FIDELITY FINANCIAL OF OHIO, INC.
4555 Montgomery Road
Cincinnati, Ohio 45212
(513) 351-6666
July 29, 1996
Dear Shareholder:
You are cordially invited to attend a Special Meeting of Shareholders of
Fidelity Financial of Ohio, Inc. ("FFOH") at 2:00 p.m., Eastern Time, on
September 10, 1996 at the Quality Hotel Central located at 4747 Montgomery Road,
Cincinnati, Ohio (the "Special Meeting"). This is a very important meeting
regarding your investment in FFOH.
At the Special Meeting, you will be asked to consider and vote upon a
proposal to adopt an Amended and Restated Agreement of Merger, dated as of June
13, 1996 (the "Agreement"), by and among FFOH, Fidelity Acquisition Corporation
("FAC"), a newly formed Ohio corporation and a wholly owned subsidiary of FFOH,
and Circle Financial Corporation ("CFC"), an Ohio corporation, pursuant to
which, among other things, CFC will be merged with and into FAC (the "Merger").
If the Agreement is adopted and the Merger is consummated, each outstanding
share of CFC Common Stock will be converted into the right to receive, subject
to certain terms, conditions, limitations and procedures set forth in the
Agreement, either $38.00 in cash or a number of shares of FFOH Common Stock
which will be determined by applying a formula (the "Exchange Ratio"), set forth
in the Agreement, which is based on the average market price ("Average FFOH
Price") of the FFOH Common Stock over a 20 trading day period (the "pricing
period") ending on the date FFOH and CFC receive all requisite regulatory
approvals and satisfy all applicable waiting periods related to the Merger or,
under certain circumstances, a combination of cash and shares of FFOH Common
Stock. If, over the pricing period, the Average FFOH Price is equal to or
greater than $9.00 but equal to or less than $11.00, shareholders of CFC
electing to receive stock will receive for each share of CFC Common Stock that
number of shares of FFOH Common Stock equal to the ratio determined by dividing
$38.00 by the Average FFOH Price. If the Average FFOH Price is greater than
$11.00, shareholders of CFC will receive 3.45 shares of FFOH Common Stock for
each share of CFC Common Stock, while if the Average FFOH Price is less than
$9.00, they will receive 4.22 shares for each such share.
If the Average FFOH Price is less than $8.00 per share, CFC may terminate
the Agreement, provided that in the event CFC elects to exercise this
termination right and upon notice, FFOH will have the right to adjust the
Exchange Ratio to an amount equal to 4.75 shares of FFOH Common Stock, in which
case the Agreement will not be terminated.
Your Board of Directors has determined the Merger to be in the best
interests of FFOH and its shareholders and has unanimously approved the
Agreement and the transactions contemplated thereby, including the Merger. THE
BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT SHAREHOLDERS VOTE "FOR" ADOPTION
OF THE AGREEMENT.
At the Special Meeting, you will also be asked to consider and vote upon a
proposal to adopt an amendment to FFOH's Articles of Incorporation in order to
increase the authorized number of shares of FFOH Common Stock and Preferred
Stock. THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT SHAREHOLDERS VOTE
"FOR" ADOPTION OF THE AMENDMENT TO FFOH'S ARTICLES OF INCORPORATION.
Enclosed are a proxy card, a Notice of Special Meeting of Shareholders and
a Prospectus/Joint Proxy Statement which describes the Merger, its effects and
the background of the transaction. A copy of the Agreement is included as Annex
I to the enclosed Prospectus/Joint Proxy Statement. Also enclosed are, for both
FFOH and CFC, their respective 1995 Annual Reports to Shareholders and Quarterly
Reports on Form 10-Q or Form 10-QSB for the quarter ended March 31, 1996. You
are urged to read all of these materials carefully.
It is very important that your shares be represented at the Special
Meeting. FAILURE TO RETURN A PROPERLY EXECUTED PROXY CARD OR TO VOTE AT THE
SPECIAL MEETING WILL HAVE THE SAME EFFECT AS A VOTE AGAINST THE PROPOSAL TO
AMEND FFOH'S ARTICLES OF INCORPORATION. Accordingly, even if you plan to be
present at the Special Meeting, you are requested to complete, date, sign, and
return the proxy card in the enclosed postage-paid envelope as soon as possible.
If you decide to attend the Special Meeting, you may vote your shares in person
whether or not you have previously submitted a proxy.
On behalf of the Board, I thank you for your attention to this important
matter.
Very truly yours,
/s/ John R. Reusing
JOHN R. REUSING
PRESIDENT AND CHIEF EXECUTIVE OFFICER
<PAGE>
FIDELITY FINANCIAL OF OHIO, INC.
4555 Montgomery Road
Cincinnati, Ohio 45212
(513) 351-6666
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
TO BE HELD ON SEPTEMBER 10, 1996
NOTICE IS HEREBY GIVEN that a Special Meeting of Shareholders (including
any adjournment or postponements thereof, the "Special Meeting") of Fidelity
Financial of Ohio, Inc. ("FFOH") will be held at 2:00 p.m., Eastern Time, on
September 10, 1996 at the Quality Hotel Central located at 4747 Montgomery Road,
Cincinnati, Ohio for the following purposes:
1. To consider and vote upon a proposal to adopt an Amended and
Restated Agreement of Merger, dated as of June 13, 1996 ("Agreement"), by
and among FFOH, Fidelity Acquisition Corporation ("FAC"), a wholly owned
subsidiary of FFOH, and Circle Financial Corporation ("CFC"), which
provides, among other things, for (i) the merger of CFC with and into FAC
(the "Merger") and (ii) the conversion of each share of common stock of CFC
outstanding immediately prior to the Merger (other than any dissenting
shares under Ohio law and any shares held by either FFOH or CFC) into the
right to receive, subject to certain terms, conditions, limitations and
procedures set forth in the Agreement, either $38.00 in cash or a number of
shares of FFOH common stock which will be determined by applying a formula,
set forth in the Agreement, which is based on the average market price of
the FFOH common stock over a 20 trading day period ending on the date FFOH
and CFC receive all requisite regulatory approvals and satisfy all
applicable waiting periods related to the Merger or, under certain
circumstances, a combination of cash and shares of FFOH Common Stock.
2. To consider and vote upon a proposal to adopt an amendment to
FFOH's Articles of Incorporation in order to increase the authorized number
of shares of common stock and preferred stock of FFOH.
3. To transact such other business, if any, as may properly come
before the Special Meeting.
Pursuant to the Code of Regulations of FFOH, the Board of Directors has
fixed the close of business on July 19, 1996 as the record date for the
determination of shareholders entitled to notice of and to vote at the Special
Meeting. Only holders of common stock of FFOH of record at the close of business
on that date will be entitled to notice of and to vote at the Special Meeting.
THE BOARD OF DIRECTORS OF FFOH HAS DETERMINED THE MERGER TO BE IN THE BEST
INTERESTS OF FFOH AND ITS SHAREHOLDERS AND UNANIMOUSLY RECOMMENDS THAT
SHAREHOLDERS VOTE "FOR" ADOPTION OF THE AGREEMENT. IN ADDITION, THE BOARD OF
DIRECTORS UNANIMOUSLY RECOMMENDS THAT SHAREHOLDERS VOTE "FOR" ADOPTION OF THE
PROPOSED AMENDMENT TO FFOH'S ARTICLES OF INCORPORATION.
By Order of the Board of Directors
/s/ John R. Reusing
JOHN R. REUSING
PRESIDENT AND CHIEF EXECUTIVE OFFICER
Cincinnati, Ohio
July 29, 1996
YOU ARE CORDIALLY INVITED TO ATTEND THE SPECIAL MEETING. FAILURE TO RETURN A
PROPERLY EXECUTED PROXY CARD OR TO VOTE AT THE SPECIAL MEETING WILL HAVE THE
SAME EFFECT AS A VOTE AGAINST THE PROPOSAL TO AMEND FFOH'S ARTICLES OF
INCORPORATION. ACCORDINGLY, EVEN IF YOU PLAN TO BE PRESENT AT THE SPECIAL
MEETING, YOU ARE REQUESTED TO COMPLETE, DATE, SIGN AND RETURN THE PROXY CARD IN
THE ENCLOSED POSTAGE-PAID ENVELOPE AS SOON AS POSSIBLE. IF YOU ATTEND THE
SPECIAL MEETING, YOU MAY VOTE EITHER IN PERSON OR BY PROXY. ANY PROXY GIVEN MAY
BE REVOKED BY YOU IN WRITING OR IN PERSON AT ANY TIME PRIOR TO THE EXERCISE
THEREOF.
<PAGE>
CIRCLE FINANCIAL CORPORATION
11100 Reading Road
Sharonville, Ohio 45241-1904
(513) 563-6231
July 29, 1996
Dear Shareholder:
You are cordially invited to attend a Special Meeting of Shareholders of
Circle Financial Corporation ("CFC") at 2:00 p.m., Eastern Time, on September
10, 1996 at CFC's main office located at 11100 Reading Road, Sharonville, Ohio
(the "Special Meeting"). This is a very important meeting regarding your
investment in CFC.
At the Special Meeting, you will be asked to consider and vote upon a
proposal to adopt an Amended and Restated Agreement of Merger, dated as of June
13, 1996 (the "Agreement"), by and among Fidelity Financial of Ohio, Inc.
("FFOH"), an Ohio corporation, Fidelity Acquisition Corporation ("FAC"), a newly
formed Ohio corporation and a wholly owned subsidiary of FFOH and CFC, pursuant
to which, among other things, CFC will be merged with and into FAC (the
"Merger"). If the Agreement is adopted and the Merger is consummated, each
outstanding share of CFC Common Stock will be converted into the right to
receive, subject to certain terms, conditions, limitations and procedures set
forth in the Agreement, either $38.00 in cash or a number of shares of FFOH
Common Stock which will be determined by applying a formula (the "Exchange
Ratio"), set forth in the Agreement, which is based on the average market price
("Average FFOH Price") of the FFOH Common Stock over a 20 trading day period
(the "pricing period") ending on the date FFOH and CFC receive all requisite
regulatory approvals and satisfy all applicable waiting periods related to the
Merger or, under certain circumstances, a combination of cash and shares of FFOH
Common Stock. If, over the pricing period, the Average FFOH Price is equal to or
greater than $9.00 but equal to or less than $11.00, shareholders of CFC
electing to receive stock will receive for each share of CFC Common Stock that
number of shares of FFOH Common Stock equal to the ratio determined by dividing
$38.00 by the Average FFOH Price. If the Average FFOH Price is greater than
$11.00, shareholders of CFC will receive 3.45 shares of FFOH Common Stock for
each share of CFC Common Stock, while if the Average FFOH Price is less than
$9.00, they will receive 4.22 shares for each such share.
If the Average FFOH Price is less than $8.00 per share, CFC may terminate
the Agreement, provided that in the event CFC elects to exercise this
termination right and upon notice, FFOH will have the right to adjust the
Exchange Ratio to an amount equal to 4.75 shares of FFOH Common Stock, in which
case the Agreement will not be terminated.
Your Board of Directors has determined the Merger to be in the best
interests of CFC and its shareholders and has unanimously approved the Agreement
and the transactions contemplated thereby, including the Merger. THE BOARD OF
DIRECTORS UNANIMOUSLY RECOMMENDS THAT SHAREHOLDERS VOTE "FOR" ADOPTION OF THE
AGREEMENT.
Enclosed are a proxy card, a Notice of Special Meeting of Shareholders and
a Prospectus/Joint Proxy Statement which describes the Merger, its effects and
the background of the transaction. A copy of the Agreement is included as Annex
I to the enclosed Prospectus/ Joint Proxy Statement. Also enclosed are, for both
CFC and FFOH, their respective 1995 Annual Reports to Shareholders and Quarterly
Reports on Form 10-Q or Form 10-QSB for the quarter ended March 31, 1996 . You
are urged to read all of these materials carefully.
It is very important that your shares be represented at the Special
Meeting. FAILURE TO RETURN A PROPERLY EXECUTED PROXY CARD OR TO VOTE AT THE
SPECIAL MEETING WILL HAVE THE SAME EFFECT AS A VOTE AGAINST THE AGREEMENT.
Accordingly, even if you plan to be present at the Special Meeting, you are
requested to complete, date, sign, and return the proxy card in the enclosed
postage-paid envelope as soon as possible. If you decide to attend the Special
Meeting, you may vote your shares in person whether or not you have previously
submitted a proxy.
On behalf of the Board, I thank you for your attention to this important
matter.
Very truly yours,
/s/ Donald H. Rolf, Jr.
DONALD H. ROLF, JR.
CHAIRMAN AND PRESIDENT
<PAGE>
CIRCLE FINANCIAL CORPORATION
11100 Reading Road
Sharonville, Ohio 45241-1904
(513) 563-6231
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
TO BE HELD ON SEPTEMBER 10, 1996
NOTICE IS HEREBY GIVEN that a Special Meeting of Shareholders (including
any adjournment or postponements thereof, the "Special Meeting") of Circle
Financial Corporation ("CFC") will be held at 2:00 p.m., Eastern Time, on
September 10, 1996 at CFC's main office located at 11100 Reading Road,
Sharonville, Ohio for the following purposes:
1. To consider and vote upon a proposal to adopt an Amended and
Restated Agreement of Merger, dated as of June 13, 1996 (the "Agreement"),
by and among Fidelity Financial of Ohio, Inc. ("FFOH"), Fidelity
Acquisition Corporation ("FAC"), a wholly owned subsidiary of FFOH, and
CFC, which provides, among other things, for (i) the merger of CFC with and
into FAC (the "Merger") and (ii) the conversion of each share of common
stock of CFC outstanding immediately prior to the Merger (other than any
dissenting shares under Ohio law and any shares held by either FFOH or CFC)
into the right to receive, subject to certain terms, conditions,
limitations and procedures set forth in the Agreement, either $38.00 in
cash or a number of shares of FFOH common stock which will be determined by
applying a formula, set forth in the Agreement, which is based on the
average market price of the FFOH common stock over a 20 trading day period
ending on the date FFOH and CFC receive all requisite regulatory approvals
and satisfy all applicable waiting periods related to the Merger or, under
certain circumstances, a combination of cash and shares of FFOH Common
Stock.
2. To transact such other business, if any, as may properly come
before the Special Meeting.
Pursuant to the Code of Regulations of CFC, the Board of Directors has
fixed the close of business on July 19, 1996 as the record date for the
determination of shareholders entitled to notice of and to vote at the Special
Meeting. Only holders of common stock of CFC of record at the close of business
on that date will be entitled to notice of and to vote at the Special Meeting.
If the Merger is approved and consummated, holders of CFC common stock will
have the right to dissent from the Merger and to obtain payment of the fair cash
value of their shares by complying with Section 1701.85 of the Ohio General
Corporation Law. A copy of Section 1701.85 of the Ohio General Corporation Law
is attached as Annex VIII to the accompanying Prospectus/Joint Proxy Statement.
THE BOARD OF DIRECTORS OF CFC HAS DETERMINED THE MERGER TO BE IN THE BEST
INTERESTS OF CFC AND ITS SHAREHOLDERS AND UNANIMOUSLY RECOMMENDS THAT
SHAREHOLDERS VOTE "FOR" ADOPTION OF THE AGREEMENT.
By Order of the Board of Directors
/s/ Donald H. Rolf, Jr.
DONALD H. ROLF, JR.
CHAIRMAN AND PRESIDENT
Sharonville, Ohio
July 29, 1996
YOU ARE CORDIALLY INVITED TO ATTEND THE SPECIAL MEETING. FAILURE TO RETURN A
PROPERLY EXECUTED PROXY CARD OR TO VOTE AT THE SPECIAL MEETING WILL HAVE THE
SAME EFFECT AS A VOTE AGAINST THE AGREEMENT. ACCORDINGLY, EVEN IF YOU PLAN TO BE
PRESENT AT THE SPECIAL MEETING, YOU ARE REQUESTED TO COMPLETE, DATE, SIGN AND
RETURN THE PROXY CARD IN THE ENCLOSED POSTAGE-PAID ENVELOPE AS SOON AS POSSIBLE.
IF YOU ATTEND THE SPECIAL MEETING, YOU MAY VOTE EITHER IN PERSON OR BY PROXY.
ANY PROXY GIVEN MAY BE REVOKED BY YOU IN WRITING OR IN PERSON AT ANY TIME PRIOR
TO THE EXERCISE THEREOF.
<PAGE>
PROSPECTUS JOINT PROXY STATEMENT
FIDELITY FINANCIAL OF OHIO, INC. FIDELITY FINANCIAL OF OHIO, INC.
and
Common Stock CIRCLE FINANCIAL CORPORATION
(Par Value $.10 Per Share) Special Meetings of Shareholders to be
held on September 10, 1996
This Prospectus/Joint Proxy Statement is being furnished in connection with
the solicitation of proxies by the Board of Directors of Fidelity Financial of
Ohio, Inc. ("FFOH") and the Board of Directors of Circle Financial Corporation
("CFC") to be used at special meetings of shareholders of FFOH and CFC,
respectively, to be held on September 10, 1996 (including any adjournments or
postponements thereof, the "FFOH Special Meeting" and the "CFC Special Meeting,"
respectively, and together the "Special Meetings"). The purpose of the Special
Meetings is to consider and vote upon the adoption of an Amended and Restated
Agreement of Merger, dated as of June 13, 1996, by and among FFOH, Fidelity
Acquisition Corporation ("FAC"), a wholly owned subsidiary of FFOH, and CFC (the
"Agreement"), which amends and restates the Agreement of Merger, dated as of
April 29, 1996, by and between FFOH and CFC, and provides, among other things,
for the merger of CFC with and into FAC (the "Merger"). In addition,
shareholders of FFOH are also being asked to consider and vote upon a proposal
to adopt an amendment to FFOH's Articles of Incorporation in order to increase
the authorized number of shares of common stock and preferred stock of FFOH.
Upon consummation of the Merger, each share of common stock of CFC, par
value $1.00 per share ("CFC Common Stock") (other than (i) any dissenting shares
under Ohio law and (ii) any shares held by FFOH or CFC) shall, by virtue of the
Merger and without any action on the part of the holder thereof, be converted
into the right to receive, subject to certain terms, conditions, limitations and
procedures set forth in the Agreement and described herein, either $38.00 in
cash or a number of shares of common stock of FFOH, par value $.10 per share
("FFOH Common Stock"), which will be determined by applying a formula (the
"Exchange Ratio"), set forth in the Agreement, which is based on the average
market price ("Average FFOH Price") of the FFOH Common Stock over a 20 trading
day period (the "pricing period") ending on the date FFOH and CFC receive all
requisite regulatory approvals and satisfy all applicable waiting periods
related to the Merger. If, over the pricing period, the Average FFOH Price is
equal to or greater than $9.00 but equal to or less than $11.00, shareholders of
CFC electing to receive stock will receive for each share of CFC Common Stock
that number of shares of FFOH Common Stock equal to the ratio determined by
dividing $38.00 by the Average FFOH Price. If the Average FFOH Price is greater
than $11.00, shareholders of CFC will receive 3.45 shares of FFOH Common Stock
for each share of CFC Common Stock, while if the Average FFOH Price is less than
$9.00, they will receive 4.22 shares for each such share. See "Summary," "The
Merger" and Annex I.
If the Average FFOH Price is less than $8.00 per share, CFC may terminate
the Agreement, provided that in the event CFC elects to exercise this
termination right and upon notice, FFOH will have the right to adjust the
Exchange Ratio to an amount equal to 4.75 shares of FFOH Common Stock, in which
case the Agreement will not be terminated. See "Summary," "The Merger" and Annex
I.
This Prospectus/Joint Proxy Statement also constitutes a prospectus of FFOH
relating to the shares of FFOH Common Stock issuable to holders of CFC Common
Stock upon consummation of the Merger.
THE SECURITIES OFFERED HEREBY HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
NOR HAS THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE
SECURITIES COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF
THIS PROSPECTUS/JOINT PROXY STATEMENT. ANY
REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
The date of this Prospectus/Joint Proxy Statement is July 29, 1996.
<PAGE>
AVAILABLE INFORMATION
Each of FFOH and CFC is subject to the informational requirements of the
Securities Exchange Act of 1934, as amended, and the rules and regulations
thereunder (the "Exchange Act"), and, in accordance therewith, files reports,
proxy statements and other information with the Securities and Exchange
Commission (the "SEC"). Reports, proxy statements and other information filed
with the SEC by FFOH and CFC can be inspected and copied at Room 1024 of the
SEC's office at 450 Fifth Street, N.W., Washington, D.C. 20549 and at the SEC's
Regional Offices in New York (7 World Trade Center, Suite 1300, New York, New
York 10048) and Chicago (The Citicorp Center, 500 West Madison Street, Suite
1400, Chicago, Illinois 60661), and copies of such material can be obtained from
the Public Reference Section of the SEC at 450 Fifth Street, N.W., Washington,
D.C. 20549 at prescribed rates. Each of the FFOH Common Stock and the CFC Common
Stock is quoted on the Nasdaq Stock Market's National Market ("NASDAQ").
Consequently, reports, proxy statements and other information relating to FFOH
and CFC also may be inspected at the office of the National Association of
Securities Dealers, Inc. at 1735 K Street, N.W., Washington, D.C. 20006.
This Prospectus/Joint Proxy Statement does not contain all of the
information set forth in the Registration Statement on Form S-4 of which this
Prospectus/Joint Proxy Statement is a part and exhibits thereto (together with
amendments thereto, the "Registration Statement"), which has been filed by FFOH
with the SEC under the Securities Act of 1933, as amended, and the rules and
regulations thereunder (the "Securities Act"), certain portions of which have
been omitted pursuant to the rules and regulations of the SEC and to which
reference is hereby made for further information.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents filed by FFOH (File No. 0-27868) and CFC (File No.
0-19430) with the SEC pursuant to the Exchange Act are hereby incorporated by
reference in this Prospectus/Joint Proxy Statement:
(1) FFOH's Annual Report on Form 10-K for the year ended December 31,
1995; and
(2) FFOH's Quarterly Report on Form 10-Q for the three month period
ended March 31, 1996; and
(3) FFOH's Current Reports on Form 8-K, dated February 29, 1996 and
April 29, 1996; and
(4) The following portions of FFOH's Annual Report to Shareholders for
the year ended December 31, 1995: selected financial and other data (pages
3 and 4); management's discussion and analysis of financial condition and
results of operations (pages 5 through 13); and audited financial
statements and notes thereto (pages 14 through 33).
(5) CFC's Annual Report on Form 10-KSB for the year ended June 30,
1995; and
(6) CFC's Quarterly Reports on Form 10-QSB for the three month periods
ended September 30, 1995, December 31, 1995 and March 31, 1996; and
(7) The following portions of CFC's Annual Report to Shareholders for
the year ended June 30, 1995: selected consolidated financial and other
data (page 4); management's discussion and analysis of financial condition
and results of operations (pages 5 through 14); and audited consolidated
financial statements and notes thereto (pages 15 through 38).
Accompanying this Prospectus/Joint Proxy Statement are FFOH's 1995 Annual
Report to Shareholders and Quarterly Report on Form 10-Q for the quarter ended
March 31, 1996 and CFC's 1995 Annual Report to Shareholders and Quarterly Report
on Form 10-QSB for the quarter ended March 31, 1996.
All documents and reports filed by FFOH and CFC, respectively, pursuant to
Section 13(a), 13(c), 14 or 15(d) of the Exchange Act subsequent to the date
hereof and prior to the Special Meetings also are hereby incorporated herein by
reference into this Prospectus/Joint Proxy Statement and shall be deemed a part
hereof from the date of filing of such documents or reports. Any statement
contained herein, in any supplement hereto or in a document or report
incorporated or deemed to be incorporated by reference herein shall be deemed to
be modified or superseded for purposes of the Registration Statement and this
Prospectus/Joint Proxy Statement to the extent that a statement contained
herein, in any supplement hereto or in any subsequently filed document or report
which also is or is deemed to be incorporated by reference herein modifies or
supersedes such statement. Any such statement so modified or superseded shall
not be deemed, except as so modified or superseded, to constitute a part of the
Registration Statement, this Prospectus/Joint Proxy Statement or any supplement
hereto.
2
<PAGE>
THIS PROSPECTUS/JOINT PROXY STATEMENT INCORPORATES DOCUMENTS OF FFOH AND
CFC BY REFERENCE WHICH ARE NOT PRESENTED HEREIN OR DELIVERED HEREWITH. ALL SUCH
DOCUMENTS WITH RESPECT TO FFOH ARE AVAILABLE WITHOUT CHARGE (OTHER THAN CERTAIN
EXHIBITS TO SUCH DOCUMENTS) UPON WRITTEN OR ORAL REQUEST FROM: FIDELITY
FINANCIAL OF OHIO, INC., 4555 MONTGOMERY ROAD, CINCINNATI, OHIO 45212,
ATTENTION: PAUL D. STAUBACH, SECRETARY (TELEPHONE NUMBER (513) 351-6666). ALL
SUCH DOCUMENTS WITH RESPECT TO CFC ARE AVAILABLE WITHOUT CHARGE (OTHER THAN
CERTAIN EXHIBITS TO SUCH DOCUMENTS) UPON WRITTEN OR ORAL REQUEST FROM: CIRCLE
FINANCIAL CORPORATION, 11100 READING ROAD, SHARONVILLE, OHIO 45241-1904,
ATTENTION: THERESA M. BARLOW, SECRETARY (TELEPHONE NUMBER (513) 563-6231).
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATION OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS/JOINT PROXY
STATEMENT AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATION MUST NOT BE
RELIED UPON AS HAVING BEEN AUTHORIZED BY FFOH OR CFC. NEITHER THE DELIVERY OF
THIS PROSPECTUS/JOINT PROXY STATEMENT NOR ANY DISTRIBUTION OF THE SECURITIES TO
WHICH THIS PROSPECTUS/JOINT PROXY STATEMENT RELATES SHALL, UNDER ANY
CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THERE HAS BEEN NO CHANGE IN THE
AFFAIRS OF FFOH OR CFC SINCE THE DATE HEREOF OR THAT THE INFORMATION CONTAINED
HEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT TO ITS DATE. THIS PROSPECTUS/JOINT
PROXY STATEMENT DOES NOT CONSTITUTE AN OFFER TO SELL OR A SOLICITATION OF AN
OFFER TO BUY ANY SECURITIES OTHER THAN THE SECURITIES TO WHICH IT RELATES OR AN
OFFER TO SELL OR SOLICITATION OF AN OFFER TO BUY SUCH SECURITIES OR THE
SOLICITATION OF A PROXY IN ANY CIRCUMSTANCES IN WHICH SUCH AN OFFER OR
SOLICITATION IS NOT LAWFUL.
3
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
<S> <C>
Available Information.................................................................................................. 2
Incorporation of Certain Documents by Reference........................................................................ 2
Summary................................................................................................................ 6
Market for Common Stock and Dividends.................................................................................. 13
Unaudited Comparative Per Share Data................................................................................... 14
Selected Consolidated Financial Data of FFOH........................................................................... 15
Selected Consolidated Financial Data of CFC............................................................................ 17
General Information.................................................................................................... 18
The Special Meetings................................................................................................... 19
Time, Date and Place................................................................................................. 19
Matters to be Considered............................................................................................. 19
Shares Outstanding and Entitled to Vote; Record Date................................................................. 19
Votes Required....................................................................................................... 19
Voting and Revocation of Proxies..................................................................................... 19
Solicitation of Proxies.............................................................................................. 20
Amendment to Articles of Incorporation................................................................................. 20
The Merger............................................................................................................. 21
General.............................................................................................................. 21
Background of the Merger............................................................................................. 21
Reasons for the Merger; Recommendations of the Boards of Directors................................................... 23
Opinions of Financial Advisors....................................................................................... 24
Effects of the Merger................................................................................................ 31
The Merger Consideration............................................................................................. 31
Conditions to the Merger............................................................................................. 33
Regulatory Approvals................................................................................................. 34
Business Pending the Merger.......................................................................................... 34
No Solicitation...................................................................................................... 36
Effective Time of the Merger; Termination and Amendment.............................................................. 36
Interests of Certain Persons in the Merger........................................................................... 37
Certain Employee Matters............................................................................................. 38
Resale of FFOH Common Stock.......................................................................................... 38
Certain Federal Income Tax Consequences.............................................................................. 39
Accounting Treatment of the Merger................................................................................... 39
Expenses of the Merger............................................................................................... 40
Stock Option Agreements.............................................................................................. 40
Stockholder Agreements............................................................................................... 41
Dissenters' Rights................................................................................................... 42
Management of FFOH after the Merger.................................................................................... 44
Pro Forma Combined Consolidated Financial Information.................................................................. 44
Description of FFOH Capital Stock...................................................................................... 49
FFOH Common Stock.................................................................................................... 49
FFOH Preferred Stock................................................................................................. 50
Other Provisions..................................................................................................... 50
Transfer Agent....................................................................................................... 50
Comparison of the Rights of Shareholders............................................................................... 50
Authorized Capital Stock............................................................................................. 51
Issuance of Capital Stock............................................................................................ 51
Voting Rights........................................................................................................ 51
Payment of Dividends................................................................................................. 51
Board of Directors................................................................................................... 51
Limitations on Liability............................................................................................. 52
Indemnification of Directors, Officers, Employees and Agents......................................................... 52
</TABLE>
4
<PAGE>
<TABLE>
<CAPTION>
PAGE
<S> <C>
Special Meetings of Shareholders..................................................................................... 52
Shareholder Nominations and Proposals................................................................................ 52
Shareholder Action without a Meeting................................................................................. 53
Shareholder's Right to Examine Books and Records..................................................................... 53
Limitations on Acquisitions of Voting Stock and Voting Rights........................................................ 53
Mergers, Consolidations and Sales of Assets.......................................................................... 54
Business Combinations with Interested Shareholders................................................................... 54
Amendment of Governing Instruments................................................................................... 55
Certain Beneficial Owners of FFOH Common Stock......................................................................... 56
Security Ownership of Management..................................................................................... 56
Security Ownership of Certain Beneficial Owners...................................................................... 57
Certain Beneficial Owners of CFC Common Stock.......................................................................... 58
Security Ownership of Management..................................................................................... 58
Security Ownership of Certain Beneficial Owners...................................................................... 59
Legal Opinion.......................................................................................................... 60
Experts................................................................................................................ 60
Proposals for the Annual Meetings...................................................................................... 60
</TABLE>
Annexes:
<TABLE>
<C> <S>
Annex I -- Amended and Restated Agreement of Merger, dated as of June 13, 1996, by and among FFOH, FAC
and CFC, including an Amended and Restated Agreement of Merger, dated as of June 13, 1996, by
and between Fidelity Federal and People's Savings, and attached as Exhibit A thereto
Annex II -- Stock Option Agreement, dated as of April 29, 1996, between CFC (as issuer) and FFOH (as
grantee)
Annex III -- Stock Option Agreement, dated as of April 29, 1996, between FFOH (as issuer) and CFC (as
grantee)
Annex IV -- Stockholder Agreement, dated as of April 29, 1996, between FFOH and certain stockholders of
CFC
Annex V -- Stockholder Agreement, dated as of April 29, 1996, between CFC and certain stockholders of
FFOH
Annex VI -- Opinion of Stifel, Nicolaus & Company, Incorporated
Annex VII -- Opinion of RP Financial, LC.
Annex VIII -- Section 1701.85 of the Ohio General Corporation Law
</TABLE>
Accompanying Documents:
1. FFOH's 1995 Annual Report to Shareholders
2. FFOH's Quarterly Report on Form 10-Q for the quarter ended March 31,
1996
3. CFC's 1995 Annual Report to Shareholders
4. CFC's Quarterly Report on Form 10-QSB for the quarter ended March 31,
1996
5
<PAGE>
SUMMARY
THE FOLLOWING SUMMARY OF CERTAIN INFORMATION CONTAINED ELSEWHERE IN THIS
PROSPECTUS/JOINT PROXY STATEMENT AND IN THE DOCUMENTS INCORPORATED HEREIN BY
REFERENCE IS NOT INTENDED TO BE A COMPLETE STATEMENT OF THE MATTERS DESCRIBED
HEREIN OR THEREIN. REFERENCE IS MADE TO, AND THIS SUMMARY IS QUALIFIED IN ITS
ENTIRETY BY, THE MORE DETAILED INFORMATION CONTAINED ELSEWHERE IN THIS
PROSPECTUS/JOINT PROXY STATEMENT AND IN THE ANNEXES ATTACHED HERETO, INCLUDING
THE AGREEMENT, A COPY OF WHICH IS ATTACHED HERETO AS ANNEX I, AND THE
INFORMATION INCORPORATED HEREIN BY REFERENCE. SHAREHOLDERS ARE URGED TO
CAREFULLY READ ALL SUCH INFORMATION.
THE SPECIAL MEETINGS
The FFOH Special Meeting will be held at 2:00 p.m., Eastern Time, on
September 10, 1996 at the Quality Hotel Central located at 4747 Montgomery Road,
Cincinnati, Ohio, and the CFC Special Meeting will be held at the same time and
on the same date at CFC's main office located at 11100 Reading Road,
Sharonville, Ohio. Only the holders of record of outstanding shares of FFOH
Common Stock and CFC Common Stock at the close of business on July 19, 1996 (the
"Record Date") are entitled to notice of and to vote at the FFOH Special Meeting
and the CFC Special Meeting, respectively. On the Record Date, 4,073,589 shares
of FFOH Common Stock and 715,033 shares of CFC Common Stock were outstanding and
entitled to be voted at the FFOH Special Meeting and the CFC Special Meeting,
respectively. Each share of FFOH Common Stock and each share of CFC Common Stock
is entitled to one vote upon each matter properly submitted at the FFOH Special
Meeting and the CFC Special Meeting, respectively.
At the Special Meetings, shareholders of FFOH and CFC will consider and
vote upon a proposal to adopt the Agreement. In addition, shareholders of FFOH
will also consider and vote upon a proposal to adopt an amendment to FFOH's
Articles of Incorporation in order to increase the authorized number of shares
of FFOH Common Stock and FFOH preferred stock, par value $.10 per share ("FFOH
Preferred Stock"). Subject to the presence of a quorum at each of the Special
Meetings, a majority of the votes cast at the FFOH Special Meeting by holders of
FFOH Common Stock, voting in person or by proxy, is necessary to adopt the
Agreement on behalf of FFOH, and the affirmative vote of the holders of a
majority of the outstanding shares of FFOH Common Stock, voting in person or by
proxy, is necessary to adopt the amendment to FFOH's Articles of Incorporation.
The affirmative vote of the holders of a majority of the outstanding shares of
CFC Common Stock, voting in person or by proxy, is necessary to adopt the
Agreement on behalf of CFC. Because adoption of the Agreement on behalf of CFC
and the adoption of the amendment to FFOH's Articles of Incorporation will be
based on the number of shares outstanding, rather than the number of shares
voting, the failure to vote, either in person or by proxy, or the abstention
from voting, by a shareholder of FFOH and/or CFC will have the same effect as a
vote against such proposals. Under applicable stock exchange rules, brokers who
hold shares in street name for customers are prohibited from giving a proxy to
vote such customers' shares with respect to adoption of the Agreement and the
amendment to FFOH's Articles of Incorporation in the absence of specific
instructions from such customers. Accordingly, such broker nonvotes also will
have the same effect as votes against adoption of such proposals.
As of the Record Date, the directors and executive officers of FFOH and
their affiliates in the aggregate beneficially owned 263,218 shares, or 6.46%,
of the outstanding FFOH Common Stock, excluding shares subject to options. In
connection with the execution of the Agreement, CFC and certain shareholders of
FFOH entered into an agreement pursuant to which, among other things, such
shareholders agreed to vote their shares of FFOH Common Stock (which amount to
5.62% of the shares of such stock outstanding) in favor of the Agreement. See
"Certain Beneficial Owners of FFOH Common Stock" and "The Merger -- Stockholder
Agreements."
As of the Record Date, the directors and executive officers of CFC and
their affiliates in the aggregate beneficially owned 155,458 shares, or 21.74%,
of the outstanding CFC Common Stock, excluding shares subject to options. In
connection with the execution of the Agreement, FFOH and certain shareholders of
CFC entered into an agreement pursuant to which, among other things, such
shareholders agreed to vote their shares of CFC Common Stock (which amount to
21.74% of the shares of such stock outstanding) in favor of the Agreement. See
"Certain Beneficial Owners of CFC Stock" and "The Merger -- Stockholder
Agreements."
PARTIES TO THE MERGER
FFOH. FFOH is an Ohio corporation and a unitary savings and loan holding
company registered under the Home Owners' Loan Act, as amended (the "HOLA").
FFOH is the parent holding company of Fidelity Federal Savings Bank, a federally
chartered savings bank ("Fidelity Federal"). Fidelity Federal conducts business
through three full-service offices
6
<PAGE>
located in the Cincinnati, Ohio metropolitan area. The deposits of Fidelity
Federal are insured to the maximum extent provided by law by the Savings
Association Insurance Fund ("SAIF"), which is administered by the Federal
Deposit Insurance Corporation ("FDIC"). The principal business of Fidelity
Federal consists of attracting retail deposits from the general public and using
such deposits and other funds to originate loans secured by first mortgage liens
on existing single-family (one-to-four units) residential properties located
primarily in southwestern Ohio. To a lesser extent, Fidelity Federal originates
loans secured by existing multi-family residential and nonresidential real
estate as well as construction and consumer loans. Fidelity Federal also invests
in U.S. Government and federal agency obligations and mortgage-backed securities
which are insured or guaranteed by federal agencies. FFOH's principal executive
offices are located at 4555 Montgomery Road, Cincinnati, Ohio 45212, and its
telephone number is (513) 351-6666. At March 31, 1996, Fidelity Federal had, on
a consolidated basis, total assets of $249.4 million, total liabilities of
$198.6 million, including deposits of $182.2 million, and stockholders' equity
of $50.8 million.
For additional information concerning FFOH, its business, financial
condition and results of operations, see "Available Information," "Incorporation
of Certain Documents by Reference" and "Selected Consolidated Financial Data of
FFOH."
FAC. FAC is a newly formed Ohio corporation which is a wholly owned
subsidiary of FFOH. To date, FAC has not conducted any operations or activities
and was incorporated in order to facilitate the proposed acquisition of CFC.
Upon the receipt of all requisite regulatory and corporate approvals and
immediately prior to the Merger, FFOH will contribute all of the outstanding
capital stock of Fidelity Federal to FAC such that Fidelity Federal will be a
wholly owned subsidiary of FAC and FAC will be a unitary savings and loan
holding company registered under the HOLA. FAC's principal executive offices are
located at 4555 Montgomery Road, Cincinnati, Ohio 45212, and its telephone
number is (513) 351-6666.
CFC. CFC is an Ohio corporation and a unitary savings and loan holding
company registered under the HOLA. CFC is the parent holding company of People's
Savings Association, an Ohio-chartered savings association ("People's Savings").
People's Savings conducts business through seven full-service offices located in
the Cincinnati, Ohio metropolitan area. The deposits of People's Savings are
insured to the maximum extent provided by law by the SAIF, which is administered
by the FDIC. The principal business of People's Savings consists of attracting
retail deposits from the general public and using such deposits and other funds
to originate loans secured by first mortgage liens on existing single-family
residential properties located primarily in southwestern Ohio. To a lesser
extent, People's Savings originates loans secured by existing multi-family
residential and commercial real estate as well as construction (including
acquisition and development loans and land loans) and consumer and other loans.
People's Savings also invests in U.S. Government and federal agency obligations,
corporate notes and mortgage-backed securities, a substantial portion of which
are insured or guaranteed by federal agencies. CFC's principal executive offices
are located at 11100 Reading Road, Sharonville, Ohio 45241, and its telephone
number is (513) 563-6231. At March 31, 1996, People's Savings had, on a
consolidated basis, total assets of $229.4 million, total liabilities of $205.0
million, including deposits of $201.3 million, and stockholders' equity of $24.4
million.
For additional information concerning CFC, its business, financial
condition and results of operations, see "Available Information," "Incorporation
of Certain Documents by Reference" and "Selected Consolidated Financial Data of
CFC."
THE MERGER AND THE BANK MERGER
In accordance with the terms of and subject to the conditions set forth in
the Agreement, CFC will be merged with and into FAC, a wholly owned subsidiary
of FFOH, with FAC as the surviving corporation of the Merger. The Agreement
provides that at the effective time of the Merger, each outstanding share of CFC
Common Stock (other than (i) any dissenting shares under Ohio law and (ii) any
shares held by either FFOH or CFC) will be converted into the right to receive,
subject to certain terms, conditions, limitations and procedures set forth in
the Agreement and described herein, either $38.00 in cash or a number of shares
of FFOH Common Stock (the "Merger Consideration") which will be determined by
applying a formula (the "Exchange Ratio"), set forth in the Agreement and
described herein. If, over the pricing period, the Average FFOH Price is equal
to or greater than $9.00 but equal to or less than $11.00, shareholders of CFC
electing to receive stock will receive for each share of CFC Common Stock that
number of shares of FFOH Common Stock equal to the ratio determined by dividing
$38.00 by the Average FFOH Price. If the Average FFOH Price is greater than
$11.00, shareholders of CFC will receive 3.45 shares of FFOH Common Stock for
each share of CFC Common Stock, while if the Average FFOH Price is less than
$9.00, they will receive 4.22 shares for each such share. See "The Merger."
If the Average FFOH Price is less than $8.00 per share, CFC may terminate
the Agreement, provided that in the event CFC elects to exercise this
termination right and upon notice, FFOH will have the right to adjust the
Exchange Ratio to an amount equal to 4.75 shares of FFOH Common Stock, in which
case the Agreement will not be terminated.
7
<PAGE>
In connection with the execution of the Agreement, Fidelity Federal and
People's Savings entered into an Amended and Restated Agreement of Merger, dated
as of June 13, 1996 (the "Bank Agreement"), which amends and restates the
Agreement of Merger, dated as of April 29, 1996, by and between Fidelity Federal
and People's Savings. The Bank Agreement sets forth the terms and conditions,
which include consummation of the Merger, pursuant to which People's Savings
will merge with and into Fidelity Federal substantially concurrently with the
Merger (the "Bank Merger").
RECOMMENDATIONS OF THE BOARDS OF DIRECTORS OF FFOH AND CFC
FFOH. The Board of Directors of FFOH (the "FFOH Board") has determined the
Merger to be in the best interests of FFOH and its shareholders and has
unanimously approved the Agreement and the transactions contemplated thereby,
including the Merger. ACCORDINGLY, THE FFOH BOARD UNANIMOUSLY RECOMMENDS THAT
SHAREHOLDERS OF FFOH VOTE "FOR" ADOPTION OF THE AGREEMENT.
THE FFOH BOARD ALSO UNANIMOUSLY RECOMMENDS THAT SHAREHOLDERS OF FFOH VOTE
"FOR" THE PROPOSAL TO AMEND FFOH'S ARTICLES OF INCORPORATION.
CFC. The Board of Directors of CFC (the "CFC Board") has determined the
Merger to be in the best interests of CFC and its shareholders and has
unanimously approved the Agreement and the transactions contemplated thereby,
including the Merger. ACCORDINGLY, THE CFC BOARD UNANIMOUSLY RECOMMENDS THAT
SHAREHOLDERS VOTE "FOR" ADOPTION OF THE AGREEMENT.
SEE "THE MERGER -- REASONS FOR THE MERGER; RECOMMENDATIONS OF THE BOARDS OF
DIRECTORS."
OPINIONS OF FINANCIAL ADVISORS
Stifel, Nicolaus & Company, Incorporated ("Stifel Nicolaus"), CFC's
financial advisor, has delivered to the CFC Board its oral opinion of April 29,
1996, and its written opinion dated the date of this Prospectus/Joint Proxy
Statement, each to the effect that, as of the date of such opinions, the Merger
Consideration was fair, from a financial point of view, to the holders of CFC
Common Stock. RP Financial, LC. ("RP Financial"), FFOH's financial advisor, has
delivered to the FFOH Board its written opinion dated as of April 29, 1996, and
its written opinion dated the date of this Prospectus/Joint Proxy Statement,
each to the effect that, as of the date of such opinions, the Merger
Consideration was fair, from a financial point of view, to the holders of FFOH
Common Stock.
For information on the assumptions made, matters considered and limits of
the reviews by Stifel Nicolaus and RP Financial, see "The Merger -- Opinions of
Financial Advisors." Shareholders are urged to read in their entirety the
opinions of Stifel, Nicolaus and RP Financial, dated as of the date of this
Prospectus/Joint Proxy Statement, which are attached as Annexes VI and VII
hereto, respectively.
REGULATORY APPROVALS
Consummation of the Merger is subject to the prior receipt of all required
approvals and consents of the Merger and the Bank Merger by all applicable
federal and state regulatory authorities, including the Office of Thrift
Supervision ("OTS") and the Ohio Department of Commerce, Division of Financial
Institutions ("Department"). Applications have been filed with such regulatory
authorities for approval of the Merger and the Bank Merger. There can be no
assurance that the necessary regulatory approvals will be obtained or as to the
timing or conditions of such approvals. See "The Merger -- Regulatory
Approvals."
CONDITIONS TO THE MERGER
The obligations of FFOH and CFC to consummate the Merger are subject to,
among other things, the following conditions: (i) all corporate action
(including without limitation approval by the requisite votes of the respective
shareholders of FFOH, FAC and CFC) necessary to authorize the execution and
delivery of the Agreement and the Bank Agreement and consummation of the
transaction contemplated thereby shall have been duly and validly taken; (ii)
the receipt of all necessary regulatory approvals and consents required to
consummate the Merger and the Bank Merger by any governmental authority, and the
expiration of all notice periods and waiting periods with respect thereto,
provided, however, that no required approval or consent shall include any
condition or requirement that, individually or in the aggregate, would result in
a material adverse effect on the financial condition, results of operations or
business of FFOH on a consolidated basis or would so materially reduce the
economic or business benefits of the transactions contemplated by the Agreement
to FFOH that had such condition or requirement been known FFOH, in its
reasonable judgment, would not have entered into the Agreement; (iii) none of
8
<PAGE>
FFOH or CFC or their respective subsidiaries shall be subject to any statute,
rule, regulation, injunction or other order or decree which prohibits, restricts
or makes illegal the consummation of the Merger or the Bank Merger or any of the
other transactions contemplated thereby; (iv) the Registration Statement shall
have become effective under the Securities Act, and FFOH shall have received all
permits, authorizations or exemptions necessary under all state securities laws
to issue FFOH Common Stock in connection with the Merger, and neither the
Registration Statement nor any such permit, authorization or exemption shall be
subject to a stop order or threatened stop order by any governmental authority;
(v) the shares of FFOH Common Stock to be issued in connection with the Merger
shall have been approved for quotation on NASDAQ; and (vi) each of FFOH and CFC
shall have received an opinion to the effect that the Merger qualifies as a
reorganization within the meaning of Section 368(a) of the Internal Revenue Code
of 1986, as amended (the "Code"), and with respect to certain other related
federal income tax considerations. In addition, the obligation of each of FFOH
and CFC to consummate the Merger are subject to the accuracy of the other
party's representations and warranties as of certain dates, the performance by
the other party of its obligations under the Agreement in all material respects
and the other party's delivery of an officer's certificate and legal opinions
covering certain matters. Furthermore, the obligations of FFOH to consummate the
Merger are conditioned on holders of not more than 10% of the outstanding CFC
Common Stock electing to exercise dissenters' rights. See "The
Merger -- Conditions to the Merger." Substantially all of the conditions to
consummation of the Merger and the Bank Merger (except for required shareholder
and regulatory approvals) may be waived at any time by the party for whose
benefit they were created, and the Agreement may be amended at any time by
written agreement of the parties, except that no waiver or amendment occurring
after approval of the Agreement by the shareholders of FFOH or CFC shall change
the amount or form of the consideration which CFC's shareholders are entitled to
receive in the Merger or otherwise materially adversely affect such shareholders
without the approval of the shareholders who would be so affected. If the Merger
is not consummated on or before April 29, 1997, FFOH or CFC may terminate the
Agreement.
EFFECTIVE TIME OF THE MERGER
The Merger shall become effective upon the filing of a certificate of
merger with the Secretary of State of the State of Ohio, unless a later date and
time is specified as the effective time in such certificate of merger. The
effective time of the Merger (the "Effective Time") shall be as set forth in
such certificate of merger, which will be filed only after the receipt of all
requisite regulatory approvals of the Merger and the Bank Merger, approval of
the Agreement by the requisite votes of the shareholders of FFOH and CFC and the
satisfaction or waiver of all other conditions to the Merger and the Bank Merger
set forth in the Agreement. In addition, the Agreement may be terminated, either
before or after approval by shareholders of FFOH or CFC, under certain
circumstances. See "The Merger -Effective Time of the Merger; Termination and
Amendment."
PRICE-BASED TERMINATION; POSSIBLE ADJUSTMENT OF EXCHANGE RATIO
If the Average FFOH Price is less than $8.00 per share, CFC may terminate
the Agreement, provided that in the event CFC elects to exercise this
termination right and upon notice, FFOH will have the right to adjust the
Exchange Ratio to an amount equal to 4.75 shares of FFOH Common Stock, in which
case the Agreement will not be terminated. See "The Merger -- Effective Time of
the Merger; Termination and Amendment."
CERTAIN FEDERAL INCOME TAX CONSEQUENCES
Consummation of the Merger is conditioned upon delivery of an opinion of
counsel to both FFOH and CFC to the effect that the Merger (i) will constitute a
reorganization within the meaning of Section 368(a) of the Code and that no
taxable gain will be recognized by FFOH, FAC or CFC in connection with the
Merger; (ii) no gain or loss will be recognized by the shareholders of CFC upon
the exchange of their shares of CFC Common Stock solely for shares of FFOH
Common Stock, except for cash received in lieu of fractional shares; and (iii) a
CFC shareholder who exchanges shares of CFC Common stock for cash will recognize
gain, but not in excess of the amount of cash received. The opinion of counsel
is summarized under "The Merger -- Certain Federal Income Tax Consequences" and
is filed as an exhibit to the Registration Statement of which this
Prospectus/Joint Proxy Statement is a part. See "The Merger -- Certain Federal
Income Tax Consequences."
EACH SHAREHOLDER IS URGED TO CONSULT HIS OR HER OWN TAX ADVISOR CONCERNING
THE FEDERAL AND ANY APPLICABLE FOREIGN, STATE AND LOCAL INCOME TAX AND OTHER TAX
CONSEQUENCES OF THE MERGER.
ACCOUNTING TREATMENT OF THE MERGER
The Merger will be accounted for as a purchase for accounting purposes. See
"The Merger -- Accounting Treatment of the Merger."
9
<PAGE>
INTERESTS OF CERTAIN PERSONS IN THE MERGER
Pursuant to the Agreement, FFOH agreed (i) to take such action as is
necessary to cause Donald H. Rolf, Jr., Chairman and President of CFC, Joseph D.
Hughes, Senior Vice President and a director of CFC, and Thomas N. Spaeth, a
director of CFC, to be elected as directors of FFOH as of the Effective Time and
for terms expiring at FFOH's 1999 annual meeting of shareholders; (ii) that
effective as of the Effective Time, Paul D. Staubach shall resign as a director
of Fidelity Federal, and that the resulting vacancy shall be filled by Donald H.
Rolf, Jr.; (iii) to cause FFOH and Fidelity Federal to elect Mr. Rolf as
Chairman of such entities pursuant to the terms of an employment agreement, in a
form previously agreed to by FFOH, CFC and Mr. Rolf, to be entered into as of
the Effective Time; (iv) to cause FFOH and Fidelity Federal to elect Joseph D.
Hughes as Executive Vice President and Chief Lending Officer of such entities
pursuant to the terms of an employment agreement, in a form previously agreed to
by FFOH, CFC and Mr. Hughes, to be entered into as of the Effective Time; (v) to
cause FFOH and Fidelity Federal to enter into severance agreements, each in a
form previously agreed to by FFOH and CFC, with certain other specified officers
of CFC, effective as of the Effective Time; (vi) to assume and satisfy CFC's
obligations under an amended employment agreement with a former officer of
People's Savings; and (vii) to continue rights to indemnification and liability
insurance for directors and officers of CFC and People's Savings for specified
periods. Other than as set forth above, no director or executive officer of CFC
has any direct or indirect material interest in the Merger, except insofar as
ownership of CFC Common Stock and existing options to purchase such stock might
be deemed such an interest. See "The Merger -- Interests of Certain Persons in
the Merger."
DESCRIPTION OF FFOH COMMON STOCK
Subject to the rights of the holders of any class of Preferred Stock of
FFOH if and when outstanding, the holders of FFOH Common Stock possess exclusive
voting rights in FFOH, are entitled to such dividends as may be declared from
time to time by the Board of Directors of FFOH and would be entitled to receive
all assets of FFOH available for distribution in the event of any liquidation,
dissolution or winding up of FFOH. Holders of FFOH Common Stock do not have any
preemptive rights with respect to any shares which may be issued by FFOH in the
future. Each share of FFOH Common Stock offered hereby will be fully paid and
non-assessable. See "Description of FFOH Capital Stock."
DIFFERENCES IN SHAREHOLDERS' RIGHTS
Shareholders of CFC who receive FFOH Common Stock in the Merger will become
shareholders of FFOH and their rights as shareholders of FFOH will be governed
by FFOH's Articles of Incorporation, Code of Regulations and Bylaws and the Ohio
General Corporation Law ("OGCL"). The rights of shareholders of FFOH differ in
certain respects from the rights of shareholders of CFC. See "Comparison of the
Rights of Shareholders."
RESALE OF FFOH COMMON STOCK
The shares of FFOH Common Stock to be issued in connection with the Merger
will be freely tradeable by the holders of such shares, except for those shares
held by persons who may be deemed to be "affiliates" of FFOH or CFC under
applicable federal securities laws. See "The Merger -- Resale of FFOH Common
Stock."
STOCK OPTION AGREEMENTS
As an inducement and a condition to FFOH's entering into the Agreement,
FFOH and CFC also entered into a Stock Option Agreement, dated as of April 29,
1996 (the "CFC Option Agreement"), pursuant to which CFC granted FFOH an option
(the "CFC Option"), exercisable upon the occurrence of certain events (none of
which has occurred as of the date hereof to the best of the knowledge of FFOH
and CFC), to purchase up to 140,911 shares of CFC Common Stock, representing
19.9% of the outstanding shares of CFC Common Stock, at a price of $30.00 per
share, subject to adjustment in certain circumstances and termination within
certain periods. As an inducement and a condition to CFC's entering into the
Agreement, FFOH and CFC also entered into a Stock Option Agreement, dated as of
April 29, 1996 (the "FFOH Option Agreement," and together with the CFC Option
Agreement, the "Stock Option Agreements"), pursuant to which FFOH granted CFC an
option (the "FFOH Option"), exercisable upon the occurrence of certain events
(none of which has occurred as of the date hereof to the best of the knowledge
of FFOH and CFC), to purchase up to 403,285 shares of FFOH Common Stock,
representing approximately 9.9% of the outstanding shares of FFOH Common Stock,
at a price of $11.00 per share, subject to adjustment in certain circumstances
and termination within certain periods. The Stock Option Agreements are intended
to increase the likelihood that the Merger will be consummated in accordance
with the terms of the Agreement and may have the effect of discouraging
competing offers to the Merger. Copies of the CFC Option Agreement and
the FFOH Option
10
<PAGE>
Agreement are included as Annexes II and III to this Prospectus/Joint Proxy
Statement, respectively, and reference is made thereto for the complete terms
thereof. See "The Merger -- Stock Option Agreements."
STOCKHOLDER AGREEMENTS
In connection with the execution of the Agreement, FFOH entered into a
Stockholder Agreement, dated as of April 29, 1996, with ten shareholders of CFC
solely in their capacities as such (the "CFC Stockholder Agreement"). Pursuant
to the CFC Stockholder Agreement, a copy of which is included as Annex IV
hereto, each of such shareholders agreed, among other things, to vote his or her
shares of CFC Common Stock in favor of the Agreement. In addition, in connection
with the execution of the Agreement, CFC entered into a Stockholder Agreement,
dated as of April 29, 1996, with ten shareholders of FFOH solely in their
capacities as such (the "FFOH Stockholder Agreement.") Pursuant to the FFOH
Stockholder Agreement, a copy of which is included as Annex V hereto, each of
such shareholders agreed, among other things, to vote his or her shares of FFOH
Common Stock in favor of the Agreement. See "The Merger -- Stockholder
Agreements."
DISSENTERS' RIGHTS
Pursuant to Section 1701.85 of the OGCL, holders of CFC Common Stock who
(i) file with such respective company not later than ten days after shareholders
vote on the Agreement at the respective Special Meetings, a written demand for
payment to them of the fair cash value of their shares if the Merger is effected
and (ii) have not voted in favor of the Agreement, will be entitled to be paid
the fair cash value of their shares as agreed upon, or if the fair value remains
unsettled, as determined by an Ohio court, provided that the Merger is
consummated and such shareholders properly comply with certain statutory
procedures. The written demand required to be delivered to CFC by a dissenting
shareholder is in addition to and separate from any proxy or vote against the
Merger. The further procedures which must be followed in connection with the
exercise of dissenters' rights by dissenting shareholders are described herein
under "The Merger -- Dissenters' Rights" and in Section 1701.85 of the OGCL, a
copy of which is attached as Annex VIII to this Prospectus/Joint Proxy
Statement. Failure to take any step in connection with the exercise of such
rights may result in termination or waiver thereof.
Dissenters' Rights are not available to holders of FFOH Common Stock
regardless of how they vote on the adoption of the Agreement.
PRO FORMA COMBINED CONSOLIDATED FINANCIAL INFORMATION
The unaudited pro forma consolidated condensed combined summary financial
information set forth below gives effect to the Merger under the purchase
accounting method. The pro forma consolidated condensed combined summary
statements of earnings treat the Merger as if it had been consummated at the
beginning of the respective periods, and the pro forma consolidated condensed
combined summary statement of financial condition treats the Merger as if it had
been consummated on March 31, 1996. The pro forma combined per share data gives
effect to an assumed Exchange Ratio of 3.80 shares (which assumes on Average
FFOH Price of $10.00 per share) and assumes that none of the outstanding stock
options to purchase CFC Common Stock are exercised. For a description of the
bases for the pro forma adjustments, see "Pro Forma Combined Consolidated
Financial Information."
This pro forma financial information is presented for illustrative purposes
only and is not necessarily indicative of the operating results or financial
position that would have occurred if the Merger had been consummated at the
dates assumed for purposes hereof, nor is it necessarily indicative of future
operating results or financial position. See "Pro Forma Combined Consolidated
Financial Information."
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<TABLE>
<CAPTION>
BALANCE SHEET DATA AS OF MARCH 31, 1996
PRO FORMA
ACQUISITION CONSOLIDATED
ADJUSTMENTS CONDENSED
FFOH CFC DR. (CR.) COMBINED
<S> <C> <C> <C> <C>
(IN THOUSANDS)
Cash and cash equivalents (1)............................................. $ 18,071 $ 23,245 $ (13,351) $ 27,965
Investment and mortgage-backed securities held to maturity and available
for sale (2)............................................................ 39,829 52,359 353 92,541
Loans receivable, net (3)................................................. 187,109 144,903 (358) 331,654
Total assets.............................................................. 249,366 229,406 (9,157) 469,615
Savings deposits.......................................................... 182,217 201,303 (728) 384,248
Borrowed funds............................................................ 14,041 2,500 -- 16,541
Total liabilities......................................................... 198,586 204,969 (480) 404,035
Retained earnings......................................................... 25,889 18,798 18,798 25,889
Total stockholders' equity................................................ 50,780 24,437 9,637 65,580
</TABLE>
(1) Includes interest-bearing deposits in other institutions.
(2) Includes Federal Home Loan Bank stock.
(3) Includes loans held for sale.
<TABLE>
<CAPTION>
STATEMENT OF EARNINGS FOR THE
THREE MONTHS ENDED MARCH 31, 1996
PRO FORMA
ACQUISITION CONSOLIDATED
ADJUSTMENTS CONDENSED
FFOH CFC DR. (CR.) COMBINED
<S> <C> <C> <C> <C>
(IN THOUSANDS, EXCEPT SHARES AND PER SHARE DATA)
Interest income......................................................... $ 4,508 $ 3,891 $ 17 $ 8,382
Interest expense........................................................ 2,649 2,338 (61) 4,926
Net interest income..................................................... 1,859 1,553 (44) 3,456
Earnings before income taxes............................................ 837 431 (77) 1,345
Net earnings............................................................ 555 285 (27) 867
Earnings per share:
Primary............................................................... $ 0.14 $ 0.39 $ -- $ 0.16
Fully diluted......................................................... $ 0.14 $ 0.39 $ -- $ 0.16
Weighted average shares and share equivalents outstanding:
Primary............................................................... 3,900,014 724,857 -- 5,379,935
Fully diluted......................................................... 3,904,619 724,857 -- 5,384,540
</TABLE>
<TABLE>
<CAPTION>
STATEMENT OF EARNINGS FOR THE
YEAR ENDED DECEMBER 31, 1995
PRO FORMA
ACQUISITION CONSOLIDATED
ADJUSTMENTS CONDENSED
FFOH CFC DR. (CR.) COMBINED
<S> <C> <C> <C> <C>
(IN THOUSANDS, EXCEPT SHARES AND PER SHARE DATA)
Interest income......................................................... $ 17,001 $ 13,627 $(274) $ 30,902
Interest expense........................................................ 10,167 8,055 (243) 17,979
Net interest income..................................................... 6,834 5,572 (517) 12,923
Earnings before income taxes............................................ 2,733 1,659 (494) 4,886
Net earnings............................................................ 1,814 1,061 (231) 3,106
Earnings per share:
Primary............................................................... $ 0.44 $ 1.46 $ -- $ 0.56
Fully diluted......................................................... $ 0.44 $ 1.46 $ -- $ 0.56
Weighted average shares and share equivalents outstanding:
Primary............................................................... 4,077,750 727,455 -- 5,557,671
Fully diluted......................................................... 4,090,062 727,455 -- 5,569,983
</TABLE>
12
<PAGE>
MARKET FOR COMMON STOCK AND DIVIDENDS
Each of the FFOH Common Stock and the CFC Common Stock is listed and traded
in the over-the-counter market on NASDAQ under the symbol "FFOH" and "CRCL,"
respectively. Application will be made to list the FFOH Common Stock to be
issued in connection with the Merger on NASDAQ. As of the Record Date, there
were 4,073,589 shares of FFOH Common Stock outstanding, which were held by
approximately 1,000 shareholders of record, and there were 715,033 shares of CFC
Common Stock outstanding, which were held by approximately 300 shareholders of
record. Such numbers of shareholders do not reflect the number of individuals or
institutional investors holding stock in nominee name through banks, brokerage
firms and others.
The following table sets forth during the periods indicated the high and
low prices of the FFOH Common Stock and the CFC Common Stock as reported on
NASDAQ and the dividends declared per share of FFOH Common Stock and CFC Common
Stock.
<TABLE>
<CAPTION>
FFOH
CFC
DIVIDENDS
DECLARED DIVIDENDS
MARKET PRICE(1) PER MARKET PRICE DECLARED
1996 HIGH LOW SHARE(2) HIGH LOW PER SHARE
<S> <C> <C> <C> <C> <C> <C>
First Quarter................................................ $11.000 $9.7500 $.094 $29.00 $25.00 $ .17
Second Quarter............................................... 10.625 $9.6250 .050 36.00 25.00 .17
Third Quarter (through July 8, 1996)......................... 10.125 $9.8125 -- 35.00 35.00 --
1995
First Quarter................................................ -- -- .075 27.50 22.00 .15
Second Quarter............................................... -- -- .075 27.50 25.00 .15
Third Quarter................................................ -- -- .075 30.50 27.00 .15
Fourth Quarter............................................... -- -- .075 29.50 27.00 .15
1994
First Quarter................................................ -- -- .058 26.00 23.00 .12
Second Quarter............................................... -- -- .058 26.00 22.00 .12
Third Quarter................................................ -- -- .058 28.50 24.00 .12
Fourth Quarter............................................... -- -- .067 27.50 22.38 .12
</TABLE>
(1) The FFOH Common Stock has been traded on the NASDAQ since March 4, 1996.
Prior to March 4, 1996, the common stock of Fidelity Federal was traded in
the over-the-counter market; however, there was not an active and liquid
market for Fidelity Federal's common stock.
(2) As adjusted to reflect subsequent stock splits and the exchange ratio with
respect to Fidelity Federal's reorganization into the stock holding company
form of organization on March 4, 1996 (whereby each share of Fidelity
Federal common stock held by public shareholders of Fidelity Federal was
converted into 2.25 shares of FFOH Common Stock).
Set forth below is information regarding the price per share of FFOH Common
Stock and CFC Common Stock on April 29, 1996, the last trading day preceding
public announcement of the Agreement following the close of business on that
date. The historical prices are as reported on NASDAQ.
<TABLE>
<CAPTION>
HISTORICAL MARKET
VALUE PER SHARE EQUIVALENT MARKET VALUE
DATE FFOH CFC PER SHARE OF CFC
<S> <C> <C> <C>
April 29, 1996................................................................... $10.625 $27.50 $38.00
</TABLE>
Shareholders are advised to obtain current market quotations for the FFOH
Common Stock and the CFC Common Stock. The market price of the FFOH Common Stock
at the Effective Time may be higher or lower than the market price at the time
the Agreement was executed, at the date of mailing of this Prospectus/Joint
Proxy Statement or at the time of the Special Meetings.
13
<PAGE>
UNAUDITED COMPARATIVE PER SHARE DATA
Set forth below is selected earnings, book value and cash dividends
declared per common shares data on an historical basis for FFOH and CFC, on a
pro forma combined basis for FFOH and on a pro forma equivalent basis for CFC.
The pro forma combined per share information assumes an Exchange Ratio of 3.80
shares in the Merger and assumes that none of the outstanding options to
purchase CFC Common Stock are exercised. In addition, per share information at
and for the year ended December 31, 1995 with respect to FFOH has been adjusted
to reflect the exchange ratio with respect to Fidelity Federal's reorganization
into the stock holding company form of organization. The information set forth
below should be read in conjunction with the respective financial statements of
FFOH and CFC incorporated by reference in this Prospectus/Joint Proxy Statement
and with the unaudited pro forma combined consolidated financial information
included under "Pro Forma Combined Consolidated Financial Information." Also see
"Selected Consolidated Financial Data of FFOH" and "Selected Consolidated
Financial Data of CFC."
<TABLE>
<CAPTION>
FFOH COMMON STOCK CFC COMMON STOCK
PRO FORMA PRO FORMA
HISTORICAL COMBINED HISTORICAL(4) EQUIVALENT
<S> <C> <C> <C> <C>
Net earnings per share(1):
Three months ended March 31, 1996......................................... $ 0.14 $ 0.16 $ 0.39 $ 0.61
Year ended December 31, 1995.............................................. 0.44 0.56 1.46 2.13
Dividends declared per share(2):
Three months ended March 31, 1996......................................... 0.09 0.09 0.17 0.34
Year ended December 31, 1995.............................................. 0.30 0.30 0.60 1.14
Book value per share(3):
March 31, 1996............................................................ 12.47 11.81 34.51 44.88
December 31, 1995......................................................... 7.39 8.05 34.30 30.59
</TABLE>
(1) The pro forma combined net earnings per share of FFOH Common Stock are based
upon the combined historical net earnings for FFOH and CFC, divided by the
pro forma combined average number of shares of FFOH Common Stock
outstanding. The pro forma equivalent net earnings per share of CFC Common
Stock represents the pro forma combined net earnings per share of FFOH
Common Stock multiplied by an assumed Exchange Ratio of 3.80 shares.
(2) The pro forma combined dividends declared per share of FFOH Common Stock is
determined by dividing FFOH and CFC combined cash dividends declared by the
pro forma combined average number of shares of FFOH Common Stock
outstanding. The pro forma equivalent dividends declared per share of CFC
Common Stock represent the FFOH pro forma combined dividend rates multiplied
by an assumed Exchange Ratio of 3.80 shares. The current annualized dividend
rate per share of FFOH Common Stock, based upon the most recent quarterly
dividend rate of $0.05 per share payable on July 3, 1996, would be $0.20. On
a pro forma equivalent basis per share of CFC Common Stock, such current
annualized FFOH dividend per share of CFC Common Stock would be $0.89, based
on an assumed Exchange Ratio of 3.80 shares.
