As filed with the Securities and Exchange
Commission
On
Registration No.
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM S-4
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
FIFTH THIRD BANCORP
(Exact name of registrant as specified in its charter)
Ohio 31-0854434
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
6711
(Primary Standard Industrial
Classification Code Number)
38 Fountain Square Plaza, Cincinnati, Ohio 45263
(513) 579-5300
(Address, including Zip Code, and telephone
number, including area code, of registrant's
principal executive offices)
S. Richard Arnold, Esq.
Dinsmore & Shohl
1900 Chemed Center, 255 East Fifth Street
Cincinnati, Ohio 45202
(513) 977-8200
(Name, address, including Zip Code and telephone
number, including area code, of agent for service)
Copies to:
Susan B. Zaunbrecher, Esq.
Dinsmore & Shohl
1900 Chemed Center
255 East Fifth Street
Cincinnati, Ohio 45202
Patrick W. Mattingly, Esq.
Wyatt, Tarrant & Combs
Citizens Plaza
Louisville, KY 40202
Approximate date of commencement of proposed sale of the securities
to the public:
As soon as practicable after this Registration Statement becomes
effective.<PAGE>
<PAGE>
If the securities being registered on this Form are being offered
in connection with the formation of a holding company and there is
compliance with General Instruction G, check the following box.//
<TABLE>
CALCULATION OF REGISTRATION FEE
<CAPTION>
Title of Amount to be Proposed Proposed Amount of
each class Registered* Maximum Maximum Registration
of securities Offering Aggregate Fee
to be Price Per Offering
registered Unit Price**
<S> <C> <C> <C> <C>
Common Stock, 254,092 $51.16 $12,999,346.72 $4,482.53
no par value
<FN>
* Represents the maximum number of shares of Registrant's Common
Stock issuable to the sole stockholder of National Bancorp,
assuming that the applicable market value per share of the
Registrant's Common Stock (as defined in the Affiliation Agreement
described herein) is $51.16.
** Based on the maximum aggregate offering price set forth in the
Affiliation Agreement and Merger Agreement, each dated as of
December 6, 1993 between National Bancorp and Fifth Third Bancorp.
</TABLE>
The Registrant hereby amends this Registration Statement on such
date or dates as may be necessary to delay its effective date until
the Registrant shall file a further amendment which specifically
states that this Registration Statement shall thereafter become
effective in accordance with Section 8(a) of the Securities Act of
1933, as amended, or until this Registration Statement shall become
effective on such date as the Securities and Exchange Commission,
acting pursuant to said Section 8(a), may determine.<PAGE>
<PAGE>
FIFTH THIRD BANCORP
Cross Reference Sheet Required by Item 501(b) of Regulation S-K
CAPTION - CAPTION IN PROSPECTUS
A. INFORMATION ABOUT THE TRANSACTION
1. Forepart of the Registration Statement and Outside Front Cover
Page of Prospectus - Facing Page; Notice of Special Meeting
2. Inside Front and Outside Back Cover Pages of Prospectus -
Available Information; Table of Contents
3. Risk Factors, Ratio of Earnings to Fixed Charges and Other
Information - Summary of the Proxy Statement and Prospectus;
General Information; Comparative Per Share Data
4. Terms of the Transaction - Summary of the Proxy Statement and
Prospectus; Terms and Conditions of the Proposed Merger;
Description of Capital Stock
5. Pro Forma Financial Information - Not Applicable
6. Material Contracts with the Company Being Acquired - Not
Applicable
7. Additional Information Required for Reoffering by Persons and
Parties Deemed to be Underwriters - Not Applicable
8. Interests of Named Experts and Counsel - Legal Matters, Experts
9. Disclosure of Commission Position on Indemnification for
Securities Act Liabilities - Not Applicable
B. INFORMATION ABOUT THE REGISTRANT
1. Information with Respect to S-3 Registrants - Fifth Third
Bancorp; Selected Historical Financial Data of Fifth Third;
Description of Capital Stock
2. Incorporation of Certain Information by Reference -
Incorporation of Certain Documents by Reference; Available
Information; Description of Capital Stock
3. Information with Respect to S-2 or S-3 Registrants - Not
Applicable
4. Incorporation of Certain Information by Reference - Not
Applicable
5. Information With Respect to Registrants Other Than S-3 or S-2
Registrants - Not Applicable
C. INFORMATION ABOUT THE COMPANY BEING ACQUIRED.
1. Information with Respect to S-3 Companies - Not Applicable
2. Information with Respect to S-2 or S-3 Companies - Not
Applicable
3. Information with Respect to Companies Other Than S-2 or S-3
Companies - National Bancorp; Selected Historical Financial Data of
National Bancorp; Description of Capital Stock, Business of
National Bancorp of Kentucky, Inc., Management's Discussion and
Analysis of The National Bancorp of Kentucky's Financial Condition
and Results of Operations, National Bancorp Financial Statements.
D. VOTING AND MANAGEMENT INFORMATION
1. Information if Proxies, Consents or Authorizations Are to Be
Solicited - Summary of the Proxy Statement and Prospectus; Terms
and Conditions of the Proposed Merger; General Information;
Incorporation of Certain Documents by Reference; National Bancorp;
National Bancorp Board of Directors
2. Information if Proxies, Consents or Authorizations Are Not To Be
Solicited or in an Exchange Offer - Not Applicable
THE NATIONAL BANCORP OF KENTUCKY, INC.
NOTICE OF SPECIAL MEETING OF THE STOCKHOLDER
To Be Held On April 15, 1994
NOTICE IS HEREBY GIVEN that the Special Meeting of the
Stockholder ("Special Meeting") of The National Bancorp of
Kentucky, Inc. ("National Bancorp") will be held on April 15, 1994,
at 3:00 p.m. E.S.T, at 2560 Richmond Road, Lexington, Kentucky
40509.
A Proxy Statement and Prospectus and Proxy Card for this
Special Meeting are enclosed herewith. The Special Meeting is for
the purpose of considering and voting upon the following matters:
A. Approval of an Affiliation Agreement and Agreement of
Merger both dated as of December 6, 1993 (the "Affiliation
Agreement" and the "Merger Agreement", respectively), between
National Bancorp and Fifth Third Bancorp ("Fifth Third"), which
provide for the merger (the "Merger") of National Bancorp with and
into Fifth Third. Pursuant to the Affiliation Agreement and Merger
Agreement the sole stockholder of National Bancorp will be entitled
to receive, for each share of National Bancorp's common stock
("National Bancorp Common Stock") which he holds on the effective
date of the Merger (the "Effective Date") 2,540.924 shares of Fifth
Third common stock ("Fifth Third Common Stock").
B. Such other business as may properly come before the
meeting or any adjournments thereof. The Board of Directors is not
aware of any other business to come before the Special Meeting.
Pursuant to the By-Laws of National Bancorp, the Board of
Directors has fixed March 1, 1994 as the record date for the
determination of stockholders entitled to receive notice of and to
vote at the Special Meeting. Only holders of record of National
Bancorp Common Stock at the close of business on such date will be
entitled to vote at the Special Meeting or any adjournments
thereof.
THE AFFIRMATIVE VOTE OF A MAJORITY OF THE ISSUED AND
OUTSTANDING SHARES OF NATIONAL BANCORP COMMON STOCK IS REQUIRED TO
APPROVE THE MERGER. YOUR VOTE IS IMPORTANT REGARDLESS OF THE
NUMBER OF SHARES WHICH YOU OWN.
THE STOCKHOLDER, WHETHER HE PLANS TO ATTEND THE SPECIAL
MEETING, IS REQUESTED TO SIGN, DATE AND RETURN THE ENCLOSED PROXY
CARD WITHOUT DELAY IN THE ENCLOSED POSTAGE-PAID ENVELOPE. ANY
PROXY GIVEN BY A STOCKHOLDER MAY BE REVOKED BY SUBMITTING A DULY
EXECUTED PROXY BEARING A LATER DATE. ANY STOCKHOLDER PRESENT AT
THE SPECIAL MEETING MAY REVOKE HIS OR HER PROXY AND VOTE PERSONALLY
ON EACH MATTER BROUGHT BEFORE THE SPECIAL MEETING.
By Order of the Board of Directors
Tracy W. Farmer, President March
___, 1994
Lexington, Kentucky
THE NATIONAL BANCORP OF KENTUCKY, INC.
2560 Richmond Road
Lexington, Kentucky 40509
(606) 269-0547
AND
FIFTH THIRD BANCORP
38 Fountain Square Plaza
Cincinnati, Ohio 45263
(513) 579-5300
PROXY STATEMENT AND PROSPECTUS
Fifth Third Bancorp ("Fifth Third") hereby registers up to
a
total of 254,092 shares of its Common Stock, without par value
("Fifth Third Common Stock"), to be distributed to the sole
stockholder of The National Bancorp of Kentucky, Inc. ("National
Bancorp") in connection with the proposed merger of National
Bancorp with and into Fifth Third. If the merger is approved by
the sole stockholder of National Bancorp at a Special Meeting of
the sole stockholder and all other conditions of the merger are
satisfied, each outstanding common share of National Bancorp will
be converted into 2,540.924 shares of Fifth Third Common Stock.
This Proxy Statement and Prospectus (the "Proxy Statement
and
Prospectus") is being furnished to the sole stockholder of National
Bancorp, a Kentucky corporation, in connection with the
solicitation of proxies by the Board of Directors of National
Bancorp for use at a Special Meeting of stockholders to be held on
April 15, 1994 (the "Special Meeting").
At the Special Meeting, the holder of shares of National
Bancorp's common stock, without par value ("National Bancorp Common
Stock"), will be asked to approve an Affiliation Agreement and an
Agreement of Merger, both dated as of December 6, 1993 (the
"Affiliation Agreement" and the "Merger Agreement", respectively),
between National Bancorp and Fifth Third, which together provide
for the merger of National Bancorp with and into Fifth Third (the
"Merger"). Pursuant to the Affiliation Agreement and Merger
Agreement, the sole stockholder of National Bancorp will be
entitled to receive for each share of National Bancorp Common Stock
held by such stockholder at the effective time of the Merger (the
"Effective Time"), 2,540.924 shares of Fifth Third Common Stock,
which was determined by dividing $13,000,000 by 100 shares of
National Bancorp Common Stock and then dividing the resulting
quotient by $51.16250, the "Applicable Market Value Per Share of
Fifth Third Common Stock". Only whole shares of Fifth Third Common
Stock will be issued in connection with the Merger. No fractional
shares will be issued. Stockholders entitled to receive fractional
shares will receive cash in lieu thereof based upon the value per
share of Fifth Third Common Stock determined as provided above.
Under the rules and regulations of the Securities and
Exchange
Commission (the "Commission"), the solicitation of National
Bancorp's sole stockholder to approve the Merger constitutes an
offering of Fifth Third Common Stock to be issued in connection
with the Merger. Accordingly, Fifth Third has filed with the
Commission a Registration Statement under the Securities Act of
1933, as amended (the "Securities Act"), with respect to such
offering, and this Proxy Statement and Prospectus does not contain
all of the information set forth in such Registration Statement,
certain parts of which are omitted in accordance with the rules and
regulations of the Commission.
This Proxy Statement and Prospectus shall not constitute a
prospectus for public reoffering of the Fifth Third Common Stock
issuable pursuant to the Merger.
THE SECURITIES OF FIFTH THIRD BANCORP TO BE ISSUED IN THE
MERGER HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION, NOR HAS THE COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROXY STATEMENT AND PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
The date of this Proxy Statement and Prospectus is March ____,
1994.<PAGE>
TABLE OF CONTENTS
AVAILABLE INFORMATION
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
SUMMARY OF THE PROXY STATEMENT AND PROSPECTUS
SELECTED HISTORICAL FINANCIAL DATA OF FIFTH THIRD
SELECTED HISTORICAL FINANCIAL DATA OF NATIONAL BANCORP
GENERAL INFORMATION
PURPOSES OF THE SPECIAL MEETING
Proposal to Merge National Bancorp into Fifth Third
Vote Required; Shares Entitled to Vote
Voting and Revocation of Proxies
Solicitation of Proxies
COMPARATIVE PER SHARE DATA
TERMS AND CONDITIONS OF THE PROPOSED MERGER
Background and Reasons for the Merger
Recommendation
Effective Time
Conversion of Shares of National Bancorp Common Stock
Merger Price
Stock Options
No Fractional Shares
Exchange of Certificates
Federal Income Tax Consequences
Accounting Treatment
Rights of Dissenting Shareholders
Conduct Pending Merger; Representations and Warranties
Conditions to Closing
Amendment; Waiver; Termination
Effect on FNB and NBC Employees
Interests of Management
Effects of Merger
Transactions With Affiliated Persons
CAPITAL REQUIREMENTS
RESALE OF FIFTH THIRD COMMON STOCK BY AFFILIATES
FIFTH THIRD BANCORP
Description of Business
Securities Exchange Act of 1934
NATIONAL BANCORP
Description of Business
Regulations
Dividends
Bank Holding Companies In General
EFFECT OF GOVERNMENTAL POLICIES
DESCRIPTION OF CAPITAL STOCK
Voting Rights
Dividends
Preemptive Rights
Rights Upon Liquidation
Indemnification and Personal Liability of
Directors and Officers
Shareholders' Meetings; Quorum
Subscription, Conversion, Redemption Rights;
Stock Nonassessable
Change of Control Provisions
CERTAIN BENEFICIAL OWNERS OF FIFTH THIRD STOCK
FIFTH THIRD MANAGEMENT
NATIONAL BANCORP BOARD OF DIRECTORS
BUSINESS OF THE NATIONAL BANCORP OF KENTUCKY, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF THE NATIONAL BANCORP OF
KENTUCKY'S FINANCIAL CONDITION AND RESULTS OF OPERATIONS
LEGAL MATTERS
EXPERTS
OTHER MATTERS
NATIONAL BANCORP FINANCIAL STATEMENTS
Annexes:
Annex A: Affiliation Agreement by and between Fifth
Third
and National Bancorp dated as of December 6,
1993
(excluding exhibits)
Annex B: Agreement of Merger dated as of December 6,
1993
between Fifth Third and National Bancorp
Annex C: Kentucky Revised Statutes Sections 271B.13-010
et
seq., Statutory Rights of Dissenting
shareholders
<PAGE>
AVAILABLE INFORMATION
THIS PROXY STATEMENT AND PROSPECTUS INCORPORATES DOCUMENTS
BY
REFERENCE WHICH ARE NOT PRESENTED HEREIN OR DELIVERED HEREWITH.
SEE "INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE". THESE
DOCUMENTS (EXCLUDING EXHIBITS UNLESS SPECIFICALLY INCORPORATED
THEREIN) ARE AVAILABLE WITHOUT CHARGE UPON WRITTEN OR ORAL REQUEST
FROM MICHAEL K. KEATING, SECRETARY, FIFTH THIRD BANCORP, 38
FOUNTAIN SQUARE PLAZA, CINCINNATI, OHIO 45263 (TELEPHONE NUMBER:
(513) 579-5300). IN ORDER TO ENSURE TIMELY DELIVERY OF THE
DOCUMENTS, ANY REQUEST SHOULD BE MADE BY MARCH 25, 1994.
No person has been authorized to give any information or to
make any representation in connection with this offering other than
those contained in this Proxy Statement and Prospectus, and, if
given or made, such information or representation must not be
relied upon as having been authorized by Fifth Third or National
Bancorp. This Proxy Statement and Prospectus shall not constitute
an offer to sell or a solicitation of an offer to buy any
securities in any jurisdiction in which it would be unlawful to
make such offer or solicitation. Neither the delivery of this
Proxy Statement and Prospectus at any time, nor any offer or
solicitation made hereunder, shall under any circumstances imply
that the information set forth herein or incorporated herein is
correct as of any time subsequent to its date.
Fifth Third is subject to the information requirements of
the
Securities Exchange Act of 1934, as amended (the "Exchange Act"),
and, in accordance therewith, files reports, proxy statements and
other information with the Commission. Reports, proxy statements
and other information filed by Fifth Third can be inspected and
copied at Room 1024 of the Offices of the Commission at 450 Fifth
Street, N.W., Washington, D.C. 20549, and at the Commission's
Regional Offices in New York, (7 World Trade Center, 13th Floor,
New York, New York 10048) and Chicago (Northwestern Atrium Center,
500 West Madison Street, Suite 1400, Chicago, Illinois 60661-2511),
and copies of such material can be obtained from the Public
Reference Section of the Commission, 450 Fifth Street, N.W.,
Washington, D.C. 20549, at prescribed rates.
All information contained in this Proxy Statement and
Prospectus with respect to National Bancorp was supplied by
National Bancorp and all information contained or incorporated in
this Proxy Statement and Prospectus with respect to Fifth Third was
supplied by Fifth Third.
Although neither National Bancorp nor Fifth Third has any
knowledge that would indicate that any statements or information
relating to the other party contained herein is inaccurate or
incomplete, neither National Bancorp nor Fifth Third can warrant
the accuracy or completeness of such statements or information as
they relate to the other party.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents are hereby incorporated into this
Proxy Statement and Prospectus by reference.
Fifth Third:
(a) Fifth Third's Annual Report on Form 10-K for the year ended
December 31, 1993;
(b) Pages 15-36 of Fifth Third's 1993 Annual Report to
Shareholders;
(c) Fifth Third's Proxy Statement dated February 10, 1994.
In addition, all subsequent documents filed with the
Securities and Exchange Commission by Fifth Third pursuant to
Sections 13(a), 13(c), 14 or 15(d) of the Securities Exchange Act
of 1934, as amended, prior to the Effective Time are incorporated
herein by reference. Any statement contained in a document
incorporated or deemed to be incorporated by reference herein shall
be deemed to be modified or superseded for purposes of this Proxy
Statement and Prospectus to the extent that a statement contained
herein (or in any other subsequently filed document which also is
deemed to be incorporated by reference herein) modifies or
supersedes such statement. Any statement so modified or superseded
shall not be deemed, except as so modified or superseded, to
constitute a part of this Proxy Statement and Prospectus.
SUMMARY OF THE PROXY STATEMENT AND PROSPECTUS
The following is a summary of certain information contained
elsewhere in this Proxy Statement and Prospectus and the documents
incorporated herein by reference. This summary is not intended to
be a summary of all information relating to the Merger and is
qualified in its entirety by reference to the more detailed
information contained elsewhere in this Proxy Statement and
Prospectus, including the Annexes hereto, and the documents
incorporated by reference in this Proxy Statement and Prospectus.
Parties to the Merger:
Fifth Third: Fifth Third is a registered multi-bank
holding
company, incorporated under Ohio law,
which
conducts its principal activities through
its
banking and non-banking subsidiaries. As
of
December 31, 1993, Fifth Third's 9
subsidiary
banks operated a general banking business
from
288 offices located throughout Ohio,
Indiana
and Kentucky. Fifth Third is also a
registered unitary savings and loan
holding
company and operates a federally
chartered
savings bank located in Naples, Florida.
At
December 31, 1993, Fifth Third had
consolidated assets, deposits and
shareholders' equity of $12.0 billion,
$8.6
billion and $1.2 billion, respectively.
Fifth
Third's voting stock is traded
over-the-counter and is listed on the
NASDAQ
National Market System under the symbol
"FITB." Fifth Third's principal
executive
offices are located at 38 Fountain Square
Plaza, Cincinnati, Ohio 45263, and its
telephone number is (513) 579-5300.
National Bancorp: National Bancorp is a registered
multi-bank
holding company, incorporated under
Kentucky
law, which conducts its principal
activities
through its two wholly owned national
bank
subsidiaries, The First National Bank of
Falmouth, Falmouth, Kentucky ("FNB") and
The
National Bank of Cynthiana, Cynthiana,
Kentucky ("NBC"). At December 31, 1993,
on a
consolidated basis National Bancorp had
total
assets, total deposits and stockholders'
equity of $96.4 million, $83.4 million
and
$5.0 million, respectively. All of
National
Bancorp's voting stock is held by one
individual, Tracy W. Farmer, a resident
of
Kentucky. National Bancorp's principal
offices are located at 2560 Richmond
Road,
Lexington, Kentucky 40509, and its
telephone
number is (606) 269-0547.
Special Meeting of National Bancorp's Sole Stockholder:
Time and Date: 3:00 P.M. on April 15, 1994
Place: 2560 Richmond Road, Lexington, Kentucky
40509
Purpose: To consider and vote upon an Affiliation
Agreement and Merger Agreement which
provide
for the Merger of National Bancorp with
and
into Fifth Third. Pursuant to the
Affiliation
Agreement and Merger Agreement, National
Bancorp's sole stockholder will receive
shares
of Fifth Third's Common Stock in exchange
for
shares of National Bancorp's Common
Stock.
Copies of the Affiliation Agreement and
Merger
Agreement are attached hereto as Annex A
and
Annex B, respectively, and are
incorporated
herein by reference.
Required Vote for the Merger,
the Affiliation Agreement and
the Merger Agreement;
Record Date: Approval of the Merger, the Affiliation
Agreement and the Agreement of Merger
requires
the affirmative vote of holders of a
majority
of the 100 shares of National Bancorp's
Common
Stock, no par value, outstanding as of
the
close of business on March 1, 1994. An
abstention or failure to vote has the
same
effect as voting against the proposed
Merger.
Accordingly, stockholders are urged to
sign
and return their proxies. See "PURPOSES
OF
THE SPECIAL MEETING - Voting and
Revocation of
Proxies".
Beneficial Ownership by Officers
and Directors: As of the close of business on March 1,
1994,
the President of National Bancorp
beneficially
owned 100 shares (100%) of the National
Bancorp Common Stock.
Rights of Dissenting
Stockholders: Holders of National Bancorp Common Stock
who
do not vote in favor of the Merger are
entitled to demand cash in lieu of Fifth
Third
Common Stock in the amount of the fair
value
of their shares determined in accordance
with
Kentucky law. See "TERMS AND CONDITIONS
OF
THE PROPOSED MERGER - Rights of
Dissenting
Shareholders" and Annex C.
Terms of the Merger:
Conversion of National
Bancorp Common Stock;
Stock
Consideration: Upon consummation of the Merger, the sole
stockholder of National Bancorp will be
entitled to receive, for each share of
National Bancorp Common Stock which he
holds
at the effective time of the Merger (the
"Effective Time"), 2,540.924 shares of
Fifth
Third's common stock, no par value
("Fifth
Third Common Stock"). See "TERMS AND
CONDITIONS OF THE PROPOSED MERGER -
Conversion
of Shares of National Bancorp Common
Stock"
and "- Merger Price".
No Fractional
Shares: No fractional shares will be issued in
connection with the Merger. The National
Bancorp stockholder will receive cash in
lieu
of any fractional shares which he would
otherwise be entitled to receive, based
on the
applicable value per share of such shares
as
defined above.
Conditions of
Closing: The Merger is subject to several
significant
conditions, including stockholder
approval,
approval by the Board of Governors of the
Federal Reserve System, the Federal
Deposit
Insurance Corporation and the Kentucky
Department of Financial Institutions.
See
"TERMS AND CONDITIONS OF THE PROPOSED
MERGER -
Conditions to Closing".
Merger: Upon consummation of the Merger, National
Bancorp will merge with and into Fifth
Third
and National Bancorp will cease to exist
as a
separate entity. As a result of the
Merger,
FNB and NBC will become wholly owned
subsidiaries of Fifth Third.
Simultaneously
with the Merger, FNB will be merged with
and
into The Fifth Third Bank of Northern
Kentucky, Inc., Florence, Kentucky, a
wholly
owned subsidiary of Fifth Third, and NBC
will
be merged with and into The Fifth Third
Bank
of Central Kentucky, Inc., Lexington,
Kentucky, and FNB and NBC will cease to
exist
as separate entities.
Effective Time;
Right to Terminate: The Effective Time will, unless the
parties
agree otherwise, occur on the last
business
day of the month in which all of the
conditions precedent to the Closing,
including
receipt of all regulatory approvals and
the
expiration of any applicable waiting
periods,
have been fully met or effectively
waived.
The parties anticipate that the Merger
will be
consummated in late May, 1994 or shortly
thereafter. National Bancorp and Fifth
Third
each will have the right to terminate the
Affiliation Agreement if the Effective
Time
does not occur on or before September 30,
1994. See "TERMS AND CONDITIONS OF THE
PROPOSED MERGER - Effective Time".
Procedure for
Exchange of Shares: Promptly after the Effective Time, Fifth
Third
will mail to the National Bancorp
stockholder
a form of transmittal letter and
instructions
for the surrender of National Bancorp
Common
Stock for the shares of Fifth Third
Common
Stock to which such stockholder is
entitled.
Certificates for shares of Fifth Third
Common
Stock will be issued to the National
Bancorp
stockholder only after his certificates
for
National Bancorp Common Stock have been
surrendered in accordance with such
instructions. See "TERMS AND CONDITIONS
OF
THE PROPOSED MERGER - Exchange of
Certificates".
Federal Income
Tax Consequences: The Merger is conditioned, in part, upon
receipt of an opinion of Fifth Third's
counsel
with respect to certain tax matters,
including
an opinion that no gain or loss (other
than
with respect to cash received in lieu of
fractional shares, or cash received upon
the
exercise of dissenters' rights) will be
recognized by National Bancorp's
stockholder
upon the exchange of his National Bancorp
Common Stock for Fifth Third Common
Stock.
See "TERMS AND CONDITIONS OF THE PROPOSED
MERGER - Federal Income Tax
Consequences".
THE STOCKHOLDER IS URGED TO CONSULT HIS
OWN
TAX ADVISORS AS TO THE SPECIFIC
CONSEQUENCES
TO HIM OF THE MERGER UNDER FEDERAL,
STATE,
LOCAL AND ANY OTHER APPLICABLE TAX LAWS.
Accounting: It is intended that the Merger will be
accounted for by the pooling of interests
method in accordance with generally
accepted
accounting principles. See "TERMS AND
CONDITIONS OF THE PROPOSED MERGER -
Accounting
Treatment" and "- Conditions to Closing".
Interests of Certain
Persons in the
Merger: Fifth Third shall use its best efforts to
employ at Fifth Third or at a Fifth Third
subsidiary or affiliate each of the
employees
of National Bancorp, FNB and NBC. Each
employee of National Bancorp, FNB or NBC
who
becomes an employee of Fifth Third or its
subsidiaries subsequent to the Merger
will be
entitled to participate in all employee
benefit plans sponsored by Fifth Third or
its
subsidiaries on the same terms and to the
same
extent as similarly situated employees.
Such
employees shall receive credit for their
period of service to National Bancorp for
purposes of determining participation and
vesting in all Fifth Third employee
benefit
plans (except for vesting in the Fifth
Third
Master Retirement Plan) but not for the
purposes of determining the benefits
accrued
thereunder.
