authorize and
reserve and to permit it to issue, and at all times from the date hereof
through the termination of this Agreement in accordance with its terms will
have reserved for issuance upon the exercise of the Option, that number of
shares of Common Stock equal to the maximum number of shares of Common Stock
at any time and from time to time issuable hereunder, and all such shares,
upon issuance pursuant thereto, will be duly authorized, validly issued, fully
paid, nonassessable, and will be delivered free and clear of all claims,
liens, encumbrance and security interests and not subject to any preemptive
rights.
12. Neither of the parties hereto may assign any of its rights or
obligations under this Agreement or the Option created hereunder to any other
person, without the express written consent of the other party, except that in
the event a Subsequent Triggering Event shall have occurred prior to an
Exercise Termination Event, Grantee, subject to the express provisions hereof,
may assign in whole or in part its rights and obligations hereunder; provided,
however, that until the date 15 days following the date on which the OTS has
approved an application by Grantee to acquire the shares of Common Stock
subject to the Option, Grantee may not assign its rights under the Option
except in (i) a widely dispersed public distribution, (ii) a private
placement in which no one party acquires the right to purchase in excess of 2%
of the voting shares of Issuer, (iii) an assignment to a single party (e.g., a
broker or investment banker) for the purpose of conducting a widely dispersed
public distribution on Grantee's behalf or (iv) any other manner approved by
the OTS.
13. Each of Grantee and Issuer will use its reasonable best efforts
to make all filings with, and to obtain consents of, all third parties and
governmental authorities necessary to the consummation of the transactions
contemplated by this Agreement, including, without limitation, applying to the
OTS under the SLHCA for approval to acquire the shares issuable hereunder, but
Grantee shall not be obligated to apply to state banking authorities for
approval to acquire the shares of Common Stock issuable hereunder until such
time, if ever, as it deems appropriate to do so.
14. (a) Grantee may, at any time following a Repurchase Event and
prior to the occurrence of an Exercise Termination Event (or such later period
as provided in Section 10), relinquish the Option (together with any Option
Shares issued to and then owned by Grantee) to Issuer in exchange for a cash
fee equal to the Surrender Price; provided, however, that Grantee may not
exercise its rights pursuant to this Section 14 if Issuer has repurchased the
Option (or any portion thereof) or any Option Shares pursuant to Section 7.
The "Surrender Price" shall be equal to $30 million (i) plus, if applicable,
Grantee's purchase price with respect to any Option Shares and (ii) minus, if
applicable, the excess of (B) the net cash amounts, if any, received by
Grantee pursuant to the arms' length sale of Option Shares (or any other
securities into which such Option Shares were converted or exchanged) to any
unaffiliated party, over (B) Grantee's purchase price of such Option Shares.
(b) Grantee may exercise its right to relinquish the Option and any
Option Shares pursuant to this Section 14 by surrendering to Issuer, at its
principal office, a copy of this Agreement together with certificates for
Option Shares, if any, accompanied by a written notice stating (i) that
Grantee elects to relinquish the Option and Option Shares, if any, in
accordance with the provisions of this Section 14 and (ii) the Surrender
Price. The Surrender Price shall be payable in immediately available funds
on or before the second business day following receipt of such notice by
Issuer.