(3) The pro forma combined book value per share of FFOH Common Stock is based
upon the historical total stockholder's equity for FFOH and CFC less
acquisition adjustments, divided by the pro forma combined period-end shares
of FFOH Common Stock outstanding. The pro forma equivalent book value per
share of CFC Common Stock represents the pro forma combined book value per
share of FFOH Common Stock multiplied by an assumed Exchange Ratio of 3.80
shares.
(4) FFOH's fiscal year end is December 31 while CFC's fiscal year end is June
30. For purposes of the table above, CFC financial data is presented
consistent with the fiscal year end of FFOH.
14
<PAGE>
SELECTED CONSOLIDATED FINANCIAL DATA OF FFOH
(Dollars in Thousands, Except Per Share Data)
The following selected historical consolidated financial data of FFOH for
the five years ended December 31, 1995 is derived in part from the audited
consolidated financial statements of FFOH. The historical consolidated financial
data for the three months ended March 31, 1996 and 1995 is derived from
unaudited consolidated financial statements. The unaudited consolidated
financial statements include all adjustments, consisting of normal recurring
accruals, which FFOH considers necessary for a fair presentation of the
financial condition and the results of operations for these periods. Operating
results for the three months ended March 31, 1996 are not necessarily indicative
of the results that may be expected for any other interim period or the entire
year ending December 31, 1996. The selected historical consolidated financial
data set forth below should be read in conjunction with, and is qualified in its
entirety by, the historical consolidated financial statements of FFOH, including
the related notes, incorporated herein by reference. See "Available Information"
and "Incorporation of Certain Documents by Reference."
<TABLE>
<CAPTION>
MARCH 31, DECEMBER 31,
1996 1995 1994 1993 1992 1991
<S> <C> <C> <C> <C> <C> <C>
(UNAUDITED)
SELECTED FINANCIAL CONDITION DATA (1):
Total assets....................................... $ 249,366 $231,137 $216,168 $202,991 $194,631 $183,748
Interest-bearing deposits in other financial
institutions..................................... 16,258 2,784 1,766 6,002 4,271 4,627
Investment securities -- at cost................... -- -- -- 4,023 3,030 2,000
Investment securities available for sale -- at
market (2)....................................... 9,566 6,044 4,267 -- -- --
Mortgage-backed securities -- at cost.............. -- -- 20,792 23,873 26,573 20,839
Mortgage-backed securities available for sale -- at
market (2)....................................... 28,377 29,378 6,280 -- -- --
Loans receivable -- net (3)........................ 187,109 185,132 175,222 162,392 153,409 150,299
Deposits........................................... 182,217 180,697 173,198 157,642 154,659 161,094
FHLB advances...................................... 14,041 17,653 12,089 15,954 13,605 3,500
Stockholders' equity (4)........................... 50,780 30,113 28,540 26,905 24,270 17,832
</TABLE>
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31, YEAR ENDED DECEMBER 31,
1996 1995 1995 1994 1993 1992 1991
<S> <C> <C> <C> <C> <C> <C> <C>
(UNAUDITED)
SELECTED OPERATING DATA (1):
Total interest income............................ $ 4,508 $ 4,106 $17,001 $15,748 $16,310 $17,142 $17,150
Total interest expense........................... 2,649 2,368 10,167 8,331 8,106 9,659 11,423
Net interest income............................ 1,859 1,738 6,834 7,417 8,204 7,483 5,727
Provision for losses on loans.................... 17 14 71 44 52 72 474
Net interest income after provision for losses on
loans.......................................... 1,842 1,724 6,763 7,373 8,152 7,411 5,253
Other income..................................... 114 87 355 347 250 324 419
General, administrative and other expense........ (1,119) (1,073) (4,385) (4,172) (4,000) (3,692) (3,401)
Earnings before income taxes and cumulative
effect of changes in accounting methods........ 837 738 2,733 3,548 4,402 4,043 2,271
Federal income taxes............................. (282) (252) (919) (1,176) (1,464) (1,371) (850)
Earnings before cumulative effect of changes in
accounting methods............................. 555 486 1,814 2,372 2,938 2,672 1,421
Cumulative effect of changes in accounting
methods........................................ -- -- -- -- -- (229) --
Net earnings..................................... $ 555 $ 486 $ 1,814 $ 2,372 $ 2,938 $ 2,443 $ 1,421
Earnings per share (5)........................... $ .14 $ .12 $ .45 $ .58 $ .73 $ .44 $ N/A
</TABLE>
15
<PAGE>
<TABLE>
<CAPTION>
AT OR FOR THE
THREE
MONTHS ENDED
MARCH 31, AT OR FOR THE YEAR ENDED DECEMBER 31,
1996 1995 1995 1994 1993 1992 1991
<S> <C> <C> <C> <C> <C> <C> <C>
(UNAUDITED)
SELECTED OPERATING RATIOS (1)(6):
Return on average assets................................. .93% .90% .82% 1.14% 1.47% 1.29% 0.81%
Return on average equity................................. 6.10 6.75 6.17 8.51 11.41 11.22 8.26
Equity to assets at end of period........................ 20.36 13.29 13.03 13.20 13.25 12.47 9.70
Interest rate spread (7)................................. 2.44 2.61 2.44 3.04 3.63 3.42 2.65
Net interest margin (7).................................. 3.18 3.27 3.13 3.63 4.20 4.03 3.30
Non-performing loans to total loans at end of period
(8).................................................... .53 .38 .54 .47 .88 .27 .50
Non-performing assets to total assets at end of period
(8).................................................... .40 .36 .44 .43 .77 .46 .42
Allowance for loan losses to non-performing loans at end
of period.............................................. 80.88 115.34 81.23 95.71 51.50 171.03 33.55
Average interest-earning assets to average interest-
bearing liabilities.................................... 116.54 114.75 114.74 114.49 113.91 111.87 110.01
Net interest income after provision for loan losses to
total general, administrative and other expenses....... 164.61 160.67 154.23 176.73 203.80 200.73 154.46
General, administrative and other expenses to average
total assets........................................... 1.87 1.98 1.97 2.00 2.01 1.95 1.93
Full service offices..................................... 3 4 4 4 3 3 3
</TABLE>
(1) Financial condition data and operating data as of and for the year ended
December 31, 1991 are those of Fidelity Federal in mutual form.
(2) FFOH adopted SFAS No. 115 as of January 1, 1994. In connection therewith,
the Savings Bank classified certain of its securities as available for sale.
(3) At March 31, 1996 and December 31, 1995, included $171,000 and $646,000,
respectively, of loans classified as held for sale. At December 31, 1994,
1993, 1992 and 1991, FFOH did not have any loans classified as held for
sale.
(4) Comprised of retained earnings only for the year ended December 31, 1991.
(5) Earnings per share is not applicable for the year ended December 31, 1991,
as Fidelity Federal converted to the stock form of ownership on May 11,
1992. Earnings per share for the year ended December 31, 1992 has been
computed on a pro forma basis based on the number of days that Fidelity
Federal was a stock institution during the year. Earnings per share has been
adjusted to reflect subsequent stock splits and the exchange ratio with
respect to Fidelity Federal's reorganization into the stock holding company
form of organization (whereby each share of Fidelity Federal common stock
held by public shareholders of Fidelity Federal was converted into 2.25
shares of FFOH Common Stock).
(6) With the exception of end of period ratios, all ratios are based on average
monthly balances during the periods and have been annualized where
appropriate.
(7) Interest rate spread represents the difference between the weighted average
yield on interest-earning assets and the weighted average rate on
interest-bearing liabilities. Net interest margin represents net interest
income as a percentage of average interest-earning assets.
(8) Non-performing loans consist of non-accrual loans and accruing loans that
are contractually past due 90 days or more, and non-performing assets
consist of non-performing loans and real estate acquired by foreclosure or
deed-in-lieu thereof.
16
<PAGE>
SELECTED CONSOLIDATED FINANCIAL DATA OF CFC
(Dollars in Thousands, Except Per Share Data)
The following selected historical consolidated financial data of CFC for
the five years ended June 30, 1995 as derived in part from the audited
consolidated financial statements of CFC. The historical consolidated financial
data for the nine months ended March 31, 1996 and 1995 is derived from unaudited
consolidated financial statements. The unaudited consolidated financial
statements include all adjustments, consisting of normal recurring accruals,
which CFC considers necessary for a fair presentation of the financial condition
and the results of operations for these periods. Operating results for the nine
months ended March 31, 1996 are not necessarily indicative of the results that
may be expected for any other interim period or the entire year ending June 30,
1996. The selected historical consolidated financial data set forth below should
be read in conjunction with, and is qualified in its entirety by, the historical
consolidated financial statements of CFC, including the related notes,
incorporated herein by reference. See "Available Information" and "Incorporation
of Certain Documents by Reference."
<TABLE>
<CAPTION>
MARCH 31, JUNE 30,
1996 1995 1994 1993 1992 1991
<S> <C> <C> <C> <C> <C> <C>
(UNAUDITED)
SELECTED FINANCIAL CONDITION DATA:
Total assets....................................... $ 229,406 $189,850 $173,932 $177,698 $186,011 $185,813
Interest-bearing deposits in other financial
institutions..................................... 21,779 4,373 862 5,856 6,617 33,712
Investment securities -- at cost................... 2,997 16,998 22,942 48,997 39,714 5,547
Investment securities available for sale -- at
market (1)....................................... 987 11,877 28,696 3,970 -- --
Mortgage-backed securities -- at cost.............. 42,708 29,127 28,438 30,091 41,629 41,047
Mortgage-backed securities available for sale -- at
market (1)....................................... 3,992 4,104 4,121 -- -- --
Loans receivable -- net............................ 144,903 116,200 80,455 77,366 87,453 96,589
Deposits........................................... 201,303 151,661 145,875 152,691 162,914 170,950
FHLB advances...................................... 2,500 13,500 2,500 -- -- --
Stockholders' equity (2)........................... 24,436 23,821 24,909 24,351 22,779 14,409
</TABLE>
<TABLE>
<CAPTION>
NINE MONTHS ENDED
MARCH 31, YEAR ENDED JUNE 30,
1996 1995 1995 1994 1993 1992 1991
<S> <C> <C> <C> <C> <C> <C> <C>
(UNAUDITED)
SELECTED OPERATING DATA:
Total interest income............................. $11,222 $8,806 $12,026 $10,873 $12,788 $14,881 $16,002
Total interest expense............................ 6,802 4,632 6,537 5,714 7,017 10,096 12,104
Net interest income............................. 4,420 4,174 5,489 5,159 5,771 4,785 3,898
Provision (credit) for losses on loans............ -- -- -- -- -- (2) 245
Net interest income after provision (credit) for
losses on loans................................. 4,420 4,174 5,489 5,159 5,771 4,787 3,653
Other income...................................... 611 337 428 864 596 671 333
Other expenses.................................... (3,794) (3,504) (4,519) (4,768) (3,786) (3,626) (3,224)
Income before income taxes and cumulative effect
of changes in accounting principles............. 1,237 1,007 1,398 1,255 2,581 1,832 762
Federal income taxes.............................. (454) (342) (475) (420) (881) (586) (330)
Income before cumulative effect of changes in
accounting principles........................... 783 665 923 835 1,700 1,246 432
Cumulative effect of changes in accounting
principles...................................... -- -- -- 315 -- -- --
Net income........................................ $ 783 $ 665 $ 923 $ 1,150 $ 1,700 $ 1,246 $ 432
Income per share (3).............................. $ 1.08 $ 0.87 $ 1.22 $ 1.44 $ 2.16 $ 1.62 $ N/A
</TABLE>
17
<PAGE>
<TABLE>
<CAPTION>
AT OR FOR THE
NINE MONTHS
ENDED MARCH 31, AT OR FOR THE YEAR ENDED JUNE 30,
1996 1995 1995 1994 1993 1992 1991
<S> <C> <C> <C> <C> <C> <C> <C>
(UNAUDITED)
SELECTED OPERATING RATIOS (4):
Return on average assets................................. .48% .50% .52% .65% .93% .66% .24%
Return on average equity (5)............................. 4.31 3.68 3.85 4.70 7.52 5.97 3.01
Equity to assets at end of period........................ 10.65 12.90 12.55 14.32 13.70 12.25 7.75
Interest rate spread (6)................................. 2.45 2.81 2.75 2.54 2.95 2.18 1.83
Net interest margin (6).................................. 2.77 3.25 3.20 3.01 3.33 2.65 2.22
Non-performing loans to total loans at end of period
(7).................................................... .10 .13 .12 .53 .25 .11 .08
Non-performing assets to total assets at end of period
(7).................................................... .07 .08 .07 .24 .10 .05 .04
Allowance for loan losses to non-performing loans at end
of period (7).......................................... 339.33 372.26 369.57 121.46 273.90 512.12 675.64
Average interest-earning assets to average interest-
bearing liabilities.................................... 107.38 112.20 111.72 114.25 109.53 108.40 105.67
Net interest income after provision for loan losses to
other expenses......................................... 116.49 119.11 121.46 108.20 152.43 132.02 113.31
Other expenses to average total assets................... 2.31 2.65 2.53 2.70 2.07 1.92 1.77
Full service offices..................................... 7 6 6 7 7 7 7
</TABLE>
(1) CFC adopted SFAS No. 115 as of June 30, 1994. In connection therewith, CFC
classified certain of its securities as available for sale.
(2) Reflects retained earnings of People's Savings at June 30, 1991.
(3) Income per share is not applicable for the year ended June 30, 1991, as
People's Savings converted to the stock form of ownership on August 6, 1991.
(4) With the exception of end of period ratios, all ratios are based on average
monthly balances and have been annualized where appropriate.
(5) Includes intangibles. Return on tangible equity for the nine months ended
March 31, 1996 was 4.91%.
(6) Interest rate spread represents the difference between the weighted average
yield on interest-earning assets and the weighted average rate on
interest-bearing liabilities. Net interest margin represents net interest
income as a percentage of average interest-earning assets.
(7) Non performing loans consist of non-accrual loans and accruing loans that
are contractually past due 90 days or more, and non-performing assets
consist of non-performing loans and real estate acquired by foreclosure or
deed-in-lieu thereof.
GENERAL INFORMATION
This Prospectus/Joint Proxy Statement is being furnished to the holders of
FFOH Common Stock and CFC Common Stock in connection with the solicitation of
proxies by the Boards of Directors of FFOH and CFC for use at the FFOH Special
Meeting and the CFC Special Meeting, respectively. This Prospectus/Joint Proxy
Statement also serves as a prospectus of FFOH in connection with the issuance of
FFOH Common Stock to holders of CFC Common Stock upon consummation of the
Merger.
All information contained or incorporated by reference in this
Prospectus/Joint Proxy Statement with respect to FFOH has been supplied by FFOH,
and all information contained or incorporated by reference in this
Prospectus/Joint Proxy Statement with respect to CFC has been supplied by CFC.
This Prospectus/Joint Proxy Statement and the other documents enclosed
herewith are first being mailed to shareholders of FFOH and CFC on or about July
29, 1996.
18
<PAGE>
THE SPECIAL MEETINGS
TIME, DATE AND PLACE
The FFOH Special Meeting will be held at 2:00 p.m., Eastern Time, on
September 10, 1996 at the Quality Hotel Central located at 4747 Montgomery Road,
Cincinnati, Ohio. The CFC Special Meeting will be held at 2:00 p.m., Eastern
Time, on September 10, 1996 at CFC's main office located at 11100 Reading Road,
Sharonville, Ohio.
MATTERS TO BE CONSIDERED
At the Special Meetings, shareholders of FFOH and CFC will each consider
and vote upon a proposal to adopt the Agreement. In addition, at the FFOH
Special Meeting, shareholders of FFOH will consider and vote upon a proposal to
amend FFOH's Articles of Incorporation in order to increase the authorized
shares of FFOH Common Stock and FFOH Preferred Stock. Pursuant to applicable law
and the articles of incorporation, code of regulations and bylaws of FFOH and
CFC, respectively, no other business may properly come before the FFOH Special
Meeting and the CFC Special Meeting.
SHARES OUTSTANDING AND ENTITLED TO VOTE; RECORD DATE
The close of business on July 19, 1996 has been fixed by the FFOH Board as
the Record Date for the determination of holders of FFOH Common Stock entitled
to notice of and to vote at the FFOH Special Meeting. At the close of business
on the Record Date, there were 4,073,589 shares of FFOH Common Stock outstanding
and entitled to vote. Each share of FFOH Common Stock entitles the holder
thereof to one vote on all matters properly presented at the FFOH Special
Meeting.
The close of business on July 19, 1996 has been fixed by the CFC Board as
the Record Date for the determination of holders of CFC Common Stock entitled to
notice of and to vote at the CFC Special Meeting and any adjournment or
adjournments thereof. At the close of business on the Record Date, there were
715,033 shares of CFC Common Stock outstanding and entitled to vote. Each share
of CFC Common Stock entitles the holder thereof to one vote on all matters
properly presented at the CFC Special Meeting.
VOTES REQUIRED
A quorum, consisting of the holders of a majority of the issued and
outstanding shares of FFOH Common Stock or CFC Common Stock, as the case may be,
must be present in person or by proxy before any action may be taken at the FFOH
Special Meeting or the CFC Special Meeting, as the case may be. A majority of
the votes cast at the FFOH Special Meeting by holders of FFOH Common Stock as of
the Record Date, voting in person or by proxy, is necessary to adopt the
Agreement on behalf of FFOH, and the affirmative vote of the holders of a
majority of the shares of FFOH Common Stock outstanding as of the Record Date,
voting in person or by proxy, is necessary to adopt the proposal to amend FFOH's
Articles of Incorporation. The affirmative vote of the holders of a majority of
the shares of CFC Common Stock outstanding as of the Record Date, voting in
person or by proxy, is necessary to adopt the Agreement on behalf of CFC.
The proposals to adopt the Agreement and the amendment to FFOH's Articles
of Incorporation are considered "non-discretionary items" whereby brokerage
firms may not vote in their discretion on behalf of their clients if such
clients have not furnished voting instructions. Abstentions and such broker
"non-votes" at the FFOH Special Meeting and the CFC Special Meeting will be
considered in determining the presence of a quorum at the FFOH Special Meeting
and the CFC Special Meeting, respectively, but will not be counted as votes cast
at such Special Meetings. Because the proposal to adopt the Agreement by CFC's
stockholders and the proposal to amend FFOH's Articles of Incorporation are
required to be approved by the holders of a majority of the outstanding shares
of CFC Common Stock and FFOH Common Stock, respectively, abstentions and broker
"non-votes" will have the same effect as a vote against such proposals (although
abstentions and broker non-votes will not have such an effect in the case of
voting on the proposal to adopt the Agreement at the FFOH Special Meeting).
VOTING AND REVOCATION OF PROXIES
Each copy of this Prospectus/Joint Proxy Statement mailed to holders of
FFOH Common Stock and CFC Common Stock is accompanied by a form of proxy for use
at the FFOH Special Meeting or the CFC Special Meeting, as the case may be. Any
shareholder executing a proxy may revoke it at any time before it is voted by
(i) filing with the Secretary of FFOH (in the case of a FFOH shareholder) or the
Secretary of CFC (in the case of a CFC shareholder) at the address of FFOH or
CFC set forth on its respective Notice of Special Meeting of Shareholders,
written notice of such revocation; (ii) executing and returning a later-dated
proxy; or (iii) attending the FFOH Special Meeting or the CFC Special Meeting,
as applicable,
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and giving notice of such revocation in person. Attendance at the applicable
Special Meeting will not, in and of itself, constitute revocation of a proxy.
Each proxy returned to FFOH or CFC (and not revoked) by a holder of FFOH
Common Stock and CFC Common Stock, respectively, will be voted in accordance
with the instructions indicated thereon. If no instructions are indicated, the
proxy will be voted for adoption of the Agreement and, in the case of FFOH, for
adoption of the amendment to FFOH's Articles of Incorporation.
SOLICITATION OF PROXIES
Each of FFOH and CFC will bear its costs of mailing this Prospectus/Joint
Proxy Statement to its shareholders, as well as all other costs incurred by it
in connection with the solicitation of proxies from its shareholders on behalf
of its Board of Directors, except that FFOH and CFC will share equally the fees
for registration of the FFOH Common Stock offered hereby and the cost of
printing this Prospectus/Joint Proxy Statement. In addition to solicitation by
mail, the directors, officers and employees of each company and its subsidiaries
may solicit proxies from shareholders of such company by telephone, telegram or
in person without compensation other than reimbursement for their actual
expenses. Arrangements also will be made with brokerage firms and other
custodians, nominees and fiduciaries for the forwarding of solicitation material
to the beneficial owners of stock held of record by such persons, and FFOH or
CFC, as the case may be, will reimburse such custodians, nominees and
fiduciaries for their reasonable out-of-pocket expenses in connection therewith.
FFOH has retained D.F. King & Co., Inc., a professional proxy solicitation
firm, to assist it in the solicitation of proxies. The fee payable to such firm
in connection with the Merger is $4,000, plus reimbursement for reasonable
out-of-pocket expenses.
AMENDMENT TO ARTICLES OF INCORPORATION
The FFOH Board is also seeking shareholder adoption of an amendment to
FFOH's Articles of Incorporation to increase the number of authorized shares of
FFOH Common Stock from 7,000,000 to 15,000,000 and the number of authorized
shares of FFOH Preferred Stock from 500,000 to 5,000,000.
The newly authorized shares of FFOH Common Stock and FFOH Preferred Stock
may be issued from time to time in the future for any proper purpose without
further action of the shareholders of FFOH, except as required by the Articles
of Incorporation, applicable law or the applicable listing requirements of
NASDAQ. Each share of FFOH Common Stock to be authorized for issuance will have
the same rights and will be identical in all respects with each other share of
FFOH Common Stock. The newly authorized shares of FFOH Common Stock will not
affect the rights, such as voting and liquidation rights, of the shares of FFOH
Common Stock currently outstanding. Shareholders will not have preemptive rights
to purchase any subsequently issued shares of FFOH Common Stock. FFOH has no
current plans to issue the newly authorized shares of FFOH Common Stock. The
FFOH Board is authorized to issue Preferred Stock and to fix and state voting
powers, designations, preferences or other special rights of such shares and the
qualifications, limitations and restrictions thereof. The FFOH Preferred Stock
may be issued in distinctly designated series, may be convertible into FFOH
Common Stock and may rank prior to the FFOH Common Stock as to dividend rights,
liquidation preferences or both. FFOH has no current plans to issue the newly
authorized shares of FFOH Preferred Stock. Nevertheless, the ability of the FFOH
Board to issue additional shares of FFOH Common Stock or FFOH Preferred Stock
without additional shareholder approval may be deemed to have an anti-takeover
effect. See "Description of FFOH Capital Stock."
Adoption of the proposed amendment to FFOH's Articles of Incorporation
requires the affirmative vote of the holders of a majority of the outstanding
shares of FFOH Common Stock, voting in person or by proxy. THE FFOH BOARD
UNANIMOUSLY RECOMMENDS THAT SHAREHOLDERS OF FFOH VOTE "FOR" THE PROPOSAL TO
AMEND FFOH'S ARTICLES OF INCORPORATION.
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THE MERGER
The following information relating to the Merger does not purport to be
complete and is qualified in its entirety by reference to the Agreement, a copy
of which is attached to this Prospectus/Joint Proxy Statement as Annex I. All
shareholders are urged to read carefully the Agreement and the exhibits thereto.
GENERAL
In accordance with the terms of and subject to the conditions set forth in
the Agreement, CFC will be merged with and into FAC, with FAC as the surviving
corporation of the Merger. The Agreement provides that at the Effective Time
each outstanding share of CFC Common Stock (other than (i) any dissenting shares
under the OGCL and (ii) any shares held by FFOH or CFC) shall, by virtue of the
Merger and without any action on the part of the holder thereof, be converted
into, subject to certain terms, conditions, limitations and procedures set forth
in the Agreement and described herein, either $38.00 in cash or a number of
shares of FFOH Common Stock which will be determined by applying a formula, set
forth in the Agreement. See " -- Merger Consideration."
In connection with the execution of the Agreement, Fidelity Federal and
People's Savings entered into the Bank Agreement, which sets forth the terms and
conditions, including consummation of the Merger, pursuant to which People's
Savings will merge with and into Fidelity Federal substantially concurrently
with the Merger.
Each of the FFOH Board and the CFC Board has unanimously approved the
Agreement and the transactions contemplated thereby and believes that the Merger
is in the best interests of FFOH and CFC, respectively, and its respective
shareholders. ACCORDINGLY, THE BOARD OF DIRECTORS OF EACH OF FFOH AND CFC
UNANIMOUSLY RECOMMENDS THAT SHAREHOLDERS OF FFOH AND CFC, RESPECTIVELY, VOTE
"FOR" ADOPTION OF THE AGREEMENT.
BACKGROUND OF THE MERGER
In connection with its normal strategic planning process, CFC continuously
reviews its strategic business alternatives, devoting particular attention to
the continuing consolidation and increasing competition within the banking and
financial services industries in the Cincinnati market area. The Cincinnati
market is home to several large regional commercial banking entities which have
substantially greater financial and marketing resources available to them as
well as a significant number of commercial banks and savings institutions which
are reasonably comparable to CFC and FFOH in size and resources. In recent
years, competition within the local banking and financial services industries
has intensified, especially for smaller institutions like CFC, leading to CFC's
exploration of a possible business combination with FFOH.
In the summer of 1995 and continuing through the fall of 1995, FFOH began a
review of its strategic business alternatives, devoting particular attention to
the limitations on its ability to pursue acquisitions as a result of its prior
mutual holding company ("MHC") ownership structure. As a MHC institution, FFOH
pursued acquisition opportunities with smaller local thrifts and thrift holding
companies. None of such discussions ever advanced beyond preliminary
discussions, in large part because of the ownership and capital structure
limitations imposed by the MHC form of ownership. In the fall of 1995, the FFOH
Board determined that it was in the best interests of FFOH and its shareholders
to convert from the MHC ownership structure to a full stock corporation. Among
other things, the benefits of such a transaction included increased flexibility
to pursue strategic acquisitions by eliminating the capital stock ownership
limitations of the MHC form of ownership. In conjunction with its conversion to
the stock form of organization, the FFOH Board adopted a business plan that
called for FFOH to pursue asset growth through internal deposit growth, branch
purchases and optionally through one or more strategic acquisitions. Such growth
strategies would be pursued with the broad objectives of leveraging FFOH's
excess capital position anticipated as a result of the conversion and increasing
shareholder returns. On March 4, 1996, FFOH completed its conversion from the
mutual to the stock form of organization and, by means of an offering of FFOH
Common Stock in connection with such conversion, raised approximately $22.1
million of additional capital.
On March 5, 1996, a representative of CFC approached senior management of
FFOH, indicating that CFC was interested in meeting with representatives of FFOH
to discuss a possible transaction between the two companies. As a result of this
indication of interest, John R. Reusing, President and Chief Executive Officer
of FFOH, Paul D. Staubach, Senior Vice President and Chief Financial Officer and
Secretary of FFOH, Donald H. Rolf, Jr., Chairman and President of CFC, and
Joseph D. Hughes, Senior Vice President of CFC, met on March 6, 1996 to discuss
the respective companies, the competitive challenges faced by each,
consolidation within the banking industry and the rationale for a potential
business combination between FFOH and CFC. Additional telephone conversations
and meetings among the parties continued over the next several
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days, during which the parties continued to discuss the rationale for a
potential business combination, as well as the management and staffing of the
combined company. On March 8, 1996, FFOH and CFC entered into mutual
confidentiality agreements.
On March 12, 1996, the FFOH Board met with RP Financial to discuss the
financial rationale for a potential business combination between FFOH and CFC.
At a meeting on March 13, 1996, the FFOH representatives, along with a
representative from RP Financial, met with the CFC representatives, along with
representatives from Stifel Nicolaus. At that meeting, FFOH, CFC and the
financial advisors reviewed certain financial and operational information of the
respective companies and conducted interviews of the respective management teams
to ascertain whether or not the transaction rationale merited further
discussions. At the March 13 meeting, it was agreed that FFOH and CFC would
exchange additional financial information, with the objective of determining
whether or not mutually agreeable financial terms could be reached.
On March 20, 1996, the FFOH representatives, the CFC representatives and
the financial advisors met to discuss the possible financial terms under which a
strategic transaction could be effected. On the basis of its analysis, FFOH and
its financial advisor discussed FFOH's financial objectives should a strategic
transaction be pursued, and outlined, in general, the terms under which FFOH
would be willing to proceed with discussions. During the following weeks, senior
management and the financial advisors of each of FFOH and CFC continued to
discuss the financial and other terms of the proposed strategic transaction,
including the form and amount of consideration to be offered, the Exchange
Ratio, the treatment of CFC stock options, the form of the Stock Option
Agreements, and issues relating to the management and operations of FFOH
following the proposed transaction, including the election of each of Donald H.
Rolf, Jr., Joseph D. Hughes and Thomas N. Spaeth to the FFOH Board and the
employment of Donald H. Rolf, Jr., Chairman and President of CFC and Chairman of
People's Savings, as Chairman of the Boards of Directors of FFOH and Fidelity
Federal, and Joseph D. Hughes, Senior Vice President of CFC and President of
People's Savings, as Executive Vice President of FFOH and Executive Vice
President and Chief Lending Officer of Fidelity Federal. During this period,
FFOH, CFC, and their respective legal counsel and financial advisors conducted
reciprocal due diligence analyses. The form and amount of consideration and the
Exchange Ratio was negotiated on an arm's length basis between the FFOH
representatives, the CFC representatives and the financial advisors. On March
21, 1996 and April 18, 1996, the CFC Board met with CFC's senior management,
financial advisor and legal counsel to review the status of discussions with
FFOH and the rationale for the potential business combination.
On April 29, 1996, at a meeting of the FFOH Board, Messrs. Reusing and
Staubach reviewed with the FFOH Board the reasons for, and the potential
benefits of the Merger; FFOH's legal counsel reviewed the terms of the
Agreement, the Bank Agreement, the Stock Option Agreements and the Stockholder
Agreements and the transactions contemplated thereby, including the election of
each of Donald H. Rolf, Jr., Joseph D. Hughes and Thomas N. Spaeth to the FFOh
Board and the employment of Donald H. Rolf, Jr., Chairman and President of CFC
and Chairman of People's Savings, as Chairman of the Boards of Directors of FFOH
and Fidelity Federal, and Mr. Joseph D. Hughes, Senior Vice President of CFC and
President of People's Savings, as Executive Vice President of FFOH and Executive
Vice President and Chief Lending Officer of Fidelity Federal; and FFOH's
financial advisor made a presentation regarding the financial terms of the
Agreement and the fairness, from a financial point of view, of the Merger
Consideration to holders of FFOH Common Stock. After a thorough discussion and
consideration of the factors discussed below under "The Merger -- Reasons for
the Merger; Recommendations of the Boards of Directors -- FFOH", the FFOH Board
unanimously approved the Agreement and the transactions contemplated thereby
(including the Bank Merger), and authorized the execution of the Agreement, the
Bank Agreement, the Stock Option Agreements and the Stockholder Agreements.
On April 29, 1996, at a meeting of the CFC Board, Messrs. Rolf and Hughes
reviewed with the CFC Board the reasons for, and the potential benefits of the
Merger; CFC's legal counsel reviewed the terms of the Agreement, the Bank
Agreement, the Stock Option Agreements and the Stockholder Agreements and the
transactions contemplated thereby, including the election of each of Donald H.
Rolf, Jr., Joseph D. Hughes and Thomas N. Spaeth to the FFOH Board and the
employment of Donald H. Rolf, Jr., Chairman and President of CFC and Chairman of
People's Savings, as Chairman of the Boards of Directors of FFOH and Fidelity
Federal, and Joseph D. Hughes, Senior Vice President of CFC and President of
People's Savings, as Executive Vice President of FFOH and Executive Vice
President and Chief Lending Officer of Fidelity Federal; and CFC's financial
advisor made a presentation regarding the financial terms of the Agreement and
the fairness, from a financial point of view, of the Merger Consideration to
holders of CFC Common Stock. After a thorough discussion and consideration of
the factors discussed below under "The Merger -- Reasons for the Merger;
Recommendations of the Boards of Directors -- CFC", the CFC Board unanimously
approved the Agreement and the transactions contemplated thereby
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(including the Bank Merger), and authorized the execution of the Agreement, the
Bank Agreement, the Stock Option Agreements and the Stockholder Agreements. The
Agreement, the Bank Agreement, the Stock Option Agreements and the Stockholder
Agreements were entered into on April 29, 1996 and on June 13, 1996, the parties
amended and restated the Agreement and the Bank Agreement.
REASONS FOR THE MERGER; RECOMMENDATIONS OF THE BOARDS OF DIRECTORS
CFC. In reaching its determination to approve and recommend to shareholders
the adoption of the Agreement and the transactions contemplated thereby, the CFC
Board considered a number of factors, including, without limitation, the
following:
(i) the CFC Board's review of the operating environment, including,
but not limited to, the continued consolidation and increasing competition
in the banking and financial services industries in southwestern Ohio, the
prospect for further changes in these industries and the increasing
importance of access to financial resources to a savings institution's
ability to capitalize on opportunities in these industries;
(ii) the CFC Board's review, with the assistance of management and
Stifel Nicolaus, of the financial condition, results of operations,
business and overall prospects of FFOH, as well as management's best
estimates of CFC's prospects;
(iii) the CFC Board's assessment, based on the analysis of and
presentations to the CFC Board by the management of CFC and Stifel Nicolaus
of CFC's strategic position, that the Merger was consistent with CFC's
strategic objectives (see "The Merger -- Background of the Merger");
(iv) the financial presentation of Stifel Nicolaus and the opinion of
Stifel Nicolaus as to the fairness from a financial point of view of the
Merger Consideration to CFC and its shareholders (see "The
Merger -- Opinions of Financial Advisors -- CFC");
(v) the anticipated cost savings and operating efficiencies available
to the combined institution from the Merger;
(vi) the CFC Board's belief that the terms of the Agreement are
attractive in that the Agreement allows CFC shareholders to become
shareholders in a combined institution which would represent the largest
public savings institution within the Cincinnati market area and provides
the combined institution with greater ability to expand its presence in
southwestern Ohio;
(vii) the general structure of the transaction and the high degree of
compatibility of the management and business philosophies of CFC and FFOH;
(viii) the CFC Board's assessment that CFC would be able to continue
its high level of personal service to the customers and the communities
that it serves through an affiliation with another community-based
institution;
(ix) the election upon consummation of the Merger of each of Donald H.
Rolf, Jr., Joseph D. Hughes and Thomas N. Spaeth to the FFOH Board, the
execution upon consummation of the Merger of employment agreements pursuant
to which Donald H. Rolf, Jr., Chairman and President of CFC and Chairman of
People's Savings, will serve as Chairman of the Boards of Directors of FFOH
and Fidelity Federal, and Joseph D. Hughes, Senior Vice President of CFC
and President of People's Savings, will serve as Executive Vice President
of FFOH and Executive Vice President and Chief Lending Officer of Fidelity
Federal;
(x) in accordance with its Articles of Incorporation, CFC's Board also
considered other relevant factors, including, without limitation, the
financial and managerial resources and future prospects of FFOH and the
social, legal, environmental and economic effects on the employees,
customers, suppliers and other affected persons, firms and corporations and
on the communities and geographical areas in which CFC and its subsidiaries
operate or are located and on the business and properties of CFC and its
subsidiaries; and
(xi) the expectation that the Merger will generally be a tax-free
transaction to CFC and, with respect to the stock portion of the Merger
Consideration, its shareholders (see "The Merger -- Certain Federal Income
Tax Consequences").
The foregoing discussion of the information and factors discussed by the
CFC Board is not meant to be exhaustive but is believed to include all material
factors considered by CFC's Board. The CFC Board did not quantify or attach any
particular weight to the various factors that it considered in reaching its
determination that the Merger is in the best interests of CFC and its
shareholders.
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FOR THE REASONS DESCRIBED ABOVE, THE CFC BOARD HAS DETERMINED THE MERGER TO
BE IN THE BEST INTERESTS OF CFC AND ITS SHAREHOLDERS AND HAS UNANIMOUSLY
APPROVED THE AGREEMENT AND THE TRANSACTIONS CONTEMPLATED THEREBY, INCLUDING THE
MERGER. ACCORDINGLY, THE CFC BOARD UNANIMOUSLY RECOMMENDS THAT SHAREHOLDERS VOTE
"FOR" ADOPTION OF THE AGREEMENT.
FFOH. In reaching its determination to approve and recommend to
shareholders the adoption of the Agreement and the transactions contemplated
thereby, the FFOH Board considered a number of factors, including, without
limitation, the following:
(i) the FFOH Board's review, with the assistance of management and of
RP Financial, of the financial condition, results of operations, business
and overall prospects of FFOH and CFC;
(ii) the fact that CFC's strong banking franchise is contiguous to
FFOH's existing banking franchise in Cincinnati, Ohio and that the Merger
would improve the combined institution's franchise value as a result of the
combined institution's enhanced branch network;
(iii) the enhanced ability of the combined entity to compete against
larger competitors and the enhanced ability to expand the combined entity's
presence in southwestern Ohio;
(iv) the financial presentations of senior management and RP Financial
and the opinion of RP Financial as to the fairness of the Merger
Consideration from a financial point of view to the FFOH shareholders (see
"The Merger -- Opinions of Financial Advisors -- FFOH");
(v) the anticipated cost savings and operating efficiencies available
to the combined institution from the Merger;
(vi) the expectation that each of the Merger and the Bank Merger will
generally be a tax-free transaction to FFOH and Fidelity Federal;
(vii) the general structure of the transaction and the compatibility
of management and business philosophy;
(viii) the ability of the combined enterprise to compete in the
relevant banking and non-banking markets; and
(ix) the nature of, and likelihood of obtaining, the regulatory
approvals that would be required with respect to the Merger and the Bank
Merger.
The foregoing discussion of the information and factors discussed by the
FFOH Board is not meant to be exhaustive but is believed to include all material
factors considered by FFOH's Board. The FFOH Board did not quantify or attach
any particular weight to the various factors that it considered in reaching its
determination that the Merger is in the best interests of FFOH and its
shareholders.
FOR THE REASONS DESCRIBED ABOVE, THE FFOH BOARD HAS DETERMINED THE MERGER
TO BE IN THE BEST INTERESTS OF FFOH AND ITS SHAREHOLDERS AND HAS UNANIMOUSLY
APPROVED THE AGREEMENT AND THE TRANSACTIONS CONTEMPLATED THEREBY, INCLUDING THE
MERGER. ACCORDINGLY, THE FFOH BOARD UNANIMOUSLY RECOMMENDS THAT SHAREHOLDERS
VOTE "FOR" ADOPTION OF THE AGREEMENT.
OPINIONS OF FINANCIAL ADVISORS
CFC. CFC has retained Stifel Nicolaus to act as its financial advisor in
connection with rendering a fairness opinion with respect to the Merger. Stifel
Nicolaus is an investment banking and securities firm with membership on all
principal U.S. securities exchanges. As part of its investment banking
activities, Stifel Nicolaus is regularly engaged in the valuation of businesses
and their securities in connection with merger transactions and other types of
acquisitions, negotiated underwritings, secondary distributions of listed and
unlisted securities, private placements and valuations for corporate and other
purposes. In requesting Stifel Nicolaus' advice and opinion, the CFC Board did
not give any special instructions to, or impose any limitations upon the scope
of the investigation which Stifel Nicolaus might wish to conduct to enable it to
give its opinion. Stifel Nicolaus has rendered its opinion that, based upon and
subject to the various considerations set forth therein, as of April 29, 1996
and the date of this Prospectus/Joint Proxy Statement, the Merger Consideration
to be paid for each share of CFC Common Stock resulted in consideration that was
fair, from a financial point of view, to the holders of CFC Common Stock. Stifel
Nicolaus is familiar with CFC, having acted as its financial advisor in
connection with, and having participated
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in, the negotiations leading to the Agreement. Representatives of Stifel
Nicolaus participated in certain portions of the meeting of CFC's Board of
Directors on April 29, 1996 at which the proposed Merger was considered and
certain officers of CFC were authorized to enter into the Agreement.
The full text of Stifel Nicolaus' opinion as of the date hereof, which sets
forth the assumptions made, matters considered and limitations of the review
undertaken, is attached as Annex VI to this Prospectus/Joint Proxy Statement and
is incorporated herein by reference, and should be read in its entirety in
connection with the Prospectus/Joint Proxy Statement. The summary of the opinion
of Stifel Nicolaus set forth in this Prospectus/Joint Proxy Statement is
qualified in its entirety by reference to the full text of such opinion. The
April 29, 1996 oral opinion was substantially identical to the opinion attached
hereto. In connection with its written opinion dated as of the date of this
Prospectus/Joint Proxy Statement, Stifel Nicolaus performed procedures to update
certain of its analyses and reviewed the assumptions on which such analyses were
based and the factors considered in connection therewith. In updating its
opinion, Stifel Nicolaus did not utilize any methods of analysis in addition to
those described.
THE OPINION OF STIFEL NICOLAUS IS DIRECTED TO THE CFC BOARD IN ITS
CONSIDERATION OF THE MERGER CONSIDERATION AS DESCRIBED IN THE AGREEMENT, AND
DOES NOT CONSTITUTE A RECOMMENDATION TO ANY SHAREHOLDER OF CFC AS TO ANY ACTION
THAT SUCH SHAREHOLDER SHOULD TAKE IN CONNECTION WITH THE AGREEMENT, OR
OTHERWISE. IT IS FURTHER UNDERSTOOD THAT THE OPINION OF STIFEL NICOLAUS IS BASED
ON MARKET CONDITIONS AND OTHER CIRCUMSTANCES EXISTING ON APRIL 29, 1996 AND THE
DATE HEREOF.
In connection with its opinion dated the date hereof, Stifel Nicolaus
reviewed and analyzed material bearing upon the financial and operating
condition of CFC and FFOH and material prepared in connection with the Merger,
including among other things: (a) the Agreement and the Stock Option Agreements;
(b) publicly available reports filed with the SEC by CFC and by FFOH; (c)
certain other publicly available financial and other information concerning CFC
and FFOH and the trading markets for the publicly traded securities of CFC and
FFOH; (d) certain other internal information, including projections for CFC and
FFOH, relating to CFC and FFOH prepared by the managements of CFC and FFOH and
furnished to Stifel Nicolaus for purposes of its analysis; and (e) publicly
available information concerning certain other banks and bank holding companies,
savings banks and savings and loan associations, savings and loan holding
companies, the trading markets for their securities and the nature and terms of
certain other merger and acquisition transactions believed relevant to its
inquiry. Stifel Nicolaus also met with certain officers and representatives of
CFC and FFOH to discuss the foregoing as well as other matters relevant to its
inquiry, including the past and current business operations, results of
regulatory examinations, financial condition and future prospects of CFC and
FFOH, both separately and on a combined basis. In addition, Stifel Nicolaus
reviewed the reported price and trading activity for CFC Common Stock and FFOH
Common Stock, compared certain financial and stock market information for CFC
and FFOH with similar information for certain other companies, the securities of
which are publicly traded, reviewed the financial terms of certain recent
business combinations in the commercial banking and thrift industries, and
performed such other studies and analyses as it considered appropriate. Stifel
Nicolaus also took into account its assessment of general economic, market and
financial conditions and its experience in other transactions, as well as its
experience in securities valuations and knowledge of the commercial banking and
thrift industries generally.
In conducting its review and arriving at its opinion, Stifel Nicolaus
relied upon and assumed the accuracy and completeness of the financial and other
information provided to it or publicly available and did not attempt
independently to verify the same. Stifel Nicolaus has relied upon the
managements of CFC and FFOH as to the reasonableness and achievability of the
projections (and the assumptions and basis therefor) provided to Stifel
Nicolaus, and assumed that such projections, including, without limitation,
projected cost savings and operating synergies resulting from the Merger,
reflected the best currently available estimates and judgments of such CFC
management and FFOH representatives and that such projections would be realized
in the amounts and time periods estimated. Stifel Nicolaus also assumed, without
independent verification, that the aggregate allowances for loan losses for CFC
and FFOH were adequate to cover such losses. Stifel Nicolaus did not conduct
physical inspections of any of the properties or assets of CFC or FFOH, and
Stifel Nicolaus did not make or obtain, and was not furnished with, any
evaluations or appraisals of any properties, assets or liabilities of CFC and
FFOH. Stifel Nicolaus was retained by the CFC Board to express an opinion as to
the fairness, from a financial point of view, to the holders of CFC Common Stock
of the Merger Consideration.
In connection with rendering its opinion to the CFC Board, Stifel Nicolaus
performed a variety of financial analyses that are summarized below. The summary
of the presentations by Stifel Nicolaus to the CFC Board as set forth herein
does not purport to be a complete description of such presentations. Stifel
Nicolaus believes that its analysis and the summary set forth herein must be
considered as a whole and that selecting portions of such analyses and the
factors considered therein, without
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considering all factors and analyses, could create an incomplete view of the
analyses and processes underlying its opinions. The preparation of a fairness
opinion is a complex process involving subjective judgments and is not
necessarily susceptible to partial analysis or summary description. In its
analyses, Stifel Nicolaus made numerous assumptions with respect to industry
performance, business and economic conditions, and other matters, many of which
are beyond the control of CFC or FFOH. Any estimates contained in Stifel
Nicolaus' analyses are not necessarily indicative of actual future values or
results, which may be significantly more or less favorable than suggested by
such estimates. Estimates of values of companies do not purport to be appraisals
or necessarily reflect the actual prices at which companies or their securities
actually may be sold. No company or transaction utilized in Stifel Nicolaus'
analyses was identical to CFC or FFOH or the Merger. Accordingly, such analyses
are not based solely on arithmatic calculations; rather, they involve complex
considerations and judgments concerning differences in financial and operating
characteristics of the relevant companies, the timing of the relevant
transactions, and prospective buyer interest, as well as other factors that
could affect the public trading values of the company or companies to which they
are being compared. None of the analyses performed by Stifel Nicolaus was
assigned a greater significance by Stifel Nicolaus than any other.
The following is a summary of the financial analyses performed by Stifel
Nicolaus in connection with providing its oral opinion to CFC's Board of
Directors on April 29, 1996, which was updated as of the date hereof and is
attached to this Prospectus/Joint Proxy Statement as Annex VI and is
incorporated herein by reference.
CONTRIBUTION ANALYSIS. Stifel Nicolaus reviewed certain estimated future
operating and financial information developed by both CFC and FFOH for the
projected twelve month period ended December 31, 1996 (the assumed closing date
of the Merger) including total assets, total loans, and total deposits and
compared the percentage contribution of CFC to the pro forma combined figures
for CFC and FFOH and to the percentage of total outstanding FFOH Common Stock
that would be owned by the CFC stockholders as a result of the Merger. The
contribution analysis showed, among other things, that CFC would contribute
47.7% of combined total assets, 43.4% of combined total loans, and 52.0% of
combined total deposits, while receiving 25.9% of the outstanding shares in the
combined institution assuming that the Merger Consideration paid to CFC
shareholders is comprised of 45% cash consideration and 55% stock consideration
as contemplated by the Agreement.
ACCRETION/DILUTION SUMMARY. Stifel Nicolaus reviewed certain estimated
future operating and financial information developed by both CFC and FFOH for
the pro forma combined entity resulting from the Merger for the projected twelve
month period ended December 31, 1997. Based on this analysis, Stifel Nicolaus
compared CFC's estimated future stand-alone per share earnings with such
projected figures for the pro forma combined entity for this twelve month
period. The Merger is projected to be accretive to shareholders electing to
receive stock on a projected pro forma basis with respect to earnings per share.
Stifel Nicolaus also reviewed certain estimated future operating and financial
information developed by both CFC and FFOH for the pro forma combined entity
resulting from the Merger for the twelve month period ended December 31, 1996
(the assumed closing date of the Merger). Based on this analysis, Stifel
Nicolaus compared CFC's projected stand-alone book value per share and projected
stand-alone tangible book value per share with such calculated figures for the
pro forma combined entity at December 31, 1996. The Merger is projected to be
accretive to shareholders electing to receive stock on a pro forma basis with
respect to book value per share and tangible book value per share.
PRESENT VALUE ANALYSIS. Applying discounted cash flow analysis to the
theoretical future earnings and dividends of CFC and FFOH, Stifel Nicolaus
compared the calculated value of a CFC share to the calculated value of a share
of the combined entity. The analysis was based upon a range of assumed returns
on assets (consistent with management's budgets), an assumed annual asset growth
rate, current dividend rates, a range of assumed price/earnings ratios, and a
10% discount rate. Stifel Nicolaus selected the range of terminal price/earnings
ratios on the basis of past and current trading multiples for CFC and other
thrift institutions. Based on this analysis, Stifel Nicolaus concluded that the
Merger increases the calculated value of a share of CFC Common Stock. This
analysis examines the per share impact on a shareholder electing to receive 100%
stock consideration.
DISCOUNTED CASH FLOW ANALYSIS. Based upon estimates provided by management
of the future earnings and the range of profit improvements for the pro forma
combined entity, Stifel Nicolaus estimated the present value of future dividends
available to be paid to FFOH under various scenarios assuming CFC maintains a
capital level of approximately 6.5% of assets. Based upon management's estimated
profitability ranges and a range of discount rates, under FFOH ownership, CFC
could theoretically produce future cash flows to FFOH with a present value
ranging from $19 million to $33 million.
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<PAGE>
SUMMARY ANALYSIS OF THRIFT MERGER TRANSACTIONS. Stifel Nicolaus analyzed
certain information relating to transactions in the thrift industry, including
median information for 101 acquisitions announced in the U.S. between April 17,
1995 and April 17, 1996. Stifel Nicolaus also analyzed 38 thrift acquisitions
announced in the Midwest Region of the U.S. during that same time period (the
"Midwest Transactions"). Stifel Nicolaus also analyzed 10 thrift acquisitions
announced in the U.S. between January 1, 1994 and April 23, 1996 involving
sellers with total assets between $100 million and $600 million, total equity to
total assets ratios between 8% and 15% and return on average assets ratios
between 0.25% and 0.75% (the "Selected Transactions"). Stifel Nicolaus
calculated the following ratios with respect to the Merger and the Midwest
Transactions.
<TABLE>
<CAPTION>
CFC/
FFOH MIDWEST TRANSACTIONS
RATIOS MERGER MEAN MEDIAN MINIMUM MAXIMUM
<S> <C> <C> <C> <C> <C>
Deal Price per share/Book Value.......................................... 113.99% 134.46% 126.85% 93.09% 207.59 %
Deal Price per share/Tangible Book Value................................. 131.42 135.41 127.01 99.36 207.59
Adjusted Deal Price/6.50% Equity......................................... 122.93 168.75 160.17 90.06 265.79
Deal Price per share/Last 12 months earnings per share................... 26.39x 25.70x 20.20x 10.11x 60.26x
Deal Price/Assets........................................................ 12.14 17.28 16.49 6.50 32.59
Premium over Tangible Book Value/Deposits................................ 3.31 5.97 5.46 (0.08) 14.31
Deal Price/Deposits...................................................... 13.84 23.30 22.91 10.61 50.32
</TABLE>
Stifel Nicolaus calculated the following ratios with respect to the Merger
and the Selected Transactions:
<TABLE>
<CAPTION>
CFC/
FFOH SELECTED TRANSACTIONS
RATIOS MERGER MEAN MEDIAN MINIMUM MAXIMUM
<S> <C> <C> <C> <C> <C>
Deal Price per share/Book Value.......................................... 113.99% 131.64% 128.94% 106.99 % 163.36 %
Deal price per share/Tangible Book Value................................. 131.42 138.52 133.13 107.04 191.63
Adjusted Deal Price/6.50% Equity......................................... 122.93 155.85 149.10 129.80 217.92
Deal Price per share/Last 12 months earnings per share................... 26.39x 24.49x 26.06x 17.55x 29.80x
Deal Price/Assets........................................................ 12.14 13.43 12.11 10.32 18.44
Premium over Tangible Book Value/Deposits................................ 3.31 5.16 4.43 2.45 9.28
Deal Price/Deposits...................................................... 13.84 17.59 17.52 11.92 23.06
</TABLE>
No company or transaction used in the above analyses as a comparison is
identical to FFOH, CFC, or the Merger. Accordingly, an analysis of the results
of the foregoing is not mathematical; rather, it involves complex considerations
and judgments concerning differences in financial and operating characteristics
of the companies and other facts that could affect the public trading value of
the companies to which they are being compared.
PREMIUM TO MARKET PRICE. Stifel Nicolaus examined a range of implied prices
of each share of CFC Common Stock based on premiums to market trading prices
paid in two groups of comparable merger transactions involving thrift
institutions as sellers. Stifel Nicolaus analyzed the Midwest Transactions and
Selected Transactions to determine the 25th, 50th, and 75th percentile range of
announced acquisition premiums to market trading prices for the publicly traded
thrift institutions. Stifel Nicolaus applied acquisition premiums ranging from
14.2% to 40.8% to the CFC market trading price of $26.00 and calculated an
implied per share valuation range of $29.69 to $36.61 per share of CFC Common
Stock.
As described above, Stifel Nicolaus' opinion and presentation to the CFC
Board of Directors were among the many factors taken into consideration by the
CFC Board in making its determination to approve the Merger.
For Stifel Nicolaus' services in connection with the Merger, CFC has paid
Stifel Nicolaus $90,000 and will pay Stifel Nicolaus a total fee of 1% of the
Merger Consideration (of which such $90,000 shall be deemed partial payment)
upon the closing of the Merger pursuant to the terms of an engagement letter and
has agreed to reimburse Stifel Nicolaus for certain out-of-pocket expenses.
Pursuant to the engagement letter, CFC has agreed to indemnify Stifel Nicolaus,
its affiliates and their respective partners, directors, officers, agents,
consultants, employees and controlling persons against certain liabilities,
including liabilities under the federal securities laws.
In the ordinary course of its business, Stifel Nicolaus actively trades
equity securities of CFC and FFOH for its own account and for the accounts of
its customers and, accordingly, may at any time hold a long or short position in
such securities.
FFOH. The Board of Directors of FFOH retained RP Financial in March 1996 to
provide certain financial advisory and investment banking services to FFOH in
conjunction with the Merger, including the rendering of an opinion with respect
to
27
<PAGE>
the fairness of the Merger Consideration from a financial point of view to FFOH
shareholders. In requesting RP Financial's advice and opinion, the Board of
Directors of FFOH did not give any special instructions to, or impose any
limitations upon the scope of the investigation which RP Financial might wish to
conduct to enable it to give its opinion. RP Financial was selected by FFOH to
act as its financial advisor because of RP Financial's expertise in the
valuation of businesses and their securities for a variety of purposes including
its expertise in connection with mergers and acquisitions of savings and loan
associations, savings banks and savings and loan holding companies. RP Financial
previously acted as financial advisor to FFOH in a variety of planning and
valuation matters not related to the Merger.
On April 29, 1996, at the meeting in which the FFOH Board approved and
adopted the Agreement and the transactions contemplated thereby, RP Financial
rendered its opinion to the FFOH Board that, as of such date, the Merger
Consideration was fair to FFOH shareholders from a financial point of view. That
opinion was updated as of the date of this Prospectus/Joint Proxy Statement. In
connection with its opinion dated the date of this Prospectus/Joint Proxy
Statement, RP Financial also confirmed the appropriateness of its reliance on
the analysis used to render its April 29, 1996 opinion by performing procedures
to update certain of such analyses and by reviewing the assumptions on which
such analyses were based and the factors considered in connection therewith.
The full text of the opinion of RP Financial, which sets forth the
assumptions made, matters considered and limitations on the review undertaken,
is attached to this Prospectus/Joint Proxy Statement as Annex VII and is
incorporated herein by reference. FFOH's shareholders are urged to read the
opinion in its entirety.
THE OPINION OF RP FINANCIAL IS DIRECTED TO THE FFOH BOARD IN ITS
CONSIDERATION OF THE MERGER CONSIDERATION AS DESCRIBED IN THE AGREEMENT, AND
DOES NOT CONSTITUTE A RECOMMENDATION TO ANY SHAREHOLDER OF FFOH AS TO ANY ACTION
THAT SUCH SHAREHOLDER SHOULD TAKE IN CONNECTION WITH THE AGREEMENT, OR
OTHERWISE. IT IS FURTHER UNDERSTOOD THAT THE OPINION OF RP FINANCIAL IS BASED ON
MARKET CONDITIONS AND OTHER CIRCUMSTANCES EXISTING ON APRIL 29, 1996 AND THE
DATE HEREOF.
The opinion states that RP Financial reviewed and analyzed the following
material in conjunction with its analysis of the Merger Consideration as
described in the Agreement: (1) the Agreement of Merger, dated April 29, 1996,
including all exhibits thereto; (2) the following information for CFC: (a)
audited financial statements for the fiscal years ended June 30, 1992 through
June 30, 1995, incorporated in CFC's annual reports to shareholders or Form
10-KSBs, shareholder and internal reports, and quarterly financial statements
for the quarters ended September 30, 1995, December 31, 1995 and March 31, 1996
incorporated in Form 10-QSBs; (b) the Prospectus utilized in connection with
People's Savings' mutual-to-stock conversion dated June 25, 1991; (c) proxy
statements for the last two years; and (d) unaudited internal and regulatory
financial reports and analyses prepared by management of CFC regarding various
aspects of CFC's assets and liabilities, particularly rates, volumes,
maturities, market values, trends, credit risk, interest rate risk and liquidity
risk of assets, liabilities, off-balance sheet assets, commitments and
contingencies of CFC; and (3) the following information for FFOH: (a) audited
financial statements for the fiscal years ended December 31, 1993 through
December 31, 1995, incorporated in FFOH's annual reports to shareholders or Form
10-Ks, and quarterly financial statements for the quarter ended March 31, 1996
incorporated in FFOH's Form 10-Q; (b) the Prospectus utilized in connection with
FFOH's mutual-to-stock conversion dated January 11, 1996; (c) proxy statements
for the last two years; and (d) unaudited internal and regulatory financial
reports and analyses prepared by management of FFOH regarding various aspects of
FFOH's assets and liabilities, particularly rates, volumes, maturities, market
values, trends, credit risk, interest rate risk and liquidity risk of assets,
liabilities, off-balance sheet assets, commitments and contingencies of FFOH.
The opinion further states that RP Financial reviewed the trading activity
of the CFC Common Stock, and compared it to similar information for thrift
institutions with comparable resources, financial condition, earnings,
operations and markets as well as for publicly-traded thrifts with comparable
financial condition, earnings, operations and markets. The opinion further
states that in the course of its evaluation and analyses, RP Financial conducted
discussions with managements of FFOH and CFC regarding past and current business
operations, financial condition, and future prospects. RP Financial reviewed
CFC's financial, operational and market area characteristics compared to similar
information for comparable thrift institutions, evaluated the potential for
growth and profitability for CFC in its market, specifically regarding
competition by other banks, thrifts, mortgage banking companies and other
financial services companies, economic projections in the local market area, the
impact of the regulatory, legislative and economic environments on operations
and the public perception of the thrift and banking industries, and the pro
forma impact on FFOH's financial condition and operations of the Merger,
including potential cost savings and earnings improvements available to FFOH as
a result of the Merger.
28
<PAGE>
As set forth in the opinion, RP Financial relied, without independent
verification, on the accuracy and completeness of the information concerning
FFOH and CFC furnished to RP Financial by the respective companies, as well as
publicly-available information regarding other financial institutions and
economic data. RP Financial relied upon the managements of FFOH and CFC as to
the reasonableness and achievability of the financial forecasts (and the
assumptions and bases therefor) provided to RP Financial, and assumed that such
forecasts reflected the best currently available estimates and judgments of such
managements and that such financial forecasts would be realized in the amounts
and in the time periods estimated by such managements. RP Financial did not
perform or obtain any independent appraisals or evaluations of the assets and
liabilities and potential and/or contingent liabilities of FFOH or CFC.
Moreover, RP Financial expressed no opinion on matters of a legal, accounting or
tax nature or the ability of the Merger to be consummated as set forth in the
Agreement.
The financial forecasts reviewed by RP Financial were prepared by the
managements of FFOH and CFC. Neither FFOH nor CFC publicly discloses internal
management forecasts of the type provided to the FFOH Board and RP Financial in
connection with the review of the Merger, and such financial forecasts were not
prepared with a view towards public disclosure. The financial forecasts were
based upon numerous variables and assumptions which are inherently uncertain,
including without limitation factors related to general economic and competitive
conditions, as well as trends in asset quality. Accordingly, actual results
could vary significantly from those set forth in such financial forecasts.
In connection with rendering its opinion dated April 29, 1996 and updated
as of the date of this Prospectus/Joint Proxy Statement, RP Financial performed
a variety of analyses, which are summarized below. The preparation of a fairness
opinion is a complex process involving subjective judgments and is not
necessarily susceptible to partial analyses or summary description. RP Financial
stated that its analyses must be considered as a whole and that selecting
portions of such analyses and of the factors considered by RP Financial without
considering all such analyses and factors could create an incomplete view of the
process underlying RP Financial's opinion. In its analyses, RP Financial made
numerous assumptions with respect to industry performance, business and economic
conditions, applicable laws and regulations, and other matters, many of which
are beyond the control of FFOH. Any estimates contained in RP Financial's
analyses are not necessarily indicative of future results or values, which may
be significantly more or less favorable than such estimates. No company or
transaction utilized in RP Financial's analyses was identical to FFOH, CFC or
the Merger. None of the analyses performed by RP Financial was assigned a
greater significance by RP Financial than any other.
The following is a summary of the material financial analyses performed by
RP Financial in connection with providing its opinion of April 29, 1996 and does
not purport to be a complete description of all analyses employed by RP
Financial.
(a) TRANSACTION SUMMARY. RP Financial summarized the terms of the Merger,
including the conversion of each share of CFC Common Stock into the right to
receive either cash or FFOH Common Stock. RP Financial also summarized the
purchase accounting treatment of the Merger including the calculation of
intangible assets, the collars and related provisions negotiated in conjunction
with the issuance of FFOH Common Stock, and the pricing ratios indicated by the
Merger Consideration relative to the book value, tangible book value, earnings
and assets of CFC.
(b) COMPARABLE TRANSACTIONS ANALYSIS. In this analysis, RP Financial
conducted an evaluation of the financial terms, financial and operating
condition and market area of other recent business combinations among comparable
thrift institutions both pending and completed. In conjunction with its
analysis, RP Financial considered the multiples of book value, earnings and
assets implied by the terms in such completed and pending comparable
transactions involving: (i) selling companies whose financial characteristics
were comparable to those of CFC including companies operating in the Midwest
U.S. with total assets of between $100 and $400 million, equity to assets
greater than 8.0 percent and return on equity of less than 8.0 percent
("Comparable Transactions"); and (ii) selling companies headquartered in the
State of Ohio or Northern Kentucky ("Ohio/No. Kentucky Transactions"). The
average price-to-book value ratios indicated by the Comparable Transactions and
Ohio/No. Kentucky Transactions were 130% and 144%, respectively, versus a
price-to-book value ratio of approximately 113% indicated by the Merger
Consideration based on March 31, 1996 financial data and 114% based on
forecasted December 31, 1996 financial data. The average price-to-tangible book
value ratios indicated by the Comparable Transactions and Ohio/No. Kentucky
Transactions were 132% and 144%, respectively, versus a price-to-tangible book
value ratio of approximately 130% indicated by the Merger Consideration based on
March 31, 1996 financial data and 131% based on forecasted December 31, 1996
financial data. The average price-to-earnings multiples indicated by the
Comparable Transactions and the Ohio/No. Kentucky Transactions were 24.85 times
and 22.63 times, respectively, versus a price-to-earnings multiple of
approximately 26.47 times indicated by the Merger Consideration based on March
31, 1996 financial data and 18.95 times
29
<PAGE>
based on forecasted December 31, 1996 financial data. The average
price-to-assets ratios indicated by the Comparable Transactions and Ohio/No.
Kentucky Transactions were 18.97% and 21.98%, respectively, versus a
price-to-assets ratio of approximately 12.01% indicated by the Merger
Consideration based on March 31, 1996 financial data and 12.02% based on
forecasted December 31, 1996 financial data.
(c) ABILITY TO PAY ANALYSIS. In this analysis, RP Financial analyzed
certain balance sheet and income statement data for FFOH and CFC on a pro forma
combined basis. Such analysis reviewed the pro forma and forecasted
profitability, capital, tangible capital, credit quality, and asset size of FFOH
and CFC. The analysis showed, among other things, that the combined company will
have approximately $470 million in assets and stockholders' equity of $66
million on a pro forma combined basis after the Merger. Approximately $4.5
million of intangible assets will be created as a result of the Merger in
addition to the approximately $3.1 million of existing intangible assets of CFC.
Profitability was evaluated assuming expense savings of approximately $750,000
annually, and the forecasted financial information was evaluated utilizing a
sensitivity analysis. The results of the Ability to Pay Analysis indicated that
the financial terms of the Merger were forecasted to be dilutive to FFOH's
tangible book value per share, with tangible book value per share realizing a
decrease of between 14% and 19%, with the level of such dilution depending upon
the issuance price of FFOH Common Stock at the date the Exchange Ratio is
determined. The results of the Ability to Pay Analysis indicated that the
financial terms of the Merger were forecasted to be accretive to FFOH's earnings
per share, with fiscal 1997 earnings per share realizing an increase of between
approximately 12% and 18%, depending upon the issuance price of FFOH Common
Stock at the date the Exchange Ratio is determined, and fiscal 1998 earnings per
share realizing an increase of between approximately 11% to 17%. The benefits to
the holders of FFOH Common Stock of the earnings accretion were evaluated
relative to the dilution in tangible book value. RP Financial also took into
account such factors as FFOH's greater market capitalization and the greater
liquidity of the FFOH Common Stock on a combined pro forma basis, as well as the
competitive advantages anticipated to be realized by FFOH as a result of the
Merger in terms of increased asset size, available economies of scale, expanded
number of markets served through the expanded branch network, and future
opportunities for expansion. The Ability to Pay Analysis was based on data
available at the time performed and should not be construed as indicative of the
actual impact of the Merger upon consummation or future impact of the Merger
following consummation.
(d) ALTERNATIVE STRATEGIES. RP Financial evaluated alternative strategies
that could potentially be pursued by FFOH in lieu of the Merger to increase
earnings per share. Evaluated were two alternative strategies. In the first
alternative strategy, instead of the Merger, FFOH pursued a leverage strategy
that sought to increase earnings per share by quickly adding new assets and
liabilities at a positive yield-cost spread. Such leverage was assumed to be in
addition to internal growth forecasted by FFOH, and was comprised of purchases
of investment and mortgage-backed securities funded with borrowings (i.e.
"wholesale growth") at a pre-tax spread of between 0.50% and 0.75%. In the
second alternative strategy, FFOH pursued an aggressive stock repurchase
strategy, repurchasing shares of FFOH Common Stock in the open market to
increase earnings per share. Stock repurchases by FFOH were assumed at $10.12
per share with a pretax funding cost of 6.5% for the cash utilized to repurchase
shares. To achieve an earnings per share accretion of approximately 15% (i.e.,
comparable to the anticipated midrange of earnings increases forecasted for the
Merger) under the alternative strategies, FFOH would be required to either
leverage the balance sheet with wholesale growth of between $80 to $120 million
or would be required to repurchase approximately 30 percent of the existing
outstanding shares of FFOH Common Stock. RP Financial concluded that such
alternative strategies would likely face sufficient regulatory and market
hurdles as to make them unfeasible to implement. In addition, RP Financial's
analysis considered a comparative analysis of other such factors as market
share, competitive considerations, and other benefits to FFOH provided by the
Merger than would not be provided by such alternative strategies.