The officers and directors of National
Bancorp
will also be provided certain directors
and
officers liability insurance protection
for
two (2) years following the Effective
Time.
See "TERMS AND CONDITIONS OF THE PROPOSED
MERGER - Effect on FNB and NBC Employees"
and
"- Interests of Management".
Board
Recommendation: The Board of Directors of National
Bancorp
believes that the stockholder of National
Bancorp will benefit from the Merger
through
an affiliation with Fifth Third and
unanimously recommends approval of the
Merger.
Securities
Involved: For a comparative analysis of the
National
Bancorp Common Stock and the Fifth Third
Common Stock, see "DESCRIPTION OF CAPITAL
STOCK".
Comparative
Market Prices: The Fifth Third Common Stock is traded on
the
National Association of Securities
Dealers
Automated Quotation ("NASDAQ") National
Market
System under the symbol FITB. The
National
Bancorp Common Stock is held by Tracy W.
Farmer. On December 3, 1993, the
business day
immediately preceding the public
announcement
of the execution of the Affiliation
Agreement
and the Merger Agreement setting forth
the
terms of the Merger, and on March 1,
1994, the
market price of the Fifth Third Common
Stock
was as follows:
Closing Sales Prices
December 3, 1993 March
1, 1994
Fifth Third Common Stock $50.25 $
SELECTED HISTORICAL FINANCIAL DATA OF FIFTH THIRD
The following table sets forth certain historical financial
data concerning Fifth Third. This information is based on
information contained in Fifth Third's 1993 Annual Report on Form
10-K which is incorporated by reference in this Proxy Statement and
Prospectus and should be read in conjunction therewith. See
"INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE".<PAGE>
<TABLE>
<CAPTION>
Years
Ended December 31,
- ------------------------------------------------------------
1993 1992
1991 1990 1989
----------- -----------
- ----------- ----------- -----------
($000's
except per share amounts)
<S> <C> <C>
<C> <C> <C>
Summary of Operations:
Net interest income $436,389 $394,194
$332,221 $286,621 $268,703
Provision for credit losses 44,487 65,315
55,744 39,879 36,468
Net interest income after ----------- -----------
- ----------- ----------- -----------
provision for credit losses 391,902 328,879
276,477 246,742 232,235
Other operating income 226,578 200,053
171,911 144,865 124,851
Operating expenses 323,387 289,276
249,792 223,324 207,527
----------- -----------
- ----------- ----------- -----------
Income before income taxes 295,093 239,656
198,596 168,283 149,559
Applicable income taxes 98,646 75,564
60,446 47,872 41,241
----------- -----------
- ----------- ----------- -----------
Net income $196,447 $164,092
$138,150 $120,411 $108,318
=========== ===========
=========== =========== ===========
Common Share Data:
Primary net income per share $3.21 $2.73
$2.32 $2.05 $1.85
Fully diluted net income per share 3.21 2.73
2.31 2.04 1.85
Cash dividends declared per share 1.02 .90
.78 .68 .60
Book value at period end 19.50 16.80
14.81 13.25 11.91
Average shares outstanding (000's):
Primary 62,557 60,255
59,493 58,929 58,521
Fully Diluted 62,563 60,356
59,702 58,974 58,579
Financial Condition at Period End:
Securities Available for Sale (at market) $815,986 --
-- -- --
Securities Held for Investment 1,487,322 $1,933,008
$2,063,766 $1,354,966 $1,059,204
Loans and Leases 8,811,039 7,474,859
5,806,612 5,496,990 5,163,840
Assets 11,966,000 10,213,320
8,826,130 7,955,808 7,142,972
Deposits 8,628,498 7,531,946
6,687,262 6,385,221 5,783,527
Funds Borrowed 1,602,217 1,229,791
1,042,566 607,047 479,219
Long-Term Debt and
Convertible Subordinated Notes 282,864 254,061
12,848 13,517 12,607
Shareholders' Equity 1,197,646 1,005,165
879,450 782,698 699,261
Ratios:
Profitability Ratios:
Return on average assets 1.80% 1.74%
1.68% 1.64% 1.62%
Return on average stockholders' equity 18.2 17.3
16.6 16.2 16.5
Net interest margin 4.51 4.73
4.58 4.53 4.70
Overhead ratio (1) 47.3 47.3
47.7 49.5 50.3
Other operating income to total income (2) 33.5 33.5
33.6 33.6 31.6
Capital Ratios:
Average shareholders' equity to
average assets 9.92 10.07
10.11 10.12 9.83
Tier 1 Capital to risk-adjusted assets (3) 11.4 11.2
12.5 11.9 N/A
Total Capital to risk-adjusted assets (3) 13.8 14.1
13.7 13.2 N/A
Leverage (4) 9.9 9.5
9.7 9.8 N/A
Credit Quality Ratios:
Reserve for credit losses to
nonperforming assets 559.8 214.5
92.6 90.7 221.0
Reserve for credit losses to loans and leases
outstanding 1.53 1.54
1.56 1.55 1.55
Net charge-offs to average loans and leases
outstanding .32 .68
.90 .66 .52
Nonperforming assets to loans, leases and
other real estate owned .27 .71
1.67 1.70 .70
- ------------------------------------------
<FN>
(1) Operating expenses divided by the sum of taxable equivalent net
interest income and other
operating income.
(2) Other operating income excluding securities gains and losses as
a percent of net interest income
and other operating income excluding securities gains and
losses.
(3) Under final year-end 1992 guidelines.
(4) Tier 1 capital (under final year-end 1992 rules) divided by
average quarterly assets.
</TABLE>
<PAGE>
SELECTED HISTORICAL FINANCIAL DATA OF NATIONAL
BANCORP
The following table sets forth certain historical financial
data concerning National Bancorp. This information is based on
information contained in National Bancorp's 1993 Annual Report to
Shareholders.<PAGE>
<TABLE>
<CAPTION>
At December 31
1993 1992 1991 1990
1989
(dollars in
thousands)
<S> <C> <C> <C> <C>
<C>
Total amount of:
Assets 96,428 98,199 100,866 102,728
97,898
Loans receivable, net 49,864 40,344 44,104 48,557
64,279
Mortgage-backed 27,727 35,739 39,703 35,183
18,551
securities, net
Investment securities 34,653 44,935 48,342 40,731
24,413
Investment-bearing 7,700 6,725 1,700 4,525
3,800
deposits in other
financial institutions
Deposit accounts 83,844 86,929 89,433 89,046
85,473
Advances from FHLB 0 0 0 0
0
Stockholders' equity 5,005 3,866 2,858 3,131
2,605
Number of:
Real estate loans N/A N/A N/A N/A
N/A
outstanding
Deposit accounts N/A N/A N/A N/A
N/A
Full service offices 5 5 5 5
5
open
</TABLE>
<TABLE>
<CAPTION>
Year Ended June 30
1993 1992 1991 1990
1989
<S> <C> <C> <C> <C>
<C>
Operations Data:
Interest Income 6,720 7,656 9,058 9,650
9,352
Interest Expense 3,013 3,889 5,620 6,187
5,937
Net interest income 3,707 3,767 3,438 3,464
3,415
Provision for loan losses 85 244 313 310
211
Net interest income after 3,622 3,523 2,625 3,154
3,204
Other income 735 842 579 430
579
General, administrative an 2,859 2,878 3,652 2,891
2,555
Earnings before income tax 1,679 1,487 (448) 693
1,228
Federal income taxes 502 479 (208) 109
319
Net earnings 1,139 1,008 (240) 584
908
Primary earnings per share N/A N/A N/A N/A
N/A
Dividends per common share N/A N/A N/A N/A
N/A
Dividend payout ratio N/A N/A N/A N/A
N/A
</TABLE>
<PAGE>
THE NATIONAL BANCORP OF KENTUCKY, INC.
2560 Richmond Road
Lexington, Kentucky 40509
(606) 269-0547
AND
FIFTH THIRD BANCORP
38 Fountain Square Plaza
Cincinnati, Ohio 45263
(513) 579-5300
PROXY STATEMENT AND PROSPECTUS
GENERAL INFORMATION
This Proxy Statement and Prospectus is being furnished to
the
sole stockholder of The National Bancorp of Kentucky, Inc.
("National Bancorp") in connection with the solicitation by the
Board of Directors of National Bancorp of proxies to be used at a
Special Meeting of the stockholder (the "Special Meeting") to be
held on April 15, 1994, at 3:00 at 2560 Richmond Road, Lexington,
Kentucky 40509, and at any adjournments thereof. This Proxy
Statement and Prospectus and the enclosed form of proxy are first
being sent to the sole stockholder of National Bancorp on or about
March ___, 1994.
PURPOSES OF THE SPECIAL MEETING
At the Special Meeting, the sole stockholder of National
Bancorp will be asked to approve an Affiliation Agreement and an
Agreement of Merger, both dated as of December 6, 1993 (the
"Affiliation Agreement" and the "Merger Agreement", respectively),
between National Bancorp and Fifth Third Bancorp ("Fifth Third"),
which provide for the merger (the "Merger") of National Bancorp
with and into Fifth Third (see "TERMS AND CONDITIONS OF THE
PROPOSED MERGER" below).
Proposal to Merge National Bancorp into Fifth Third
Pursuant to the Affiliation Agreement and the Merger
Agreement, the sole stockholder of National Bancorp will be
entitled to receive, for each share of National Bancorp common
stock, no par value ("National Bancorp Common Stock"), which such
stockholder holds at the effective time of the Merger (the
"Effective Time"), 2,540.924 shares of Fifth Third common stock, no
par value ("Fifth Third Common Stock"). The number of shares of
Fifth Third Common Stock to be issued to the sole stockholder of
National Bancorp in this transaction will be determined by
multiplying 2,540.924 by the total number of shares of National
Bancorp Common Stock held by such stockholder as discussed below.
See "TERMS AND CONDITIONS OF THE PROPOSED MERGER - Merger Price"
below.
NATIONAL BANCORP'S BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE
FOR THE APPROVAL OF THE AFFILIATION AGREEMENT AND MERGER AGREEMENT.
Vote Required; Shares Entitled to Vote
The presence in person or by proxy of the holders of a
majority of the outstanding shares of National Bancorp Common Stock
will constitute a quorum for the transaction of business at the
Special Meeting. APPROVAL OF THE MERGER WILL REQUIRE THE
AFFIRMATIVE VOTE OF A MAJORITY OF THE OUTSTANDING SHARES OF
NATIONAL BANCORP COMMON STOCK. Holders of record of National
Bancorp Common Stock at the close of business on March 1, 1994,
(the "Record Date") are entitled to receive notice of, and to vote
at, the Special Meeting. At the close of business on February 28,
1994, there were 100 shares of National Bancorp Common Stock
outstanding. Each share of National Bancorp Common Stock will be
entitled to one vote.
Persons and groups owning in excess of 5% of the National
Bancorp Common Stock are required to file certain reports regarding
such ownership with National Bancorp and with the Securities and
Exchange Commission, in accordance with the Securities Exchange Act
of 1934. As of February 28, 1994, management of National Bancorp
was not aware of any person or group who beneficially owned more
than 5% of the outstanding shares of National Bancorp Common Stock
except as listed below. Such table also shows the number of and
percentage of outstanding shares of Fifth Third Common Stock each
such beneficial owner will hold upon consummation of the Merger
(assuming that each share of National Bancorp Common Stock is
converted into 2,540.924 shares of Fifth Third Common Stock.)<PAGE>
<TABLE>
<CAPTION>
Name and No. of Percent Shares Percent of
Address of Shares of of Outstanding
Beneficial Beneficially Outstanding Fifth Fifth Third
Owner Owned Shares Third Shares
to be
Owned
<S> <C> <C> <C> <C>
Tracy W. Farmer 100(1) 100% 254,092 .41%
2560 Richmond Rd
Lexington, KY 40509
All directors and
officers as a
group (8 persons) 100 100% 254,092 .41%
<FN>
(1) Includes shares held directly, shares held by certain family
members, with respect to which shares the respective persons may be
deemed to have shared voting and investment powers.
</FN>
/TABLE
<PAGE>
Voting and Revocation of Proxies
Shares represented by proxies properly signed and returned
will be voted at the Special Meeting in accordance with the
instructions thereon, unless revoked. If a proxy is signed and
returned without voting instructions, the shares represented
thereby will be voted IN FAVOR OF the Merger, and at the discretion
of the proxy holders as to any other matters which may properly
come before the Special Meeting. Each proxy may be revoked at any
time before its exercise by giving written notice to the Secretary
of the Meeting. A subsequently dated proxy will, if properly
presented, revoke a prior proxy. Any stockholder may attend the
Special Meeting and vote in person whether or not such stockholder
has previously given a proxy.
Solicitation of Proxies
Following the mailing of proxy solicitation materials,
directors, officers and employees of National Bancorp may solicit
proxies by mail, telephone, telegraph and personal interviews.
National Bancorp will bear the expense of proxy solicitation,
including reimbursement of reasonable out-of-pocket expenses
incurred by brokerage houses and other custodians, nominees and
fiduciaries in forwarding proxy solicitation material to the
beneficial owners of stock held of record by such persons. In
addition, National Bancorp may retain professional proxy solicitors
to aid in the solicitation of proxies and may pay reasonable
compensation therefor.<PAGE>
MARKET PRICE AND DIVIDEND DATA
Fifth Third Common Stock is traded in the over-the-counter
market and quoted on NASDAQ's National Market System. The
following table sets forth (in per share amounts), for the
quarterly periods indicated, the high and low closing sales prices
of Fifth Third Common Stock and the dividends declared during each
quarterly period.<PAGE>
<TABLE>
<CAPTION>
Fifth Third
Common Stock
High Low
Dividends Declared
<S> <C> <C>
<C>
Year Ended December 31, 1991:
First Calendar Quarter $28.00 $20.13
$0.18
Second Calendar Quarter $35.13 $27.13
$0.20
Third Calendar Quarter $40.38 $32.50
$0.20
Fourth Calendar Quarter $45.38 $38.00
$0.20
Year Ended December 31, 1992:
First Calendar Quarter $50.38 $43.00
$0.22
Second Calendar Quarter $46.75 $40.13
$0.22
Third Calendar Quarter $52.75 $40.75
$0.22
Fourth Calendar Quarter $54.00 $46.75
$0.24
Year Ended December 31, 1993:
First Calendar Quarter $55.13 $49.89
$0.24
Second Calendar Quarter $58.50 $50.25
$0.24
Third Calendar Quarter $54.63 $51.25
$0.27
Fourth Calendar Quarter $54.00 $49.75
$0.27
</TABLE>
<PAGE>
COMPARATIVE PER SHARE DATA
The following table sets forth certain per-share information
at the dates indicated and for the periods then ended of Fifth
Third and National Bancorp. The equivalent values of such
information are based on the exchange of 2,540.924 shares of Fifth
Third Common Stock for the merger of National Bancorp with and into
Fifth Third. Neither National Bancorp nor Fifth Third can give any
assurances that the following table will accurately reflect figures
and values applicable at the date of consummation of the merger
transaction.<PAGE>
<TABLE>
<CAPTION>
For the Periods Ended:
Equivalent Share Basis -
Fifth Third National
2540.924 Shares of
Bancorp Fifth
Third Common Stock
Primary Fully Actual Primary
Fully
Diluted
Diluted
<S> <C> <C> <C> <C>
<C>
Net Income Per Share
From Continuing
Operations
December 31, 1989 $1.85 $1.85
$4,700.71
December 31, 1990 $2.05 $2.04
$5,208.89
December 31, 1991 $2.32 $2.31
$5,894.94
December 31, 1992 $2.73 $2.73
$6,936.72
December 31, 1993 $3.21 $3.21
$8,156.37
Dividends Declared
Per Share
December 31, 1989 $0.60
December 31, 1990 $0.68
December 31, 1991 $0.78
December 31, 1992 $0.90
December 31, 1993 $1.02
Book Value Per Share
December 31, 1989 $11.91
December 31, 1990 $13.25
December 31, 1991 $14.81
December 31, 1992 $16.80
December 31, 1993 $19.50
Market Value Per Share $50.25
on December 31 1993(1)
<FN>
(1) December 3 1993
was the last day of
trading preceding the
public announcement of
the acquisition
</FN>
</TABLE>
TERMS AND CONDITIONS OF THE PROPOSED MERGER
The following description contains, among other information,
summaries of certain provisions of the Affiliation Agreement and
the Merger Agreement and is qualified in its entirety by reference
to the full text thereof, copies of which are reproduced as Annex
A and Annex B, respectively, to this Proxy Statement and Prospectus
and are incorporated herein by reference.
Background and Reasons for the Merger
In the fourth quarter of 1993, National Bancorp and Fifth
Third entered into negotiations which on December 6, 1993 resulted
in the execution of the definitive Affiliation Agreement and the
Agreement of Merger whereby National Bancorp will be merged with
and into Fifth Third. The Board of Directors of National Bancorp
unanimously approved the Affiliation Agreement and the Merger
Agreement on December 6, 1993.
The Board of Directors of National Bancorp believes that the
terms of the Merger are fair to the National Bancorp stockholder
and that consummation of the Merger is in the best interests of
National Bancorp, The First National Bank of Falmouth ("FNB") and
The National Bank of Cynthiana ("NBC"). In reaching this business
judgment, the Board considered, among other things, the Merger
price as it relates to the market value, book value and earnings
per share of National Bancorp Common Stock and Fifth Third Common
Stock, information concerning the financial condition, results of
operations and prospects of National Bancorp, FNB and NBC, the
ability of the surviving entity to compete in FNB and NBC's
existing markets, the anticipated tax-deferred nature of the Merger
to the National Bancorp stockholder under the Internal Revenue Code
of 1986, as amended (the "Code") (to the extent Fifth Third stock
is received) and the financial terms of other recent acquisitions
of bank holding companies and their subsidiary national banks.
The Boards of Directors of National Bancorp, FNB and NBC
believe that by virtue of the Merger, FNB and NBC will be able to
compete more effectively in their market areas and to provide much
broader services to its customers.
Fifth Third's primary reason for consummating the Merger is
to
further a long-range commitment of realigning and expanding its
branch system to better meet and satisfy the financial needs of the
customers in the National Bancorp, FNB and NBC's service areas.
In view of all the considerations described above, the Board
of Directors of National Bancorp unanimously recommends that its
stockholder vote FOR the Merger. For information regarding
interests of directors and executive officers of National Bancorp,
FNB and NBC in the Merger, see "National Bancorp Board of
Directors" "Effect on FNB and NBC Employees" and "Interests of
Management."
Recommendation
THE BOARD OF DIRECTORS OF NATIONAL BANCORP HAS UNANIMOUSLY
APPROVED THE MERGER AND RECOMMENDS A VOTE IN FAVOR OF THE MERGER.
Tracy W. Farmer, a member of National Bancorp's Board of
Directors, beneficially owns 100 shares (or 100%) of the National
Bancorp Common Stock outstanding. He has indicated his intention
to vote all of his shares of National Bancorp Common Stock in favor
of the Merger.
Effective Time
The Effective Time of the Merger will occur on the last
business day of the month in which all conditions precedent
contained in the Affiliation Agreement have been met or waived,
including the expiration of all applicable waiting periods. It is
anticipated that the Merger will be consummated in late May, 1994
or shortly thereafter, although no assurance can be given in this
regard. National Bancorp and Fifth Third each will have the right,
but not the obligation, to terminate the Affiliation Agreement if
the Effective Time does not occur on or before September 30, 1994.
Conversion of Shares of National Bancorp Common Stock
At the Effective Time, any shares of National Bancorp Common
Stock held in the treasury of National Bancorp will be cancelled
and retired. No cash, securities or other consideration will be
paid or delivered in exchange for any such treasury shares. 1,900
authorized but unissued shares existed as of the date of execution
of the Affiliation Agreement. Each share of National Bancorp
Common Stock which is issued and outstanding immediately prior to
the Effective Time which is not then held in National Bancorp's
treasury and which is not a dissenting share (as described below)
will be converted at the Effective Time into a fraction of a share
of Fifth Third Common Stock. See "Merger Price" herein.
The exchange ratio set forth herein shall be adjusted so as
to
give National Bancorp stockholders the economic benefit of any
stock dividends, reclassifications, recapitalizations, split-ups,
exchanges of shares, distributions or combinations or subdivision
of Fifth Third Common Stock effected between the date of the
Affiliation Agreement and the Effective Date.
Merger Price
At the Effective Time of the Merger, each of the shares of
National Bancorp Common Stock that are issued and outstanding
immediately prior to the Effective Time will, when the Merger
becomes effective, be converted by virtue of the Merger and without
further action, into 2,540.924 shares of Fifth Third Common Stock.
Such conversion ratio was determined by dividing $13,000,000 by 100
shares of National Bancorp Common Stock and then dividing the
resulting quotient by $51.16250, the Applicable Market Value Per
Share of Fifth Third Common Stock (as that term is defined in the
Affiliation Agreement).
The Fifth Third Common Stock will be distributed to National
Bancorp's sole stockholder upon the surrender of his certificates
for shares of National Bancorp Common Stock to Fifth Third.
Stock Options
Currently, there are no outstanding options to purchase any
shares of National Bancorp Common Stock held by any party.
No Fractional Shares
Only whole shares of Fifth Third Common Stock will be issued
in connection with the Merger. In lieu of fractional shares, each
holder of shares of National Bancorp Common Stock otherwise
entitled to a fractional share of Fifth Third Common Stock will be
paid in cash in an amount equal to the amount of such fraction
multiplied by $51.16250. No such holder will be entitled to
dividends, voting rights or other rights in respect of any such
fractional share.
Exchange of Certificates
After the Effective Time, the holder of certificates
previously representing shares of National Bancorp Common Stock
will cease to have any rights as a stockholder of National Bancorp
and his sole rights will pertain to the shares of Fifth Third
Common Stock into which his shares of National Bancorp Common Stock
will have been converted pursuant to the Merger Agreement. As soon
as practicable after the Effective Time, Fifth Third will send to
the sole former National Bancorp stockholder a letter of
transmittal for use in submitting to Fifth Third (the "Exchange
Agent") certificates (or with instructions for handling lost
National Bancorp stock certificates) formerly representing shares
of National Bancorp Common Stock to be exchanged for certificates
representing Fifth Third Common Stock (and, to the extent
applicable, cash in lieu of fractional shares of Fifth Third Common
Stock) to which the former National Bancorp stockholder is entitled
to receive as a result of the Merger. If the sole stockholder of
National Bancorp becomes a holder of Fifth Third Common Stock in
the Merger, he will not be entitled to receive any dividends or
other distributions which may be payable to holders of record of
Fifth Third Common Stock following the Effective Time until he has
surrendered and exchanged his certificates evidencing ownership of
shares of National Bancorp Common Stock. Any dividends payable on
Fifth Third Common Stock after the Effective Time will be paid to
the Exchange Agent and, upon receipt of the certificates
representing shares of National Bancorp Common Stock, the Exchange
Agent will forward to the National Bancorp stockholder (i)
certificates representing his shares of Fifth Third Common Stock,
(ii) dividends declared thereon subsequent to the Effective Time
(without interest) and (iii) the cash value of any fractional
shares (without interest). NATIONAL BANCORP'S STOCKHOLDER IS
REQUESTED NOT TO SUBMIT STOCK CERTIFICATES UNTIL HE HAS RECEIVED
WRITTEN INSTRUCTIONS TO DO SO.
At the Effective Time, the stock transfer books of National
Bancorp will be closed and no transfer of the National Bancorp
Common Stock will thereafter be made on such books, and, if a
certificate formerly representing shares of National Bancorp Common
Stock is presented to National Bancorp or Fifth Third, it will be
forwarded to the Exchange Agent for cancellation and exchange for
a certificate representing shares of Fifth Third Common Stock.
Federal Income Tax Consequences
The following discussion summarizes the material federal
income tax consequences of the Merger to the sole shareholder of
National Bancorp.
THE FEDERAL INCOME TAX DISCUSSION SET FORTH BELOW
NECESSARILY
IS NOT SPECIFIC TO THE SITUATION OF A PARTICULAR STOCKHOLDER AND IS
INCLUDED FOR GENERAL INFORMATION ONLY. NATIONAL BANCORP'S SOLE
STOCKHOLDER SHOULD CONSULT HIS OWN TAX ADVISER AS TO THE SPECIFIC
TAX CONSEQUENCES OF THE MERGER TO HIM, INCLUDING THE APPLICATION
AND EFFECT OF FEDERAL, STATE, LOCAL AND OTHER TAX LAWS.
The federal income tax consequences to the National Bancorp
stockholder depend upon (i) the form of consideration received in
exchange for the shares of National Bancorp Common Stock actually
owned by him, and (ii) in the case of a National Bancorp
stockholder receiving cash, or a combination of cash and Fifth
Third Common Stock, the type of consideration received in exchange
for shares of National Bancorp Common Stock deemed to be
constructively owned by him under Section 318(a) of the Internal
Revenue Code of 1986, as amended (the "Code"), if any. Generally,
under Section 318(a), a stockholder is deemed to constructively own
shares owned directly or indirectly by certain related individuals
(including spouses, children, grandchildren and parents) or by
certain related entities (including partnerships, trusts, estates,
and corporations in which the stockholder owns, directly or
indirectly, 50% or more in value of the stock). Under Section
318(a), if any person has an option to acquire stock, such stock is
considered as owned by such person.
National Bancorp stockholders Receiving Solely Fifth Third
Common Stock. If the National Bancorp stockholder receives solely
Fifth Third Common Stock in exchange for all shares of National
Bancorp Common Stock actually owned by him, such stockholder will
not recognize any gain or loss upon such exchange. The tax basis
of the Fifth Third Common Stock received in such exchange will be
equal to the basis of the shares of National Bancorp Common Stock
surrendered and, provided the shares of National Bancorp Common
Stock surrendered were held as capital assets at the time of such
exchange, the holding period of the Fifth Third Common Stock
received will include the holding period of the shares of National
Bancorp Common Stock surrendered.
National Bancorp stockholders Receiving Solely Cash. If all
the shares of National Bancorp Common Stock actually owned and
deemed to be constructively owned under Code Section 318(a) by the
National Bancorp stockholder are exchanged solely for cash upon the
exercise of dissenters' rights, such National Bancorp stockholder
will recognize capital gain or loss (provided he held the shares
actually owned by him as capital assets at the time of the
exchange) measured by the difference between such stockholder's tax
basis in the shares of National Bancorp Common Stock actually owned
by him and the amount of cash received by him in exchange for such
shares.