(c) To the extent that Issuer is prohibited under applicable law or
regulation, or as a consequence of administrative policy, from paying the
Surrender Price to Grantee in full, Issuer shall immediately so notify Grantee
and thereafter deliver or cause to be delivered, from time to time, to
Grantee, the portion of the Surrender Price that it is no longer prohibited
from paying, within five business days after the date on which Issuer is no
longer so prohibited; provided, however, that if Issuer at any time after
delivery of a notice of surrender pursuant to paragraph (b) of this Section 14
is prohibited under applicable law or regulation, or as a consequence of
administrative policy, from paying to Grantee the Surrender Price in full, (i)
Issuer shall (A) use its reasonable best efforts to obtain all required
regulatory and legal approvals and to file any required notices as promptly as
practicable in order to make such payments, (B) within five days of the
submission or receipt of any documents relating to any such regulatory and
legal approvals, provide Grantee with copies of the same, and (c) keep Grantee
advised of both the status of any such request for regulatory and legal
approvals, as well as any discussions with any relevant regulatory or other
third party reasonably related to the same and (ii) Grantee may revoke such
notice of surrender by delivery of a notice of revocation to Issuer and, upon
delivery of such notice of revocation, the Exercise Termination Date shall be
extended to a date six months from the date on which the Exercise Termination
Date would have occurred if not for the provisions of this Section 14(c)
(during which period Grantee may exercise any of its rights hereunder,
including any and all rights pursuant to this Section 14).
15. The parties hereto acknowledge that damages would be an
inadequate remedy for a breach of this Agreement by either party hereto and
that the obligations of the parties hereto shall be enforceable by either
party hereto through injunctive or other equitable relief. In connection
therewith both parties waive the posting of any bond or similar requirement.
16. If any term, provision, covenant or restriction contained in this
Agreement is held by a court or a federal or state regulatory agency of
competent jurisdiction to be invalid, void or unenforceable, the remainder of
the terms, provisions and covenants and restrictions contained in this
Agreement shall remain in full force and effect, and shall in no way be
affected, impaired or invalidated. If for any reason such court or regulatory
agency determines that the Holder is not permitted to acquire, or Issuer is
not permitted to repurchase pursuant to Section 7, the full number of shares
of Common Stock provided in Section l(a) hereof (as adjusted pursuant to
Section l(b) or Section 5 hereof), it is the express intention of Issuer to
allow the Holder to acquire or to require Issuer to repurchase such lesser
number of shares as may be permissible, without any amendment or modification
hereof.
17. All notices, requests, claims, demands and other communications
hereunder shall be deemed to have been duly given when delivered in person, by
fax, telecopy, or by registered or certified mail (postage prepaid, return
receipt requested) at the respective addresses of the parties set forth in the
Merger Agreement.
18. This Agreement shall be governed by and construed in accordance
with the laws of the State of Delaware, without regard to the conflict of law
principles thereof (except to the extent that mandatory provisions of Federal
law are applicable).
19. This Agreement may be executed in two or more counterparts, each
of which shall be deemed to be an original, but all of which shall constitute
one and the same agreement.
20. Except as otherwise expressly provided herein, each of the
parties hereto shall bear and pay all costs and expenses incurred by it or on
its behalf in connection with the transactions contemplated hereunder,
including fees and expenses of its own financial consultants, investment
bankers, accountants and counsel.
21. Except as otherwise expressly provided herein or in the Merger
Agreement, this Agreement contains the entire agreement between the parties
with respect to the transactions contemplated hereunder and supersedes all
prior arrangements or understandings with respect thereof, written or oral.
The terms and conditions of this Agreement shall inure to the benefit of and
be binding upon the parties hereto and their respective successors and
permitted assignees. Nothing in this Agreement, expressed or implied, is
intended to confer upon any party, other than the parties hereto, and their
respective successors except as assignees, any rights, remedies, obligations
or liabilities under or by reason of this Agreement, except as expressly
provided herein.
22. Capitalized terms used in this Agreement and not defined herein
shall have the meanings assigned thereto in the Merger Agreement.
23. Grantee agrees that for so long as this Option Agreement is in
effect and for a period of one year following the termination of this Option
Agreement pursuant to Section 2(a) hereof, Grantee shall not seek to engage in
an Acquisition Transaction with Issuer or an Issuer Subsidiary absent the
approval of Issuer's Board of Directors.
IN WITNESS WHEREOF, each of the parties has caused this Agreement to be
executed on its behalf by its officers thereunto duly authorized, all as of
the date first above written.
FIFTH THIRD BANCORP
By:
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Its:
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CITFED BANCORP, INC.
By:
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Its:
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