On the basis of these analyses, RP Financial concluded that the Merger
Consideration, as described in the Agreement, is fair to the shareholders of
FFOH from a financial point of view. As described above, RP Financial's opinion
and presentation to the FFOH Board was one of many factors taken into
consideration by the FFOH Board in making its determination to approve the
Agreement. Although the foregoing summary describes the material components of
the analyses presented by RP Financial to the FFOH Board, it does not purport to
be a complete description of all the analyses performed by RP Financial and is
qualified by reference to the written opinion of RP Financial attached to this
Prospectus/Joint Proxy Statement as Annex VII, which the FFOH shareholders are
urged to read in its entirety.
FFOH and RP Financial have entered into a letter agreement, dated April 5,
1996 (the "RP Financial Engagement Letter"), relating to the services to be
provided by RP Financial in connection with the Merger. Pursuant to the RP
Financial Engagement Letter, FFOH agreed to pay RP Financial total fees of
$65,000, of which $40,000 has been paid to date, plus reimbursement of certain
out-of-pocket expenses, for its services in connection with the Merger. In
addition, pursuant to the
30
<PAGE>
RP Financial Engagement Letter, FFOH also agreed to indemnify RP Financial
against certain liabilities, including liabilities under the federal securities
laws.
EFFECTS OF THE MERGER
EFFECT ON CFC'S SHAREHOLDERS. Upon consummation of the Merger, each
shareholder of CFC shall be entitled to receive either cash or shares of FFOH
Common Stock, or, in certain circumstances, a combination of cash and shares of
FFOH Common Stock, in consideration for each share of CFC Common Stock then held
and thereupon shall cease to be a shareholder of CFC.
EFFECT ON CFC AND PEOPLE'S SAVINGS. Upon consummation of the Merger, FAC,
as the surviving corporation of the Merger, shall succeed to all the rights,
obligations and properties of CFC, the separate corporate existence of which
shall cease. In addition, upon consummation of the Bank Merger, Fidelity
Federal, as the surviving corporation of the Bank Merger, shall succeed to all
the rights, obligations and properties of People's Savings, the separate
corporate existence of which shall cease.
EFFECT ON FFOH. Upon consummation of the Merger, Messrs. Rolf, Hughes and
Spaeth will become directors of FFOH, for terms expiring at FFOH's 1999 annual
meeting of shareholders. In addition, upon consummation of the Merger, Mr.
Staubach shall resign as a director of Fidelity Federal, and the resultant
vacancy shall be filled by Mr. Rolf.
THE MERGER CONSIDERATION
GENERAL. The Agreement provides that at the Effective Time, each share of
CFC Common Stock (other than (i) any dissenting shares under the OGCL and (ii)
any shares held by FFOH or CFC) shall, by virtue of the Merger and without any
action on the part of the holder thereof, be converted into the right to
receive, subject to certain terms, conditions, limitations and procedures set
forth in the Agreement, either $38.00 in cash or a number of shares of FFOH
Common Stock which will be determined by applying a formula, set forth in the
Agreement, which is based on the Average FFOH Price over a 20 trading day period
(the "pricing period") ending on the date FFOH and CFC receive all requisite
regulatory approvals and satisfy all applicable waiting periods related to the
Merger or, under certain circumstances, a combination of cash and shares of FFOH
Common Stock. If, over the pricing period, the Average FFOH Price is equal to or
greater than $9.00 but equal to or less than $11.00, shareholders of CFC
electing to receive stock will receive for each share of CFC Common Stock that
number of shares of FFOH Common Stock equal to the ratio determined by dividing
$38.00 by the Average FFOH Price. If the Average FFOH Price is greater than
$11.00, shareholders of CFC will receive 3.45 shares of FFOH Common Stock for
each share of CFC Common Stock, while if the Average FFOH Price is less than
$9.00, they will receive 4.22 shares for each such share.
If the Average FFOH Price is less than $8.00 per share, CFC may terminate
the Agreement, provided that in the event CFC elects to exercise this
termination right and upon notice, FFOH will have the right to adjust the
Exchange Ratio to an amount equal to 4.75 shares of FFOH Common Stock, in which
case the Agreement will not be terminated.
If between the date of the Prospectus/Joint Proxy Statement and the
Effective Time, the shares of FFOH Common Stock are changed into or exchanged
for a different number or kind of shares by reason of any reorganization,
reclassification, recapitalization, stock dividend, stock split, reverse stock
split or other changes in FFOH's capitalization, the Merger Consideration as
specified above shall be adjusted accordingly.
ELECTION AND EXCHANGE PROCEDURES. As promptly as practicable after the
Effective Time (and in no event later than seven business days following the
Effective Time), FFOH shall cause a to-be-designated exchange agent ("Exchange
Agent") to mail or make available to each holder of record of a certificate or
certificates which immediately prior the Effective Time represented issued and
outstanding shares of CFC Common Stock (i) a notice and letter of transmittal
(which shall specify that delivery shall be effected and risk of loss and title
to the certificates theretofore representing shares of CFC Common Stock shall
pass only upon proper delivery of such certificates to the Exchange Agent)
advising such holder of the effectiveness of the Merger and the procedure for
surrendering to the Exchange Agent such certificate or certificates in exchange
for the Merger Consideration and (ii) an election form in such form as FFOH and
CFC shall mutually agree ("Election Form"). Each Election Form shall permit the
holder (or in the case of nominee record holders, the beneficial owner through
proper instructions and documentation) (i) to elect to receive FFOH Common Stock
with respect to all such holder's CFC Common Stock (the "Stock Election
Shares"), (ii) to elect to receive cash with respect to all such holder's CFC
Common Stock (the "Cash Election Shares"), or (iii) to indicate that such holder
makes no such election with respect to such holder's shares of CFC Common Stock
(the "No-Election Shares"). Any shares of CFC Common Stock with respect to which
the holder thereof
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<PAGE>
shall not, as of a to-be-specified deadline ("Election Deadline"), have made
such an election by submission to the Exchange Agent of an effective, properly
completed Election Form shall be deemed to be No-Election Shares.
Any election to receive FFOH Common Stock or cash shall have been properly
made only if the Exchange Agent shall have actually received a properly
completed Election Form by the Election Deadline. An Election Form will be
properly completed only if accompanied by certificates representing all shares
of CFC Common Stock covered thereby, subject to certain limited exceptions in
the case of lost or destroyed certificates. Any Election Form may be revoked or
changed by the person submitting such Election Form to the Exchange Agent by
written notice to the Exchange Agent only if such notice is actually received by
the Exchange Agent at or prior to the Election Deadline. The certificate or
certificates representing CFC Common Stock relating to any revoked Election Form
shall be promptly returned without charge to the person submitting the Election
Form to the Exchange Agent. The Exchange Agent shall have reasonable discretion
to determine when any election, modification or revocation is received and
whether any such election, modification or revocation has been properly made.
Within ten business days after the Election Deadline, the Exchange Agent
will effect the allocation among holders of CFC Common Stock of rights to
receive FFOH Common Stock or cash in accordance with the Election Form.
If the number of Cash Election Shares times $38.00 is less than the product
of the number of shares of CFC Common Stock (other than shares of CFC Common
Stock owned by CFC (including treasury shares) or FFOH) outstanding at the
Effective Time times .45 times $38.00 (the "Aggregate Cash Consideration"),
then:
(1) all Cash Election Shares will be converted into the right to
receive cash,
(2) the Exchange Agent will select first from among the holders of
No-Election Shares and then (if necessary) will allocate among the holders
of Stock Election Shares (by the method of allocation described below), a
sufficient number of Stock Election Shares ("Reallocated Cash Shares") such
that the sum of the number of Cash Election Shares plus the number of
Reallocated Cash Shares times $38.00 equals the Aggregate Cash
Consideration, and all Reallocated Cash Shares will be converted into the
right to receive cash, and
(3) the No-Election Shares and Stock Election Shares which are not
Reallocated Cash Shares will be converted into the right to receive
Acquiror Common Stock.
If the number of Cash Election Shares times $38.00 is greater than the
Aggregate Cash Consideration, then:
(1) all Stock Election Shares and all No-Election Shares will be
converted into the right to receive FFOH Common Stock,
(2) the Exchange Agent will allocate among the holders of Cash
Election Shares (by the method of allocation described below), a sufficient
number of Cash Election Shares ("Reallocated Stock Shares") such that the
number of remaining Cash Election Shares times $38.00 equals the Aggregate
Cash Consideration, and all Reallocated Stock Shares shall be converted
into the right to receive FFOH Common Stock, and
(3) the Cash Election Shares which are not Reallocated Stock Shares
will be converted into the right to receive cash.
After the completion of the foregoing allocation, each holder of an
outstanding certificate or certificates which prior thereto represented shares
of CFC Common Stock who surrenders such certificate or certificates to the
Exchange Agent will, upon acceptance thereof by the Exchange Agent, be entitled
to a certificate or certificates representing the number of full shares of FFOH
Common Stock or the amount of cash into which the aggregate number of shares of
CFC Common Stock previously represented by such certificate or certificates
surrendered shall have been converted pursuant to the Agreement and, if such
holder's shares of CFC Common Stock have been converted into FFOH Common Stock,
any other distribution theretofore paid with respect to the FFOH Common Stock
issuable in the Merger, in each case without interest. The Exchange Agent shall
accept such certificates upon compliance with such reasonable terms and
conditions as the Exchange Agent may impose to effect an orderly exchange
thereof in accordance with normal exchange practices. Each outstanding
certificate which prior to the Effective Time represented CFC Common Stock and
which is not surrendered to the Exchange Agent in accordance with the procedures
provided for in the Agreement shall, except as otherwise provided in the
Agreement, until duly surrendered to the Exchange Agent be deemed to evidence
ownership of the number of shares of FFOH Common Stock or the right to receive
the amount of cash into which such CFC Common Stock shall have been converted.
After the Effective Time, there shall be no further transfer on the records of
CFC of certificates representing shares of CFC Common Stock and if such
certificates are presented to FFOH for transfer, they shall be cancelled against
delivery of certificates for FFOH Common Stock or cash as provided in the
Agreement. No dividends which have been declared will be
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remitted to any person entitled to receive shares of FFOH Common Stock until
such person surrenders the certificate or certificates representing CFC Common
Stock, at which time such dividends shall be remitted to such person, without
interest.
NO FRACTIONAL SHARES OF FFOH COMMON STOCK TO BE ISSUED. No fractional
shares of FFOH Common Stock shall be issued in the Merger to holders of shares
of CFC Common Stock. Each holder of shares of CFC Common Stock who otherwise
would have been entitled to a fraction of a shares of FFOH Common Stock shall
receive in lieu thereof, at the time of surrender of the certificate or
certificates representing such holder's shares of CFC Common Stock, an amount of
cash (without interest) determined by multiplying the fractional share interest
to which such holder would otherwise be entitled by the Average FFOH Price.
TREATMENT OF OUTSTANDING STOCK OPTIONS FOR CFC COMMON STOCK. The Agreement
provides that immediately before the Effective Time, each option with respect to
CFC Common Stock that is outstanding and exercisable at the Effective Time shall
be cancelled and converted into the right to receive from CFC, subject to
required withholding taxes, if any, cash in an amount determined by multiplying
(i) the excess, if any, of $38.00 over the applicable exercise price per share
of such option by (ii) the number of shares of CFC Common Stock subject to such
option.
CONDITIONS TO THE MERGER
The Agreement provides that consummation of the Merger is subject to the
satisfaction of certain conditions, or the waiver of such conditions by the
party or parties entitled to do so, at or before the Effective Time. Each of the
parties' obligations under the Agreement is subject to the following conditions:
(i) all corporate action (including without limitation approval by the requisite
votes of the respective shareholders of FFOH, FAC and CFC) necessary to
authorize the execution and delivery of the Agreement and the Bank Agreement and
consummation of the transactions contemplated thereby shall have been duly and
validly taken; (ii) the receipt of all necessary regulatory approvals and
consents required to consummate the Merger and the Bank Merger by any
governmental authority, and the expiration of all notice periods and waiting
periods with respect thereto, provided, however, that no required approval or
consent shall include any condition or requirement that, individually or in the
aggregate, would result in a material adverse effect on the financial condition,
results of operations or business of FFOH on a consolidated basis or would so
materially reduce the economic or business benefits of the transactions
contemplated by the Agreement to FFOH that had such condition or requirement
been known FFOH, in its reasonable judgment, would not have entered into the
Agreement; (iii) none of FFOH or CFC or their respective subsidiaries shall be
subject to any statute, rule, regulation, injunction or other order or decree
which prohibits, restricts or makes illegal the consummation of the Merger or
the Bank Merger or any of the other transactions contemplated thereby; (iv) the
Registration Statement shall have become effective under the Securities Act, and
FFOH shall have received all permits, authorizations or exemptions necessary
under all state securities laws to issue FFOH Common Stock in connection with
the Merger, and neither the Registration Statement nor any such permit,
authorization or exemption shall be subject to a stop order or threatened stop
order by any governmental authority; (v) the shares of FFOH Common Stock to be
issued in connection with the Merger shall have been approved for quotation on
NASDAQ; and (vi) each of FFOH and CFC shall have received an opinion to the
effect that the Merger qualifies as a reorganization within the meaning of
Section 368(a) of the Code and with respect to certain other related federal
income tax considerations.
In addition to the foregoing conditions, the obligations of FFOH under the
Agreement are conditioned upon (i) the accuracy in all material respects as of
the date of the Agreement and as of the Effective Time of the representations
and warranties of CFC set forth in the Agreement, except as to any
representation or warranty which specifically relates to an earlier date and
except as otherwise contemplated by the Agreement; (ii) the performance in all
material respects of all covenants and obligations required to be complied with
and satisfied by CFC; (iii) the receipt of a certificate from specified officers
of CFC with respect to compliance with the conditions relating to (i) and (ii)
immediately above as set forth in the Agreement; (iv) the receipt of certain
legal opinions from CFC's legal counsel; (v) the receipt by FFOH of such
certificates of CFC's officers or others and such other documents to evidence
fulfillment of the conditions relating to CFC as FFOH may reasonably request;
and (vi) the holders of not more than 10% of the outstanding CFC Common Stock
shall have elected to exercise dissenters' or appraisal rights under Section
1701.85 of the OGCL. Any of the foregoing conditions may be waived by FFOH.
In addition to the other conditions set forth above, CFC's obligations
under the Agreement are conditioned upon (i) the accuracy in all material
respects as of the date of the Agreement and as of the Effective Time of the
representations and warranties of FFOH set forth in the Agreement, except as to
any representation or warranty which specifically relates to an earlier date and
except as otherwise contemplated by the Agreement; (ii) the performance in all
material respects of all covenants and obligations required to be complied with
and satisfied by FFOH; (iii) the receipt of a certificate from specified
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officers of FFOH with respect to compliance with the conditions relating to (i)
and (ii) immediately above as set forth in the Agreement; (iv) the receipt of
certain legal opinions from legal counsel to FFOH; and (v) the receipt by CFC of
such certificates of FFOH's officers or others and such other documents to
evidence fulfillment of the conditions relating to them as CFC may reasonably
request. Any of the foregoing conditions may be waived by CFC.
REGULATORY APPROVALS
Consummation of the Merger is subject to prior receipt of all required
approvals and consents of the Merger and the Bank Merger by all applicable
federal and state regulatory authorities. In order to consummate the Merger and
the Bank Merger, FFOH must obtain the prior consent and approval, as applicable,
of the OTS and the Department.
The Merger is subject to the prior approval of the OTS under the HOLA and
the Bank Merger is subject to the prior approval of the OTS under the Bank
Merger Act ("BMA") provisions of the Federal Deposit Insurance Act. Pursuant to
the applicable provisions of the HOLA and the BMA, the OTS may not approve the
Merger or the Bank Merger if (i) such transaction would result in a monopoly or
would be in furtherance of any combination or conspiracy to monopolize or
attempt to monopolize the business of banking in any part of the United States;
or (ii) the effect of such transaction, in any section of the country, may be to
substantially lessen competition, or tend to create a monopoly, or in any other
manner to restrain trade, in each case unless the OTS finds that the
anticompetitive effects of the proposed transaction are clearly outweighed in
the public interests by the probable effect of the transaction in meeting the
convenience and needs of the community to be served. In conducting its review of
any application for approval, the OTS is required to consider whether the
financial and managerial resources of the acquiring savings and loan holding
company and acquiring savings institution are adequate (including consideration
by a variety of means of the competence, experience and integrity of the
applicant's directors, officers and principal shareholders and compliance with,
among other things, fair lending laws). The OTS has the authority to deny an
application if it concludes that the combined organization would have an
inadequate capital position or if the acquiring organization does not meet the
requirements of the Community Reinvestment Act of 1977, as amended.
Each of the HOLA and the BMA provides that a transaction approved by the
OTS generally may not be consummated until 30 days after approval by such
agency. If the U.S. Department of Justice and the OTS otherwise agree, this
30-day period may be reduced to as few as 15 days. During such period, the U.S.
Department of Justice may commence a legal action challenging the transaction
under the antitrust laws. The commencement of an action would stay the
effectiveness of the approval of the OTS unless a court specifically orders
otherwise. If, however, the U.S. Department of Justice does not commence a legal
action during such waiting period, it may not thereafter challenge the
transaction except in an action commenced under Section 2 of the Sherman
Antitrust Act.
The approval of the Department also is required for consummation of the
Merger. Under Ohio law, the Department shall not approve an application for such
a transaction unless it determines, after a consideration of all relevant
evidence, that the rights of all interested parties are protected. The factors
to be considered by the Department in this regard are substantially similar to
those to be considered by the OTS, as discussed above.
Applications have been filed with applicable regulatory authorities for
approval of the Merger and the Bank Merger. Although neither FFOH nor CFC is
aware of any basis for disapproving the Merger and the Bank Merger, there can be
no assurance that all requisite approvals will be obtained, that such approvals
will be received on a timely basis or that such approvals will not impose
conditions or requirements which, individually or in the aggregate, would (i)
result in a material adverse effect on the financial condition, results of
operations or business of FFOH on a consolidated basis or (ii) so materially
reduce the economic or business benefits of the transactions contemplated by the
Agreement to FFOH that had such condition or requirement been known FFOH, in its
reasonable judgment, would not have entered into the Agreement. If any such
condition or requirement is imposed, the Agreement permits the Board of
Directors of FFOH to terminate the Agreement.
BUSINESS PENDING THE MERGER
Pursuant to the Agreement, CFC agreed that, except as contemplated by the
Agreement or with the prior written consent of FFOH, during the period from the
date of the Agreement and continuing until the Effective Time, CFC and CFC's
subsidiaries shall carry on their respective businesses in the ordinary course
consistent with past practice. Pursuant to the Agreement, CFC also agreed to use
all reasonable efforts to (i) preserve its business organization and that of its
subsidiaries intact, (ii) keep available to itself and FFOH the present services
of the employees of CFC and its subsidiaries and (iii) preserve for itself and
FFOH the goodwill of the customers of CFC and its subsidiaries and others with
whom business relationships exist. In addition, under the terms of the
Agreement, CFC agreed, except as contemplated by the Agreement, not to take
certain
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actions, nor permit its subsidiaries to take certain actions, without the prior
written consent of FFOH, including, among other things, the following: (i)
declare, set aside, make or pay any dividend or other distribution in respect of
CFC Common Stock, except for regular quarterly cash dividends at a rate per
share of CFC Common Stock not in excess of $.17 per share, which shall have the
same record and payment dates as the record and payment dates relating to
dividends on the FFOH Common Stock, it being the intention of the parties that
the shareholders of CFC receive dividends for any particular quarter on either
the CFC Common Stock or the FFOH Common Stock but not both; (ii) issue, grant or
authorize any capital stock or rights to acquire the same, other than in each
case pursuant to the CFC Option Agreement; purchase any shares of CFC Common
Stock; or effect any recapitalization, reclassification, stock dividend, stock
split or like change in capitalization; (iii) amend its articles of
incorporation, code of regulations or bylaws; impose, or suffer the imposition
of, any material lien, charge or encumbrance on any share of stock held by CFC
in any of its subsidiaries, or permit any such lien to exist; or waive or
release any material right or cancel or compromise any material debt or claim;
(iv) increase the rate of compensation of, pay or agree to pay any bonus or
severance to, or provide any other new employee benefit or incentive to, any of
its directors, officers or employees, except (a) as may be required pursuant to
binding commitments existing on the date of the Agreement or as previously
disclosed to FFOH, (b) in the case of employees who are not executive officers,
such as may be granted in the ordinary course of business consistent with past
practice and (c) in the case of Messrs. Rolf and Hughes, in the event the Merger
is not consummated by January 1, 1997, such as may be granted in the ordinary
course of business consistent with past practice; (v) enter into or, except as
may be required by law, modify any employee benefit plan, or make any
contributions to any defined benefit or defined contribution plan other than in
the ordinary course of business consistent with past practice; (vi) enter into
(w) any agreement, arrangement or commitment not made in the ordinary course of
business, (x) any agreement, indenture or other instrument relating to the
borrowing of money by CFC or its subsidiaries or guarantee by CFC or its
subsidiaries of any such obligation, except for deposits and certain other
borrowings in the ordinary course of business consistent with past practice, (y)
any employment, consulting or severance contracts or agreements, or amend any
such existing agreement, or (z) any contract, agreement or understanding with a
labor union; (vii) change its methods of accounting or tax reporting, except as
may be required by changes in generally accepted accounting principles or
applicable law; (viii) purchase or otherwise acquire, or sell or otherwise
dispose of, any assets or incur any liabilities other than in the ordinary
course of business consistent with past practice and policies; (ix) make any
capital expenditures in excess of $50,000 individually or $100,000 in the
aggregate, other than pursuant to binding commitments existing on the date of
the Agreement and other than expenditures necessary to maintain existing assets
in good repair; (x) file any applications or make any contract with respect to
branching or site location or relocation; (xi) acquire in any manner whatsoever
(other than to realize upon collateral for a defaulted loan) any business or
entity; (xii) engage in any transaction with affiliated persons or affiliates
other than loans to directors, officers and employees in the ordinary course of
business consistent with past practice and which are in compliance with the
requirements of applicable laws and regulations; (xiii) discharge or satisfy any
lien or encumbrance or pay any material obligation or liability (absolute or
contingent) other than at scheduled maturity or in the ordinary course of
business; (xiv) change its lending, investment, deposit or asset and liability
management or other banking policies in any material respect except as may be
required by applicable law; (xv) enter into any futures contract, option
contract, interest rate cap, interest rate floor, interest rate exchange
agreement or other agreement for purposes of hedging interest rate risk; (xvi)
enter or agree to enter into any agreement or arrangement granting any
preferential right to purchase any of its assets or rights or requiring the
consent of any party to the transfer and assignment of any such assets or
rights; (xvii) take any action that would result in any of the representations
and warranties of CFC contained in the Agreement not to be true and correct in
any material respect at the Effective Time; or (xviii) agree to do any of the
foregoing.
Pursuant to the Agreement, FFOH agreed that during the period from the date
of the Agreement to the Effective Time, except as expressly contemplated or
permitted by the Agreement or with the prior written consent of CFC, FFOH and
Fidelity Federal shall carry on their respective businesses in the ordinary
course consistent with past practice and use all reasonable efforts to preserve
intact their present business organizations and relationships. In addition,
under the terms of the Agreement, FFOH agreed, except as contemplated by the
Agreement, not to take the following actions, nor permit Fidelity Federal to
take the following actions, without the prior written consent of CFC: (i)
declare, set aside, make or pay any dividend or other distribution in respect of
FFOH Common Stock, except for regular quarterly cash dividends at a rate per
share of FFOH Common Stock not in excess of $.05 per share; (ii) issue, grant or
authorize any capital stock or rights to acquire the same, other than in each
case pursuant to the FFOH Option Agreement or FFOH employee stock benefit plans;
(iii) effect any recapitalization, reclassification, stock split or like change
in capitalization; (iv) amend its articles of incorporation, code of regulations
or bylaws in a manner which would adversely affect the terms of the FFOH Common
Stock or the ability of FFOH to consummate the transactions contemplated by the
Agreement; (v) acquire in any manner whatsoever (other than to realize upon
collateral for a defaulted loan) any business or entity (including acquisitions
of branch offices and related deposit liabilities); (vi) change its method of
accounting in a manner which would have a material adverse effect on FFOH's
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financial condition or results of operations during fiscal 1996, except as may
be required by changes in generally accepted accounting principles or applicable
law; (vii) take any action that would result in any of the representations and
warranties of FFOH contained in the Agreement not to be true and correct in any
material respect at the Effective Time; or (viii) agree to do any of the
foregoing.
Pursuant to the Agreement, FFOH and CFC also agreed to provide the other
party and its representatives with such financial data and other information
with respect to its and its subsidiaries' business and properties as such party
shall from time to time reasonably request. Each party will cause all non-public
financial and business information obtained by it from the other to be treated
confidentially. If the Merger is not consummated, each party will return to the
other all non-public financial statements, documents and other materials
previously furnished by such party.
NO SOLICITATION
Pursuant to the Agreement, neither CFC nor FFOH shall, and each of them
shall cause its respective subsidiaries not to, solicit or encourage inquiries
or proposals with respect to, furnish any information relating to, or
participate in any negotiations or discussions concerning, any acquisition,
lease or purchase of all or a substantial portion of the assets of, or any
equity interest in, such party or any of its subsidiaries, other than as
contemplated by the Agreement, provided, however, that the Board of Directors of
CFC or FFOH, on behalf of CFC and FFOH, respectively, may furnish such
information or participate in such negotiations or discussions if such Board of
Directors, after having consulted with and considered the advice of outside
counsel, has determined that the failure to do the same would cause the members
of such Board of Directors to breach their fiduciary duties under applicable
laws. Each of CFC and FFOH has agreed to promptly inform the other party of any
such request for information or of any such negotiations or discussions, as well
to instruct its and its subsidiaries' directors, officers, representatives and
agents to refrain from taking any action prohibited by the above-described
restrictions.
EFFECTIVE TIME OF THE MERGER; TERMINATION AND AMENDMENT
The Effective Time of the Merger shall be the date and time of the filing
of a certificate of merger with the Secretary of State of Ohio, unless a
different date and time is specified as the effective time in such certificate
of merger. The Effective Time shall be as set forth in such certificate of
merger, which will be filed only after the receipt of all requisite regulatory
approvals of the Merger and the Bank Merger, approval of the Agreement by the
requisite votes of the shareholders of CFC and FFOH and the satisfaction or
waiver of all other conditions to the Merger and the Bank Merger set forth in
the Agreement.
A closing (the "Closing") shall take place immediately prior to the
Effective Time on the fifth business day following the satisfaction or waiver
(to the extent permitted) of all the conditions to consummation of the Merger
specified in the Agreement (other than the delivery of certificates, opinions
and other instruments and documents to be delivered at the Closing), or on such
other date as the parties may mutually agree upon.
The Agreement may be terminated as follows: (i) at any time on or prior to
the Effective Time by the mutual consent in writing of the parties; (ii) at any
time on or prior to the Effective Time in the event of a material breach by the
other party of any representation, warranty, material covenant or undertaking,
which breach has not been cured within the time period specified in the
Agreement; (iii) at any time by any party in writing if any application for any
required federal or state regulatory approval has been denied or is approved
with any condition or requirement which would prevent satisfaction of this
condition to FFOH's obligation to consummate the Merger, and the time period for
appeals and requests for reconsideration has run; (iv) at any time by any party
in writing if the shareholders of FFOH or CFC fail to approve the Agreement at a
meeting duly called for the purpose, unless the failure of such occurrence is
due to the failure of the party seeking to terminate to perform or observe in
any material respect its agreements set forth in the Agreement; (v) by any party
in writing in the event that the Merger is not consummated by April 29, 1997,
provided that this right to terminate shall not be available to any party whose
failure to perform an obligation under the Agreement resulted in the failure of
the Merger to be consummated by such date; (vi) at any time by either FFOH or
CFC if such party is not in default and such party determines in good faith that
any condition precedent to such party's obligations to consummate the Merger is
or would be impossible to satisfy, and such condition is not waived by the other
party; and (vii) by CFC if the Average FFOH Price is less than $8.00, subject,
however, to the following three sentences. If CFC elects to exercise its
termination right pursuant to clause (vii) above, it shall give written notice
to FFOH. During the five-day period commencing with its receipt of such notice,
FFOH shall have the option to increase the stock portion of the consideration to
be received by the holders of CFC Common Stock under the Agreement by adjusting
the Exchange Ratio to 4.75 shares. If FFOH so elects within such five-day
period, it shall give prompt written notice to CFC of such election and the
revised Exchange Ratio, whereupon no termination shall have occurred pursuant to
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clause (vii) above and the Agreement shall remain in effect in accordance with
its terms (except as the Exchange Ratio shall have been so modified).
In the event of termination, the Agreement shall become null and void,
except that certain provisions thereof relating to expenses and confidentiality
shall survive any such termination and any such termination shall not relieve
any breaching party from liability for any willful breach of any covenant,
undertaking, representation or warranty giving rise to such termination.
To the extent permitted under applicable law, the Agreement may be amended
or supplemented at any time by written agreement of the parties whether before
or after the approval of the shareholders of FFOH or CFC, provided that after
any such approval the Agreement may not be amended or supplemented in a manner
which modifies either the amount or form of the consideration to be received by
CFC's shareholders or otherwise materially adversely affects CFC shareholders
without further approval by those shareholders who are so affected.
INTERESTS OF CERTAIN PERSONS IN THE MERGER
Certain directors and executive officers of CFC may be deemed to have
interests in the Merger in addition to their interests as shareholders
generally. The Board of Directors of CFC was aware of these factors and
considered them, among other matters, in approving the Agreement and the
transactions contemplated thereby.
ELECTION OF DIRECTORS. Pursuant to the Agreement, FFOH agreed that it will
take such action as is necessary to cause each of Donald H. Rolf, Jr., Joseph D.
Hughes and Thomas N. Spaeth to be elected as a director of FFOH for a term which
expires at FFOH's 1999 annual meeting of shareholders. In addition, FFOH has
agreed that effective as of the Effective Time, Paul D. Staubach shall resign as
a director of Fidelity Federal, and the resultant vacancy shall be filled by
Donald H. Rolf, Jr.
EMPLOYMENT AND SEVERANCE ARRANGEMENTS. Pursuant to the Agreement, as of the
Effective Time, FFOH and Fidelity Federal shall enter into an employment
agreement with Donald H. Rolf, Jr., Chairman and President of CFC, and Joseph D.
Hughes, Senior Vice President of CFC, pursuant to which Messrs. Rolf and Hughes
shall serve as Chairman and Executive Vice President, respectively, of FFOH and
Fidelity Federal for a period of three years from the Effective Time. In
addition, subject to satisfactory reviews by the Boards of Directors of FFOH and
Fidelity Federal (collectively, the "Employers"), the employment agreements may
be extended for additional one-year terms on each anniversary date so that the
remaining term shall be three years. Pursuant to the employment agreements,
Messrs. Rolf and Hughes shall be entitled to be compensated at a rate not less
than the rate of compensation received by him from People's Savings immediately
prior to the Effective Time.
The employment agreements are terminable with or without cause by the
Employers. Messrs. Rolf and Hughes shall have no right to compensation or other
benefits pursuant to the employment agreements for any period after voluntary
termination or termination by the Employers for cause, disability, retirement or
death, provided, however, that (i) in the event that either Mr. Rolf or Mr.
Hughes terminates his employment because of failure of the Employers to comply
with any material provision of the respective employment agreement or (ii) such
employment agreement is terminated by the Employers other than for cause,
disability, retirement or death or by Mr. Rolf or Mr. Hughes as a result of
certain adverse actions which are taken with respect to Mr. Rolf's or Mr.
Hughes' respective employment, in each case following a Change in Control of
FFOH, as defined, Messrs. Rolf and Hughes will be entitled to a cash severance
amount equal to three times his respective base salary. In addition, Messrs.
Rolf and Hughes will be entitled to a continuation of benefits similar to those
they are receiving at the time of such termination for the remaining term of the
agreement or until such employee obtains full-time employment with another
employer.
A Change in Control is generally defined in the employment agreements to
include any change in control required to be reported under the federal
securities laws, as well as (i) the acquisition by any person of 25% or more of
the FFOH's outstanding voting securities and (ii) a change in majority of the
directors of FFOH during any two-year period without the approval of at least
two-thirds of the persons who were directors of FFOH at the beginning of such
period.
The employment agreements provide that in the event that any of the
payments to be made thereunder or otherwise upon termination of employment are
deemed to constitute "excess parachute payments" within the meaning of Section
280G of the Code, then such payments and benefits received thereunder shall be
reduced, in the manner determined by the employee, by the amount, if any, which
is the minimum necessary to result in no portion of the payments and benefits
being non-deductible by the Employers for federal income tax purposes. Excess
parachute payments generally are payments in excess of three times the base
amount, which is defined to mean the recipients average annual compensation from
the employer includable in the recipient's gross income during the most recent
five taxable years ending before the date on which a change in control of the
employer occurred. Recipients of excess parachute payments are subject to a 20%
excise tax on the amount by which
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such payments exceed the base amount, in addition to regular income taxes, and
payments in excess of the base amount are not deductible by the employer as
compensation expense for federal income tax purposes.
In connection with the Merger and pursuant to the Agreement, as of the
Effective Time, the Employers will also enter into severance agreements with
Anita G. Glasmeier, an existing officer of People's Savings, and Carolyn R.
Watt, an existing officer of CFC and People's Savings, in order to assist the
Employers in maintaining a stable and competent management base. The severance
agreements provide for a two-year term, and subject to satisfactory performance
reviews by the Boards of Directors, may be extended on each anniversary date for
an additional year so that the remaining term will be two years. The severance
agreements provide for severance payments in the event that certain adverse
actions are taken with respect to an employee's employment following a Change in
Control of FFOH, as defined, in an amount equal to two times the respective
employee's annual compensation.
Finally, pursuant to the Agreement, as of the Effective Time, FFOH will
assume and satisfy CFC's obligations under an amended employment agreement with
a former officer of CFC.
INDEMNIFICATION AND INSURANCE. Pursuant to the Agreement, FFOH agreed, from
and after the Effective Time through the third anniversary of the Effective
Time, to indemnify and hold harmless each present and former director, officer
and employee of CFC or its subsidiaries determined as of the Effective Time
against any costs or expenses (including reasonable attorneys' fees), judgments,
fines, losses, claims, damages or liabilities incurred in connection with any
claim, action, suit, proceeding or investigation, whether civil, criminal,
administrative or investigative, arising out of matters existing or occurring at
or prior to the Effective Time, whether asserted or claimed prior to, at or
after the Effective Time, to the fullest extent to which such indemnified
parties were entitled under the articles of incorporation, code of regulations
and bylaws of CFC and any subsidiary of CFC as in effect as of the date of
execution of the Agreement.
Pursuant to the Agreement, FFOH also agreed to permit CFC to purchase
directors' and officers' liability insurance (on substantially the same terms
and conditions as the liability insurance currently provided for CFC's directors
and officers as of the date of the Agreement) for acts or omissions occurring
prior to the Effective Time for a period of three years following the Effective
Time, subject to certain limitations with respect to the cost of such insurance
coverage.
Other than as set forth above, no director or executive officer of CFC has
any direct or indirect material interest in the Merger, except insofar as
ownership of CFC Common Stock and existing options to purchase such stock might
be deemed such an interest.
CERTAIN EMPLOYEE MATTERS
The Agreement provides that current employees of CFC and its subsidiaries
shall be entitled to participate in FFOH's employee benefit plans on the same
terms and to the same extent as similarly situated employees of FFOH and its
subsidiaries. For purposes of determining eligibility to participate in and the
vesting of benefits under FFOH's employee benefit plans, FFOH shall recognize
years of service with CFC and its subsidiaries as such service is recognized by
CFC and its subsidiaries.
RESALE OF FFOH COMMON STOCK
The FFOH Common Stock issued pursuant to the Merger will be freely
transferable under the Securities Act, except for shares issued to any CFC
shareholder who may be deemed to be an affiliate of FFOH for purposes of Rule
144 promulgated under the Securities Act ("Rule 144") or an affiliate of CFC for
purposes of Rule 145 promulgated under the Securities Act ("Rule 145") (each an
"Affiliate"). Affiliates will include persons (generally executive officers,
directors and 10% shareholders) who control, are controlled by or are under
common control with (i) FFOH or CFC at the time of the CFC Special Meeting or
(ii) FFOH at or after the Effective Time.
Rules 144 and 145 will restrict the sale of FFOH Common Stock received in
the Merger by Affiliates and certain of their family members and related
interests. Generally speaking, during the two years following the Effective
Time, those persons who are Affiliates of CFC at the time of the CFC Special
Meeting, provided they are not Affiliates of FFOH at or following the Effective
Time, may publicly resell any FFOH Common Stock received by them in the Merger,
subject to certain limi-tations as to, among other things, the amount of FFOH
Common Stock sold by them in any three-month period and as to the manner of
sale. After the two-year period, such Affiliates may resell their shares without
such restrictions so long as there is adequate current public information with
respect to FFOH as required by Rule 144. Persons who are Affiliates of FFOH
after the Effective Time may publicly resell the FFOH Common Stock received by
them in the Merger subject to similar limitations and subject to certain filing
requirements specified in Rule 144.
38
<PAGE>
The ability of Affiliates to resell shares of FFOH Common Stock received in
the Merger under Rule 144 or 145 as summarized herein generally will be subject
to FFOH's having satisfied its Exchange Act reporting requirements for specified
periods prior to the time of sale. Affiliates also would be permitted to resell
FFOH Common Stock received in the Merger pursuant to an effective registration
statement under the Securities Act or another available exemption from the
Securities Act registration requirements. This Prospectus/Joint Proxy Statement
does not cover any resales of FFOH Common Stock received by persons who may be
deemed to be Affiliates of FFOH or CFC in the Merger.
FFOH has received from each person who may be deemed to be an Affiliate
(for purposes of Rule 145) of CFC a letter agreement intended to ensure
compliance with the foregoing provisions of the Securities Act.
CERTAIN FEDERAL INCOME TAX CONSEQUENCES
The following summary discusses the material federal income tax
consequences of the Merger. The summary is based on the Code, applicable
Treasury Regulations thereunder, and administrative rulings and judicial
authority as of the date hereof. All of the foregoing are subject to change, and
any such change could affect the continuing validity of this discussion. This
summary is not a complete description of all of the consequences of the Merger
and, in particular, may not address federal income tax considerations that may
affect the treatment of a shareholder which, at the Effective Time, already owns
FFOH Common Stock, is not a U.S. citizen, is a tax-exempt entity or an
individual who acquired CFC Common Stock pursuant to an employee stock option,
or exercises some form of control over CFC. In addition, no information is
provided herein with respect to the tax consequences of the Merger under
applicable foreign, state, or local laws.
Thompson Hine & Flory, P.L.L. has rendered an opinion to FFOH and CFC,
based upon the assumptions set forth therein, that the Merger will have the
federal income tax consequences as discussed below.
The Merger will constitute a reorganization within the meaning of Section
368(a)(1)(A) and Section 368(a)(2)(D) of the Code, and FFOH, FAC and CFC will
each be a party to a reorganization. Accordingly, neither FFOH, FAC nor CFC will
recognize any gain or loss as a result of the Merger. In addition, no gain or
loss will be recognized by a shareholder of CFC upon the exchange of shares of
CFC Common Stock solely for shares of FFOH Common Stock except for any gain
recognized with respect to cash received by a shareholder of CFC in lieu of
fractional shares of FFOH Common Stock. A shareholder of CFC who receives cash
in lieu of a fractional interest in FFOH Common Stock will be treated as if a
fractional share were distributed as part of the Merger exchange, immediately
redeemed, and then as having received a cash distribution in full payment of the
stock thus redeemed as provided in Section 302 of the Code. Any shareholder of
CFC who receives cash in exchange for their shares of CFC Common Stock will
recognize gain, if any, equal to the lesser of (i) the excess of the amount of
cash plus the fair market value of any FFOH Common Stock received in the Merger
over the shareholder's adjusted tax basis in their CFC Common Stock, or (ii) the
amount of cash received. The adjusted tax basis of the FFOH Common Stock
received by shareholders of CFC who exchange all of their CFC Common Stock
solely for FFOH Common Stock in the Merger will be the same as the adjusted tax
basis of the shares of CFC Common Stock surrendered in exchange therefor,
decreased by any amount allocable to a fractional share interest for which cash
is received. The holding period of the FFOH Common Stock received by
shareholders of CFC who exchange all of their CFC Common Stock solely for FFOH
Common Stock in the Merger will include the holding period of the shares of CFC
Common Stock surrendered in exchange therefor, provided that such CFC Common
Stock is held as a capital asset by the CFC shareholder at the consummation of
the Merger.
THE PRECEDING DISCUSSION DOES NOT PURPORT TO BE A COMPLETE ANALYSIS OR
DISCUSSION OF ALL POTENTIAL TAX EFFECTS OF THE MERGER AND DOES NOT CONSIDER THE
PARTICULAR FACTS OR CIRCUMSTANCES OF ANY SHAREHOLDER. THUS, CFC SHAREHOLDERS ARE
URGED TO CONSULT THEIR OWN TAX ADVISORS AS TO THE SPECIFIC TAX CONSEQUENCES TO
THEM OF THE MERGER.
ACCOUNTING TREATMENT OF THE MERGER
The Merger will be accounted for as a purchase for financial reporting
purposes. Under this method of accounting, FFOH will record the acquisition of
CFC at its cost at the Effective Time of the Merger, which cost would include
the cash paid in the Merger, the fair value of the shares of FFOH Common Stock
issued in the Merger and all direct acquisition costs. The acquisition cost will
be allocated to the acquired assets and liabilities of CFC based upon their fair
values at the Effective Time of the Merger in accordance with generally accepted
accounting principles. Acquisition cost in excess of the fair values of the net
assets acquired, if any, will be recorded as an intangible asset and amortized
over a period of 15 years for financial accounting purposes. The reported income
of FFOH will include the operations of CFC after the Effective Time of the
Merger. See "Pro Forma Combined Consolidated Financial Information."
39
<PAGE>
EXPENSES OF THE MERGER
The Agreement provides that each party thereto shall each bear and pay all
costs and expenses incurred by it in connection with the transactions
contemplated by the Agreement, including fees and expenses of its own financial
consultants, accountants and counsel, except that expenses of printing the
Registration Statement and the registration fee to be paid to the SEC in
connection therewith shall be shared equally between FFOH and CFC.
STOCK OPTION AGREEMENTS
As an inducement and a condition to FFOH's entering into the Agreement,
FFOH and CFC also entered into the CFC Option Agreement, pursuant to which CFC,
as issuer, granted FFOH, as grantee, the CFC Option, upon the occurrence of
certain events (none of which has occurred as of the date hereof to the best of
the knowledge of FFOH and CFC), to purchase up to 140,911 shares of CFC Common
Stock, representing 19.9% of the outstanding shares of CFC Common Stock, at a
price of $30.00 per share, subject to adjustment in certain circumstances and
termination within certain periods. As an inducement and a condition to CFC's
entering into the Agreement, FFOH and CFC also entered into the FFOH Option
Agreement, pursuant to which FFOH, as issuer, granted CFC, as grantee, the FFOH
Option, upon the occurrence of certain events (none of which has occurred as of
the date hereof to the best of the knowledge of FFOH and CFC), to purchase up to
403,285 shares of FFOH Common Stock, representing approximately 9.9% of the
outstanding shares of FFOH Common Stock, at a price of $11.00 per share, subject
to adjustment in certain circumstances and termination within certain periods.
With the exception of the number and percentage of shares of common stock of the
Issuer ("Issuer Common Stock") subject to an Option ("Option Shares") and the
per share price at which an Option may be exercised, the terms of the CFC Stock
Option Agreement and the FFOH Stock Option Agreement are substantially
identical.
For purposes of the following summary of the material provisions of the
Stock Option Agreements, the term (i) "Issuer" means CFC with respect to the CFC
Option Agreement and FFOH with respect to the FFOH Option Agreement, (ii)
"Grantee" means FFOH with respect to the CFC Option Agreement and CFC with
respect to the FFOH Option Agreement and (iii) "Option" means the CFC Option or
the FFOH Option, as applicable.
Provided that the holder of an Option (which is initially the Grantee
thereof) is not in material breach of the Agreement or the applicable Stock
Option Agreement and there is no applicable injunction or order in effect, the
holder of the Option may exercise the Option, in whole or in part, at any time
and from time to time following the occurrence of a Purchase Event (as defined),
provided that the Option shall terminate and be of no further force and effect
upon the earliest to occur of (i) the Effective Time, (ii) termination of the
Agreement in accordance with its terms prior to the occurrence of a Purchase
Event or a Preliminary Purchase Event (as defined), other than a termination of
the Agreement by Grantee as a result of the Issuer having breached a material
covenant or obligation in the Agreement (a "Default Termination"); (iii) 12
months after termination of the Agreement by Grantee pursuant to a Default
Termination and (iv) 12 months after termination of the Agreement (other than
pursuant to a Default Termination) following the occurrence of a Purchase Event
or a Preliminary Purchase Event. The purchase of any shares of Issuer Common
Stock pursuant to a Stock Option Agreement is subject to compliance with
applicable law, including the receipt of necessary approvals under the change in
Bank Control Act of 1978, as amended (the "CBC Act").
Each Stock Option Agreement defines a "Purchase Event" to mean any of the
following events:
(i) without Grantee's prior written consent, Issuer shall have
authorized, recommended or publicly-proposed, or publicly announced an
intention to authorize, recommend or propose, or entered into an agreement
with any person (other than Grantee or any subsidiary of Grantee) to effect
(A) a merger, consolidation or similar transaction involving Issuer or any
of its subsidiaries, (B) the disposition, by sale, lease, exchange or
otherwise, of assets of Issuer or any of its subsidiaries representing in
either case 20% or more of the consolidated assets of Issuer and its
subsidiaries, or (C) the issuance, sale or other disposition of (including
by way of merger, consolidation, share exchange or any similar transaction)
securities representing 20% or more of the voting power of Issuer or any of
its subsidiaries (any of the foregoing an "Acquisition Transaction"); or
(ii) any person (other than Grantee or any subsidiary of Grantee)
shall have acquired beneficial ownership (as such term is defined in Rule
13d-3 promulgated under the Exchange Act) of or the right to acquire
beneficial ownership of, or any "group" (as such term is defined in Section
13(d)(3) of the Exchange Act) shall have been formed which beneficially
owns or has the right to acquire beneficial ownership of, 25% or more of
the then outstanding shares of Issuer Common Stock.
Each Stock Option Agreement defines a "Preliminary Purchase Event" to
include any of the following events:
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<PAGE>
(i) any person (other than Grantee or any subsidiary of Grantee) shall
have commenced (as such term is defined in Rule 14d-2 under the Exchange
Act), or shall have filed a registration statement under the Securities Act
with respect to, a tender offer or exchange offer to purchase any shares of
Issuer Common Stock such that, upon consummation of such offer, such person
would own or control 10% or more of the then outstanding shares of Issuer
Common Stock (such an offer being referred to as a "Tender Offer" and an
"Exchange Offer," respectively); or
(ii) (A) the holders of Issuer Common Stock shall not have approved
the Agreement at the meeting of such shareholders held for the purpose of
voting on the Agreement, (B) such meeting shall not have been held or shall
have been canceled prior to termination of the Agreement, or (C) Issuer's
Board of Directors shall have withdrawn or modified in a manner adverse to
Grantee the recommendation of Issuer's Board of Directors with respect to
the Agreement, in each case after it shall have been publicly announced
that any person (other than Grantee or any subsidiary of Grantee) shall
have (x) made, or disclosed an intention to make, a proposal to engage in
an Acquisition Transaction, (y) commenced a Tender Offer or filed a
registration statement under the Securities Act with respect to an Exchange
Offer, or (z) filed an application (or given notice), whether in draft or
final form, under certain banking laws for approval to engage in an
Acquisition Transaction; or
(iii) Issuer shall have breached any representation, warranty,
covenant or obligation contained in the Agreement and such breach would
entitle Grantee to terminate the Agreement in accordance with its terms
(without regard to the cure period provided for therein unless such cure is
promptly effected without jeopardizing consummation of the Merger pursuant
to the terms of the Agreement), after (x) a bona fide proposal is made by
any person (other than Grantee or any subsidiary of Grantee) to Issuer or
its shareholders to engage in an Acquisition Transaction, (y) any person
(other than Grantee or any subsidiary of Grantee) states its intention to
Issuer or its shareholders to make a proposal to engage in an Acquisition
Transaction if the Agreement terminates, or (z) any person (other than
Grantee or any subsidiary of Grantee) shall have filed an application or
notice with an applicable governmental authority to engage in an
Acquisition Transaction.
As used in the Stock Option Agreements, "person" shall have the meaning
specified in Sections 3(a)(9) and 13(d)(3) of the Exchange Act.
Each Stock Option Agreement provides that, subject to limitations set forth
therein, the holder of the Option may demand that Issuer promptly prepare, file
and keep current a registration statement under the Securities Act covering the
Option Shares and use its reasonable efforts to cause such registration
statement to become effective and remain current in order to permit the
disposition of the Option Shares by such holder.
Each Stock Option Agreement provides for adjustment in the number of Option
Shares to reflect any change in Issuer Common Stock by reason of a stock
dividend, stock split, split-up, recapitalization, combination, exchange of
shares or similar transaction. Each Stock Option Agreement also provides that
upon the occurrence of certain events set forth therein the Option must be
converted into, or exchanged for, an option, at the election of the holder of
the Option, covering the stock of another corporation or Issuer (the "Substitute
Option"). The number of shares subject to the Substitute Option and the exercise
price per share will be determined in accordance with a formula set forth in
each Stock Option Agreement.
At the request of a holder of an Option at any time beginning on the first
occurrence of certain events, including, among others, the acquisition by a
third party of beneficial ownership of 50% or more of the outstanding Issuer
Common Stock, and ending 12 months thereafter, Issuer will repurchase from the
holder of the Option (i) the Option and (ii) all shares of Issuer Common Stock
purchased by the holder of the Option pursuant to the applicable Stock Option
Agreement with respect to which such holder then has beneficial ownership. The
manner for determining the repurchase price of the Option and such shares of
Issuer Common Stock is set forth in each Stock Option Agreement.
The Stock Option Agreements are intended to increase the likelihood that
the Merger will be consummated in accordance with the terms of the Agreement and
may have the effect of discouraging competing offers to the Merger.
Copies of the CFC Option Agreement and the FFOH Option Agreement are
included as Annexes II and III to this Prospectus/Joint Proxy Statement,
respectively, and reference is made thereto for the complete terms thereof.
STOCKHOLDER AGREEMENTS
In conjunction with the Agreement, FFOH also entered into the CFC
Stockholder Agreement, dated as of April 29, 1996, with certain directors and
executive officers of CFC. See "Certain Beneficial Owners of CFC Common Stock."
Pursuant to the CFC Stockholder Agreement, a copy of which is included as Annex
IV hereto, each of such persons, solely in his
41
<PAGE>
or her capacity as a shareholder of CFC, agreed, among other things, not to
sell, pledge, transfer or otherwise dispose of his or her shares of CFC Common
Stock prior to the meeting of shareholders of CFC at which the Agreement is
considered and to vote such shares of CFC Common Stock in favor of the
Agreement. In addition, in conjunction with the Agreement, CFC also entered into
the FFOH Stockholder Agreement, dated as of April 29, 1996, with certain
directors and executive officers of FFOH. See "Certain Beneficial Owners of FFOH
Common Stock." Pursuant to the FFOH Stockholder Agreement, a copy of which is
included as Annex V hereto, each of such persons, solely in his or her capacity
as a shareholder of FFOH, agreed, among other things, not to sell, pledge,
transfer or otherwise dispose of his or her shares of FFOH Common Stock prior to
the meeting of shareholders of FFOH at which the Agreement is considered and to
vote such shares of FFOH Common Stock in favor of the Agreement.
DISSENTERS' RIGHTS
Pursuant to Section 1701.85 of the OGCL, in the event that the Merger is
consummated, any holder of shares of CFC Common Stock who objects to the Merger
is entitled to dissent from the Merger and to have the fair value of such shares
("Dissenting Stock") as determined by FFOH, CFC, or if necessary, judicially
determined, paid to him or her, by complying with the provisions of Section
1701.85 of the OGCL. Failure to take any steps set forth in Section 1701.85 in
connection with the exercise of such rights may result in termination or waiver
thereof.
The following is a summary of the statutory procedures required to be
followed by a holder of Dissenting Stock (a "dissenting shareholder") in order
to exercise his or her rights under the OGCL. This summary is qualified in its
entirety by reference to Section 1701.85 of the OGCL, the text of which is
attached as Annex VIII to this Prospectus/Joint Proxy Statement.
Under Section 1701.85 where a merger is to be submitted for approval at a
meeting of shareholders, as in the case of the CFC Special Meeting, not later
than ten days after such meeting, any holder of CFC Common Stock for which
appraisal rights are available who wishes to assert his appraisal rights shall
deliver to CFC a written demand for payment to him of the fair cash value of the
shares for which he seeks relief. The demand shall include the dissenting
shareholder's address, the number and class of such shares and the amount
claimed by him as the fair cash value of the shares. ANY SUCH SHAREHOLDER WHO
WISHES TO EXERCISE SUCH APPRAISAL RIGHTS SHOULD REVIEW CAREFULLY THE FOLLOWING
DISCUSSION AND ANNEX VIII TO THIS PROSPECTUS/JOINT PROXY STATEMENT BECAUSE
FAILURE TO TIMELY AND PROPERLY COMPLY WITH THE PROCEDURES SPECIFIED WILL RESULT
IN THE LOSS OF APPRAISAL RIGHTS UNDER SECTION 1701.85.
A demand for appraisal rights must be in addition to and separate from any
proxy or vote against the Merger. A vote against the Merger does not, by itself,
constitute a demand for appraisal rights. Also, voting for the Merger will
result in the loss of appraisal rights with respect to such shares.
Only a holder of record of shares of CFC Common Stock is entitled to assert
appraisal rights for the shares of CFC Common Stock registered in that holder's
name. A demand for appraisal should be executed by or on behalf of the holder of
record fully and correctly, as his name appears on his stock certificates. If
the shares of CFC Common Stock are owned of record in a fiduciary capacity, such
as by a trustee, guardian or custodian, execution of the demand should be made
in that capacity, and if the shares of CFC Common Stock are owned of record by
more than one person, as in a joint tenancy or tenancy in common, the demand
should be executed by or on behalf of all joint owners. An authorized agent,
including one or more joint owners, may execute a demand for appraisal on behalf
of a holder of record; however, the agent must identify the record owner or
owners and expressly disclose the fact that, in executing the demand, the agent
is agent for such owner or owners. A record holder such as a broker who holds
shares of CFC Common Stock as nominee for several beneficial owners may exercise
appraisal rights with respect to the shares of CFC Common Stock held for one or
more beneficial owners while not exercising such rights with respect to the
shares of CFC Common Stock held for other beneficial owners; in such case, the
written demand should set forth the number of shares of CFC Common Stock as to
which appraisal is sought and where no number of shares of CFC Common Stock is
expressly mentioned the demand will be presumed to cover all shares of CFC
Common Stock held in the name of the record owner. Shareholders who hold their
shares of CFC Common Stock in brokerage accounts or other nominee forms and who
wish to exercise appraisal rights must take all necessary steps in order that a
demand for appraisal is made by the record holder of such shares and are urged
to consult with their brokers to determine the appropriate procedures for the
making of a demand for appraisal by the record holder and for surrendering the
certificates for such shares for notation of appraisal rights as set forth
below.
All written demands for appraisal with respect to CFC Common Stock should
be sent or delivered to Theresa M. Barlow, Secretary, Circle Financial
Corporation, 11100 Reading Road, Sharonville, Ohio 45241, within ten days
following the CFC Special Meeting.
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<PAGE>
If CFC sends to a dissenting shareholder, at the address specified in his
demand, a request for the certificates representing the shares as to which he
seeks relief, the dissenting shareholder, within fifteen days from the date of
the sending of such request, shall deliver to CFC the certificates requested so
that such institution may endorse on them a legend to the effect that demand for
the fair cash value of such shares has been made. CFC shall promptly return such
endorsed certificates to the dissenting shareholder. Failure to deliver such
certificates to CFC terminates, at the option of CFC, the dissenting
shareholder's appraisal rights if CFC exercises such option by providing written
notice to the dissenting shareholder within twenty days after the lapse of
fifteen-day period unless a court for good cause shown otherwise directs.
If CFC and any holder of CFC Common Stock who has complied with the
foregoing procedures and who is entitled to appraisal rights under Section
1701.85 have not agreed as to the fair value of his shares within three months
after the service of the demand by the dissenting shareholder, CFC, FFOH or the
shareholder may file a complaint with the court of common pleas in the county in
which the principal office of CFC is located. Other dissenting shareholders,
within the three-month period, may join as plaintiffs.
If a complaint requesting an appraisal is timely filed, after a hearing on
such petition, the court may determine that the holders of shares of CFC Common
Stock are entitled to appraisal rights and, in such a case, may order an
appraisal of the "fair value" of the shares of such CFC Common Stock, as of the
day prior to the day on which the vote by the shareholders was taken. Such
appraisal may be conducted by an appraiser appointed by the court. The fair cash
value for purposes of appraisal rights is the amount that a willing seller who
is under no compulsion to sell would be willing to accept and that a willing
buyer under no compulsion to purchase would be willing to pay. Holders of shares
of CFC Common Stock considering seeking appraisal rights should be aware that
the fair value of their shares of CFC Common Stock as determined under Section
1701.85 could be more than, the same as, or less than the value of the
consideration they would receive pursuant to the Agreement if they did not seek
appraisal of their shares of CFC Common Stock.
The costs of any appraisal proceeding may be apportioned and assessed by
the court as it deems equitable against all or some of the parties. The final
order of the court may be appealed as set forth in Section 1701.85.
Any holder of shares of CFC Common Stock who has duly demanded an appraisal
in compliance with Section 1701.85 will not, after the Effective Time, be
entitled to vote the shares of CFC Common Stock subject to such demand for any
purpose or be entitled to the payment of dividends or other distributions on
those shares (except dividends or other distributions payable to holders of
record of shares of FFOH Common Stock shall be paid to the holder of record as a
credit upon the fair cash value of the shares).
If any holder of CFC Common Stock who demands appraisal of his shares under
Section 1701.85 fails to perfect, or effectively withdraws or loses his right to
appraisal as provided in Section 1701.85, the shares of such shareholder will be
converted into the right to receive the Merger Consideration in accordance with
the terms of the Agreement. A holder may withdraw his demand for appraisal by
delivering to CFC a written withdrawal of his demand for appraisal.
Failure to follow the steps required by Section 1701.85 for perfecting
appraisal rights may result in the loss of such rights.
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<PAGE>
MANAGEMENT OF FFOH AFTER THE MERGER
Upon consummation of the Merger, the directors and executive officers of
FFOH will be the directors and executive officers of FFOH immediately prior to
the Merger, except three of the existing directors of CFC will become directors
of FFOH. See "The Merger -- Effects of the Merger."
The following table sets forth certain information about each director of
CFC who will become a director of FFOH upon consummation of the Merger.
<TABLE>
<CAPTION>
POSITION WITH CFC AND DIRECTOR
PRINCIPAL OCCUPATION DURING OF CFC
NAME AGE THE PAST FIVE YEARS SINCE(1)
<S> <C> <C> <C>
Donald H. Rolf, Jr. 55 Chairman of the Board and President of CFC; 1982
Chairman of the Board and President of People's
Savings. Mr. Rolf is also an attorney.
Joseph D. Hughes 44 Senior Vice President and director of CFC; 1995
President and director of People's Savings; from
January 1994 through August 1994, served as Vice
President of Mortgage Banking of Fidelity
Federal; from 1989 through 1993, was employed as
President of First Financial Savings
Association, F.A., Cincinnati, Ohio
Thomas N. Spaeth 58 Director of CFC and People's Savings; managing 1992
partner of Spaeth and Batterberry, a certified
public accounting firm since 1983
</TABLE>
(1) Includes service with predecessor institutions.
Additional information about the foregoing persons is contained in CFC's
Proxy Statement for its 1995 annual meeting of shareholders, relevant portions
of which are incorporated by reference in this Prospectus/Joint Proxy Statement
pursuant to CFC's Annual Report on Form 10-KSB for the year ended June 30, 1995.
See "Incorporation of Certain Documents by Reference" and "Available
Information."
PRO FORMA COMBINED CONSOLIDATED FINANCIAL INFORMATION
The unaudited pro forma combined consolidated financial information set
forth below should be read in conjunction with the audited consolidated
financial statements, including the notes thereto, of FFOH and CFC that are
incorporated by reference in this Prospectus/Joint Proxy Statement. See
"Incorporation of Certain Documents by Reference," "FFOH Selected Consolidated
Financial Data" and "CFC Selected Consolidated Financial Data." The unaudited
pro forma combined consolidated financial information set forth below gives
effect to the Merger under the purchase accounting method. The pro forma
combined consolidated statement of financial condition treats the Merger as if
it had been consummated on March 31, 1996, and the pro forma combined
consolidated statements of earnings treat the Merger as if it has been
consummated at the beginning of the respective periods. The pro forma combined
per share data gives effect to an assumed Exchange Ratio of 3.80 shares of FFOH
Common Stock for each share of CFC Common Stock not converted into the right to
receive cash in the Merger and assumes that none of the outstanding stock
options to purchase CFC Common Stock are exercised.
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<PAGE>
This pro forma financial information is presented for illustrative purposes
only and is not necessarily indicative of the operating results or financial
position that would have occurred if the Merger had been consummated at the
dates assumed for purposes hereof, nor is it necessarily indicative of future
operating results or financial position.
<TABLE>
<CAPTION>
UNAUDITED PRO FORMA COMBINED
CONSOLIDATED STATEMENT OF FINANCIAL CONDITION
MARCH 31, 1996
PRO FORMA
ACQUISITION CONSOLIDATED
ADJUSTMENTS CONDENSED FOOTNOTE
FFOH CFC DR. (CR.) COMBINED REFERENCES
<S> <C> <C> <C> <C> <C>
(IN THOUSANDS, EXCEPT PER SHARE DATA)
ASSETS:
Cash and due from banks.................................... $ 1,813 $ 1,466 $ (101) $ 3,178 (A)
Interest-bearing deposits in other institutions............ 16,258 21,779 (13,250) 24,787 (A)
Investment securities available for sale -- at market...... 9,566 987 -- 10,553
Investment securities held to maturity -- at cost.......... -- 2,997 85 3,082 (B)
Mortgage-backed securities available for sale -- at
market.................................................. 28,377 3,992 -- 32,369
Mortgage-backed securities held to maturity -- at cost..... -- 42,708 268 42,976 (B)
Loans receivable, net...................................... 187,109 144,903 (358) 331,654 (C)
Federal Home Loan Bank stock............................... 1,886 1,675 -- 3,561
Goodwill and other intangible assets....................... -- 3,240 (3,240) -- (D)
-- -- 7,439 7,439 (D)
Other assets............................................... 4,357 5,659 -- 10,016
Total assets............................................ $249,366 $229,406 $ (9,157) $469,615
LIABILITIES:
Savings deposits........................................... $182,217 $201,303 $ 728 $384,248 (E)
Borrowed funds............................................. 14,041 2,500 -- 16,541
Other liabilities.......................................... 2,328 1,166 (248) 3,246 (F)
Total liabilities....................................... 198,586 204,969 (480) 404,035
STOCKHOLDERS' EQUITY:
Common stock............................................... 407 776 628 555 (G)
Additional paid-in capital................................. 26,782 6,606 (8,046) 41,434 (H)
Retained earnings.......................................... 25,889 18,798 18,798 25,889 (I)
Treasury stock, at cost.................................... (1,722) (1,722) -- (I)
Less shares acquired by Employee Stock Ownership
Plan.................................................... (2,135) -- -- (2,135)
Less shares acquired by Management Recognition Plan........ (15) -- -- (15)
Unrealized losses on securities designated as available for
sale -- net............................................. (148) (21) (21) (148) (I)
Total stockholders' equity.............................. 50,780 24,437 9,637 65,580
Total liabilities and stockholders' equity.............. $249,366 $229,406 $ 9,157 $469,615
Tangible book value per share.............................. $ 12.47 $ 29.94 $ 10.47
</TABLE>
(A) FFOH intends to utilize $13.3 million of interest-bearing deposits in other
institutions and $100,000 of cash on hand and due from banks as sources of
funds for the cash portion of the Merger Consideration.
<TABLE>
<S> <C>
Shares of CFC Common Stock outstanding at March 31, 1996 (708,096 x 45%)............... 318,643
Cash payment per share................................................................. $ 38.00
Cash portion of the Merger Consideration............................................... $12,108,434
Cash to be paid to holders of the 47,871 Options to purchase CFC Common Stock, net of
tax benefits......................................................................... 642,557
Estimated acquisition costs............................................................ 600,000
Total estimated cash payments by FFOH.................................................. $13,350,991
</TABLE>
45
<PAGE>
The Merger Consideration in the form of FFOH Common Stock will be as shown
below:
<TABLE>
<S> <C>
Shares of CFC Common Stock outstanding at March 31, 1996 (708,096 x 55%)................. 389,453
Exchange ratio........................................................................... 3.800
Total shares of FFOH Common Stock to be issued........................................... 1,479,921
</TABLE>
Fractional shares are not determinable at this point in time. Cash will be
paid in lieu of fractional shares at an assumed rate of $10.00 per full
share (which assumes an Average FFOH Price of $10.00 per share).
(B) The adjustment to investment securities and mortgage-backed securities,
designated as held to maturity, reflects the recording of CFC's respective
portfolios to fair value at the date of acquisition.
(C) The adjustment to loans receivable, net of unearned interest, reflects the
adjustment of CFC's loan portfolio to fair value by discounting the
portfolio using the estimated remaining lives of the various types of loans
and estimated current interest rates as of March 31, 1996.
(D) This adjustment reflects the allocation to goodwill and other intangible
assets as a result of the fair value adjustments set forth in Notes B, C, E
and F herein. The calculation of this adjustment is shown below:
<TABLE>
<S> <C>
Total shares of FFOH Common Stock issued pursuant to the Agreement.................... 1,479,921
Market price of FFOH Common Stock used for exchange of FFOH Common Stock (based upon
the closing market price of FFOH at April 30, 1996)................................. 10.00
Market value of shares exchanged...................................................... $ 14,799,210
Cash payment by FFOH pursuant to Note A............................................... 13,350,991
Less CFC's March 31, 1996 tangible stockholders' equity............................... (21,196,350)
Mark to market adjustments (1)........................................................ 485,000
$ 7,438,851
</TABLE>
(1) Represents the net amount of the adjustments discussed in
Notes B, C, D, E and F.
(E) The adjustment to savings deposits reflects the fair value of such deposits
by discounting the deposits on the basis of the estimated remaining lives
of the various types of savings deposits and their estimated current
interest rates as of March 31, 1996.
(F) The $248,000 adjustment of other liabilities reflects the tax effect of the
fair value adjustments set forth in Notes B, C and E.
(G) Represents the elimination of CFC's Common Stock and the issuance of
1,479,921 shares of FFOH Common Stock pursuant to the Agreement.
(H) Represents the elimination of CFC's Additional Paid-in Capital and the
issuance of 1,479,921 shares of FFOH Common Stock at the current market
value of $10.00 per share on April 30, 1996, less the $0.10 par value per
share.
(I) Represents the elimination of CFC's historical retained earnings, treasury
stock and unrealized loss on investment securities.