If a National Bancorp stockholder exchanges all the shares
of
National Bancorp Common Stock actually owned by him solely for cash
upon the exercise of dissenters' rights but shares of National
Bancorp Common Stock constructively owned by him under Code Section
318(a) are exchanged in whole or in part for Fifth Third Common
Stock, then the tax consequences to such stockholder will be
determined under Code Section 302 which deals with redemptions.
Section 302 contains three tests that are relevant in this context
to determine whether a redemption is taxed as ordinary income or as
a capital gain or loss (provided that the shares were held as
capital assets at the time of the exchange). Under Section 302, a
redemption, to the extent of available undistributed earnings and
profits, is treated as a dividend resulting in ordinary income
unless it (1) is "not essentially equivalent to a dividend"; (2) is
"substantially disproportionate" with respect to the stockholder;
or (3) completely terminates the stockholder's interest. If one of
those tests is satisfied, capital gain or loss recognized will be
measured by the difference between the amount of cash received by
the stockholder in exchange for the shares of National Bancorp
Common Stock actually owned by him and his tax basis in those
shares. If none of the tests is satisfied, and assuming the cash
distribution is not in excess of the current and accumulated
earnings and profits of National Bancorp, the stockholder will be
treated as having received dividend income equal to the amount of
cash received (without deduction for such stockholder's tax basis
in the National Bancorp shares).
Whether the transaction will be "not essentially equivalent
to
a dividend" with respect to a National Bancorp stockholder depends
upon the particular circumstances applicable to such stockholder,
there being no precise mathematical formula whereby it is possible
to assure satisfaction of this test. On the other hand, the
"substantially disproportionate" test is a mathematical test. The
transaction will be "substantially disproportionate" with respect
to a National Bancorp stockholder if his percentage ownership of
Fifth Third Common Stock after the Merger (considering shares
actually and constructively owned) is less than 50% of all Fifth
Third Common Stock and less than 80% of his hypothetical percentage
ownership of the total number of shares of Fifth Third Common Stock
immediately after the Merger if all of the National Bancorp Common
Stock had been exchanged for Fifth Third Common Stock (considering
shares actually and constructively owned).
The third test is the complete termination of interest,
which
can only be satisfied if all the National Bancorp shares actually
and constructively owned by the National Bancorp stockholder are
exchanged solely for cash upon the exercise of dissenters' rights,
except that Code Section 302 sets forth a procedure, which, under
certain circumstances, allows a waiver of the constructive
ownership rules as they apply to family members.
Under the rules of Section 302, a National Bancorp
stockholder
who receives cash on exercise of dissenters' rights for any
National Bancorp shares actually owned by him risks having such
amounts treated as a dividend rather than as capital gains if any
shares of National Bancorp Common Stock constructively owned by him
or her are exchanged in whole or in part for Fifth Third Common
Stock, the substantially disproportionate test is not met, and the
stockholder cannot or does not waive constructive ownership of the
shares held by others but which are attributed to him or her.
Cash Received in Lieu of Fractional Shares. No fractional
shares of Fifth Third Common Stock will be issued pursuant to the
Merger Agreement. A National Bancorp stockholder who receives cash
in lieu of a fractional share will be treated as having received
such fractional share of Fifth Third Common Stock and then as
having received such cash in redemption of such fractional share
subject to the provisions of Section 302 of the Code. The
circumstances under which cash is being issued in lieu of a
fractional share interest appear to satisfy the Internal Revenue
Service ruling guidelines under which the receipt of such cash will
qualify for capital gain or loss treatment (provided such
fractional interest is held as a capital asset at the time of such
exchange).
Because of the complexity of the tax laws, and because the
tax
consequences to any particular stockholder may be affected by
specific matters not common to all stockholders, it is recommended
that the National Bancorp stockholder consult his personal tax
advisors concerning the consequences of the Merger to him,
including the consequences of the application of state and local
tax laws, if any.
Accounting Treatment
In accordance with generally accepted accounting principles,
the Merger will be accounted for as a pooling of interests.
Under pooling of interests accounting, as of the Effective
Time, the assets and liabilities of National Bancorp will be added
to those of Fifth Third at their recorded book values and the
stockholders' equity account of National Bancorp will be included
on Fifth Third's consolidated balance sheet. See "COMPARATIVE
MARKET PRICE AND DIVIDEND DATA" and "COMPARATIVE PER SHARE DATA".
Rights of Dissenting Shareholders
The following is only a general summary of the provisions of
the Kentucky Revised Statutes relating to dissenters' rights and
should not be considered to be a comprehensive description. A copy
of the Kentucky dissenters' rights statute (Kentucky Revised
Statutes Sections 271B.13-010 et seq.) is appended hereto as Annex
C as a complete description of the rights and obligations of
National Bancorp and of any shareholder who desires to exercise
dissenters' rights. EACH STEP MUST BE TAKEN IN STRICT COMPLIANCE
WITH THE APPLICABLE PROVISIONS OF THE DISSENTERS' RIGHTS STATUTE IN
ORDER FOR HOLDERS OF NATIONAL BANCORP COMMON STOCK TO PERFECT
DISSENTERS' RIGHTS.
A National Bancorp stockholder entitled to vote on the
adoption of the Affiliation Agreement and the Merger Agreement may
dissent from the Merger and obtain payment of the fair value of his
shares in accordance with Sections 271B.13-010 et seq. of the
Kentucky Revised Statutes. Any National Bancorp stockholder who
desires to assert dissenters' rights must not vote his shares of
National Bancorp Common Stock in favor of the proposed Merger and
must deliver to National Bancorp before the vote is taken written
notice of his intent to demand payment for his shares if the Merger
is effectuated. If a stockholder does not initially satisfy these
two requirements, he is not entitled to demand payment for the
shares owned by him subsequent to the approval of the proposed
Merger.
If the shareholder delivers the notice to National Bancorp
as
required above, National Bancorp shall deliver to him a written
dissenters' notice no later than ten (10 days) after the date on
which the vote of the proposed merger was taken: (a) stating where
the payment demand must be send and where and when certificates for
certificated shares must be deposited; (b) stating the restrictions
on transfer after the payment demand is received, if any, on
holders of uncertificated shares; (c) supplying a form for
demanding payment that includes the date of the first announcement
to news media or to shareholders of the terms of the Merger and
requiring that the person asserting dissenters' rights certify
whether or not he acquired beneficial ownership of the shares
before that date; (d) indicating a date by which National Bancorp
must receive the payment demand, which date may not be fewer than
thirty nor more than sixty days after the date the notice to be
provided in this paragraph is delivered; and (e) providing a copy
of Sections 271B.13-010 et seq.
If the shareholder is sent a dissenter's notice as described
in the immediately preceding paragraph, he shall demand payment,
certify whether he acquired beneficial ownership of the shares
before the date required to be set forth in the dissenter's notice
and deposit his certificates in accordance with the terms of the
notice. IF THE SHAREHOLDER DOES NOT DEMAND PAYMENT OR DEPOSIT HIS
SHARE CERTIFICATES WHERE REQUIRED IN ACCORDANCE WITH THE TERMS SET
FORTH IN THE DISSENTER'S NOTICE, HE SHALL NOT BE ENTITLED TO
PAYMENT FOR HIS SHARES UNDER SECTIONS 271B.13-010 ET SEQ.
Upon receipt of a payment demand, National Bancorp shall pay
the shareholder who has taken all of the steps enumerated above the
amount National Bancorp estimates to be the fair value of his
shares, plus accrued interest. The payment shall be accompanied
by: (1) National Bancorp's balance sheet as of the end of a fiscal
year ending not more than sixteen (16) months before the date of
payment, an income statement for that year, a statement of changes
in shareholders' equity for that year, and the latest available
interim financial statements, if any; (2) a statement of National
Bancorp's estimate of the fair value of the shares; (3) an
explanation of how the interest was calculated; and (4) a statement
of the dissenter's right to demand payment under Kentucky Revised
Statutes 271B.13-280.
The shareholder may notify National Bancorp in writing of
his
own estimate of the fair value of his shares and amount of interest
due, and demand payment of his estimate (less any payment already
made to the shareholder) if: (a) the dissenter believes that the
amount to be paid as set out in the preceding paragraph is less
than the fair value of his shares or that the interest due is
incorrectly calculated; (b) National Bancorp fails to make payment
within sixty (60) days after the date set for demanding payment; or
(c) National Bancorp, having failed to take the proposed action,
does not return the deposited certificates or release the transfer
restrictions imposed on uncertificated shares within sixty (60)
days after the date set for demanding payment. A DISSENTER WAIVES
HIS RIGHT TO DEMAND PAYMENT AS DESCRIBED IN THIS PARAGRAPH UNLESS
HE NOTIFIES NATIONAL BANCORP OF HIS DEMAND IN WRITING WITHIN THIRTY
(30) DAYS AFTER NATIONAL BANCORP MADE OR OFFERED PAYMENT FOR HIS
SHARES.
If the dissenting shareholder and National Bancorp are
unable
to resolve the fair market value of and interest owed upon the
shares, National Bancorp shall commence a proceeding within sixty
(60) days after receiving the payment demand and petition the court
to determine the fair value of the shares and accrued interest. If
National Bancorp does not commence the proceeding within the sixty
(60) day period, it shall pay the dissenting shareholder the amount
demanded. National Bancorp shall commence the proceeding in
Fayette County, Kentucky. The court may appoint one (1) or more
persons as appraisers to receive evidence and recommend decision on
the question of fair value. The dissenter shall be entitled to the
same discovery rights as parties in other civil proceedings. The
dissenter shall be entitled to judgment for the amount, if any, by
which the court finds the fair value of his shares, plus interest,
exceeds the amount paid by National Bancorp.
Conduct Pending Merger; Representations and Warranties
National Bancorp has agreed, among other things, that prior
to
the Effective Time, it will carry on its business in the ordinary
course. National Bancorp has agreed to give Fifth Third and Fifth
Third's representatives reasonable access during business hours to
its facilities and personnel. National Bancorp has further agreed
that, without Fifth Third's prior written consent, it will not,
among other things, make any changes in its capital or corporate
structures; issue any additional shares of its Common Stock; issue
any securities of any kind; or make any material changes in its
method of business operations. National Bancorp also has agreed
not to make or become obligated to make any capital expenditures in
excess of $10,000, nor will it make or renew any agreement for
services to be provided to National Bancorp, FNB or NBC or permit
the automatic renewal of any such agreement, except any agreement
for services having a term of not more than three months or
requiring the expenditure of not more than $2,500. National
Bancorp has also agreed not to declare or pay any cash dividends on
its stock other than normal and customary cash dividends paid in
amounts and at times National Bancorp historically has paid them;
pay any stock dividends or make any other distributions on its
stock and will not provide any increases in employee salaries or
benefits other than in the ordinary course of business. Moreover,
National Bancorp will not sell, dispose of or otherwise encumber
any of the shares of the capital stock of FNB or NBC which are now
owned by it.
Fifth Third and National Bancorp have also made numerous
representations and warranties to each other with respect to
financial and other matters. These include, without limitation,
representations and warranties to the effect that both Fifth Third
and National Bancorp have the corporate power and authorization to
enter into the proposed transaction, that each will have provided
the other with financial statements and that Fifth Third has enough
authorized Fifth Third Common Stock with which to accomplish the
proposed transaction. No representations, warranties and covenants
made by either National Bancorp or Fifth Third will survive beyond
the Effective Time. Thereafter, neither National Bancorp, FNB or
NBC nor any officer or director of either of them will have any
liability or obligation with respect to such representations,
warranties or covenants, with the exception of any
misrepresentations, breaches of warranties or violations of
covenants that were made with intent to defraud.
Conditions to Closing
The Affiliation Agreement and Merger Agreement must be
approved by the affirmative vote of a majority of the outstanding
shares of the National Bancorp Common Stock. The Merger must also
be approved in writing by the Board of Governors of the Federal
Reserve System, the Federal Deposit Insurance Corporation, and the
Kentucky Department of Financial Institutions and must comply with
any applicable waiting periods. No assurance can be given that the
required governmental approvals will be forthcoming.
The obligations of National Bancorp and Fifth Third to
consummate the Merger are also subject to receipt of an opinion of
counsel with respect to certain tax matters. See "Federal Income
Tax Consequences" herein.
Fifth Third's and National Bancorp's obligations to
consummate
the Merger are further subject to various other conditions set
forth in the Affiliation Agreement, including, but not limited to,
National Bancorp stockholder approval of the Affiliation Agreement
and the Merger Agreement, the absence of any material adverse
change in the affairs of National Bancorp or Fifth Third prior to
the Effective Time; the continued truth and accuracy at the
Effective Time of the representations and warranties made by
National Bancorp and Fifth Third in the Affiliation Agreement; the
receipt of all necessary governmental and regulatory approvals and
the expiration of any applicable waiting periods, the absence at
the Effective Time of any material actions, proceedings or
investigations of any kind pending or threatened with respect to
the transactions contemplated by the Affiliation Agreement and
Merger Agreement, delivery by Fifth Third's counsel of an opinion
as to certain federal tax aspects of the transaction and both
institutions having performed all of the obligations required of
them under the Affiliation Agreement and Merger Agreement.
Fifth Third's obligation to consummate the Merger is further
subject to conditions set forth in the Affiliation Agreement,
including, but not limited to, the continuing truth and accuracy of
all of the representations and warranties of National Bancorp,
National Bancorp's performance of all of the obligations required
of it under the Affiliation Agreement and Agreement of Merger,
delivery by National Bancorp's counsel of a certain legal opinion
addressed to Fifth Third, the aggregate amount of stockholder's
equity of National Bancorp immediately prior to the Effective Time,
as shown by and reflected on its books and records of accounts on
a consolidated basis in accordance with generally accepted
principles, consistently applied, shall not be less than $5,031,000
(its separate stockholder's equity at October 31, 1993).
National Bancorp's obligation to consummate the Merger is
further subject to conditions set forth in the Affiliation
Agreement, including, but not limited to, the continuing truth and
accuracy of Fifth Third's representations and warranties, Fifth
Third's performance of all of the obligations required of it under
the Affiliation Agreement and Agreement of Merger, delivery by
Fifth Third's counsel of a certain legal opinion addressed to
National Bancorp, Fifth Third shall have registered its shares of
Fifth Third Common Stock to be issued to National Bancorp's sole
stockholder.
Amendment; Waiver; Termination
The Affiliation Agreement and Merger Agreement may be
amended,
modified or supplemented by the written agreement of both parties,
upon the authorization of each company's respective Board of
Directors and without further approval of National Bancorp's
stockholders, except that no amendment, modification or supplement
may be effected without National Bancorp stockholder approval if to
do so would violate any applicable provisions of Kentucky
corporation law.
The Affiliation Agreement and Merger Agreement may be
terminated and the Merger abandoned at any time prior to the
Effective Time by written notice delivered by Fifth Third to
National Bancorp or by National Bancorp to Fifth Third in the
following instances: (1) by Fifth Third or National Bancorp, if
there has been a material misrepresentation, a material breach of
warranty or a material failure to comply with any covenant on the
part of the other party with respect to the representations,
warranties and covenants set forth in the Affiliation Agreement and
such misrepresentation, breach or failure to comply has not been
cured within ten days of notice, provided the party in default has
no right to terminate for its own default; (2) by Fifth Third or
National Bancorp, if the business or assets or financial condition
of the other party have materially and adversely changed from that
in existence at September 30, 1993; (3) by Fifth Third or National
Bancorp, if the Merger has not been consummated by September 30,
1994, provided the terminating party is not in material breach or
default of any representation, warranty or covenant contained in
the Affiliation Agreement on the date of such termination. (All
capitalized terms set forth in this paragraph are defined in the
Affiliation Agreement.)
If the National Bancorp stockholder, acting at a meeting
held
for the purpose of voting upon the Affiliation Agreement and Merger
Agreement, fails to approve the Affiliation Agreement and Merger
Agreement in the manner required by law, then the Affiliation
Agreement and Merger Agreement shall be deemed to be automatically
terminated.
Effect on FNB and NBC Employees
Fifth Third shall use its best efforts to employ at Fifth
Third or at a Fifth Third subsidiary or affiliate each of the
employees of National Bancorp, FNB and NBC. Each employee of
National Bancorp, FNB or NBC who becomes an employee of Fifth Third
or its subsidiaries subsequent to the Merger will be entitled to
participate in all employee benefit plans sponsored by Fifth Third
or its subsidiaries on the same terms and to the same extent as
similarly situated employees. Such employees shall receive credit
for their period of service to National Bancorp, FNB or NBC for
purposes of determining participation and vesting in all Fifth
Third employee benefit plans (except for vesting in the Fifth Third
Master Retirement Plan) but not for purposes of determining the
benefits accrued thereunder. Prior to the Closing Date, as
provided in the Affiliation Agreement, National Bancorp shall be
permitted, consistent with past practices, to make bonus awards
pursuant to its existing incentive bonus programs accruing for the
period prior to the Closing Date.
In the event that Fifth Third merges or consolidates any
defined contribution plan maintained by or for National Bancorp or
a National Bancorp subsidiary into a Fifth Third defined
contribution plan, each employee of National Bancorp shall have an
accrued benefit immediately after the Merger which is equal to or
greater than the employee's accrued benefit immediately before the
merger or consolidation. In the event that on or after the
Effective Time, Fifth Third terminates any defined contribution
plan maintained by or for National Bancorp or a National Bancorp
subsidiary, each participating employee shall have the right or
option either to receive a single lump-sum payment equal to the
benefits to which he is entitled under the terminating plan, or to
"roll over" such benefits to a defined contribution plan maintained
by Fifth Third. Notwithstanding the foregoing, National Bancorp
reserves the right to initiate before the Effective Time the
termination of any defined contribution plan being maintained by
National Bancorp or a National Bancorp subsidiary, provided that no
such action will result in a material liability to the Pension
Benefit Guaranty Corporation or the Internal Revenue Service.
Prior to the Closing Date, except as otherwise expressly provided
herein, National Bancorp shall be permitted, consistent with past
practices, to make profit sharing contributions pursuant to its
existing program accruing for the period prior to the Closing Date.
Any employee (other than the officers who are parties to
Termination Agreements as provided for in the Affiliation
Agreement) whose employment is terminated by Fifth Third other than
for cause or who voluntarily resigns after being notified by Fifth
Third that, as a condition of employment, such employee must work
at a location outside of the Cincinnati MSA or that such employee's
salary will be decreased, in any case within six months after the
Effective Time, shall be entitled to severance pay equal to, in the
case of a salaried employee, other than an officer, one week's pay
for each year of service up to a maximum of twelve week's pay, in
the case of an officer, one week's pay for each year of service up
to a maximum of twenty-four week's pay and, in the case of an
hourly employee, one week's pay for each year of service up to a
maximum of six week's pay, plus applicable COBRA benefits. Fifth
Third, through its Human Resources Department, shall provide
clerical and advisory services to such former National Bancorp
officers who become eligible for severance as is reasonably
requested in connection with an officers' search for new employment
for a period of one year after the Effective Time. Nothing
contained in the Affiliation Agreement shall be construed or
interpreted to limit or modify in any way Fifth Third's at-will
employment policy.
Interests of Management
Except as provided herein, it is not anticipated that Fifth
Third will enter into employment agreements with any officers of
National Bancorp in connection with the transactions contemplated
by the Affiliation Agreement.
All provisions for indemnification and limitation of
liability
now existing in favor of the employees, agents, Directors or
officers of National Bancorp or any of its subsidiaries as provided
by regulation or in their respective articles of incorporation or
codes of regulations shall survive the Merger, shall be assumed by
Fifth Third and shall continue in full force and effect with
respect to acts or omissions occurring on or prior to the Effective
Time for a period of two years thereafter, or in the case of
matters occurring prior to the Effective Time which have not been
resolved prior to the second anniversary of the Effective Time,
until such matters are finally resolved. Fifth Third shall also
purchase and keep in force for such two year period, directors' and
officers' liability insurance to provide coverage for acts or
omissions of the type and in the amount currently covered by
National Bancorp's existing directors' and officers' liability
insurance for acts or omissions occurring on or prior to the
Effective Time, but only to the extent such insurance may be
purchased or kept in full force on commercially reasonable terms
taking into account the cost thereof and the benefits provided
thereby. To the extent permitted by law, Fifth Third shall advance
expenses in connection with the foregoing indemnification.
Effects of Merger
At the Effective Time, National Bancorp will merge with and
into Fifth Third. The surviving bank holding company will be Fifth
Third, which will continue to conduct its operations under the same
name. Immediately following the Merger, it is anticipated that FNB
will be merged with The Fifth Third Bank of Northern Kentucky,
Inc., Florence, Kentucky ("Fifth Third Northern"), a Kentucky
state-chartered banking subsidiary of Fifth Third, and NBC will be
merged with and into The Fifth Third Bank of Central Kentucky,
Inc., Cynthiana, Kentucky ("Fifth Third Central"), also a Kentucky
state-chartered banking subsidiary of Fifth Third. Upon
consummation of the Merger, FNB's main office and branch offices
will become banking centers of Fifth Third Northern and NBC's main
office and branch office will become banking centers of Fifth Third
Central. Fifth Third, Fifth Third Northern and Fifth Third Central
will each conduct business under its existing Articles of
Incorporation.
The Board of Directors of Fifth Third after the Merger is
consummated will consist of all of the members of Fifth Third's
Board of Directors, each of whom will continue to serve as
directors for the term for which such directors were elected,
subject to the Regulations of Fifth Third and in accordance with
law. Pursuant to the Affiliation Agreement, the Board of Directors
of Fifth Third Northern and Fifth Third Central also will remain
the same. The officers of Fifth Third Northern and Fifth Third
Central after the Merger is consummated will be those officers of
Fifth Third Northern and Fifth Third Central who are in office at
the Effective Time, subject to the By-Laws of Fifth Third Northern
and Fifth Third Central and in accordance with law.
Transactions With Affiliated Persons
Pursuant to the Affiliation Agreement, Fifth Third may
request
that National Bancorp, FNB and NBC enter into an agreement with
Midwest Payment Systems, Inc., a subsidiary of Fifth Third ("MPS")
to convert all of its electronic funds transfer ("EFT") related
services to MPS and the Jeanie (Registered) system. Such agreement
will provide that MPS will be the exclusive provider of EFT-related
services to National Bancorp and FNB and NBC for a period of five
years. Fifth Third has agreed that it will pay all of the costs of
National Bancorp's, FNB's or NBC's conversion to EFT or the Jeanie
(Registered) system (including, without limitation, the cost of all
card reissue, signage and penalties relating to terminating its
current EFT relationships). Fifth Third has further agreed that
the costs and fees to National Bancorp and FNB and NBC for the
operation of the Jeanie (Registered) system will not exceed those
charged by its current EFT service provider, subject to any
increases in such costs and fees which would otherwise be permitted
under their current EFT service agreements.
CAPITAL REQUIREMENTS
The Federal Reserve Board, the Office of the Comptroller of
the Currency, and the Federal Deposit Insurance Corporation issued
new guidelines to implement risk-based capital requirements for
state member banks and bank holding companies in the first quarter
of 1989. The guidelines established a systematic analytical
framework that makes regulatory capital requirements more sensitive
to differences in risk profiles among banking organizations, takes
off-balance sheet exposures into explicit account in assessing
capital adequacy, and minimizes disincentives to holding liquid,
low-risk assets.
The guidelines provided for phasing in risk-based capital
standards through the end of 1992, at which time the standards
became fully effective. At that time, banking organizations were
required to have capital equivalent to 8 percent of assets,
weighted by risk. Banking organizations must have at least 4
percent Tier 1 capital, which consists of core capital elements
including common stockholder's equity, retained earnings, and
perpetual preferred stock, to weighted risk assets. The other half
of required capital (Tier 2), can include, among other
supplementary capital elements, limited-life preferred stock and
subordinated debt, and loan loss reserves up to certain limits.
Under Federal Reserve Board policy, the holding company is
expected to act as a source of financial strength to each
subsidiary bank and to commit resources to support each of its
subsidiaries. This support may be required at times when, absent
such Board policy, the holding company may not find itself able to
provide it.
Fifth Third, and each of its subsidiary banks, is in
compliance with both the current leverage ratios and the final
risk-based capital standards. As of December 31, 1993, Fifth Third
had a leverage ratio of 9.85%, the Tier 1 Risk-based capital ratio
was 11.41% and the total Risk-based capital ratio was 13.82%.
RESALE OF FIFTH THIRD COMMON STOCK BY AFFILIATES
No restrictions on the sale, pledge, transfer or other
disposition of the shares of Fifth Third Common Stock issued
pursuant to the Merger will be imposed solely as a result of the
Merger, other than restrictions on the transfer of such shares
issued to any National Bancorp stockholder who may be deemed to be
an "affiliate" of Fifth Third or National Bancorp for purposes of
Rule 145 promulgated under the Securities Act of 1933, as amended.
Directors, executive officers, or holders of 10% or more of the
outstanding shares of National Bancorp Common Stock generally are
deemed to be affiliates of National Bancorp for purposes of Rule
145. Affiliates may not sell, pledge, transfer or otherwise
dispose of the shares of Fifth Third Common Stock issued to them in
exchange for their shares of National Bancorp Common Stock, unless
the requirements of Rule 145(d) are satisfied or the sale, pledge,
transfer, or disposition is otherwise in compliance with the
Securities Act of 1933 and the rules and regulations promulgated
thereunder. Generally, under Rule 145(d) an affiliate of National
Bancorp will be permitted to sell, pledge, transfer, or otherwise
dispose of his or her shares of Fifth Third Common Stock received
pursuant to the Merger if one of the following is satisfied:
(1) The shares are sold in "brokers' transactions" or in
transactions directly with a "market maker", the affiliate does not
solicit or arrange for the solicitation of purchase orders or make
any payments in connection with the sale to anyone other than the
broker or market maker, and the number of shares sold, together
with all other sales of Fifth Third Common Stock by such affiliate
within the preceding three months, does not exceed one percent of
the outstanding shares of Fifth Third Common Stock; or
(2) The affiliate is not an affiliate of Fifth Third and
has
been the beneficial owner of the Fifth Third Common Stock for at
least two years, and there is publicly available certain
information regarding Fifth Third.
In addition, shares of Fifth Third Common Stock issued to
affiliates in the Merger may not be sold, pledged, transferred or
otherwise disposed of until such time as financial results covering
at least 30 days of combined operations of Fifth Third and National
Bancorp have been published within the meaning of Section 201.01 of
the Securities and Exchange Commission's Codification of Financial
Reporting Policies.