46
<PAGE>
<TABLE>
<CAPTION>
UNAUDITED PRO FORMA CONSOLIDATED CONDENSED
COMBINED STATEMENTS OF EARNINGS
THREE MONTHS ENDED MARCH 31, 1996
PRO FORMA
CONSOLIDATED
ADJUSTMENTS CONDENSED FOOTNOTE
FFOH CFC DR. (CR.) COMBINED REFERENCES
<S> <C> <C> <C> <C> <C>
(IN THOUSANDS, EXCEPT SHARES AND PER SHARE DATA)
Interest income:
Loans....................................................... $ 3,782 $2,660 $ (6) $6,448 (A)
Mortgage-backed securities.................................. 460 834 13 1,281 (B)
Investment securities....................................... 93 242 11 324 (C)
Interest-bearing deposits and other......................... 173 155 1 329 (D)
Total interest income.................................... 4,508 3,891 17 8,382
Interest expense:
Deposits.................................................... 2,406 2,296 (61) 4,641 (E)
Borrowings.................................................. 243 42 -- 285
Total interest expense................................... 2,649 2,338 (61) 4,926
Net interest income...................................... 1,859 1,553 (44) 3,456
Provision for losses on loans............................... 17 -- -- 17
Net interest income after provision for
losses on loans........................................ 1,842 1,553 (44) 3,439
Other income................................................ 114 138 -- 252
General, administrative and other expenses.................. 1,119 1,260 (103) 2,276 (F)
Write-off of intangible assets.............................. -- -- 70 70 (G)
Earnings before income taxes................................ 837 431 (77) 1,345
Federal income taxes........................................ 282 146 50 478 (H)
Net earnings................................................ $ 555 $ 285 $ (27) $ 867
Earnings per share: (I)
Primary.................................................. $ 0.14 $ 0.39 $-- $ 0.16
Fully diluted............................................ $ 0.14 $ 0.39 $-- $ 0.16
Weighted average shares and share equivalents outstanding:
Primary.................................................. 3,900,014 724,857 -- 5,379,935
Fully diluted............................................ 3,904,619 724,857 -- 5,384,540
</TABLE>
47
<PAGE>
<TABLE>
<CAPTION>
UNAUDITED PRO FORMA CONSOLIDATED CONDENSED
COMBINED STATEMENTS OF EARNINGS
YEAR ENDED DECEMBER 31, 1995
PRO FORMA
ACQUISITION CONSOLIDATED
ADJUSTMENTS CONDENSED FOOTNOTE
FFOH CFC DR. (CR.) COMBINED REFERENCES
<S> <C> <C> <C> <C> <C>
(IN THOUSANDS, EXCEPT SHARES AND PER SHARE DATA)
Interest income:
Loans....................................................... $14,697 $9,113 $ (24) $ 23,834 (A)
Mortgage-backed securities.................................. 1,695 2,775 53 4,417 (B)
Investment securities....................................... 307 1,501 43 1,765 (C)
Interest-bearing deposits and other......................... 302 238 (346) 886 (D)
Total interest income.................................... 17,001 13,627 (274) 30,902
Interest expense:
Deposits.................................................... 9,267 7,648 (243) 16,672 (E)
Borrowings.................................................. 900 407 -- 1,307
Total interest expense................................... 10,167 8,055 (243) 17,979
Net interest income...................................... 6,834 5,572 (517) 12,923
Provision for losses on loans............................... 71 -- -- 71
Net interest income after provision for
losses on loans........................................ 6,763 5,572 (517) 12,852
Other income................................................ 355 675 -- 1,030
General, administrative and other expenses.................. 4,385 4,588 (257) 8,716 (F)
Write-off of intangible assets.............................. -- -- 280 280 (G)
Earnings before income taxes................................ 2,733 1,659 (494) 4,886
Federal income taxes........................................ 919 598 263 1,780 (H)
Net earnings................................................ $ 1,814 $1,061 $(231) $ 3,106
Earnings per share: (I)
Primary.................................................. $ 0.44 $ 1.46 $-- $ 0.56
Fully diluted............................................ $ 0.44 $ 1.46 $-- $ 0.56
Weighted average shares and share equivalents outstanding:
Primary.................................................. 4,077,750 727,455 -- 5,557,671
Fully diluted............................................ 4,090,062 727,455 -- 5,569,983
</TABLE>
(A) Represents the current amortization of the adjustment to fair value of the
loans receivable of CFC using the interest method over an estimated
remaining life of approximately 15 years.
(B) Represents the current amortization of the adjustment to fair value of the
mortgage-backed securities of CFC using the interest method over an
estimated remaining life of approximately five years.
(C) Represents the current amortization of the adjustment to fair value of the
investment securities of CFC using the interest method over an estimated
remaining life of approximately two years.
(D) Represents earnings as a result of $19.5 million in net proceeds from FFOH's
stock conversion on March 4, 1996, net of the $13.4 million of cash used to
fund the Merger, at an average rate of 5.6%. The weighted average rate was
derived from the historic yields on assets identified to fund the cash
consideration of the Merger. This pro forma adjustment for the three months
ended March 31, 1996, was prorated to take into account the completion of
FFOH's stock offering on March 4, 1996.
(E) Represents the period accretion of the fair value adjustment applied to CFC
deposits, using the interest method over an estimated remaining life of
approximately three years.
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<PAGE>
(F) Represents direct cost reductions as a result of the Merger, primarily
attributable to declines in employee compensation and benefits, net of
additional expenses due to FFOH's stock conversion on March 4, 1996 as
follows:
<TABLE>
<S> <C>
Direct cost reductions................................................................... $ 750,000
Adjustments due to FFOH's stock conversion
Ohio franchise tax adjustment.......................................................... (190,000)
ESOP adjustment........................................................................ (121,000)
1996 Recognition Plan adjustment....................................................... (182,000)
$ 257,000
</TABLE>
This pro forma adjustment for the three months ended March 31, 1996, was
prorated to take into account the completion of FFOH's stock offering on
March 4, 1996.
(G) Represents amortization of additional goodwill and other intangible assets
over an estimated weighted average life of fifteen years.
(H) Represents the income tax effect with respect to the fair value and other
adjustments described in Notes A through G above.
(I) Earnings per share are based upon the combined historical income of FFOH
and CFC divided by the historical weighted average shares during the
periods as presented above. Weighted average shares outstanding has been
adjusted to reflect the exchange ratio with respect to FFOH's
reorganization into the stock holding company form of organization on March
4, 1996 (whereby each share of Fidelity Federal common stock held by public
shareholders of Fidelity Federal were converted into 2.25 shares of FFOH
Common Stock). For purposes of calculating pro forma earnings per share,
the weighted average shares gives effect to FFOH's historic weighted
average shares outstanding plus the FFOH Common Stock to be issued as part
of the Merger Consideration pursuant to the Agreement at the beginning of
each of the periods presented.
DESCRIPTION OF FFOH CAPITAL STOCK
FFOH is currently authorized to issue up to 7,000,000 shares of FFOH Common
Stock and up to 500,000 shares of FFOH Preferred Stock. The FFOH Board is
currently seeking shareholder approval of an amendment to FFOH's Articles of
Incorporation to increase the number of authorized shares of FFOH Common Stock
and FFOH Preferred Stock to 15,000,000 and 5,000,000, respectively. The capital
stock of FFOH does not represent or constitute a deposit account and is not
insured by the FDIC.
The following description of the FFOH capital stock does not purport to be
complete and is qualified in all respects by reference to the Articles of
Incorporation ("Articles"), Code of Regulations and Bylaws of FFOH and the OGCL.
FFOH COMMON STOCK
GENERAL. Each share of FFOH Common Stock has the same relative rights and
is identical in all respects with each other share of FFOH Common Stock. The
FFOH Common Stock is not subject to call for redemption and, at the Effective
Time of the Merger, each share of FFOH Common Stock offered hereby will be fully
paid and non-assessable.
VOTING RIGHTS. Except as provided in any resolution or resolutions adopted
by the FFOH Board establishing any series of FFOH Preferred Stock, the holders
of FFOH Common Stock possess exclusive voting rights in FFOH. Each holder of
FFOH Common Stock is entitled to one vote for each share held on all matters
voted upon by shareholders, and shareholders are not permitted to cumulate votes
in elections of directors.
DIVIDENDS. Subject to the rights of the holders of any series of FFOH
Preferred Stock, the holders of the FFOH Common Stock are entitled to such
dividends as may be declared from time to time by the FFOH Board out of funds
legally available therefor.
PREEMPTIVE RIGHTS. Holders of FFOH Common Stock do not have any preemptive
rights with respect to any shares which may be issued by FFOH in the future;
thus, FFOH may issue and sell shares of FFOH Common Stock without first offering
them to the then holders of the FFOH Common Stock.
LIQUIDATION. In the event of any liquidation, dissolution or winding up of
FFOH, the holders of the FFOH Common Stock would be entitled to receive, after
payment of all debts and liabilities of FFOH, all assets of FFOH available for
49
<PAGE>
distribution, subject to the rights of the holders of any FFOH Preferred Stock
which may be issued with a priority in liquidation or dissolution over the
holders of the FFOH Common Stock.
FFOH PREFERRED STOCK
The FFOH Board is authorized to issue FFOH Preferred Stock and to fix and
state voting powers, designations, preferences or other special rights of such
shares and the qualifications, limitations and restrictions thereof. The FFOH
Preferred Stock may be issued in distinctly designated series, may be
convertible into FFOH Common Stock and may rank prior to the FFOH Common Stock
as to dividend rights, liquidation preferences, or both.
The authorized but unissued shares of FFOH Preferred Stock (as well as the
authorized but unissued and unreserved shares of FFOH Common Stock) are
available for issuance in future mergers or acquisitions, in a future public
offering or private placement or for other general corporate purposes. Except as
otherwise required to approve the transaction in which the additional authorized
shares of FFOH Preferred Stock (as well as FFOH Common Stock) would be issued,
shareholder approval generally would not be required for the issuance of these
shares. Depending on the circumstances, however, shareholder approval may be
required pursuant to the requirements for continued listing of the FFOH Common
Stock on the Nasdaq Stock Market's National Market or the requirements of any
exchange on which the FFOH Common Stock may then be listed.
OTHER PROVISIONS
Certain provisions of FFOH's Articles, Code of Regulations and Bylaws which
deal with matters of corporate governance and rights of shareholders might be
deemed to have a potential anti-takeover effect. These provisions, which are
described under "Comparison of the Rights of Shareholders" below, provide, among
other things, (i) that the Board of Directors of FFOH shall be divided into up
to three classes; (ii) that special meetings of shareholders may only be called
by the Chairman of the Board, President or the Board of Directors of FFOH and
upon written request by the holders of 50% or more of the outstanding voting
shares; (iii) that shareholders generally must provide FFOH advance notice of
shareholder proposals and nominations for director and provide certain specified
related information; (iv) that no person may acquire more than 10% of the issued
and outstanding shares of any class of an equity security of FFOH, subject to
certain exceptions, until March 4, 2001; (v) for the authority of the FFOH Board
to issue shares of authorized but unissued FFOH Common Stock and FFOH Preferred
Stock and to establish the terms of any one or more series of FFOH Preferred
Stock, including voting rights; and (vi) restrictions on FFOH's ability to
engage in certain business combinations with "related persons." In addition to
the foregoing, and also as described under "Comparison of the Rights of
Shareholders" below, the OGCL generally restricts FFOH's ability to engage in
certain business combinations with "interested shareholders" and restricts the
voting rights of shares acquired by a person in excess of 20% of the outstanding
shares.
The foregoing provisions of the Articles, Code of Regulations and Bylaws of
FFOH and the OGCL could have the effect of discouraging an acquisition of FFOH
or purchases of shares of FFOH Common Stock in furtherance of an acquisition,
and could accordingly, under certain circumstances, discourage transactions
which might otherwise have a favorable effect on the price of the FFOH Common
Stock.
TRANSFER AGENT
The transfer agent and registrar for the FFOH Common Stock is Fifth Third
Bank, Cincinnati, Ohio.
COMPARISON OF THE RIGHTS OF SHAREHOLDERS
The rights of holders of FFOH Common Stock are governed by the OGCL and
FFOH's Articles, Code of Regulations and Bylaws, while the rights of holders of
CFC Common Stock are governed by the OGCL and CFC's Articles of Incorporation
("Articles") and Code of Regulations. Upon consummation of the Merger,
shareholders of CFC will become shareholders of FFOH and their rights as
shareholders of FFOH will be governed by the Articles, Code of Regulations and
Bylaws of FFOH and the OGCL.
THE FOLLOWING SUMMARY IS NOT INTENDED TO BE A COMPLETE STATEMENT OF THE
DIFFERENCES AFFECTING THE RIGHTS OF CFC'S SHAREHOLDERS, BUT RATHER SUMMARIZES
THE MORE SIGNIFICANT DIFFERENCES AFFECTING THE RIGHTS OF SUCH SHAREHOLDERS AND
CERTAIN IMPORTANT SIMILARITIES; THE SUMMARY IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO THE ARTICLES AND CODE OF REGULATIONS OF CFC, THE ARTICLES, CODE OF
REGULATIONS AND BYLAWS OF FFOH AND APPLICABLE LAWS AND REGULATIONS.
50
<PAGE>
AUTHORIZED CAPITAL STOCK
FFOH's authorized capital stock consists of 7,000,000 shares of FFOH Common
Stock, of which 4,073,589 shares were outstanding as of the Record Date, and
500,000 shares of FFOH Preferred Stock, none of which are issued and
outstanding. The FFOH Board is currently seeking shareholder approval of an
amendment to FFOH's Articles to increase the number of authorized shares of FFOH
Common Stock and FFOH Preferred Stock to 15,000,000 and 5,000,000, respectively.
The FFOH Preferred Stock is issuable in series, each series having such rights
and preferences as FFOH's Board may fix and determine.
CFC's authorized capital stock consists of 5,000,000 shares of CFC Common
Stock, of which 715,033 shares were outstanding as of the Record Date, and
2,000,000 shares of preferred stock, par value $1.00 per share ("CFC Preferred
Stock"), of which no shares are issued and outstanding. The CFC Preferred Stock
is issuable in series, each series having such rights and preferences as CFC's
Board may fix and determine.
ISSUANCE OF CAPITAL STOCK
Under the OGCL, FFOH and CFC may issue shares of their capital stock and
rights or options for the purchase of shares of their capital stock on such
terms and for such consideration as may be determined by the respective Boards.
Neither the OGCL nor FFOH's Articles, Code of Regulations and Bylaws or CFC's
Articles and Code of Regulations require shareholder approval of any such
actions. However, the Bylaws of the National Association of Securities Dealers,
Inc. ("NASD") generally require corporations, such as FFOH and CFC, with
securities which are quoted on the Nasdaq Stock Market's National Market to
obtain shareholder approval of certain issuances of common stock and most stock
compensation plans for directors, officers and key employees of the corporation.
Shareholder approval of stock-related compensation plans also may be sought in
certain instances in order to qualify such plans for favorable federal income
tax and securities law treatment under current laws and regulations.
VOTING RIGHTS
Except as set forth in FFOH's and CFC's respective Articles, holders of
both FFOH Common Stock and CFC Common Stock are entitled to one vote per share
on all matters properly presented at meetings of shareholders. Neither FFOH's
Articles nor CFC's Articles permit shareholders to cumulate their votes in an
election of directors.
For additional information relating to voting rights, see " -- Limitations
on Acquisitions of Voting Stock and Voting Rights" and "Business Combinations
with Interested Shareholders" below.
PAYMENT OF DIVIDENDS
Both FFOH and CFC can pay dividends on their outstanding shares in
accordance with the terms of the OGCL. The OGCL generally provides that, subject
to any restrictions in the corporation's articles of incorporation, a
corporation may make distributions to its shareholders, provided that the
dividend does not exceed the combination of the surplus of the corporation
(defined generally as the excess of a corporation's assets plus stated capital
over its liabilities); and provided further that no dividend or distribution
shall be paid to the holders of shares of any class in violation of the rights
of the holders of shares of any other class, or when the corporation is
insolvent or there is reasonable ground to believe that by such payment the
corporation would be rendered insolvent.
BOARD OF DIRECTORS
The Articles of FFOH require that the FFOH Board consist of not less than
five nor more than 15 members and be divided into two classes if the FFOH Board
consists of six, seven or eight members, or into three classes if the FFOH Board
consists of nine or more members. Each class must consist of no fewer than three
members and the members of each class shall be elected for a term of two or
three years and until their successors are elected and qualified. The Articles
of CFC provide that the CFC Board shall consist of not less than six nor more
than 15 members and that the CFC Board be divided into three classes as nearly
equal in number as possible and that the members of each class shall be elected
for a term of three years and until their successors are elected and qualified,
with one class being elected annually.
Under the Articles of both FFOH and CFC, any vacancies in the respective
Boards may be filled by the affirmative vote of two-thirds of the remaining
directors, whether or not a quorum. Persons elected to fill vacancies on FFOH's
or CFC's Board may serve until the respective annual meeting of shareholders at
which the term of the class to which the director has been elected expires.
51
<PAGE>
FFOH's Articles provide that any director may be removed without cause at a
duly constituted meeting of shareholders called expressly for that purpose upon
the vote of the holders of at least 75% of the total votes eligible to be cast
by shareholders, and with cause by the affirmative vote of a majority of the
total votes eligible to be cast by shareholders. Cause for removal shall exist
only if the director whose removal is proposed has been either declared
incompetent by order of a court, convicted of a felony or an offense punishable
by imprisonment for a term of more than one year by a court of competent
jurisdiction, or deemed liable by a court of competent jurisdiction for gross
negligence or misconduct in the performance of such directors' duties to FFOH.
Under the Articles of CFC, any director may be removed with or without cause by
the holders of at least 80% of the outstanding voting shares entitled to vote
generally in an election of directors at a meeting of shareholders called for
that purpose.
LIMITATIONS ON LIABILITY
The Articles of FFOH provide that a director of FFOH shall not be
personally liable for monetary damages for any action taken, or for any failure
to take any action, except to the extent that by law a director's liability for
monetary damages may not be limited. The Articles of CFC do not contain a
provision limiting the personal liability of directors. Section 1701.59 of the
OGCL currently provides that directors generally will not be liable for any
action taken as a director, or any failure to take any action, unless (i) the
director has failed to perform the duties of the director's office in compliance
with said section (I.E., in good faith, with the care an ordinarily prudent
person in a like position would exercise under similar circumstances and in a
manner the director reasonably believes to be in the best interests of the
corporation) and (ii) the breach or failure to act is undertaken with deliberate
intent to cause injury to the corporation or undertaken with reckless disregard
for the best interests of the corporation. The foregoing limitation on the
liability of directors does not apply to certain actions set forth in Sections
1701.60 and 1701.95 of the OGCL.
INDEMNIFICATION OF DIRECTORS, OFFICERS, EMPLOYEES AND AGENTS
The Articles of FFOH provide that FFOH shall indemnify any person who was
or is a party or is threatened to be made a party to any threatened, pending or
completed formal or informal action, suit or proceeding, whether civil,
criminal, administrative or investigative, by reason of the fact that such
person is or was a director, officer, employee or agent of FFOH or any
predecessor of FFOH, or is or was serving at the request of FFOH or any
predecessor of FFOH as a director, officer, trustee, member, manager, employee
or agent of another corporation, partnership, limited liability company, joint
venture, trust or other enterprise, against expenses (including court costs and
attorneys' fees), judgments, fines and amounts paid in settlement actually and
reasonably incurred by such person in connection with such action, suit or
proceeding to the fullest extent authorized by law. The Articles of CFC do not
contain a provision providing for indemnification for officers, directors,
employees or other related persons of CFC. Section 1701.13 of OGCL provides that
such indemnity shall be made only if (i) such person's conduct was in good
faith; (ii) such person acted in a manner he reasonably believed to be in or not
opposed to the corporation's best interests; and (iii) in the case of any
criminal proceeding, the person had no reasonable cause to believe that such
person's conduct was unlawful, with certain exceptions in the case of actions by
or in the right of the corporation.
SPECIAL MEETINGS OF SHAREHOLDERS
The Articles of both FFOH and CFC contain a provision pursuant to which
special meetings of shareholders only may be called by the Chairman, President
(or, in the case of FFOH, in the President's absence, death or disability, a
Vice-President authorized to exercise the authority of the President), the Board
of Directors by action at a meeting or a majority of the Board of Directors
acting without a meeting or by the Chairman, President or Secretary upon the
written request of the holders of 50% or more of the outstanding capital stock
entitled to vote at a meeting.
SHAREHOLDER NOMINATIONS AND PROPOSALS
The Articles of FFOH provide that all nominations for election to the FFOH
Board and proposals for any new business, other than those made by the FFOH
Board or a committee thereof, shall be made by a shareholder who has complied
with the notice provisions in the Articles. Written notice of a shareholder
nomination or written notice of a shareholder proposal must be communicated to
the attention of the Secretary and either delivered to, or mailed and received
at, the principal executive offices of FFOH not less than 60 days prior to the
anniversary date of the immediately preceding annual meeting. Each such notice
given by a shareholder with respect to nominations for the election of directors
shall set forth (i) the name, age, business address and, if known, residence
address of each nominee proposed in such notice; (ii) the principal occupation
or employment of each such nominee; and (iii) the number of shares of stock of
FFOH which are beneficially owned by each
52
<PAGE>
such nominee. Furthermore, any notice given by a shareholder to the Secretary
with respect to business proposals to be brought before a meeting shall set
forth in writing as to each matter: (i) a brief description of the business
desired to be brought before the meeting and the reasons for conducting such
business at the meeting; (ii) the name and address, as they appear on FFOH's
books, of the shareholder proposing such business; (iii) the class and number of
shares of FFOH which are beneficially owned by the shareholder; and (iv) any
material interest of the shareholder in such business.
The Code of Regulations of CFC provides that nominations for election as
directors at any meeting of shareholders may be made (a) by, or at the direction
of, a majority of the CFC Board, or (b) by any shareholder of record entitled to
vote at such meeting. Nominations, other than those made by, or at the direction
of, the CFC Board, may only be made pursuant to timely notice in writing to the
Secretary of CFC. To be timely, a shareholder's notice shall be delivered to, or
mailed and received by the Secretary, for an annual meeting, not less than 60
days nor more than 90 days in advance of the anniversary date (month and day) of
the previous year's annual meeting, and for a special meeting, not less than 60
days nor more than 90 days in advance of the date (month and day) of the special
meeting, regardless of any postponement or adjournments of that meeting to a
later date. Such shareholder notice shall set forth (a) as to each person whom
the shareholder proposes to nominate for election as a director (i) the name,
age, business address and residential address of such person, (ii) the principal
occupation or employment of such person, (iii) the class and number of shares of
CFC's stock which are beneficially owned by such person on the date of such
shareholder notice and (iv) any other information relating to such person that
would be required to be disclosed on Schedule 13D pursuant to Regulation 13D-G
under the Exchange Act; and (b) as to the shareholder giving the notice (i) the
name and address, as they appear on the CFC's books, of such shareholder and the
name and principal business or residential address of any other beneficial
shareholders known by such shareholder to support such nominee(s) and (ii) the
class and number of shares of CFC's stock which are beneficially owned by such
shareholder on the date of such shareholder notice and the number of shares
owned beneficially by any other record or beneficial shareholders known by such
shareholder to be supporting such nominee(s) on the date of such shareholder
notice. Any new business to be conducted at the annual meeting of the
shareholders shall be stated in writing and filed with the Secretary of CFC on
or before thirty (30) days in advance of the anniversary date (month and day) of
the previous year's annual meeting, and all business so stated, proposed and
filed shall, unless prior action thereon is required by the CFC Board, be
considered at the annual meeting. Any shareholder may make any other proposal at
the annual meeting and the same may be discussed and considered, but unless
stated in writing and filed with the Secretary of CFC on or before thirty (30)
days in advance of the anniversary date (month and day) of the previous year's
annual meeting, such proposal may only be voted upon at a meeting held at least
thirty (30) days after the annual meeting at which it is presented.
SHAREHOLDER ACTION WITHOUT A MEETING
The Articles of FFOH provide that any action permitted to be taken by the
shareholders at a meeting may be taken without a meeting if a consent in writing
setting forth the action so taken shall be signed by all of the shareholders
entitled to vote.
The Articles of CFC specifically provide that shareholders may not take
action without a meeting and the power of shareholders to consent in writing to
action without a meeting is denied.
SHAREHOLDER'S RIGHT TO EXAMINE BOOKS AND RECORDS
Neither FFOH's Articles nor Code of Regulations addresses a shareholder's
right to examine books and records of FFOH. Nevertheless, the OGCL provides that
a shareholder may inspect books and records for any reasonable and proper
purpose upon written demand stating the purpose of the inspection.
CFC's Code of Regulations provides a shareholder with the right to examine
books and records of CFC upon written demand and a proper purpose.
LIMITATIONS ON ACQUISITIONS OF VOTING STOCK AND VOTING RIGHTS
The Articles of FFOH provide that for a period of five years from March 4,
1996, no person shall directly or indirectly offer to acquire or acquire the
beneficial ownership of (i) more than 10% of the issued and outstanding shares
of any class of an equity security of FFOH, or (ii) any securities convertible
into, or exercisable for, any equity securities of FFOH if, assuming conversion
or exercise by such person of all securities of which such person is the
beneficial owner which are convertible into, or exercisable for, such equity
securities (but of no securities convertible into, or exercisable for, such
equity securities of which such person is not the beneficial owner), such person
would be the beneficial owner of more than 10% of
53
<PAGE>
any class of an equity security of FFOH. The term "person" is broadly defined in
the Articles to prevent circumvention of this restriction.
The foregoing restrictions do not apply to (i) any offer with a view toward
public resale made exclusively to FFOH by underwriters or a selling group acting
on its behalf, (ii) any employee benefit plan established by FFOH or Fidelity
Federal, and (iii) any other offer or acquisition approved in advance by the
affirmative vote of two-thirds of FFOH's Board. In the event that shares are
acquired in violation of this restriction, all shares beneficially owned by any
person in excess of 10% shall not be counted as shares entitled to vote and
shall not be voted by any person or counted as voting shares in connection with
any matters submitted to shareholders for a vote.
The Articles of CFC contain a similar provision. However, pursuant to its
terms, the five year period will expire effective August 6, 1996 and,
consequently, after such date such provision will no longer be applicable.
MERGERS, CONSOLIDATIONS AND SALES OF ASSETS
The OGCL requires the approval of the board of directors and, unless the
articles of incorporation provide for a different vote (which cannot be less
than a majority), the affirmative vote of the holders of two-thirds of the
outstanding stock entitled to vote thereon for mergers or consolidations, and
for sales, leases or exchanges of all or substantially all of a company's
assets. The OGCL permits a company to merge with another corporation without
obtaining the approval of shareholders if the company is the surviving
corporation of such merger and if: (i) the articles of incorporation or code of
regulations of the company do not require the company to obtain shareholder
approval; (ii) the terms of the merger do not conflict with the company's
articles of incorporation; (iii) the company's articles of incorporation will
not differ from its articles of incorporation before the merger; and (iv) the
number of voting shares issuable as a result of the merger will not exceed
one-sixth of the shares of the company's common stock outstanding immediately
prior to the merger.
FFOH's Articles do not provide for a lesser vote in the case of mergers,
consolidations or sales of assets. CFC's Articles, however, do provide that
mergers, consolidations and sales of assets may be approved by a majority of the
outstanding shares of stock (as opposed to two-thirds).
BUSINESS COMBINATIONS WITH INTERESTED SHAREHOLDERS
The Articles of FFOH contain certain provisions which require the holders
of at least 80% of FFOH's outstanding shares of voting stock and a majority of
such shares not including shares deemed beneficially owned by a "related person"
(generally defined to include any shareholder owning more than 10% of FFOH's
outstanding voting stock) to approve certain "business combinations," as defined
therein. FFOH's Articles require the approval of the shareholders in accordance
with the increased voting requirements in connection with any such transactions,
except in cases where the proposed transaction has been approved in advance by
at least two-thirds of the Continuing Directors (generally, those members of the
FFOH Board who are not affiliated with the related person and were directors
before the related person became a related person). These provisions of FFOH's
Articles apply to any "business combination," which generally is defined to
include (i) any merger or consolidation of FFOH with or into a related person;
(ii) any sale, lease, exchange, mortgage, transfer or other disposition of all
or a substantial part of the assets of FFOH or of a subsidiary to a related
person (the term "substantial part" is defined to include more than 25% of the
FFOH's total assets); (iii) any merger or consolidation of a related person with
or into FFOH or a subsidiary; (iv) any sale, lease, exchange, mortgage, transfer
or other disposition of all or any substantial part of the assets of a related
person to FFOH or a subsidiary; (v) the issuance of any securities of FFOH or a
subsidiary to a related person; (vi) the acquisition by FFOH or a subsidiary of
any securities of a related person; (vii) any reclassification of FFOH Common
Stock, or any recapitalization involving the FFOH Common Stock; and (viii) any
agreement, contract or other arrangement providing for any of the foregoing
transactions.
The Articles of CFC also contain certain provisions which require the
holders of at least 80% of CFC's outstanding shares of voting stock to approve
certain transactions with a "related person" (generally defined to include any
shareholder owning more than 5% of the outstanding voting stock). CFC's Articles
require the approval of the shareholders in accordance with the increased voting
requirements in connection with any such transactions, except in certain
circumstances such as where the proposed transaction has been approved in
advance by at least two-thirds of the CFC Board. These provisions apply to (i)
the purchase by CFC of any of its shares from any related person who owned such
shares for less than two years; (ii) any merger or consolidation of CFC with or
into a related person; (iii) any sale, lease, exchange, transfer or other
disposition of all or a substantial part of the assets of CFC or a subsidiary of
CFC to or with any related person; (iv) the purchase by CFC from a related
person of any assets or securities having an aggregate fair market value in
excess of $1.0 million; (v) the issuance or transfer of any securities of CFC to
any related person for cash (except in connection with an employee benefit
54
<PAGE>
plan of CFC or a subsidiary thereof); (vi) the adoption of any plan or proposal
for the voluntary dissolution, liquidation, spin-off or split-up of any kind of
CFC or a subsidiary, or a recapitalization or reclassification of any securities
of CFC, proposed by or on behalf of any related person; or (vii) any other
material transaction involving CFC or a subsidiary of CFC with, or proposed by
or on behalf of, any related person.
In addition, Ohio law generally provides that an "interested shareholder"
(generally defined to include any shareholder owning more than 10% of a
company's outstanding voting stock) may not engage in a business combination and
certain other specified transactions with the company for a period of three
years following the date he became an interested shareholder unless the business
combination or the transaction by which the interested shareholder became an
interested shareholder was approved prior to such date by the company's Board of
Directors. If such Board approval is not obtained, following the expiration of
this three-year period, any business combination with the interested shareholder
must be approved by a two-thirds vote of disinterested shareholders or meet
certain fair price and other procedural requirements.
AMENDMENT OF GOVERNING INSTRUMENTS
The Articles of FFOH generally provide that they may be amended by the
affirmative vote of at least a majority of the voting power of FFOH, except that
any amendment to Articles IV (number of directors), VII (indemnification), X
(meetings of shareholders, director nominations and shareholder proposals), XI
(directors), XII (removal of directors), XIII (duties of directors and
limitation of liability), XIV (restrictions on share purchases), XV (business
combinations), XVI (amendments to the Code of Regulations) and XVII (amendments
to the Articles) must be approved by the affirmative vote of the holders of not
less than 75% of the voting power of FFOH entitled to vote thereon. The Code of
Regulations of FFOH may only be amended by a vote of not less than two-thirds of
the then outstanding voting power of FFOH entitled to vote at a meeting of
shareholders called for that purpose and the Bylaws of FFOH may only be amended
by a majority vote of the FFOH Board.
The Articles of CFC may generally be amended upon the affirmative vote of a
majority of the voting power of CFC except that, the provisions of Articles
Eighth (the board of directors), Ninth (removal of directors), Tenth
(restrictions on share purchases), Eleventh (supermajority vote for
extraordinary transactions) and Thirteenth (amendments) may not be repealed,
replaced, altered, amended or rescinded in any respect unless the same is
approved by the affirmative vote of the holders of not less than 80 percent of
the voting power of CFC entitled to vote at a meeting of shareholders called for
that purpose. The Code of Regulations of CFC may be amended by the shareholders
by the vote of the holders of not less than a majority of the voting power
entitled to vote at a meeting of shareholders called for that purpose.
55
<PAGE>
CERTAIN BENEFICIAL OWNERS OF FFOH COMMON STOCK
SECURITY OWNERSHIP OF MANAGEMENT
The following table sets forth information as to the FFOH Common Stock
beneficially owned as of March 31, 1996 by (i) each director and executive
officer of FFOH and (ii) all directors and executive officers of FFOH as a
group.
<TABLE>
<CAPTION>
SHARES BENEFICIALLY
OWNED
AS OF MARCH 31, 1996
(1)
NAME OF BENEFICIAL OWNER AMOUNT PERCENT
<S> <C> <C>
Directors:
Michael W. Jordan................................................................................. 12,925(2) *
David A. Luecke................................................................................... 12,187(3) *
Constantine N. Papadakis.......................................................................... 10,000 *
John R. Reusing................................................................................... 87,944(4) 2.2%
Paul D. Staubach.................................................................................. 60,072(5) 1.5
Robert W. Zumbiel................................................................................. 26,875(6) *
Executive Officers who are not Directors:
Lloyd L. Kuster................................................................................... 33,742(7) *
M. Robin Ruholl-Cassady........................................................................... 19,893(8) *
Gregory G. Eagan.................................................................................. 2,000 *
Jerald L. Jones................................................................................... 36,682(9) *
Deborah A. Peter.................................................................................. 19,326(10) *
All directors and executive officers of FFOH as a group (11 persons)................................ 321,646(11) 7.8%
</TABLE>
* Represents less than 1.0% of the issued and outstanding FFOH Common Stock.
(1) The number of shares beneficially owned by the persons set forth above is
determined under rules under Section 13 of the Exchange Act, and the
information is not necessarily indicative of beneficial ownership for any
other purpose. Under such rules, an individual is considered to beneficially
own any shares of FFOH Common Stock if he or she directly or indirectly has
or shares: (i) voting power, which includes the power to vote or to direct
the voting of the shares, or (ii) investment power, which includes the power
to dispose or direct the disposition of the shares. Unless otherwise
indicated, an individual has sole voting power and sole investment power
with respect to the indicated shares.
(2) Includes 8,925 shares owned jointly with Mr. Jordan's wife and 4,000 shares
held in Mr. Jordan's Individual Retirement Account ("IRA").
(3) Includes 11,687 shares owned jointly with Mr. Luecke's wife and 500 shares
of Mr. Luecke's daughter for which Mr. Luecke is custodian.
(4) Includes 46,352 shares owned jointly with Mr. Reusing's wife, 337 shares
owned by Mr. Reusing's wife, which shares may be deemed to be owned by Mr.
Reusing, 337 shares held as custodian for Mr. Reusing's son, 2,576 shares
which were awarded to Mr. Reusing pursuant to FFOH's Management Recognition
Plan (and which vest at the rate of 20% per year), options to purchase
21,375 shares pursuant to FFOH's 1992 Stock Incentive Plan, 9,267 shares
held by FFOH's Employee Stock Ownership Plan ("ESOP") for the account of Mr.
Reusing and 7,700 shares held by FFOH's 401(k) Retirement Plan.
(5) Includes 36,307 shares owned jointly with Mr. Staubach's wife, 1,546 shares
which were awarded to Mr. Staubach pursuant to FFOH's Management Recognition
Plan (and which vest at the rate of 20% per year), options to purchase
13,500 shares pursuant to FFOH's 1992 Stock Incentive Plan, 4,979 shares
held by FFOH's ESOP for the account of Mr. Staubach, 3,090 shares held by
FFOH's 401(k) Retirement Plan, and 650 shares held in trust for Mr.
Staubach's children, for which Mr. Staubach is custodian.
(6) All of such shares are owned jointly with Mr. Zumbiel's wife.
(7) Includes 1,546 shares which were awarded to Mr. Kuster pursuant to FFOH's
Management Recognition Plan (and which vest at the rate of 20% per year),
options to purchase 3,038 shares pursuant to FFOH's 1992 Stock Incentive
Plan, 4,563 shares held by FFOH's ESOP for the account of Mr. Kuster and
2,550 shares held by FFOH's 401(k) Retirement Plan.
56
<PAGE>
(8) Includes options to purchase 10,687 shares pursuant to FFOH's 1992 Stock
Incentive Plan, 3,479 shares held by FFOH's ESOP for the account of Ms.
Ruholl-Cassady, and 2,352 shares held by FFOH's 401(k) Retirement Plan.
(9) Includes 25 shares for Mr. Jones' grandson for which Mr. Jones is custodian,
options to purchase 2,250 shares pursuant to FFOH's 1992 Stock Incentive
Plan, 4,059 shares held by FFOH's ESOP for the account of Mr. Jones, and
3,500 shares held by FFOH's 401(k) Retirement Plan.
(10) Includes options to purchase 7,578 shares pursuant to FFOH's 1992 Stock
Incentive Plan, 3,159 shares held by FFOH's ESOP for the account of Ms.
Peter, and 2,400 shares held by the FFOH's 401(k) Retirement Plan.
(11) Includes in the case of all directors and executive officers of FFOH as a
group, options to purchase 58,428 shares granted pursuant to FFOH's 1992
Stock Incentive Plan, 5,668 shares which were awarded to certain officers
of FFOH pursuant to FFOH's Management Recognition Plan, 21,592 shares held
for the account of participating executive officers in FFOH's 401(k)
Retirement Plan and 29,506 shares which are held by the trust established
pursuant to FFOH's ESOP, which have been allocated to the accounts of
participating officers.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
The following table sets forth information as to the FFOH Common Stock
beneficially owned by each person or entity, including any "group" as that term
is used in Section 13(d)(3) of the Exchange Act, who or which was known by FFOH
to be the beneficial owner of 5% or more of the outstanding FFOH Common Stock as
of March 31, 1996.
<TABLE>
<CAPTION>
SHARES BENEFICIALLY
OWNED
NAME AND ADDRESS OF AS OF MARCH 31, 1996
BENEFICIAL OWNER AMOUNT PERCENT
<S> <C> <C>
FFOH Employee Stock Ownership Plan Trust
4555 Montgomery Road
Cincinnati, Ohio 45212...................................................... 329,854(1) 8.1%
Jeffrey S. Halis, et al.
500 Park Avenue, Fifth Floor
New York, New York 10022.................................................... 406,400 9.9
</TABLE>
(1) The FFOH Employee Stock Ownership Plan Trust ("Trust") was established
pursuant to the FFOH ESOP by an agreement between FFOH and the six directors
of FFOH, who act as trustees of the ESOP ("Trustees"). As of March 31, 1996,
262,741 shares held in the Trust were unallocated and 67,113 shares held in
the Trust had been allocated to the accounts of participating employees.
Under the terms of the ESOP, the Trustees must vote all allocated shares
held in the ESOP in accordance with the instructions of the participating
employees, and unallocated shares and allocated shares for which employees
do not give instructions will be voted in the same ratio on any matter as to
those shares for which instructions are given.
57
<PAGE>
CERTAIN BENEFICIAL OWNERS OF CFC COMMON STOCK
SECURITY OWNERSHIP OF MANAGEMENT
The following table sets forth information as to the CFC Common Stock
beneficially owned as of March 31, 1996 by (i) each director and executive
officer of CFC and (ii) all directors and executive officers of CFC as a group.
<TABLE>
<CAPTION>
SHARES BENEFICIALLY OWNED
AS OF MARCH 31, 1996 (1)
NAME OF BENEFICIAL OWNER AMOUNT PERCENT
<S> <C> <C>
Directors:
Donald H. Rolf, Jr....................................................................... 59,000(2)(11) 8.16%
David C. Greis........................................................................... 45,565(3)(11) 6.37
Frederick A. Tobergte.................................................................... 18,660(4) 2.64
Theodore G. Hagen........................................................................ 11,345(5) 1.60
Catherine del Campo Hartman.............................................................. 1,000(6) *
Joseph D. Hughes......................................................................... 18,160(7) 2.57
S. Patrick Raffel........................................................................ 1,600(6)(8) *
Thomas N. Spaeth......................................................................... 3,135(6)(9) *
Lloyd C. Sullivan........................................................................ 7,545(10) 1.07
Executive Officers who are not Directors:
Theresa M. Barlow........................................................................ 12,025(11)(12) 1.69
Carolyn R. Watt.......................................................................... 1,742(11)(13) *
All directors and executive officers of CFC as a group (11 persons)........................ 179,777(5)(6)(11)(14) 24.32%
</TABLE>
* Represents less than 1.0% of the issued and outstanding CFC Common Stock.
(1) The number of shares beneficially owned by the persons set forth above is
determined under rules under Section 13 of the Exchange Act, and the
information is not necessarily indicative of beneficial ownership for any
other purpose. Under such rules, an individual is considered to beneficially
own any shares of CFC Common Stock if he or she directly or indirectly has
or shares: (i) voting power, which includes the power to vote or to direct
the voting of the shares, or (ii) investment power, which includes the power
to dispose or direct the disposition of the shares. Unless otherwise
indicated, an individual has sole voting power and sole investment power
with respect to the indicated shares.
(2) Includes 14,559 shares held through the People's Savings and Investment Plan
Trust (the "Savings Plan Trust") and 731 shares owned by his IRA account,
for which he has power to dispose or direct the disposition and to vote or
direct the voting. Does not include the remaining 23,292 shares held by the
Savings Plan Trust, as to which Mr. Rolf is a trustee and as such might be
deemed to have shared power to vote or direct the voting of such shares and
as to which Mr. Rolf disclaims beneficial ownership. See " -- Securities
Ownership of Certain Beneficial Owners." Does not include 2,821 shares owned
by Mr. Rolf's spouse, as to which Mr. Rolf disclaims beneficial ownership.
(3) Includes 13,768 shares held through the Savings Plan Trust and 6,081 shares
owned by his IRA account, for which he has power to dispose or direct the
disposition and to vote or direct the voting. Does not include 766 shares
owned by Mr. Greis' spouse, as to which Mr. Greis disclaims beneficial
ownership.
(4) Includes 7,803 shares owned by his IRA account, for which he has power to
dispose or direct the disposition and to vote or direct the voting. Does not
include 313 shares owned by Mr. Tobergte's spouse, as to which Mr. Tobergte
disclaims beneficial ownership.
(5) Includes options to purchase 750 shares granted pursuant to the CFC 1991
Nonstatutory Stock Option Plan, which are exercisable within 60 days by Mr.
Hagen, and 10,595 shares held indirectly in trust. Does not include 750
shares owned by Mr. Hagen's wife in a trust, as to which Mr. Hagen disclaims
beneficial ownership.
(6) Includes options in each case to purchase 1,000 shares granted pursuant to
the CFC 1994 Non-employee Directors Stock Option Plan which are exercisable
within 60 days by Ms. Hartman, Mr. Raffel and Mr. Spaeth, respectively.
(7) Includes 79 shares held through the Savings Plan Trust and 12,261 shares
owned by his IRA account, for which he has the power to dispose or direct
the disposition and to vote or direct the voting.
58
<PAGE>
(8) Includes 500 shares owned by his IRA account, for which he has power to
dispose or direct the disposition and to vote or direct the voting. Does not
include 500 shares owned by the IRA account of Mr. Raffel's spouse, as to
which Mr. Raffel disclaims beneficial ownership.
(9) Includes 1,091 shares owned by his IRA account, for which Mr. Spaeth has
power to dispose or direct the disposition and to vote or direct the voting
and 1,044 shares held through his 401(k) plan.
(10) Includes 4,545 shares owned by his IRA account, for which Mr. Sullivan has
power to dispose or direct the disposition and to vote or direct the
voting.
(11) Includes options to purchase 14,587, 6,937, 5,213, 769 and 27,506 shares
granted pursuant to the CFC 1991 Incentive Stock Option Plan which are
exercisable within 60 days by Mr. Rolf, Mr. Greis, Ms. Barlow, Ms. Watt and
all directors and executive officers as a group, respectively.
(12) Includes 4,318 shares held through the Savings Plan Trust. Does not include
651 shares owned by Ms. Barlow's spouse, as to which Ms. Barlow disclaims
beneficial ownership.
(13) Includes 973 shares held through the Savings Plan Trust.
(14) Includes 3,640 unvested shares purchased by the People's Savings Management
Recognition Plan and allocated to accounts of individual officers. Does not
include any shares held in the Savings Plan Trust allocated to accounts of
employees who are not directors or executive officers.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
The following table sets forth information as to the CFC Common Stock
beneficially owned by each person or entity, including any "group" as that term
is used in Section 13(d)(3) of the Exchange Act, who or which was the beneficial
owner of 5% or more of the outstanding CFC Common Stock as of March 31, 1996.
<TABLE>
<CAPTION>
SHARES BENEFICIALLY
OWNED
NAME AND ADDRESS OF AS OF MARCH 31, 1996(1)
BENEFICIAL OWNER AMOUNT PERCENT
<S> <C> <C>
Donald H. Rolf, Jr.
11100 Reading Road
Sharonville, Ohio 45241................................................... 59,000(1)(2) 8.16%
Barbara Vorjohan
6510 Apache Circle
Cincinnati, Ohio 45243.................................................... 49,364(3) 6.97
David C. Greis
11100 Reading Road
Cincinnati, Ohio 45241.................................................... 45,565(4) 6.37
Berkshire Asset Management, Inc.
Michael H. Cook
Suite 510
First Eastern Bank Building
11 West Market Street
Wilkes-Barre, Pennsylvania 18701.......................................... 39,149(5) 5.53
</TABLE>
(1) Donald H. Rolf, Jr. is one of the trustees of the Savings Plan Trust and as
such might be deemed to share the power to vote the shares held in the
Savings Plan Trust with the participants to whose accounts the shares are
allocated. An aggregate of 37,851 shares is held by the Savings Plan Trust,
which constituted approximately 5.35% of the outstanding shares of CFC
Common Stock at March 31, 1996. Mr. Rolf disclaims beneficial ownership of
the shares held by the Savings Plan Trust, except as to the 14,559 shares
held in his account in the Savings Plan Trust and included in the number of
shares listed above. The trustees of the Savings Plan Trust further disclaim
that they are a "group" for the purposes of Section 13 of the Exchange Act.
(2) Includes 731 shares owned by his IRA account, for which he has power to
dispose or direct the disposition and to vote or direct the voting, and
options to purchase 14,587 shares which are exercisable within 60 days by
Mr. Rolf. Does not include 2,821 shares owned by Mr. Rolf's spouse, as to
which Mr. Rolf disclaims beneficial ownership.
59
<PAGE>
(3) Includes 39,364 shares held in the Frank H. Vorjohan Revocable Trust, dated
August 18, 1995, of which Mrs. Vorjohan is the sole trustee with the power
to dispose or direct the disposition and to vote or direct the voting.
(4) Includes 13,768 shares held through the Savings Plan Trust, 6,081 shares
owned by his IRA account, for which he has power to dispose or direct the
disposition and to vote or direct the voting, and options to purchase 6,937
shares which are exercisable within 60 days by Mr. Greis. Does not include
766 shares owned by Mr. Greis' spouse, as to which Mr. Greis disclaims
beneficial ownership.
(5) Berkshire Asset Management, Inc. and Michael H. Cook, President of Berkshire
Asset Management, Inc. filed with the SEC Amendment No. 1 to a Schedule 13D,
dated February 3, 1993, pursuant to Section 13 of the Exchange Act. As
stated in the Schedule 13D, Berkshire Asset Management, Inc. has sole power
to dispose or direct the disposition of, and has sole power to vote or
direct the voting of, 7,000 shares, and has shared power to dispose of or
direct the disposition of, and shared power to vote or direct the voting of
32,149 shares. Michael H. Cook has sole power to dispose or direct the
disposition of, and has sole power to vote or direct voting of, 7,000 shares
and has shared power to dispose of, or direct the disposition of, and shared
power to vote or direct voting of, 32,149 shares; Berkshire Asset
Management, Inc. is a Pennsylvania corporation and an investment adviser
registered as such under the Investment Advisers Act of 1940; and Michael H.
Cook is the President, Chief Executive Officer and majority stockholder of
Berkshire Asset Management, Inc.
LEGAL OPINION
The validity of the FFOH Common Stock offered hereby will be passed upon
for FFOH by Elias, Matz, Tiernan & Herrick L.L.P., Washington, D.C.
EXPERTS
The consolidated financial statements of FFOH as of December 31, 1995 and
1994, and for each of the years in the three-year period ended December 31, 1995
incorporated by reference herein and elsewhere in the Registration Statement,
have been incorporated by reference herein and elsewhere in the Registration
Statement in reliance upon the report of Grant Thornton LLP, independent
certified public accountants, incorporated by reference herein, and upon the
authority of said firm as experts in accounting and auditing.
The consolidated financial statements of CFC as of June 30, 1995 and 1994,
and for each of the years in the three-year period ended June 30, 1995
incorporated by reference herein and elsewhere in the Registration Statement,
have been incorporated by reference herein and elsewhere in the Registration
Statement in reliance upon the report of Clark, Schaeffer, Hackett & Co.,
independent certified public accountants, incorporated by reference herein, and
upon the authority of said firm as experts in accounting and auditing.
PROPOSALS FOR THE
ANNUAL MEETINGS
In the case of CFC, the deadline set forth in Rule 14a-8 under the Exchange
Act for the submission of proposals by shareholders for inclusion in the proxy
statement and form of proxy to be used by CFC in connection with its 1996 annual
meeting of shareholders has passed. In the case of FFOH, the deadline set forth
in Rule 14a-8 under the Exchange Act for the submission of proposals by
shareholders for inclusion in the proxy statement and form of proxy to be used
by FFOH in connection with its 1997 annual meeting of shareholders in December
16, 1996.
60
<PAGE>
ANNEX I
AMENDED AND RESTATED
AGREEMENT OF MERGER
AMONG
FIDELITY FINANCIAL OF OHIO, INC.,
FIDELITY ACQUISITION CORPORATION
AND
CIRCLE FINANCIAL CORPORATION
DATED AS OF JUNE 13, 1996
<PAGE>
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<PAGE>
AMENDED AND RESTATED AGREEMENT OF MERGER
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
<C> <S> <C>
ARTICLE I DEFINITIONS.......................................................................................... I-1
ARTICLE II THE MERGER AND THE BANK MERGER....................................................................... I-4
2.1 The Merger........................................................................................... I-4
2.2 Effective Time; Closing.............................................................................. I-4
2.3 Conversion of Shares................................................................................. I-5
2.4 Election and Exchange Procedures..................................................................... I-5
2.5 No Fractional Shares................................................................................. I-8
2.6 Stock Options........................................................................................ I-8
2.7 Withholding Rights................................................................................... I-8
2.8 Dissenting Shares.................................................................................... I-8
2.9 Anti-Dilution Provisions............................................................................. I-8
2.10 Additional Actions................................................................................... I-9
2.11 The Bank Merger...................................................................................... I-9
ARTICLE III REPRESENTATIONS AND WARRANTIES OF THE COMPANY........................................................ I-10
3.1 Capital Structure.................................................................................... I-10
3.2 Organization, Standing and Authority of the Company.................................................. I-10
3.3 Ownership of the Company Subsidiaries................................................................ I-10
3.4 Organization, Standing and Authority of the Company Subsidiaries..................................... I-10
3.5 Authorized and Effective Agreement................................................................... I-11
3.6 Securities Documents and Regulatory Reports.......................................................... I-11
3.7 Financial Statements................................................................................. I-12
3.8 Material Adverse Change.............................................................................. I-12
3.9 Environmental Matters................................................................................ I-12
3.10 Allowance for Loan Losses and Real Estate Owned...................................................... I-13
3.11 Tax Matters.......................................................................................... I-13
3.12 Legal Proceedings.................................................................................... I-13
3.13 Compliance with Laws................................................................................. I-14
3.14 Deposit Insurance and Other Regulatory Matters....................................................... I-14
3.15 Certain Information.................................................................................. I-14
3.16 Employee Benefit Plans............................................................................... I-15
3.17 Certain Contracts.................................................................................... I-15
3.18 Brokers and Finders.................................................................................. I-16
3.19 Insurance............................................................................................ I-16
3.20 Properties........................................................................................... I-16
3.21 Labor................................................................................................ I-17
3.22 Transactions with Affiliated Persons and Affiliates.................................................. I-17
3.23 Required Vote........................................................................................ I-17
3.24 Disclosures.......................................................................................... I-17
ARTICLE IV REPRESENTATIONS AND WARRANTIES OF THE ACQUIROR AND THE ACQUISITION CORPORATION....................... I-18
4.1 Capital Structure of the Acquiror.................................................................... I-18
4.2 Organization, Standing and Authority of the Acquiror................................................. I-18
4.3 Ownership of the Acquisition Corporation and the Bank................................................ I-18
4.4 Organization, Standing and Authority of the Bank..................................................... I-18
4.5 Authorized and Effective Agreement................................................................... I-19
4.6 Securities Documents and Regulatory Reports.......................................................... I-19
4.7 Financial Statements................................................................................. I-20
4.8 Material Adverse Change.............................................................................. I-20
4.9 Environmental Matters................................................................................ I-20
4.10 Allowance for Loan Losses and Real Estate Owned...................................................... I-21
4.11 Tax Matters.......................................................................................... I-21
4.12 Legal Proceedings.................................................................................... I-22
</TABLE>
i
<PAGE>
<TABLE>
<CAPTION>
PAGE
4.13 Compliance with Laws................................................................................. I-22
<C> <S> <C>
4.14 Deposit Insurance and Other Regulatory Matters....................................................... I-22
4.15 Certain Information.................................................................................. I-22
4.16 Employee Benefit Plans............................................................................... I-23
4.17 Certain Contracts.................................................................................... I-24
4.18 Brokers and Finders.................................................................................. I-24
4.19 Insurance............................................................................................ I-24
4.20 Properties........................................................................................... I-24
4.21 Labor................................................................................................ I-25
4.22 Transactions with Affiliated Persons and Affiliates.................................................. I-25
4.23 Required Vote........................................................................................ I-25
4.24 Disclosures.......................................................................................... I-25
4.25 Organization, Standing and Authority of the Acquisition Corporation.................................. I-25
ARTICLE V COVENANTS............................................................................................ I-26
5.1 Reasonable Best Efforts.............................................................................. I-26
5.2 Shareholder Meetings................................................................................. I-26
5.3 Regulatory Matters................................................................................... I-26
5.4 Investigation and Confidentiality.................................................................... I-27
5.5 Press Releases....................................................................................... I-27
5.6 Business of the Parties.............................................................................. I-27
5.7 Current Information.................................................................................. I-30
5.8 Indemnification; Insurance........................................................................... I-30
5.9 Directors, Officers and Employees.................................................................... I-31
5.10 Certain Policies; Integration........................................................................ I-32
5.11 Restrictions on Resale............................................................................... I-32
5.12 Disclosure Supplements............................................................................... I-32
5.13 Failure to Fulfill Conditions........................................................................ I-32
ARTICLE VI CONDITIONS PRECEDENT................................................................................. I-32
6.1 Conditions Precedent -- The Acquiror, the Acquisition Corporation and the Company.................... I-32
6.2 Conditions Precedent -- The Company.................................................................. I-33
6.3 Conditions Precedent -- The Acquiror and the Acquisition Corporation................................. I-34
ARTICLE VII TERMINATION, WAIVER AND AMENDMENT.................................................................... I-35
7.1 Termination.......................................................................................... I-35
7.2 Effect of Termination................................................................................ I-35
7.3 Survival of Representations, Warranties and Covenants................................................ I-35
7.4 Waiver............................................................................................... I-36
7.5 Amendment or Supplement.............................................................................. I-36
ARTICLE VIII MISCELLANEOUS........................................................................................ I-36
8.1 Expenses............................................................................................. I-36
8.2 Entire Agreement..................................................................................... I-36
8.3 No Assignment........................................................................................ I-36
8.4 Notices.............................................................................................. I-36
8.5 Alternative Structure................................................................................ I-37
8.6 Interpretation....................................................................................... I-37
8.7 Counterparts......................................................................................... I-37
8.8 Governing Law........................................................................................ I-37
Exhibit A Form of Amended and Restated Merger Agreement between Fidelity Federal Savings Bank and People's
Savings Association
Exhibit B Form of Company Stock Option Agreement
Exhibit C Form of Company Stockholder Agreement
Exhibit D Form of Acquiror Stock Option Agreement
Exhibit E Form of Acquiror Stockholder Agreement
Exhibit F Form of Company Affiliate Letter
Exhibit G Matters to be covered by Opinion of Counsel to the Acquiror
Exhibit H Matters to be covered by Opinion of Counsel to the Company
</TABLE>
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<PAGE>
AMENDED AND RESTATED AGREEMENT OF MERGER
Amended and Restated Agreement of Merger (the "Agreement"), dated as of
June 3, 1996, by and among Fidelity Financial of Ohio, Inc. (the "Acquiror"), an
Ohio corporation, Fidelity Acquisition Corporation ("Acquisition Corporation"),
an Ohio corporation, and Circle Financial Corporation (the "Company"), an Ohio
corporation, which amends and restates the Agreement of Merger between the
Acquiror and the Company dated as of April 29, 1996 ("Initial Agreement").
W I T N E S S E T H:
WHEREAS, the Acquiror and the Company entered into the Initial Agreement on
April 29, 1996 and, pursuant to Section 8.5 thereof, subsequently determined to
modify the structure of the acquisition of the Company by providing for the
merger of the Company with and into Acquisition Corporation, a wholly owned
subsidiary of the Acquiror; and
WHEREAS, the Boards of Directors of the Acquiror, Acquisition Corporation
and the Company have determined that it is in the best interests of their
respective companies and their shareholders to consummate the business
combination transactions provided for herein, including the merger of the
Company with and into the Acquisition Corporation, subject to the terms and
conditions set forth herein; and
WHEREAS, the parties desire to provide for certain undertakings,
conditions, representations, warranties and covenants in connection with the
transactions contemplated hereby; and
WHEREAS, as a condition and inducement to the Acquiror's willingness to
enter into the Initial Agreement, (i) the Company entered into a Stock Option
Agreement with the Acquiror (the "Company Stock Option Agreement"), in
substantially the form attached hereto as Exhibit B, pursuant to which the
Company granted to the Acquiror the option to purchase shares of Company Common
Stock (as defined herein) under certain circumstances and (ii) certain
stockholders of the Company entered into a Stockholder Agreement with the
Acquiror (the "Company Stockholder Agreement"), in substantially the form
attached hereto as Exhibit C, pursuant to which, among other things, such
stockholders agreed to vote their shares of Company Common Stock in favor of
this Agreement and the transactions contemplated hereby; and
WHEREAS, as a condition and inducement to the Company's willingness to
enter into the Initial Agreement, (i) the Acquiror entered into a Stock Option
Agreement with the Company (the "Acquiror Stock Option Agreement"), in
substantially the form attached hereto as Exhibit D, pursuant to which the
Acquiror granted to the Company the option to purchase shares of Acquiror Common
Stock (as defined herein) under certain circumstances and (ii) certain
stockholders of the Acquiror entered into a Stockholder Agreement with the
Company (the "Acquiror Stockholder Agreement"), in substantially the form
attached hereto as Exhibit E, pursuant to which, among other things, such
stockholders agreed to vote their shares of Acquiror Common Stock in favor of
this Agreement and the transactions contemplated hereby.
NOW, THEREFORE, in consideration of the premises and of the mutual
covenants and agreements herein contained, the parties hereto do hereby agree as
follows:
ARTICLE I
DEFINITIONS
The following terms shall have the meanings ascribed to them for all
purposes of this Agreement.
"Acquiror Common Stock" shall mean the common stock, par value $.10 per
share, of the Acquiror.
"Acquiror Employee Plans" shall have the meaning set forth in Section
4.16(a) hereof.
"Acquiror Employee Stock Benefit Plans" shall mean the following employee
benefit plans of the Acquiror: 1992 Stock Incentive Plan, 1992 Directors' Stock
Option Plan, Management Recognition Plan, Employee Stock Ownership Plan,
Fidelity Federal Savings Bank 401(k) Retirement Plan, 1996 Stock Option Plan and
1996 Management Recognition Plan and Trust.
"Acquiror Financial Statements" shall mean (i) the statements of financial
condition (including related notes and schedules, if any) of the Bank as of
December 31, 1995, 1994 and 1993 and the statements of earnings, stockholders'
equity and cash flows (including related notes and schedules, if any) of the
Bank for each of the three years ended December 31, 1995, 1994 and 1993 as filed
by the Bank in its Securities Documents, and (ii) the consolidated statements of
financial condition of the Acquiror (including related notes and schedules, if
any) and the consolidated statements of earnings, stockholders' equity
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and cash flows (including related notes and schedules, if any) of the Acquiror
included in the Securities Documents filed by the Acquiror with respect to the
quarterly and annual periods ended subsequent to December 31, 1995.
"Acquiror Preferred Stock" shall mean the shares of serial preferred stock,
par value $.10 per share, of the Acquiror.
"Aggregate Cash Consideration" shall have the meaning set forth in Section
2.3(c)(2)(i) hereof.
"Association" shall mean People's Savings Association, an Ohio-chartered
savings and loan association and a wholly-owned subsidiary of the Company.
"Average Acquiror Share Price" shall have the meaning set forth in Section
2.3(c)(2)(ii).
"Bank" shall mean Fidelity Federal Savings Bank, a federally-chartered
savings bank which upon the receipt of all requisite regulatory approvals and
the contribution to the Acquisition Corporation of all of the capital stock of
the Bank, will become a wholly-owned subsidiary of the Acquisition Corporation.
"Bank Merger" shall have the meaning set forth in Section 2.11 hereof.
"Bank Merger Agreement" shall have the meaning set forth in Section 2.11
hereof.
"Cash Election Shares" shall have the meaning set forth in Section 2.4(a)
hereof.
"Certificate of Merger" shall have the meaning set forth in Section 2.2
hereof.
"Code" shall mean the Internal Revenue Code of 1986, as amended.
"Commission" shall mean the Securities and Exchange Commission.
"Company Common Stock" shall mean the common stock, par value $1.00 per
share, of the Company.
"Company Dissenting Shares" shall have the meaning set forth in Section
2.8(a) hereof.
"Company Employee Plans" shall have the meaning set forth in Section
3.16(a) hereof.
"Company Financial Statements" shall mean (i) the consolidated statements
of financial condition (including related notes and schedules, if any) of the
Company as of June 30, 1995, 1994 and 1993 and the consolidated statements of
income, stockholders' equity and cash flows (including related notes and
schedules, if any) of the Company for each of the three years ended June 30,
1995, 1994 and 1993 as filed by the Company in its Securities Documents, and
(ii) the consolidated statements of financial condition of the Company
(including related notes and schedules, if any) and the consolidated statements
of income, stockholders' equity and cash flows (including related notes and
schedules, if any) of the Company included in the Securities Documents filed by
the Company with respect to the quarterly and annual periods ended subsequent to
June 30, 1995.
"Company Preferred Stock" shall mean the shares of serial preferred stock,
par value $1.00 per share, of the Company.
"Department" shall mean the Ohio Department of Commerce, Division of
Financial Institutions or any successor thereto.
"Effective Time" shall mean the date and time specified pursuant to Section
2.2 hereof as the effective time of the Merger.
"Environmental Claim" means any written notice from any Governmental Entity
or third party alleging potential liability (including, without limitation,
potential liability for investigatory costs, cleanup costs, governmental
response costs, natural resources damages, property damages, personal injuries
or penalties) arising out of, based on, or resulting from the presence, or
release into the environment, of any Materials of Environmental Concern.
"Environmental Laws" means any federal, state or local law, statute,
ordinance, rule, regulation, code, license, permit, authorization, approval,
consent, order, judgment, decree, injunction or agreement with any Governmental
Entity relating to (1) the protection, preservation or restoration of the
environment (including, without limitation, air, water vapor, surface water,
groundwater, drinking water supply, surface soil, subsurface soil, plant and
animal life or any other natural resource), and/or (2) the use, storage,
recycling, treatment, generation, transportation, processing, handling,
labeling, production, release or disposal of Materials of Environment Concern.
The term Environmental Law includes without limitation (1) the Comprehensive
Environmental Response, Compensation and Liability Act, as amended, 42 U.S.C.
(section mark)9601, ET SEQ; the Resource Conservation and Recovery Act, as
amended, 42 U.S.C. (section mark)6901, ET SEQ; the Clean Air Act, as amended, 42
U.S.C. (section mark)7401, ET SEQ; the Federal Water Pollution Control Act, as
amended, 33 U.S.C. (section mark)1251, ET SEQ; the Toxic Substances Control Act,
as
I-2
<PAGE>
amended, 15 U.S.C. (section mark)9601, ET SEQ; the Emergency Planning and
Community Right to Know Act, 42 U.S.C. (section mark)1101, ET SEQ; the Safe
Drinking Water Act, 42 U.S.C. (section mark)300f, ET SEQ; and all comparable
state and local laws, and (2) any common law (including without limitation
common law that may impose strict liability) that may impose liability or
obligations for injuries or damages due to, or threatened as a result of, the
presence of or exposure to any Materials of Environmental Concern.
"ERISA" shall mean the Employee Retirement Income Security Act of 1974, as
amended.
"Exchange Act" shall mean the Securities Exchange Act of 1934, as amended.
"Exchange Ratio" shall have the meaning set forth in Section 2.3(c)(1)(i)
hereof.
"FDIA" shall mean the Federal Deposit Insurance Act, as amended.
"FDIC" shall mean the Federal Deposit Insurance Corporation or any
successor thereto.
"FHLB" shall mean Federal Home Loan Bank.
"Form S-4" shall mean the registration statement on Form S-4 (or on any
successor or other appropriate form) to be filed by the Acquiror in connection
with the issuance of shares of Acquiror Common Stock pursuant to the Merger,
including the Proxy Statement which forms a part thereof, as amended and
supplemented.
"Governmental Entity" shall mean any federal or state court, administrative
agency or commission or other governmental authority or instrumentality.
"HOLA" shall mean the Home Owners' Loan Act.
"Materials of Environmental Concern" means pollutants, contaminants,
wastes, toxic substances, petroleum and petroleum products and any other
materials regulated under Environmental Laws.
"Merger" shall mean the merger of the Company with and into the Acquisition
Corporation pursuant to the terms hereof.
"NASD" shall mean the National Association of Securities Dealers, Inc.
"No-Election Shares" shall have the meaning set forth in Section 2.4(a)
hereof.
"OGCL" shall mean the Ohio General Corporation Law.
"OTS" shall mean the Office of Thrift Supervision of the U.S. Department of
the Treasury and its predecessor, the Federal Home Loan Bank Board, or any
successor thereto.
"PBGC" shall mean the Pension Benefit Guaranty Corporation or any successor
thereto.
"Per Share Cash Consideration" and "Per Share Stock Consideration" shall
have the meanings set forth in Section 2.3(c)(1) hereof.
"Previously Disclosed" shall mean disclosed (i) in a letter dated the date
hereof delivered from the disclosing party to the other party specifically
referring to the appropriate section of this Agreement and describing in
reasonable detail the matters contained therein, or (ii) in a letter dated after
the date hereof from the disclosing party specifically referring to this
Agreement and describing in reasonable detail the matters contained therein and
delivered by the other party pursuant to Section 5.12 hereof.
"Proxy Statement" shall mean the joint prospectus/proxy statement contained
in the Form S-4, as amended or supplemented, and to be delivered to shareholders
of the Acquiror and the Company in connection with the solicitation of their
approval of this Agreement and the transactions contemplated hereby.
"Real Estate Owned" shall mean real estate acquired by foreclosure or by
deed-in-lieu of foreclosure, real estate in judgment and subject to redemption
and in-substance foreclosures under generally accepted accounting principles.
"Reallocated Cash Shares" shall have the meaning set forth in Section
2.4(d)(i)(2).
"Reallocated Stock Shares" shall have the meaning set forth in Section
2.4(d)(ii)(2).
"Rights" shall mean warrants, options, rights, convertible securities and
other arrangements or commitments which obligate an entity to issue or dispose
of any of its capital stock or other ownership interests in the entity.
"SAIF" means the Savings Association Insurance Fund administered by the
FDIC or any successor thereto.
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"Securities Act" shall mean the Securities Act of 1933, as amended.
"Securities Documents" shall mean all reports, offering circulars, proxy
statements, registration statements and all similar documents filed, or required
to be filed, pursuant to the Securities Laws.
"Securities Laws" shall mean the Securities Act; the Exchange Act; the
Investment Company Act of 1940, as amended; the Investment Advisers Act of 1940,
as amended; the Trust Indenture Act of 1939, as amended, and the rules and
regulations of the Commission promulgated pursuant to such laws.
"SGFSC" means Spring Garden Financial Service Corp., an Ohio corporation
and a wholly-owned subsidiary of the Association.
"Stock Election Shares" shall have the meaning set forth in Section 2.4(a)
hereof.
"Subsidiary" shall mean any corporation, bank, savings association,
partnership, joint venture or other organization more than 10% of the stock or
ownership interest of which is owned, directly or indirectly, by an entity.
Other terms used herein are defined in the preamble and elsewhere in this
Agreement.
ARTICLE II
THE MERGER AND THE BANK MERGER
2.1 THE MERGER
(a) Subject to the terms and conditions of this Agreement, at the Effective
Time (as defined in Section 2.2 hereof), the Company shall be merged with and
into the Acquisition Corporation (the "Merger") in accordance with the
applicable provisions of the OGCL. The Acquisition Corporation shall be the
surviving corporation (hereinafter sometimes called the "Surviving Corporation")
of the Merger, and shall continue its corporate existence under the laws of the
State of Ohio. The name of the Surviving Corporation shall continue to be
"Fidelity Acquisition Corporation" and the Surviving Corporation will continue
to operate as a wholly owned subsidiary of Fidelity Financial of Ohio, Inc. Upon
consummation of the Merger, the separate corporate existence of the Company
shall terminate.
(b) From and after the Effective Time, the Merger shall have the effects
set forth in Section 1701.82 of the OGCL.
(c) The Articles of Incorporation, Code of Regulations and Bylaws of the
Acquisition Corporation, as in effect immediately prior to the Effective Time,
shall be the Articles of Incorporation, Code of Regulations and Bylaws of the
Surviving Corporation, respectively, until altered, amended or repealed in
accordance with their terms and applicable law.
(d) Upon consummation of the Merger, (i) the directors of the Acquiror
shall consist of (x) Donald H. Rolf, Jr., Joseph D. Hughes and Thomas N. Spaeth
(each of whom is presently a director of the Company; in the event of the death,
disability or other inability to serve of any one or more of them, the Company
and the Acquiror shall mutually agree upon another individual presently or at
such time serving as a director of the Company to replace such person in this
capacity), and (y) all six of the directors of the Acquiror immediately prior to
the Effective Time, (ii) the executive officers of the Acquiror shall be the
executive officers of the Acquiror immediately prior to the Effective Time,
except that Donald H. Rolf, Jr. shall be Chairman of the Board of the Acquiror
and Joseph D. Hughes shall be Executive Vice President of the Acquiror.
Directors and officers of the Acquiror shall serve for such terms as are
specified herein and in the Articles of Incorporation, Code of Regulations and
Bylaws of the Acquiror.
2.2 EFFECTIVE TIME; CLOSING
The Merger shall become effective upon the occurrence of the filing of a
certificate of merger (the "Certificate of Merger") with the Secretary of State
of the State of Ohio pursuant to the OGCL, unless a later date and time is
specified as the effective time in such Certificate of Merger (the "Effective
Time"). A closing (the "Closing") shall take place immediately prior to the
Effective Time at 10:00 a.m., Eastern Time, on or before the fifth business day
following the satisfaction or waiver, to the extent permitted hereunder, of the
conditions to the consummation of the Merger specified in Article VI of this
Agreement (other than the delivery of certificates, opinions and other
instruments and documents to be delivered at the Closing), at the principal
executive offices of the Acquiror in Cincinnati, Ohio, or at such other place,
at such other time, or on such other date as the parties may mutually agree
upon. At the Closing, there shall be delivered to the Acquiror and the Company
the opinions, certificates and other documents required to be delivered under
Article VI hereof.
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2.3 CONVERSION OF SHARES
At the Effective Time, by virtue of the Merger and without any action on
the part of a holder of shares of Company Common Stock:
(a) Each share of Acquiror Common Stock that is issued and outstanding
immediately prior to the Effective Time shall remain issued and outstanding and
shall be unchanged by the Merger.
(b) All shares of Company Common Stock owned by the Company (including
treasury shares) or the Acquiror or any of their respective wholly-owned
subsidiaries shall be cancelled and retired and shall not represent capital
stock of the Surviving Corporation and shall not be exchanged for shares of
Acquiror Common Stock, cash or other consideration.
(c) (1) Subject to paragraph (a) of Section 2.8 and Sections 2.5 and 2.9,
each share of Company Common Stock issued and outstanding at the Effective Time
(other than shares to be cancelled in accordance with Section 2.3(b)) shall be
converted into, and shall be cancelled in exchange for, the right to receive, at
the election of the holder thereof,
(i) the number of shares of Acquiror Common Stock which is equal to
(the "Exchange Ratio") (A) if the Average Acquiror Share Price is equal to
or greater than $9.00 but equal to or less than $11.00, the quotient
determined by dividing (x) $38.00 by (y) the Average Acquiror Share Price,
(B) if the Average Acquiror Share Price is less than $9.00, 4.22 shares or
(C) if the Average Acquiror Share Price is greater than $11.00, 3.45 shares
(the "Per Share Stock Consideration"), or
(ii) a cash amount equal to $38.00 per share of Company Common Stock
(the "Per Share Cash Consideration").
(2) For purposes of this Agreement:
(i) the "Aggregate Cash Consideration" shall amount to the product of
the number of shares of Company Common Stock (other than Company Common
Stock owned by the Company (including treasury shares) or the Acquiror)
outstanding at the Effective Time times .45 times $38.00;
(ii) the "Average Acquiror Share Price" shall mean the average of the
closing bid and asked price per share of Acquiror Common Stock, as reported
on the Nasdaq Stock Market's National Market (as reported by THE WALL
STREET JOURNAL or, if not reported thereby, another authoritative source),
for the 20 trading days ending on the date the Acquiror and the Company
receive all requisite regulatory approvals and satisfy all applicable
waiting periods; and
(d) Each share of common stock, par value $.01 per share, of the
Acquisition Corporation ("Acquisition Corporation Common Stock") that is issued
and outstanding immediately prior to the Effective Time shall remain issued and
outstanding and shall be unchanged by the Merger.
2.4 ELECTION AND EXCHANGE PROCEDURES
(a) The parties shall designate an exchange agent to act as agent (the
"Exchange Agent") for purposes of conducting the election procedure and the
exchange procedure as described in Sections 2.4 and 2.5. No later than seven
business days following the Effective Time, the Acquiror shall cause the
Exchange Agent to mail or make available to each holder of record of a
certificate or certificates which immediately prior to the Effective Time
represented issued and outstanding shares of Company Common Stock (i) a notice
and letter of transmittal (which shall specify that delivery shall be effected
and risk of loss and title to the certificates theretofore representing shares
of Company Common Stock shall pass only upon proper delivery of such
certificates to the Exchange Agent) advising such holder of the effectiveness of
the Merger and the procedure for surrendering to the Exchange Agent such
certificate or certificates which immediately prior to the Effective Time
represented issued and outstanding shares of Company Common Stock in exchange
for the consideration set forth in Section 2.3(c) hereof deliverable in respect
thereof pursuant to this Agreement and (ii) an election form in such form as the
Acquiror and the Company shall mutually agree ("Election Form"). Each Election
Form shall permit the holder (or in the case of nominee record holders, the
beneficial owner through proper instructions and documentation) (i) to elect to
receive Acquiror Common Stock with respect to all such holder's Company Common
Stock as hereinabove provided (the "Stock Election Shares"), (ii) to elect to
receive cash with respect to all such holder's Company Common Stock as
hereinabove provided (the "Cash Election Shares"), or (iii) to indicate that
such holder makes no such election with respect to such holder's shares of
Company Common Stock (the "No-Election Shares"). Any shares of Company Common
Stock with respect to which the holder thereof shall not, as of the Election
Deadline, have made such an election by submission to the Exchange Agent of an
effective, properly completed Election Form shall be deemed to be No-Election
Shares. Any Company Dissenting Shares
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shall be deemed to be Cash Election Shares, and with respect to such shares the
holders thereof shall in no event be classified as Reallocated Stock Shares (as
hereinafter defined).
(b) The term "Election Deadline," as used below, shall mean 5:00 p.m.,
Eastern Time, on the 20th business day following but not including the date of
mailing of the Election Form or such other date as the Acquiror and the Company
shall mutually agree upon.
(c) Any election to receive Acquiror Common Stock or cash shall have been
properly made only if the Exchange Agent shall have actually received a properly
completed Election Form by the Election Deadline. An Election Form will be
properly completed only if accompanied by certificates representing all shares
of Company Common Stock covered thereby, subject to the provisions of subsection
(h) below of this Section 2.4. Any Election Form may be revoked or changed by
the person submitting such Election Form to the Exchange Agent by written notice
to the Exchange Agent only if such notice is actually received by the Exchange
Agent at or prior to the Election Deadline. The certificate or certificates
representing Company Common Stock relating to any revoked Election Form shall be
promptly returned without charge to the person submitting the Election Form to
the Exchange Agent. The Exchange Agent shall have reasonable discretion to
determine when any election, modification or revocation is received and whether
any such election, modification or revocation has been properly made.
(d) Within ten business days after the Election Deadline, the Exchange
Agent shall effect the allocation among holders of Company Common Stock of
rights to receive Acquiror Common Stock or cash in the Merger in accordance with
the Election Forms as follows:
(i) If the number of Cash Election Shares times the Per Share Cash
Consideration is less than the Aggregate Cash Consideration, then:
(1) all Cash Election Shares (subject to Section 2.8(a) with
respect to Company Dissenting Shares) will be converted into the right
to receive cash,
(2) the Exchange Agent will select first from among the holders of
No-Election Shares and then (if necessary) will allocate among the
holders of Stock Election Shares (by the method of allocation described
below), a sufficient number of Stock Election Shares ("Reallocated Cash
Shares") such that the sum of the number of Cash Election Shares plus
the number of Reallocated Cash Shares times the Per Share Cash
Consideration equals the Aggregate Cash Consideration, and all
Reallocated Cash Shares will be converted into the right to receive
cash, and
(3) the No-Election Shares and Stock Election Shares which are not
Reallocated Cash Shares will be converted into the right to receive
Acquiror Common Stock.
(ii) If the number of Cash Election Shares times the Per Share Cash
Consideration is greater than the Aggregate Cash Consideration, then:
(1) all Stock Election Shares and all No-Election Shares will be
converted into the right to receive Acquiror Common Stock,
(2) the Exchange Agent will allocate among the holders of Cash
Election Shares (by the method of allocation described below), a
sufficient number of Cash Election Shares (excluding any Company
Dissenting Shares) ("Reallocated Stock Shares") such that the number of
remaining Cash Election Shares (including Company Dissenting Shares)
times the Per Share Cash Consideration equals the Aggregate Cash
Consideration, and all Reallocated Stock Shares shall be converted into
the right to receive Acquiror Common Stock, and
(3) the Cash Election Shares (subject to Section 2.8(a) with
respect to Company Dissenting Shares) which are not Reallocated Stock
Shares will be converted into the right to receive cash.
(iii) If the number of Cash Election Shares times the Per Share Cash
Consideration is equal to the Aggregate Cash Consideration, then
subparagraphs (d)(i) and (ii) above shall not apply and all No-Election
Shares and all Stock Election Shares will be converted into the right to
receive Acquiror Common Stock.
(e) In the event that the Exchange Agent is required pursuant to Section
2.4(d)(i)(2) to designate from among all Stock Election Shares the Reallocated
Cash Shares to receive cash, each holder of Stock Election Shares shall be
allocated a pro rata portion of the remainder of the total Reallocated Cash
Shares less the number of No Election Shares which are Reallocated Cash Shares.
In the event the Exchange Agent is required pursuant to Section 2.4(d)(ii)(2) to
designate from among all holders of Cash Election Shares the Reallocated Stock
Shares to receive Acquiror Common Stock, each holder of Cash Election Shares
shall be allocated a pro rata portion of the total Reallocated Stock Shares.
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(f) At the Effective Time, the Acquiror shall issue to the Exchange Agent
the number of shares of Acquiror Common Stock issuable and the amount of cash
payable in the Merger (which shall be held by the Exchange Agent in trust for
the holders of Company Common Stock and invested only in deposit accounts issued
by the Exchange Agent (or an FDIC-insured affiliate of the Exchange Agent),
direct obligations of the U.S. Government or obligations issued or guaranteed by
an agency thereof which carry the full faith and credit of the United States).
Within 10 business days after the Election Deadline, the Exchange Agent shall
distribute Acquiror Common Stock and cash as provided herein. The Exchange Agent
shall not be entitled to vote or exercise any rights of ownership with respect
to the shares of Acquiror Common Stock held by it from time to time hereunder,
except that it shall receive and hold all dividends or other distributions paid
or distributed with respect to such shares for the account of the persons
entitled thereto.
(g) After the completion of the foregoing allocation, each holder of an
outstanding certificate or certificates which prior thereto represented shares
of Company Common Stock who surrenders such certificate or certificates to the
Exchange Agent will, upon acceptance thereof by the Exchange Agent, be entitled
to a certificate or certificates representing the number of full shares of
Acquiror Common Stock or the amount of cash into which the aggregate number of
shares of Company Common Stock previously represented by such certificate or
certificates surrendered shall have been converted pursuant to this Agreement
and, if such holder's shares of Company Common Stock have been converted into
Acquiror Common Stock, any other distribution theretofore paid with respect to
the Acquiror Common Stock issuable in the Merger, in each case without interest.
The Exchange Agent shall accept such certificates upon compliance with such
reasonable terms and conditions as the Exchange Agent may impose to effect an
orderly exchange thereof in accordance with normal exchange practices. Each
outstanding certificate which prior to the Effective Time represented Company
Common Stock and which is not surrendered to the Exchange Agent in accordance
with the procedures provided for herein shall, except as otherwise herein
provided, until duly surrendered to the Exchange Agent be deemed to evidence
ownership of the number of shares of Acquiror Common Stock or the right to
receive the amount of cash into which such Acquiror Common Stock shall have been
converted. After the Effective Time, there shall be no further transfer on the
records of the Company of certificates representing shares of Company Common
Stock and if such certificates are presented to the Company for transfer, they
shall be cancelled against delivery of certificates for Acquiror Common Stock or
cash as hereinabove provided. No dividends which have been declared will be
remitted to any person entitled to receive shares of Acquiror Common Stock under
this Section 2.4 until such person surrenders the certificate or certificates
representing Company Common Stock, at which time such dividends shall be
remitted to such person, without interest.
(h) The Acquiror shall not be obligated to deliver cash and/or a
certificate or certificates representing shares of Acquiror Common Stock to
which a holder of Company Common Stock would otherwise be entitled as a result
of the Merger until such holder surrenders the certificate or certificates
representing the shares of Company Common Stock for exchange as provided in this
Section 2.4, or, in default thereof, an appropriate affidavit of loss and
indemnity agreement and/or a bond as may be required in each case by the
Acquiror. If any certificates evidencing shares of Acquiror Common Stock are to
be issued in a name other than that in which the certificate evidencing Company
Common Stock surrendered in exchange therefor is registered, it shall be a
condition of the issuance thereof that the certificate so surrendered shall be
properly endorsed or accompanied by an executed form of assignment separate from
the certificate and otherwise in proper form for transfer and that the person
requesting such exchange pay to the Exchange Agent any transfer or other tax
required by reason of the issuance of a certificate for shares of Acquiror
Common Stock in any name other than that of the registered holder of the
certificate surrendered or otherwise establish to the satisfaction of the
Exchange Agent that such tax has been paid or is not payable.
(i) Any portion of the shares of Company Common Stock and cash delivered to
the Exchange Agent by the Acquiror pursuant to Section 2.4(f) that remains
unclaimed by the shareholders of the Company for six months after the Effective
Time (as well as any proceeds from any investment thereof) shall be delivered by
the Exchange Agent to the Acquiror. Any shareholders of the Company who have not
theretofore complied with Section 2.4(g) shall thereafter look only to the
Acquiror for the consideration deliverable in respect of each share of Company
Common Stock such shareholder holds as determined pursuant to this Agreement
without any interest thereon. If outstanding certificates for shares of Company
Common Stock are not surrendered or the payment for them is not claimed prior to
the date on which such shares of Acquiror Common Stock or cash would otherwise
escheat to or become the property of any governmental unit or agency, the
unclaimed items shall, to the extent permitted by abandoned property and any
other applicable law, become the property of the Acquiror (and to the extent not
in its possession shall be delivered to it), free and clear of all claims or
interest of any person previously entitled to such property. Neither the
Exchange Agent nor any party to this Agreement shall be liable to any holder of
stock represented by any certificate for any consideration paid to a public
official pursuant to applicable abandoned property, escheat or similar laws. The
Acquiror and the Exchange Agent shall be entitled to rely upon the stock
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transfer books of the Company to establish the identity of those persons
entitled to receive consideration specified in this Agreement, which books shall
be conclusive with respect thereto. In the event of a dispute with respect to
ownership of stock represented by any certificate, the Acquiror and the Exchange
Agent shall be entitled to deposit any consideration represented thereby in
escrow with an independent third party and thereafter be relieved with respect
to any claims thereto.
2.5 NO FRACTIONAL SHARES
Notwithstanding any other provision of this Agreement, neither certificates
nor scrip for fractional shares of Acquiror Common Stock shall be issued in the
Merger. Each holder who otherwise would have been entitled to a fraction of a
share of Acquiror Common Stock shall receive in lieu thereof cash (without
interest) in an amount determined by multiplying the fractional share interest
to which such holder would otherwise be entitled by the Average Acquiror Share
Price. No such holder shall be entitled to dividends, voting rights or any other
rights in respect of any fractional share.
2.6 STOCK OPTIONS
Immediately before the Effective Time, each option with respect to Company
Common Stock (a "Company Stock Option") that is outstanding and exercisable at
the Effective Time shall be cancelled and converted into the right to receive
from the Company, subject to required withholding taxes, if any, cash in an
amount equal to the difference between the exercise price of such Company Stock
Option and the Per Share Cash Consideration for each share of Company Common
Stock subject to such Company Stock Option.
2.7 WITHHOLDING RIGHTS
The Acquiror (through the Exchange Agent, if applicable) shall be entitled
to deduct and withhold from any amounts otherwise payable pursuant to this
Agreement to any holder of shares of Company Common Stock such amounts as the
Acquiror is required under the Code or any provision of state, local or foreign
tax law to deduct and withhold with respect to the making of such payment. Any
amounts so withheld shall be treated for all purposes of this Agreement as
having been paid to the holder of Company Common Stock in respect of which such
deduction and withholding was made by the Acquiror.
2.8 DISSENTING SHARES
(a) Each outstanding share of Company Common Stock the holder of which has
perfected his right to dissent under the OGCL and has not effectively withdrawn
or lost such right as of the Effective Time (the "Company Dissenting Shares")
shall not be converted into or represent a right to receive shares of Acquiror
Common Stock or cash hereunder, and the holder thereof shall be entitled only to
such rights as are granted by the OGCL. The Company shall give the Acquiror
prompt notice upon receipt by the Company of any such written demands for
payment of the fair value of such shares of Company Common Stock and of
withdrawals of such demands and any other instruments provided pursuant to the
OGCL (any shareholder duly making such demand being hereinafter called a
"Dissenting Company Shareholder"). Any payments made in respect of Company
Dissenting Shares shall be made by the Surviving Corporation. If any Company
Dissenting Shareholder shall effectively withdraw or lose (through failure to
perfect or otherwise) his right to such payment at or prior to the Effective
Time, such holder's shares of Company Common Stock shall be converted into a
right to receive cash or Acquiror Common Stock in accordance with the applicable
provisions of this Agreement. If such holder shall effectively withdraw or lose
(through failure to perfect or otherwise) his right to such payment after the
Effective Time, each share of Company Common Stock of such holder shall be
converted on a share by share basis into either the right to receive cash or
Acquiror Common Stock as the Acquiror shall determine.
(b) No holder of Acquiror Common Stock shall be entitled to relief as a
dissenting shareholder pursuant to Section 1701.85 of the OGCL or otherwise.
2.9 ANTI-DILUTION PROVISIONS
The Exchange Ratio, the Per Share Stock Consideration, the Per Share Cash
Consideration and the Stock Amount shall be subject to appropriate adjustments
as mutually agreed to by the Acquiror and the Company in the event that,
subsequent to the date of this Agreement but prior to the Effective Time, the
outstanding Acquiror Common Stock shall have been increased, decreased, changed
into or exchanged for a different number or kind of shares or securities through
reorganization, recapitalization, reclassification, stock dividend, stock split,
reverse stock split or other like changes in Acquiror's capitalization. Nothing
contained herein shall be deemed to permit any action which may be proscribed by
this Agreement.
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2.10 ADDITIONAL ACTIONS
If at any time after the Effective Time the Surviving Corporation shall
consider that any further assignments or assurances in law or any other acts are
necessary or desirable to (i) vest, perfect or confirm, of record or otherwise,
in the Surviving Corporation its rights, title or interest in, to or under any
of the rights, properties or assets of the Company acquired or to be acquired by
the Surviving Corporation as a result of, or in connection with, the Merger, or
(ii) otherwise carry out the purposes of this Agreement, the Company and its
proper officers and directors shall be deemed to have granted to the Surviving
Corporation an irrevocable power of attorney to execute and deliver all such
proper deeds, assignments and assurances in law and to do all acts necessary or
proper to vest, perfect or confirm title to and possession of such rights,
properties or assets in the Surviving Corporation and otherwise to carry out the
purposes of this Agreement; and the proper officers and directors of the
Surviving Corporation are fully authorized in the name of the Company or
otherwise to take any and all such action.
2.11 THE BANK MERGER
The Acquiror and the Company shall take all action necessary and
appropriate, including causing the entering into of an amended and restated
agreement of merger by the Bank and the Association (the "Bank Merger
Agreement") which amends and restates the Agreement of Merger between the Bank
and the Association dated as of April 29, 1996, the form of which is attached
hereto as Exhibit A, to cause the Association to merge with and into the Bank
(the "Bank Merger") immediately after consummation of the Merger in accordance
with the applicable laws of the State of Ohio and the United States and the
regulations of the Department and the OTS thereunder. The Bank shall be the
surviving corporation in the Bank Merger, and shall continue its corporate
existence under the name "Fidelity Bank" under the laws of the United States.
The Bank will become a wholly-owned subsidiary of the Acquisition Corporation
upon the receipt of all requisite regulatory approvals and the contribution to
the Acquisition Corporation of all the capital stock of the Bank. Upon
consummation of the Bank Merger, the separate corporate existence of the
Association shall cease. The directors and executive officers of the Bank upon
consummation of the Bank Merger shall be as set forth in the Bank Merger
Agreement.
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ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company represents and warrants to the Acquiror as follows:
3.1 CAPITAL STRUCTURE
The authorized capital stock of the Company consists of 5,000,000 shares of
Company Common Stock and 2,000,000 shares of Company Preferred Stock. As of the
date hereof, there are 708,096 shares of Company Common Stock issued and
outstanding, 67,927 shares of Company Common Stock are directly held as treasury
stock by the Company and no shares of Company Preferred Stock are issued and
outstanding. All outstanding shares of Company Common Stock have been duly
authorized and validly issued and are fully paid and nonassessable, and none of
the outstanding shares of Company Common Stock has been issued in violation of
the preemptive rights of any person, firm or entity. Except for (i) 47,871
shares of Company Common Stock issuable upon exercise of outstanding stock
options which have been granted pursuant to the 1991 Non-Statutory Stock Option
Plan, 1991 Incentive Stock Option Plan, 1994 Employee Stock Option Plan and 1994
Non-Employee Director Stock Option Plan and (ii) shares of Company Common Stock
issuable pursuant to the terms of the Company Stock Option Agreement, there are
no Rights authorized, issued or outstanding with respect to the capital stock of
the Company.
3.2 ORGANIZATION, STANDING AND AUTHORITY OF THE COMPANY
The Company is a corporation duly organized, validly existing and in good
standing under the laws of the State of Ohio with full corporate power and
authority to own or lease all of its properties and assets and to carry on its
business as now conducted and is duly licensed or qualified to do business and
is in good standing in each jurisdiction in which its ownership or leasing of
property or the conduct of its business requires such licensing or qualification
and where the failure to be so licensed, qualified or in good standing would
have a material adverse effect on the financial condition, results of operations
or business of the Company on a consolidated basis. The Company is duly
registered as a savings and loan holding company under the HOLA and the
regulations of the OTS thereunder. The Company has heretofore delivered to the
Acquiror true and complete copies of the Articles of Incorporation, Code of
Regulations and Bylaws of the Company as in effect as of the date hereof.
3.3 OWNERSHIP OF THE COMPANY SUBSIDIARIES
The only direct or indirect Subsidiaries of the Company are the Association
and SGFSC (the "Company Subsidiaries"). Except for capital stock of the Company
Subsidiaries, stock in the FHLB of Cincinnati, securities and other interests
taken in consideration of debts previously contracted and by virtue of the
Acquiror Stock Option Agreement, the Company does not own or have the right to
acquire, directly or indirectly, any outstanding capital stock or other voting
securities or ownership interests of any corporation, bank, savings association,
partnership, joint venture or other organization. The outstanding shares of
capital stock or other ownership interests of each of the Company Subsidiaries
have been duly authorized and validly issued, are fully paid and nonassessable,
and are directly or indirectly owned by the Company free and clear of all liens,
claims, encumbrances, charges, pledges, restrictions or rights of third parties
of any kind whatsoever. No Rights are authorized, issued or outstanding with
respect to the capital stock or other ownership interests of any Company
Subsidiary and there are no agreements, understandings or commitments relating
to the right of the Company to vote or to dispose of said shares or other
ownership interests.
3.4 ORGANIZATION, STANDING AND AUTHORITY OF THE COMPANY SUBSIDIARIES
The Association is a savings and loan association duly organized, validly
existing and in good standing under the laws of the State of Ohio, and SGFSC is
a corporation duly organized, validly existing and in good standing under the
laws of the State of Ohio. Each of the Company Subsidiaries (i) has full power
and authority to own or lease all of its properties and assets and to carry on
its business as now conducted, and (ii) is duly licensed or qualified to do
business and is in good standing in each jurisdiction in which its ownership or
leasing of property or the conduct of its business requires such qualification,
except where the failure to be so licensed, qualified or in good standing would
not have a material adverse effect on the financial condition, results of
operations or business of the Company on a consolidated basis. The Company has
heretofore delivered to the Acquiror true and complete copies of the Articles of
Incorporation, Constitution and Bylaws of the Association and the Articles of
Incorporation, Code of Regulations and Bylaws of SGFSC as in effect as of the
date hereof.
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3.5 AUTHORIZED AND EFFECTIVE AGREEMENT
(a) The Company has all requisite corporate power and authority to enter
into this Agreement and (subject to receipt of all necessary governmental
approvals and the approval of the Company's shareholders of this Agreement) to
perform all of its obligations under this Agreement. The execution and delivery
of this Agreement and the consummation of the transactions contemplated hereby
have been duly and validly authorized by all necessary corporate action in
respect thereof on the part of the Company, except for the approval of this
Agreement by the Company's shareholders. This Agreement has been duly and
validly executed and delivered by the Company and constitutes a legal, valid and
binding obligation of the Company which is enforceable against the Company in
accordance with its terms, subject, as to enforceability, to bankruptcy,
insolvency and other laws of general applicability relating to or affecting
creditors' rights and to general equity principles.
(b) Neither the execution and delivery of this Agreement, nor consummation
of the transactions contemplated hereby (including the Merger and the Bank
Merger), nor compliance by the Company with any of the provisions hereof (i)
does or will conflict with or result in a breach of any provisions of the
Articles of Incorporation, Code of Regulations or Bylaws of the Company or the
equivalent documents of any Company Subsidiary, (ii) except as Previously
Disclosed, violate, conflict with or result in a breach of any term, condition
or provision of, or constitute a default (or an event which, with notice or
lapse of time, or both, would constitute a default) under, or give rise to any
right of termination, cancellation or acceleration with respect to, or result in
the creation of any lien, charge or encumbrance upon any property or asset of
the Company or any Company Subsidiary pursuant to, any material note, bond,
mortgage, indenture, deed of trust, license, lease, agreement or other
instrument or obligation to which the Company or any Company Subsidiary is a
party, or by which any of their respective properties or assets may be bound or
affected, or (iii) subject to receipt of all required governmental and
shareholder approvals, violate any order, writ, injunction, decree, statute,
rule or regulation applicable to the Company or any Company Subsidiary.
(c) Except for (i) the filing of applications and notices with, and the
consents and approvals of, as applicable, the OTS and the Department, (ii) the
filing and effectiveness of the Form S-4 with the Commission, (iii) compliance
with applicable state securities or "blue sky" laws and the NASD Bylaws in
connection with the issuance of Acquiror Common Stock pursuant to this
Agreement, (iv) the approval of this Agreement by the requisite vote of the
shareholders of the Company and the Acquiror, (v) the filing of the Certificate
of Merger with the Secretary of State of Ohio pursuant to the OGCL in connection
with the Merger and (vi) the filing of a Certificate of Merger with the
Secretary of State of Ohio and Articles of Combination with the OTS in
connection with the Bank Merger, and except for such filings, authorizations or
approvals which are Previously Disclosed, no consents or approvals of or filings
or registrations with any Governmental Entity or with any third party are
necessary on the part of the Company or any Company Subsidiary in connection
with (i) the execution and delivery by the Company of this Agreement and the
consummation by the Company of the transactions contemplated hereby and (ii) the
execution and delivery by the Association of the Bank Merger Agreement and the
consummation by the Association of the transactions contemplated thereby.
(d) As of the date hereof, neither the Company nor any of the Company
Subsidiaries is aware of any reasons relating to the Company or any of the
Company Subsidiaries (including, without limitation, Community Reinvestment Act
compliance) why all consents and approvals shall not be procured from all
regulatory agencies having jurisdiction over the transactions contemplated by
this Agreement as shall be necessary for (i) consummation of the transactions
contemplated by this Agreement and the Bank Merger Agreement and (ii) the
continuation by the Acquiror after the Effective Time of the business of each of
the Acquiror and the Company as such business is carried on immediately prior to
the Effective Time, free of any conditions or requirements which, in the
reasonable opinion of the Company, could have a material adverse effect upon the
financial condition, results of operations or business of the Acquiror or the
Company on a consolidated basis or materially impair the value of the Company
and the Company Subsidiaries to the Acquiror.
3.6 SECURITIES DOCUMENTS AND REGULATORY REPORTS
(a) The Company has previously delivered or made available to the Acquiror
a complete copy of all Securities Documents filed by the Company pursuant to the
Securities Laws or mailed by the Company to its shareholders as a class since
January 1, 1993. The Company has timely filed with the Commission all Securities
Documents required by the Securities Laws and such Securities Documents complied
in all material respects with the Securities Laws and did not contain any untrue
statement of a material fact or omit to state any material fact required to be
stated therein or necessary in order to make the statements therein, in light of
the circumstances under which they were made, not misleading, provided that
information as of a later date shall be deemed to modify information as of an
earlier date.
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(b) Since January 1, 1993, each of the Company and the Association has duly
filed with the OTS, the FDIC and the Department, as the case may be, in correct
form the reports required to be filed under applicable laws and regulations and
such reports were in all material respects complete and accurate and in
compliance with the requirements of applicable laws and regulations, provided
that information as of a later date shall be deemed to modify information as of
an earlier date; and the Company has previously delivered or made available to
the Acquiror accurate and complete copies of all such reports. In connection
with the most recent examinations of the Company and the Association by the OTS
and the Department, neither the Company nor the Association was required to
correct or change any action, procedure or proceeding which the Company or the
Association believes has not been corrected or changed as required.
3.7 FINANCIAL STATEMENTS
(a) The Company has previously delivered or made available to the Acquiror
accurate and complete copies of the Company Financial Statements which, in the
case of the consolidated statements of financial condition of the Company as of
June 30, 1995, 1994 and 1993 and the consolidated statements of income,
stockholders' equity and cash flows for each of the three years ended June 30,
1995, 1994 and 1993, are accompanied by the audit reports of Clark, Schaefer,
Hackett & Co., independent public accountants with respect to the Company. The
Company Financial Statements referred to herein, as well as the Company
Financial Statements to be delivered pursuant to Section 5.7 hereof, fairly
present or will fairly present, as the case may be, the consolidated financial
condition of the Company as of the respective dates set forth therein, and the
consolidated results of operations, stockholders' equity and cash flows of the
Company for the respective periods or as of the respective dates set forth
therein.
(b) Each of the Company Financial Statements referred to in Section 3.7(a)
has been or will be, as the case may be, prepared in accordance with generally
accepted accounting principles consistently applied during the periods involved,
except as stated therein. The audits of the Company and the Company Subsidiaries
have been conducted in all material respects in accordance with generally
accepted auditing standards. The books and records of the Company and the
Company Subsidiaries are being maintained in material compliance with applicable
legal and accounting requirements, and such books and records accurately reflect
in all material respects all dealings and transactions in respect of the
business, assets, liabilities and affairs of the Company and the Company
Subsidiaries.
(c) Except to the extent (i) reflected, disclosed or provided for in the
consolidated statement of financial condition of the Company as of December,
1995 (including related notes) and (ii) of liabilities incurred since December
31, 1995 in the ordinary course of business, neither the Company nor any Company
Subsidiary has any liabilities, whether absolute, accrued, contingent or
otherwise, material to the financial condition, results of operations or
business of the Company on a consolidated basis.
3.8 MATERIAL ADVERSE CHANGE
(a) There has not been any material adverse change in the business,
operations, prospects, assets or financial condition of the Company on a
consolidated basis since December 31, 1995 and to the best knowledge of the
Company, no fact or condition exists which the Company believes will cause such
a material adverse change in the future.
(b) Except as Previously Disclosed, neither the Company nor any of the
Company Subsidiaries has taken or permitted any of the actions set forth in
Section 5.6(a) hereof between December 31, 1995 and the date hereof.
3.9 ENVIRONMENTAL MATTERS
(a) To the best of the Company's knowledge, the Company and the Company
Subsidiaries are in compliance with all Environmental Laws, except for any
violations of any Environmental Law which would not, singly or in the aggregate,
have a material adverse effect on the financial condition, results of operations
or business of the Company on a consolidated basis. Neither the Company nor any
Company Subsidiary has received any written communication alleging that the
Company or any Company Subsidiary is not in such compliance and, to the best
knowledge of the Company, there are no present circumstances that would prevent
or interfere with the continuation of such compliance.
(b) To the best of the Company's knowledge, none of the properties owned,
leased or operated by the Company or the Company's Subsidiaries has been or is
in violation of or liable under any Environmental Law, except any such
violations or liabilities which would not singly or in the aggregate have a
material adverse effect on the financial condition, results of operations or
business of the Company on a consolidated basis.
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(c) To the best of the Company's knowledge, there are no past or present
actions, activities, circumstances, conditions, events or incidents that could
reasonably form the basis of any Environmental Claim or other claim or action or
governmental investigation that could result in the imposition of any liability
arising under any Environmental Law against the Company or any Company
Subsidiary or against any person or entity whose liability for any Environmental
Claim the Company or any Company Subsidiary has or may have retained or assumed
either contractually or by operation of law, except such which would not have a
material adverse effect on the financial condition, results of operations or
business of the Company on a consolidated basis.
(d) Except as Previously Disclosed, the Company has not conducted any
environmental studies during the past five years with respect to any properties
owned by it or any Company Subsidiary as of the date hereof.
3.10 ALLOWANCE FOR LOAN LOSSES AND REAL ESTATE OWNED
The allowance for loan losses reflected on the Company's consolidated
statements of financial condition included in the Company Financial Statements
is, or will be in the case of subsequently delivered Company Financial
Statements, as the case may be, in the opinion of the Company's management
adequate in all material respects as of their respective dates under the
requirements of generally accepted accounting principles to provide for
reasonably anticipated losses on outstanding loans net of recoveries. The Real
Estate Owned reflected on the consolidated statements of financial condition
included in the Company Financial Statements is, or will be in the case of
subsequently delivered Company Financial Statements, as the case may be, carried
at the lower of cost or fair value, less estimated costs to sell, as required by
generally accepted accounting principles.
3.11 TAX MATTERS
(a) The Company and the Company Subsidiaries, and each of their
predecessors, have timely filed all federal, state and local (and, if
applicable, foreign) income, franchise, bank, excise, real property, personal
property and other tax returns required by applicable law to be filed by them
(including, without limitation, estimated tax returns, income tax returns,
information returns and withholding and employment tax returns) and have paid,
or where payment is not required to have been made, have set up an adequate
reserve or accrual for the payment of, all taxes required to be paid in respect
of the periods covered by such returns and, as of the Effective Time, will have
paid, or where payment is not required to have been made, will have set up an
adequate reserve or accrual for the payment of, all taxes for any subsequent
periods ending on or prior to the Effective Time. Neither the Company nor any of
the Company Subsidiaries will have any material liability for any such taxes in
excess of the amounts so paid or reserves or accruals so established.
(b) All federal, state and local (and, if applicable, foreign) income,
franchise, bank, excise, real property, personal property and other tax returns
filed by the Company and the Company Subsidiaries are complete and accurate in
all material respects. Neither the Company nor any of the Company Subsidiaries
is delinquent in the payment of any tax, assessment or governmental charge, and
none of them has requested any extension of time within which to file any tax
returns in respect of any fiscal year or portion thereof which have not since
been filed. Except as Previously Disclosed, the federal, state and local income
tax returns of the Company and the Company Subsidiaries have been examined by
the applicable tax authorities (or are closed to examination due to the
expiration of the applicable statute of limitations) and no deficiencies for any
tax, assessment or governmental charge have been proposed, asserted or assessed
(tentatively or otherwise) against the Company or any Company Subsidiary as a
result of such examinations or otherwise which have not been settled and paid.
There are currently no agreements in effect with respect to the Company or any
Company Subsidiary to extend the period of limitations for the assessment or
collection of any tax. As of the date hereof, no audit, examination or
deficiency or refund litigation with respect to such return is pending or, to
the best of the Company's knowledge, threatened.
(c) Except as Previously Disclosed, none of the Company or the Company
Subsidiaries (i) is a party to any agreement providing for the allocation or
sharing of taxes, (ii) is required to include in income any adjustment pursuant
to Section 481(a) of the Code by reason of a voluntary change in accounting
method initiated by the Company or the Company Subsidiaries (nor does the
Company have any knowledge that the Internal Revenue Service has proposed any
such adjustment or change of accounting method) or (iii) has filed a consent
pursuant to Section 341(f) of the Code or agreed to have Section 341(f)(2) of
the Code apply.
3.12 LEGAL PROCEEDINGS
Except as Previously Disclosed, there are no actions, suits, claims,
governmental investigations or proceedings instituted, pending or, to the best
knowledge of the Company, threatened against the Company or any Company
Subsidiary or
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against any asset, interest or right of the Company or each of the Company
Subsidiaries, or against any officer, director or employee of any of them that
in any such case, if decided adversely, would have a material adverse effect on
the financial condition, results of operations or business of the Company on a
consolidated basis. Neither the Company nor any Company Subsidiary is a party to
any order, judgment or decree which has or could reasonably be expected to have
a material adverse effect on the financial condition, results of operations or
business of the Company on a consolidated basis.
3.13 COMPLIANCE WITH LAWS
(a) Each of the Company and each of the Company Subsidiaries has all
permits, licenses, certificates of authority, orders and approvals of, and has
made all filings, applications and registrations with, federal, state, local and
foreign governmental or regulatory bodies that are required in order to permit
it to carry on its business as it is presently being conducted and the absence
of which could reasonably be expected to have a material adverse effect on the
financial condition, results of operations or business of the Company on a
consolidated basis; all such permits, licenses, certificates of authority,
orders and approvals are in full force and effect; and to the best knowledge of
the Company, no suspension or cancellation of any of the same is threatened.
(b) Neither the Company nor any of the Company Subsidiaries is in violation
of its respective Articles of Incorporation, Code of Regulations, Constitution
or other chartering instrument or Bylaws, or of any applicable federal, state or
local law or ordinance or any order, rule or regulation of any federal, state,
local or other governmental agency or body (including, without limitation, all
banking (including, without limitation, all regulatory capital requirements),
securities, municipal securities, safety, health, environmental, zoning,
anti-discrimination, antitrust, and wage and hour laws, ordinances, orders,
rules and regulations), or in default with respect to any order, writ,
injunction or decree of any court, or in default under any order, license,
regulation or demand of any governmental agency, any of which violations or
defaults could reasonably be expected to have a material adverse effect on the
financial condition, results of operations or business of the Company on a
consolidated basis; and neither the Company nor any Company Subsidiary has
received any written notice or communication from any federal, state or local
governmental authority asserting that the Company or any Company Subsidiary is
in violation of any of the foregoing which could reasonably be expected to have
a material adverse effect on the financial condition, results of operations or
business of the Company on a consolidated basis. Neither the Company nor any
Company Subsidiary is subject to any regulatory or supervisory cease and desist
order, agreement, written directive, memorandum of understanding or written
commitment (other than those of general applicability to all savings
institutions or holding companies thereof issued by governmental authorities),
and none of them has received any written communication requesting that they
enter into any of the foregoing.
3.14 DEPOSIT INSURANCE AND OTHER REGULATORY MATTERS
(a) The deposit accounts of the Association are insured by the SAIF to the
maximum extent permitted by the FDIA, and the Association has paid all premiums
and assessments required by the FDIA and the regulations thereunder.
(b) The Association is a member in good standing of the FHLB of Cincinnati
and owns the requisite amount of stock in the FHLB of Cincinnati.
(c) The Association is a "qualified thrift lender," as such term is defined
in the HOLA and the regulations thereunder.
(d) The Association has at all time qualified as a "domestic building and
loan association," as such term is defined in Section 7701(a)(19) of the Code,
for purposes of Section 593 of the Code.
3.15 CERTAIN INFORMATION
None of the information relating to the Company and the Company
Subsidiaries supplied or to be supplied for inclusion or incorporation by
reference in (i) the Form S-4 will, at the time the Form S-4 and any amendment
thereto becomes effective under the Securities Act, contain any untrue statement
of a material fact or omit to state a material fact necessary to make the
statements therein, in light of the circumstances under which they were made,
not misleading, and (ii) the Proxy Statement, as of the date(s) such Proxy
Statement is mailed to shareholders of the Company and the Acquiror and up to
and including the date(s) of the meetings of shareholders to which such Proxy
Statement relates, will contain any untrue statement of a material fact or omit
to state a material fact necessary to make the statements therein, in light of
the circumstances under which they were made, not misleading, provided that
information as of a later date shall be deemed to modify information as of an
earlier date. The Proxy Statement mailed by the Company to its shareholders in
connection with the meeting of shareholders at which this Agreement will be
considered by such shareholders will comply as to form in all material respects
with the Exchange Act and the rules and regulations promulgated thereunder.
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3.16 EMPLOYEE BENEFIT PLANS
(a) The Company has Previously Disclosed all stock option, employee stock
purchase and stock bonus plans, qualified pension or profit-sharing plans, any
fringe benefit, incentive, deferred compensation, consultant, bonus or group
insurance contract, plan or arrangement, or any other welfare plan (as defined
under Section 3(1) of ERISA), employee pension benefit plan (as defined under
Section 3(2) of ERISA) or agreement maintained for the benefit of employees or
former employees of the Company or any Company Subsidiary (the "Company Employee
Plans"), and the Company has previously furnished or made available to the
Acquiror accurate and complete copies of the same together with (i) the most
recent actuarial and financial reports prepared with respect to any qualified
plans, (ii) the most recent annual reports filed with any governmental agency,
and (iii) all rulings and determination letters and any open requests for
rulings or letters that pertain to any qualified plan.
(b) None of the Company, any Company Subsidiary, any pension plan
maintained by any of them and qualified under Section 401 of the Code or, to the
best of the Company's knowledge, any fiduciary of such plan has incurred any
material liability to the PBGC or the Internal Revenue Service with respect to
any employees of the Company or any Company Subsidiary. To the best of the
Company's knowledge, no reportable event under Section 4043(b) of ERISA has
occurred with respect to any such pension plan.
(c) Neither the Company nor any Company Subsidiary participates in or has
incurred any liability under Section 4201 of ERISA for a complete or partial
withdrawal from a multi-employer plan (as such term is defined in ERISA).
(d) A favorable determination letter has been issued by the Internal
Revenue Service with respect to each Company Employee Plan which is an "employee
pension benefit plan" (as defined in Section 3(2) of ERISA) (a "Company Pension
Plan") which is intended to qualify under Section 401 of the Code to the effect
that such plan is qualified under Section 401 of the Code and the trust
associated with such employee pension plan is tax exempt under Section 501 of
the Code. No such letter has been revoked or, to the best of the Company's
knowledge, is threatened to be revoked and the Company does not know of any
ground on which such revocation may be based. Except as Previously Disclosed,
neither the Company nor any Company Subsidiary has any liability under any such
plan that is not reflected on the consolidated statement of financial condition
of the Company at December 31, 1995 included in the Company Financial
Statements, other than liabilities incurred in the ordinary course of business
in connection therewith subsequent to the date thereof.
(e) No prohibited transaction (which shall mean any transaction prohibited
by Section 406 of ERISA and not exempt under Section 408 of ERISA or Section
4975 of the Code) has occurred with respect to any Company Employee Plan which
would result in the imposition, directly or indirectly, of a material excise tax
under Section 4975 of the Code or otherwise have a material adverse effect on
the financial condition, results of operations or business of the Company on a
consolidated basis.
(f) Full payment has been made (or proper accruals have been established)
of all contributions which are required for periods prior to the date hereof,
and full payment will be so made (or proper accruals will be so established) of
all contributions which are required for periods after the date hereof and prior
to the Effective Time, under the terms of each Company Employee Plan or ERISA;
no accumulated funding deficiency (as defined in Section 302 of ERISA or Section
412 of the Code), whether or not waived, exists with respect to any Company
Pension Plan, and, except as Previously Disclosed, there is no "unfunded current
liability" (as defined in Section 412 of the Code) with respect to any Company
Pension Plan.
(g) The Company Employee Plans have been operated in compliance in all
material respects with the applicable provisions of ERISA, the Code, all
regulations, rulings and announcements promulgated or issued thereunder and all
other applicable governmental laws and regulations.
(h) There are no pending or, to the best knowledge of the Company,
threatened claims (other than routine claims for benefits) by, on behalf of or
against any of the Company Employee Plans or any trust related thereto or any
fiduciary thereof.
3.17 CERTAIN CONTRACTS
(a) Except as Previously Disclosed, neither the Company nor any Company
Subsidiary is a party to, is bound or affected by, receives, or is obligated to
pay, benefits under (i) any agreement, arrangement or commitment, including
without limitation any agreement, indenture or other instrument, relating to the
borrowing of money by the Company or any Company Subsidiary or the guarantee by
the Company or any Company Subsidiary of any obligation, (ii) any agreement,
arrangement or commitment relating to the employment of a consultant or the
employment, election or retention in office of any present or
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former director, officer or employee of the Company or any Company Subsidiary,
(iii) any agreement, arrangement or understanding pursuant to which any payment
(whether of severance pay or otherwise) became or may become due to any
director, officer or employee of the Company or any Company Subsidiary upon
execution of this Agreement or upon or following consummation of the
transactions contemplated by this Agreement (either alone or in connection with
the occurrence of any additional acts or events), (iv) any agreement,
arrangement or understanding pursuant to which the Company or any Company
Subsidiary is obligated to indemnify any director, officer, employee or agent of
the Company or any Company Subsidiary, (v) any agreement, arrangement or
understanding to which the Company or any Company Subsidiary is a party or by
which any of the same is bound which limits the freedom of the Company or any
Company Subsidiary to compete in any line of business or with any person, (vi)
any assistance agreement, supervisory agreement, memorandum of understanding,
consent order, cease and desist order or condition of any regulatory order or
decree with or by the OTS, the FDIC, the Department or any other regulatory
agency, or (vii) any other agreement, arrangement or understanding which would
be required to be filed as an exhibit to the Company's Annual Report on Form
10-KSB under the Exchange Act and which has not been so filed.
(b) Neither the Company nor any Company Subsidiary is in default or in
non-compliance, which default or non-compliance could reasonably be expected to
have a material adverse effect on the financial condition, results of operations
or business of the Company on a consolidated basis or the transactions
contemplated hereby, under any contract, agreement, commitment, arrangement,
lease, insurance policy or other instrument to which it is a party or by which
its assets, business or operations may be bound or affected, whether entered
into in the ordinary course of business or otherwise and whether written or
oral, and there has not occurred any event that with the lapse of time or the
giving of notice, or both, would constitute such a default or non-compliance.
3.18 BROKERS AND FINDERS
Except as Previously Disclosed, neither the Company nor any Company
Subsidiary, nor any of their respective directors, officers or employees, has
employed any broker or finder or incurred any liability for any broker or finder
fees or commissions in connection with the transactions contemplated hereby.
3.19 INSURANCE
The Company and each Company Subsidiary is insured for reasonable amounts
with financially sound and reputable insurance companies against such risks as
companies engaged in a similar business would, in accordance with good business
practice, customarily be insured and has maintained all insurance required by
applicable laws and regulations. Neither the Company nor any of the Company
Subsidiaries has received any notice of cancellation or notice of a material
amendment of any such insurance policy or bond or is in default under such
policy or bond, no coverage thereunder is being disputed and all material claims
thereunder have been filed in a timely fashion.
3.20 PROPERTIES
All real and personal property owned by the Company or any of the Company
Subsidiaries or presently used by any of them in their respective business is in
an adequate condition (ordinary wear and tear excepted) and is sufficient to
carry on the business of the Company and the Company Subsidiaries in the
ordinary course of business consistent with their past practices. The Company
and the Company Subsidiaries have good and marketable title free and clear of
all liens, encumbrances, charges, defaults or equities (other than equities of
redemption under applicable foreclosure laws) to all of the material properties
and assets, real and personal, reflected on the consolidated statement of
financial condition of the Company as of December 31, 1995 included in the
Company Financial Statements or acquired after such date, except (i) liens for
current taxes not yet due or payable, (ii) pledges to secure deposits and other
liens incurred in the ordinary course of its banking business, (iii) such
imperfections of title, easements and encumbrances, if any, as are not material
in character, amount or extent and (iv) as reflected on the consolidated
statement of financial condition of the Company as of December 31, 1995 included
in the Company Financial Statements. All real and personal property which is
material to the Company's business on a consolidated basis and leased or
licensed by the Company or any Company Subsidiary is held pursuant to leases or
licenses which are valid and enforceable in accordance with their respective
terms and such leases will not terminate or lapse prior to the Effective Time.
The Company has Previously Disclosed an accurate listing of each such lease or
license referred to in the immediately preceding sentence pursuant to which the
Company or any of the Company Subsidiaries acts as lessor (other than
month-to-month leases) or lessee, including the expiration date and the terms of
any renewal options which relate to the same, as well as a listing of each
material real property owned by the Company or any Company Subsidiary and used
in the conduct of its business.
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3.21 LABOR
No work stoppage involving the Company or any Company Subsidiary is pending
or, to the best knowledge of the Company, threatened. Neither the Company nor
any Company Subsidiary is involved in, or threatened with or affected by, any
labor dispute, arbitration, lawsuit or administrative proceeding involving the
employees of the Company or any Company Subsidiary which could have a material
adverse effect on the financial condition, results of operations or business of
the Company on a consolidated basis. Employees of the Company and the Company
Subsidiaries are not represented by any labor union nor are any collective
bargaining agreements otherwise in effect with respect to such employees, and to
the best of the Company's knowledge, there have been no efforts to unionize or
organize any employees of the Company or any Company Subsidiary during the past
five years.
3.22 TRANSACTIONS WITH AFFILIATED PERSONS AND AFFILIATES
Except as Previously Disclosed, (i) no "affiliated person" or "affiliate"
of the Association, as defined in 12 C.F.R. (section mark)561.5 and 12 C.F.R.
(section mark)563.41, respectively, has engaged in any transaction with the
Association since January 1, 1993 which was not in compliance with applicable
laws and regulations and (ii) as of the date hereof there is no loan or
extension of credit outstanding to any of the same which is not in compliance
with applicable laws and regulations.
3.23 REQUIRED VOTE
(a) The affirmative vote of the holders of a majority of the issued and
outstanding shares of Company Common Stock is necessary to approve this
Agreement and the transactions contemplated hereby on behalf of the Company.
(b) At least two-thirds of the whole Board of Directors (as defined in the
Articles of Incorporation of the Company) has approved the Merger and this
Agreement such that the provisions of (i) Section 1 of Article Eleventh of the
Articles of Incorporation of the Company and (ii) Section 1704.02 of the Ohio
Revised Code shall be inapplicable to the Merger and this Agreement and the
transactions contemplated hereby.
3.24 DISCLOSURES
None of the representations and warranties of the Company or any of the
written information or documents furnished or to be furnished by the Company to
the Acquiror in connection with or pursuant to this Agreement or the
consummation of the transactions contemplated hereby, when considered as a
whole, contains or will contain any untrue statement of a material fact, or
omits or will omit to state any material fact required to be stated or necessary
to make any such information or document, in light of the circumstances, not
misleading.
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ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF THE ACQUIROR
AND THE ACQUISITION CORPORATION
The Acquiror and the Acquisition Corporation represent and warrant to the
Company as follows:
4.1 CAPITAL STRUCTURE OF THE ACQUIROR
The authorized capital stock of the Acquiror consists of 7,000,000 shares
of Acquiror Common Stock and 500,000 shares of Acquiror Preferred Stock. As of
the date hereof, there are 4,073,589 shares of Acquiror Common Stock issued and
outstanding, no shares of Acquiror Common Stock are directly or indirectly held
as treasury stock by the Acquiror and there are no shares of Acquiror Preferred
Stock issued and outstanding. All outstanding shares of Acquiror Common Stock
have been duly authorized and validly issued and are fully paid and
nonassessable, and none of the outstanding shares of Acquiror Common Stock have
been issued in violation of the preemptive rights of any person, firm or entity.
Except for (i) shares of Acquiror Common Stock issuable pursuant to the Acquiror
Employee Stock Benefit Plans, now or hereafter, and (ii) shares of Acquiror
Common Stock issuable pursuant to the terms of the Acquiror Stock Option
Agreement, there are no Rights authorized, issued or outstanding with respect to
the capital stock of the Acquiror.
4.2 ORGANIZATION, STANDING AND AUTHORITY OF THE ACQUIROR
The Acquiror is a corporation duly organized, validly existing and in good
standing under the laws of the State of Ohio with full corporate power and
authority to own or lease all of its properties and assets and to carry on its
business as now conducted and is duly licensed or qualified to do business and
is in good standing in each jurisdiction in which its ownership or leasing of
property or the conduct of its business requires such licensing or qualification
and where the failure to be so licensed, qualified or in good standing would
have a material adverse effect on the financial condition, results of operations
or business of the Acquiror on a consolidated basis. The Acquiror is duly
registered as a savings and loan holding company under the HOLA and the
regulations of the OTS thereunder. The Acquiror has heretofore delivered to the
Company true and complete copies of the Articles of Incorporation, Code of
Regulations and Bylaws of the Acquiror as in effect as of the date hereof.
4.3 OWNERSHIP OF THE ACQUISITION CORPORATION AND THE BANK
The only direct or indirect subsidiaries of the Acquiror are the
Acquisition Corporation and the Bank. Except as Previously Disclosed and except
for capital stock of the Acquisition Corporation and the Bank, stock in the FHLB
of Cincinnati, securities and other interests taken in consideration of debts
previously contracted and by virtue of this Agreement and the Company Stock
Option Agreement, the Acquiror does not own or have the right to acquire,
directly or indirectly, any outstanding capital stock or other voting securities
or ownership interests of any corporation, bank, savings association,
partnership, joint venture or other organization. The outstanding shares of
capital stock of the Acquisition Corporation and the Bank have been duly
authorized and validly issued, are fully paid and nonassessable, and are
directly or indirectly owned by the Acquiror free and clear of all liens,
claims, encumbrances, charges, pledges, restrictions or rights of third parties
of any kind whatsoever. No Rights are authorized, issued or outstanding with
respect to the capital stock or other ownership interests of the Acquisition
Corporation and the Bank and there are no agreements, understandings or
commitments relating to the right of the Acquiror to vote or to dispose of said
shares or other ownership interests.
4.4 ORGANIZATION, STANDING AND AUTHORITY OF THE BANK
The Bank is a savings bank duly organized, validly existing and in good
standing under the laws of the United States. The Bank (i) has full power and
authority to own or lease all of its properties and assets and to carry on its
business as now conducted, and (ii) is duly licensed or qualified to do business
and is in good standing in each jurisdiction in which its ownership or leasing
of property or the conduct of its business requires such qualification and where
the failure to be so licensed, qualified or in good standing would have a
material adverse effect on the financial condition, results of operations or
business of the Acquiror on a consolidated basis. The Acquiror has heretofore
delivered to the Company true and complete copies of the Charter and Bylaws of
the Bank as in effect as of the date hereof.
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4.5 AUTHORIZED AND EFFECTIVE AGREEMENT
(a) Each of the Acquiror and the Acquisition Corporation has all requisite
corporate power and authority to enter into this Agreement and (subject to
receipt of all necessary governmental approvals and the approval of the
Acquiror's shareholders of this Agreement) to perform all of its obligations
under this Agreement. The execution and delivery of this Agreement and the
consummation of the transactions contemplated hereby have been duly and validly
authorized by all necessary corporate action in respect thereof on the part of
the Acquiror and the Acquisition Corporation, except for the approval of this
Agreement by the Acquiror's shareholders and by Acquiror as sole shareholder of
the Acquisition Corporation. This Agreement has been duly and validly executed
and delivered by each of the Acquiror and the Acquisition Corporation and
constitutes a legal, valid and binding obligation of the Acquiror and the
Acquisition Corporation which is enforceable against the Acquiror and the
Acquisition Corporation in accordance with its terms, subject, as to
enforceability, to bankruptcy, insolvency and other laws of general
applicability relating to or affecting creditors' rights and to general equity
principles.
(b) Neither the execution and delivery of this Agreement, nor consummation
of the transactions contemplated hereby (including the Merger and the Bank
Merger), nor compliance by the Acquiror or the Acquisition Corporation with any
of the provisions hereof (i) does or will conflict with or result in a breach of
any provisions of the Articles of Incorporation, Code of Regulations, Charter or
Bylaws of the Acquiror, the Acquisition Corporation or the Bank, (ii) except as
Previously Disclosed, violate, conflict with or result in a breach of any term,
condition or provision of, or constitute a default (or an event which, with
notice or lapse of time, or both, would constitute a default) under, or give
rise to any right of termination, cancellation or acceleration with respect to,
or result in the creation of any lien, charge or encumbrance upon any property
or asset of the Acquiror, the Acquisition Corporation or the Bank pursuant to,
any material note, bond, mortgage, indenture, deed of trust, license, lease,
agreement or other instrument or obligation to which the Acquiror, the
Acquisition Corporation or the Bank is a party, or by which any of their
respective properties or assets may be bound or affected, or (iii) subject to
receipt of all required governmental and shareholder approvals, violate any
order, writ, injunction, decree, statute, rule or regulation applicable to the
Acquiror, the Acquisition Corporation or the Bank.
(c) Except for (i) the filing of applications and notices with, and the
consents and approvals of, as applicable, the OTS and the Department, (ii) the
filing and effectiveness of the Form S-4 with the Commission, (iii) compliance
with applicable state securities or "blue sky" laws and the NASD Bylaws in
connection with the issuance of Acquiror Common Stock pursuant to this
Agreement, (iv) the approval of this Agreement by the requisite vote of the
shareholders of the Company and the Acquiror and by the Acquiror as sole
shareholder of the Acquisition Corporation, (v) the filing of the Certificate of
Merger with the Secretary of State of Ohio pursuant to the OGCL in connection
with the Merger and (vi) the filing of a Certificate of Merger with the
Secretary of State of Ohio and Articles of Combination with the OTS in
connection with the Bank Merger, and except for such filings, authorizations or
approvals as are Previously Disclosed, no consents or approvals of or filings or
registrations with any Governmental Entity or with any third party are necessary
on the part of the Acquiror, the Acquisition Corporation or the Bank in
connection with (i) the execution and delivery by the Acquiror and the
Acquisition Corporation of this Agreement and the consummation by the Acquiror
and the Acquisition Corporation of the transactions contemplated hereby and (ii)
the execution and delivery by the Bank of the Bank Merger Agreement and the
consummation by the Bank of the transactions contemplated thereby.
(d) As of the date hereof, none of the Acquiror, the Acquisition
Corporation or the Bank is aware of any reasons relating to the Acquiror, the
Acquisition Corporation or the Bank (including, without limitation, Community
Reinvestment Act compliance) why all consents and approvals shall not be
procured from all regulatory agencies having jurisdiction over the transactions
contemplated by this Agreement as shall be necessary for (i) consummation of the
transactions contemplated by this Agreement and the Bank Merger Agreement and
(ii) the continuation by the Acquiror and the Acquisition Corporation after the
Effective Time of the business of each of the Acquiror and the Company as such
business is carried on immediately prior to the Effective Time, free of any
conditions or requirements which, in the reasonable opinion of the Acquiror,
could have a material adverse effect upon the financial condition, results of
operations or business of the Acquiror on a consolidated basis or materially
impair the value of the Company and the Company Subsidiaries to the Acquiror.
4.6 SECURITIES DOCUMENTS AND REGULATORY REPORTS
(a) The Acquiror has previously delivered or made available to the Company
a complete copy of all Securities Documents filed by the Acquiror or the Bank
pursuant to the Securities Laws or mailed by the Acquiror or the Bank to its
respective shareholders as a class since January 1, 1993. The Acquiror has
timely filed with the Commission (and the Bank has timely filed with the OTS)
all Securities Documents required by the Securities Laws and such Securities
Documents complied in all material respect with the Securities Laws and did not
contain any untrue statement of a material fact or omit
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to state any material fact required to be stated therein or necessary in order
to make the statements therein, in light of the circumstances under which they
were made, not misleading, provided that information as of a later date shall be
deemed to modify information as of an earlier date.
(b) Since January 1, 1993, each of the Acquiror and the Bank has duly filed
with the OTS and the FDIC, as the case may be, in correct form the reports
required to be filed under applicable laws and regulations and such reports were
in all material respects complete and accurate and in compliance with the
requirements of applicable laws and regulations, provided that information as of
a later date shall be deemed to modify information as of an earlier date; and
the Acquiror has previously delivered or made available to the Company accurate
and complete copies of all such reports. In connection with the most recent
examinations of the Acquiror and the Bank by the OTS, neither the Acquiror nor
the Bank was required to correct or change any action, procedure or proceeding
which the Acquiror or the Bank believes has not been corrected or changed as
required.
4.7 FINANCIAL STATEMENTS
(a) The Acquiror has previously delivered or made available to the Company
accurate and complete copies of the Acquiror Financial Statements which, in the
case of the statements of financial condition of the Bank as of December 31,
1995, 1994 and 1993 and the statements of income, stockholders' equity and cash
flows for each of the three years ended December 31, 1995, 1994 and 1993, are
accompanied by the audit reports of Grant Thornton LLP, independent public
accountants with respect to the Acquiror and the Bank. The Acquiror Financial
Statements referred to herein, as well as the Acquiror Financial Statements to
be delivered pursuant to Section 5.7 hereof, fairly present or will fairly
present, as the case may be, the consolidated financial condition of the
Acquiror or the Bank, as applicable, as of the respective dates set forth
therein, and the consolidated results of operations, stockholders' equity and
cash flows of the Acquiror or the Bank, as applicable, for the respective
periods or as of the respective dates set forth therein.
(b) Each of the Acquiror Financial Statements referred to in Section 4.7(a)
has been or will be, as the case may be, prepared in accordance with generally
accepted accounting principles consistently applied during the periods involved,
except as stated therein. The audits of the Acquiror and the Bank have been
conducted in all material respects in accordance with generally accepted
auditing standards. The books and records of the Acquiror, the Acquisition
Corporation and the Bank are being maintained in material compliance with
applicable legal and accounting requirements, and all such books and records
accurately reflect in all material respects all dealings and transactions in
respect of the business, assets, liabilities and affairs of the Acquiror, the
Acquisition Corporation and the Bank.
(c) Except to the extent (i) reflected, disclosed or provided for in the
consolidated statement of financial condition of the Bank as of December 31,
1995 (including related notes) and (ii) of liabilities incurred since December
31, 1995 in the ordinary course of business, none of the Acquiror, the
Acquisition Corporation or the Bank has any liabilities, whether absolute,
accrued, contingent or otherwise, material to the financial condition, results
of operations or business of the Acquiror on a consolidated basis.
4.8 MATERIAL ADVERSE CHANGE
(a) There has not been any material adverse change in the business,
operations, prospects, assets or financial condition of the Acquiror on a
consolidated basis since December 31, 1995 and to the best knowledge of the
Acquiror, no fact or condition exists which the Acquiror believes will cause
such a material adverse change in the future.
(b) Except as Previously Disclosed, none of the Acquiror, the Acquisition
Corporation or the Bank has taken or permitted any of the actions set forth in
Section 5.6(b) hereof between December 31, 1995 and the date hereof.
4.9 ENVIRONMENTAL MATTERS
(a) To the best of the Acquiror's knowledge, the Acquiror, the Acquisition
Corporation and the Bank are in compliance with all Environmental Laws, except
for any violations of any Environmental Law which would not, singly or in the
aggregate, have a material adverse effect on the financial condition, results of
operations or business of the Acquiror on a consolidated basis. None of the
Acquiror, the Acquisition Corporation or the Bank has received any written
communication alleging that the Acquiror, the Acquisition Corporation or the
Bank is not in such compliance and, to the best knowledge of the Acquiror, there
are no present circumstances that would prevent or interfere with the
continuation of such compliance.
(b) To the best of the Acquiror's knowledge, none of the properties owned,
leased or operated by the Acquiror, the Acquisition Corporation or the Bank has
been or is in violation of or liable under any Environmental Law, except any
such
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violations or liabilities which would not singly or in the aggregate have a
material adverse effect on the financial condition, results of operations or
business of the Acquiror on a consolidated basis.
(c) To the best of the Acquiror's knowledge and except as Previously
Disclosed, there are no past or present actions, activities, circumstances,
conditions, events or incidents that could reasonably form the basis of any
Environmental Claim or other claim or action or governmental investigation that
could result in the imposition of any liability arising under any Environmental
Law against the Acquiror, the Acquisition Corporation or the Bank or against any
person or entity whose liability for any Environmental Claim the Acquiror, the
Acquisition Corporation or the Bank has or may have retained or assumed either
contractually or by operation of law, except such which would not have a
material adverse effect on the financial condition, results of operations or
business of the Acquiror on a consolidated basis.
(d) Except as Previously Disclosed, the Acquiror has not conducted any
environmental studies during the past five years with respect to any properties
owned by it or the Bank as of the date hereof.
4.10 ALLOWANCE FOR LOAN LOSSES AND REAL ESTATE OWNED
The allowance for loan losses reflected on the Acquiror's statements of
financial condition included in the Acquiror Financial Statements is, or will be
in the case of subsequently delivered Acquiror Financial Statements, as the case
may be, in the opinion of the Acquiror's management adequate in all material
respects as of their respective dates under the requirements of generally
accepted accounting principles to provide for reasonably anticipated losses on
outstanding loans net of recoveries. The Real Estate Owned reflected on the
statements of financial condition included in the Acquiror Financial Statements
is, or will be in the case of subsequently delivered Acquiror Financial
Statements, as the case may be, carried at the lower of cost or fair value, less
estimated costs to sell, as required by generally accepted accounting
principles.