Share certificates for Fifth Third Common Stock issued to
affiliates of National Bancorp will bear a legend as follows:
The shares of stock evidenced by this
certificate are subject to restrictions on
transfer and may only be transferred after the
Issuer has received an opinion from its
counsel that the transfer will be in
compliance with the requirements of Rule
145(d) promulgated under the Securities Act of
1933. The Issuer will mail a copy of Rule
145(d) to the shareholder without charge
within five (5) days after written request
therefor.
As this is a general statement of the restrictions on the
disposition of the shares of Fifth Third Common Stock to be issued
in the Merger, those stockholders of National Bancorp who may be
affiliates of National Bancorp should confer with legal counsel
with respect to the resale restrictions.
FIFTH THIRD BANCORP
Description of Business
Fifth Third is an Ohio corporation organized in 1975 as a
bank
holding company registered under the Bank Holding Company Act of
1956, as amended (the "Act"), and subject to regulation by the
Board of Governors of the Federal Reserve System (the "Federal
Reserve Board"). Fifth Third, with its principal office located in
Cincinnati, is a multi-bank holding company that owns all of the
outstanding stock of five commercial banks with 243 offices in 30
counties in Ohio. Fifth Third owns all of the outstanding capital
stock of two commercial banks with 24 offices in five counties in
Kentucky. Fifth Third also owns all the outstanding capital stock
of two commercial banks which maintain 21 offices in six counties
in Indiana.
Fifth Third is also a unitary savings and loan holding
company. As such, Fifth Third is registered with and subject to
regulation by the Office of Thrift Supervision ("OTS"). Fifth
Third owns all of the outstanding stock of one federally-chartered
savings bank with one office in Naples, Florida.
Effective as of September 9, 1992, Fifth Third completed its
purchase of First Federal Savings and Loan Association of Lima,
Ohio. As a result of this transaction, The Fifth Third Bank of
Western Ohio, N.A., a wholly-owned subsidiary of Fifth Third was
merged with First Federal Savings and Loan Association of Lima.
The six former offices of First Federal Savings and Loan
Association of Lima were retained and are being operated as
full-service banking centers of The Fifth Third Bank of Western
Ohio.
Effective as of January 22, 1993, Fifth Third completed the
purchase of certain assets and the assumption of certain
liabilities in connection with three branch offices of Home Savings
of America, FSB ("Home Savings"). Three of Fifth Third's
subsidiary banks, The Fifth Third Bank, Cincinnati, The Fifth Third
Bank of Southern Ohio, and The Fifth Third Bank of Northwestern
Ohio, N.A., each purchased the assets and assumed the liabilities
associated with one of the purchased Home Savings branches. Upon
consummation of this transaction each of the three Home Savings
branches is being operated by one of the three Fifth Third
subsidiaries set forth above. The total amount assumed by Fifth
Third's subsidiaries was $53.5 million in deposits.
Effective as of February 26, 1993, Fifth Third completed the
purchase of certain assets and the assumption of certain
liabilities in connection with six branch offices of The First
National Bank, Dayton, Ohio. As a result of this transaction The
Fifth Third Bank, Cincinnati, Ohio, a wholly-owned subsidiary of
Fifth Third assumed $106.4 million in deposits. Upon consummation
of the purchase and assumption, The Fifth Third Bank retained four
of the former offices of The First National Bank as branches of The
Fifth Third Bank while closing two former offices acquired from The
First National Bank.
On September 24, 1993, Fifth Third terminated its agreement
to
acquire Shelby County Bancorp, Shelbyville, Indiana, and its thrift
subsidiary, Shelby County Savings Bank, because of certain
environmental issues that were raised in connection with the St.
Paul, Indiana branch office of Shelby County Savings Bank.
On October 15, 1993, Fifth Third acquired five branches of
World Savings and Loan Association ("World Savings") through two of
its subsidiary banks. The Fifth Third Bank of Western Ohio
acquired three branches of World Savings while The Fifth Third Bank
of Northwestern Ohio acquired two branches. The total amount
assumed by Fifth Third's subsidiaries was approximately $131
million in deposits.
On December 23, 1993, Fifth Third completed the purchase of
The TriState Bancorp, Cincinnati, Ohio, and its thrift subsidiary,
First Financial Savings Association, F.A. As a result of this
transaction, The Fifth Third Bank, Cincinnati, Ohio, a wholly owned
subsidiary of Fifth Third, was merged with First Financial Savings
Association, F.A. The six former offices of First Financial
Savings Association, F.A. were retained and are being operated as
full-service banking centers of The Fifth Third Bank.
At December 31, 1993, Fifth Third, its affiliated banks and
other subsidiaries had consolidated total assets of $12.0 billion,
consolidated total deposits of $8.6 billion and consolidated total
shareholders' equity of $1.2 billion.
Fifth Third, through its subsidiaries, engages primarily in
commercial, retail and trust banking, investment services and
leasing activities and also provides credit life, accident and
health insurance, discount brokerage services and property
management for its properties. Fifth Third's affiliates provide a
full range of financial products and services to the retail,
commercial, financial, governmental, educational and medical
sectors, including a wide variety of checking, savings and money
market accounts; and credit products such as credit cards,
installment loans, mortgage loans and leasing. Each of the banking
affiliates has deposit insurance provided by the Federal Deposit
Insurance Corporation (the "FDIC") through the Bank Insurance Fund
("BIF") and the savings bank affiliate has deposit insurance
provided by the FDIC through the Savings Association Insurance Fund
("SAIF").
Fifth Third, through its banking subsidiaries, operates for
itself and other financial institutions a proprietary automated
teller machine (ATM) network, Jeanie (Registered). The Jeanie
(Registered) system participates in a shared ATM network called
"Money Station (Registered)", which includes several Ohio bank
holding companies and over 1,000 ATM's. The "Money Station
(Registered)" network participates in another shared ATM network
called "PLUS System (Registered)", which is a nationwide network
with over 17,000 participating ATM's. The Fifth Third Bank through
its wholly-owned subsidiary, Midwest Payment Systems, Inc., also
provides electronic switch services for several regional banks and
bank holding companies in Ohio, Kentucky and Illinois.
Fifth Third is a corporate entity legally separate and
distinct from the affiliates. The principal source of Fifth
Third's income is dividends from its affiliates. There are certain
regulatory restrictions as to the extent to which the affiliates
can pay dividends or otherwise supply funds to Fifth Third. See
"DESCRIPTION OF CAPITAL STOCK."
Fifth Third's executive offices are located at 38 Fountain
Square Plaza, Cincinnati, Ohio 45263, and its telephone number is
(513) 579-5300.
Securities Exchange Act of 1934
Fifth Third is subject to the provisions of the Securities
Exchange Act of 1934 ("Exchange Act") regarding the filing of
periodic reports, the solicitation of proxies, the disclosure of
beneficial ownership of certain securities, short swing profits and
the conduct of tender offers. Such provisions of the Exchange Act,
as applied to bank holding companies such as Fifth Third, are
administered by the Securities and Exchange Commission.
NATIONAL BANCORP
Description of Business
National Bancorp is a Kentucky corporation organized in 1985
as a bank holding company within the meaning of the Act. As such,
it is registered with the Federal Reserve Board. The Act, as
administered by the Board of Governors, regulates the activities of
bank holding companies including proposed acquisitions and equity
investments.
The Act, the Federal Reserve Act and the Federal Deposit
Insurance Act also subject bank holding companies and their
subsidiaries to certain restrictions on any extensions of credit by
subsidiary banks to the bank holding company or any of its
subsidiaries, or investments in the stock or other securities
thereof, and on the taking of such stocks or securities as
collateral for loans to any borrower. Further, under the Act and
the regulations of the Board of Governors, a bank holding company
and its subsidiaries are effectively prohibited from engaging in
certain tie-in arrangements in connection with any extension of
credit, sale or lease of any property or furnishing of services.
FNB and NBC are national banks subject to primary
supervision,
examination and regulation by the Comptroller of the Currency (the
"OCC") under the National Bank Act. FNB and NBC are also members
of the Federal Reserve System and are subject to the applicable
provisions of the Federal Reserve Act and Regulations. Deposits of
FNB and NBC are insured by the Federal Deposit Insurance
Corporation (FDIC) to the maximum extent permitted by law. The OCC
regularly examines the operations of FNB and NBC, including but not
limited to capital adequacy, reserves, loans, investments and
management practices. The OCC's enforcement authority includes the
power to remove officers and directors and the authority to issue
cease-and-desist orders to prevent a bank from engaging in unsafe
or unsound practices or violating laws or regulations governing its
business. In addition, FNB and NBC are required to furnish
quarterly and annual reports to the FDIC.
National Bancorp's executive offices are located at 2560
Richmond Road, Lexington, Kentucky 40509 (Telephone: (606)
269-0547). At December 31, 1993, National Bancorp and its
subsidiaries had total assets of $96.4 million, total deposits of
$83.4 million and total stockholder's equity of $5.0 million.
Regulations
The Federal Deposit Insurance Corporation Improvement Act of
1991 ("FDICIA") became effective December 19, 1991. FDICIA
authorizes the FDIC to assess insured institutions for the cost of
FDIC examinations and requires the OTS to assess federal
associations for the costs of its examinations.
FDICIA also requires the federal banking regulators to
prescribe new standards relating to (a) internal controls,
information systems and internal audit systems; (b) loan
documentation; (c) credit underwriting; (d) asset growth; (e)
interest rate exposure; and (f) compensation, fees, and benefits.
The compensation standards must prohibit as an unsafe and unsound
practice any employment contract, compensation or benefit
agreement, fee arrangement, perquisite, stock option plan,
post-employment benefit or other compensatory arrangement that
would provide any executive officer, employee, director or
principal stockholder with excessive compensation, fees or benefits
or that could lead to material financial loss to the institution,
although such standards generally do not apply to well capitalized
institutions. In addition, legislation was recently adopted which
limits the compensation standards to situations involving safety or
soundness concerns or enforcement proceedings.
FDICIA also required the federal banking agencies to develop
jointly a method for insured depository institutions to provide
supplemental disclosure of the estimated fair market value of
assets and liabilities, to the extent feasible and practicable, in
financial statements or reports required to be filed with the
federal banking agencies.
FDICIA also included the Truth in Savings Act, which
requires
the Federal Reserve Board to establish regulations providing for
clear and uniform disclosure of the rates, fees and terms of
deposit accounts. The Federal Reserve Board has adopted
regulations, which became effective June 21, 1993, requiring a
specific disclosure before an account is opened, in regularly
provided statements and in advertisements, announcements and
solicitations initiated by a depository institution. The
regulations prescribe detailed disclosure of deposit account yield
information, minimum balance requirements and fee impact on the
yield. The regulations also establish certain recordkeeping
requirements.
In addition, within 18 months following the enactment of
FDICIA, the federal banking agencies were required to revise their
risk-based capital standards to take adequate account of
interest-rate risk, concentration of credit risk, and the risks of
nontraditional activities, and to reflect the actual performance
and expected risk of multifamily mortgages.
FDICIA requires the FDIC to issue regulations effective by
no
later than January 1, 1994, which establish a system for setting
deposit insurance premiums based upon the risks a particular bank
or savings association poses to the deposit insurance funds. In
October, 1992, the FDIC adopted a final rule that implements a
transitional risk-based assessment system whereby a base insurance
premium will be adjusted according to the capital category and
subcategory of an institution to one of three capital categories
consisting of (1) well capitalized, (2) adequately capitalized, or
(3) undercapitalized, and one of three subcategories consisting of
(a) healthy, (b) supervisory concern, or (c) substantial
supervisory concern. An institution's assessment rate will depend
on the capital category and supervisory category to which it is
assigned. Assessment rates will range from 23 basis points for an
institution in the highest category (i.e., well capitalized and
healthy) to 31 basis points for an institution in the lowest
category (i.e., undercapitalized and substantial supervisory
concern). The rule became effective January 1, 1993. The
supervisory subgroup to which an institution is assigned by the
FDIC is confidential and may not be disclosed.
Until August 10, 1994, banks and savings associations are
generally barred from switching insurance funds. There are limited
exceptions, such as when a bank acquires a savings association in
default or in danger of default, if the benefits to the SAIF or to
the RTC equal or exceed the assessment income that will be lost
during the moratorium. After August 9, 1994, any insured
depository institution may switch insurance funds, but only after
paying an exit fee to the old fund and an entrance fee to the new
fund.
The Comptroller of the Currency, effective December 31,
1990,
adopted a new minimum leverage ratio of 3% Tier 1 capital-to-total
assets for the highest rated national banks, with an additional
requirement of 100 to 200 basis points for all other national
banks.
Federal Reserve System. Under Federal Reserve Board
regulations, FNB and NBC are required to maintain reserves against
their transaction accounts (primarily checking and NOW accounts)
and non-personal money market deposit accounts. These regulations,
as of September 30, 1992, generally require that reserves be
maintained against transaction accounts in the amount of 3% of the
total of such accounts up to $46.8 million (subject to adjustment
by the Federal Reserve Board), plus 10% (subject to adjustment by
the Federal Reserve Board between 8% and 14%) of the total in
excess of $46.8 million. In addition, a reserve of 3% (subject to
adjustment by the Federal Reserve Board between 0% and 9%) must be
maintained on non-personal money market deposit accounts that have
original maturities of less than one and one-half years. No
reserve is required to be maintained on non-personal time deposits.
Dividends
For information regarding restrictions on the payment of
dividends see "Description of Capital Stock - Dividends."
Bank Holding Companies In General
Bank holding companies and banks are extensively regulated
under both federal and state law. To the extent that the following
information describes statutory and regulatory provisions, it is
qualified in its entirety by reference to the particular statutory
and regulatory provisions.
As bank holding companies, Fifth Third and National Bancorp
are registered with and subject to regulation by the Federal
Reserve Board. A bank holding company is required to file with the
Federal Reserve Board an annual report and such additional
information as the Federal Reserve Board may require pursuant to
the Bank Holding Company Act.
The Federal Reserve Board may also make examinations of a
holding company and each of its subsidiaries. The Act requires
each bank holding company to obtain the prior approval of the
Federal Reserve Board before it may acquire substantially all of
the assets of any bank, or before it may acquire ownership or
control of any voting shares of any bank if, after such
acquisition, it would own or control directly or indirectly, more
than 5% of the voting shares of such bank.
The Act also restricts the types of businesses and
operations
in which a bank holding company and its subsidiaries (other than
bank subsidiaries) may engage. Generally, permissible activities
are limited to banking and activities found by the Federal Reserve
Board to be so closely related to banking as to be a proper
incident thereto.
The operations of the subsidiary banks of Fifth Third and
National Bancorp are subject to requirements and restrictions under
federal and state law, including requirements to maintain reserves
against deposits, restrictions on the types and amounts of loans
that may be granted and the interest that may be charged thereon,
and limitations on the types of investments that may be made and
the types of services which may be offered. Various consumer laws
and regulations also affect the operations of these banking
subsidiaries.
National banks are subject to the supervision of and are
regularly examined by the Comptroller of the Currency. In
addition, national banks may be members of the Federal Reserve
System and their deposits are insured by the Federal Deposit
Insurance Corporation and, as such, may be subject to regulation
and examination by each agency. State chartered banking
corporations are subject to federal and state regulation of their
business and activities, including, in the case of banks chartered
in Kentucky, by the Kentucky Department of Financial Institutions.
EFFECT OF GOVERNMENTAL POLICIES
The earnings of both National Bancorp's and Fifth Third's
subsidiaries are affected not only by domestic and foreign economic
conditions, but also by the monetary and fiscal policies of the
United States and its agencies (particularly the Federal Reserve
Board), foreign governments and other official agencies. The
Federal Reserve Board can and does implement national monetary
policy, such as the curbing of inflation and combating of
recession, by its open market operations in United States
Government securities, control of the discount rate applicable to
borrowings and the establishment of reserve requirements against
deposits and certain liabilities of depository institutions. The
actions of the Federal Reserve Board influence the growth of bank
loans, investments and deposits and also affect interest rates
charged on loans or paid on deposits. The nature and impact of
future changes in monetary and fiscal policies are not predictable.
From time to time various proposals are made in the United
States Congress and in state legislatures and before various
regulatory authorities which would alter the powers or the existing
regulatory framework for banks, bank holding companies, savings
banks and other financial institutions. It is impossible to
predict whether any of the proposals will be adopted and the
impact, if any, of such adoption on the business of National
Bancorp or of Fifth Third and the subsidiaries of each.
DESCRIPTION OF CAPITAL STOCK
Fifth Third is authorized to issue 100,000,000 shares of its
Common Stock, no par value, and 500,000 shares of preferred stock,
no par value ("Fifth Third Preferred Stock"). As of December 31,
1993, Fifth Third had outstanding 61,402,257 shares of Common Stock
and no shares of Fifth Third Preferred Stock. Pursuant to Article
Fourth of Fifth Third's Seconded Amended Articles of Incorporation,
as amended, the Board of Directors of Fifth Third may, without
further action of the shareholders, (a) divide into one or more new
series the authorized shares of Fifth Third Preferred Stock which
have not previously been designated, (b) fix the number of shares
constituting any such new series and (c) fix the dividend rates,
payment dates, whether dividend rights shall be cumulative or
non-cumulative, conversion rights, redemption rights (including
sinking fund provisions) and liquidation preferences. Except as
otherwise provided by law, holders of any series of Fifth Third
Preferred Stock shall not be entitled to vote on any matter.
National Bancorp is authorized to issue 2,000 shares of
National Bancorp Common Stock, $1.00 par value, of which 100 shares
were issued and outstanding as of December 31, 1993. Currently,
National Bancorp holds 1,900 shares of National Bancorp Common
Stock as treasury shares. National Bancorp also is authorized to
issue 100 shares of preferred stock, $1,000 par value, none of
which are outstanding.
Set forth below is a description of the Fifth Third Common
Stock and the National Bancorp Common Stock. This description and
analysis are brief summaries of relevant provisions of the Articles
of Incorporation of Fifth Third and National Bancorp and are
qualified in their entirety by reference to such documents and the
parties' Codes of Regulations.
Voting Rights
Holders of both Fifth Third Common Stock and National
Bancorp
Common Stock are entitled to one vote per share on all matters
submitted to a vote of shareholders.
The Code of Regulations of Fifth Third provides for the
division of its Board of Directors into three classes of
approximately equal size. Directors are generally elected for
three-year terms, and the terms of office of approximately
one-third of the members of the Board of Directors expire each
year. This classification of Fifth Third's Board may make it more
difficult for a stockholder to acquire control of Fifth Third and
remove management by means of a hostile takeover. The Articles of
Incorporation of National Bancorp do not provide for a classified
Board of Directors. Each of its Directors is elected annually.
The holders of Fifth Third Common Stock have the right to
vote
cumulatively in the election of directors. Under applicable Ohio
law, cumulative voting in the election of directors of a
corporation will be permitted if (i) written notice is given by any
shareholder of such corporation to the President, Vice President or
the Secretary of such corporation not less than 48 hours before the
time fixed for holding the meeting at which directors are to be
elected that such shareholder desires that voting for the election
of directors be cumulative and (ii) announcement of the giving of
such notice is made upon the convening of the meeting by the
meeting chairman or secretary or by or on behalf of the shareholder
giving such notice. In such event, each shareholder will be
entitled to cumulate such voting power as he possesses and to give
one nominee as many votes as the number of directors to be elected
multiplied by the number of his or her shares, or to distribute
such votes on the same principle among two or more candidates, as
each shareholder sees fit. Shareholders of National Bancorp also
have the right to vote cumulatively in the election of directors as
provided by the Kentucky Business Corporation Act.
Fifth Third is only authorized to effect a merger,
consolidation or sale of assets not in the regular course of
business, to dissolve, or amend its Articles of Incorporation
pursuant to authority given by persons holding two-thirds of its
respective capital stock. National Bancorp's Articles of
Incorporation do not contain any similar provision.
Dividends
Holders of Fifth Third and National Bancorp Common Stock are
each entitled to dividends as and when declared by the respective
Board of Directors of each institution out of funds legally
available for the payment of dividends.
Most of the revenues of Fifth Third and National Bancorp
available for payment of dividends derive from amounts paid to each
such corporation by its respective subsidiaries. Under applicable
banking law, the total of all dividends declared in any calendar
year by a national bank or a state-chartered bank may not, without
the approval of the Comptroller of the Currency, Board of Governors
of the Federal Reserve System, or the Federal Deposit Insurance
Corporation, as the case may be, exceed the aggregate of such
bank's net profits (as defined) and retained net profits for the
preceding two years.
The affiliates of Fifth Third include both state and
nationally chartered banks and one federally chartered savings
bank. Under the applicable regulatory limitations, during the year
1994, the affiliates of Fifth Third could declare aggregate
dividends limited to their 1994 eligible net profits and
$154,963,000, the retained 1993 and 1992 net income, without the
approval of their respective regulators. The Comptroller of the
Currency, banking authorities of the States of Ohio, Indiana and
Kentucky, and the Office of Thrift Supervision, the principal
regulators of such affiliates, have the statutory authority to
prohibit a depository institution under their supervision from
engaging in what, in their opinion, constitutes an unsafe or
unsound practice in conducting its banking or savings association
business. The payment of dividends could, depending upon the
financial condition of affiliates, be deemed to constitute such an
unsafe or unsound practice. No affiliate of Fifth Third has ever
been prohibited from declaring dividends or restricted in paying
any dividends declared.
If, in the opinion of the applicable regulatory authority,
a
depository institution under its jurisdiction is engaged in or is
about to engage in an unsafe or unsound practice (which, depending
on the financial condition of the depository institution, could
include the payment of dividends), such authority may require,
after notice and hearing, that such bank cease and desist from
practice. The Federal Reserve Board has similar authority with
respect to bank holding companies, and the OTS has similar
authority with respect to savings and loan holding companies. In
addition, the Federal Reserve Board, the Comptroller and the FDIC
have issued policy statements which provide that insured banks and
bank holding companies should generally only pay dividends out of
current operating earnings. Finally, the regulatory authorities
have established guidelines with respect to the maintenance of
appropriate levels of capital by a bank, bank holding company,
savings association or savings and loan holding company under their
jurisdiction. Compliance with the standards set forth in such
guidelines could limit the amount of dividends which Fifth Third
and National Bancorp and their respective affiliates may pay.
Preemptive Rights
The Articles of Incorporation of National Bancorp provide
that
the holders of capital stock of National Bancorp are not entitled
to preemptive rights to acquire additional shares of its common
stock. Shareholders of Fifth Third also have no preemptive rights.
Rights Upon Liquidation
In the event of any liquidation, dissolution or winding up
of
FNB and NBC, National Bancorp, as holder of FNB's and NBC's capital
stock, would be entitled to receive, after payment or provision for
payment of all debts and liabilities of FNB and NBC (including all
deposit accounts and accrued interest thereon), all assets of FNB
and NBC available for distribution. In the event of liquidation,
dissolution or winding up of National Bancorp, the holders of
National Bancorp Common Stock would be entitled to receive, after
payment or provision for payment of all of its debts and
liabilities, all of the assets of National Bancorp available for
distribution. If National Bancorp preferred stock is issued, the
holders thereof will have a priority over the holders of National
Bancorp Common Stock in the event of liquidation or dissolution.
Indemnification and Personal Liability of Directors and Officers
Fifth Third's Code of Regulations provides for the
indemnification of each director and officer of the corporation, to
the fullest extent permitted by Ohio law, against all expenses and
liabilities reasonably incurred by or imposed on him or her in
connection with any proceeding or threatened proceeding in which he
may become involved by reason of his or her being or having been a
director or officer. Generally, Ohio permits such indemnification
provided that the person seeking to be indemnified has acted in
good faith and in a manner reasonably believed to be in or not
opposed to the best interests of the corporation, and with respect
to any criminal action, had no reasonable cause to believe his
conduct was unlawful, so long as no judgment or other final
adjudication adverse to such person establishes that his acts or
omissions (i) were in breach of his duty of loyalty to the
corporation or its shareholders, (ii) were not in good faith or
involved a knowing violation of law, or (iii) resulted in his or
her receipt of an improper personal benefit. The grant of
indemnification in the context of a derivative or other comparable
suit may have a circular effect, inasmuch as any damages recovered
in such action will be offset by the cost of indemnification.
The By-Laws of National Bancorp provide that National
Bancorp
may indemnify and may advance expenses to a director, officer,
employee or agent in connection with the defense of any pending,
threatened or completed action, suit or proceeding (whether civil
or criminal, administrative or investigative) to which he is or may
be made a party by reason of being or having been a director,
officer, employee or agent of National Bancorp to the fullest
extent that is expressly permitted or required by the Kentucky
Business Corporation Act and all other applicable law.
Shareholders' Meetings; Quorum
Special meetings of Fifth Third's shareholders may be called
at any time by the Board of Directors, or the shareholders of Fifth
Third upon the written application of the holders of at least 25%
of all Fifth Third capital stock entitled to vote on the matters to
be considered at the meeting. Such applications must set forth the
purpose of the meeting. Special meetings of National Bancorp's
stockholders may be called by the President or by a majority of the
members of the Board of Directors, and shall be called by the
Chairman of the Board, the President or the Secretary upon the
written request of the holders of not less than one-fifth (1/5) of
all of the shares outstanding and entitled to vote at the meeting.
A written request for a meeting from the stockholders must state
the purpose or purposes of the meeting and must be delivered at the
principal executive office of National Bancorp addressed to the
President or the Secretary.
The presence in person or by proxy of the holders of a
majority of the aggregate number of the outstanding shares of any
class or series of Fifth Third capital stock each voting at a
meeting constitutes a quorum. Under the By-Laws of National
Bancorp, a majority of the outstanding shares entitled to vote,
represented in person or by proxy, constitutes a quorum at any
meeting of shareholders.
Subscription, Conversion, Redemption Rights; Stock Nonassessable
Neither Fifth Third Common Stock nor National Bancorp Common
Stock has subscription or conversion rights, and there are no
mandatory redemption provisions applicable thereto.
Shares of Fifth Third Common Stock issued to stockholders of
National Bancorp pursuant to the Affiliation Agreement will be
validly issued, fully paid and non-assessable.
Change of Control Provisions
Fifth Third's Articles of Incorporation and Code of
Regulations contain various provisions which could make more
difficult a change in control of each corporation or discourage a
tender offer or other plan to restructure each corporation. Under
Fifth Third's Articles of Incorporation, Fifth Third's Board of
Directors has the authority to issue 500,000 shares of Preferred
Stock and to fix the designations, powers, preferences and rights
of such shares and the qualifications, limitations or restrictions
applicable thereto. National Bancorp's Articles of Incorporation
and By-Laws contain no similar provisions.