4.11 TAX MATTERS
(a) The Acquiror, the Acquisition Corporation and the Bank, and each of
their predecessors, have timely filed all federal, state and local (and, if
applicable, foreign) income, franchise, bank, excise, real property, personal
property and other tax returns required by applicable law to be filed by them
(including, without limitation, estimated tax returns, income tax returns,
information returns and withholding and employment tax returns) and have paid,
or where payment is not required to have been made, have set up an adequate
reserve or accrual for the payment of, all taxes required to be paid in respect
of the periods covered by such returns and, as of the Effective Time, will have
paid, or where payment is not required to have been made, will have set up an
adequate reserve or accrual for the payment of, all taxes for any subsequent
periods ending on or prior to the Effective Time. None of the Acquiror, the
Acquisition Corporation or the Bank will have any material liability for any
such taxes in excess of the amounts so paid or reserves or accruals so
established.
(b) All federal, state and local (and, if applicable, foreign) income,
franchise, bank, excise, real property, personal property and other tax returns
filed by the Acquiror, the Acquisition Corporation and the Bank are complete and
accurate in all material respects. None of the Acquiror, the Acquisition
Corporation or the Bank is delinquent in the payment of any tax, assessment or
governmental charge, and neither of them has requested any extension of time
within which to file any tax returns in respect of any fiscal year or portion
thereof which have not since been filed. Except as Previously Disclosed, the
federal, state and local income tax returns of the Acquiror, the Acquisition
Corporation and the Bank have been examined by the applicable tax authorities
(or are closed to examination due to the expiration of the applicable statute of
limitations) and no deficiencies for any tax, assessment or governmental charge
have been proposed, asserted or assessed (tentatively or otherwise) against the
Acquiror, the Acquisition Corporation or the Bank as a result of such
examinations or otherwise which have not been settled and paid. There are
currently no agreements in effect with respect to the Acquiror, the Acquisition
Corporation or the Bank to extend the period of limitations for the assessment
or collection of any tax. As of the date hereof, no audit, examination or
deficiency or refund litigation with respect to such return is pending or, to
the best of the Acquiror's knowledge, threatened.
(c) Except as Previously Disclosed, none of the Acquiror, the Acquisition
Corporation or the Bank (i) is a party to any agreement providing for the
allocation or sharing of taxes, (ii) is required to include in income any
adjustment pursuant to Section 481(a) of the Code by reason of a voluntary
change in accounting method initiated by the Acquiror, the Acquisition
Corporation or the Bank (nor does the Acquiror have any knowledge that the
Internal Revenue Service has proposed any such adjustment or change of
accounting method) or (iii) has filed a consent pursuant to Section 341(f) of
the Code or agreed to have Section 341(f)(2) of the Code apply.
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4.12 LEGAL PROCEEDINGS
Except as Previously Disclosed, there are no actions, suits, claims,
governmental investigations or proceedings instituted, pending or, to the best
knowledge of the Acquiror, threatened against the Acquiror, the Acquisition
Corporation or the Bank or against any asset, interest or right of the Acquiror,
the Acquisition Corporation or the Bank, or against any officer, director or
employee of any of them that in any such case, if decided adversely, would have
a material adverse effect on the financial condition, results of operations or
business of the Acquiror on a consolidated basis. None of the Acquiror, the
Acquisition Corporation or the Bank is a party to any order, judgment or decree
which has or could reasonably be expected to have a material adverse effect on
the financial condition, results of operations or business of the Acquiror on a
consolidated basis.
4.13 COMPLIANCE WITH LAWS
(a) Each of the Acquiror, the Acquisition Corporation and the Bank has all
permits, licenses, certificates of authority, orders and approvals of, and has
made all filings, applications and registrations with, federal, state, local and
foreign governmental or regulatory bodies that are required in order to permit
it to carry on its business as it is presently being conducted and the absence
of which could reasonably be expected to have a material adverse effect on the
financial condition, results of operations or business of the Acquiror on a
consolidated basis; all such permits, licenses, certificates of authority,
orders and approvals are in full force and effect; and to the best knowledge of
the Acquiror, no suspension or cancellation of any of the same is threatened.
(b) None of the Acquiror, the Acquisition Corporation or the Bank is in
violation of its respective Articles of Incorporation, Code of Regulations,
Charter or other chartering instrument or Bylaws, or of any applicable federal,
state or local law or ordinance or any order, rule or regulation of any federal,
state, local or other governmental agency or body (including, without
limitation, all banking (including, without limitation, all regulatory capital
requirements), securities, municipal securities, safety, health, environmental,
zoning, anti-discrimination, antitrust, and wage and hour laws, ordinances,
orders, rules and regulations), or in default with respect to any order, writ,
injunction or decree of any court, or in default under any order, license,
regulation or demand of any governmental agency, any of which violations or
defaults could reasonably be expected to have a material adverse effect on the
financial condition, results of operations or business of the Company on a
consolidated basis; and none of the Acquiror, the Acquisition Corporation or the
Bank has received any written notice or communication from any federal, state or
local governmental authority asserting that the Acquiror, the Acquisition
Corporation or the Bank is in violation of any of the foregoing which could
reasonably be expected to have a material adverse effect on the financial
condition, results of operations or business of the Acquiror on a consolidated
basis. None of the Acquiror, the Acquisition Corporation or the Bank is subject
to any regulatory or supervisory cease and desist order, agreement, written
directive, memorandum of understanding or written commitment (other than those
of general applicability to all savings institutions or holding companies
thereof issued by governmental authorities), and none of them has received any
written communication requesting that it enter into any of the foregoing.
4.14 DEPOSIT INSURANCE AND OTHER REGULATORY MATTERS
(a) The deposit accounts of the Bank are insured by the SAIF to the maximum
extent permitted by the FDIA, and the Bank has paid all premiums and assessments
required by the FDIA and the regulations thereunder.
(b) The Bank is a member in good standing of the FHLB of Cincinnati and
owns the requisite amount of stock in the FHLB of Cincinnati.
(c) The Bank is a "qualified thrift lender," as such term is defined in the
HOLA and the regulations thereunder.
(d) The Bank has at all times qualified as a "domestic building and loan
association," as such term is defined in Section 7701(a)(19) of the Code, for
purposes of Section 593 of the Code.
4.15 CERTAIN INFORMATION
None of the information relating to the Acquiror, the Acquisition
Corporation and the Bank to be included or incorporated by reference in (i) the
Form S-4 will, at the time the Form S-4 and any amendment thereto becomes
effective under the Securities Act, contain any untrue statement of a material
fact or omit to state a material fact necessary to make the statements therein,
in light of the circumstances under which they were made, not misleading, and
(ii) the Proxy Statement, as of the date(s) such Proxy Statement is mailed to
shareholders of the Acquiror and the Company and up to and including the date(s)
of the meetings of shareholders to which such Proxy Statement relates, will
contain any untrue statement of a material
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fact or omit to state a material fact necessary to make the statements therein,
in light of the circumstances under which they were made, not misleading,
provided that information as of a later date shall be deemed to modify
information as of an earlier date. The Proxy Statement mailed by the Acquiror to
shareholders of the Company and the Acquiror in connection with the meetings of
shareholders at which this Agreement will be considered by such shareholders
will comply as to form in all material respects with the Securities Act and the
Exchange Act and the rules and regulations promulgated thereunder.
4.16 EMPLOYEE BENEFIT PLANS
(a) The Acquiror has Previously Disclosed all stock option, employee stock
purchase and stock bonus plans, qualified pension or profit-sharing plans, any
fringe benefit, incentive, deferred compensation, consultant, bonus or group
insurance contract, plan or arrangement, or any other welfare plan (as defined
in Section 3(1) of ERISA), employee pension benefit plan (as defined under
Section 3(2) of ERISA) or agreement maintained for the benefit of employees or
former employees of the Acquiror, the Acquisition Corporation or the Bank (the
"Acquiror Employee Plans"), and the Acquiror has previously furnished or made
available to the Company accurate and complete copies of the same together with
(i) the most recent actuarial and financial reports prepared with respect to any
qualified plans, (ii) the most recent annual reports filed with any governmental
agency, and (iii) all rulings and determination letters and any open requests
for rulings or letters that pertain to any qualified plan.
(b) Except as Previously Disclosed, none of the Acquiror, the Acquisition
Corporation, the Bank, any pension plan maintained by either of them and
qualified under Section 401 of the Code or, to the best of the Acquiror's
knowledge, any fiduciary of such plan has incurred any material liability to the
PBGC or the Internal Revenue Service with respect to any employees of the
Acquiror, the Acquisition Corporation or the Bank. Except as Previously
Disclosed, to the best of the Acquiror's knowledge, no reportable event under
Section 4043(b) of ERISA has occurred with respect to any such pension plan.
(c) None of the Acquiror, the Acquisition Corporation or the Bank
participates in or has incurred any liability under Section 4201 of ERISA for a
complete or partial withdrawal from a multi-employer plan (as such term is
defined in ERISA).
(d) A favorable determination letter has been issued by the Internal
Revenue Service with respect to each Acquiror Employee Plan which is an
"employee pension benefit plan" (as defined in Section 3(2) of ERISA) (an
"Acquiror Pension Plan") which is intended to qualify under Section 401 of the
Code to the effect that such plan is qualified under Section 401 of the Code and
the trust associated with such employee pension plan is tax exempt under Section
501 of the Code. No such letter has been revoked or, to the best of the
Acquiror's knowledge, is threatened to be revoked and the Acquiror does not know
of any ground on which such revocation may be based. Neither the Acquiror nor
the Bank has any liability under any such plan that is not reflected on the
statement of financial condition of the Bank at December 31, 1995 included in
the Acquiror Financial Statements, other than liabilities incurred in the
ordinary course of business in connection therewith subsequent to the date
thereof.
(e) No prohibited transaction (which shall mean any transaction prohibited
by Section 406 of ERISA and not exempt under Section 408 of ERISA or Section
4975 of the Code) has occurred with respect to any Acquiror Employee Plan which
would result in the imposition, directly or indirectly, of a material excise tax
under Section 4975 of the Code or otherwise have a material adverse effect on
the financial condition, results of operations or business of the Acquiror on a
consolidated basis.
(f) Full payment has been made (or proper accruals have been established)
of all contributions which are required for periods prior to the date hereof,
and full payment will be so made (or proper accruals will be so established) of
all contributions which are required for periods after the date hereof and prior
to the Effective Time, under the terms of each Acquiror Employee Plan or ERISA;
no accumulated funding deficiency (as defined in Section 302 of ERISA or Section
412 of the Code), whether or not waived, exists with respect to any Acquiror
Pension Plan, and there is no "unfunded current liability" (as defined in
Section 412 of the Code) with respect to any Acquiror Pension Plan.
(g) The Acquiror Employee Plans have been operated in compliance in all
material respects with the applicable provisions of ERISA, the Code, all
regulations, rulings and announcements promulgated or issued thereunder and all
other applicable governmental laws and regulations.
(h) There are no pending or, to the best knowledge of the Acquiror,
threatened claims (other than routine claims for benefits) by, on behalf of or
against any of the Acquiror Employee Plans or any trust related thereto or any
fiduciary thereof.
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4.17 CERTAIN CONTRACTS
(a) Except as Previously Disclosed, none of the Acquiror, the Acquisition
Corporation or the Bank is a party to, is bound or affected by, receives, or is
obligated to pay, benefits under (i) any agreement, arrangement or commitment,
including without limitation any agreement, indenture or other instrument,
relating to the borrowing of money by the Acquiror, the Acquisition Corporation
or the Bank or the guarantee by the Acquiror, the Acquisition Corporation or the
Bank of any obligation, (ii) any agreement, arrangement or commitment relating
to the employment of a consultant or the employment, election or retention in
office of any present or former director, officer or employee of the Acquiror,
the Acquisition Corporation or the Bank, (iii) any agreement, arrangement or
understanding pursuant to which any payment (whether of severance pay or
otherwise) became or may become due to any director, officer or employee of the
Acquiror, the Acquisition Corporation or the Bank upon execution of this
Agreement or upon or following consummation of the transactions contemplated by
this Agreement (either alone or in connection with the occurrence of any
additional acts or events), (iv) any agreement, arrangement or understanding
pursuant to which the Acquiror, the Acquisition Corporation or the Bank is
obligated to indemnify any director, officer, employee or agent of the Acquiror,
the Acquisition Corporation or the Bank, (v) any agreement, arrangement or
understanding to which the Acquiror, the Acquisition Corporation or the Bank is
a party or by which any of the same is bound which limits the freedom of the
Acquiror, the Acquisition Corporation or the Bank to compete in any line of
business or with any person, (vi) any assistance agreement, supervisory
agreement, memorandum of understanding, consent order, cease and desist order or
condition of any regulatory order or decree with or by the OTS, the FDIC or any
other regulatory agency, or (vii) any other agreement, arrangement or
understanding which would be required to be filed as an exhibit to the
Acquiror's Annual Report on Form 10-K under the Exchange Act and which has not
been so filed.
(b) None of the Acquiror, the Acquisition Corporation or the Bank is in
default or in non-compliance, which default or non-compliance could reasonably
be expected to have a material adverse effect on the financial condition,
results of operations or business of the Acquiror on a consolidated basis or the
transactions contemplated hereby, under any contract, agreement, commitment,
arrangement, lease, insurance policy or other instrument to which it is a party
or by which its assets, business or operations may be bound or affected, whether
entered into in the ordinary course of business or otherwise and whether written
or oral, and there has not occurred any event that with the lapse of time or the
giving of notice, or both, would constitute such a default or non-compliance.
4.18 BROKERS AND FINDERS
Except as Previously Disclosed, none of the Acquiror, the Acquisition
Corporation or the Bank, nor any of their respective directors, officers or
employees, has employed any broker or finder or incurred any liability for any
broker or finder fees or commissions in connection with the transactions
contemplated hereby.
4.19 INSURANCE
The Acquiror and the Bank are insured for reasonable amounts with
financially sound and reputable insurance companies against such risks as
companies engaged in a similar business would, in accordance with good business
practice, customarily be insured and has maintained all insurance required by
applicable laws and regulations. Neither the Acquiror nor the Bank has received
any notice of cancellation or notice of a material amendment of any such
insurance policy or bond or is in default under such policy or bond, no coverage
thereunder is being disputed and all material claims thereunder have been filed
in a timely fashion.
4.20 PROPERTIES
All real and personal property owned by the Acquiror, the Acquisition
Corporation or the Bank or presently used by any of them in its respective
business is in an adequate condition (ordinary wear and tear excepted) and is
sufficient to carry on its business in the ordinary course of business
consistent with their past practices. The Acquiror, the Acquisition Corporation
and the Bank have good and marketable title free and clear of all liens,
encumbrances, charges, defaults or equities (other than equities of redemption
under applicable foreclosure laws) to all of the material properties and assets,
real and personal, reflected on the statement of financial condition of the Bank
as of December 31, 1995 included in the Acquiror Financial Statements or
acquired after such date, except (i) liens for current taxes not yet due or
payable, (ii) pledges to secure deposits and other liens incurred in the
ordinary course of its banking business, (iii) such imperfections of title,
easements and encumbrances, if any, as are not material in character, amount or
extent and (iv) as reflected on the statement of financial condition of the Bank
as of December 31, 1995 included in the Acquiror Financial Statements. All real
and personal property which is material to the Acquiror's business on a
consolidated basis and leased or licensed by the Acquiror or the Bank is held
pursuant to leases or licenses which are valid and enforceable in accordance
with their respective terms and such leases will
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not terminate or lapse prior to the Effective Time. The Acquiror has Previously
Disclosed an accurate listing of each such lease or license referred to in the
immediately preceding sentence pursuant to which the Acquiror, the Acquisition
Corporation or the Bank acts as lessor (other than month-to-month leases) or
lessee, including the expiration date and the terms of any renewal options which
relate to the same, as well as a listing of each material real property owned by
the Acquiror, the Acquisition Corporation or the Bank and used in the conduct of
its business.
4.21 LABOR
No work stoppage involving the Acquiror, the Acquisition Corporation or the
Bank is pending or, to the best knowledge of the Acquiror, threatened. None of
the Acquiror, the Acquisition Corporation or the Bank is involved in, or
threatened with or affected by, any labor dispute, arbitration, lawsuit or
administrative proceeding involving its employees which could have a material
adverse effect on the financial condition, results of operations or business of
the Acquiror on a consolidated basis. Employees of the Acquiror, the Acquisition
Corporation and the Bank are not represented by any labor union nor are any
collective bargaining agreements otherwise in effect with respect to such
employees, and to the best of the Acquiror's knowledge, there have been no
efforts to unionize or organize any employees of the Acquiror, the Acquisition
Corporation or the Bank during the past five years.
4.22 TRANSACTIONS WITH AFFILIATED PERSONS AND AFFILIATES
Except as Previously Disclosed, (i) no "affiliated person" or "affiliate"
of the Bank, as defined in 12 C.F.R. (section mark)561.5 and 12 C.F.R.
(section mark)563.41, respectively, has engaged in any transaction with the Bank
since January 1, 1993 which was not in compliance with applicable laws and
regulations and (ii) as of the date hereof there is no loan or extension of
credit outstanding to any of the same which is not in compliance with applicable
laws and regulations.
4.23 REQUIRED VOTE
(a) Subject to the presence of a quorum at the meeting of the shareholders
of Acquiror called for the purpose of considering and acting upon the Merger, a
majority of the total votes cast on the proposal by the holders of the issued
and outstanding shares of Acquiror's Common Stock is necessary to approve the
Merger and this Agreement and the transactions contemplated hereby on behalf of
the Acquiror.
(b) At least two-thirds of the Continuing Directors (as defined in the
Articles of Incorporation of the Acquiror) has approved the Merger and this
Agreement such that the provisions of (i) Paragraph A of Article XIV of the
Articles of Incorporation of the Acquiror, (ii) Paragraph A of Article XV of the
Articles of Incorporation of the Acquiror and (ii) Section 1704.02 of the Ohio
Revised Code shall be inapplicable to the Merger and this Agreement and the
transactions contemplated hereby.
(c) The affirmative vote of two-thirds of the holders of the issued and
outstanding shares of common stock of Acquisition Corporation is necessary to
approve the Merger and this Agreement and the transaction contemplated hereby on
behalf of Acquisition Corporation.
4.24 DISCLOSURES
None of the representations and warranties of the Acquiror or any of the
written information or documents furnished or to be furnished by the Acquiror to
the Company in connection with or pursuant to this Agreement or the consummation
of the transactions contemplated hereby, when considered as a whole, contains or
will contain any untrue statement of a material fact, or omits or will omit to
state any material fact required to be stated or necessary to make any such
information or document, in light of the circumstances, not misleading.
4.25 ORGANIZATION, STANDING AND AUTHORITY OF THE ACQUISITION CORPORATION
The Acquisition Corporation is a corporation duly organized, validly
existing and in good standing under the laws of the State of Ohio with full
corporate power and authority to own or lease all of its properties and assets
and to carry on its business as now conducted and is duly licensed or qualified
to do business and is in good standing in each jurisdiction in which its
ownership or leasing of property or the conduct of its business requires such
licensing or qualification and where the failure to be so licensed, qualified or
in good standing would have a material adverse effect on the financial
condition, results of operations or business of the Acquiror on a consolidated
basis. The Acquisition Corporation has heretofore delivered to the Company true
and complete copies of the Articles of Incorporation, Code of Regulations and
Bylaws of the Acquisition Corporation as in effect as of the date hereof.
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ARTICLE V
COVENANTS
5.1 REASONABLE BEST EFFORTS
Subject to the terms and conditions of this Agreement, each of the Company,
the Acquiror and the Acquisition Corporation shall use its reasonable best
efforts in good faith to take, or cause to be taken, all actions, and to do, or
cause to be done, all things necessary or advisable under applicable laws and
regulations so as to permit consummation of the Merger and the Bank Merger as
promptly as reasonably practicable and to otherwise enable consummation of the
transactions contemplated hereby, and shall cooperate fully with the other party
or parties hereto to that end.
5.2 SHAREHOLDER MEETINGS
Each of the Acquiror, the Acquisition Corporation and the Company shall
take all action necessary to properly call and convene a meeting of its
shareholders as soon as practicable after the date hereof to consider and vote
upon this Agreement and the transactions contemplated hereby. The Board of
Directors of the Acquiror, the Board of Directors of the Acquisition
Corporation, and the Board of Directors of the Company will recommend that the
shareholders of the Acquiror, the Acquisition Corporation and the Company,
respectively, approve this Agreement and the transactions contemplated hereby,
provided that the Board of Directors of the Company may fail to make such
recommendation, or withdraw, modify or change any such recommendation, if such
Board of Directors, after having consulted with and considered the advice of
outside counsel, has determined that the making of such recommendation, or the
failure to withdraw, modify or change such recommendation, would constitute a
breach of the fiduciary duties of such directors under applicable law.
5.3 REGULATORY MATTERS
(a) The parties hereto shall promptly cooperate with each other in the
preparation and filing of the Form S-4, including the Proxy Statement. Each of
the Acquiror and the Company shall use its reasonable best efforts to have the
Form S-4 declared effective under the Securities Act as promptly as practicable
after such filing, and the Acquiror and the Company each shall thereafter
promptly mail the Proxy Statement to its respective shareholders. The Acquiror
also shall use its reasonable best efforts to obtain all necessary state
securities law or "blue sky" permits and approvals required to carry out the
issuance of Acquiror Common Stock pursuant to the Merger and all other
transactions contemplated by this Agreement, and the Company shall furnish all
information concerning the Company and the holders of the Company Common Stock
as may be reasonably requested in connection with any such action.
(b) The parties hereto shall cooperate with each other and use their
reasonable best efforts to prepare and file within 30 days of the date of this
Agreement all necessary documentation, to effect all applications, notices,
petitions and filings, and to obtain as promptly as practicable all permits,
consents, approvals and authorizations of all Governmental Entities and third
parties which are necessary or advisable to consummate the transactions
contemplated by this Agreement (including without limitation the Merger and the
Bank Merger). The Acquiror and the Company shall have the right to review in
advance, and to the extent practicable each will consult with the other on, in
each case subject to applicable laws relating to the exchange of information,
all the information which appears in any filing made with or written materials
submitted to any third party or any Governmental Entity in connection with the
transactions contemplated by this Agreement. In exercising the foregoing right,
each of the parties hereto shall act reasonably and as promptly as practicable.
The parties hereto agree that they will consult with each other with respect to
the obtaining of all permits, consents, approvals and authorizations of all
third parties and Governmental Entities necessary or advisable to consummate the
transactions contemplated by this Agreement and each party will keep the other
apprised of the status of matters relating to completion of the transactions
contemplated herein.
(c) The Acquiror and the Company shall, upon request, furnish each other
with all information concerning themselves, their respective Subsidiaries,
directors, officers and shareholders and such other matters as may be reasonably
necessary or advisable in connection with the Proxy Statement, the Form S-4 or
any other statement, filing, notice or application made by or on behalf of the
Acquiror, the Company or any of their respective Subsidiaries to any
Governmental Entity in connection with the Merger, the Bank Merger and the other
transactions contemplated hereby.
(d) The Acquiror and the Company shall promptly furnish each other with
copies of written communications received by the Acquiror or the Company, as the
case may be, or any of their respective Subsidiaries from, or delivered by any
of the foregoing to, any Governmental Entity in respect of the transactions
contemplated hereby.
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5.4 INVESTIGATION AND CONFIDENTIALITY
(a) Each of the Acquiror and the Company shall permit the other party and
its representatives reasonable access to its properties and personnel, and shall
disclose and make available to such other party all books, papers and records
relating to the assets, stock ownership, properties, operations, obligations and
liabilities of it and its Subsidiaries, including, but not limited to, all books
of account (including the general ledger), tax records, minute books of meetings
of boards of directors (and any committees thereof) and shareholders,
organizational documents, bylaws, material contracts and agreements, filings
with any regulatory authority, accountants' work papers, litigation files, loan
files, plans affecting employees, and any other business activities or prospects
in which the other party may have a reasonable interest, provided that such
access shall be reasonably related to the transactions contemplated hereby and,
in the reasonable opinion of the respective parties providing such access, not
unduly interfere with normal operations. Each of the Acquiror and the Company
and its Subsidiaries shall make their respective directors, officers, employees
and agents and authorized representatives (including counsel and independent
public accountants) available to confer with the other party and its
representatives, provided that such access shall be reasonably related to the
transactions contemplated hereby and shall not unduly interfere with normal
operations.
(b) All information furnished previously in connection with the
transactions contemplated by this Agreement or pursuant hereto shall be treated
as the sole property of the party furnishing the information until consummation
of the transactions contemplated hereby and, if such transactions shall not
occur, the party receiving the information shall return to the party which
furnished such information all documents or other materials containing,
reflecting or referring to such information, shall use its best efforts to keep
confidential all such information, and shall not directly or indirectly use such
information for any competitive or other commercial purposes. The obligation to
keep such information confidential shall continue for five years from the date
the proposed transactions are abandoned but shall not apply to (i) any
information which (x) the party receiving the information can establish by
convincing evidence was already in its possession prior to the disclosure
thereof by the party furnishing the information; (y) was then generally known to
the public; or (z) became known to the public through no fault of the party
receiving the information; or (ii) disclosures pursuant to a legal requirement
or in accordance with an order of a court of competent jurisdiction, provided
that the party which is the subject of any such legal requirement or order shall
use its best efforts to give the other party at least ten business days prior
notice thereof.
5.5 PRESS RELEASES
The Acquiror and the Company 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 consult with each other as to the form and substance of
other public disclosures which may relate to the transactions contemplated by
this Agreement, provided, however, that nothing contained herein shall prohibit
either party, following notification to the other party, from making any
disclosure which is required by law or regulation.
5.6 BUSINESS OF THE PARTIES
(a) During the period from the date of this Agreement and continuing until
the Effective Time, except as expressly contemplated or permitted by this
Agreement or with the prior written consent of the Acquiror, the Company and the
Company Subsidiaries shall carry on their respective businesses in the ordinary
course consistent with past practice. The Company will use all reasonable
efforts to (x) preserve its business organization and that of the Company
Subsidiaries intact, (y) keep available to itself and the Acquiror the present
services of the employees of the Company and the Company Subsidiaries and (z)
preserve for itself and the Acquiror the goodwill of the customers of the
Company and the Company Subsidiaries and others with whom business relationships
exist. Without limiting the generality of the foregoing, except with the prior
written consent of the Acquiror or as expressly contemplated hereby, between the
date hereof and the Effective Time, the Company shall not, and shall cause each
Company Subsidiary not to:
(i) declare, set aside, make or pay any dividend or other distribution
(whether in cash, stock or property or any combination thereof) in respect
of the Company Common Stock, except for regular quarterly cash dividends at
a rate per share of Company Common Stock not in excess of $.17 per share,
which shall have the same record and payment dates as the record and
payment dates relating to dividends on the Acquiror Common Stock (as
Previously Disclosed by the Acquiror), it being the intention of the
parties that the shareholders of the Company receive dividends for any
particular quarter on either the Company Common Stock or the Acquiror
Common Stock but not both;
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(ii) issue any shares of its capital stock, other than pursuant to the
Company Stock Option Agreement, or issue, grant, modify or authorize any
Rights, other than the Company Stock Option Agreement; purchase any shares
of Company Common Stock or Acquiror Common Stock; or effect any
recapitalization, reclassification, stock dividend, stock split or like
change in capitalization;
(iii) amend its Articles of Incorporation, Code of Regulations or
other governing instrument or Bylaws; impose, or suffer the imposition, on
any share of stock held by the Company in any Company Subsidiary of any
material lien, charge or encumbrance or permit any such lien, charge or
encumbrance to exist; or waive or release any material right or cancel or
compromise any material debt or claim;
(iv) increase the rate of compensation of any of its directors,
officers or employees, or pay or agree to pay any bonus or severance to, or
provide any other new employee benefit or incentive to, any of its
directors, officers or employees, except (i) as may be required pursuant to
binding commitments existing on the date hereof or as Previously Disclosed,
(ii) in the case of employees who are not executive officers, such as may
be granted in the ordinary course of business consistent with past practice
and (iii) in the case of Donald H. Rolf, Jr. and Joseph D. Hughes, in the
event the Merger is not consummated by January 1, 1997, such as may be
granted in the ordinary course of business consistent with past practice;
(v) except as Previously Disclosed, enter into or, except as may be
required by law, modify any pension, retirement, stock option, stock
purchase, stock appreciation right, savings, profit sharing, deferred
compensation, supplemental retirement, consulting, bonus, group insurance
or other employee benefit, incentive or welfare contract, plan or
arrangement, or any trust agreement related thereto, in respect of any of
its directors, officers or employees; or make any contributions to any
defined benefit or defined contribution plan not in the ordinary course of
business consistent with past practice;
(vi) enter into (w) any agreement, arrangement or commitment not made
in the ordinary course of business, (x) any agreement, indenture or other
instrument relating to the borrowing of money by the Company or any Company
Subsidiary or guarantee by the Company or any Company Subsidiary of any
such obligation, except in the case of the Association for deposits and
borrowings in the ordinary course of business consistent with past
practice, (y) any agreement, arrangement or commitment relating to the
employment of, or severance of, an employee, or, except as contemplated by
Section 5.9 hereof, amend any such existing agreement, arrangement or
commitment, provided that the Company and any Company Subsidiary may employ
an employee if necessary to operate the business of the Company or a
Company Subsidiary in the ordinary course of business consistent with past
practice and if the employment of such employee is terminable by the
Company and any successor at will without liability, other than as required
by law; or (z) any contract, agreement or understanding with a labor union;
(vii) change its method of accounting in effect for the year ended
June 30, 1995, except as required by changes in laws or regulations or
generally accepted accounting principles concurred in by its and the
Acquiror's independent certified public accountants, or change any of its
methods of reporting income and deductions for federal income tax purposes
from those employed in the preparation of its federal income tax return for
the year ended June 30, 1995, except as required by changes in laws or
regulations;
(viii) purchase or otherwise acquire, or sell or otherwise dispose of,
any assets or incur any liabilities other than in the ordinary course of
business consistent with past practice and policies;
(ix) make any capital expenditures in excess of $50,000 individually
or $100,000 in the aggregate, other than pursuant to binding commitments
existing on the date hereof and other than expenditures necessary to
maintain existing assets in good repair;
(x) file any applications or make any contract with respect to
branching or site location or relocation;
(xi) acquire in any manner whatsoever (other than to realize upon
collateral for a defaulted loan) any business or entity;
(xii) engage in any transaction with an "affiliated person" or
"affiliate," in each case as defined in Section 3.22 hereof, other than
loans to directors, officers and employees in the ordinary course of
business consistent with past practice and which are in compliance with the
requirements of applicable laws and regulations or transactions
contemplated by this Section 5.6;
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(xiii) discharge or satisfy any lien or encumbrance or pay any
material obligation or liability (absolute or contingent) other than at
scheduled maturity or in the ordinary course of business;
(xiv) change its lending, investment, deposit or asset and liability
management or other banking policies in any material respect except as may
be required by applicable law;
(xv) enter into any futures contract, option contract, interest rate
cap, interest rate floor, interest rate exchange agreement or other
agreement for purposes of hedging the exposure of its interest-earning
assets and interest-bearing liabilities to changes in market rates of
interest;
(xvi) enter or agree to enter into any agreement or arrangement
granting any preferential right to purchase any of its assets or rights or
requiring the consent of any party to the transfer and assignment of any
such assets or rights;
(xvii) take any action that would result in any of the representations
and warranties of the Company contained in this Agreement not to be true
and correct in any material respect at the Effective Time; or
(xviii) agree to do any of the foregoing.
(b) During the period from the date of this Agreement and continuing until
the Effective Time, except as expressly contemplated or permitted by this
Agreement or with the prior written consent of the Company, the Acquiror, the
Acquisition Corporation and the Bank shall carry on their respective businesses
in the ordinary course consistent with past practice and use all reasonable
efforts to preserve intact their present business organizations and
relationships. Without limiting the generality of the foregoing, except with the
prior written consent of the Company or as expressly contemplated hereby,
between the date hereof and the Effective Time, the Acquiror shall not, and
shall cause the Acquisition Corporation and the Bank not to:
(i) declare, set aside, make or pay any dividend or other distribution
(whether in cash, stock or property or any combination thereof) in respect
of the Acquiror Common Stock, except for regular quarterly cash dividends
which are not in excess of $.05 per share of Acquiror Common Stock,
provided, however, that nothing contained herein shall be deemed to affect
the ability of the Bank to pay dividends on its common stock to the
Acquiror;
(ii) issue any shares of its capital stock or issue, grant, modify or
authorize any Rights, other than in each case pursuant to (i) Rights
granted pursuant to the Acquiror Employee Stock Benefit Plans, (ii) the
Acquiror Stock Option Agreement or (iii) any acquisition to the extent
permitted under subsection (v) below;
(iii) effect any recapitalization, reclassification, stock split or
like change in capitalization;
(iv) amend its Articles of Incorporation, Code of Regulations, Charter
or other governing instrument or Bylaws in a manner which would adversely
affect in any manner the terms of the Acquiror Common Stock or the ability
of the Acquiror to consummate the transactions contemplated hereby;
(v) except as Previously Disclosed as of the date hereof, acquire in
any manner whatsoever (other than to realize upon collateral for a
defaulted loan) any business or entity (including acquisitions of branch
offices and related deposit liabilities);
(vi) change its method of accounting in effect for the year ended
December 31, 1995 in a manner which would have a material adverse effect on
the Company's financial condition or results of operations during fiscal
1996, except as required by changes in laws or regulations or generally
accepted accounting principles concurred in by its and the Company's
independent certified public accountants;
(vii) take any action that would result in any of the representations
and warranties of the Acquiror contained in this Agreement not to be true
and correct in any material respect at the Effective Time; or
(viii) agree to do any of the foregoing.
(c) Neither the Company nor the Acquiror shall, and each of them shall
cause its respective Subsidiaries not to, solicit or encourage inquiries or
proposals with respect to, furnish any information relating to, or participate
in any negotiations or discussions concerning, any acquisition, lease or
purchase of all or a substantial portion of the assets of, or any equity
interest in, such party or any of its Subsidiaries (other than in the case of
the Company with the Acquiror or an affiliate thereof and in the case of the
Acquiror as permitted by Section 5.6(b) (v) hereof), provided, however, that the
Board of Directors of the Company or the Acquiror, on behalf of the Company and
the Acquiror, respectively, may furnish such information or participate in such
negotiations or discussions if such Board of Directors, after having consulted
with and considered the advice of
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outside counsel, has determined that the failure to do the same would cause the
members of such Board of Directors to breach their fiduciary duties under
applicable laws. Each of the Company and the Acquiror will promptly inform the
other party of any such request for information or of any such negotiations or
discussions, as well as instruct its and its Subsidiaries' directors, officers,
representatives and agents to refrain from taking any action prohibited by this
Section 5.6(c).
5.7 CURRENT INFORMATION
During the period from the date of this Agreement to the Effective Time,
each party shall, upon the request of the other party, cause one or more of its
designated representatives to confer on a monthly or more frequent basis with
representatives of the other party regarding its financial condition, operations
and business and matters relating to the completion of the transactions
contemplated hereby. As soon as reasonably available, but in no event more than
45 days after the end of each calendar quarter ending after the date of this
Agreement (other than the last quarter of each fiscal year ending June 30, in
the case of the Company, and December 31, in the case of the Acquiror), the
Company and the Acquiror will deliver to the other party its quarterly report on
Form 10-Q (or Form 10-QSB) under the Exchange Act, and, as soon as reasonably
available, but in no event more than 90 days after the end of each fiscal year,
the Company and the Acquiror will deliver to the other party its Annual Report
on Form 10-K (or Form 10-KSB). Within 25 days after the end of each month, the
Company and the Acquiror will deliver to the other party a consolidated
statement of financial condition and a consolidated statement of income, without
related notes, for such month prepared in accordance with generally accepted
accounting principles.
5.8 INDEMNIFICATION; INSURANCE
(a) From and after the Effective Time through the third anniversary of the
Effective Time, the Acquiror (the "Indemnifying Party") shall indemnify and hold
harmless each present and former director, officer and employee of the Company
or any Company Subsidiary determined as of the Effective Time (the "Indemnified
Parties") against any costs or expenses (including reasonable attorneys' fees),
judgments, fines, losses, claims, damages or liabilities (collectively, "Costs")
incurred in connection with any claim, action, suit, proceeding or
investigation, whether civil, criminal, administrative or investigative, arising
out of matters existing or occurring at or prior to the Effective Time, whether
asserted or claimed prior to, at or after the Effective Time, to the fullest
extent to which such Indemnified Parties were entitled under the Articles of
Incorporation, Code of Regulations or other governing instrument and Bylaws of
the Company and any Company Subsidiary as in effect on the date hereof.
(b) Any Indemnified Party wishing to claim indemnification under Section
5.8(a), upon learning of any such claim, action, suit, proceeding or
investigation, shall promptly notify the Indemnifying Party, but the failure to
so notify shall not relieve the Indemnifying Party of any liability it may have
to such Indemnified Party if such failure does not materially prejudice the
Indemnifying Party. In the event of any such claim, action, suit, proceeding or
investigation (whether arising before or after the Effective Time), (i) the
Indemnifying Party shall have the right to assume the defense thereof and the
Indemnifying Party shall not be liable to such Indemnified Parties for any legal
expenses of other counsel or any other expenses subsequently incurred by such
Indemnified Parties in connection with the defense thereof, except that if the
Indemnifying Party elects not to assume such defense or counsel for the
Indemnified Parties advises that there are issues which raise conflicts of
interest between the Indemnifying Party and the Indemnified Parties, the
Indemnified Parties may retain counsel which is reasonably satisfactory to the
Indemnifying Party, and the Indemnifying Party shall pay, promptly as statements
therefor are received, the reasonable fees and expenses of such counsel for the
Indemnified Parties (which may not exceed one firm in any jurisdiction unless
the use of one counsel for such Indemnified Parties would present such counsel
with a conflict of interest), (ii) the Indemnified Parties will cooperate in the
defense of any such matter and (iii) the Indemnifying Party shall not be liable
for any settlement effected without its prior written consent.
(c) On or prior to the Effective Time, the Company shall purchase insurance
coverage on substantially the same terms and conditions as the liability
insurance provided by the Company for its directors and officers as of the date
hereof for a period of three years following the Effective Time, provided,
however, that in no event shall the Company expend, in order to obtain such
insurance, any amount per annum in excess of 140% of the amount of the actual
premiums paid as of the date hereof by the Company for such insurance (the
"Maximum Amount"). If the amount of the annual premiums necessary to maintain or
procure such insurance coverage exceeds the Maximum Amount, the Company shall
use all reasonable efforts to maintain the most advantageous policies of
directors' and officers' insurance obtainable for an annual premium equal to the
Maximum Amount.
(d) In the event that the Acquiror or any of its respective successors or
assigns (i) consolidates with or merges into any other person and shall not be
the continuing or surviving corporation or entity of such consolidation or
merger or (ii) transfers
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all or substantially all of its properties and assets to any person, then, and
in each such case the successors and assigns of such entity shall assume the
obligations set forth in this Section 5.8, which obligations are expressly
intended to be for the irrevocable benefit of, and shall be enforceable by, each
director and officer covered hereby.
5.9 DIRECTORS, OFFICERS AND EMPLOYEES
(a) Effective as of the Effective Time, (i) the number of directors of the
Acquiror shall be increased by three and (ii) the Acquiror agrees to take all
action necessary to elect Donald H. Rolf, Jr., Joseph D. Hughes and Thomas N.
Spaeth as directors for terms expiring at the 1999 annual meeting of
stockholders of the Acquiror.
(b) Effective as of the Effective Time, Paul D. Staubach shall resign as a
director of the Bank, and the resulting vacancy shall be filled by Donald H.
Rolf, Jr.
(c) Effective as of the Effective Time, Donald H. Rolf, Jr. shall be
elected as Chairman of the Board of the Acquiror and the Bank and Mr. Rolf shall
be entitled to be compensated at a rate not less than the rate of compensation
received by him from the Association immediately prior to the Effective Time.
Effective as of the Effective Time, Mr. Rolf shall, subject to any requisite
regulatory approval, enter into an employment agreement with the Acquiror and
the Bank, the form of which has been Previously Disclosed.
(d) Effective as of the Effective Time, Joseph D. Hughes shall be elected
as Executive Vice President and Chief Lending Officer of the Acquiror and the
Bank and Mr. Hughes shall be entitled to be compensated at a rate not less than
the rate of compensation received by him from the Association immediately prior
to the Effective Time. Effective as of the Effective Time, Mr. Hughes shall,
subject to any requisite regulatory approval, enter into an employment agreement
with the Acquiror and the Bank, the form of which has been Previously Disclosed.
(e) Effective as of the Effective Time, Anita G. Glasmeier and Carolyn R.
Watt shall, subject to any requisite regulatory approval, enter into severance
agreements with the Acquiror and the Bank, the form of which has been Previously
Disclosed.
(f) Effective as of the Effective Time, the Acquiror and the Bank shall
assume and agree to perform all obligations set forth in the Amended Employment
Agreement, dated December 21, 1995, by and between the Association and David C.
Greis.
(g) The Acquiror and the Bank shall have the right, but not the obligation,
to offer employment, as officers and employees of the Acquiror or the Bank,
immediately following the Effective Time, to any persons who are officers and
employees of the Company or any Company Subsidiary immediately before the
Effective Time. To the extent that the employment of any employee of the Company
or any Company Subsidiary (other than any employee who is party to an employment
or severance agreement) is involuntarily terminated at or during the one-year
period following the Effective Time as a result of the elimination of a job
position, such employee will be entitled to receive severance benefits in
accordance with and to the extent Previously Disclosed (which severance benefits
shall not in any event be less than the severance benefits that an employee of
the Acquiror or the Bank with similar years of service would be entitled to in
the event of termination). For purposes of determining severance benefits, each
employee whose employment is terminated will be credited with his or her years
of service with the Company or a Company Subsidiary prior to the Effective Time.
(h) The Company shall use its best efforts to begin the process of
terminating the People's Savings Association Pension Plan prior to the Effective
Time.
(i) On or after the Effective Time, the Acquiror shall cause the People's
Savings Association Savings & Investment Plan to be merged with and into the
Fidelity Federal Savings Bank 401(k) Retirement Plan. The Company and the
Acquiror agree to cooperate with respect to any government filing, including,
but not limited to, the filing of Internal Revenue Service Forms 5310, if
necessary, to effect the merger contemplated by this Section 5.9(h).
(j) Each current employee of the Company and the Company Subsidiaries who
remains an employee of the Acquiror and/or the Bank following the Effective Time
shall be entitled to participate in all Acquiror Employee Plans on the same
terms and to the same extent as similarly situated employees of the Acquiror and
the Bank. Employees of the Company and the Company Subsidiaries shall receive
credit for their years of service with the Company and the Company Subsidiaries
for purposes of determining eligibility and vesting, but not benefit accrual, in
all Acquiror Employee Plans.
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5.10 CERTAIN POLICIES; INTEGRATION
(a) If requested by the Acquiror, on the business day immediately prior to
the Effective Time, the Company shall, consistent with generally accepted
accounting principles, establish such additional accruals and reserves as may be
necessary to conform the Company's accounting and credit loss reserve practices
and methods to those of the Acquiror (as such practices and methods are to be
applied to the Company or its Subsidiaries from and after the Effective Time)
and reflect the Acquiror's plans with respect to the conduct of the Company's
business following the Merger and to provide for the costs and expenses relating
to the consummation by the Company of the transactions contemplated by this
Agreement; provided, however, that the Company shall not be required to take
such action (i) if such action is prohibited by applicable law or by generally
accepted accounting principles, (ii) if such action would have a material
adverse effect on the financial condition, results of operations or business of
the Acquiror on a consolidated basis following consummation of the Merger and
the Bank Merger or (iii) unless the Acquiror informs the Company that all
conditions to the Acquiror's obligations to consummate the transactions
contemplated by this Agreement set forth in Article VI hereof have been
satisfied or waived. The establishment of such accruals and reserves shall not,
in and of itself, constitute a breach of any representation or warranty of the
Company contained in this Agreement.
(b) During the period from the date of this Agreement to the Effective
Time, the Company shall, and shall cause its directors, officers and employees
to, cooperate with and assist the Company in the formulation of a plan of
integration for the Acquiror and the Company and their respective banking
subsidiaries.
5.11 RESTRICTIONS ON RESALE
(a) The Company has Previously Disclosed to the Acquiror a schedule of each
person that, to the best of its knowledge, is deemed to be an "affiliate" of the
Company (each an "Affiliate"), as that term is used in Rule 145 under the
Securities Act.
(b) The Company shall use its reasonable best efforts to cause each person
who may be deemed to be an Affiliate of the Company to execute and deliver to
the Acquiror an agreement in the form attached hereto as Exhibit F.
5.12 DISCLOSURE SUPPLEMENTS
From time to time prior to the Effective Time, each party shall promptly
supplement or amend any materials Previously Disclosed and delivered to the
other party pursuant hereto with respect to any matter hereafter arising which,
if existing, occurring or known at the date of this Agreement, would have been
required to be set forth or described in materials Previously Disclosed to the
other party or which is necessary to correct any information in such materials
which has been rendered materially inaccurate thereby; no such supplement or
amendment to such materials shall be deemed to have modified the
representations, warranties and covenants of the parties for the purpose of
determining whether the conditions set forth in Article VI hereof have been
satisfied.
5.13 FAILURE TO FULFILL CONDITIONS
In the event that either of the parties hereto determines that a condition
to its respective obligations to consummate the transactions contemplated hereby
cannot be fulfilled on or prior to the termination of this Agreement, it will
promptly notify the other party or parties. Each party will promptly inform the
other party or parties of any facts applicable to it that would be likely to
prevent or materially delay approval of the Merger or the Bank Merger by any
Governmental Entity or third party or which would otherwise prevent or
materially delay completion of the Merger or the Bank Merger.
ARTICLE VI
CONDITIONS PRECEDENT
6.1 CONDITIONS PRECEDENT -- THE ACQUIROR, THE ACQUISITION CORPORATION AND THE
COMPANY
The respective obligations of the Acquiror, the Acquisition Corporation and
the Company to effect the transactions contemplated by this Agreement shall be
subject to satisfaction of the following conditions at or prior to the Effective
Time.
(a) All corporate action necessary to authorize the execution and delivery
of this Agreement and consummation of the transactions contemplated hereby shall
have been duly and validly taken by the Acquiror, the Acquisition Corporation
and the Company, including approval by the requisite vote of the respective
shareholders of the Acquiror, the Acquisition Corporation and the Company of
this Agreement, and all corporate and shareholder action necessary to authorize
the execution and
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delivery of the Bank Merger Agreement and consummation of the transactions
contemplated thereby shall have been duly and validly taken by the Association
and the Bank.
(b) All approvals and consents for the transactions contemplated hereby and
the Bank Merger Agreement from the OTS, the Department and any other
Governmental Entity the approval or consent of which is required for the
consummation of the Merger, the Bank Merger and the other transactions
contemplated hereby shall have been received and all statutory waiting periods
in respect thereof shall have expired; and the Acquiror and the Company shall
have procured all other approvals, consents and waivers of each person (other
than the Governmental Entities referred to above) whose approval, consent or
waiver is necessary to the consummation of the Merger, the Bank Merger and the
other transactions contemplated hereby.
(c) None of the Acquiror, the Company or their respective Subsidiaries
shall be subject to any statute, rule, regulation, injunction or other order or
decree which shall have been enacted, entered, promulgated or enforced by any
governmental or judicial authority which prohibits, restricts or makes illegal
consummation of the Merger or the Bank Merger or any of the other transactions
contemplated hereby.
(d) The Form S-4 shall have become effective under the Securities Act, and
the Acquiror shall have received all state securities laws or "blue sky" permits
and other authorizations or there shall be exemptions from registration
requirements necessary to issue the Acquiror Common Stock in connection with the
Merger, and neither the Form S-4 nor any such permit, authorization or exemption
shall be subject to a stop order or threatened stop order by the Commission or
any state securities authority.
(e) The shares of Acquiror Common Stock to be issued in connection with the
Merger shall have been approved for listing on the Nasdaq Stock Market's
National Market.
(f) The parties shall have received an opinion addressed to both the
Acquiror and the Company and issued by either Thompson Hine & Flory P.L.L. or a
law firm or accounting firm designated by the Acquiror and reasonably acceptable
to the Company, which opinion shall be reasonably acceptable to the parties and
to the effect that, on the basis of facts, representations and assumptions set
forth in such opinion which are consistent with the state of facts existing at
the Effective Time, the Merger and the Bank Merger will be treated for federal
income tax purposes as part of one or more reorganizations within the meaning of
Section 368 of the Code, and that accordingly:
(i) no gain or loss will be recognized by (x) the Acquiror, the
Acquisition Corporation or the Company as a result of the Merger or (y) the
Bank or the Association as a result of the Bank Merger;
(ii) no gain or loss will be recognized by the shareholders of the
Company who exchange their Company Common Stock solely for Acquiror Common
Stock pursuant to the Merger (except with respect to cash received in lieu
of a fractional share interest in Acquiror Common Stock);
(iii) the tax basis of the Acquiror Common Stock received by
shareholders who exchange all of their Company Common Stock solely for
Acquiror Common Stock in the Merger will be the same as the tax basis of
the Company Common Stock surrendered in exchange therefor (reduced by any
amount allocable to a fractional share interest for which cash is
received); and
(iv) any shareholders of the Company who receive cash in exchange for
their shares of Company Common Stock will recognize gain, if any, equal to
the lesser of (i) the excess of the amount of cash plus the fair market
value of any Acquiror Common Stock received in the Merger over the
shareholder's adjusted tax basis in their Company Common Stock, or (ii) the
amount of cash received.
In rendering such opinion, Thompson Hine & Flory P.L.L. or such other law
firm or accounting firm will require and rely upon representations contained in
certificates of officers of the Acquiror, the Acquisition Corporation, the
Company, the Bank and the Association.
6.2 CONDITIONS PRECEDENT -- THE COMPANY
The obligations of the Company to effect the transactions contemplated by
this Agreement shall be subject to satisfaction of the following conditions at
or prior to the Effective Time unless waived by the Company pursuant to Section
7.4 hereof.
(a) The representations and warranties of the Acquiror and the Acquisition
Corporation as set forth in Article IV hereof shall be true and correct as of
the date of this Agreement and as of the Effective Time as though made on and as
of the Effective Time (or on the date when made in the case of any
representation and warranty which specifically relates to an
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earlier date), provided, however, that notwithstanding anything herein to the
contrary, this Section 6.2(a) shall be deemed to have been satisfied even if
such representations or warranties are not true and correct unless the failure
of any of the representations or warranties to be so true and correct would
have, individually or in the aggregate, a material adverse effect on the
financial condition, results of operations or business of the Acquiror on a
consolidated basis or on the ability of the Acquiror, the Acquisition
Corporation, the Company, the Bank and the Association, as applicable, to
consummate the Merger and the Bank Merger.
(b) The Acquiror and the Acquisition Corporation shall have performed in
all material respects all obligations and complied with all covenants required
to be performed and complied with by them pursuant to this Agreement on or prior
to the Effective Time (including without limitation the covenants set forth in
Sections 5.9(a), (b), (c) and (d) hereof).
(c) Each of the Acquiror and the Acquisition Corporation shall have
delivered to the Company a certificate, dated the date of the Closing and signed
by its President and by its Chief Financial Officer, to the effect that the
conditions set forth in Sections 6.2(a) and 6.2(b) have been satisfied.
(d) The Company shall have received the written opinion of Elias, Matz,
Tiernan & Herrick L.L.P., dated the date of the Closing, that collectively
address the matters set forth in Exhibit G hereto.
(e) The Acquiror and/or the Acquisition Corporation shall have furnished
the Company with such certificates of its respective officers or others and such
other documents to evidence fulfillment of the conditions set forth in Sections
6.1 and 6.2 as such conditions relate to the Acquiror or the Acquisition
Corporation as the Company may reasonably request.
6.3 CONDITIONS PRECEDENT -- THE ACQUIROR AND THE ACQUISITION CORPORATION
The obligations of the Acquiror and the Acquisition Corporation to effect
the transactions contemplated by this Agreement shall be subject to satisfaction
of the following conditions at or prior to the Effective Time unless waived by
the Acquiror or the Acquisition Corporation pursuant to Section 7.4 hereof.
(a) The representations and warranties of the Company set forth in Article
III hereof shall be true and correct as of the date of this Agreement and as of
the Effective Time as though made on and as of the Effective Time (or on the
date when made in the case of any representation and warranty which specifically
relates to an earlier date), provided, however, that notwithstanding anything
herein to the contrary, this Section 6.3(a) shall be deemed to have been
satisfied even if such representations or warranties are not true and correct
unless the failure of any of the representations or warranties to be so true and
correct would have, individually or in the aggregate, a material adverse effect
on the financial condition, results of operations or business of the Company on
a consolidated basis or on the ability of the Acquiror, the Acquisition
Corporation, the Company, the Bank and the Association, as applicable, to
consummate the Merger and the Bank Merger.
(b) The Company shall have performed in all material respects all
obligations and covenants required to be performed by it pursuant to this
Agreement on or prior to the Effective Time.
(c) The Company shall have delivered to the Acquiror a certificate, dated
the date of the Closing and signed by its Chairman and President and by its
Chief Financial Officer, to the effect that the conditions set forth in Sections
6.3(a) and 6.3(b) have been satisfied.
(d) No approval or consent referred to in Section 6.1(b) hereof shall
include any condition or requirement that, individually or in the aggregate,
would (i) result in a material adverse effect on the financial condition,
results of operations or business of the Acquiror on a consolidated basis or
(ii) reduce the economic or business benefits of the transactions contemplated
by this Agreement to the Acquiror in so significant a manner that the Acquiror,
in its reasonable judgment, would not have entered into this Agreement.
(e) The Acquiror shall have received the written opinion of Thompson Hine &
Flory P.L.L., dated the date of the Closing, that collectively address the
matters set forth in Exhibit H hereto.
(f) The Company shall have furnished the Acquiror with such certificates of
its officers or others and such other documents to evidence fulfillment of the
conditions set forth in Sections 6.1 and 6.3 as such conditions relate to the
Company as the Acquiror may reasonably request.
(g) Holders of not more than 10% of the outstanding Company Common Stock
shall have elected to exercise dissenters' or appraisal rights under Section
1701.85 of the OGCL.
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<PAGE>
ARTICLE VII
TERMINATION, WAIVER AND AMENDMENT
7.1 TERMINATION
This Agreement may be terminated:
(a) at any time on or prior to the Effective Time, by the mutual consent in
writing of the parties hereto;
(b) at any time on or prior to the Effective Time, by the Acquiror in
writing if the Company has, or by the Company in writing if the Acquiror or the
Acquisition Corporation has, in any material respect, breached (i) any material
covenant (including without limitation the covenants set forth in Sections
5.9(a), (b), (c) and (d) hereof) or undertaking contained herein or (ii) any
representation or warranty contained herein, in any case if such breach has not
been cured by the earlier of 30 days after the date on which written notice of
such breach is given to the party committing such breach or the Effective Time;
(c) at any time, by any party hereto in writing, if any of the applications
for prior approval referred to in Section 5.3 hereof are denied or are approved
in a manner which does not satisfy the requirements of Section 6.1(b) hereof,
and the time period for appeals and requests for reconsideration has run;
(d) at any time, by any party hereto in writing, if the shareholders of the
Acquiror, the Acquisition Corporation or the Company do not approve this
Agreement after a vote taken thereon at a meeting duly called for such purpose
(or at any adjournment thereof), unless the failure of such occurrence shall be
due to the failure of the party seeking to terminate to perform or observe in
any material respect its agreements set forth herein to be performed or observed
by such party at or before the Effective Time;
(e) by either the Company or the Acquiror in writing if the Effective Time
has not occurred by the close of business on the first anniversary of the date
hereof, provided that this right to terminate shall not be available to any
party whose failure to perform an obligation in breach of such party's
obligations under this Agreement has been the cause of, or resulted in, the
failure of the Merger and the other transactions contemplated hereby to be
consummated by such date;
(f) by the Company, by action of a majority of its entire Board of
Directors, in the event the Average Acquiror Share Price is less than $8.00,
provided, however, that during the five day period following the provision by
the Company of such a written notice of termination to the Acquiror pursuant to
this Section 7.1(f), the Acquiror shall have the option of changing the Per
Share Stock Consideration to an amount equal to 4.75 shares. If the Acquiror so
elects within such five-day period, it shall give prompt written notice to the
Company of such election and the revised Exchange Ratio, whereupon no
termination shall have occurred pursuant to this Section 7.1(f) and this
Agreement shall remain in effect in accordance with its terms (except that the
Exchange Ratio shall have been so modified).
(g) at any time by any party hereto in writing if such party is not in
default hereunder and such party determines in good faith that any condition
precedent to such party's obligations to consummate the Merger and the other
transactions contemplated hereby is or would be impossible to satisfy, and such
condition is not waived by the other party.
7.2 EFFECT OF TERMINATION
In the event that this Agreement is terminated pursuant to Section 7.1
hereof, this Agreement shall become void and have no effect, except that (i) the
provisions relating to confidentiality and expenses set forth in Section 5.4 and
Section 8.1, respectively, and this Section 7.2 shall survive any such
termination and (ii) a termination pursuant to Section 7.1(b), (d), (e) and (g)
shall not relieve the breaching party from liability for willful breach of any
covenant, undertaking, representation or warranty giving rise to such
termination.
7.3 SURVIVAL OF REPRESENTATIONS, WARRANTIES AND COVENANTS
All representations, warranties and covenants in this Agreement or in any
instrument delivered pursuant hereto or thereto shall expire on, and be
terminated and extinguished at, the Effective Time other than covenants that by
their terms are to be performed after the Effective Time (including without
limitation the covenants set forth in Sections 5.8 and 5.9 hereof), provided
that no such representations, warranties or covenants shall be deemed to be
terminated or extinguished so as to deprive the Acquiror or the Company (or any
director, officer or controlling person thereof) of any defense at law or in
equity which otherwise would be available against the claims of any person,
including, without limitation, any shareholder or former shareholder of either
the Acquiror or the Company.
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<PAGE>
7.4 WAIVER
Each party hereto by written instrument signed by an executive officer of
such party, may at any time (whether before or after approval of this Agreement
by the shareholders of the Acquiror, the Acquisition Corporation and the
Company) extend the time for the performance of any of the obligations or other
acts of the other party hereto and may waive (i) any inaccuracies of the other
party in the representations or warranties contained in this Agreement or any
document delivered pursuant hereto, (ii) compliance with any of the covenants,
undertakings or agreements of the other party, (iii) to the extent permitted by
law, satisfaction of any of the conditions precedent to its obligations
contained herein or (iv) the performance by the other party of any of its
obligations set forth herein, provided that any such waiver granted, or any
amendment or supplement pursuant to Section 7.5 hereof executed after
shareholders of the Acquiror, the Acquisition Corporation or the Company have
approved this Agreement shall not modify either the amount or form of the
consideration to be provided hereby to the holders of Company Common Stock upon
consummation of the Merger or otherwise materially adversely affect such
shareholders without the approval of the shareholders who would be so affected.
7.5 AMENDMENT OR SUPPLEMENT
This Agreement may be amended or supplemented at any time by mutual
agreement of the Acquiror, the Acquisition Corporation and the Company, subject
to the proviso to Section 7.4 hereof. Any such amendment or supplement must be
in writing and authorized by their respective Boards of Directors.
ARTICLE VIII
MISCELLANEOUS
8.1 EXPENSES
(a) Each party hereto shall bear and pay all costs and expenses incurred by
it in connection with the transactions contemplated by this Agreement, including
fees and expenses of its own financial consultants, accountants and counsel,
except that expenses of printing the Form S-4 and the registration fees to be
paid to the Commission in connection therewith shall be shared equally between
the Company and the Acquiror.
(b) Notwithstanding any provision in this Agreement to the contrary, in the
event that any of the parties shall default in its obligations hereunder, either
of the non-defaulting parties may pursue any remedy available at law or in
equity to enforce its rights and shall be paid by the defaulting party for all
damages, costs and expenses, including without limitation legal, accounting,
investment banking and printing expenses, incurred or suffered by such
non-defaulting party in connection herewith or in the enforcement of its rights
hereunder.
8.2 ENTIRE AGREEMENT
This Agreement contains the entire agreement among the parties with respect
to the transactions contemplated hereby and supersedes all prior arrangements or
understandings with respect thereto (including the respective confidentiality
letter agreements dated as of March 8, 1996), written or oral, other than
documents referred to herein and therein. The terms and conditions of this
Agreement shall inure to the benefit of and be binding upon the parties hereto
and thereto and their respective successors. Nothing in this Agreement,
expressed or implied, is intended to confer upon any party, other than the
parties hereto, and their respective successors, any rights, remedies,
obligations or liabilities other than as set forth in Sections 5.8 and 5.9
hereof.
8.3 NO ASSIGNMENT
None of the parties hereto may assign any of its rights or obligations
under this Agreement to any other person.
8.4 NOTICES
All notices or other communications which are required or permitted
hereunder shall be in writing and sufficient if delivered personally, telecopied
(with confirmation) or sent by overnight mail service or by registered or
certified mail (return receipt requested), postage prepaid, addressed as
follows:
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<PAGE>
If to the Acquiror or the Acquisition Corporation:
Fidelity Financial of Ohio, Inc.
4555 Montgomery Road
Cincinnati, Ohio 45212
Attn: John R. Reusing
President and Chief Executive Officer
Fax: 513-458-3475
With a required copy to:
Elias, Matz, Tiernan & Herrick L.L.P.
734 15th Street, N.W.
Washington, D.C. 20005
Attn: Jeffrey D. Haas, Esq.
Fax: 202-347-2172
If to the Company:
Circle Financial Corporation
11100 Reading Road
Sharonville, Ohio 45241-1904
Attn: Donald H. Rolf, Jr.
Chairman and President
Fax: 513-563-2264
With a required copy to:
Thompson Hine & Flory P.L.L.
3900 Society Center
127 Public Square
Cleveland, Ohio 44114-1216
Attn: Raymond T. Sawyer, Esq.
Fax: 216-566-5800
8.5 ALTERNATIVE STRUCTURE
Notwithstanding any provision of this Agreement to the contrary, the
Acquiror may, with the written consent of the Company, which shall not be
unreasonably withheld, elect, subject to the filing of all necessary
applications and the receipt of all required regulatory approvals, to modify the
structure of the acquisition of the Company and the Association set forth herein
(including without limitation restructuring the Bank Merger or delaying the Bank
Merger), provided that (i) the federal income tax consequences of any
transactions created by such modification shall not be other than those set
forth in Section 6.1(f) hereof, (ii) the consideration to be paid to the holders
of the Company Common Stock is not thereby changed in kind or reduced in amount
as a result of such modification and (iii) such modification will not materially
delay or jeopardize receipt of any required regulatory approvals or any other
condition to the obligations of the Acquiror set forth in Sections 6.1 and 6.3
hereof.
8.6 INTERPRETATION
The captions contained in this Agreement are for reference purposes only
and are not part of this Agreement.
8.7 COUNTERPARTS
This Agreement may be executed in any number of counterparts, and each such
counterpart shall be deemed to be an original instrument, but all such
counterparts together shall constitute but one agreement.
8.8 GOVERNING LAW
This Agreement shall be governed by and construed in accordance with the
laws of the State of Ohio applicable to agreements made and entirely to be
performed within such jurisdiction.
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<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed in counterparts by their duly authorized officers and their corporate
seal to be hereunto affixed and attested by their officers thereunto duly
authorized, all as of the day and year first above written.
<TABLE>
<S> <C>
FIDELITY FINANCIAL OF OHIO, INC.
Attest:
/s/ PAUL D. STAUBACH By: /s/ JOHN R. REUSING
Name: Paul D. Staubach Name: John R. Reusing
Title: Senior Vice President, Chief Title: President and Chief Executive Officer
Financial Officer and Secretary
FIDELITY ACQUISITION CORPORATION
Attest:
/s/ PAUL D. STAUBACH By: /s/ JOHN R. REUSING
Name: Paul D. Staubach Name: John R. Reusing
Title: Senior Vice President, Chief Title: President and Chief Executive Officer
Financial Officer and Executive Officer
Secretary
CIRCLE FINANCIAL CORPORATION
Attest:
/s/ THERESA M. BARLOW By: /s/ DONALD H. ROLF, JR.
Name: Theresa M. Barlow Name: Donald H. Rolf, Jr.
Title: Secretary Title: Chairman and President
</TABLE>
I-38
<PAGE>
EXHIBIT A
AMENDED AND RESTATED AGREEMENT OF MERGER
Amended and Restated Agreement of Merger, dated as of June 13, 1996, by and
between Fidelity Federal Savings Bank (the "Acquiror Bank") and People's Savings
Association (the "Association") which amends and restates the Agreement of
Merger between the Acquiror Bank and the Association dated as of April 29, 1996.
WITNESSETH:
WHEREAS, the Association is an Ohio-chartered savings and loan association
and a wholly-owned subsidiary of Circle Financial Corporation (the "Company");
and
WHEREAS, the Acquiror Bank is a federally chartered savings bank which upon
the receipt of all requisite regulatory approvals and the contribution of all of
the capital stock of the Bank, will become a wholly-owned subsidiary of Fidelity
Acquisition Corporation ("Acquisition Corporation") which is in turn a
wholly-owned subsidiary of Fidelity Financial of Ohio, Inc. (the "Acquiror");
and
WHEREAS, the Acquiror, Acquisition Corporation and the Company have entered
into an Amended and Restated Agreement of Merger, dated as of June 13, 1996 (the
"Agreement"), pursuant to which the Company will merge with and into the
Acquisition Corporation (the "Parent Merger"); and
WHEREAS, the Association and the Acquiror Bank desire to merge on the terms
and conditions herein provided immediately following the effective time of the
Parent Merger.
NOW, THEREFORE, in consideration of the premises and the mutual covenants
and agreements herein contained, the parties hereto, intending to be legally
bound hereby, agree as follows:
1. THE MERGER. Subject to the terms and conditions of this Amended and
Restated Agreement of Merger, at the Effective Time (as defined in Section 2
hereof), the Association shall merge with and into the Acquiror Bank (the
"Merger") under the laws of the State of Ohio and the United States. The
Acquiror Bank shall be the surviving bank of the Merger (the "Surviving Bank").
2. EFFECTIVE TIME. The Merger shall become effective on the date and at the
time that a Certificate of Merger is filed with the Secretary of State of Ohio
and Articles of Combination are declared effective by the Office of Thrift
Supervision (the "OTS"), unless a later date and time is specified as the
effective time on such certificate or Articles of Combination (the "Effective
Time").
3. CHARTER; BYLAWS. The Charter and Bylaws of the Acquiror Bank in effect
immediately prior to the Effective Time shall be the Charter and Bylaws of the
Surviving Bank, until altered, amended or repealed in accordance with their
terms and applicable law.
4. NAME; OFFICES. The name of the Surviving Bank shall be "Fidelity Bank."
The main office of the Surviving Bank shall be the main office of the Acquiror
Bank immediately prior to the Effective Time. All branch offices of the
Association and the Acquiror Bank which were in lawful operation immediately
prior to the Effective Time shall be the branch offices of the Surviving Bank
upon consummation of the Merger, subject to the opening or closing of any
offices which may be authorized by the Association or the Acquiror Bank and
applicable regulatory authorities after the date hereof. Schedule I hereto
contains a list of each of the deposit taking offices of the Association and the
Acquiror Bank which shall be operated by the Surviving Bank, subject to the
opening or closing of any offices which may be authorized by the Association or
the Acquiror Bank and applicable regulatory authorities after the date hereof.
5. DIRECTORS AND EXECUTIVE OFFICERS. Upon consummation of the Merger, (i)
the directors of the Surviving Bank shall consist of six persons the names and
residence addresses of which are set forth as Schedule II hereto and (ii) the
executive officers of the Surviving Bank shall be the executive officers of the
Acquiror Bank immediately prior to the Effective Time, except that Donald H.
Rolf, Jr. shall be Chairman of the Board of Directors of the Surviving Bank and
Joseph D. Hughes shall be Executive Vice President and Chief Lending Officer of
the Surviving Bank. Directors and officers of the Surviving Bank shall serve for
such terms as are specified in the Charter and Bylaws of the Surviving Bank.