Ohio corporation law also provides certain change of control
protective provisions. Section 1701.831 of the Ohio Revised Code
sets forth the procedures for the acquisition of a control share of
an Ohio corporation which include the delivery of an acquiring
person statement to the target corporation and the affirmative vote
of a majority of the shares held by the shareholders of the target
corporation prior to the acquisition of a control share, at a
meeting held for the purpose of voting on such acquisition.
Finally, Fifth Third's Code of Regulations provides for the
election of directors on a classified basis. Neither the Articles
of Incorporation nor the By-Laws of National Bancorp provide for a
classified board.
CERTAIN BENEFICIAL OWNERS OF FIFTH THIRD STOCK
The following table shows those persons known to Fifth Third
to be the beneficial owners of more than 5% of Fifth Third Common
Stock at December 31, 1993:<PAGE>
<TABLE>
<CAPTION>
Name and Address Amount and Percent of Class
of Beneficial Nature of
Owner Ownership
<S> <C> <C>
Cincinnati Financial
Corporation
6200 South Gilmore
Fairfield, Ohio 45014 12,319,300(1) 19.96%
Fifth Third Bancorp
Subsidiary Banks
38 Fountain Square Plaza
Cincinnati, Ohio 45263 5,637,959(2) 9.13%
Capital Growth Management
1 International Place
45th Floor
Boston, Massachusetts 02110 4,717,600(3) 7.64%
The Western-Southern
Life Insurance Company
400 Broadway
Cincinnati, Ohio 45202 4,530,732(4) 7.34%
<FN>
(1) Cincinnati Financial Corporation owns 9,210,000 shares of
Fifth Third Common Stock. Cincinnati Insurance Company, a
subsidiary of Cincinnati Financial Corporation, owns 2,695,000
shares. Cincinnati Casualty Company, another subsidiary, owns
210,000 shares. Cincinnati Life Insurance Company, another
subsidiary of Cincinnati Financial, owns 204,300 shares. In
addition, Mr. John J. Schiff, Jr., a director of Fifth Third and
Chairman and a director of Cincinnati Financial Corporation,
individually beneficially owns 65,440 shares and Mr. Robert B.
Morgan, a director of Fifth Third, who is President and a director
of Cincinnati Financial Corporation and Cincinnati Insurance
individually owns 12,695 shares. Also affiliated is a trust in
which John J. Schiff, Jr. and Thomas R. Schiff are trustees which
owns 4,500 shares.
(2) There are five wholly-owned bank subsidiaries of Fifth Third,
which are beneficial owners of 3,155,887 shares. The banks hold
these shares in a fiduciary capacity under numerous trust
relationships none of which relates to more than 5% of the shares,
and have sole or shared voting power, and sole or shared investment
decision over these shares. The banks also hold shares in a
non-discretionary capacity, and disclaim any beneficial interest in
all shares held in these capacities.
(3) Capital Growth Management has informed Fifth Third that it is
an investment advisor that may be deemed the beneficial owner of
4,717,600 shares of Common Stock. Capital Growth Management has
sole power to vote or direct the voting of, and to dispose or
direct the disposition of all shares.
(4) The Western-Southern Life Insurance Co. owns 635,468 shares of
Fifth Third Common Stock. Waslic Delaware Company, II, a
subsidiary of The Western-Southern Life Insurance Co., owns
3,895,264 shares. In addition, Mr. John F. Barrett, a director,
President and Chief Operating Officer of The Western-Southern Life
Insurance Co., and a director of Fifth Third individually
beneficially owns 13,683 shares.
</FN>
/TABLE
<PAGE>
Fifth Third, its directors, executive officers and their
affiliates (collectively, the "Fifth Third Affiliates") owned no
shares of the National Bancorp Common Stock outstanding on December
31, 1993.
FIFTH THIRD MANAGEMENT
The names and ages of the Directors and executive officers
of
Fifth Third, their current positions and offices held with Fifth
Third, their business experience during the past five years and
certain other information, together with their beneficial ownership
of Fifth Third Common Stock at December 31, 1993 are as follows:
<TABLE>
<CAPTION>
Name, Age and Principal Director Shares of Fifth
Occupation During Past Five of Fifth Third Common Stock
Years; Other Directorships(1) Third Beneficially Owned
Since(2) at December 31,
1993(3)(6)
Number of Percent
Shares of Class
Owned
Directors
<S> <C> <C> <C>
John F. Barrett, 44, President,
Chief Operating Officer and
Director of The
Western-Southern Life
Insurance Co. since
November, 1989. Formerly
Executive Vice President
and Chief Financial Officer,
The Western-Southern Life
Insurance Co. since May,
1987. Director of Cincinnati
Bell Inc. 1988 13,683 .0222
Milton C. Boesel, Jr., 65,
Counsel, Ritter, Robinson,
McReady & James, Attorneys
at Law, Toledo, Ohio,
formerly Ritter, Boesel
& Robinson 1989 10,158 .0165
Clement L. Buenger, 67,
Director of Fifth Third
and The Fifth Third Bank
since April, 1989. Retired
Chairman, Fifth Third and
Fifth Third Bank as of
March, 1993. Retired as
CEO of Fifth Third and The
Fifth Third Bank as of
January, 1991. Previously
President of Fifth Third
and The Fifth Third Bank.
Director of Cincinnati Gas
& Electric Company. 1971 275,600 .4467
Nolan W. Carson, 69, Partner,
Dinsmore & Shohl, Attorneys
at Law and Counsel to Fifth
Third. 1982 30,905 .0501
Thomas L. Dahl, 48, Formerly
President of The Drackett
Co., manufacturers of
household cleaning products
from April, 1990 to January,
1993. Previously Mr. Dahl
was President, Branded Consumer
Products of Weyerhauser
Company since January, 1988. 1991 4,250 .0069
Gerald V. Dirvin, 56,
Director and Executive Vice
President of The Procter
& Gamble Company,
manufacturers of household
and consumer products since
January, 1990. Formerly Mr.
Dirvin was Senior Vice
President since January,
1989 and previously was a
Group Vice President of
The Procter & Gamble
Company. Director of
Cintas Corporation. 1989 7,850 .0127
Thomas B. Donnell, 47,
Chairman, The Fifth Third
Bank of Northwestern Ohio,
N.A. (Toledo, Ohio), the
resulting institution from
the November 12, 1991
merger of The Fifth Third
Bank of Northwestern Ohio,
N.A. and The Fifth Third
Bank of Toledo, N.A.
Formerly President and
Chief Executive Officer
of The Fifth Third Bank of
Northwestern Ohio, N.A. 1984 136,660 .2214
Richard T. Farmer, 59,
Chairman, Chief Executive
Officer and Director, Cintas
Corporation, a service
company that designs,
manufactures and implements
corporate identity uniform
programs. Director of
Safety-Kleen Corp. 1982 27,655 .0448
John D. Geary, 67,
Retired as President,
Midland Enterprises Inc.,
a company engaged in
inland waterway
transportation in June,
1988. 1977 20,288 .0329
Ivan W. Gorr, 64,
Chairman and Chief
Executive Officer of
Cooper Tire & Rubber
Company, a manufacturer
of tires and rubber
products, since
November, 1989.
Previously Mr. Gorr
was President and
Chief Operating Officer
of Cooper Tire &
Rubber Company. 1991 4,852 .0079
Joseph H. Head, Jr.,
61, Chairman, Chief
Executive Officer and
Director, Atkins &
Pearce, Inc., manufacturer
of industrial textiles,
since January, 1990.
Previously, Mr. Head was a
partner with Graydon,
Head & Ritchey, Counsel
to The Fifth Third Bank.
Director of Baldwin
Piano & Organ, Co. 1987 44,188 .0716
Joan R. Herschede, 54,
President and Chief
Executive Officer of
The Frank Herschede
Company, retailer of jewelry,
china, crystal and silver. 1991 4,050 .0066
William G. Kagler, 61,
Chairman, Chief Executive
Officer and a Director of
Skyline Chili, Inc., a
restaurant chain and
frozen food product
manufacturer since
November, 1992 and
President of Kagler
and Associates, Inc.,
a consulting firm
serving the food industry.
Previously Mr. Kagler
was President, Chief
Executive Officer and
Director of Skyline
Chili, Inc., since May 1989.
Director of The Union Central
Life Insurance Company, The
Ryland Group, Inc., The
Future Now Inc. and
Advanced Promotion
Technologies, Inc. 1983 14,145 .0229
William J. Keating, 66,
Retired Chairman and
Publisher, The Cincinnati
Enquirer, a regional
newspaper, since March, 1990.
Previously Mr. Keating was
President and Chief
Executive Officer, Detroit
Newspaper Agency. Director
of The Midland Co. 1980 40,949 .0663
James D. Kiggen, 61,
Chairman, President, Chief
Executive Officer and Director,
Xtek, Inc., manufacturer
of hardened steel parts.
Director of Cincinnati Bell,
Inc. and United States
Playing Card Co. 1982 22,819 .0370
Robert B. Morgan, 59,
President, Chief
Executive Officer and a
Director of Cincinnati
Financial Corporation and
Cincinnati Insurance
Company since April,
1991. Previously, Mr.
Morgan was President and
Director of Cincinnati
Financial Corporation
and Cincinnati Insurance
Company. 1986 12,965 .0210
Michael H. Norris, 57,
President and Director,
The Deerfield
Manufacturing Co.,
a fabricator of sheet
metal stampings,
deep drawn parts and
assemblies. Mr.
Norris is also a
Group Vice President
and Director of the
Ralph J. Stolle Company. 1985 14,587 .0236
Brian H. Rowe, 62,
Chairman, GE Aircraft
Engines, General Electric
Company since September,
1993. Previously Mr. Rowe
was President and Chief
Executive Officer of GE
Aircraft Engines,
General Electric Company
since August 1991.
Formerly Mr. Rowe was
Senior Vice President
of GE Aircraft Engines,
General Electric Company. 1980 13,789 .0223
George A. Schaefer, Jr., 48,
President and Chief
Executive Officer of Fifth
Third and The Fifth Third
Bank since January, 1991.
Previously Mr. Schaefer was
President and Chief
Operating Officer of
Fifth Third and The Fifth
Third Bank since April, 1989.
Formerly Executive Vice
President of Fifth
Third and The Fifth
Third Bank. 1988 193,947 .3142
John J. Schiff, Jr., 50,
Chairman and Director,
John J. & Thomas R.
Schiff & Co., Inc., an
insurance agency. Chairman
and Director of Cincinnati
Financial Corp. and
Cincinnati Insurance Co.
Director of Cincinnati Gas
& Electric Company,
Standard Register Co. and
the Cincinnati Bengals. 1983 65,440 .1060
Stephen Stranahan, 59,
Chairman and President
of Intelco, Inc.
(formerly known as Bay
Enterprises, Inc.), an
industrial air compressor
services and electronic
controls manufacturer.
Director of RPM, Inc. 1989 12,677 .0205
Dennis J. Sullivan, Jr.,
61, Executive Counselor
of Dan Pinger Public
Relations, Inc., an
advertising agency,
since February, 1993.
Formerly Director,
Executive Vice President
and Chief Financial Officer,
Cincinnati Bell, Inc. and
Cincinnati Bell Telephone
Company. Director of
Community Mutual Insurance
Company, Access Corporation
and The Future Now, Inc. 1984 18,478 .0299
Dudley S. Taft, 53,
President and Director,
Taft Broadcasting Company,
owner and operator
of television broadcasting
stations since October,
1987. Director of The Union
Central Life Insurance
Company, Cincinnati Gas &
Electric Company, United
States Playing Card Co.,
and The Future Now, Inc. 1981 19,273 .0312
Executive Officers
Neal E. Arnold, 33,
Treasurer of Fifth Third
and Fifth Third Bank since
October, 1990, and Senior
Vice President of Fifth
Third Bank since April,
1993. Previously Mr.
Arnold was Vice President
of Fifth Third Bank since
October, 1990. Formerly,
Chief Financial Officer
and Senior Vice President
of First National Bank of
Grand Forks, North Dakota. ---- 2,613 .0042
Michael D. Baker, 43,
Senior Vice President
of Fifth Third since
March, 1993. Senior
Vice President of Fifth
Third Bank since July, 1987. ---- 44,064 .0714
P. Michael Brumm, 46,
Senior Vice President
and Chief Financial Officer
of Fifth Third and The
Fifth Third Bank since
June, 1990. Previously,
Mr. Brumm was Treasurer of
Fifth Third since 1985 and
Senior Vice President
of The Fifth Third Bank
since 1987. ---- 48,418 .0784
Roger W. Dean, 31,
Controller of Fifth Third
and Vice President of
Fifth Third Bank since
June, 1993. Mr. Dean was
formerly with Deloitte &
Touche, independent public
accountants. ---- 195 .0003
Michael K. Keating, 38,
Senior Vice President
and General Counsel of
Fifth Third since March,
1993 and Senior Vice
President and Counsel of
The Fifth Third Bank since
November, 1989, and
Secretary of Fifth Third
and The Fifth Third Bank
since January, 1994.
Previously, Mr. Keating
was Vice President,
Counsel and Assistant
Secretary of The Fifth
Third Bank and Counsel
of Fifth Third. Mr.
Keating is a son of Mr.
William J. Keating,
Director. ---- 19,351 .0313
George W. Landry, 53,
Executive Vice President
of Fifth Third and The
Fifth Third Bank since
November, 1989. Previously
Mr. Landry was Group Vice
President of The Fifth
Third Bank. ---- 86,184 .1396
Robert P. Niehaus, 47,
Senior Vice President
of Fifth Third since
March, 1993, previously
Vice President of Fifth
Third and Senior Vice
President of The Fifth
Third Bank. ---- 54,437 .0882
Stephen J. Schrantz, 45,
Executive Vice President
of Fifth Third and The
Fifth Third Bank since
November, 1989. Previously
Mr. Schrantz was Senior
Vice President of The
Fifth Third Bank.
Director, The Frank
Herschede Company. ---- 54,276 .0879
Gerald L. Wissel, 37,
Auditor of Fifth Third
and The Fifth Third Bank
since March, 1990,
and Senior Vice President
of Fifth Third Bank
since November, 1991.
Previously Mr. Wissel
was Vice President of
The Fifth Third Bank
since March 1990. Mr.
Wissel was formerly
with Deloitte & Touche,
independent public
accountants. ---- 6,812 .0110
All Directors and
Officers of Fifth Third
as a Group (33 persons)(5) 1,327,068 2.1496
<FN>
(1) Unless otherwise indicated, the director or officer has had the
same principal occupation for the past five years.
(2) On April 15, 1975, the Board of Directors of The Fifth Third
Bank became the Board of Directors of Fifth Third pursuant to an
Agreement and Plan of Reorganization under which Fifth Third
acquired The Fifth Third Bank. Service on the Board of The Fifth
Third Bank prior to April 15, 1975 is reflected in the dates shown
above.
(3) As reported to Fifth Third by the persons listed as of the date
stated. Includes shares held in the name of spouses, minor
children, certain relatives, trusts, estates and certain affiliated
companies as to which beneficial ownership may be disclaimed.
(4) Messrs. Morgan and Schiff, Jr. are officers and directors of
Cincinnati Financial Corporation, and Mr. Barrett is an Officer and
Director of The Western-Southern Life Insurance Company, whose
holdings of Fifth Third shares with their affiliates are more fully
set forth above under the caption "CERTAIN BENEFICIAL OWNERS OF
FIFTH THIRD STOCK."
(5) Shares of Fifth Third Common Stock held by The Fifth Third Bank
in its fiduciary capacity, as set forth above under the caption
"CERTAIN BENEFICIAL OWNERS OF FIFTH THIRD STOCK," are not included
in these totals.
(6) The amounts shown represent the total shares owned outright by
such individuals together with shares which are issuable upon the
exercise of all stock options which are currently exercisable.
Specifically the following individuals have the right to acquire
the shares indicated after their names, upon the exercise of such
stock options; Mr. Arnold, 2113; Mr. Baker, 14,063; Mr. Barrett,
7,125; Mr. Boesel, 7,125; Mr. Brumm, 13,813; Mr. Buenger, 1,500;
Mr. Carson, 7,125; Mr. Dahl, 2,500; Mr. Dean, 175; Mr. Dirvin,
7,125; Mr. Donnell, 3,880; Mr. Farmer, 7,125; Mr. Geary, 4,875; Mr.
Gorr, 3,750; Mr. Head, 12,188; Ms. Herschede, 1,500; Mr. Kagler,
1,500; Mr. M. Keating, 12,376; Mr. W. Keating, 1,500; Mr. Kiggen,
12,188; Mr. Landry, 34,250; Mr. Morgan, 12,188; Mr. Niehaus,
13,813; Mr. Norris, 5,639; Mr. Rowe, 9,188; Mr. Schaefer, 85,169;
Mr. Schiff, 3,750; Mr. Schrantz, 29,750; Mr. Stranahan, 7,125; Mr.
Sullivan, 1,500; Mr. Taft, 1,500; and Mr. Wissel, 4,288.
</FN>
/TABLE
<PAGE>
NATIONAL BANCORP BOARD OF DIRECTORS
The names and ages of the National Bancorp Board of
Directors,
their current positions and certain other information, together
with their beneficial ownership of National Bancorp Common Stock at
December 31, 1993 are as follows:<PAGE>
<TABLE>
<CAPTION>
Name Age Principal Director Shares Percent
Occupation Since Common of
Stock Class
Beneficially
Owned at
December 31,
1993(1)
<S> <C> <C> <C> <C> <C>
Tracy W. 55 Entrepreneur
Farmer with ownership
interest
including car
dealerships,
restaurants
and shopping
centers. 1985 100 100%
John E. 43 Vice Chairman
Darnell of National
Bancorp, Vice
President of
NBC and Chief
Financial
Officer of
Farmer
Enterprises. 1991 0 0
Todd Smith 38 Controller of
NBC. 1985 0 0
Rhonda 43 Trust Officer
Brown of NBC and
Secretary of
National
Bancorp and
NBC. 1985 0 0
/TABLE
<PAGE>
BUSINESS OF THE NATIONAL BANCORP OF KENTUCKY, INC.
The National Bancorp of Kentucky, Inc. (NBK) was incorporated on
June 12, 1985 and became a bank holding company under the BHC Act
upon its acquisition of all of the outstanding capital stock of The
National Bank of Cynthiana (NBC) and The First National Bank of
Falmouth (FNBF). NBK engages in a wide range of commercial banking
activities through both NBC and FNBF (collectively the "Banks").
NBC and FNBF have operated as commercial banks in Cynthiana and
Falmouth, Kentucky since 1871 and 1921 respectively. NBC and FNBF
engage in a wide range of commercial banking activities, including
the acceptance of deposits for checking, savings, and time deposit
accounts, making of secured and unsecured loans, rental of safe
deposit boxes, financial counseling and trust. NBC and FNBF's
lending services include the making of commercial, real estate,
installment, agricultural and credit card loans and their operating
revenues are derived primarily from interest and fees on domestic
real estate, commercial, agricultural, and consumer loans, and on
interest on securities of the United States government and
agencies, states, and municipalities.
At December 31, 1993, NBC had total assets of $64.7 million, total
deposits of $55.5 million, and stockholders equity of $5.9 million.
FNBF had total assets of $31.9 million, total deposits of $28.3
million, and stockholders equity of $3.4 million. NBC's market
area includes Harrison County, Kentucky and the surrounding
counties. FNBF's market area includes Pendleton County, Kentucky
and the surrounding counties. NBC is the second largest of four
financial institutions in Harrison County. FNBF is the largest of
six financial institutions in Pendleton County.
NBC and FNBF actively compete with other local and regional
commercial banks and financial institutions for all types of
deposits and loans, and to provide financial and other services.
The Bank's competitors are not commercial banks. For example, with
respect to certain banking services, the Banks compete with
insurance companies, savings and loan associations, credit unions
and other financial institutions and private concerns providing
financial services such as savings and loan associations, finance
companies, credit unions, certain governmental agencies, and with
merchants who extend their own credit in selling to consumers and
other customers. Many of the banks, financial institutions and
other entities with which the Banks compete have capital and
resources substantially in excess of the Banks.
NBC has a trust department and at December 31, 1993, it managed
trust accounts with a book value of approximately $2.9 million.
NBC's principal office is located at 100 South Main Street in
Cynthiana, Kentucky. NBC has one branch located at Route 27 South
in Harrison Square, Cynthiana. NBC owns its principal office and
leases its branch.
FNBF's principal office is located at 216 Shelby Street in
Falmouth, Kentucky. FNBF has two branches, one located on Route 27
North, Falmouth and the other also on Route 27 North in Butler,
Kentucky. FNBF owns its principal office and Butler branch and
leases its Falmouth branch.
At December 31, 1993, NBC had 29 full-time and five part-time
employees. FNBF had 19 full-time and two part-time employees at
December 31, 1993. Management considers employee relations to be
good. None of the Banks' employees are covered by a collective
bargaining agreement.
NBC and FNBF are national banks whose deposits are insured by the
Federal Deposit Insurance Corporation, (FDIC). As such, NBC and
FNBF are subject to extensive regulation by the Office of the
Comptroller of the Currency (OCC). The lending, investments, and
other activities are subject to federal and state laws and
regulations and requirements of the OCC. The OCC regularly
examines the Banks for compliance with federal and state laws,
regulations and requirements. NBC and FNBF must file quarterly-
basis reports with the OCC providing financial and other
information. This supervision is intended for the protection of
depositors.
As a registered bank holding company under the BHC Act, NBK is
subject to the supervision and examination of the Federal Reserve
Board. NBK is subject to extensive federal laws, regulations and
other Federal Reserve Board requirements which govern the
operations of bank holding companies. The purpose of these
extensive laws, regulations and requirements is primarily to
encourage a bank holding company to serve as a source of strength
for its bank subsidiaries.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF THE NATIONAL
BANCORP
OF KENTUCKY'S FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
For purposes of the following discussion, the term "Company" is
used to refer to the consolidated financial statements of NBK and
the Banks. The Company's service area is economically dependent on
agriculture and it has a significant amount of loans directly
related to agriculture. In addition, due to the Company's close
proximity to other metropolitan areas, it has a significant amount
of commercial real estate credits. The Company's net income is
most directly related to the quality of its loan portfolio and by
the spread between interest earned on assets and interest paid on
liabilities. The primary sources of income for the Company are
interest income from loans and investments and various service
charges, fees and commissions.
In 1992, the Company implemented several strategies to improve
asset quality, profitability, and diversification. To accomplish
these goals, management sought to improve its penetration in the
real estate loan markets, and to continue increased credit analysis
and more stringent credit policies.
To enhance profits, management has sought to increase the volume
and quality of loans and to reduce overhead. A significant
increase in loan volume was generated in the local residential real
estate market and in high quality participation loans purchased.
This resulted in greater interest and loan fee income. Overhead
has been reduced by controlling salaries and benefits and reducing
those expenses sensitive to loan quality such as loan loss
provisions, legal fees and OREO expense. This has been
accomplished through quicker problem loan identification and
quicker problem loan resolution.
To improve investment diversification and reduce interest rate risk
in a rising rate environment, management reversed the trend of
greater dependence on long-term securities in favor of variable
rate loans. Pricing strategies played a key role in the success of
increasing loan volume.
The purpose of the following discussion is to provide insight into
the results of operations and financial condition of the Company
for the indicated periods.
Results of Operations
for the years ended December 31, 1993, 1992 and
1991
A summary of the percentage increases and decreases in the
components of net income for the last three years is shown in the
table below:
<TABLE>
<CAPTION>
Percentage of
Increase (Decrease)
1993 1992 1991
vs vs vs
1992 1991 1990
<S> <C> <C> <C>
Interest income (12.25) (15.47) (6.14)
Interest expense (22.52) (30.80) (9.16)
Net interest income ( 1.59) 9.57 ( .75)
Provision for loan loss (65.16) (70.00) 162.26
Net interest income after
provision for loan loss 2.80 34.20 (16.8)
Non-interest income (12.71) (45.42) 34.65
Operating expenses 8.55 (21.22) (26.35)
Net income 16.76 519.58 141.09
</TABLE>
Net Income:
Net income (loss) for 1993 was $1,177,000 (before cumulative effect
of change in accounting principles more fully described under
"Income Taxes" in 1993), compared with $1,008,000 in 1992 and
$(240,000) in 1991.
Net Interest Income and Net Interest Margin:
Interest income decreased steadily through the indicated periods
due primarily to decline in interest rates and to a lesser degree
to volume and change in earning asset mix. Interest expense has
also decreased from 1991 to 1993 due primarily to decline in
interest rates.
The difference between interest income and interest expense, or net
interest income, is the principal indicator of profitability. it
reflects the margin between interest earned on assets and interest
incurred on liabilities. From 1991 to 1993, average interest
earning assets declined from $95.4 million to $92.7 million, a
decrease of $2.7 million or 2.83 percent. During this period, tax
equivalent interest income increased $341,000 or 9.82 percent.
This increase reflects the result of an increase in loans, which
earn a high rate of interest than other earning assets.
<TABLE>
<CAPTION>
For the Year Ended December 31
1993 1992 1991
(Dollars in Thousands)
<S> <C> <C> <C>
Interest income $ 6,813 $ 7,656 $ 9,058
Tax equivalent adjustment 13 21 34
Interest income
(fully tax equivalent basis) 6,826 7,677 9,092
Interest expense 3,013 3,889 5,620
Net interest income
(fully tax equivalent basis) $3,813 $3,788 $3,472
Average interest earning
assets $92,698 $93,530 $95,424
Average interest bearing
liability $79,267 $81,377 $84,292
Net interest margin 4.11% 4.05% 3.64%
Average rate on interest
earning assets 7.36% 8.21% 9.53%
Average rate on interest
bearing liabilities 3.80% 4.78% 6.67%
Net interest spread 3.56% 3.43% 2.86%
</TABLE>
Non-Interest Income:
The following schedule provides a summary of the Company's non-
interest income for the last three years:
<TABLE>
<CAPTION>
For the Year Ended December 31
1993 1992 1991
(Dollars in Thousands)
<S> <C> <C> <C>
Service charges $306 $299 $302
Investment gains (losses) 179 251 17
Other Income 209 292 261
Total non-interest income $694 $842 $580
</TABLE>
Sales and calls of investment securities have generated gains in
each of the last three years, and such transactions are the primary
reason for fluctuations in non-interest income. Other sources of
non-interest income have also fluctuated in the three-year time
horizon. Trust fees, which are included in other income, were
$90,000 in 1991, $8,000 in 1992 and $48,000 in 1993. In addition,
a one-time reimbursement for environmental clean-up of $132,000 is
included in other income for the year ended December 31, 1992.
Operating Expenses:
The following schedule provides a summary of the Company's
operating expenses for the last three years:
<TABLE>
<CAPTION>
For the Year Ended December 31
1993 1992 1991
(Dollars in Thousands)
<S> <C> <C> <C>
Salaries and benefits $1,343 $1,336 $1,359
Expenses of premises and
fixed assets 362 379 367
Other operating expenses 1,081 1,163 1,926
Total operating expenses $2,786 $2,878 $3,652
</TABLE>
Salaries and benefits and expenses of premises and fixed assets
have remained relatively unchanged during the three-year period.
Other operating expenses have decreased by 40 percent from 1991 to
1992. In 1991, other operating expenses included $215,000 in
expenses related to the settlement of litigation; $250,000 of loss
recognized on the sale of other real estate owned; $215,000 in
other real estate owned expenses; and $120,000 in legal fees
incurred in connection with the above. Other operating expenses
declined $81,000 or seven percent from 1992 to 1993 as legal and
consulting fees declined by $133,000.
Provision for Loan Losses:
The allowance for loan losses is established through a provision
for loan losses charged to expenses. Loans are charged against the
allowance when management believes that the collectibility of the
principal is unlikely. The allowance is an amount that management
believes will be adequate to absorb possible losses on existing
loans that may become uncollectible. The evaluations take into
consideration such factors as changes in the nature and volume of
the loan portfolio, overall portfolio quality, review of specific
problem loans, and current economic conditions that may affect
borrower's ability to pay.
The amount of the provision charged to expense was $814,000 in
1991, $244,000 in 1992, and $85,000 in 1993. The increase in loan
loss expense in 1991 is directly related to management's strategy
to emphasize more stringent credit policies and improve overall
asset quality. In 1993, 73 percent of loans charged off were
business loans and 27 percent were consumer loans. In 1992, 43
percent of the charged-off loans were agricultural, 30 percent were
business, and 26 percent were consumer. In 1991, 72 percent of
charged-off loans were business loans, 11 percent were real estate
and 16 percent were consumer. See "Allowance for Loan Losses."
Applicable Income Taxes:
The effective tax rates of 30.8 percent if 1993, 32.2 percent in
1992 and (46.4) percent in 1991 differ from the statutory rate as
follows:
<TABLE>
<CAPTION>
For the Year Ended December 31
1993 1992 1991
(Dollars in Thousands)
<S> <C> <C> <C>
Tax as statutory rates $552 $505 $(153)
Tax basis of assets over
book basis (7) (5) (31)
Tax-exempt interest (11) (18) (31)
Amortization (19) (19) (19)
Other, principally changes in
prior year tax estimates (13) 16 26
$502 $479 $(208)
</TABLE>
The Company adopted FAS 109 in 1993. The cumulative affect of the
change in accounting for income taxes was a benefit of $17,000.
Financial Condition
as of December 31, 1993, 1992 and 1991
Investment Portfolio:
The composition of the Company's investment portfolio at book value
is as follows. A significant portion of the portfolio is comprised
of mortgage-related securities. These securities differ from
traditional debt securities in that they have uncertain maturity
dates and are priced based upon estimated prepayment rates of the
underlying mortgages. Management has estimated the average life of
these securities to be three to four years.
The continued decrease in the overall portfolio is a result of
management's plans to increase the loan portfolio and the
prepayment of mortgage-backed securities.
<TABLE>
<CAPTION>
December 31
1993 1992 1991
(Dollars in Thousands)
<S> <C> <C> <C>
U.S. Treasury $ 6,161 $ 8,279 $ 7,152
U.S. Government agencies 6,984 12,046 11,644
States and political
subdivisions 400 636 827
Agency mortgage-backed
securities 20,742 23,694 28,059
Other mortgage-backed
securities 183 279 660
$34,470 $44,934 $48,342
</TABLE>
The maturity distribution of the securities portfolio at book value
on December 31, 1993 and the related average yield follows. Yields
on the municipal portfolio are on a tax-equivalent basis. Yields
on mortgage-backed securities consider the estimated prepayments.
All U.S. Government Agency securities are floating-rate
investments.
<PAGE>
<PAGE>
<TABLE>
<CAPTION>
Maturities
In Years
Under One One-Five
Six-Ten
Amount Yield Amount Yield
Amount Yield Total Yield
<S> <C> <C> <C> <C> <C>
<C> <C> <C>
U.S. Treasury $4,114 6.67%
$2,042 5.88% $6,158 4.40%
U.S. Government Agency 2,984 3.44%
4,000 5.00% 6,984 4.32%
States and Political 100 9.09% 300 9.08%
400 9.09%
Subdivisions
Mortgage-backed 20,928 6.79%
20,928 6.79%
Securities
Total 100 28,328
6,042 34,470
/TABLE
<PAGE>
The Company adopted FAS 115 "Accounting for Debt and Equity
Securities" effective January 1, 1994. Investment securities with
a book value of approximately $18,286,000 were classified as
"available-for-sale". All other securities were classified as
"hold-to-maturity". Had FAS 115 been implemented on December 31,
1993, investment securities would have been increased by
approximately $532,000, other assets would have been reduced by
$181,000 and stockholders' equity would have been increased by
$351,000. Implementation of FAS 115 at December 31, 1993 would not
have a significant impact on the results of the operations.
Loan Portfolio:
The following table shows the composition of the Company's loan
portfolio:
<TABLE>
<CAPTION>
December 31
1993 1992 1991
(Dollars in Thousands)
<S> <C> <C> <C>
Business $ 3,934 $ 4,071 $ 5,121
Agricultural 8,742 7,329 7,456
Commercial real estate 19,177 15,167 18,171
Residential real estate 14,424 10,581 8,117
Consumer 4,094 3,826 6,155
Total loans $50,371 $40,974 $45,020
</TABLE>
As noted above, the loan portfolio declined from 1991 to 1992. A
significant portion of this decline came in the consumer lending
area. Consumer loans totaling approximately $1,318,000 at December
31, 1991 were sold in 1992 as a result of discussions with the
Office of the Comptroller of the Currency. Other reductions in the
consumer portfolio are the result of a soft loan demand and
competition for consumer credits.
The most significant increase in the loan portfolio in 1993 was
commercial and residential real estate mortgages. Such loans
increased 29.4 percent from 1992 to 1993. This increase reflects
management's decision to initiate an adjustable-rate mortgage
program, increased loan demand, and to aggressively market its real
estate lending.
The following table demonstrates the percentage of loans in each
category to total outstanding loans.
<TABLE>
<CAPTION>
December 31,
1993 1992 1991
(Dollars in Thousands)
<S> <C> <C> <C>
Business 7.81% 9.93% 11.37%
Agricultural 17.35% 17.88% 16.56%
Commercial real estate 38.07% 37.01% 40.36%
Residential real estate 28.63% 25.82% 18.03%
Consumer 8.14% 9.36% 13.68%
Total loans 100.00% 100.00% 100.00%
</TABLE>
Agriculture plays a significant role in the economy of the
Company's service area. Agricultural credits above include loans
secured by farmlands and loans to finance agricultural production.
Management is cognizant of the current agricultural economy and
continuously monitors and evaluates such credits. None of the
Company's loans are foreign loans.
Maturity Distribution of Loans:
The following table shows the maturity distribution of the
Company's business, agriculture and real estate loans that were
outstanding on December 31, 1993.
<TABLE>
<CAPTION>
Through One-Five Over Five
One Year Years Years
(Dollars in Thousands)
<S> <C> <C> <C>
Business $2,659 $1,850 $155
Agricultural 4,287 837 3,618
Real estate 8,627 6,417 18,573
Total $15,573 $9,104 $22,346
</TABLE>
Interest Sensitivity:
The following table shows the maturity distribution of the
Company's business, agricultural and real estate loans that were
outstanding on December 31, 1993. In this table, loans are grouped
as either fixed rate loans or floating rate loans.
<TABLE>
<CAPTION>
One-Five Over Five
Years Years
(Dollars in Thousands)
<S> <C> <C>
Fixed rate loans $8,056 $7,975
Floating rate loans 1,048 14,371
Total $9,104 $22,346
</TABLE>
All loans are categorized in both tables above according to the
time they are due based on contract terms.
Provision and Allowance for Loan Losses:
The Company provides as an expense an amount which reflects
expected credit losses. The provision is based upon management's
evaluation of the outstanding credits, growth in the loan portfolio
and prior loan loss experience. A detailed analysis of the
Company's allowance for loan losses is shown below:
<TABLE>
<CAPTION>
December 31,
1993 1992 1991
(Dollars in Thousands)
<S> <C> <C> <C>
Balance at beginning of period $630 $917 $468
Amounts charged off:
Business 107 174 276
Agricultural 2 255 0
Commercial real estate 0 0 10
Residential real estate 0 6 42
Consumer 37 154 58
Total loans charged off $146 $589 $386
Recoveries on amounts
previously charged off:
Business $20 $18 $7
Agricultural 0 0 0
Commercial real estate 6 0 0
Residential real estate 5 4 6
Consumer 65 36 8
Total recoveries 96 58 21
Net chargeoffs 50 531 365
Provision charged (added)
to operations 85 244 814
Balance at end of period $665 $630 $917
</TABLE>
The following table provides an allocation of the allowance for
loan losses for the periods indicated. The allocation represents
the amount deemed to be reasonably necessary to provide for the
possibility of losses in each category and is based upon the level
of non-performing loans in each category:
<TABLE>
<CAPTION>
December 31,
1993 1992 1991
(Dollars in Thousands)
<S> <C> <C> <C>
Business $187 $107 $356
Agricultural 308 324 391
Commercial real estate 119 142 104
Residential real estate 12 0 6
Consumer 39 57 60
Total loans $665 $630 $917
</TABLE>
The ratio of loans in each category to total outstanding loans is
as follows:
<TABLE>
<CAPTION>
December 31,
1993 1992 1991
(Dollars in Thousands)
<S> <C> <C> <C>
Business 28.12% 16.98% 38.82%
Agricultural 46.31% 51.42% 42.63%
Commercial real estate 17.89 22.54% 11.34%
Residential real estate 1.80% .65%
Consumer 5.88% 9.06% 6.56%
100.00% 100.00% 100.00%
</TABLE>
The table below presents historical statistics of the Company
regarding loans (net of unearned discount), net charge-offs and the
allowance for loan losses.
<TABLE>
<CAPTION>
December 31,
1993 1992 1991
(Dollars in Thousands)
<S> <C> <C> <C>
Balances:
Average total loans $46,068 $41,298 $47,224
Total loans $50,371 $40,974 $45,020
Net charge-offs $50 $531 $365
Allowance for loan losses $665 $630 $917
Provision for loan losses $85 $244 $814
Asset quality ratios:
Net charge-offs to:
Average total loans 0.11% 1.29% 0.77%
Total loans 0.10% 1.30% 0.81%
Allowance for loan
losses 7.52% 84.29% 39.80%
Allowance for loan losses to:
Average total loans 1.44% 1.53% 1.94%
Total loans 1.32% 1.54% 2.04%
Provision for loan losses to: 0.18% 0.59% 1.72%
Average total loans
</TABLE>
Under-Performing Assets:
Under-performing assets consist of:
(1) nonaccrual loans on which the ultimate collectibility
of
the amount of interest is uncertain,
(2) loans which have been renegotiated to provide for a
reduction or deferral of interest or principal because
of
a deterioration in the financial position of the
borrower,
(3) loans and leases past due ninety days or more as to
principal or interest;
(4) other real estate owned.
The following table summarizes nonaccrual loans and the related
reduction in interest income:
<TABLE>
<CAPTION>
December 31,
1993 1992 1991
(Dollars in Thousands)
<S> <C> <C> <C>
Nonaccrual loans $208 $545 $129
Loans 90 days past due
and accruing 12 43 312
Restructured loans 106 1,016 1,870
Other real estate 224 1,404 1,142
Total under-performing assets $550 $3,008 $3,453
Interest income that would
have been recorded if
nonaccrual loans and
restructured loans
were on a current basis in
accordance with their
original terms $19 $63 $50
</TABLE>
The accrual of interest income is generally discontinued when a
loan becomes ninety days past due as to principal or interest.
When interest accruals are discontinued, interest credited to
income in the current year is reversed, and interest accrued in the
prior year is charged to the allowance for loan losses. Management
may elect to continue the accrual of interest when the estimated
net realizable value of collateral is sufficient to cover the
principal balance and accrued interest. Generally, any payment
received on non-accruing loans is applied first to outstanding loan
amounts and next to the recovery of charged-off loan amounts. Any
excess is treated as recovery of lost interest.
<TABLE>
<CAPTION>
December 31,
1993 1992 1991
<S> <C> <C> <C>
Nonperforming assets as a
percentage of total loans
and other real estate 1.09% 7.09% 7.48%
Nonperforming assets as a
percentage of total
assets 0.57% 3.06% 3.42%
</TABLE>
Deposits:
The following is a distribution of average deposits with average
rates of interest:<PAGE>
<PAGE>
<TABLE>
<CAPTION>
December 31,
1993
1992 1991
<S> <C> <C> <C>
<C> <C> <C>
Non-Interest Bearing DDA $9,813 0.00%
$10,227 0.00% $9,750 0.00%
Interest Bearing Transaction Account 19,640 2.58%
18,201 3.18% 14,915 4.82%
NNDA and Savings 8,037 2.85%
7,602 3.41% 6,868 5.04%
Certificates of Deposit 44,609 4.38%
49,622 5.35% 54,598 7.24%
Total Deposits $82,099 3.28%
$85,652 4.08% $86,131 5.82%
/TABLE
<PAGE>
At December 31, 1993, time deposits issued in the amount of
$100,000 or more totaled $4,568,000. A maturity distribution of
such deposits follows:
Three months or less $1,025,000
Three through twelve months 2,600,000
Over twelve months 943,000
$4,568,000
Short-Term Borrowings:
Securities sold under repurchase agreements and federal funds
purchased mature in varying amounts generally within a twelve-month
period. The following table shows information relating to federal
funds purchased and securities sold under repurchase agreements.
<TABLE>
<CAPTION>
December 31,
1993 1992 1991
(Dollars in Thousands)
<S> <C> <C> <C>
Amounts outstanding $2,721 $2,890 $4,763
Weighted average
interest rate 3.14% 3.85% 6.85%
Maximum amount outstanding
at any month-end during
period $4,771 $3,541 $5,526
Average amount outstanding
during period $3,044 $3,333 $4,801
Weighted average interest
rate during the period 4.53% 4.74% 7.03%
</TABLE>
Other short-term borrowings include notes payable due annually to
an unrelated bank. The following table shows information relating
to this borrowing.
<TABLE>
<CAPTION>
December 31,
1993 1992 1991
(Dollars in Thousands)
<S> <C> <C> <C>
Amounts outstanding $2.402 $2,452 $2,257
Weighted average
interest rate 6.00% 6.00% 8.50%
Maximum amount outstanding
at any month-end during
period $2,752 $2,752 $2,316
Average amount outstanding
during period $2,664 $2,380 $2,271
Weighted average interest
rate during the period 6.00% 6.60% 8.19%
</TABLE>
Capital Resources:
The Company's total capital at December 31, 1993 was $5,005,000
compared to $3,866,000 at December 31, 1992, an increase of
$1,139,000 or 29.5 percent. This increase in capital resulted from
the retention of earnings.
The Federal Reserve Board requires bank holding companies maintain
a minimum leverage ratio of 3.00 percent. The leverage ratio is
defined as stockholder's equity less unrealized gains on sale of
securities, goodwill and certain other intangibles divided by
average quarterly assets. The Company's leverage ratio was 5.15
percent at December 31, 1993 and 3.96 percent at December 31, 1992.
The Federal Reserve Board has adopted risk-based capital guidelines
which assign risk weightings to assets and off balance sheet items.
Tier 1 capital consists of common shareholders equity and Tier 2
capital consists of the allowance for loan losses. Under the final
1992 rules, all banks are required to have Tier 1 capital of 4.00
percent of risk-weighted assets and a minimum total capital of 8.00
percent of risk-weighted assets.
The table below illustrates the Company's regulatory capital ratios
computed using the final 1992 rules:
<TABLE>
<CAPTION>
December 31,
1993 1992 1991
(Dollars in Thousands)
<S> <C> <C> <C>
Tier 1 Capital $ 5,005 $ 3,866 $ 2,857
Tier 2 Capital 615 630 625
Total qualifying capital $ 5,620 $ 4,496 $ 3,482
Risk adjusted total
assets $49,166 $52,361 $50,054
Tier 1 risk-based capital
ratio 10.17% 7.38% 5.71%
Total risk-based capital
ratio 11.43% 8.58% 6.96%
</TABLE>
Each of the Banks' capital ratios exceed minimum requirements of
the Office of the Comptroller of the Currency as calculated under
the 1992 rules.
Liquidity and Interest Rate Sensitivity:
The objective of the Company's asset/liability management is to
maintain consistent growth in net interest income. This objective
is accomplished through flexible management of the Company's
balance sheet liquidity and interest rate exposure due to changes
in economic conditions and interest rate levels.
The goal of liquidity management is to provide adequate funds to
meet changes in loan demand and to fund withdrawal of deposits.
At December 31, 1993, the Company had approximately $7,700,000 of
federal funds sold compared to $6,725,000 at December 31, 1992. At
December 31, 1993, the Company had $7,289,000 in certificates of
deposit of $100,000 or more and other repurchase agreements
compared to $8,862,000 at December 31, 1992. Average deposits
other than certificates greater than $100,000 and other repurchase
agreements were approximately 70 percent of average earning assets.
The table which follows reflects the Company's interest rate
sensitivity for the year ended December 31, 1993. Increasing
interest rates would result in a lower net interest income within
the twelve-month time period. Decreasing rates would result in
higher net interest income within the twelve-month time period.<PAGE>
<PAGE>
<TABLE>
<CAPTION>
(In Thousands)
0-3 Months
3-12 Months 1-5 Years Over 5 Years Total
<S> <C>
<C> <C> <C> <C>
Earning Assets:
Investments $16,165
$4,543 $19,462 $2,000 $42,170
Total Loans 17,690
21,316 7,824 3,414 50,514
Total Earning Assets $34,125
$25,859 $27,286 $5,414 $92,684
Interest Bearing Liabilities:
Interest Bearing Deposits and Other L $45,631
$21,200 $8,686 $75,517
Short-term Borrowing
2,402 2,402
Total Liabilities $45,631
$23,602 $8,686 $77,919
Discrete Gap ($11,506)
$2,257 $18,600 $5,414 $14,765
Cumulative Gap
($9,249) $9,351 $14,765
/TABLE
<PAGE>
The following table presents various financial ratios for the
Company:
<TABLE>
<CAPTION>
December 31,
1993 1992 1991
<S> <C> <C> <C>
Profitability Ratios:
Rate of return on: 1.23% 1.06% (.25)%
Average earning assets 1.18% 1.03% (.25)%
Average total assets 25.03% 27.74% (2.89)%
Average stockholders' equity
Capital Ratios:
Average stockholders' equity to
average earnings' assets 4.91% 3.88% 3.22%
Average stockholders' equity to
average total assets 4.74% 3.75% 3.01%
Dividend Payout Ratio 0 0 (13.68)%
</TABLE>
Distribution of Assets, Liabilities and Stockholders' Equity:
The tables captioned "Average Balances and Interest Rates" show,
for each major category of interest earning assets and interest
bearing liabilities, the average amount outstanding, the interest
earned or paid on such amount and the average rate earned or paid
for each of the years in the three-year period ended December 31,
1993. The tables also show the average rate earned on all interest
earning assets, the average rate paid on all interest bearing
liabilities, and the net interest margin (net interest income
divided by total average interest earning assets) for each of the
years in the three-year period ended December 31, 1993.
Average balances are full-year daily averages balances. Nonaccrual
loans outstanding were included in calculating the rate earned on
loans. Total interest income includes the effects of tax
equivalent adjustments using tax rates of 34 percent.<PAGE>
<PAGE>
<TABLE>
<CAPTION>
For the
Years Ended December 31,
1993
1992 1991
---------------------------
- ---------------------------- ---------------------------
Average Average
Average Average Average Average
Balance Interest Rate
Balance Interest Rate Balance Interest Rate
<S> <C> <C> <C> <C>
<C> <C>
Earning Assets:
U.S. Treasury and $44,183 $2,974 6.73%
$48,410 $3,734 7.71% $42,966 $3,849 8.96%
U.S. Govt Agency
Obligations of States 403 37 9.18%
781 62 7.94% 1,257 108 8.59%
and Political
Subdivisions
Other Investments 265 23 8.68%
417 37 8.87% 795 67 8.43%
Federal Funds Sold 1,779 52 2.92%
2,624 90 3.43% 3,182 151 4.75%
Total Loans 46,068 3,740 8.12%
41,298 3,753 9.09% 47,224 4,918 10.41%
Total Earning Assets $92,698 $6,826 7.36%
$93,530 $7,676 8.21% $95,424 $9,093 9.53%
Less Allowance for (555)
(660) (656)
Loan Losses
Non-Earning Assets:
Cash and Due From 1,994
2,676 3,098
Banks
Bank Premises and 645
749 831
Equipment
Other Assets 1,192
1,486 1,646
Total Assets $95,974
$97,781 $100,343
</TABLE>
<TABLE>
<CAPTION>
For the
Years Ended December 31,
1993
1992 1991
----------------------------
- ----------------------------- --------------------------
Average Average
Average Average Average Average
Balance Interest Rate
Balance Interest Rate Balance Interest Rate
<S> <C> <C> <C> <C>
<C> <C> <C> <C> <C>
LIABILITIES AND
STOCKHOLDERS' EQUITY
Interest Bearing
Liabilities
Transaction Accts. $19,640 $507 2.58%
$18,201 $579 3.18% $14,915 $719 4.82%
Money Market Deposit 8,037 229 2.85% 7,602
259 3.41% 6,868 346 5.04%
Accounts
Certificates of 44,609 1,954 4.38% 49,622
2,655 5.35% 54,598 3,957 7.24%
Deposit and Other
Time Deposits
Federal Funds Purch. 4,038 139 3.44% 3,088
156 5.05% 4,069 281 6.91%
and Securities Sold
Under Repurchase
Agreements
Other Borrowed Money 2,943 184 6.25% 2,824
240 8.50% 3,842 317 8.25%
Total Interest Bearing $79,267 $3,013 3.80%
$81,337 $3,889 4.78% $84,292 $5,620 7.67%
Liabilities
Non-Interest Bearing 9,813
10,227 9,750
Liabilities
Other Liabilities 2,344
2,584 3,254
Stockholders' Equity 4,550
3,633 3,047
Total Liabilities and $95,974
$97,781 $100,343
Stockholders' Equity
Net Interest Income $3,813
$3,787 $3,473
Net Interest Spread 3.56%
3.43% 2.86%
Net Interest Margin 4.11%
4.05% 3.64%
</TABLE>
Interest Differential:
The changes in interest income and interest expense resulting from
changes in volume and changes in rate for the years ended December
31, 1993 and 1992 are shown below. The change in interest due to
both rate and volume has been allocated to change due to volume and
change due to rate in proportion to the relationship of the
absolute dollar amounts of the change in each. Total interest
income includes the effects of tax equivalent adjustments using tax
rates of 34 percent.
<PAGE>
<TABLE>
<CAPTION>
1993 Over/Under 1992
1992 Over/Under 19
Increase/Decrease
Increase/Decrease
Due to:
Due to:
---------------------------
--------------------
Total Net
Total Net
Change Rate Volume
Change Rate Volume
Increase/Decrease In:
<S> <C> <C> <C>
<C> <C> <C>
Interest Income:
U.S. Treasury & U.S. ($760) ($433) ($327)
($115) ($604) $489
Government Agencies
Obligations of State & (25) 5 (30)
(46) (5) (41)
Political Subdivisions
Other Investments (14) (1) (13)
(30) (5) (25)
Federal Funds Sold (30) (4) (29)
(61) (35) (26)
Total Loans (13) (448) 435
(1,165) (546) (619)
Total ($850) ($886) $36
($1,417) ($1,195) ($222)
Interest Expense:
Interest Bearing ($72) ($118) $46
($140) ($298) $158
Transaction Accounts
Money Market Deposit (30) (45) 15
(87) (124) 37
Accounts
Certificates of Deposit (701) (432) (269)
(1,302) (938) (364)
and Other Time Deposits
Federal Funds Purchased
& Securities Sold Under
Repurchase Agreements (17) (65) 48
(125) (57) (68)
Other Borrowed Money (56) (66) 10
(77) 7 (84)
Total ($876) ($726) ($150)
($1,731) ($1,410) ($321)
Increase/Decrease in $26 ($160) $186
$314 $215 $99
Interest Differential
/TABLE
<PAGE>
LEGAL MATTERS
Dinsmore & Shohl, Cincinnati, Ohio, counsel for Fifth Third,
has rendered its opinion that the shares of Fifth Third Common
Stock to be issued to the stockholders of National Bancorp in
connection with the Merger have been duly authorized and, if issued
pursuant to the Affiliation Agreement and Merger Agreement, will be
validly issued, fully paid and non-assessable under the current
laws of the State of Ohio. Such firm will also render its opinion
with respect to certain federal income tax consequences of the
Merger to Fifth Third, National Bancorp and the stockholder of
National Bancorp.
Nolan W. Carson, a partner in Dinsmore & Shohl, is a
Director
of Fifth Third. As of January 31, 1994, partners of Dinsmore &
Shohl and attorneys employed by such firm beneficially owned 27,154
shares of Fifth Third Common Stock.
EXPERTS
The financial statements incorporated in this prospectus by
reference from Fifth Third's Annual Report on Form 10-K for the
year ended December 31, 1993 have been audited by Deloitte &
Touche, independent auditors, as stated in their report, which is
incorporated herein by reference (which report expresses an
unqualified opinion and includes an explanatory paragraph relating
to a change in the method of accounting for debt and equity
securities) and have been so incorporated in reliance upon the
report of such firm given upon their authority as experts in
accounting and auditing.
The consolidated financial statements of National Bancorp
appearing in the 1993 Annual Report to Stockholders for the year
ended December 31, 1993 have been audited by Clines & Satterly,
P.S.C., independent certified public accountants, whose report is
also incorporated by reference herein. Such financial statements
have been incorporated herein in reliance upon such reports and
upon the authority of said firms as experts in accounting and
auditing.
OTHER MATTERS
The Board of Directors of National Bancorp knows of no other
matters which may come before the Special Meeting. However, if any
matters other than those set forth in the notice should be properly
presented for action, including any adjournment of the Special
Meeting, such matters will be handled in accordance with applicable
legal requirements.<PAGE>
<PAGE>
INDEPENDENT AUDITORS' REPORT
Board of Directors
The National Bancorp of Kentucky, Inc.