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<PAGE>
6. EFFECTS OF THE MERGER. Upon consummation of the Merger, and in addition
to the effects set forth at 12. C.F.R. (section mark)552.13, Sections 1151.36
and 1151.60 of the Ohio Revised Code and other applicable law:
(i) all rights, franchises and interests of the Association in and to
every type of property (real, personal and mixed), tangible and intangible,
and chooses in action shall be transferred to and vested in the Surviving
Bank by virtue of the Merger without any deed or other transfer, and the
Surviving Bank, without any order or other action on the part of any court
or otherwise, shall hold and enjoy all rights of property, franchises and
interests, including appointments, designations and nominations, and all
other rights and interests as trustee, executor, administrator, registrar
of stocks and bonds, guardian of estates, assignee, receiver and committee,
and in every other fiduciary capacity, in the same manner and to the same
extent as such rights, franchises and interest were held or enjoyed by the
Association immediately prior to the Effective Time; and
(ii) the Surviving Bank shall be liable for all liabilities of the
Association, fixed or contingent, including all deposits, accounts, debts,
obligations and contracts thereof, matured or unmatured, whether accrued,
absolute, contingent or otherwise, and whether or not reflected or reserved
against on balance sheets, books of account or records thereof, and all
rights of creditors or obligees and all liens on property of the
Association shall be preserved unimpaired; after the Effective Time, the
Surviving Bank will continue to issue savings accounts on the same basis as
immediately prior to the Effective Time. In accordance with 12 C.F.R.
(section mark) 563b.3(f), the Surviving Bank shall assume and maintain the
liquidation account established by the Association in connection with its
conversion to stock form.
7. EFFECT ON SHARES OF STOCK.
(a) Each share of Acquiror Bank common stock issued and outstanding
immediately prior to the Effective Time shall be unchanged and shall remain
issued and outstanding.
(b) At the Effective Time, each share of Association common stock issued
and outstanding prior to the Merger shall, by virtue of the Merger and without
any action on the part of the holder thereof, be canceled. Any shares of
Association common stock held in the treasury of the Association immediately
prior to the Effective Time shall be retired and canceled.
8. ADDITIONAL ACTIONS. If, at any time after the Effective Time, the
Surviving Bank shall consider that any further assignments or assurances in law
or any other acts are necessary or desirable to (i) vest, perfect or confirm, of
record or otherwise, in the Surviving Bank its rights, title or interest in, to
or under any of the rights, properties or assets of the Association acquired or
to be acquired by the Surviving Bank as a result of, or in connection with, the
Merger, or (ii) otherwise carry out the purposes of this Agreement of Merger,
the Association and its proper officers and directors shall be deemed to have
granted to the Surviving Bank an irrevocable power of attorney to execute and
deliver all such proper deeds, assignments and assurances in law and to do all
acts necessary or proper to vest, perfect or confirm title to and possession of
such rights, properties or assets in the Surviving Bank and otherwise to carry
out the purposes of this Agreement of Merger; and the proper officers and
directors of the Surviving Bank are fully authorized in the name of the
Association or otherwise to take any and all such action.
9. COUNTERPARTS. This Amended and Restated Agreement of Merger may be
executed in one or more counterparts, each of which shall be deemed to be an
original but all of which together shall constitute one agreement.
10. GOVERNING LAW. This Amended and Restated Agreement of Merger shall be
governed in all respects, including, but not limited to, validity,
interpretation, effect and performance, by the laws of the United States and, to
the extent applicable, the State of Ohio.
11. AMENDMENT. Subject to applicable law, this Amended and Restated
Agreement of Merger may be amended, modified or supplemented only by written
agreement of the Acquiror Bank and the Association at any time prior to the
Effective Time.
12. WAIVER. Any of the terms or conditions of this Amended and Restated
Agreement of Merger may be waived at any time by whichever of the parties hereto
is, or the shareholders of which are, entitled to the benefit thereof by action
taken by the Board of Directors of such waiving party.
13. ASSIGNMENT. This Amended and Restated Agreement of Merger may not be
assigned by any party hereto without the prior written consent of the other
party.
14. TERMINATION. This Amended and Restated Agreement of Merger shall
terminate upon the termination of the Agreement in accordance with its terms.
A-2
<PAGE>
15. PROCUREMENT OF APPROVALS. This Amended and Restated Agreement of Merger
shall be subject to the approval of the sole shareholder of the Acquiror Bank
and the Company as the sole shareholder of the Association at a meeting to be
called and held or by consent in lieu thereof in accordance with the applicable
provisions of law and their respective Charter, Articles of Incorporation,
Constitution and Bylaws (or a consent or consents in lieu thereof). The Acquiror
Bank and the Association shall proceed expeditiously and cooperate fully in the
procurement of any other consents and approvals and in the taking of any other
action, and the satisfaction of all other requirements prescribed by law or
otherwise necessary for consummation of the Merger on the terms provided herein,
including without limitation the preparation and submission of such applications
or other filings for approval of the Merger to the Superintendent and OTS as may
be required by applicable laws and regulations.
16. CONDITIONS PRECEDENT. The obligations of the parties under this Amended
and Restated Agreement of Merger shall be subject to: (i) the approval of this
Amended and Restated Agreement of Merger by the Acquisition Corporation as the
sole shareholder of the Acquiror Bank and the Company as the sole shareholder of
the Association at meetings of shareholders duly called and held (or by consent
or consents in lieu thereof), in each case without any exercise of such
dissenters' rights as may be applicable; (ii) receipt of approval of the Merger
from all governmental and banking authorities whose approval is required; (iii)
receipt of any necessary regulatory approval to operate the main office and the
branch offices of the Association as offices of the Surviving Bank; and (iv) the
consummation of the Parent Merger pursuant to the Agreement on or before the
Effective Time.
17. EFFECTIVENESS OF AGREEMENT. Notwithstanding anything to the contrary
contained herein, the execution and delivery of this Amended and Restated
Agreement of Merger by the parties hereto shall not be deemed to be effective
unless and until the requirements of 12 C.F.R. (section mark) 552.13 and
Sections 1151.36 and 1151.60 of the Revised Code of Ohio are met.
IN WITNESS WHEREOF, each of the Acquiror Bank and the Association has
caused this Amended and Restated Agreement of Merger to be executed on its
behalf by its duly authorized officers.
FIDELITY FEDERAL SAVINGS BANK
Attest:
<TABLE>
<S> <C>
/s/ PAUL D. STAUBACH By: /s/ JOHN R. REUSING
Name: Paul D. Staubach Name: John R. Reusing
Title: Senior Vice President, Title: President and
Chief Financial Officer and Secretary Chief Executive Officer
</TABLE>
PEOPLE'S SAVINGS ASSOCIATION
Attest:
<TABLE>
<S> <C>
/s/ THERESA M. BARLOW By: /s/ DONALD H. ROLF, JR.
Name: Theresa M. Barlow Name: Donald H. Rolf, Jr.
Title: Secretary Title: Chairman
</TABLE>
A-3
<PAGE>
SCHEDULE I
LIST OF OFFICES OF
THE SURVIVING CORPORATION
Home Office:
4555 Montgomery Road
Cincinnati, Ohio 45212
Branch Offices:
8434 Vine Street
Cincinnati, Ohio 45216
7136 Miami Avenue
Cincinnati, Ohio 45243
11100 Reading Road
Cincinnati, Ohio 45241
11700 Princeton Pike
Springdale, Ohio 45246
4144 Hunt Road
Blue Ash, Ohio 45236
5030 Delhi Avenue
Cincinnati, Ohio 45238
3316 Glenmore Avenue
Cincinnati, Ohio 45211
3777 Hamilton Cleves Road
Ross, Ohio 45061
8045 Colerain Avenue
Cincinnati, Ohio 45239
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<PAGE>
SCHEDULE II
<TABLE>
<CAPTION>
NAME OF DIRECTOR RESIDENCE ADDRESS TERM OF OFFICE EXPIRES
<S> <C> <C>
Donald H. Rolf, Jr. 1128 Cleveland Avenue 1997
Park Hills, Kentucky 41011
David A. Luecke 6609 Powner Farm Drive 1997
Cincinnati, Ohio 45248
Michael W. Jordan 5796 Bayberry Drive 1998
Cincinnati, Ohio 45242
Constantine N. Papadakis 103 Airdale Road 1998
Rosemont, Pennsylvania 19010
John R. Reusing 1307 Tara Ridge 1999
Milford, Ohio 45150
Robert W. Zumbiel 2339 Harris Avenue 1999
Norwood, Ohio 45212
</TABLE>
A-5
<PAGE>
ANNEX II
STOCK OPTION AGREEMENT
Stock Option Agreement, dated as of April 29, 1996 (the "Agreement"), by
and between Circle Financial Corporation, an Ohio corporation ("Issuer"), and
Fidelity Financial of Ohio, Inc. an Ohio corporation ("Grantee").
WITNESSETH:
WHEREAS, Grantee and Issuer have entered into an Agreement of Merger, dated
as of April 29, 1996 (the "Plan"), providing for, among other things, the merger
of Issuer with and into Grantee (the "Merger"), with Grantee as the surviving
corporation; and
WHEREAS, as a condition and inducement to Grantee's execution of the Plan
and Grantee's agreement referred to in the next WHEREAS clause, Grantee has
required that Issuer agree, and Issuer has agreed, to grant to Grantee the
Option (as hereinafter defined); and
WHEREAS, as a condition and inducement to Issuer's execution of the Plan
and this Agreement, Grantee has agreed to grant an option to Issuer on terms and
conditions which are substantially identical to those of the Option and this
Agreement with respect to 9.9% of the common stock of Grantee.
NOW THEREFORE, in consideration of the foregoing and the respective
representations, warranties, covenants and agreements set forth herein and in
the Plan, and intending to be legally bound hereby, Issuer and Grantee agree as
follows:
1. DEFINED TERMS. Capitalized terms which are used but not defined herein
shall have the meanings ascribed to such terms in the Plan.
2. GRANT OF OPTION. Subject to the terms and conditions set forth herein,
Issuer hereby grants to Grantee an irrevocable option (the "Option") to purchase
up to 140,911 shares (as adjusted as set forth herein) (the "Option Shares,"
which shall include the Option Shares before and after any transfer of such
Option Shares) of Common Stock, par value $1.00 per share ("Issuer Common
Stock"), of Issuer at a purchase price per Option Share (the "Purchase Price")
of $30.00, provided, however, that in no event shall the number of Option Shares
for which the Option is exercisable exceed 19.9% of the issued and outstanding
shares of Issuer Common Stock without giving effect to any shares subject to or
issued pursuant to the Option.
3. EXERCISE OF OPTION.
(a) Provided that (i) Grantee or Holder (as hereinafter defined), as
applicable, shall not be in material breach of the agreements or covenants
contained in this Agreement or the Plan, and (ii) no preliminary or permanent
injunction or other order against the delivery of shares covered by the Option
issued by any court of competent jurisdiction in the United States shall be in
effect, Grantee may exercise the Option, in whole or in part, at any time and
from time to time following the occurrence of a Purchase Event (as hereinafter
defined); provided that the Option shall terminate and be of no further force
and effect upon the earliest to occur of (i) the Effective Time of the Merger,
(ii) termination of the Plan in accordance with the terms thereof prior to the
occurrence of a Purchase Event or a Preliminary Purchase Event, other than a
termination of the Plan by Grantee pursuant to Section 7.1(b)(i) of the Plan (a
"Default Termination"), (iii) 12 months after the termination of the Plan by
Grantee pursuant to a Default Termination, and (iv) 12 months after termination
of the Plan (other than pursuant to a Default Termination) following the
occurrence of a Purchase Event or a Preliminary Purchase Event; and provided,
further, that any purchase of shares upon exercise of the Option shall be
subject to compliance with applicable laws, including without limitation the
Change in Bank Control Act of 1978, as amended (the "CBC Act"). The term
"Holder" shall mean the holder or holders of the Option from time to time, and
which is initially Grantee. The rights set forth in Section 8 hereof shall
terminate when the right to exercise the Option terminates (other than as a
result of a complete exercise of the Option) as set forth above.
(b) As used herein, a "Purchase Event" means any of the following events:
(i) Without Grantee's prior written consent, Issuer shall have
authorized, recommended or publicly-proposed, or publicly announced an
intention to authorize, recommend or propose, or entered into an agreement
with any person (other than Grantee or any subsidiary of Grantee) to effect
(A) a merger, consolidation or similar transaction involving Issuer or any
of its subsidiaries, (B) the disposition, by sale, lease, exchange or
otherwise, of assets of Issuer or any of its subsidiaries representing in
either case 20% or more of the consolidated assets of Issuer and its
subsidiaries, or (C) the
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<PAGE>
issuance, sale or other disposition of (including by way of merger,
consolidation, share exchange or any similar transaction) securities
representing 20% or more of the voting power of Issuer or any of its
subsidiaries (any of the foregoing an "Acquisition Transaction"); or
(ii) any person (other than Grantee or any subsidiary of Grantee)
shall have acquired beneficial ownership (as such term is defined in Rule
13d-3 promulgated under the Exchange Act) of or the right to acquire
beneficial ownership of, or any "group" (as such term is defined in Section
13(d)(3) of the Exchange Act) shall have been formed which beneficially
owns or has the right to acquire beneficial ownership of, 25% or more of
the then outstanding shares of Issuer Common Stock.
(c) As used herein, a "Preliminary Purchase Event" means any of the
following events:
(i) any person (other than Grantee or any subsidiary of Grantee) shall
have commenced (as such term is defined in Rule 14d-2 under the Exchange
Act), or shall have filed a registration statement under the Securities Act
with respect to, a tender offer or exchange offer to purchase any shares of
Issuer Common Stock such that, upon consummation of such offer, such person
would own or control 10% or more of the then outstanding shares of Issuer
Common Stock (such an offer being referred to herein as a "Tender Offer"
and an "Exchange Offer," respectively); or
(ii) (A) the holders of Issuer Common Stock shall not have approved
the Plan at the meeting of such stockholders held for the purpose of voting
on the Plan, (B) such meeting shall not have been held or shall have been
canceled prior to termination of the Plan or (C) Issuer's Board of
Directors shall have withdrawn or modified in a manner adverse to Grantee
the recommendation of Issuer's Board of Directors with respect to the Plan,
in each case after it shall have been publicly announced that any person
(other than Grantee or any subsidiary of Grantee) shall have (x) made, or
disclosed an intention to make, a proposal to engage in an Acquisition
Transaction, (y) commenced a Tender Offer or filed a registration statement
under the Securities Act with respect to an Exchange Offer, or (z) filed an
application (or given notice), whether in draft or final form, under the
CBC Act or the Bank Merger Act, as amended, for approval to engage in an
Acquisition Transaction; or
(iii) Issuer shall have breached any representation, warranty,
covenant or obligation contained in the Plan and such breach would entitle
Grantee to terminate the Plan under Section 7.1(b) thereof (without regard
to the cure period provided for therein unless such cure is promptly
effected without jeopardizing consummation of the Merger pursuant to the
terms of the Plan) after (x) a bona fide proposal is made by any person
(other than Grantee or any subsidiary of Grantee) to Issuer or its
stockholders to engage in an Acquisition Transaction, (y) any person (other
than Grantee or any subsidiary of Grantee) states its intention to Issuer
or its stockholders to make a proposal to engage in an Acquisition
Transaction if the Plan terminates, or (z) any person (other than Grantee
or any subsidiary of Grantee) shall have filed an application or notice
with any Governmental Entity to engage in an Acquisition Transaction.
As used in this Agreement, "person" shall have the meaning specified in
Sections 3(a)(9) and 13(d)(3) of the Exchange Act.
(d) Issuer shall notify Grantee promptly in writing of the occurrence of
any Preliminary Purchase Event or Purchase Event, it being understood that the
giving of such notice by Issuer shall not be a condition to the right of Holder
to exercise the Option.
(e) In the event Holder wishes to exercise the Option, 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 Option Shares it intends to
purchase pursuant to such exercise, and (ii) a place and date not earlier than
three business days nor later than 15 business days from the Notice Date for the
closing (the "Closing") of such purchase (the "Closing Date"). If prior
notification to or approval of the Office of Thrift Supervision (the "OTS") or
any other Governmental Entity is required in connection with such purchase,
Issuer shall cooperate with Grantee in the filing of the required notice of
application for approval and the obtaining of such approval and the Closing
shall occur immediately following such regulatory approvals (and any mandatory
waiting periods).
4. PAYMENT AND DELIVERY OF CERTIFICATES.
(a) On each Closing Date, Holder shall (i) pay to Issuer, in immediately
available funds by wire transfer to a bank account designated by Issuer, an
amount equal to the Purchase Price multiplied by the number of Option Shares to
be purchased on such Closing Date, and (ii) present and surrender this Agreement
to Issuer at the address of Issuer specified in Section 12(f) hereof.
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(b) At each Closing, simultaneously with the delivery of immediately
available funds and surrender of this Agreement as provided in Section 4(a), (i)
Issuer shall deliver to Holder (A) a certificate or certificates representing
the Option Shares to be purchased at such Closing, which Option Shares shall be
free and clear of all liens, claims, charges and encumbrances of any kind
whatsoever, other than such lien or encumbrance created by Grantee, and not
subject to preemptive rights, and (B) if the Option is exercised in part only,
an executed new agreement with the same terms as this Agreement evidencing the
right to purchase the balance of the shares of Issuer Common Stock purchasable
hereunder, and (ii) Holder shall deliver to Issuer a letter agreeing that Holder
shall not offer to sell or otherwise dispose of such Option Shares in violation
of applicable federal and state law or of the provisions of this Agreement.
(c) In addition to any other legend that is required by applicable law,
certificates for the Option Shares delivered at each Closing shall be endorsed
with a restrictive legend which shall read substantially as follows:
THE TRANSFER OF THE STOCK REPRESENTED BY THIS CERTIFICATE IS SUBJECT TO
RESTRICTIONS ARISING UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND PURSUANT
TO THE TERMS OF A STOCK OPTION AGREEMENT DATED AS OF APRIL 29, 1996. A COPY OF
SUCH AGREEMENT WILL BE PROVIDED TO THE HOLDER HEREOF WITHOUT CHARGE UPON RECEIPT
BY ISSUER OF A WRITTEN REQUEST THEREFOR.
It is understood and agreed that the above legend shall be removed by
delivery of substitute certificate(s) without such legend if Holder shall have
delivered to Issuer either a copy of a letter from the staff of the Commission,
or an opinion of counsel in form and substance reasonably satisfactory to Issuer
and its counsel, to the effect that such legend is not required for purposes of
the Securities Act.
(d) Upon the giving by Holder to Issuer of the written notice of exercise
of the Option provided for under Section 3(e), the tender of the applicable
purchase price in immediately available funds and the tender of this Agreement
to Issuer, Holder shall be deemed to be the holder of record of the shares of
Issuer 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 Issuer Common Stock shall not then be actually delivered to
Holder.
(e) Issuer agrees (i) that it shall at all times maintain, free from
preemptive rights, sufficient authorized but unissued or treasury shares of
Issuer Common Stock so that the Option may be exercised without additional
authorization of Issuer Common Stock after giving effect to all other options,
warrants, convertible securities and other rights to purchase Issuer 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 (A) complying with all premerger notification, reporting and waiting
period requirements and (B) in the event prior approval of or notice to any
Governmental Entity is necessary before the Option may be exercised, cooperating
fully with Holder in preparing such applications or notices and providing such
information to such Governmental Entity as it may require) in order to permit
Holder to exercise the Option and Issuer duly and effectively to issue shares of
Issuer Common Stock pursuant hereto, and (iv) promptly to take all action
provided herein to protect the rights of Holder against dilution.
5. REPRESENTATIONS AND WARRANTIES OF ISSUER. Issuer hereby represents and
warrants to Grantee (and Holder, if different than Grantee) as follows:
(a) DUE AUTHORIZATION. Issuer has all requisite corporate power and
authority to enter into this Agreement, and subject to any approvals referred to
herein, to consummate the transactions contemplated hereby. The execution and
delivery of this Agreement and the consummation of the transactions contemplated
hereby have been duly authorized by all necessary corporate action on the part
of Issuer, and this Agreement has been duly executed and delivered by Issuer.
(b) NO VIOLATIONS. The execution and delivery of this Agreement, the
consummation of the transactions contemplated hereby and compliance by Issuer
with any of the provisions hereof will not (i) conflict with or result in a
breach of any provision of its Articles of Incorporation, Code of Regulations or
Bylaws or a default (or give rise to any right of termination, cancellation or
acceleration) under any of the terms, conditions or provisions of any note,
bond, debenture, mortgage, indenture, license, material agreement or other
material instrument or obligation to which Issuer is a party, or by which it or
any of its properties or assets may be bound, or (ii) violate any order, writ,
injunction, decree, statute, rule or regulation applicable to Issuer or any of
its properties or assets.
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(c) AUTHORIZED STOCK. Issuer has taken all necessary corporate and other
action to authorize and reserve and to permit it to issue, and at all times from
the date hereof until the obligation to deliver Issuer Common Stock upon the
exercise of the Option terminates, will have reserved for issuance upon exercise
of the Option that number of shares of Issuer Common Stock equal to the maximum
number of shares of Issuer Common Stock at any time and from time to time
purchasable upon exercise of the Option, and all such shares, upon issuance
pursuant to the Option, will be duly and validly issued, fully paid and
nonassessable, and will be delivered free and clear of all liens, claims,
charges and encumbrances of any kind or nature whatsoever (except any such lien
or encumbrance created by Grantee) and not be subject to any preemptive rights.
(d) BOARD ACTION. By action of the Board of Directors of Issuer prior to
the execution of this Agreement, resolutions were duly adopted approving the
execution, delivery and performance of the Plan and the other transactions
contemplated thereby. Accordingly, the provisions of Section 1704.02 of the Ohio
Revised Code as they relate to Issuer and Section 1 of Article Eleventh of
Issuer's Articles of Incorporation do not and will not apply to the Plan or any
of the other transactions contemplated thereby.
6. REPRESENTATIONS AND WARRANTIES OF GRANTEE. Grantee hereby represents and
warrants to Issuer as follows:
(a) Grantee has all requisite corporate power and authority to enter into
this Agreement and, subject to any approvals or consents referred to herein, to
consummate the transactions contemplated hereby. The execution and delivery of
this Agreement and the consummation of the transactions contemplated hereby have
been duly authorized by all necessary corporate action on the part of Grantee,
and this Agreement has been duly executed and delivered by Grantee.
(b) PURCHASE NOT FOR DISTRIBUTION. This Option is not being acquired with a
view to the public distribution thereof and neither this Option nor any Option
Shares will be transferred or otherwise disposed of except in a transaction
registered or exempt from registration under the Securities Act.
7. ADJUSTMENT UPON CHANGES IN ISSUER CAPITALIZATION, ETC.
(a) In the event of any change in Issuer Common Stock by reason of a stock
dividend, stock split, split-up, recapitalization, combination, exchange of
shares or similar transaction, the type and number of shares or securities
subject to the Option, and the Purchase Price therefor, shall be adjusted
appropriately, and proper provision shall be made in the agreements governing
such transactions so that Holder shall receive, upon exercise of the Option, the
number and class of shares or other securities or property that Holder would
have received in respect of Issuer Common Stock if the Option had been exercised
immediately prior to such event, or the record date therefor, as applicable. If
any additional shares of Issuer Common Stock are issued after the date of this
Agreement (other than pursuant to an event described in the first sentence of
this Section 7(a)), the number of shares of Issuer Common Stock subject to the
Option shall be adjusted so that, after such issuance, it, together with any
shares of Issuer Common Stock previously issued pursuant hereto, equals 19.9% of
the number of shares of Issuer Common Stock then issued and outstanding, without
giving effect to any shares subject to or issued pursuant to the Option.
(b) In the event that Issuer shall enter in an agreement: (i) to
consolidate with or merge into any person, other than Grantee or one of its
subsidiaries, and shall not be the continuing or surviving corporation of such
consolidation or merger, (ii) to permit any person, other than Grantee or one of
its subsidiaries, to merge into Issuer and Issuer shall be the continuing or
surviving corporation, but, in connection with such merger, the then outstanding
shares of Issuer Common Stock shall be changed into or exchanged for stock or
other securities of Issuer or any other person or cash or any other property or
the outstanding shares of Issuer Common Stock immediately prior to such merger
shall after such merger represent less than 50% of the outstanding shares and
share equivalents of the merged company, or (iii) to sell or otherwise transfer
all or substantially all of its assets to any person, other than Grantee or one
of its subsidiaries, then, and in each such case, the agreement governing such
transaction shall make proper provisions 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 Holder, of any of (x) the Acquiring Corporation (as
hereinafter defined), (y) any person that controls the Acquiring Corporation or
(z) in the case of a merger described in clause (ii), Issuer (such person being
referred to as "Substitute Option Issuer").
(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 Holder. Substitute Option Issuer also shall enter into an
agreement with Holder in substantially the same form as this Agreement, which
shall be applicable to the Substitute Option.
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<PAGE>
(d) The Substitute Option shall be exercisable for such number of shares of
Substitute Common Stock (as hereinafter defined) as is equal to the Assigned
Value (as hereinafter defined) multiplied by the number of shares of Issuer
Common Stock for which the Option was theretofore exercisable, divided by the
Average Price (as hereinafter defined). The exercise price of Substitute Option
per share of Substitute Common Stock (the "Substitute Option Price") shall then
be equal to the Purchase Price multiplied by a fraction in which the numerator
is the number of shares of Issuer Common Stock for which the Option was
theretofore exercisable and the denominator is the number of shares of the
Substitute Common Stock for which the Substitute Option is exercisable.
(e) The following terms have the meanings indicated:
(1) "Acquiring Corporation" shall mean (i) the continuing or surviving
corporation of a consolidation or merger with Issuer (if other than
Issuer), (ii) Issuer in a merger in which Issuer is the continuing or
surviving person, or (iii) the transferee of all or substantially all of
Issuer's assets (or a substantial part of the assets of its subsidiaries
taken as a whole).
(2) "Substitute Common Stock" shall mean the shares of capital stock
(or similar equity interest) with the greatest voting power in respect of
the election of directors (or persons similarly responsible for the
direction of the business and affairs) of the Substitute Option Issuer.
(3) "Assigned Value" shall mean the highest of (w) the price per share
of Issuer Common Stock at which a Tender Offer or an Exchange Offer
therefor has been made, (x) the price per share of Issuer Common Stock to
be paid by any third party pursuant to an agreement with Issuer, (y) the
highest closing price for shares of Issuer Common Stock within the
six-month period immediately preceding the consolidation, merger or sale in
question and (z) in the event of a sale of all or substantially all of
Issuer's assets or deposits, an amount equal to (i) the sum of the price
paid in such sale for such assets (and/or deposits) and the current market
value of the remaining assets of Issuer, as determined by a nationally-
recognized investment banking firm selected by Holder, divided by (ii) the
number of shares of Issuer Common Stock outstanding at such time. In the
event that a Tender Offer or an Exchange Offer is made for Issuer Common
Stock or an agreement is entered into for a merger or consolidation
involving consideration other than cash, the value of the securities or
other property issuable or deliverable in exchange for Issuer Common Stock
shall be determined by a nationally-recognized investment banking firm
selected by Holder.
(4) "Average Price" shall mean the average closing price of a share of
Substitute Common Stock for the 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 Issuer, the person merging into Issuer
or by any company which controls such person, as Holder may elect.
(f) In no event, pursuant to any of the foregoing paragraphs, shall the
Substitute Option be exercisable for more than 19.9% of the aggregate 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 aggregate of the shares of Substitute Common Stock
but for the limitation in the first sentence of this Section 7(f), 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 the
first sentence of this Section 7(f) over (ii) the value of the Substitute Option
after giving effect to the limitation in the first sentence of this Section
7(f). This difference in value shall be determined by a nationally-recognized
investment banking firm selected by Holder.
(g) Issuer shall not enter into any transaction described in Section 7(b)
hereof unless the Acquiring Corporation and any person that controls the
Acquiring Corporation assume in writing all the obligations of Issuer hereunder
and take all other actions that may be necessary so that the provisions of this
Section 7 are given full force and effect (including, without limitation, any
action that may be necessary so that the holders of the other shares of common
stock issued by Substitute Option Issuer are not entitled to exercise any rights
by reason of the issuance or exercise of the Substitute Option and the shares of
Substitute Common Stock are otherwise in no way distinguishable from or have
lesser economic value (other than any diminution in value resulting from the
fact that the shares of Substitute Common Stock are restricted securities, as
defined in Rule 144 under the Securities Act or any successor provision) than
other shares of common stock issued by Substitute Option Issuer).
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8. REPURCHASE AT THE OPTION OF HOLDER.
(a) Subject to the last sentence of Section 3(a), at the request of Holder
at any time commencing upon the first occurrence of a Repurchase Event (as
defined in Section 8(d)) and ending 12 months immediately thereafter, Issuer
shall repurchase from Holder (i) the Option and (ii) all shares of Issuer Common
Stock purchased by Holder pursuant hereto with respect to which Holder then has
beneficial ownership. The date on which Holder exercises its rights under this
Section 8 is referred to as the "Request Date." Such repurchase shall be at an
aggregate price (the "Section 8 Repurchase Consideration") equal to the sum of:
(i) the aggregate Purchase Price paid by Holder for any shares of
Issuer Common Stock acquired pursuant to the Option with respect to which
Holder then has beneficial ownership;
(ii) the excess, if any, of (x) the Applicable Price (as defined
below) for each share of Issuer Common Stock over (y) the Purchase Price
(subject to adjustment pursuant to Section 7), multiplied by the number of
shares of Issuer Common Stock with respect to which the Option has not been
exercised; and
(iii) the excess, if any, of the Applicable Price over the Purchase
Price (subject to adjustment pursuant to Section 7) paid (or, in the case
of Option Shares with respect to which the Option has been exercised but
the Closing Date has not occurred, payable) by Holder for each share of
Issuer Common Stock with respect to which the Option has been exercised and
with respect to which Holder then has beneficial ownership, multiplied by
the number of such shares.
(b) If Holder exercises its rights under this Section 8, Issuer shall,
within 10 business days after the Request Date, pay the Section 8 Repurchase
Consideration to Holder in immediately available funds, and contemporaneously
with such payment Holder shall surrender to Issuer the Option and the
certificates evidencing the shares of Issuer Common Stock purchased thereunder
with respect to which Holder then has beneficial ownership, and shall warrant
that it has sole record and beneficial ownership of such shares and that the
same are then free and clear of all liens, claims, charges and encumbrances of
any kind whatsoever. Notwithstanding the foregoing, to the extent that prior
notification to or approval of the OTS or any other Governmental Entity is
required in connection with the payment of all or any portion of the Section 8
Repurchase Consideration, Holder shall have the ongoing option to revoke its
request for repurchase pursuant to Section 8, in whole or in part, or to require
that Issuer deliver from time to time that portion of the Section 8 Repurchase
Consideration that it is not then so prohibited from paying and promptly file
the required notice or application for approval and expeditiously process the
same (and each party shall cooperate with the other in the filing of any such
notice or application and the obtaining of any such approval). If the OTS or any
other Governmental Entity disapproves of any part of Issuer's proposed
repurchase pursuant to this Section 8, Issuer shall promptly give notice of such
fact to Holder. If the OTS or any other Governmental Entity prohibits the
repurchase in part but not in whole, then Holder shall have the right (i) to
revoke the repurchase request or (ii) to the extent permitted by the OTS or
other Governmental Entity, determine whether the repurchase should apply to the
Option and/or Option Shares and to what extent to each, and Holder shall
thereupon have the right to exercise the Option as to the number of Option
Shares for which the Option was exercisable at the Request Date less the sum of
the number of shares covered by the Option in respect of which payment has been
made pursuant to Section 8(a)(ii) and the number of shares covered by the
portion of the Option (if any) that has been repurchased. Holder shall notify
Issuer of its determination under the preceding sentence within five business
days of receipt of notice of disapproval of the repurchase.
Notwithstanding anything herein to the contrary, (i) Issuer shall not be
obligated to repurchase the Option or any shares of Issuer Common Stock pursuant
to this Section 8 on more than one occasion, except that Issuer's obligation to
repurchase on one occasion any Option or shares of Issuer Common Stock shall be
reinstated in the event that Grantee has revoked its request for repurchase in
accordance with the provisions of this Section 8 and (ii) all of Grantee's
rights under this Section 8 shall terminate on the date of termination of this
Option pursuant to Section 3(a) hereof, unless this Option shall have been
exercised in whole or in part prior to the date of termination described in
clause (ii) above, then Grantee's rights under this Section 8 shall terminate 12
months after such date of termination.
(c) For purposes of this Agreement, the "Applicable Price" means the
highest of (i) the highest price per share of Issuer Common Stock paid for any
such share by the person or groups described in Section 8(d)(i), (ii) the price
per share of Issuer Common Stock received by holders of Issuer Common Stock in
connection with any merger or other business combination transaction described
in Section 7(b)(i), 7(b)(ii) or 7(b)(iii) hereof, or (iii) the highest closing
sales price per share of Issuer Common Stock quoted on the Nasdaq Stock Market's
National Market ("NASDAQ/NMS") (or if Issuer Common Stock is not quoted on
NASDAQ/NMS, the highest bid price per share as quoted on the principal trading
market or securities exchange on which such shares are traded as reported by a
recognized source chosen by Holder during the 60 business days preceding the
Request Date); provided, however, that in the event of a sale of less than all
of Issuer's assets, the Applicable
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Price shall be the sum of the price paid in such sale for such assets and the
current market value of the remaining assets of Issuer as determined by a
nationally-recognized investment banking firm selected by Holder, divided by the
number of shares of Issuer Common Stock outstanding at the time of such sale. If
the consideration to be offered, paid or received pursuant to either of the
foregoing clauses (i) or (ii) shall be other than in cash, the value of such
consideration shall be determined in good faith by an independent
nationally-recognized investment banking firm selected by Holder and reasonably
acceptable to Issuer, which determination shall be conclusive for all purposes
of this Agreement.
(d) As used herein, a "Repurchase Event" shall occur if (i) any person
(other than Grantee or any subsidiary of Grantee) shall have acquired beneficial
ownership of (as such term is defined in Rule 13d-3 promulgated under the
Exchange Act), or the right to acquire beneficial ownership of, or any "group"
(as such term is defined in Section 13(d)(3) of the Exchange Act) shall have
been formed which beneficially owns or has the right to acquire beneficial
ownership of, 50% or more of the then outstanding shares of Issuer Common Stock,
or (ii) any of the transactions described in Section 7(b)(i), Section 7(b)(ii)
or Section 7(b)(iii) hereof shall be consummated.
9. REGISTRATION RIGHTS.
(a) DEMAND REGISTRATION RIGHTS. Issuer shall, subject to the conditions of
Section 9(c), if requested by any Holder, as expeditiously as possible prepare
and file a registration statement under the Securities Act if such registration
is necessary in order to permit the sale or other disposition of any or all
shares of Issuer Common Stock or other securities that have been acquired by or
are issuable to Holder upon exercise of the Option in accordance with the
intended method of sale or other disposition stated by Holder in such request,
including without limitation a "shelf" registration statement under Rule 415
under the Securities Act or any successor provision, and Issuer shall use its
best efforts to qualify such shares or other securities for sale under any
applicable state securities laws.
(b) ADDITIONAL REGISTRATION RIGHTS. If Issuer at any time after the
exercise of the Option proposes to register any shares of Issuer Common Stock
under the Securities Act in connection with an underwritten public offering of
such Issuer Common Stock, Issuer will promptly give written notice to Holder of
its intention to do so and, upon the written request of Holder given within 30
days after receipt of any such notice (which request shall specify the number of
shares of Issuer Common Stock intended to be included in such underwritten
public offering by Holder), Issuer will cause all such shares for which a Holder
shall have requested participation in such registration to be so registered and
included in such underwritten public offering; provided, however, that Issuer
may elect to not cause any such shares to be so registered (i) if the
underwriters in good faith object for valid business reasons, or (ii) in the
case of a registration solely to implement an employee benefit plan or a
registration filed on Form S-4 under the Securities Act or any successor form;
provided, further, however, that such election pursuant to clause (i) may only
be made one time. If some but not all the shares of Issuer Common Stock with
respect to which Issuer shall have received requests for registration pursuant
to this Section 9(b) shall be excluded from such registration, Issuer shall make
appropriate allocation of shares to be registered among Holders permitted to
register their shares of Issuer Common Stock in connection with such
registration pro rata in the proportion that the number of shares requested to
be registered by each such Holder bears to the total number of shares requested
to be registered by all such Holders then desiring to have Issuer Common Stock
registered for sale.
(c) CONDITIONS TO REQUIRED REGISTRATION. Issuer shall use all reasonable
efforts to cause each registration statement referred to in Section 9(a) to
become effective and to obtain all consents or waivers of other parties which
are required therefor and to keep such registration statement effective;
provided, however, that Issuer may delay any registration of Option Shares
required pursuant to Section 9(a) for a period not exceeding 90 days if Issuer
shall in good faith determine that any such registration would adversely affect
an offering or contemplated offering of other securities by Issuer, and Issuer
shall not be required to register Option Shares under the Securities Act
pursuant to Section 9(a):
(i) prior to the earliest of (A) termination of the Plan pursuant to
Article VII thereof, and (B) a Purchase Event or a Preliminary Purchase
Event;
(ii) on more than one occasion during any calendar year;
(iii) within 90 days after the effective date of a registration
referred to in Section 9(b) pursuant to which the Holder or Holders
concerned were afforded the opportunity to register such shares under the
Securities Act and such shares were registered as requested; and
(iv) unless a request therefor is made to Issuer by the Holder or
Holders of at least 25% or more of the aggregate number of Option Shares
(including shares of Issuer Common Stock issuable upon exercise of the
Option) then outstanding.
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In addition to the foregoing, Issuer shall not be required to maintain the
effectiveness of any registration statement after the expiration of nine months
from the effective date of such registration statement. Notwithstanding anything
to the contrary contained herein, in no event shall Issuer be obligated to
effect more than two registrations pursuant to the first sentence of Section
9(a) hereof by reason of the fact that there shall be more than one Holder as a
result of any assignment of this Agreement or division of this Agreement
pursuant to Section 11 hereof. Issuer shall use all reasonable efforts to make
any filings, and take all steps, under all applicable state securities laws to
the extent necessary to permit the sale or other disposition of the Option
Shares so registered in accordance with the intended method of distribution for
such shares, provided, however, that Issuer shall not be required to consent to
general jurisdiction or to qualify to do business in any state where it is not
otherwise required to so consent to such jurisdiction or to so qualify to do
business.
(d) EXPENSES. Issuer will pay all expenses (including without limitation
registration fees, qualification fees, blue sky fees and expenses, accounting
expenses, legal expenses and printing expenses incurred by it) in connection
with each registration pursuant to Section 9(a) or (b) and all other
qualifications, notifications or exemptions pursuant to Section 9(a) or (b).
Underwriting discounts and commissions relating to Option Shares, fees and
disbursements of counsel to the Holder(s) of Option Shares being registered and
any other expenses incurred by such Holder(s) in connection with any such
registration shall be borne by such Holder(s).
(e) INDEMNIFICATION. In connection with any registration under Section 9(a)
or (b), Issuer hereby indemnifies each Holder, and each underwriter thereof,
including each person, if any, who controls such Holder or underwriter within
the meaning of Section 15 of the Securities Act, against all expenses, losses,
claims, damages and liabilities caused by any untrue, or alleged untrue,
statement of a material fact contained in any registration statement or
prospectus or notification or offering circular (including any amendments or
supplements thereto) or any preliminary prospectus, or caused by any omission,
or alleged omission, to state therein a material fact required to be stated
therein or necessary to make the statements therein not misleading, except
insofar as such expenses, losses, claims, damages or liabilities of such
indemnified party are caused by any untrue statement or alleged untrue statement
that was included by Issuer in any such registration statement or prospectus or
notification or offering circular (including any amendments or supplements
thereto) in reliance upon, and in conformity with, information furnished in
writing to Issuer by such indemnified party expressly for use therein, and
Issuer and each officer, director and controlling person of Issuer shall be
indemnified by such Holder, or by such underwriter, as the case may be, for all
such expenses, losses, claims, damages and liabilities caused by any untrue, or
alleged untrue, statement that was included by Issuer in any such registration
statement or prospectus or notification or offering circular (including any
amendments or supplements thereto) in reliance upon, and in conformity with,
information furnished in writing to Issuer by such Holder or such underwriter,
as the case may be, expressly for such use.
Promptly upon receipt by a party indemnified under this Section 9(e) of
notice of the commencement of any action against such indemnified party in
respect of which indemnity or reimbursement may be sought against any
indemnifying party under this Section 9(e), such indemnified party shall notify
the indemnifying party in writing of the commencement of such action, but,
except to the extent of any actual prejudice to the indemnifying party, the
failure so to notify the indemnifying party shall not relieve it of any
liability which it may otherwise have to any indemnified party under this
Section 9(e). In case notice of commencement of any such action shall be given
to the indemnifying party as above provided, the indemnifying party shall be
entitled to participate in and, to the extent it may wish, jointly with any
other indemnifying party similarly notified, to assume the defense of such
action at its own expense, with counsel chosen by it and reasonably satisfactory
to such indemnified party. The indemnified party shall have the right to employ
separate counsel in any such action and participate in the defense thereof, but
the fees and expenses of such counsel (other than reasonable costs of
investigation) shall be paid by the indemnified party unless (i) the
indemnifying party agrees to pay the same, (ii) the indemnifying party fails to
assume the defense of such action with counsel reasonably satisfactory to the
indemnified party, or (iii) the indemnified party has been advised by counsel
that one or more legal defenses may be available to the indemnifying party that
may be contrary to the interest of the indemnified party, in which case the
indemnifying party shall be entitled to assume the defense of such action
notwithstanding its obligation to bear fees and expenses of such counsel. No
indemnifying party shall be liable for any settlement entered into without its
consent, which consent may not be unreasonably withheld.
If the indemnification provided for in this Section 9(e) is unavailable to
a party otherwise entitled to be indemnified in respect of any expenses, losses,
claims, damages or liabilities referred to herein, then the indemnifying party,
in lieu of indemnifying such party otherwise entitled to be indemnified, shall
contribute to the amount paid or payable by such party to be indemnified as a
result of such expenses, losses, claims, damages or liabilities in such
proportion as is appropriate to reflect the relative benefits received by
Issuer, the selling Holders and the underwriters from the offering of the
securities and also the relative fault of Issuer, the selling Holders and the
underwriters in connection with the statement or omissions which results in such
expenses, losses, claims, damages or liabilities, as well as any other relevant
equitable considerations. The
II-8
<PAGE>
amount paid or payable by a party as a result of the expenses, losses, claims,
damages and liabilities referred to above shall be deemed to include any legal
or other fees or expenses reasonably incurred by such party in connection with
investigating or defending any action or claim; provided, however, that in no
case shall the selling Holders be responsible, in the aggregate, for any amount
in excess of the net offering proceeds attributable to its Option Shares
included in the offering. No person guilty of fraudulent misrepresentation
(within the meaning of Section 11(g) of the Securities Act) shall be entitled to
contribution from any person who was not guilty of such fraudulent
misrepresentation. Any obligation by any Holder to indemnify shall be several
and not joint with other Holders.
In connection with any registration pursuant to Section 9(a) or (b) above,
Issuer and each selling Holder (other than Grantee) shall enter into an
agreement containing the indemnification provisions of this Section 9(e).
(f) MISCELLANEOUS REPORTING. Issuer shall comply with all reporting
requirements and will do all such other things as may be necessary to permit the
expeditious sale at any time of any Option Shares by the Holder(s) in accordance
with and to the extent permitted by any rule or regulation permitting
nonregistered sales of securities promulgated by the Commission from time to
time, including, without limitation, Rule 144A. Issuer shall at its expense
provide the Holder with any information necessary in connection with the
completion and filing of any reports or forms required to be filed by them under
the Securities Act or the Exchange Act, or required pursuant to any state
securities laws or the rules of any stock exchange.
(g) ISSUE TAXES. Issuer will pay all stamp taxes in connection with the
issuance and the sale of the Option Shares and in connection with the exercise
of the Option, and will save any Holder harmless, without limitation as to time,
against any and all liabilities, with respect to all such taxes.
10. QUOTATION; LISTING. If Issuer Common Stock or any other securities to
be acquired upon exercise of the Option are then authorized for quotation or
trading or listing on NASDAQ/NMS or any securities exchange, Issuer, upon the
request of Holder, will promptly file an application, if required, to authorize
for quotation or trading or listing the shares of Issuer Common Stock or other
securities to be acquired upon exercise of the Option on the NASDAQ/NMS or such
other securities exchange and will use its best efforts to obtain approval, if
required, of such quotation or listing as soon as practicable.
11. DIVISION OF OPTION. Upon the occurrence of a Purchase Event or a
Preliminary Purchase Event, this Agreement (and the Option granted hereby) are
exchangeable, without expense, at the option of Holder, upon presentation and
surrender of this Agreement at the principal office of the Issuer for other
Agreements providing for Options of different denominations entitling the holder
thereof to purchase in the aggregate the same number of shares of Issuer Common
Stock purchasable hereunder. The terms "Agreement" and "Option" as used herein
include any other 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.
12. MISCELLANEOUS.
(a) EXPENSES. Except as otherwise provided in Section 9 hereof, 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.
(b) WAIVER AND AMENDMENT. Any provision of this Agreement may be waived at
any time by the party that is entitled to the benefits of such provision. This
Agreement may not be modified, amended, altered or supplemented except upon the
execution and delivery of a written agreement executed by the parties hereto.
(c) ENTIRE AGREEMENT; NO THIRD PARTY BENEFICIARIES; SEVERABILITY. This
Agreement, together with the Plan and the other documents and instruments
referred to herein and therein, between Grantee and Issuer (i) constitutes the
entire agreement and supersedes all prior agreements and understandings, both
written and oral, between the parties with respect to the subject matter hereof,
and (ii) is not intended to confer upon any person other than the parties hereto
(other than the indemnified parties under Section 9(e) hereof and any transferee
of the Option Shares or any permitted transferee of this Agreement pursuant to
Section 12(h) hereof) any rights or remedies hereunder. If any term, provision,
covenant or restriction of this Agreement is held by a court of competent
jurisdiction or a federal or state regulatory agency to be invalid, void or
unenforceable, the remainder of the terms, provisions, covenants and
restrictions of 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
II-9
<PAGE>
that the Option does not permit Holder to acquire, or does not require Issuer to
repurchase, the full number of shares of Issuer Common Stock as provided in
Sections 3 and 8 hereof (as adjusted pursuant to Section 7 hereof), it is the
express intention of Issuer to allow Holder to acquire or to require Issuer to
repurchase such lesser number of shares as may be permissible without any
amendment or modification hereof.
(d) GOVERNING LAW. This Agreement shall be governed and construed in
accordance with the laws of the State of Ohio without regard to any applicable
conflicts of law rules.
(e) DESCRIPTIVE HEADINGS. The descriptive headings contained herein are for
convenience of reference only and shall not affect in any way the meaning or
interpretation of this Agreement.
(f) NOTICES. All notices and other communications hereunder shall be in
writing and shall be deemed given if delivered personally, telecopied (with
confirmation) or sent by overnight mail service or mailed by registered or
certified mail (return receipt requested) postage prepaid, to the parties at the
following address (or at such other address for a party as shall be specified by
like notice):
If to Grantee:
Fidelity Financial of Ohio, Inc.
4555 Montgomery Road
Cincinnati, Ohio 45212
Attn: John R. Reusing
President and Chief Executive Officer
Fax: 513-458-3475
With a required copy to:
Elias, Matz, Tiernan & Herrick L.L.P.
734 15th Street, N.W.
Washington, D.C. 20005
Attn: Jeffrey D. Haas, Esq.
Fax: 202-347-2172
If to Issuer:
Circle Financial Corporation
11100 Reading Road
Sharonville, Ohio 45241-1904
Attn: Donald H. Rolf, Jr.
Chairman and President
Fax: 513-563-2264
With a required copy to:
Thompson Hine & Flory P.L.L.
3900 Society Center
127 Public Square
Cleveland, Ohio 44114-1216
Attn: Raymond T. Sawyer, Esq.
Fax: 216-566-5800
(g) COUNTERPARTS. This Agreement and any amendments hereto may be executed
in two counterparts, each of which shall be considered one and the same
agreement and shall become effective when both counterparts have been signed, it
being understood that both parties need not sign the same counterpart.
(h) ASSIGNMENT. Neither this Agreement nor any of the rights, interests or
obligations hereunder or under the Option shall be assigned by any of the
parties hereto (whether by operation of law or otherwise) without the prior
written consent of the other party, except that Holder may assign this Agreement
to a wholly-owned subsidiary of Holder and Holder may assign its rights
hereunder in whole or in part after the occurrence of a Purchase Event. Subject
to the preceding sentence, this Agreement shall be binding upon, inure to the
benefit of and be enforceable by the parties and their respective successors and
assigns.
II-10
<PAGE>
(i) FURTHER ASSURANCES. In the event of any exercise of the Option by
Holder, Issuer and Holder shall execute and deliver all other documents and
instruments and take all other action that may be reasonably necessary in order
to consummate the transactions provided for by such exercise.
(j) SPECIFIC PERFORMANCE. The parties hereto agree that this Agreement may
be enforced by either party through specific performance, injunctive relief and
other equitable relief. Both parties further agree to waive any requirement for
the securing or posting of any bond in connection with the obtaining of any such
equitable relief and that this provision is without prejudice to any other
rights that the parties hereto may have for any failure to perform this
Agreement.
IN WITNESS WHEREOF, Issuer and Grantee have caused this Stock Option
Agreement to be signed by their respective officers thereunto duly authorized,
all as of the day and year first written above.
FIDELITY FINANCIAL OF OHIO, INC.
Attest:
<TABLE>
<S> <C>
/s/ PAUL D. STAUBACH By: /s/ JOHN R. REUSING
Name: Paul D. Staubach Name: John R. Reusing
Title: Senior Vice President, Title: President and
Chief Financial Officer Chief Executive Officer
and Secretary
</TABLE>
CIRCLE FINANCIAL CORPORATION
Attest:
<TABLE>
<S> <C>
By: /s/ THERESA M. BARLOW By: /s/ DONALD H. ROLF, JR.
Name: Theresa M. Barlow Name: Donald H. Rolf, Jr.
Title: Secretary Title: Chairman and President
</TABLE>
II-11
<PAGE>
ANNEX III
STOCK OPTION AGREEMENT
Stock Option Agreement, dated as of April 29, 1996 (the "Agreement"), by
and between Fidelity Financial of Ohio, Inc., an Ohio corporation ("Issuer"),
and Circle Financial Corporation, an Ohio corporation ("Grantee").
WITNESSETH:
WHEREAS, Grantee and Issuer have entered into an Agreement and Plan of
Merger, dated as of April 29, 1996 (the "Plan"), providing for, among other
things, the merger of Grantee with and into Issuer (the "Merger"), with Issuer
as the surviving corporation; and
WHEREAS, as a condition and inducement to Grantee's execution of the Plan
and Grantee's agreement referred to in the next WHEREAS clause, Grantee has
required that Issuer agree, and Issuer has agreed, to grant to Grantee the
Option (as hereinafter defined); and
WHEREAS, as a condition and inducement to Issuer's execution of the Plan
and this Agreement, Grantee has agreed to grant an option to Issuer on terms and
conditions which are substantially identical to those of the Option and this
Agreement with respect to 19.9% of the common stock of Grantee.
NOW THEREFORE, in consideration of the foregoing and the respective
representations, warranties, covenants and agreements set forth herein and in
the Plan, and intending to be legally bound hereby, Issuer and Grantee agree as
follows:
1. DEFINED TERMS. Capitalized terms which are used but not defined herein
shall have the meanings ascribed to such terms in the Plan.
2. GRANT OF OPTION. Subject to the terms and conditions set forth herein,
Issuer hereby grants to Grantee an irrevocable option (the "Option") to purchase
up to 403,285 shares (as adjusted as set forth herein) (the "Option Shares,"
which shall include the Option Shares before and after any transfer of such
Option Shares) of Common Stock, par value $.10 per share ("Issuer Common
Stock"), of Issuer at a purchase price per Option Share (the "Purchase Price")
of $11.00, provided, however, that in no event shall the number of Option Shares
for which the Option is exercisable exceed 9.9% of the issued and outstanding
shares of Issuer Common Stock without giving effect to any shares subject to or
issued pursuant to the Option.
3. EXERCISE OF OPTION.
(a) Provided that (i) Grantee or Holder (as hereinafter defined), as
applicable, shall not be in material breach of the agreements or covenants
contained in this Agreement or the Plan, and (ii) no preliminary or permanent
injunction or other order against the delivery of shares covered by the Option
issued by any court of competent jurisdiction in the United States shall be in
effect, Grantee may exercise the Option, in whole or in part, at any time and
from time to time following the occurrence of a Purchase Event (as hereinafter
defined); provided that the Option shall terminate and be of no further force
and effect upon the earliest to occur of (i) the Effective Time of the Merger,
(ii) termination of the Plan in accordance with the terms thereof prior to the
occurrence of a Purchase Event or a Preliminary Purchase Event, other than a
termination of the Plan by Grantee pursuant to Section 7.1(b) (i) of the Plan (a
"Default Termination"), (iii) 12 months after the termination of the Plan by
Grantee pursuant to a Default Termination, and (iv) 12 months after termination
of the Plan (other than pursuant to a Default Termination) following the
occurrence of a Purchase Event or a Preliminary Purchase Event; and provided,
further, that any purchase of shares upon exercise of the Option shall be
subject to compliance with applicable laws, including without limitation the
Change in Bank Control Act of 1978, as amended (the "CBC Act"). The term
"Holder" shall mean the holder or holders of the Option from time to time, and
which is initially Grantee. The rights set forth in Section 8 hereof shall
terminate when the right to exercise the Option terminates (other than as a
result of a complete exercise of the Option) as set forth above.
(b) As used herein, a "Purchase Event" means any of the following events:
(i) Without Grantee's prior written consent, Issuer shall have
authorized, recommended or publicly-proposed, or publicly announced an
intention to authorize, recommend or propose, or entered into an agreement
with any person (other than Grantee or any subsidiary of Grantee) to effect
(A) a merger, consolidation or similar transaction involving Issuer or any
of its subsidiaries, (B) the disposition, by sale, lease, exchange or
otherwise, of assets of Issuer or any of its
III-1
<PAGE>
subsidiaries representing in either case 20% or more of the consolidated
assets of Issuer and its subsidiaries, or (C) the issuance, sale or other
disposition of (including by way of merger, consolidation, share exchange
or any similar transaction) securities representing 20% or more of the
voting power of Issuer or any of its subsidiaries (any of the foregoing an
"Acquisition Transaction"); or
(ii) any person (other than Grantee or any subsidiary of Grantee)
shall have acquired beneficial ownership (as such term is defined in Rule
13d-3 promulgated under the Exchange Act) of or the right to acquire
beneficial ownership of, or any "group" (as such term is defined in Section
13(d)(3) of the Exchange Act) shall have been formed which beneficially
owns or has the right to acquire beneficial ownership of, 25% or more of
the then outstanding shares of Issuer Common Stock.
(c) As used herein, a "Preliminary Purchase Event" means any of the
following events:
(i) any person (other than Grantee or any subsidiary of Grantee) shall
have commenced (as such term is defined in Rule 14d-2 under the Exchange
Act), or shall have filed a registration statement under the Securities Act
with respect to, a tender offer or exchange offer to purchase any shares of
Issuer Common Stock such that, upon consummation of such offer, such person
would own or control 10% or more of the then outstanding shares of Issuer
Common Stock (such an offer being referred to herein as a "Tender Offer"
and an "Exchange Offer," respectively); or
(ii) (A) the holders of Issuer Common Stock shall not have approved
the Plan at the meeting of such stockholders held for the purpose of voting
on the Plan, (B) such meeting shall not have been held or shall have been
canceled prior to termination of the Plan or (C) Issuer's Board of
Directors shall have withdrawn or modified in a manner adverse to Grantee
the recommendation of Issuer's Board of Directors with respect to the Plan,
in each case after it shall have been publicly announced that any person
(other than Grantee or any subsidiary of Grantee) shall have (x) made, or
disclosed an intention to make, a proposal to engage in an Acquisition
Transaction, (y) commenced a Tender Offer or filed a registration statement
under the Securities Act with respect to an Exchange Offer, or (z) filed an
application (or given notice), whether in draft or final form, under the
CBC Act or the Bank Merger Act, as amended, for approval to engage in an
Acquisition Transaction; or
(iii) Issuer shall have breached any representation, warranty,
covenant or obligation contained in the Plan and such breach would entitle
Grantee to terminate the Plan under Section 7.1(b) thereof (without regard
to the cure period provided for therein unless such cure is promptly
effected without jeopardizing consummation of the Merger pursuant to the
terms of the Plan) after (x) a bona fide proposal is made by any person
(other than Grantee or any subsidiary of Grantee) to Issuer or its
stockholders to engage in an Acquisition Transaction, (y) any person (other
than Grantee or any subsidiary of Grantee) states its intention to Issuer
or its stockholders to make a proposal to engage in an Acquisition
Transaction if the Plan terminates, or (z) any person (other than Grantee
or any subsidiary of Grantee) shall have filed an application or notice
with any Governmental Entity to engage in an Acquisition Transaction.
As used in this Agreement, "person" shall have the meaning specified in
Sections 3(a)(9) and 13(d)(3) of the Exchange Act.
(d) Issuer shall notify Grantee promptly in writing of the occurrence of
any Preliminary Purchase Event or Purchase Event, it being understood that the
giving of such notice by Issuer shall not be a condition to the right of Holder
to exercise the Option.
(e) In the event Holder wishes to exercise the Option, 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 Option Shares it intends to
purchase pursuant to such exercise, and (ii) a place and date not earlier than
three business days nor later than 15 business days from the Notice Date for the
closing (the "Closing") of such purchase (the "Closing Date"). If prior
notification to or approval of the Office of Thrift Supervision (the "OTS") or
any other Governmental Entity is required in connection with such purchase,
Issuer shall cooperate with Grantee in the filing of the required notice of
application for approval and the obtaining of such approval and the Closing
shall occur immediately following such regulatory approvals (and any mandatory
waiting periods).
4. PAYMENT AND DELIVERY OF CERTIFICATES.
(a) On each Closing Date, Holder shall (i) pay to Issuer, in immediately
available funds by wire transfer to a bank account designated by Issuer, an
amount equal to the Purchase Price multiplied by the number of Option Shares to
be purchased on such Closing Date, and (ii) present and surrender this Agreement
to Issuer at the address of Issuer specified in Section 12(f) hereof.
III-2
<PAGE>
(b) At each Closing, simultaneously with the delivery of immediately
available funds and surrender of this Agreement as provided in Section 4(a), (i)
Issuer shall deliver to Holder (A) a certificate or certificates representing
the Option Shares to be purchased at such Closing, which Option Shares shall be
free and clear of all liens, claims, charges and encumbrances of any kind
whatsoever, other than such lien or encumbrance created by Grantee, and not
subject to preemptive rights, and (B) if the Option is exercised in part only,
an executed new agreement with the same terms as this Agreement evidencing the
right to purchase the balance of the shares of Issuer Common Stock purchasable
hereunder, and (ii) Holder shall deliver to Issuer a letter agreeing that Holder
shall not offer to sell or otherwise dispose of such Option Shares in violation
of applicable federal and state law or of the provisions of this Agreement.
(c) In addition to any other legend that is required by applicable law,
certificates for the Option Shares delivered at each Closing shall be endorsed
with a restrictive legend which shall read substantially as follows:
THE TRANSFER OF THE STOCK REPRESENTED BY THIS CERTIFICATE IS SUBJECT TO
RESTRICTIONS ARISING UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND PURSUANT
TO THE TERMS OF A STOCK OPTION AGREEMENT DATED AS OF APRIL 29, 1996. A COPY OF
SUCH AGREEMENT WILL BE PROVIDED TO THE HOLDER HEREOF WITHOUT CHARGE UPON RECEIPT
BY ISSUER OF A WRITTEN REQUEST THEREFOR.
It is understood and agreed that the above legend shall be removed by
delivery of substitute certificate(s) without such legend if Holder shall have
delivered to Issuer either a copy of a letter from the staff of the Commission,
or an opinion of counsel in form and substance reasonably satisfactory to Issuer
and its counsel, to the effect that such legend is not required for purposes of
the Securities Act.
(d) Upon the giving by Holder to Issuer of the written notice of exercise
of the Option provided for under Section 3(e), the tender of the applicable
purchase price in immediately available funds and the tender of this Agreement
to Issuer, Holder shall be deemed to be the holder of record of the shares of
Issuer 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 Issuer Common Stock shall not then be actually delivered to
Holder.
(e) Issuer agrees (i) that it shall at all times maintain, free from
preemptive rights, sufficient authorized but unissued or treasury shares of
Issuer Common Stock so that the Option may be exercised without additional
authorization of Issuer Common Stock after giving effect to all other options,
warrants, convertible securities and other rights to purchase Issuer 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 (A) complying with all premerger notification, reporting and waiting
period requirements and (B) in the event prior approval of or notice to any
Governmental Entity is necessary before the Option may be exercised, cooperating
fully with Holder in preparing such applications or notices and providing such
information to such Governmental Entity as it may require) in order to permit
Holder to exercise the Option and Issuer duly and effectively to issue shares of
Issuer Common Stock pursuant hereto, and (iv) promptly to take all action
provided herein to protect the rights of Holder against dilution.
5. REPRESENTATIONS AND WARRANTIES OF ISSUER. Issuer hereby represents and
warrants to Grantee (and Holder, if different than Grantee) as follows:
(a) DUE AUTHORIZATION. Issuer has all requisite corporate power and
authority to enter into this Agreement, and subject to any approvals referred to
herein, to consummate the transactions contemplated hereby. The execution and
delivery of this Agreement and the consummation of the transactions contemplated
hereby have been duly authorized by all necessary corporate action on the part
of Issuer, and this Agreement has been duly executed and delivered by Issuer.
(b) NO VIOLATIONS. The execution and delivery of this Agreement, the
consummation of the transactions contemplated hereby and compliance by Issuer
with any of the provisions hereof will not (i) conflict with or result in a
breach of any provision of its Articles of Incorporation, Code of Regulations or
Bylaws or a default (or give rise to any right of termination, cancellation or
acceleration) under any of the terms, conditions or provisions of any note,
bond, debenture, mortgage, indenture, license, material agreement or other
material instrument or obligation to which Issuer is a party, or by which it or
any of its properties or assets may be bound, or (ii) violate any order, writ,
injunction, decree, statute, rule or regulation applicable to Issuer or any of
its properties or assets.
III-3
<PAGE>
(c) AUTHORIZED STOCK. Issuer has taken all necessary corporate and other
action to authorize and reserve and to permit it to issue, and at all times from
the date hereof until the obligation to deliver Issuer Common Stock upon the
exercise of the Option terminates, will have reserved for issuance upon exercise
of the Option that number of shares of Issuer Common Stock equal to the maximum
number of shares of Issuer Common Stock at any time and from time to time
purchasable upon exercise of the Option, and all such shares, upon issuance
pursuant to the Option, will be duly and validly issued, fully paid and
nonassessable, and will be delivered free and clear of all liens, claims,
charges and encumbrances of any kind or nature whatsoever (except any such lien
or encumbrance created by Grantee) and not be subject to any preemptive rights.
(d) BOARD ACTION. By action of the Board of Directors of Issuer prior to
the execution of the Plan, resolutions were duly adopted approving the
execution, delivery and performance of the Plan and the other transactions
contemplated thereby. Accordingly, the provisions of Section 1704.02 of the Ohio
Revised Code as they relate to Issuer and Paragraph A of Article XV of Issuer's
Articles of Incorporation do not and will not apply to the Plan or any of the
other transactions contemplated thereby.
6. REPRESENTATIONS AND WARRANTIES OF GRANTEE. Grantee hereby represents and
warrants to Issuer as follows:
(a) Grantee has all requisite corporate power and authority to enter into
this Agreement and, subject to any approvals or consents referred to herein, to
consummate the transactions contemplated hereby. The execution and delivery of
this Agreement and the consummation of the transactions contemplated hereby have
been duly authorized by all necessary corporate action on the part of Grantee,
and this Agreement has been duly executed and delivered by Grantee.
(b) PURCHASE NOT FOR DISTRIBUTION. This Option is not being acquired with a
view to the public distribution thereof and neither this Option nor any Option
Shares will be transferred or otherwise disposed of except in a transaction
registered or exempt from registration under the Securities Act.
7. ADJUSTMENT UPON CHANGES IN ISSUER CAPITALIZATION, ETC.
(a) In the event of any change in Issuer Common Stock by reason of a stock
dividend, stock split, split-up, recapitalization, combination, exchange of
shares or similar transaction, the type and number of shares or securities
subject to the Option, and the Purchase Price therefor, shall be adjusted
appropriately, and proper provision shall be made in the agreements governing
such transactions so that Holder shall receive, upon exercise of the Option, the
number and class of shares or other securities or property that Holder would
have received in respect of Issuer Common Stock if the Option had been exercised
immediately prior to such event, or the record date therefor, as applicable. If
any additional shares of Issuer Common Stock are issued after the date of this
Agreement (other than pursuant to an event described in the first sentence of
this Section 7(a)), the number of shares of Issuer Common Stock subject to the
Option shall be adjusted so that, after such issuance, it, together with any
shares of Issuer Common Stock previously issued pursuant hereto, equals 9.9% of
the number of shares of Issuer Common Stock then issued and outstanding, without
giving effect to any shares subject to or issued pursuant to the Option.
(b) In the event that Issuer shall enter in an agreement: (i) to
consolidate with or merge into any person, other than Grantee or one of its
subsidiaries, and shall not be the continuing or surviving corporation of such
consolidation or merger, (ii) to permit any person, other than Grantee or one of
its subsidiaries, to merge into Issuer and Issuer shall be the continuing or
surviving corporation, but, in connection with such merger, the then outstanding
shares of Issuer Common Stock shall be changed into or exchanged for stock or
other securities of Issuer or any other person or cash or any other property or
the outstanding shares of Issuer Common Stock immediately prior to such merger
shall after such merger represent less than 50% of the outstanding shares and
share equivalents of the merged company, or (iii) to sell or otherwise transfer
all or substantially all of its assets to any person, other than Grantee or one
of its subsidiaries, then, and in each such case, the agreement governing such
transaction shall make proper provisions 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 Holder, of any of (x) the Acquiring Corporation (as
hereinafter defined), (y) any person that controls the Acquiring Corporation or
(z) in the case of a merger described in clause (ii), Issuer (such person being
referred to as "Substitute Option Issuer").
(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 Holder. Substitute Option Issuer also shall enter into an
agreement with Holder in substantially the same form as this Agreement, which
shall be applicable to the Substitute Option.
III-4
<PAGE>
(d) The Substitute Option shall be exercisable for such number of shares of
Substitute Common Stock (as hereinafter defined) as is equal to the Assigned
Value (as hereinafter defined) multiplied by the number of shares of Issuer
Common Stock for which the Option was theretofore exercisable, divided by the
Average Price (as hereinafter defined). The exercise price of Substitute Option
per share of Substitute Common Stock (the "Substitute Option Price") shall then
be equal to the Purchase Price multiplied by a fraction in which the numerator
is the number of shares of Issuer Common Stock for which the Option was
theretofore exercisable and the denominator is the number of shares of the
Substitute Common Stock for which the Substitute Option is exercisable.
(e) The following terms have the meanings indicated:
(1) "Acquiring Corporation" shall mean (i) the continuing or surviving
corporation of a consolidation or merger with Issuer (if other than
Issuer), (ii) Issuer in a merger in which Issuer is the continuing or
surviving person, or (iii) the transferee of all or substantially all of
Issuer's assets (or a substantial part of the assets of its subsidiaries
taken as a whole).
(2) "Substitute Common Stock" shall mean the shares of capital stock
(or similar equity interest) with the greatest voting power in respect of
the election of directors (or persons similarly responsible for the
direction of the business and affairs) of the Substitute Option Issuer.