Lexington, Kentucky
We have audited the accompanying consolidated balance sheets of The
National Bancorp of Kentucky, Inc. and Subsidiaries as of December
31, 1993 and 1992, and the related consolidated statements of
operations, changes in stockholders' equity, and cash flows for the
years then ended. These financial statements are the responsibili-
ty of the Company's management. Our responsibility is to express
an opinion on these consolidated financial statements based on our
audits.
We conducted our audits in accordance with generally accepted
auditing standards. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the
financial statements are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the
amounts and disclosures in the consolidated financial statements.
An audit also includes assessing the accounting principles used and
significant estimates made by management as well as evaluating the
overall financial statement presentation. We believe that our
audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to
above present fairly, in all material respects, the financial
position of The National Bancorp of Kentucky, Inc. and Subsidiaries
as of December 31, 1993 and 1992, and the results of its operations
and its cash flows for the years then ended in conformity with
generally accepted accounting principles.
/S/ Clines & Satterly, P.S.C.
Lexington, Kentucky
February 15, 1994<PAGE>
THE NATIONAL BANCORP OF KENTUCKY, INC.
<TABLE>
<CAPTION>
CONSOLIDATED BALANCE SHEETS
December 31, 1993 and 1992
_______________
ASSETS 1993 1992
<S> <C> <C>
Cash and due from banks (Note 2) $ 2,345,999 $ 2,615,516
Federal funds sold 7,700,000 6,725,000
Investment securities, approximate
market value of $35,491,415
(1992, $46,180,430)
(Notes 1 and 3) 34,470,319 44,933,476
Loans, less allowance for loan losses
of $664,809 (1992, $630,468)
Notes 1, 4, and 12) 49,707,068 40,343,583
Interest receivable 851,843 1,109,023
Office buildings and equipment,
net (Notes 1, 5, and 13) 574,682 715,133
Other assets (Note 6) 634,658 1,756,868
___________ ___________
$96,284,569 $98,198,599
</TABLE>
See notes to consolidated financial statements.
<TABLE>
<CAPTION>
LIABILITIES AND 1993 1992
STOCKHOLDERS' EQUITY
<S> <C> <C>
Liabilities:
Deposits:
Demand $10,899,348 $10,668,099
NOW accounts 19,829,170 20,309,372
Money market accounts 4,738,115 2,730,867
Savings accounts 5,343,323 4,933,317
Time, over $100,000 (Note 7) 4,568,220 6,110,495
Time, other 38,317,436 41,027,164
------------ -----------
83,695,612 85,779,314
Securities sold under repurchase
agreements (Note 8) 2,721,064 2,890,400
Notes payable (Note 9) 2,402,159 2,752,159
Accrued interest and other
liabilities 482,371 769,954
Capital lease obligation (Note 13) 214,356 321,951
Excess of net assets acquired over
cost (Note 1) 1,763,494 1,818,877
---------- ----------
Total liabilities 91,279,056 94,332,655
Commitments and contingent
liabilities (Notes 11 and 13)
Stockholders' equity: (Notes 9 and 15)
Preferred stock, nonvoting,
$1,000 par value,
100 shares authorized;
23 shares outstanding 23,000 23,000
Common stock, no par value,
2,000 shares authorized;
100 shares outstanding 1,426,336 1,426,336
Retained earnings 3,556,177 2,416,608
Total stockholders' equity 5,005,513 3,865,944
$96,284,569 $98,198,599
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
CONSOLIDATED STATEMENTS OF OPERATIONS
for the years ended December 31, 1993 and 1992
__________
1993 1992
<S> <C> <C>
Interest income:
Interest and fees on loans $3,740,003 $3,752,535
Interest on investment securities:
U.S. Government and agency
securities 2,974,573 3,734,834
State and municipal securities 24,033 41,211
Other securities 23,719 36,780
Interest on Federal funds sold 52,054 90,642
6,814,382 7,656,002
Interest expense:
Interest on deposits 2,689,871 3,490,499
Interest on securities sold under
agreements to repurchase 137,846 157,512
Interest on computer lease 26,307 35,908
Interest on notes payable 159,337 157,141
Interest on subordinated notes
payable 47,749
3,013,361 3,888,809
Net interest income 3,801,021 3,767,193
Provision for loan losses
(Notes 1, 4, and 9) 85,000 244,460
Net interest income after
provision for loan losses 3,716,021 3,522,733
Other income:
Amortization 57,354 57,354
Fees, commissions and other
income (Note 17) 105,082 226,336
Service charges 304,576 299,041
Trust department 47,910 8,489
Securities gains 179,054 250,702
693,976 841,922
Other expenses:
Salaries 1,135,764 1,105,444
Employee benefits 206,674 230,825
Furniture, fixtures and occupancy
(Notes 5 and 12) 362,140 379,323
Other operating expenses 1,080,995 1,162,320
2,785,573 2,877,912
Net income before taxes $1,624,424 $1,486,743
Applicable income taxes
(Notes 1 and 10) 501,598 478,683
Net income before cumulative
effect of change in accounting
for income taxes 1,122,826 1,008,060
Cumulative effect (benefit) of change
in accounting for income taxes
(Note 10) (16,743)
$1,139,569 $1,008,060
</TABLE>
See notes to consolidated financial statements.
<TABLE>
<CAPTION>
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
for the years ended December 31, 1993 and 1992
__________
Stock
Preferred Common Retained
Shs Par Shs Amount Earnings
Total
<S> <C> <C> <C> <C> <C>
<C>
Balance,
December 31,
1991 23 $23,000 100 $1,426,336 $1,408,548
$2,857,884
Net income __ _______ ___ __________ 1,008,060
1,008,060
Balance,
December 31,
1992 23 23,000 100 1,426,336 2,416,608
3,865,944
Net income __ _______ ___ __________ 1,139,569
1,139,569
Balance,
December 31,
1993 23 $23,000 100 $1,426,336 $3,556,177
$5,005,513
</TABLE>
<PAGE>
See notes to consolidated financial statements.
<TABLE>
<CAPTION>
CONSOLIDATED STATEMENTS OF CASH FLOWS
for the years ended December 31, 1993 and 1992
__________
1993 1992
<S> <C> <C>
Cash flows from operating activities:
Interest received $ 7,402,536 $ 8,177,659
Fees and commissions received 539,324 649,085
Interest paid (3,125,015) ( 4,144,593)
Cash paid to suppliers and
employees (2,610,577) ( 2,876,285)
Litigation claims paid (65,000)
Income taxes paid (579,850) (248,000)
Net cash provided by
operating activities 1,626,418 1,492,866
Cash flows from investing activities:
Proceeds from sale of other real
estate 37,500
Proceeds from sales and maturities
of investments securities 22,394,875 22,488,620
Loans made to customers and
principal collected, net (8,329,349) 3,837,544
Capital expenditures (38,507) (103,597)
Purchase of investment
securities (12,134,775) (19,679,347)
Purchase FHLB stock (130,300)
Net cash provided by
investing activities 1,799,444 6,543,220
Cash flows from financing activities:
Net increase in demand deposits,
NOW, money market and
savings accounts 2,158,556 4,856,555
Net requirements from securities
sold under repurchase
agreements (169,336) (617,004)
Net requirements from sales of
certificates of deposit and
payments for maturing
certificates (4,252,004) (7,359,640)
Principal payment capital lease
obligation (107,595) (98,047)
Proceeds, notes payable bank 745,267
Principal payments on notes
payable and subordinated notes (350,000) (989,695)
Net cash used by financing
activities (2,720,379) (3,462,564)
Net increase in cash and
cash equivalents 705,483 4,573,522
Cash and cash equivalents,
beginning of year 9,340,516 4,766,994
Cash and cash equivalents,
end of year $10,045,999 $ 9,340,516
</TABLE>
See notes to consolidated financial statements.
<PAGE>
<TABLE>
<CAPTION>
CONSOLIDATED STATEMENTS OF CASH FLOWS
for the years ended December 31, 1993 and 1992
__________
1993 1992
<S> <C> <C>
Reconciliation of net income to cash
provided by operating activities:
Net income $ 1,139,569 $ 1,008,060
Adjustments to reconcile net income
to cash provided by operating
activities:
Depreciation and amortization 454,643 459,416
Provision for losses on other
real estate 59,500 (51,960)
Provision for possible loan
losses 85,000 244,460
Gain on sale of investments (179,054) (250,702)
Provision for deferred taxes 49,255 78,910
Decrease in interest receivable 257,176 204,015
Decrease (increase) in other
assets 182,460 (77,956)
Decrease in interest payable
and accrued expenses (422,131) (139,428)
Loss on sale of other real
estate and assets 3,146
Provision for losses on
repossessions 14,905
Net cash provided by
operating activities $ 1,626,418 $ 1,492,866
Schedule of cash and cash equivalents:
Cash and due from banks $ 2,345,999 $ 2,615,516
Federal funds sold 7,700,000 6,725,000
$10,045,999 $ 9,340,516
</TABLE>
See notes to consolidated financial statements.
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. Summary of Significant Accounting and Reporting Policies:
The accounting and reporting policies of The National Bancorp of
Kentucky, Inc. (Company) and its subsidiaries conform to generally
accepted accounting principles and prevailing practices within the
banking industry. The Company carries its assets and liabilities
principally on the historical cost basis and follows the accrual
basis of accounting.
Basis of Presentation:
The consolidated financial statements include the accounts of The
National Bancorp of Kentucky, Inc. and its wholly-owned
subsidiaries: The National Bank of Cynthiana (Bank) and The First
National Bank of Falmouth (Bank). All significant intercompany
balances and transactions have been eliminated.
The excess of net assets acquired over cost, negative goodwill, has
been reduced by $793,823 which is the amount of noncurrent assets
at subsidiary acquisition date. The remaining amount of $2,210,446
is being amortized by the straight-line method over forty years.
Assets held in an agency or fiduciary capacity are not assets of
the Company and, accordingly, are not included in the accompanying
financial statements.
Investment Securities:
Investment securities are those which management has the intent and
ability to hold to maturity. Investment securities are stated at
cost adjusted for the accretion of discounts and amortization of
premiums computed by the effective-yield method. Gains and losses
on disposition are based on the net proceeds and the adjusted
carrying amount of the securities on the trade date using the
specific-identification method.
Loans and Allowance for Loan Losses:
Loans are stated at the amount of unpaid principal reduced by
unearned discount and an allowance for loan losses. Unearned
discount on installment loans is recognized as income over the
terms of the loans by the sum-of-the-years-digits method. Interest
on other loans is calculated by using the simple-interest method on
daily balances of the principal amount outstanding.
The allowance for loan losses is established through a provision
for loan losses charged to expenses. Loans are charged against the
allowance for loan losses when management believes that the
collectibility of the principal is unlikely. The allowance is an
amount that management believes will be adequate to absorb possible
losses on existing loans that may become uncollectible based on
prior loan loss experience. The evaluations take into
consideration such factors as changes in the nature and volume of
the loan portfolio, overall portfolio quality, review of specific
problem loans, and current economic conditions that may affect
borrower's ability to pay. Accrual on interest is discontinued on
a loan when management believes, after considering economic and
business conditions and collection efforts, that the borrower's
financial condition is such that collection of interest is
doubtful.
Depreciation
Office buildings and equipment are stated at cost as adjusted for
the excess of net assets acquired over cost, negative goodwill,
less accumulated depreciation computed on the straightline and
declining-balance methods over the estimated useful lives of the
assets.
Other Real Estate Owned
Real estate acquired in settlement of loans is carried at the lower
of cost or estimated fair market value; costs relating to holding
these assets are expensed as incurred.
Income Taxes
The Company and its wholly-owned subsidiaries file a consolidated
federal income tax return. A charge or credit is made by the
Parent equivalent to the federal income taxes which would be
provided if the Banks were filing separate returns.
The Company adopted Statement of Financial Accounting Standards No.
109 prospectively in 1993. In accordance with this Statement,
deferred federal income taxes are provided on certain transactions
which are reported for financial statement purposes in different
years than for income tax purposes, utilizing the liability method.
The tax provision for December 31, 1992 is computed in accordance
with APB No. 11.
Off Balance Sheet Financial Instruments:
In the ordinary course of business the Banks have entered into off
balance sheet financial instruments consisting of commitments to
extend credit and standby letters of credit. Such financial
instruments are recorded in the financial statements when they
become payable.
2. Restriction on Cash and Due from Banks:
Bank regulatory authorities require the Banks to maintain average
reserve balances relating to customer deposits. At December 31,
1993 those reserve balances were approximately $766,000.
3. Investment Securities:
Carrying amounts and approximate market values of investment
securities are summarized as follows:<PAGE>
<PAGE>
<TABLE>
<CAPTION>
Carrying Unrealized
Unrealized Market
Amount Gains
Losses Value
<S> <C> <C> <C>
<C>
December 31, 1993:
U.S. Treasury $ 6,161,051 $ 274,573
$ 6,435,624
Government agency 27,726,361 761,515 $
(33,851) 28,454,025
State and municipal
securities 400,336 7,943
(726) 407,553
Other securities 182,571 11,642
194,213
$34,470,319 $1,055,673 $
(34,577) $35,491,415
Carrying Unrealized
Unrealized Market
Amount Gains
Losses Value
December 31, 1992:
U.S. Treasury $ 8,279,113 $ 236,502
$ 8,515,615
Government agency 35,739,361 1,000,146 $ (
7,485) 36,732,022
State and municipal
securities 635,649 10,160
645,809
Other securities 279,353 7,631
286,984
$44,933,476 $1,254,439 $ (
7,485) $46,180,430
Assets, principally securities, carried at approximately
$13,649,000 at December 31, 1993 and $16,374,000 at December 31,
1992 were pledged to secure public deposits and for other purposes
required or permitted by law.
/TABLE
<PAGE>
Gross realized gains and losses on sales of securities were:
<TABLE>
<CAPTION>
1993 1992
<S> <C> <C>
Gross realized gains:
U.S. Treasury $179,054 $ 39,586
Government agency securities 211,116
$179,054 $250,702
</TABLE>
The contractual maturities of investment securities at December 31,
1993 are presented below. Expected maturities will differ from
contractual maturities because the issuers have the right to call
or prepay obligations with or without call or prepayment penalties.
<TABLE>
<CAPTION>
Carrying Market
Amount Value
<S> <C> <C>
Due in one year or less $ 100,024 $ 99,298
Due from one to five years 7,401,003 7,594,504
Due from five to ten years 6,042,530 6,114,275
13,543,557 13,808,077
Mortgaged backed securities 20,926,762 21,683,338
$ 34,470,319 $35,491,415
</TABLE>
4. Loans:
Major classifications of loans are as follows:
<TABLE>
<CAPTION>
December 31,
1993 1992
<S> <C> <C>
Real estate $39,618,733 $31,343,020
Commercial 8,580,138 7,510,418
Installment 2,278,570 2,324,265
Other 142,503 65,722
50,619,944 41,243,425
Unearned discount (248,067) (269,374)
50,371,877 40,974,051
Allowance for loan losses (664,809) (630,468)
Loans, net $49,707,068 $40,343,583
</TABLE>
Nonaccrual and renegotiated loans at December 31, 1993 and 1992
were approximately $313,000 and $51,467,000, respectively.
At December 31, 1993, there were no commitments to lend additional
funds to borrowers whose loans were classified as nonaccrual or
renegotiated.
The Company recognizes loan fees on loans with a maturity of one
year or less and fees totaling less than $500 when received. Loan
fees on loans with a maturity of greater than one year are deferred
and amortized over the life of the loan. Generally accepted
accounting principles require the deferral and subsequent
amortization of loan fees over the life of the loans. Loan fees
recognized as income were $68,163 and $8,887 in 1993 and 1992,
respectively.
The Company's service area is based principally on an agrarian
economy. Loans secured by farmlands and loans to finance
agricultural production approximated $8,746,000 at December 31,
1993 and $7,329,000 at December 31, 1992. Management is cognizant
of the depressed agricultural economy and continuously monitors and
evaluates such credits.
The reduction in interest income associated with nonaccrual and
renegotiated loans is as follows:
<TABLE>
<CAPTION>
December 31,
1993 1992
<S> <C> <C>
Income in accordance with
original loan terms $ 32,211 $ 143,374
Income recognized (12,870) 79,400
Reduction in interest income $ 19,341 $ 63,974
</TABLE>
Changes in the allowance account for loan losses are as follows:
<TABLE>
<CAPTION>
December 31,
1993 1992
<S> <C> <C>
Balance, beginning of year $ 630,468 $ 916,938
Provisions charged to operations 85,000 244,460
Loans charged off (147,377) (586,043)
Recoveries 96,718 55,113
Balance, end of year $ 664,809 $ 630,468
</TABLE>
5. Office Buildings and Equipment:
Major classifications of these assets are summarized as follows:
<TABLE>
<CAPTION>
Life December 31,
Years 1993 1992
<S> <C> <C> <C>
Land $ 40,569 $ 40,569
Office buildings and
improvements 20-50 258,866 230,863
Furniture and equipment 5-10 968,617 958,114
Leasehold improvements 5-10 79,139 79,139
1,347,191 1,308,685
772,509 (593,552)
Accumulated depreciation $ 574,682 $ 715,133
</TABLE>
Depreciation expense amounted to $177,571 and $167,990 for 1993 and
1992, respectively. Fixed assets have been reduced by negative
goodwill recorded at the acquisition date of the Bank Subsidiaries.
The reduction amounted to $793,823. In addition, related
depreciation expense has been reduced by approximately $21,000 and
$19,000 in 1993 and 1992, respectively.
Furniture and equipment includes $530,000 of computer equipment
held under capital lease agreements at December 31, 1993 and 1992.
Amortization of capitalized leases of $106,000 per year is included
in depreciation expense for the years ended December 31, 1993 and
1992.
6. Other Assets:
The major classifications of other assets are as follows:
<TABLE>
<CAPTION>
December 31,
1993 1992
<S> <C> <C>
Prepaid insurance and other
expenses $ 114,620 $ 138,290
Other real estate acquired in
settlement of debt, net 224,460 1,404,892
Deferred tax benefit 85,165 133,573
Organization and subsidiary
acquisition cost 27,513 27,513
Federal Reserve Bank stock and
other miscellaneous
investments 52,600 52,600
Federal Home Loan Bank stock 130,300
$ 634,658 $1,756,868
</TABLE>
Other real estate acquired in settlement of debt is stated at its
estimated net realizable value. Other real estate owned includes
certain loans made to facilitate the sale of assets acquired in
lieu of or through foreclosure. Such loans are classified as other
real estate until the borrower's investment in the property meets
the Bank's minimum criteria. The amounts of such loans were
$912,000 in 1992. Valuation allowances on other real estate owned
were $46,311 and $133,811 at December 31, 1993 and 1992,
respectively. Other real estate also includes in-substance
foreclosures of $61,000 at December 31, 1992.
7. Time Deposits, Over $100,000:
Certificates of deposit in amounts of $100,000 or more mature as
follows, (in thousands):
<TABLE>
<CAPTION>
December 31,
1993 1992
<S> <C> <C>
Three months or less $1,025 $1,920
Three through twelve months 2,600 2,548
Over twelve months 943 1,642
$4,568 $6,110
</TABLE>
8. Securities Sold Under Repurchase Agreements:
Securities sold under repurchase agreements mature as follows (in
thousands):
<TABLE>
<CAPTION>
December 31,
1993 1992
<S> <C> <C>
One day or less $1,677 $1,740
Three months or less 574 646
Three through twelve months 370 270
Over twelve months 100 234
$2,721 $2,890
</TABLE>
9. Notes Payable:
Notes payable to an unrelated bank:
<TABLE>
<CAPTION>
December 31,
1993 1992
<S> <C> <C>
Due April 30, of each year
renewable annually for a period
not to exceed seven years.
Interest is at prime (6.0 percent,
1993) and payable quarterly.
All subsidiary bank stock is
pledged as collateral.
$2,402,159 $2,752,159
</TABLE>
Scheduled payments are as follows:
<TABLE>
<S> <C>
1994 $ 350,000
1995 350,000
1996 350,000
1997 350,000
1998 350,000
Later years 652,159
$2,402,159
</TABLE>
Among other provisions, Subsidiary Banks are required to maintain
capital funds in the aggregate of $8,558,000 and adjusted capital
funds in an aggregate amount equal to not less than eight percent
of each Bank Subsidiary's total assets. Each Subsidiary Bank shall
maintain at all times loan loss allowances equal to one percent of
all the Bank's outstanding loans. The First National Bank of
Falmouth did not meet the loan loss requirement of one percent.
In accordance with the loan agreement, the Company can declare
dividends only to reduce personal obligations of the majority
stockholder of the Company to the unrelated lending bank above.
10. Income Taxes:
Income tax expense consists of the following:
<TABLE>
<CAPTION>
December 31,
1993 1992
<S> <C> <C>
Current $438,131 $399,773
Deferred 63,467 78,910
$501,598 $478,683
</TABLE>
The provision for federal income taxes is less than that computed
by applying the federal statutory rate of 34 percent in 1993 and
1992, as indicated in the following analysis:
<TABLE>
<CAPTION>
December 31,
1993 1992
<S> <C> <C>
Tax based on statutory rate $552,304 $505,492
Effect of tax exempt income (10,892) (17,764)
Effect of non-taxable amortization
of negative goodwill (19,500) (19,500)
Effect of different tax bases of
fixed assets (7,286) ( 6,355)
Other, principally adjustment to
prior year tax estimates (13,028) (16,810)
$501,598 $478,683
</TABLE>
Temporary differences between the financial statement carrying
amounts and tax basis of assets and liabilities that result in
significant portions of the deferred tax liability at December 31,
1993 relate to the following:
<TABLE>
<CAPTION>
1993
<S> <C>
Allowance for loan loss $84,712
Accumulated depreciation (28,688)
Deferred loan fees 24,113
Accumulated amortization 5,028
$85,165
</TABLE>
The deferred tax asset is included in other assets. Deferred taxes
were computed in accordance with Accounting Principles Board
Opinion No. 11 at December 31, 1992. The deferred tax provision
for the year ended December 31, 1992 relates to provision for loan
loss and depreciation.
On January 1, 1993, the Company adopted Statement of Financial
Accounting Standards No. 109, "Accounting for Income Taxes"
prospectively. The cumulative effect of this accounting change on
years prior to 1993 was a $16,743 increase in the Company's
deferred tax asset. The increase resulted in an increase in net
income for the year ended December 31, 1993 of $16,743. The effect
of the change on 1993 income, excluding the cumulative effect upon
adoption, was not significant to the financial statements.
11. Commitments and Contingent Liabilities:
The Company's financial statements do not reflect various
commitments and contingent liabilities which arise in the normal
course of business and which involve elements of credit risk,
interest rate risk, and liquidity risk. These commitments and
contingent liabilities are commitments to extend credit and standby
letters of credit. A summary of the Company's commitments and
contingent liabilities at December 31, 1993 is as follows:
<TABLE>
<S> <C>
Commitments to extend credit $4,854,790
Standby letters of credit 60,000
</TABLE>
Commitments to extend credit and standby letters of credit all
include exposure to some credit loss in the event of nonperformance
of the customer. The Company's credit policies and procedures for
credit commitments are the same as those for extension of credit
that are recorded on the consolidated balance sheets.
The amount of collateral obtained is based on management's credit
evaluation of the customer. Collateral held varies, including
tangible personal property and real property. Because these
instruments, have fixed maturity dates, and because many expire
without being drawn upon they do not represent any significant
liquidity risk to the Company. The Company has not been required
to perform on any financial guarantees during the past two years.
The Company has not incurred any losses on its commitments in
either 1993 or 1992.
The National Bank of Cynthiana has been notified, as co-owner of a
tract of real estate acquired in lieu of foreclosure, that water
damage has been sustained by contiguous property owners as a result
of a retaining wall on the Bank's property. The matter is under
investigation and discovery proceedings have commenced. No
provision has been made in the financial statements for this matter
and the Company does not expect to incur a material loss as a
result of the above.
12. Related-Party Transactions:
At December 31, 1993, certain officers, directors, and companies in
which they have significant ownership were indebted to the Banks in
the aggregate amount of approximately $1,403,000. All such loans
were made in the ordinary course of business. Commitments to
extend credit to certain officers, directors and their related
companies were $2,112,000 at December 31, 1993.
The Company leases space for branch operations and loan production
operations form its majority shareholder. Such rents for 1993 and
1992 were $39,000.
13. Lease Obligations.
The Company leases real estate for its branch and loan production
offices and various equipment under noncancellable agreements which
require certain minimum rentals. The leases expire between August,
1994 and January, 1998. Certain leases contain various renewal
options. The leases require the Company to pay insurance,
maintenance and taxes.
The National Bank of Cynthiana entered into a lease agreement for
data processing equipment. The lease agreement requires the Bank
to pay all insurance, maintenance and taxes on the equipment.
There is no residual value at the end of the five-year lease term.
The future minimum rental commitment as of December 31, 1993 under
the leases is as follows:
<TABLE>
<CAPTION>
Operating Leases
Due To
Related Capital
Party Other Leases
<S> <C> <C> <C>
Due in the year ending
December 31,
1994 $31,280 $30,125 $134,458
1995 21,000 17,893 100,843
1996 21,000 11,849
1997 12,250 11,400
1998 950
$85,530 $72,217 $235,301
Amount representing interest 20,945
$214,356
</TABLE>
14. Dividends from Subsidiaries:
The approval of the Comptroller of the Currency is required if the
total of all dividends declared by a national bank in any calendar
year exceeds the bank's net profits (as defined) for that year
combined with its retained net profits for the preceding two
calendar years. Under this formula, The First National Bank of
Falmouth can declare dividends in 1993 without the approval of the
Comptroller of the Currency of approximately $520,000 in addition
to the net profits in 1994 up to the date of any such dividend
declaration. In 1994, The National Bank of Cynthiana can declare
dividends without such approval of approximately $870,000 in
addition to the net profits in 1994 up to the date of any such
dividend declaration.
15. Regulatory Matters:
The Company's principal source of funds for debt service is
dividends received from The National Bank of Cynthiana and the
First National Bank of Falmouth.
Each subsidiary bank is required to maintain minimum amounts of
capital to total "risk weighted" assets as defined by banking
regulators. At December 31, 1993, the Banks are required to have
minimum Tier 1 capital and total capital ratios of 4.00 percent and
8.00 percent, respectively. The First National Bank of Falmouth's
Tier 1 and total capital ratios were 23.47 percent and 24.13
percent, respectively. The National Bank of Cynthiana's Tier 1 and
total capital ratios were 17.13 percent and 18.38 percent,
respectively. Leverage ratios for The First National Bank of
Falmouth and The National Bank of Cynthiana were 10.46 percent and
9.29 percent respectively at December 31, 1993.