(3) "Assigned Value" shall mean the highest of (w) the price per share
of Issuer Common Stock at which a Tender Offer or an Exchange Offer
therefor has been made, (x) the price per share of Issuer Common Stock to
be paid by any third party pursuant to an agreement with Issuer, (y) the
highest closing price for shares of Issuer Common Stock within the
six-month period immediately preceding the consolidation, merger or sale in
question and (z) in the event of a sale of all or substantially all of
Issuer's assets or deposits, an amount equal to (i) the sum of the price
paid in such sale for such assets (and/or deposits) and the current market
value of the remaining assets of Issuer, as determined by a nationally-
recognized investment banking firm selected by Holder, divided by (ii) the
number of shares of Issuer Common Stock outstanding at such time. In the
event that a Tender Offer or an Exchange Offer is made for Issuer Common
Stock or an agreement is entered into for a merger or consolidation
involving consideration other than cash, the value of the securities or
other property issuable or deliverable in exchange for Issuer Common Stock
shall be determined by a nationally-recognized investment banking firm
selected by Holder.
(4) "Average Price" shall mean the average closing price of a share of
Substitute Common Stock for the 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 Issuer, the person merging into Issuer
or by any company which controls such person, as Holder may elect.
(f) In no event, pursuant to any of the foregoing paragraphs, shall the
Substitute Option be exercisable for more than 9.9% of the aggregate 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 9.9% of the aggregate of the shares of Substitute Common Stock but
for the limitation in the first sentence of this Section 7(f), 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 the first
sentence of this Section 7(f) over (ii) the value of the Substitute Option after
giving effect to the limitation in the first sentence of this Section 7(f). This
difference in value shall be determined by a nationally-recognized investment
banking firm selected by Holder.
(g) Issuer shall not enter into any transaction described in Section 7(b)
hereof unless the Acquiring Corporation and any person that controls the
Acquiring Corporation assume in writing all the obligations of Issuer hereunder
and take all other actions that may be necessary so that the provisions of this
Section 7 are given full force and effect (including, without limitation, any
action that may be necessary so that the holders of the other shares of common
stock issued by Substitute Option Issuer are not entitled to exercise any rights
by reason of the issuance or exercise of the Substitute Option and the shares of
Substitute Common Stock are otherwise in no way distinguishable from or have
lesser economic value (other than any diminution in value resulting from the
fact that the shares of Substitute Common Stock are restricted securities, as
defined in Rule 144 under the Securities Act or any successor provision) than
other shares of common stock issued by Substitute Option Issuer).
III-5
<PAGE>
8. REPURCHASE AT THE OPTION OF HOLDER.
(a) Subject to the last sentence of Section 3(a), at the request of Holder
at any time commencing upon the first occurrence of a Repurchase Event (as
defined in Section 8(d)) and ending 12 months immediately thereafter, Issuer
shall repurchase from Holder (i) the Option and (ii) all shares of Issuer Common
Stock purchased by Holder pursuant hereto with respect to which Holder then has
beneficial ownership. The date on which Holder exercises its rights under this
Section 8 is referred to as the "Request Date." Such repurchase shall be at an
aggregate price (the "Section 8 Repurchase Consideration") equal to the sum of:
(i) the aggregate Purchase Price paid by Holder for any shares of
Issuer Common Stock acquired pursuant to the Option with respect to which
Holder then has beneficial ownership;
(ii) the excess, if any, of (x) the Applicable Price (as defined
below) for each share of Issuer Common Stock over (y) the Purchase Price
(subject to adjustment pursuant to Section 7), multiplied by the number of
shares of Issuer Common Stock with respect to which the Option has not been
exercised; and
(iii) the excess, if any, of the Applicable Price over the Purchase
Price (subject to adjustment pursuant to Section 7) paid (or, in the case
of Option Shares with respect to which the Option has been exercised but
the Closing Date has not occurred, payable) by Holder for each share of
Issuer Common Stock with respect to which the Option has been exercised and
with respect to which Holder then has beneficial ownership, multiplied by
the number of such shares.
(b) If Holder exercises its rights under this Section 8, Issuer shall,
within 10 business days after the Request Date, pay the Section 8 Repurchase
Consideration to Holder in immediately available funds, and contemporaneously
with such payment Holder shall surrender to Issuer the Option and the
certificates evidencing the shares of Issuer Common Stock purchased thereunder
with respect to which Holder then has beneficial ownership, and shall warrant
that it has sole record and beneficial ownership of such shares and that the
same are then free and clear of all liens, claims, charges and encumbrances of
any kind whatsoever. Notwithstanding the foregoing, to the extent that prior
notification to or approval of the OTS or any other Governmental Entity is
required in connection with the payment of all or any portion of the Section 8
Repurchase Consideration, Holder shall have the ongoing option to revoke its
request for repurchase pursuant to Section 8, in whole or in part, or to require
that Issuer deliver from time to time that portion of the Section 8 Repurchase
Consideration that it is not then so prohibited from paying and promptly file
the required notice or application for approval and expeditiously process the
same (and each party shall cooperate with the other in the filing of any such
notice or application and the obtaining of any such approval). If the OTS or any
other Governmental Entity disapproves of any part of Issuer's proposed
repurchase pursuant to this Section 8, Issuer shall promptly give notice of such
fact to Holder. If the OTS or any other Governmental Entity prohibits the
repurchase in part but not in whole, then Holder shall have the right (i) to
revoke the repurchase request or (ii) to the extent permitted by the OTS or
other Governmental Entity, determine whether the repurchase should apply to the
Option and/or Option Shares and to what extent to each, and Holder shall
thereupon have the right to exercise the Option as to the number of Option
Shares for which the Option was exercisable at the Request Date less the sum of
the number of shares covered by the Option in respect of which payment has been
made pursuant to Section 8(a)(ii) and the number of shares covered by the
portion of the Option (if any) that has been repurchased. Holder shall notify
Issuer of its determination under the preceding sentence within five business
days of receipt of notice of disapproval of the repurchase.
Notwithstanding anything herein to the contrary, (i) Issuer shall not be
obligated to repurchase the Option or any shares of Issuer Common Stock pursuant
to this Section 8 on more than one occasion, except that Issuer's obligation to
repurchase on one occasion any Option or shares of Issuer Common Stock shall be
reinstated in the event that Grantee has revoked its request for repurchase in
accordance with the provisions of this Section 8 and (ii) all of Grantee's
rights under this Section 8 shall terminate on the date of termination of this
Option pursuant to Section 3(a) hereof, unless this Option shall have been
exercised in whole or in part prior to the date of termination described in
clause (ii) above, then Grantee's rights under this Section 8 shall terminate 12
months after such date of termination.
(c) For purposes of this Agreement, the "Applicable Price" means the
highest of (i) the highest price per share of Issuer Common Stock paid for any
such share by the person or groups described in Section 8(d)(i), (ii) the price
per share of Issuer Common Stock received by holders of Issuer Common Stock in
connection with any merger or other business combination transaction described
in Section 7(b)(i), 7(b) (ii) or 7(b)(iii) hereof, or (iii) the highest closing
sales price per share of Issuer Common Stock quoted on the Nasdaq Stock Market's
National Market ("NASDAQ/NMS") (or if Issuer Common Stock is not quoted on
NASDAQ/NMS, the highest bid price per share as quoted on the principal trading
market or securities exchange on which such shares are traded as reported by a
recognized source chosen by Holder during the 60 business days preceding the
Request Date); provided, however, that in the event of a sale of less than all
of Issuer's assets, the Applicable
III-6
<PAGE>
Price shall be the sum of the price paid in such sale for such assets and the
current market value of the remaining assets of Issuer as determined by a
nationally-recognized investment banking firm selected by Holder, divided by the
number of shares of Issuer Common Stock outstanding at the time of such sale. If
the consideration to be offered, paid or received pursuant to either of the
foregoing clauses (i) or (ii) shall be other than in cash, the value of such
consideration shall be determined in good faith by an independent
nationally-recognized investment banking firm selected by Holder and reasonably
acceptable to Issuer, which determination shall be conclusive for all purposes
of this Agreement.
(d) As used herein, a "Repurchase Event" shall occur if (i) any person
(other than Grantee or any subsidiary of Grantee) shall have acquired beneficial
ownership of (as such term is defined in Rule 13d-3 promulgated under the
Exchange Act), or the right to acquire beneficial ownership of, or any "group"
(as such term is defined in Section 13(d)(3) of the Exchange Act) shall have
been formed which beneficially owns or has the right to acquire beneficial
ownership of, 50% or more of the then outstanding shares of Issuer Common Stock,
or (ii) any of the transactions described in Section 7(b)(i), Section 7(b) (ii)
or Section 7(b) (iii) hereof shall be consummated.
9. REGISTRATION RIGHTS.
(a) DEMAND REGISTRATION RIGHTS. Issuer shall, subject to the conditions of
Section 9(c), if requested by any Holder, as expeditiously as possible prepare
and file a registration statement under the Securities Act if such registration
is necessary in order to permit the sale or other disposition of any or all
shares of Issuer Common Stock or other securities that have been acquired by or
are issuable to Holder upon exercise of the Option in accordance with the
intended method of sale or other disposition stated by Holder in such request,
including without limitation a "shelf" registration statement under Rule 415
under the Securities Act or any successor provision, and Issuer shall use its
best efforts to qualify such shares or other securities for sale under any
applicable state securities laws.
(b) ADDITIONAL REGISTRATION RIGHTS. If Issuer at any time after the
exercise of the Option proposes to register any shares of Issuer Common Stock
under the Securities Act in connection with an underwritten public offering of
such Issuer Common Stock, Issuer will promptly give written notice to Holder of
its intention to do so and, upon the written request of Holder given within 30
days after receipt of any such notice (which request shall specify the number of
shares of Issuer Common Stock intended to be included in such underwritten
public offering by Holder), Issuer will cause all such shares for which a Holder
shall have requested participation in such registration to be so registered and
included in such underwritten public offering; PROVIDED, HOWEVER, that Issuer
may elect to not cause any such shares to be so registered (i) if the
underwriters in good faith object for valid business reasons, or (ii) in the
case of a registration solely to implement an employee benefit plan or a
registration filed on Form S-4 under the Securities Act or any successor form;
provided, further, however, that such election pursuant to clause (i) may only
be made one time. If some but not all the shares of Issuer Common Stock with
respect to which Issuer shall have received requests for registration pursuant
to this Section 9(b) shall be excluded from such registration, Issuer shall make
appropriate allocation of shares to be registered among Holders permitted to
register their shares of Issuer Common Stock in connection with such
registration pro rata in the proportion that the number of shares requested to
be registered by each such Holder bears to the total number of shares requested
to be registered by all such Holders then desiring to have Issuer Common Stock
registered for sale.
(c) CONDITIONS TO REQUIRED REGISTRATION. Issuer shall use all reasonable
efforts to cause each registration statement referred to in Section 9(a) to
become effective and to obtain all consents or waivers of other parties which
are required therefor and to keep such registration statement effective;
provided, however, that Issuer may delay any registration of Option Shares
required pursuant to Section 9(a) for a period not exceeding 90 days if Issuer
shall in good faith determine that any such registration would adversely affect
an offering or contemplated offering of other securities by Issuer, and Issuer
shall not be required to register Option Shares under the Securities Act
pursuant to Section 9(a):
(i) prior to the earliest of (A) termination of the Plan pursuant to
Article VII thereof, and (B) a Purchase Event or a Preliminary Purchase
Event;
(ii) on more than one occasion during any calendar year;
(iii) within 90 days after the effective date of a registration
referred to in Section 9(b) pursuant to which the Holder or Holders
concerned were afforded the opportunity to register such shares under the
Securities Act and such shares were registered as requested; and
(iv) unless a request therefor is made to Issuer by the Holder or
Holders of at least 25% or more of the aggregate number of Option Shares
(including shares of Issuer Common Stock issuable upon exercise of the
Option) then outstanding.
III-7
<PAGE>
In addition to the foregoing, Issuer shall not be required to maintain the
effectiveness of any registration statement after the expiration of nine months
from the effective date of such registration statement. Notwithstanding anything
to the contrary contained herein, in no event shall Issuer be obligated to
effect more than two registrations pursuant to the first sentence of Section
9(a) hereof by reason of the fact that there shall be more than one Holder as a
result of any assignment of this Agreement or division of this Agreement
pursuant to Section 11 hereof. Issuer shall use all reasonable efforts to make
any filings, and take all steps, under all applicable state securities laws to
the extent necessary to permit the sale or other disposition of the Option
Shares so registered in accordance with the intended method of distribution for
such shares, provided, however, that Issuer shall not be required to consent to
general jurisdiction or to qualify to do business in any state where it is not
otherwise required to so consent to such jurisdiction or to so qualify to do
business.
(d) EXPENSES. Issuer will pay all expenses (including without limitation
registration fees, qualification fees, blue sky fees and expenses, accounting
expenses, legal expenses and printing expenses incurred by it) in connection
with each registration pursuant to Section 9(a) or (b) and all other
qualifications, notifications or exemptions pursuant to Section 9(a) or (b).
Underwriting discounts and commissions relating to Option Shares, fees and
disbursements of counsel to the Holder(s) of Option Shares being registered and
any other expenses incurred by such Holder(s) in connection with any such
registration shall be borne by such Holder(s).
(e) INDEMNIFICATION. In connection with any registration under Section 9(a)
or (b), Issuer hereby indemnifies each Holder, and each underwriter thereof,
including each person, if any, who controls such Holder or underwriter within
the meaning of Section 15 of the Securities Act, against all expenses, losses,
claims, damages and liabilities caused by any untrue, or alleged untrue,
statement of a material fact contained in any registration statement or
prospectus or notification or offering circular (including any amendments or
supplements thereto) or any preliminary prospectus, or caused by any omission,
or alleged omission, to state therein a material fact required to be stated
therein or necessary to make the statements therein not misleading, except
insofar as such expenses, losses, claims, damages or liabilities of such
indemnified party are caused by any untrue statement or alleged untrue statement
that was included by Issuer in any such registration statement or prospectus or
notification or offering circular (including any amendments or supplements
thereto) in reliance upon, and in conformity with, information furnished in
writing to Issuer by such indemnified party expressly for use therein, and
Issuer and each officer, director and controlling person of Issuer shall be
indemnified by such Holder, or by such underwriter, as the case may be, for all
such expenses, losses, claims, damages and liabilities caused by any untrue, or
alleged untrue, statement that was included by Issuer in any such registration
statement or prospectus or notification or offering circular (including any
amendments or supplements thereto) in reliance upon, and in conformity with,
information furnished in writing to Issuer by such Holder or such underwriter,
as the case may be, expressly for such use.
Promptly upon receipt by a party indemnified under this Section 9(e) of
notice of the commencement of any action against such indemnified party in
respect of which indemnity or reimbursement may be sought against any
indemnifying party under this Section 9(e), such indemnified party shall notify
the indemnifying party in writing of the commencement of such action, but,
except to the extent of any actual prejudice to the indemnifying party, the
failure so to notify the indemnifying party shall not relieve it of any
liability which it may otherwise have to any indemnified party under this
Section 9(e). In case notice of commencement of any such action shall be given
to the indemnifying party as above provided, the indemnifying party shall be
entitled to participate in and, to the extent it may wish, jointly with any
other indemnifying party similarly notified, to assume the defense of such
action at its own expense, with counsel chosen by it and reasonably satisfactory
to such indemnified party. The indemnified party shall have the right to employ
separate counsel in any such action and participate in the defense thereof, but
the fees and expenses of such counsel (other than reasonable costs of
investigation) shall be paid by the indemnified party unless (i) the
indemnifying party agrees to pay the same, (ii) the indemnifying party fails to
assume the defense of such action with counsel reasonably satisfactory to the
indemnified party, or (iii) the indemnified party has been advised by counsel
that one or more legal defenses may be available to the indemnifying party that
may be contrary to the interest of the indemnified party, in which case the
indemnifying party shall be entitled to assume the defense of such action
notwithstanding its obligation to bear fees and expenses of such counsel. No
indemnifying party shall be liable for any settlement entered into without its
consent, which consent may not be unreasonably withheld.
If the indemnification provided for in this Section 9(e) is unavailable to
a party otherwise entitled to be indemnified in respect of any expenses, losses,
claims, damages or liabilities referred to herein, then the indemnifying party,
in lieu of indemnifying such party otherwise entitled to be indemnified, shall
contribute to the amount paid or payable by such party to be indemnified as a
result of such expenses, losses, claims, damages or liabilities in such
proportion as is appropriate to reflect the relative benefits received by
Issuer, the selling Holders and the underwriters from the offering of the
securities and also the relative fault of Issuer, the selling Holders and the
underwriters in connection with the statement or omissions which results in such
expenses, losses, claims, damages or liabilities, as well as any other relevant
equitable considerations. The
III-8
<PAGE>
amount paid or payable by a party as a result of the expenses, losses, claims,
damages and liabilities referred to above shall be deemed to include any legal
or other fees or expenses reasonably incurred by such party in connection with
investigating or defending any action or claim; provided, however, that in no
case shall the selling Holders be responsible, in the aggregate, for any amount
in excess of the net offering proceeds attributable to its Option Shares
included in the offering. No person guilty of fraudulent misrepresentation
(within the meaning of Section 11(g) of the Securities Act) shall be entitled to
contribution from any person who was not guilty of such fraudulent
misrepresentation. Any obligation by any Holder to indemnify shall be several
and not joint with other Holders.
In connection with any registration pursuant to Section 9(a) or (b) above,
Issuer and each selling Holder (other than Grantee) shall enter into an
agreement containing the indemnification provisions of this Section 9(e).
(f) MISCELLANEOUS REPORTING. Issuer shall comply with all reporting
requirements and will do all such other things as may be necessary to permit the
expeditious sale at any time of any Option Shares by the Holder(s) in accordance
with and to the extent permitted by any rule or regulation permitting
nonregistered sales of securities promulgated by the Commission from time to
time, including, without limitation, Rule 144A. Issuer shall at its expense
provide the Holder with any information necessary in connection with the
completion and filing of any reports or forms required to be filed by them under
the Securities Act or the Exchange Act, or required pursuant to any state
securities laws or the rules of any stock exchange.
(g) ISSUE TAXES. Issuer will pay all stamp taxes in connection with the
issuance and the sale of the Option Shares and in connection with the exercise
of the Option, and will save any Holder harmless, without limitation as to time,
against any and all liabilities, with respect to all such taxes.
10. QUOTATION; LISTING. If Issuer Common Stock or any other securities to
be acquired upon exercise of the Option are then authorized for quotation or
trading or listing on NASDAQ/NMS or any securities exchange, Issuer, upon the
request of Holder, will promptly file an application, if required, to authorize
for quotation or trading or listing the shares of Issuer Common Stock or other
securities to be acquired upon exercise of the Option on the NASDAQ/NMS or such
other securities exchange and will use its best efforts to obtain approval, if
required, of such quotation or listing as soon as practicable.
11. DIVISION OF OPTION. Upon the occurrence of a Purchase Event or a
Preliminary Purchase Event, this Agreement (and the Option granted hereby) are
exchangeable, without expense, at the option of Holder, upon presentation and
surrender of this Agreement at the principal office of the Issuer for other
Agreements providing for Options of different denominations entitling the holder
thereof to purchase in the aggregate the same number of shares of Issuer Common
Stock purchasable hereunder. The terms "Agreement" and "Option" as used herein
include any other 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.
12. MISCELLANEOUS.
(a) EXPENSES. Except as otherwise provided in Section 9 hereof, 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.
(b) WAIVER AND AMENDMENT. Any provision of this Agreement may be waived at
any time by the party that is entitled to the benefits of such provision. This
Agreement may not be modified, amended, altered or supplemented except upon the
execution and delivery of a written agreement executed by the parties hereto.
(c) ENTIRE AGREEMENT; NO THIRD PARTY BENEFICIARIES; SEVERABILITY. This
Agreement, together with the Plan and the other documents and instruments
referred to herein and therein, between Grantee and Issuer (i) constitutes the
entire agreement and supersedes all prior agreements and understandings, both
written and oral, between the parties with respect to the subject matter hereof,
and (ii) is not intended to confer upon any person other than the parties hereto
(other than the indemnified parties under Section 9(e) hereof and any transferee
of the Option Shares or any permitted transferee of this Agreement pursuant to
Section 12(h) hereof) any rights or remedies hereunder. If any term, provision,
covenant or restriction of this Agreement is held by a court of competent
jurisdiction or a federal or state regulatory agency to be invalid, void or
unenforceable, the remainder of the terms, provisions, covenants and
restrictions of 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
III-9
<PAGE>
that the Option does not permit Holder to acquire, or does not require Issuer to
repurchase, the full number of shares of Issuer Common Stock as provided in
Sections 3 and 8 hereof (as adjusted pursuant to Section 7 hereof), it is the
express intention of Issuer to allow Holder to acquire or to require Issuer to
repurchase such lesser number of shares as may be permissible without any
amendment or modification hereof.
(d) GOVERNING LAW. This Agreement shall be governed and construed in
accordance with the laws of the State of Ohio without regard to any applicable
conflicts of law rules.
(e) DESCRIPTIVE HEADINGS. The descriptive headings contained herein are for
convenience of reference only and shall not affect in any way the meaning or
interpretation of this Agreement.
(f) NOTICES. All notices and other communications hereunder shall be in
writing and shall be deemed given if delivered personally, telecopied (with
confirmation) or sent by overnight mail service or mailed by registered or
certified mail (return receipt requested) postage prepaid, to the parties at the
following address (or at such other address for a party as shall be specified by
like notice):
If to Grantee:
Circle Financial Corporation
11100 Reading Road
Sharonville, Ohio 45241-1904
Attn: Donald H. Rolf, Jr.
Chairman and President
Fax: 513-563-2264
With a required copy to:
Thompson, Hine and Flory
3900 Society Center
127 Public Square
Cleveland, Ohio 44114-1216
Attn: Raymond T. Sawyer, Esq.
Fax: 216-566-5800
If to Issuer:
Fidelity Financial of Ohio, Inc.
4555 Montgomery Road
Cincinnati, Ohio 45212
Attn: John R. Reusing
President and Chief Executive Officer
Fax: 513-458-3475
With a required copy to:
Elias, Matz, Tiernan & Herrick L.L.P.
734 15th Street, N.W.
Washington, D.C. 20005
Attn: Jeffrey D. Haas, Esq.
Fax: 202-347-2172
(g) COUNTERPARTS. This Agreement and any amendments hereto may be executed
in two counterparts, each of which shall be considered one and the same
agreement and shall become effective when both counterparts have been signed, it
being understood that both parties need not sign the same counterpart.
(h) ASSIGNMENT. Neither this Agreement nor any of the rights, interests or
obligations hereunder or under the Option shall be assigned by any of the
parties hereto (whether by operation of law or otherwise) without the prior
written consent of the other party, except that Holder may assign this Agreement
to a wholly-owned subsidiary of Holder and Holder may assign its rights
hereunder in whole or in part after the occurrence of a Purchase Event. Subject
to the preceding sentence, this Agreement shall be binding upon, inure to the
benefit of and be enforceable by the parties and their respective successors and
assigns.
III-10
<PAGE>
(i) FURTHER ASSURANCES. In the event of any exercise of the Option by
Holder, Issuer and Holder shall execute and deliver all other documents and
instruments and take all other action that may be reasonably necessary in order
to consummate the transactions provided for by such exercise.
(j) SPECIFIC PERFORMANCE. The parties hereto agree that this Agreement may
be enforced by either party through specific performance, injunctive relief and
other equitable relief. Both parties further agree to waive any requirement for
the securing or posting of any bond in connection with the obtaining of any such
equitable relief and that this provision is without prejudice to any other
rights that the parties hereto may have for any failure to perform this
Agreement.
IN WITNESS WHEREOF, Issuer and Grantee have caused this Stock Option
Agreement to be signed by their respective officers thereunto duly authorized,
all as of the day and year first written above.
CIRCLE FINANCIAL CORPORATION
ATTEST:
<TABLE>
<S> <C>
/S/ THERESA M. BARLOW By: /s/ DONALD H. ROLF, JR.
Name: Theresa M. Barlow Name: Donald H. Rolf, Jr.
Title: Secretary Title: Chairman and President
FIDELITY FINANCIAL OF OHIO, INC.
ATTEST:
/S/ PAUL D. STAUBACH By: /s/ JOHN R. REUSING
Name: Paul D. Staubach Name: John R. Reusing
Title: Senior Vice President, Title: President and Chief Executive
Chief Financial Officer and Officer
Secretary
</TABLE>
III-11
<PAGE>
ANNEX IV
STOCKHOLDER AGREEMENT
STOCKHOLDER AGREEMENT, dated as of April 29, 1996, by and among Fidelity
Financial of Ohio, Inc. (the "Acquiror"), an Ohio corporation, and certain
stockholders of Circle Financial Corporation (the "Company"), an Ohio
corporation, named on Schedule I hereto (collectively the "Stockholders").
WITNESSETH:
WHEREAS, the Acquiror and the Company have entered into an Agreement of
Merger, dated as of the date hereof (the "Agreement"), which is being executed
simultaneously with the execution of this Stockholder Agreement and provides
for, among other things, the merger of the Company with and into the Acquiror
(the "Merger"); and
WHEREAS, in order to induce the Acquiror to enter into the Agreement, each
of the Stockholders agrees to, among other things, vote in favor of the
Agreement in his or her capacity as a stockholder of the Company.
NOW, THEREFORE, in consideration of the premises, the mutual covenants and
agreements set forth herein and other good and valuable consideration, the
sufficiency of which is hereby acknowledged, the parties hereto agree as
follows:
1. OWNERSHIP OF COMPANY COMMON STOCK. Each Stockholder represents and
warrants that the Stockholder has or shares the right to vote and dispose of the
number of shares of common stock of the Company, $1.00 par value per share
("Company Common Stock"), set forth opposite such Stockholder's name on Schedule
I hereto.
2. AGREEMENTS OF THE STOCKHOLDERS. Each Stockholder covenants and agrees
that:
(a) such Stockholder shall, at any meeting of the Company's stockholders
called for the purpose, vote, or cause to be voted, all shares of Company Common
Stock in which such stockholder has the right to vote (whether owned as of the
date hereof or hereafter acquired) in favor of the Agreement;
(b) except as otherwise expressly permitted hereby, such Stockholder shall
not, prior to the meeting of the Company's stockholders referred to in Section
2(a) hereof or the earlier termination of the Agreement in accordance with its
terms, sell, pledge, transfer or otherwise dispose of the Stockholder's shares
of Company Common Stock;
(c) such Stockholder shall not in his capacity as a stockholder of the
Company directly or indirectly encourage or solicit or hold discussions or
negotiations with, or provide any information to, any person, entity or group
(other than the Acquiror or an affiliate thereof) concerning any merger, sale of
substantial assets or liabilities not in the ordinary course of business, sale
of shares of capital stock or similar transactions involving the Company or any
subsidiary of the Company (provided that nothing herein shall be deemed to
affect the ability of any Stockholder to fulfill his duties as a director and/or
officer of the Company); and
(d) such Stockholder shall use his reasonable best efforts to take or cause
to be taken all action, and to do or cause to be done all things, necessary,
proper or advisable under applicable laws and regulations to consummate and make
effective the agreements contemplated by this Stockholder Agreement.
Each Stockholder further agrees that the Company's transfer agent shall be
given an appropriate stop transfer order and shall not be required to register
any attempted transfer of shares of Company Common Stock, unless the transfer
has been effected in compliance with the terms of this agreement.
3. SUCCESSORS AND ASSIGNS. Subject to Section 5.11 of the Agreement and the
terms of the agreement with affiliates of the Company referred to therein, a
Stockholder may sell, pledge, transfer or otherwise dispose of his shares of
Company Common Stock, provided that, with respect to any sale, transfer or
disposition which would occur on or before the meeting of the Company's
stockholders referred to in Section 2(a) hereof, such Stockholder obtains the
prior written consent of the Acquiror and that any acquiror of such Company
Common Stock expressly agrees in writing to be bound by the terms of this
Stockholder Agreement.
4. TERMINATION. The parties agree and intend that this Stockholder
Agreement be a valid and binding agreement enforceable against the parties
hereto and that damages and other remedies at law for the breach of this
Stockholder Agreement are inadequate. This Stockholder Agreement may be
terminated at any time prior to the consummation of the Merger by
IV-1
<PAGE>
mutual written consent of the parties hereto and shall be automatically
terminated in the event that the Agreement is terminated in accordance with its
terms.
5. NOTICES. Notices may be provided to the Acquiror and the Stockholders in
the manner specified in Section 8.4 of the Agreement, with all notices to the
Stockholders being provided to them at the Company in the manner specified in
such section.
6. GOVERNING LAW. This Stockholder Agreement shall be governed by the laws
of the State of Ohio without giving effect to the principles of conflicts of
laws thereof.
7. COUNTERPARTS. This Stockholder Agreement may be executed in one or more
counterparts, all of which shall be considered one and the same and each of
which shall be deemed an original.
8. HEADINGS AND GENDER. The Section headings contained herein are for
reference purposes only and shall not affect in any way the meaning or
interpretation of this Stockholder Agreement. Use of the masculine gender herein
shall be considered to represent the masculine, feminine or neuter gender
whenever appropriate.
IN WITNESS WHEREOF, the Acquiror, by a duly authorized officer, and each of
the Stockholders have caused this Stockholder Agreement to be executed as of the
day and year first above written.
FIDELITY FINANCIAL OF OHIO, INC.
By: /s/ JOHN R. REUSING
Name: John R. Reusing
Title: President and Chief Executive
Officer
COMPANY STOCKHOLDERS:
/s/ THERESA M. BARLOW
Theresa M. Barlow
/s/ DAVID C. GREIS
David C. Greis
/s/ THEODORE G. HAGEN
Theodore G. Hagen
/s/ JOSEPH D. HUGHES
Joseph D. Hughes
/s/ S. PATRICK RAFFEL
S. Patrick Raffel
/s/ DONALD H. ROLF, JR.
Donald H. Rolf, Jr.
IV-2
<PAGE>
/s/ THOMAS N. SPAETH
Thomas N. Spaeth
/s/ LLOYD C. SULLIVAN
Lloyd C. Sullivan
/s/ FREDERICK A. TOBERGTE
Frederick A. Tobergte
/s/ CAROLYN R. WATT
Carolyn R. Watt
IV-3
<PAGE>
SCHEDULE I
<TABLE>
<CAPTION>
NUMBER OF SHARES OF
COMPANY COMMON STOCK
NAME OF STOCKHOLDER BENEFICIALLY OWNED
<S> <C>
Theresa M. Barlow.................................................................................... 6,812
David C. Greis....................................................................................... 38,628
Theodore G. Hagen.................................................................................... 10,595
Joseph D. Hughes..................................................................................... 18,160
S. Patrick Raffel.................................................................................... 600
Donald H. Rolf, Jr................................................................................... 44,413
Thomas N. Spaeth..................................................................................... 2,135
Lloyd C. Sullivan.................................................................................... 7,545
Frederick A. Tobergte................................................................................ 13,660
Carolyn R. Watt...................................................................................... 973
</TABLE>
IV-4
<PAGE>
ANNEX V
STOCKHOLDER AGREEMENT
STOCKHOLDER AGREEMENT, dated as of April 29, 1996, by and among Circle
Financial Corporation (the "Company"), an Ohio corporation, and certain
stockholders of Fidelity Financial of Ohio, Inc. (the "Acquiror"), an Ohio
corporation, named on Schedule I hereto (collectively the "Stockholders").
WITNESSETH:
WHEREAS, the Acquiror and the Company have entered into an Agreement of
Merger, dated as of the date hereof (the "Agreement"), which is being executed
simultaneously with the execution of this Stockholder Agreement and provides
for, among other things, the merger of the Company with and into the Acquiror
(the "Merger"); and
WHEREAS, in order to induce the Company to enter into the Agreement, each
of the Stockholders agrees to, among other things, vote in favor of the
Agreement in his or her capacity as a stockholder of the Acquiror.
NOW, THEREFORE, in consideration of the premises, the mutual covenants and
agreements set forth herein and other good and valuable consideration, the
sufficiency of which is hereby acknowledged, the parties hereto agree as
follows:
1. OWNERSHIP OF ACQUIROR COMMON STOCK. Each Stockholder represents and
warrants that the Stockholder has or shares the right to vote and dispose of the
number of shares of common stock of the Acquiror, $.10 par value per share
("Acquiror Common Stock"), set forth opposite such Stockholder's name on
Schedule I hereto.
2. AGREEMENTS OF THE STOCKHOLDERS. Each Stockholder covenants and agrees
that:
(a) such Stockholder shall, at any meeting of the Acquiror's stockholders
called for the purpose, vote, or cause to be voted, all shares of Acquiror
Common Stock in which such stockholder has the right to vote (whether owned as
of the date hereof or hereafter acquired) in favor of the Agreement;
(b) except as otherwise expressly permitted hereby, such Stockholder shall
not, prior to the meeting of the Acquiror's stockholders referred to in Section
2(a) hereof or the earlier termination of the Agreement in accordance with its
terms, sell, pledge, transfer or otherwise dispose of the Stockholder's shares
of Acquiror Common Stock; and
(c) such Stockholder shall use his reasonable best efforts to take or cause
to be taken all action, and to do or cause to be done all things, necessary,
proper or advisable under applicable laws and regulations to consummate and make
effective the agreements contemplated by this Stockholder Agreement.
Each Stockholder further agrees that the Acquiror's transfer agent shall be
given an appropriate stop transfer order and shall not be required to register
any attempted transfer of shares of Acquiror Common Stock, unless the transfer
has been effected in compliance with the terms of this agreement.
3. SUCCESSORS AND ASSIGNS. A stockholder may sell, pledge, transfer or
otherwise dispose of his shares of Acquiror Common Stock, provided that, with
respect to any sale, transfer or disposition which would occur on or before the
meeting of the Acquiror's stockholders referred to in Section 2(a) hereof, such
Stockholder obtains the prior written consent of the Company and that any
acquiror of such Acquiror Common Stock expressly agrees in writing to be bound
by the terms of this Stockholder Agreement.
4. TERMINATION. The parties agree and intend that this Stockholder
Agreement be a valid and binding agreement enforceable against the parties
hereto and that damages and other remedies at law for the breach of this
Stockholder Agreement are inadequate. This Stockholder Agreement may be
terminated at any time prior to the consummation of the Merger by mutual written
consent of the parties hereto and shall be automatically terminated in the event
that the Agreement is terminated in accordance with its terms.
5. NOTICES. Notices may be provided to the Company and the Stockholders in
the manner specified in Section 8.4 of the Agreement, with all notices to the
Stockholders being provided to them at the Acquiror in the manner specified in
such section.
6. GOVERNING LAW. This Stockholder Agreement shall be governed by the laws
of the State of Ohio without giving effect to the principles of conflicts of
laws thereof.
V-1
<PAGE>
7. COUNTERPARTS. This Stockholder Agreement may be executed in one or more
counterparts, all of which shall be considered one and the same and each of
which shall be deemed an original.
8. HEADINGS AND GENDER. The Section headings contained herein are for
reference purposes only and shall not affect in any way the meaning or
interpretation of this Stockholder Agreement. Use of the masculine gender herein
shall be considered to represent the masculine, feminine or neuter gender
whenever appropriate.
IN WITNESS WHEREOF, the Company, by a duly authorized officer, and each of
the Stockholders have caused this Stockholder Agreement to be executed as of the
day and year first above written.
CIRCLE FINANCIAL CORPORATION
By: /s/ DONALD H. ROLF, JR.
Name: Donald H. Rolf, Jr.
Title: Chairman and President
ACQUIROR STOCKHOLDERS:
/s/ GREGORY G. EAGAN
Gregory G. Eagan
/s/ MICHAEL W. JORDAN
Michael W. Jordan
/s/ LLOYD L. KUSTER
Lloyd L. Kuster
/s/ DAVID A. LUECKE
David A. Luecke
/s/ CONSTANTINE N. PAPADAKIS
Constantine N. Papadakis
/s/ DEBORAH A. PETER
Deborah A. Peter
/s/ JOHN R. REUSING
John R. Reusing
/s/ M. ROBIN RUHOLL-CASSADY
M. Robin Ruholl-Cassady
/s/ PAUL D. STAUBACH
Paul D. Staubach
/s/ ROBERT W. ZUMBIEL
Robert W. Zumbiel
V-2
<PAGE>
SCHEDULE I
<TABLE>
<CAPTION>
NUMBER OF SHARES OF
ACQUIROR COMMON STOCK
NAME OF STOCKHOLDER BENEFICIALLY OWNED
<S> <C>
Gregory G. Eagan...................................................................................... 2,000
Michael W. Jordan..................................................................................... 12,925
Lloyd L. Kuster....................................................................................... 30,704
David A. Luecke....................................................................................... 12,187
Constantine N. Papadakis.............................................................................. 10,000
Deborah A. Peter...................................................................................... 11,748
John R. Reusing....................................................................................... 66,569
M. Robin Ruholl-Cassady............................................................................... 9,206
Paul D. Staubach...................................................................................... 46,572
Robert W. Zumbiel..................................................................................... 26,875
</TABLE>
V-3
<PAGE>
500 North Broadway
St. Louis, Missouri 63102
Stifel, Nicolaus 314-342-2000
& Company, Incorporated
ANNEX VI
July 29, 1996
Board of Directors
Circle Financial Corporation
11100 Reading Road
Sharonville, Ohio 45241-1904
Members of the Board:
You have requested our opinion as to the fairness from a financial point of
view to the shareholders of Circle Financial Corporation ("CFC") of the
consideration to be paid by Fidelity Financial of Ohio, Inc. ("FFOH") pursuant
to the terms of the Amended and Restated Agreement of Merger, dated as of June
13, 1996 by and between FFOH and CFC (the "Agreement"). Pursuant to the
Agreement, the holder of each share of common stock of CFC would be entitled to
receive, subject to certain terms, conditions, limitations and procedures set
forth in the Agreement, either $38.00 in cash or a number of shares of FFOH
Common Stock which will be determined by applying a formula, set forth in the
Agreement, which is based on the average market price of the FFOH Common Stock
over a 20 trading day period ending on the date FFOH and CFC receive all
requisite regulatory approvals and satisfy all applicable waiting periods
related to the Merger (the "Average FFOH Price"). For the purposes of our
opinion, we have assumed that the Average FFOH Price remains in a range of $8.00
per share to $13.00 per share. No opinion is expressed as to the fairness of the
consideration resulting from an Average FFOH Price outside of this range. For
the purposes of our opinion we have also assumed that no securities will be
issued under the Option Agreements being entered into between CFC and FFOH.
Additionally, we have assumed that the transaction will constitute a tax-free
reorganization as contemplated by the Agreement.
Stifel, Nicolaus & Company, Incorporated ("Stifel"), as part of its
investment banking services, is regularly engaged in the independent valuation
of businesses and securities in connection with mergers, acquisitions,
underwritings, sales and distributions of listed and unlisted securities,
private placements and valuations for estate, corporate and other purposes. We
are familiar with CFC and FFOH and have completed our financial analysis of this
transaction.
In rendering our opinion, we have reviewed the Agreement as well as
financial and other information that was publicly available or furnished to us
by CFC and FFOH including information provided during Stifel's discussions with
their respective management. We have conducted conversations with CFC's senior
management and FFOH's senior management regarding recent developments and
management's financial projections for CFC and FFOH. In addition, we have spoken
to members of CFC's management and FFOH's management regarding factors which
affect each entity's business. We have also compared certain financial and
securities data (as appropriate) of CFC and FFOH with various other companies
whose securities are traded in public markets, reviewed the historical stock
prices and trading volumes of the common stock of CFC and FFOH, reviewed prices
and premiums paid in other business combinations and conducted such other
financial studies, analyses and investigations as we deemed appropriate for
purposes of this opinion.
Over a Century of Knowledge and Service
MEMBER SIPC AND MEMBERS, NEW YORK STOCK EXCHANGE, INC., CHICAGO AND AMERICAN
STOCK EXCHANGES
VI-1
<PAGE>
Board of Directors
July 29, 1996
In rendering our opinion, we have relied upon and assumed, without
independent verification, the accuracy and completeness of all of the financial
and other information that was provided to us or that was otherwise reviewed by
us. With respect to the financial projections supplied to us, we have assumed
that they were reasonably prepared on the basis reflecting the best currently
available estimates and judgments of the management of CFC and FFOH as to the
future operating and financial performance of CFC and FFOH and that they
provided a reasonable basis upon which we could form our opinion. We also
assumed that there were no material changes in the assets, liabilities,
financial condition, results of operations, business or prospects of either CFC
or FFOH since the date of the last financial statements made available to us. We
did not make or obtain any independent evaluation, appraisal or physical
inspection of CFC's or FFOH's assets or liabilities nor did we review loan files
of CFC or FFOH. We relied on advice of counsel to CFC as to all legal matters
with respect to CFC, the Agreement and the transactions and other matters
contained or contemplated therein.
Our opinion is necessarily based on economic, market, financial and other
conditions as they exist on, and on the information made available to us as of,
the date of this letter. Our opinion is directed to the Board of Directors of
CFC and does not constitute a recommendation to any shareholder as to how such
shareholder should vote on the proposed transaction, nor have we expressed any
opinion as to the prices at which any securities of CFC or FFOH might trade in
the future. Except as required by applicable law, including without limitation
federal securities laws, our opinion may not be published or otherwise used or
referred to, nor shall any public reference to Stifel be made, without our prior
consent.
Based upon the foregoing and such other factors as we deem relevant, we are
of the opinion as of the date hereof that within the ranges discussed above the
consideration to be paid to the shareholders of CFC pursuant to the Agreement is
fair to the shareholders of CFC from a financial point of view.
Very truly yours,
STIFEL, NICOLAUS & COMPANY,
INCORPORATED
VI-2
<PAGE>
RP FINANCIAL, LC.
Financial Services Industry Consultants
ANNEX VII
July 29, 1996
Board of Directors
Fidelity Financial of Ohio, Inc.
4555 Montgomery Road
Cincinnati, Ohio 45212-3133
Gentlemen:
You have requested RP Financial, LC. ("RP Financial") to provide you with
our opinion as to the fairness from a financial point of view to the
shareholders of Fidelity Financial of Ohio, Inc., Cincinnati, Ohio, an Ohio
corporation (the "Acquiror"), of the Amended and Restated Agreement of Merger
(the "Agreement"), dated June 13, 1996, by and among the Acquiror, Fidelity
Acquisition Corporation ("FAC"), a newly formed Ohio corporation and a wholly
owned subsidiary of the Acquiror, and Circle Financial Corporation (the
"Company"), an Ohio corporation.
SUMMARY DESCRIPTION OF CONSIDERATION
The Agreement is incorporated herein by reference. Unless otherwise
defined, all capitalized terms incorporated herein have the meanings ascribed to
them in the Agreement. As of the date hereof, there are 708,096 shares of
Company Common Stock issued and outstanding, and there are 47,871 shares of
Company Common Stock issuable upon exercise of outstanding stock options
("Company Stock Options"). At the Effective Time, by virtue of the Merger and
without any action on the part of a holder of shares of Company Common Stock:
(a) each share of Acquiror Common Stock that is issued and outstanding
immediately prior to the Effective Time shall remain issued and outstanding and
shall be unchanged by the Merger; (b) all shares of Company Common Stock owned
by the Company (including treasury shares) or the Acquiror or any of their
respective wholly-owned subsidiaries shall be cancelled and retired and shall
not represent capital stock of the Surviving Corporation and shall not be
exchanged for shares of Acquiror Common Stock, cash or other consideration; and
(c) each share of Company Common Stock issued and outstanding at the Effective
Time (other than shares to be cancelled in accordance with provision (b) above)
shall be converted into, and shall be cancelled in exchange for, the right to
receive, at the election of the holder thereof, (i) the number of shares of
Acquiror Common Stock which is equal to (the "Exchange Ratio") (A) if the
Average Acquiror Share Price is equal to or greater than $9.00 but equal to or
less than $11.00, the quotient determined by dividing (x) $38.00 by (y) the
Average Acquiror Share Price, (B) if the Average Acquiror Share Price is less
than $9.00, 4.22 shares or (C) if the Average Acquiror Share Price is greater
than $11.00, 3.45 shares (the "Per Share Stock Consideration"), or (ii) a cash
amount equal to $38.00 per share of Company Common Stock (the "Per Share Cash
Consideration"); (2) For purposes of the Agreement: (i) the Aggregate Cash
Consideration shall amount to the product of the number of shares of Company
Common Stock outstanding at the Effective Time times .45 times $38.00; and (ii)
the Average Acquiror Share Price shall mean the average of the closing bid and
asked price per share of Acquiror Common Stock, as reported on the NASDAQ Stock
Market's National Market (as reported by THE WALL STREET JOURNAL or, if not
reported thereby, another authoritative source), for the 20 trading days ending
on the date the Acquiror and the Company receive all requisite regulatory
approvals and satisfy all applicable waiting periods. The shares of Acquiror
Common Stock to be issued in the merger and the Aggregate Cash Consideration
shall be hereinafter referred to as the Merger Consideration.
Washington Headquarters
Rosslyn Center Telephone: (703) 528-1700
1700 North Moore Street, Suite 2210 Fax No: (703) 528-1788
Arlington, VA 22209
VII-1
<PAGE>
RP Financial, LC.
Board of Directors
July 29, 1996
Each holder of Company Common Stock will be allowed to specify the form of
consideration on an Election Form. Each Election Form will permit the holder (i)
to elect to receive Acquiror Common Stock with respect to all such holder's
Company Common Stock ("Stock Election Shares"); (ii) to elect to receive cash
with respect to all such holder's Company Common Stock ("Cash Election Shares");
or (iii) to indicate that such holder makes no such election with respect to
such holder's shares of Company Common Stock ("No-Election Shares"). Any shares
of Company Common Stock with respect to which the holder thereof shall not, as
of the Election Deadline, have made such an election by submission to the
Exchange Agent of an effective, properly completed Election Form shall be deemed
to be No-Election Shares. Within ten (10) business days after the Election
Deadline, the Exchange Agent will effect the allocation among holders of Company
Common Stock of rights to receive Acquiror Common Stock or cash in the Merger in
accordance with the Election Forms. Such allocation will be made in the manner
described in the Agreement.
Immediately before the Effective Time, each Company Stock Option that is
outstanding and exercisable at the Effective Time shall be cancelled and
converted into the right to receive from the Company, cash in an amount equal to
the difference between the exercise price of such Company Stock Option and the
Per Share Cash Consideration for each share of Company Common Stock subject to
such Company Stock Option.
RP FINANCIAL BACKGROUND AND EXPERIENCE
RP Financial, as part of its financial institution valuation and consulting
practice, is regularly engaged in the valuation of financial institution
securities in connection with mergers and acquisitions of commercial banks and
thrift institutions, initial and secondary offerings, mutual-to-stock
conversions of thrift institutions, and business valuations for other corporate
purposes for financial institutions. As specialists in the securities of
financial institutions, RP Financial has experience in, and knowledge of, the
Ohio and Midwest U.S. markets for thrift and bank securities and the
institutions operating in Cincinnati.
MATERIALS REVIEWED AND ANALYSES PERFORMED
RP Financial reviewed and analyzed the following material in conjunction
with its analysis of the Merger Consideration as described in the Agreement: (1)
the Amended and Restated Agreement of Merger, dated June 13, 1996, including
exhibits; (2) the following information for the Company -- (a) audited financial
statements for the fiscal years ended June 30, 1992 through June 30, 1995,
incorporated in Annual Reports to shareholders or Form 10-Ks, shareholder and
internal reports, quarterly financial statements for the quarters ended
September 30, 1995, December 31, 1995 and March 31, 1996 incorporated in Form
10-QSBs, and internal financial results through June 30, 1996; (b) the
Prospectus for the Company's mutual-to-stock conversion dated June 25, 1991; (c)
proxy statements for the last two years, and (d) unaudited internal and
regulatory financial reports and analyses prepared by management of the Company
regarding various aspects of the Company's assets and liabilities, particularly
rates, volumes, maturities, market values, trends, credit risk, interest rate
risk and liquidity risk of assets, liabilities, off-balance sheet assets,
commitments and contingencies of the Company; and (3) the following information
for the Acquiror -- (a) audited financial statements for the fiscal years ended
December 31, 1993 through December 31, 1995, incorporated in Annual Reports to
shareholders or Form 10-Ks, quarterly financial results through March 31, 1996
and quarterly results through June 30, 1996 released in press release form; (b)
the Prospectus for the Acquiror's mutual-to-stock conversion dated January 11,
1996; (c) proxy statements for the last two years, and (d) unaudited internal
and regulatory financial reports and analyses prepared by management of the
Acquiror regarding various aspects of the Acquiror's assets and liabilities,
particularly rates, volumes, maturities, market values, trends, credit risk,
interest rate risk and liquidity risk of assets, liabilities, off-balance sheet
assets, commitments and contingencies of the Acquiror.
RP Financial reviewed the trading activity of the Company Common Stock, and
compared it to similar information for thrift institutions with comparable
resources, financial condition, earnings, operations and markets as well as for
publicly-traded thrifts with comparable financial condition, earnings,
operations and markets. In the course of its evaluation and analyses, RP
Financial conducted discussions with management of the Company regarding past
and current business operations, financial condition, and future prospects. RP
Financial reviewed the Company's financial, operational and market area
characteristics compared to similar information for comparable thrift
institutions, evaluated the potential for growth and profitability for the
Company in its market, specifically regarding competition by other banks,
thrifts, mortgage banking
VII-2
<PAGE>
RP Financial, LC.
Board of Directors
July 29, 1996
companies and other financial services companies, economic projections in the
local market area, the impact of the regulatory, legislative and economic
environments on operations and the public perception of the thrift and banking
industries, and the pro forma impact on the Acquiror's financial condition and
operations of the merger, including potential cost savings and earnings
improvements available to the Acquiror as a result of the merger. RP Financial's
analyses included, but were not limited to, (i) an evaluation of the financial
terms, financial and operating condition and market areas of other recent
business combinations among comparable thrift institutions in the Midwest U.S.,
Ohio and Northern Kentucky; (ii) an ability to pay analysis quantifying the
impact of the merger on the Acquiror's financial condition and operations; and
(iii) an evaluation of possible alternative business strategies available to the
Acquiror, with a comparison of the potential financial and operational impact of
such strategies compared to the merger. The results of these analyses and the
other factors considered were evaluated as a whole, with the aggregate results
indicating a range of financial parameters utilized to assess the Merger
Consideration as described in the Agreement.
In rendering our opinion, RP Financial relied, without independent
verification, on the accuracy and completeness of the information concerning the
Acquiror and the Company furnished to us for review for purposes of this
opinion, as well as publicly-available information regarding other financial
institutions and economic data. Neither the Acquiror nor the Company has
restricted RP Financial as to the material it was permitted to review. RP
Financial has not performed or obtained any independent appraisals or
evaluations of the assets and liabilities and potential and/or contingent
liabilities of the Acquiror or the Company. RP Financial expresses no opinion on
matters of a legal, accounting or tax nature or the ability of the merger to be
consummated as set forth in the Agreement.
OPINION
It is understood that this letter is directed to the Board of Directors of
the Acquiror in its consideration of the Agreement, and does not constitute a
recommendation to any shareholder of the Acquiror as to any action that such
shareholder should take in connection with the Agreement, or otherwise.
It is understood that this opinion is based on market conditions and other
circumstances existing on the date hereof.
It is understood that this opinion may be included in its entirety in any
communication by the Acquiror or its Board of Directors to the stockholders of
the Acquiror. It is also understood that this opinion may be included in its
entirety in any regulatory filing by the Acquiror or the Company. Except as
described above, this opinion may not be summarized, excerpted from or otherwise
publicly referred to without our prior written consent.
Based upon and subject to the foregoing, and other such matters as we
consider relevant, it is RP Financial's opinion that, as of the date hereof, the
Merger Consideration as described in the Agreement, is fair to the shareholders
of the Acquiror from a financial point of view.
Respectfully submitted,
/s/ RP Financial, LC.
RP FINANCIAL, LC.
VII-3
<PAGE>
ANNEX VIII
1701.85 RELIEF FOR DISSENTING SHAREHOLDERS; QUALIFICATION;
PROCEDURES. -- (A)(1) A shareholder of a domestic corporation is entitled to
relief as a dissenting shareholder in respect of the proposals described in
sections 1701.74, 1701.76, and 1701.84 of the Revised Code, only in compliance
with this section.
(2) If the proposal must be submitted to the shareholders of the
corporation involved, the dissenting shareholder shall be a record holder of the
share of the corporation as to which he seeks relief as of the date fixed for
the determination of shareholders entitled to notice of a meeting of the
shareholders at which the proposal is to be submitted, and such shares shall not
have been voted in favor of the proposal. Not later than ten days after the date
on which the vote on the proposal was taken at the meeting of the shareholders,
the dissenting shareholder shall deliver to the corporation a written demand for
payment to him of the fair cash value of the shares as to which he seeks relief,
which demand shall state his address, the number and class of such shares, and
the amount claimed by him as the fair cash value of the shares.
(3) The dissenting shareholder entitled to relief under division (C) of
section 1701.84 of the Revised Code in the case of a merger pursuant to section
1701.80 of the Revised Code and a dissenting shareholder entitled to relief
under division (E) of section 1701.84 of the Revised Code in the case of a
merger pursuant to section 1701.801 of the Revised Code shall be a record holder
of the shares of the corporation as to which he seeks relief as of the date of
which the agreement of merger was adopted by the directors of that corporation.
Within twenty days after he has been sent the notice provided in section 1701.80
or 1701.801 of the Revised Code, the dissenting shareholder shall deliver to the
corporation a written demand for payment with the same information as that
provided for in division (A)(2) of this section.
(4) In the case of a merger or consolidation, a demand served on the
constituent corporation involved constitutes service on the surviving or the new
entity, whether the demand is served before, on, or after the effective date of
the merger or consolidation.
(5) If the corporation sends to the dissenting shareholder, at the address
specified in his demand, a request for the certificates representing the shares
as to which he seeks relief, the dissenting shareholder, within fifteen days
from the date of the sending of such request, shall deliver to the corporation
the certificates requested so that the corporation may forthwith endorse on them
a legend to the effect that demand for the fair cash value of such shares has
been made. The corporation promptly shall return such endorsed certificates to
the dissenting shareholder. A dissenting shareholder's failure to deliver such
certificates terminates his rights as a dissenting shareholder, at the option of
the corporation, exercised by written notice sent to the dissenting shareholder
within twenty days after the lapse of the fifteen-day period, unless a court for
good cause shown otherwise directors. If shares represented by a certificate on
which such a legend has been endorsed are transferred, each new certificate
issued for them shall bear a similar legend, together with the name of the
original dissenting holder of such shares. Upon receiving a demand for payment
from a dissenting shareholder who is the record holder of uncertificated
securities, the corporation shall make an appropriate notation of the demand for
payment in its shareholder records. If uncertificated shares for which payment
has been demanded are to be transferred, any new certificate issued for the
shares shall bear the legend required for certificated securities as provided in
this paragraph. A transferee of the shares so endorsed, or of uncertificated
securities where such notation has been made, acquires only such rights in the
corporation as the original dissenting holder of such shares had immediately
after the service of a demand for payment of the fair cash value of such shares.
A request under this paragraph by the corporation is not an admission by the
corporation that the shareholder is entitled to relief under this section.
(B) Unless the corporation and the dissenting shareholder have come to an
agreement on the fair cash value per share of the shares as to which the
dissenting shareholder seeks relief, the dissenting shareholder or the
corporation, which in case of a merger or consolidation may be the surviving or
new entity, within three months after the service of the demand by the
dissenting shareholder, may file a complaint in the court of common pleas of the
county in which the principal office of the corporation that issued the shares
is located or was located when the proposal was adopted by the shareholders of
the corporation, or, if the proposal was not required to be submitted to the
shareholders, was approved by the directors. Other dissenting shareholders,
within that three-month period may join as plaintiffs or may be joined as
defendants in any such proceeding, and any two or more such proceedings may be
consolidated. The complaint shall contain a brief statement of the facts,
including the vote and the facts entitling the dissenting shareholder to the
relief demanded. No answer to such a complaint is required. Upon the filing of
such a complaint, the court, on motion of the petitioner, shall enter an order
fixing a date for a hearing on the complaint and requiring that a copy of the
complaint and a notice of the filing and of the date for hearing be given to the
respondent or defendant in the manner in which summons is required to be served
or substituted service is required to be made in other cases. On the day fixed
for the hearing on the compliant of any adjournment of it, the court shall
determine from the complaint and from such evidence as is submitted by either
party whether the dissenting shareholder is
VIII-1
<PAGE>
entitled to be paid the fair cash value of any shares and, if so, the number and
class of such shares. If the court finds that the dissenting shareholder is so
entitled, the court may appoint one or more persons as appraisers to receive
evidence and to recommend a decision on the amount of the fair cash value. The
appraisers have such power and authority as is specified in the order of their
appointment. The court thereupon shall make a finding as to the fair cash value
of a share and shall render judgment against the corporation for the payment of
it, with interest at such rate and from such date as the court considers
equitable. The costs of the proceeding, including reasonable compensation to the
appraisers to be fixed by the court, shall be assessed or apportioned as the
court considers equitable. The proceeding is a special proceeding and final
orders in it may be vacated, modified, or reversed on appeal pursuant to the
Rules of Appellate Procedure and, to the extent not in conflict with those
rules, Chapter 2505 of the Revised Code. If, during the pendency of any
proceeding instituted under this section, a suit or proceeding is or has been
instituted to enjoin or otherwise to prevent the carrying out of the action as
to which the shareholder has dissented, the proceeding instituted under this
section shall be stayed until the final determination of the other suit or
proceeding. Unless any provision in division (D) of this section is applicable,
the fair cash value of the shares that is agreed upon by the parties or fixed
under this section shall be paid within thirty days after the date of final
determination of such value under this division, the effective date of the
amendment to the articles, or the consummation of the other action involved,
whichever occurs last. Upon the occurrence of the last such event, payment shall
be made immediately to a holder of uncertificated securities entitled to such
payment. In the case of holders of shares represented by certificates, payment
shall be made only upon and simultaneously with the surrender to the corporation
of the certificates representing the shares for which the payment is made.
(C) If the proposal was required to be submitted to the shareholders of the
corporation, fair cash value as to those shareholders shall be determined as of
the day prior to the day on which the vote by the shareholders was taken, and,
in the case of a merger pursuant to section 1701.80 or 1701.801 of the Revised
Code, fair cash value as to shareholders of a constituent subsidiary corporation
shall be determined as of the day before the adoption of the agreement of merger
by the directors of the particular subsidiary corporation. The fair cash value
of a share for the purposes of this section is the amount that a willing seller
who is under no compulsion to sell would be willing to accept and that a willing
buyer who is under no compulsion to purchase would be willing to pay, but in no
event shall the fair cash value of a share exceed the amount specified in the
demand of the particular shareholder. In computing such fair cash value, any
appreciation or depreciation in market value resulting from the proposal
submitted to the directors or to the shareholders shall be excluded.
(D)(1) The right and obligation of a dissenting shareholder to receive such
fair cash value and to sell such shares as to which he seeks relief, and the
right and obligation of the corporation to purchase such shares and to pay the
fair cash value of them terminates if any of the following applies:
(a) The dissenting shareholder has not complied with this section,
unless the corporation by its directors waives such failure;
(b) The corporation abandons the action involved or is finally
enjoined or prevented from carrying it out, or the shareholders rescind
their adoption, of the action involved;
(c) The dissenting shareholder withdraws his demand, with the consent
of the corporation by its directors;
(d) The corporation and the dissenting shareholder have not come to an
agreement as to the fair cash value per share, and neither the shareholder
nor the corporation has filed or joined in a complaint under division (B)
of this section within the period provided in that division.
(2) For purposes of division (D)(1) of this section, if the merger or
consolidation has become effective and the surviving or new entity is not a
corporation, action required to be taken by the directors of the
corporation shall be taken by the general partners of a surviving or new
partnership or the comparable representatives of any other surviving or new
entity.
(E) From the time of the dissenting shareholder's giving of the demand
until either the termination of the rights and obligations arising from it or
the purchase of the shares by the corporation, all other rights accruing from
such shares, including voting and dividend or distribution rights, are
suspended. If during the suspension, any dividend or distribution is paid in
money upon shares of such class or any dividend, distribution, or interest is
paid in money upon any securities issued in extinguishment of or in substitution
for such shares, an amount equal to the dividend, distribution, or interest
which, except for the suspension, would have been payable upon such shares or
securities, shall be paid to the holder of record as a credit upon the fair cash
value of the shares. If the right to receive fair cash value is terminated other
than by the purchase of the shares by the corporation, all rights of the holder
shall be restored and all distributions which, except for the suspension, would
have been made shall be made to the holder of record of the shares at the time
of termination.
VIII-2
<PAGE>
******************************************************************************
APPENDIX
FIDELITY FINANCIAL OF OHIO, INC.
REVOCABLE PROXY
SPECIAL MEETING OF SHAREHOLDERS
SEPTEMBER 10, 1996
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS.
The undersigned, as a holder of Common Stock of Fidelity Financial of Ohio,
Inc. ("FFOH"), hereby appoints the Board of Directors of FFOH, or any successors
thereto, as Proxies, with full powers of substitution, to represent and to vote
as designated on the reverse of this card all of the shares of Common Stock of
FFOH which the undersigned is entitled to vote at the Special Meeting of
Shareholders to be held at the Quality Hotel Central located at 4747 Montgomery
Road, Cincinnati, Ohio, on September 10, 1996 at 2:00 p.m., Eastern Time, or any
adjournment thereof.
THIS PROXY MAY BE REVOKED AT ANY TIME BEFORE IT IS EXERCISED.
SHARES OF COMMON STOCK OF FFOH WILL BE VOTED AS SPECIFIED. UNLESS OTHERWISE
SPECIFIED, THIS PROXY WILL BE VOTED FOR THE PROPOSAL TO ADOPT AN AMENDED AND
RESTATED AGREEMENT OF MERGER, DATED AS OF JUNE 13, 1996, BY AND AMONG FFOH,
FIDELITY ACQUISITION CORPORATION ("FAC"), A WHOLLY OWNED SUBSIDIARY OF FFOH, AND
CIRCLE FINANCIAL CORPORATION, AND FOR THE PROPOSAL TO AMEND FFOH'S ARTICLES OF
INCORPORATION. IF ANY OTHER MATTER IS PROPERLY PRESENTED AT THE SPECIAL MEETING
OF SHAREHOLDERS, THE PROXY WILL BE VOTED IN ACCORDANCE WITH THE JUDGMENT OF THE
PERSONS APPOINTED AS PROXIES.
IMPORTANT: PLEASE DATE AND SIGN THE PROXY ON REVERSE SIDE.
PLEASE MARK YOUR CHOICE LIKE THIS [X] IN BLUE OR BLACK INK
I PLAN TO ATTEND THE MEETING [ ]
1. Proposal to adopt an Amended and Restated Agreement of Merger, dated as
of June 13, 1996 (the "Agreement"), by and among FFOH, FAC and Circle
Financial Corporation ("CFC"), which provides, among other things, for
(i) the merger of CFC with and into FAC (the "Merger") and (ii) the
conversion of each share of common stock of CFC outstanding immediately
prior to the Merger (other than any dissenting shares under Ohio law and
any shares held by either FFOH or CFC) into the right to receive, subject
to certain further terms, conditions, limitations and procedures set
forth in the Agreement, either $38.00 in cash or a number of shares of
FFOH common stock which will be determined by applying a formula, set
forth in the Agreement, which is based on the average market price of the
FFOH common stock over a 20 trading day period ending on the date FFOH
and CFC receive all requisite regulatory approvals and satisfy all
applicable waiting periods related to the Merger.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
(continued on other side)
<PAGE>
(continued from other side)
THE BOARD OF DIRECTORS OF FFOH RECOMMENDS A VOTE FOR APPROVAL OF THE
AGREEMENT. SUCH VOTES ARE HEREBY SOLICITED BY THE BOARD OF DIRECTORS.
2. Proposal to adopt an amendment to FFOH's Articles of Incorporation to
increase the number of authorized shares of FFOH Common Stock from
7,000,000 to 15,000,000 and the number of authorized shares of FFOH
Preferred Stock from 500,000 to 5,000,000.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
THE BOARD OF DIRECTORS OF FFOH RECOMMENDS A VOTE FOR THE PROPOSAL TO AMEND
FFOH'S ARTICLES OF INCORPORATION.
Dated: , 1996
Signature
Signature
(print name)
IMPORTANT: Please sign your name exactly as it appears hereon. When shares are
held as joint tenants, either may sign. When signing as an attorney, executor,
administrator, trustee or guardian, add such title to your signature.
NOTE: If you receive more than one proxy card, please date and sign each card
and return all proxy cards in the enclosed envelope.
<PAGE>
CIRCLE FINANCIAL CORPORATION
REVOCABLE PROXY
SPECIAL MEETING OF SHAREHOLDERS
SEPTEMBER 10, 1996
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS.
The undersigned, as a holder of Common Stock of Circle Financial Corporation
("CFC"), hereby appoints the Board of Directors of CFC, or any successors
thereto, as Proxies, with the full powers of substitution, to represent and to
vote as designated on the reverse of this card all of the shares of Common Stock
of CFC which the undersigned is entitled to vote at the Special Meeting of
Shareholders to be held at CFC's main office located at 11100 Reading Road,
Sharonville, Ohio, on September 10, 1996 at 2:00 p.m., Eastern Time, or any
adjournment thereof.
THIS PROXY MAY BE REVOKED AT ANY TIME BEFORE IT IS EXERCISED.
SHARES OF COMMON STOCK OF CFC WILL BE VOTED AS SPECIFIED. UNLESS OTHERWISE
SPECIFIED, THIS PROXY WILL BE VOTED FOR THE PROPOSAL TO ADOPT AN AMENDED AND
RESTATED AGREEMENT OF MERGER, DATED AS OF JUNE 13, 1996, BY AND AMONG FIDELITY
FINANCIAL OF OHIO, INC. ("FFOH"), FIDELITY ACQUISITION CORPORATION ("FAC"), A
WHOLLY OWNED SUBSIDIARY OF FFOH, AND CFC. IF ANY OTHER MATTER IS PROPERLY
PRESENTED AT THE SPECIAL MEETING OF SHAREHOLDERS, THE PROXY WILL BE VOTED IN
ACCORDANCE WITH THE JUDGMENT OF THE PERSONS APPOINTED AS PROXIES.
IMPORTANT: PLEASE DATE AND SIGN THE PROXY ON REVERSE SIDE.
PLEASE MARK YOUR CHOICE LIKE THIS [X] IN BLUE OR BLACK INK
I PLAN TO ATTEND THE MEETING [ ]
(continued on other side)
<PAGE>
(continued from other side)
Proposal to adopt an Amended and Restated Agreement of Merger, dated as of June
13, 1996 (the "Agreement"), by and among FFOH, FAC and CFC, which provides,
among other things, for (i) the merger of CFC with and into FAC (the "Merger")
and (ii) the conversion of each share of common stock of CFC outstanding
immediately prior to the Merger (other than any dissenting shares under Ohio law
and any shares held by either FFOH or CFC) into the right to receive, subject to
certain further terms, conditions, limitations and procedures set forth in the
Agreement, either $38.00 in cash or a number of shares of FFOH common stock
which will be determined by applying a formula, set forth in the Agreement,
which is based on the average market price of the FFOH common stock over a 20
trading day period ending on the date FFOH and CFC receive all requisite
regulatory approvals and satisfy all applicable waiting periods related to the
Merger.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
THE BOARD OF DIRECTORS OF CFC RECOMMENDS A VOTE FOR APPROVAL OF THE
AGREEMENT. SUCH VOTES ARE HEREBY SOLICITED BY THE BOARD OF DIRECTORS.
Dated: , 1996 Signature
Signature
(print name)
IMPORTANT: Please sign your name
exactly as it appears hereon. When
shares are held as joint tenants,
either may sign. When signing as an
attorney, executor, administrator,
trustee or guardian, add such title to
your signature.
NOTE: If you receive more than one
proxy card, please date and sign
each card and return all proxy cards
in the enclosed envelope.