During The National Bank of Cynthiana's 1991 regulatory
examination, regulators identified several transactions which they
deemed to be violations of banking laws and regulations. One such
issue related to the Bank's purchase of "dealer paper" from
companies related to the Bank's majority shareholder. The
regulators allege such purchases were at below market rates and
therefore violate the transactions with affiliates regulations.
As a result of these findings, The National Bank of Cynthiana
entered into an agreement with the Office of the Comptroller of the
Currency in 1992. Among other provisions, the Bank was required to
form a compliance committee, adopt a written comprehensive conflict
of interest policy, establish a comprehensive internal audit
program and implement a program designed to eliminate criticized
assets. In 1993, the Bank was found to be in compliance with the
agreement and, accordingly, the agreement was terminated by the
Office of the Comptroller of the Currency.
16. Parent Company Financial Statements:
THE NATIONAL BANCORP OF KENTUCKY, INC. (PARENT ONLY)
BALANCE SHEETS
December 31, 1993 and 1992
__________
<TABLE>
<CAPTION>
1993 1992
ASSETS
<S> <C> <C>
Cash $ 104,034 $ 448
Notes receivable 23,000 23,000
Investment in subsidiaries:
The First National Bank of
Falmouth 3,339,713 3,065,301
The National Bank of Cynthiana 5,727,478 5,334,808
Other assets 41,649 194,077
$9,235,874 $8,617,634
LIABILITIES AND
STOCKHOLDERS' EQUITY
<S> <C> <C>
Liabilities:
Accounts payable and accrued
expenses $ 64,708 $ 180,654
Notes payable - bank 2,402,159 2,752,159
Subordinated promissory notes
Excess of net assets acquired
over cost 1,763,494 1,818,877
4,230,361 4,751,690
Stockholders' Equity:
Preferred stock 23,000 23,000
Common stock 1,426,336 1,426,336
Retained earnings 3,556,177 2,416,608
5,005,513 3,865,944
$9,235,874 $8,617,634
</TABLE>
<TABLE>
<CAPTION>
STATEMENTS OF OPERATIONS AND RETAINED EARNINGS
for the years ended December 31, 1993 and 1992
___________
1993 1992
<S> <C> <C>
Income:
Dividends from subsidiary banks $ 525,000 $ 342,250
Amortization of negative
goodwill 57,354 57,354
582,354 399,604
Expenses:
Interest 159,337 204,890
Other 20,396 23,400
179,733 228,290
Income before tax benefit and
equity in undistributed earnings
of subsidiaries 402,621 171,314
Income tax benefit 71,836 71,790
Income before equity in
undistributed earnings of
subsidiaries 474,457 243,104
Equity in undistributed income
of subsidiaries 665,112 764,956
Net income 1,139,569 1,008,060
Beginning retained earnings 2,416,608 1,408,548
Ending retained earnings $3,556,177 $2,416,608
</TABLE>
<TABLE>
<CAPTION>
STATEMENTS OF CASH FLOWS
for the years ended December 31, 1993 and 1992
1993 1992
<S> <C> <C>
Cash flows from operating activities:
Interest paid $ (167,423) $ (208,370)
Cash paid for services and supplies (10,319) (28,582)
Taxes recovered, net 106,328 138,933
Dividends - Subsidiaries 525,000 342,250
Net cash provided by
operating activities 453,586 244,231
Cash flows from financing activities:
Dividends paid
Principal payments on subordinated
notes (739,695)
Principal payment on notes payable,
bank (350,000) (250,000)
Proceeds, notes payable bank 745,267
Net cash used by
financing activities (350,000) (244,428)
Net increase (decrease) in cash 103,586 (197)
Cash, beginning of year 448 645
Cash, end of year $ 104,034 $ 448
Reconciliation:
Net income $1,139,569 $1,008,060
Adjustments to reconcile net
income to net cash provided by
operations:
Amortization (57,354) (57,354)
Undistributed earnings
of Subsidiaries (665,112) (764,956)
Decrease (increase) in other
assets 152,429 (62,973)
(Decrease) increase in accrued
expenses and other
liabilities (115,946) 121,454
Net cash provided by
operating activities $ 453,586 $ 244,231
</TABLE>
17. Other Income:
In 1992 fees, commissions and other income includes a one-time
reimbursement of expenses relating to environmental clean-up of
approximately $132,000. The expenditures related to a parcel of
property included in the Bank's other real estate owned.
18. Employee Benefit Plan:
The Company provides a 401(k) profit-sharing plan that covers
substantially all employees. The plan provides for discretionary
employer contributions. There were no employer contributions in
1993 or 1992.
The National Bank of Cynthiana also maintains an unqualified
defined benefit plan covering two former employees. The Bank has
not provided accrued pension costs, or pension expense computed in
accordance with generally accepted accounting principles. The
Bank's policy is to fund and recognize this expense as payments are
made to the recipients. Such amounts are immaterial to the
financial statements.
19. Significant Group Concentrations of Credit Risk:
Substantially all of the Company's business activity is with
customers located within the state of Kentucky. A majority of
loans are secured by residential or commercial real estate or other
personal property. Approximately $5,315,000 of the Company's loans
are on an unsecured basis. The concentrations of credit by type of
loan are set forth in Note 4. The loans are expected to be repaid
from cash flow or proceeds from the sale of selected assets of the
borrowers.
20. Adoption FAS 115 "Accounting for Debt and Equity Securities":
The Company adopted FAS 115 "Accounting for Debt and Equity
Securities" effective January 1, 1994. Investment securities with
a book value of approximately $18,286,000 were classified as
"available-for-sale". All other securities were classified as
"hold-to-maturity". Had FAS 115 been implemented on December 31,
1993, investment securities would have been increased by
approximately $532,000, other assets would have been reduced by
$181,000 and stockholders' equity would have been increased by
$351,000. Implementation of FAS 115 at December 31, 1993 would not
have a significant impact on the results of operations.
21. Reclassifications:
Certain 1992 balance sheet and income statement accounts have been
reclassified to conform with the 1993 presentation. The
reclassifications have no effect on net income or retained
earnings.
22. Merger Agreement:
On December 6, 1993 the Board of Directors of the Company approved,
in principle, a plan of merger between The National Bancorp of
Kentucky, Inc. and Fifth Third Bancorp. Under the terms of this
plan, Fifth Third Bancorp in exchange for shares of its common
stock shall acquire all of the outstanding common stock of the
Company. All preferred shares of the Company along with the
related notes receivable shall be cancelled. Subject to regulatory
approval, the exchange shall be effective on the last business day
of the month in which all conditions precedent to closing as
outlined in the Affiliations Agreement have been met or at such a
later time as may be set out in the Affiliations Agreement.
NATIONAL BANCORP OF KENTUCKY, INC.
CONSOLIDATED BALANCE SHEET
December 31, 1992 and 1991
<TABLE>
<CAPTION>
1992 1991
ASSETS
<S> <C> <C>
Cash and due from banks $2,615,520 $3,066,998
Federal funds sold $6,725,000 $1,700,000
Investment securities, approximate
market value of $46,178,002,
(1991, $50,258,585) (Notes 1 and 2) $44,933,476 $48,342,234
Loans, less allowance for loan
losses of $630,468 (1991,
$916,938) (Notes 1, 3 and 11) $40,343,583 $44,103,756
Interest receivable $1,109,091 $1,313,034
Office buildings and equipment,
net (Notes 1, 4, and 10) $715,133 $782,771
Other assets (Note 5) $1,756,868 $1,556,910
-------------- -----------
$98,198,599 $100,865,703
============== ===========
<FN>
See notes to financial statements
</FN>
/TABLE
<PAGE>
<TABLE>
<CAPTION>
CONSOLIDATED STATEMENT OF OPERATIONS
for the years ended December 31, 1992 and 1991
1992 1991
<S> <C> <C>
Interest Income:
Interest and fees on loans $3,752,535 $4,917,762
Interest on investment securities:
U.S. Treasury securities and other
U.S. government agencies $3,734,834 $3,848,903
Obligations of states and political
subdivisions $41,211 $74,470
Other securities $36,780 $66,487
Interest on Federal funds sold $90,642 $150,195
---------- ----------
$7,656,002 $9,057,817
----------- ----------
Interest Expense:
Interest on deposits $3,577,270 $5,197,633
Interest on Federal funds purchased,
securities sold under agreements to
repurchase and other borrowed funds $70,741 $105,568
Interest on notes payable $157,141 $186,320
Interest on subordinated notes
payable $47,749 $85,529
---------- ----------
$3,888,809 $5,619,642
---------- ----------
Net interest income $3,767,193 $3,438,175
Provision for loan losses (Notes
1, 3 and 7) $244,460 $813,419
----------- ----------
Net interest income after
provision for loan losses $3,522,733 $2,624,756
Other Income:
Amortization $57,354 $57,354
Fees, commissions and other income
(Note 16) $226,336 $113,000
Service charges $229,041 $301,729
Trust department $8,489 $90,429
Securities gains and losses, net $250,702 $16,884
---------- ----------
$841,922 $579,396
Other Expense:
Salaries $1,105,444 $1,111,058
Employee benefits $230,825 $248,192
Furniture, fixtures and occupancy
(Notes 4 and 11) $379,323 $367,381
Other operating expenses
(Note 15) $1,162,320 $1,925,693
---------- ----------
$2,877,912 $3,652,324
---------- ----------
Net income (loss) before taxes $1,486,743 ($448,172)
Applicable income taxes (benefit)
(Notes 1 and 8) $478,683 ($208,247)
--------- -----------
Net income (loss) $1,008,060 ($239,925)
--------- -----------
LIABILITIES AND STOCKHOLDER'S
EQUITY
Liabilities:
Deposits
Demand $10,668,099 $9,560,322
NOW accounts $20,309,372 $17,169,211
Money market accounts $2,730,867 $2,7138,820
Savings $4,933,317 $4,341,747
Time, over $100,000 (Note 6) $6,110,495 $6,782,527
Time, other $42,177,272 $48,864,879
----------- -----------
$86,929,422 $89,432,506
Securities sold under repurchase
agreements $1,740,292 $2,357,295
Notes payable $2,752,159 $2,256,893
Accrued interest and other liabilities $769,954 $925,202
Capital lease obligation (Note 10) $321,951 $419,997
Excess of net assets acquired over
cost (Note 1) $1,818,877 $1,876,231
Total liabilities $94,332,655 $98,007,819
----------- -----------
Commitments and contingent liabilities
(Notes 8 and 10)
Stockholder's equity: (Notes 7 and 13)
Preferred stock, non-voting,
$1000 par value, 100 shares
authorized, 23 shares
outstanding $23,000 $23,000
Common stock, no par value,
2,000 shares authorized
and 100 shares outstanding $1,426,336 $1,426,336
Retained earnings $2,416,608 $1,408,548
---------- ----------
Total stockholder's equity $3,865,944 $2,857,884
---------- ----------
$98,198,599 $100,865,703
=========== ===========
</TABLE>
<TABLE>
<CAPTION>
STATEMENT OF CHANGES IN STOCKHOLDER'S EQUITY
for the years ended December 31, 1992 and 1991
Preferred Stk Common Stock Retained
Shs Par Shs Amt Earnings Total
<S> <C> <C> <C> <C> <C> <C>
Balance,
December 31,
1990 23 $23,000 100 $1,426,336 $1,681,317 $3,310,653
Net loss (239,925) (239,925)
Cash dividends ------ -------- -------- (32,844) (32,844)
Balance,
December 31,
1991 23 $23,000 100 $1,426,336 $1,408,548 $2,857,884
Net income $1,008060 $1,008,060
Balance,
December 31,
1992 23 $23,000 100 $1,426,336 $2,416,608 $3,865,944
====================================================
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
CONSOLIDATED STATEMENT OF CASH FLOWS
for the years ended December 31, 1992 and 1991
1992 1991
<S> <C> <C>
Cash flows from operating activities:
Interest received $8,177,659 $9,273,765
Fees and commissions received 649,085 565,374
Interest paid (4,144,593) (5,860,464)
Cash paid to suppliers and employees (2,876,285) (2,801,551)
Income taxes (paid) recovered (248,000) 74,999
Litigation claims paid (65,000) (150,000)
Net cash provided by
operating activities $1,492,866 $1,102,123
Cash flows from investing activities:
Proceeds from sale of other real
estate 937,112
Proceed from sales and maturity of
investments securities 22,488,620 9,748,817
Purchase of investment securities (19,679,347) (17,579,906)
Loans made to customers and principal
collected, net 3,837,544 3,489,564
Capital expenditures (103,597) (57,621)
Net cash provided by
investing activities 6,543,220 (3,480,034)
--------- -------
Cash flows from financing activities:
Principal payment under capital lease
obligation (98,047) (89,411)
Net increase in demand deposits, NOW
accounts, money market accounts and
savings accounts 4,856,555 2,582,377
Net requirements from securities sold
under repurchase agreements (617,004) (1,390,186)
Net requirements from sales of
certificates of deposit and
payments for maturing certificates (7,359,640) (2,201,991)
Dividends paid (32,844)
Proceeds, notes payable bank 745,267
Principal payments on notes
payable, and subordinated notes (989,695) (200,863)
----------- -----------
Net cash used by financing
activities (3,462,564) (1,332,918)
Net increase (decrease) in cash and
cash equivalents 4,573,522 (3,710,829)
Cash and cash equivalents,
beginning of year 4,766,998 8,477,827
--------- ----------
Cash and cash equivalents,
end of year $9,340,520 $4,766,998
========== ==========
</TABLE>
See notes to financial statements
<TABLE>
<CAPTION>
CONSOLIDATED STATEMENT OF CASH FLOWS
for the years ended December 31, 1992 and 1991
1992 1991
<S> <C> <C>
Reconciliation of net income (loss)
to cash provided by operating
activities:
Net income (loss) $1,008,060 ($239,925)
Adjustments to reconcile net income to
net cash provided by operations:
Depreciation and amortization 459,416 308,238
(Decrease) increase in provision for
losses on other real estate (51,960) 155,794
Provision for possible loan losses 244,460 813,419
Gain on sale of investments (250,702) (16,884)
(Increase) decrease in other assets (77,956) 46,039
Decrease in interest receivable 204,015 66,531
Decrease in interest payable and
accrued expenses (139,428) (97,037)
Provision for deferred taxes
(benefit) 78,114 (226,091)
Loss on sale of other real estate 158,140
Provision for losses on repossessions 14,905 42,091
---------- ---------
$1,492,866 $1,102,123
========== =========
Schedule of cash and cash equivalents:
Cash and due from banks $2,615,520 $3,066,998
Federal funds sold 6,725,000 1,700,000
----------- -----------
7,128,713 3,229,660
=========== ===========
</TABLE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. Summary of Significant Accounting and Reporting Policies:
The accounting and reporting policies of The National Bank of
Kentucky, Inc. and its Subsidiaries conform to generally accepted
accounting principles and prevailing practices within the banking
industry. The Company carries its assets and liabilities
principally on the historical cost basis and follows the accrual
basis of accounting.
Basis of Presentation:
The consolidated financial statements include the accounts of The
National Bancorp of Kentucky, Inc. (Parent) and its wholly owned
Subsidiaries: The National Bank of Cynthiana (Bank) and The First
National Bank of Falmouth (Bank). All significant intercompany
balances and transactions have been eliminated.
The excess of net assets acquired over cost, negative goodwill, has
been reduced by $793,823 which is the amount of noncurrent assets
at subsidiary acquisition date. The remaining amount of $2,210,446
is being amortized by the straight-line method over forty years.
Assets held in an agency or fiduciary capacity are not assets of
the Company and, accordingly, are not included in the accompanying
financial statements.
Investment Securities:
Investment securities are stated at cost adjusted for the accretion
of discounts and amortization of premiums computed by the
effective-yield method. Gains and losses on disposition are based
on the net proceeds and the adjusted carrying amount of the
securities on the trade date using the specific-identification
method.
Loans and Allowance for Loan Losses:
Loans are stated at the amount of unpaid principal reduced by
unearned discount and an allowance for loan losses. Unearned
discount on installment loans is recognized as income over the
terms of the loans by the sum-of-the-years-digits method. Interest
on other loans is calculated by using the simple-interest method on
daily balances of the principal amount outstanding.
The allowance for loan losses is established through a provision
for loan losses charged to expenses. Loans are charged against the
allowance for loan losses when management believes that the
collectibility of the principal is unlikely. The allowance is an
amount that management believes will be adequate to absorb possible
losses on existing loans that may become uncollectible based on
prior loan loss experience. The evaluations take into
consideration such factors as changes in the nature and volume of
the loan portfolio, overall portfolio quality, review of specific
problem loans, and current economic conditions that may affect
borrower's ability to pay. Accrual on interest is discontinued on
a loan when management believes, after considering economic and
business conditions and collection efforts, that the borrower's
financial condition is such that collection of interest is
doubtful.
Depreciation:
Office buildings and equipment are stated at cost as adjusted for
the excess of net assets acquired over cost, negative goodwill,
less accumulated depreciation computed on the straight-line and
declining-balance methods over the estimated useful lives of the
assets.
Income Taxes:
The Company and its wholly-owned subsidiaries file a consolidated
federal income tax return. A charge or credit is made by the
Parent equivalent to the federal income taxes which would be
provided if the Banks were filing separate returns.
The Company has not implemented SFAS 109 in accounting for income
taxes. The Company plans to adopt SFAS 109 in 1993. Management
does not anticipate that such adoption will have a material impact
on the Company's financial position and results of operations.
There will be no cash flow impact from the implementation of SFAS
109.
2. Investment Securities:
The carrying amounts and approximate market values of investment
securities are summarized as follows:<PAGE>
<PAGE>
<TABLE>
<CAPTION>
December 31, 1992
December 31, 1991
Carrying Approximate
Carrying Approximate
Amount Market Value
Amount Market Value
<S> <C> <C>
<C> <C>
U.S. Treasury securities $8,279,112 $8,515,615
$7,151,774 $7,379,978
Obligations of:
Other U.S. government agencies 35,739,361 36,729,591
39,703,159 41,347,256
States and political 635,650 645,810
827,042 839,301
subdivisions
Other securities 279,353 286,986
660,259 692,050
Total 44,933,476 46,178,002
48,342,234 50,258,585
/TABLE
<PAGE>
Investment securities with a carrying amount of approximately
$18,725,000 and $22,897,000 at 1992 and 1991, respectively, were
pledged to secure public deposits and for other purposes required
or permitted by law.
The following table shows the maturity distribution (based on
carrying value) of the investment portfolio at December 31, 1992:<PAGE>
<PAGE>
<TABLE>
<CAPTION>
Maturity Distribution
(in thousands)
Within One One-five Five-ten
After Total
Year Years Years
Ten Years
<S> <C> <C> <C>
<C> <C>
U.S. Treasury securities $3,003 $4,166 $1,033
$77 $8,279
Obligations of:
Other U.S. govt agencies 7,070 2,977 8,575
17,117 35,739
States and political subdiv 235 401
636
Other securities
279 279
Total $10,308 $7,544 $9,608
$17,473 $44,933
</TABLE>
3. Loans:
Major classifications of loans are as follows:
<TABLE>
<CAPTION>
December 31,
1992 1991
<S> <C> <C>
Real estate loans $31,343,020 $30,954,654
Commercial 7,510,418 9,548,585
Installment 2,324,265 4,842,768
Other 65,722 279,790
------------ -----------
41,243,425 45,625,797
Unearned discount (269,374) (605,103)
------------ -----------
40,974,051 45,020,694
Allowance for loan losses (630,468) (916,938)
------------ -----------
Loans, net $40,343,583 $44,103,756
=========== ===========
</TABLE>
Nonaccrual loans at December 31, 1992 and 1991 were $545,235 and
$129,000, respectively.
At December 31, 1992, there were no commitments to lend additional
funds to borrowers whose loans were classified as nonaccrual or
renegotiated.
The Company recognizes loan fees on loans with a maturity of one
year or less when received. Loan fees on loans with a maturity of
greater than one year are deferred and amortized over the life of
the loan. Generally accepted accounting principles require the
deferral and subsequent amortization of loan fees over the life of
the loans. Loan fees recognized as income were $8,887 and $12,317
in 1992 and 1991, respectively.
The Company's service area is based principally on an agrarian
economy. Loans secured by farmlands and loans to finance
agricultural production approximated $7,329,000 at December 31,
1992. Management is cognizant of the depressed agricultural
economy and continuously monitors and evaluates such credits.
Variable and fixed rate loans (in thousands) mature as follows:
<TABLE>
<CAPTION>
Within One- After Total
One Year Five Years Five Years
<S> <C> <C> <C> <C>
Fixed rate $19,318 $3,436 $2,109 $24,863
Variable rate 15,182 1,198 16,380
------- -------- -------- -------
$34,500 $4,634 $2,109 $41,243
======= ====== ====== =======
</TABLE>
The reduction in interest income associated with nonaccrual and
renegotiated loans is as follows:
<TABLE>
<CAPTION>
December 31,
1992 1991
<S> <C> <C>
Income in accordance with
original loan terms $54,032 $62,062
Income recognized (12,191)
------- --------
Reduction in interest income $54,032 $49,871
======= ========
</TABLE>
Changes in the allowance account for loan losses are as follows:
<TABLE>
<CAPTION>
December 31,
1992 1991
<S> <C> <C>
Balance, beginning of year $916,938 $468,012
Provision charged to operations 244,460 813,419
Loans charged off (586,043) (379,512)
Recoveries 55,113 15,019
---------- ----------
Balance, end of year $630,468 $916,938
========== ==========
</TABLE>
4. Office Buildings and Equipment:
Major classifications of these assets are summarized as follows:
<TABLE>
<CAPTION>
Life December 31,
Years 1992 1991
<S> <C> <C> <C>
Land $40,569 $40,569
Office buildings and
improvements 20-50 $230,863 $230,863
Furniture and equipment 5-10 958,114 1,102,317
Leasehold improvements 5-10 79,139 79,139
---------- ---------
1,308,685 1,452,888
Accumulated depreciation (593,552) (670,117)
----------- -----------
$715,133 $782,771
=========== ===========
</TABLE>
Depreciation expense amounted to $167,990 and $154,502 for 1992 and
1991, respectively. Fixed assets have been reduced by negative
goodwill recorded at the acquisition date of the Bank Subsidiaries.
The reduction amounted to $793,823. In addition, related
depreciation expense has been reduced by approximately $19,000 and
$92,000 in 1992 and 1991, respectively.
5. Other Assets:
The major classifications of other assets are as follows:
<TABLE>
<CAPTION>
December 31,
1992 1991
<S> <C> <C>
Prepaid insurance and other
expenses $138,290 $122,063
Other real estate acquired in
settlement of debt, net 1,404,892 1,142,251
Deferred tax benefit 133,573 212,483
Organization and subsidiary
acquisition cost 27,513 27,513
Federal Reserve Bank stock and
other miscellaneous investments 52,600 52,600
--------- ----------
$1,756,868 $1,556,910
=========== ==========
</TABLE>
Other real estate acquired in settlement of debt is stated at its
estimated net realizable value. Other real estate owned includes
certain loans made to facilitate the sale of assets acquired in
lieu of or through foreclosure. Such loans are classified as other
real estate until the borrower's investment in the property meets
the Bank's minimum criteria. The amounts of such loans were
$912,000 and $761,000 in 1991. Valuation allowances on other real
estate owned were $133,811 and $185,771 at December 31, 1992 and
1991, respectively. Losses on the sale of other real estate, which
are included in other operating expenses, amounted to $249,948 in
1991. Other real estate also includes in-substance foreclosures of
$61,000 at December 31, 1992.
6. Time Deposits, Over $100,000:
Certificates of deposit in amounts of $100,000 or more mature as
follows (in thousands):
<TABLE>
<CAPTION>
December 31,
1992 1991
<S> <C> <C>
Three months or less $1,920 $2,239
Three through twelve months $2,548 3,447
Over twelve months 1,642 1,097
--------- ----------
$6,110 $6,783
======== ==========
</TABLE>
7. Notes Payable:
Notes payable to an unrelated bank:
<TABLE>
<CAPTION>
December 31,
1992 1991
<S> <C> <C>
Due April 30 of each year renewable
annually for a period not to exceed
seven years. Interest is at prime
(6.0 percent, 1992) and payable
quarterly. All subsidiary bank
stock is pledged as collateral. $2,752,159 $2,256,893
========== ==========
</TABLE>
Scheduled payments are as follows:
<TABLE>
<S> <C>
1993 $350,000
1994 350,000
1995 350,000
1996 350,000
1997 350,000
Later years 1,002,159
---------
$2,752,159
==========
</TABLE>
Among other provisions, Subsidiary Banks are required to maintain
capital funds in the aggregate of $8,558,000 and adjusted capital
funds in an aggregate amount equal to not less than eight percent
of each Bank Subsidiary's total assets. Each Subsidiary Bank shall
maintain at all times loan loss allowances equal to one percent of
all the Bank's outstanding loans. The First National Bank of
Falmouth did not meet the loan loss requirement of one percent.
In accordance with the loan agreement, the Company can declare
dividends only to reduce personal obligations of the majority
stockholder of the Company to the unrelated lending bank above.
Dividends to such stockholder totaled $32,844 in 1991.
8. Income Taxes:
Total income tax differed from the amount computed by applying the
federal income tax rate to pretax income as follows:
<TABLE>
<CAPTION>
December 31,
1992 1991
<S> <C> <C>
Tax provision at statutory rates
less surtax exemption $505,492 $(152,378)
Excess tax basis of fixed
assets over book basis (6,355) (31,265)
Tax exempt interest from states
and political subdivisions (17,764) (30,951)
Amortization of excess of net
assets acquired over cost (19,500) (19,500)
Other 16,810 25,847
--------- ----------
$478,683 $(208,247)
======== ==========
</TABLE>
The components of the provision for income taxes are:
<TABLE>
<CAPTION>
December 31,
1992 1991
<S> <C> <C>
Current $399,773 $17,844
Deferred (benefit) 78,910 (226,091)
--------- ---------
$478,683 $(208,247)
======== ==========
</TABLE>
Deferred income taxes result primarily from timing differences in
recognition of revenue and expenses for financial accounting and
tax purposes. These timing differences relate primarily to the
provision for loan losses and depreciation.
9. Subordinated Promissory Notes:
<TABLE>
<CAPTION>
December 31,
1992 1991
<S> <C> <C>
Subordinated promissory notes payable
to former shareholders of The First
National Bank of Falmouth, Subsidiary $739,695
--------- --------
$739,695
========= ========
</TABLE>
10. Commitments and Contingent Liabilities:
In the normal course of business, there are outstanding various
commitments and contingent liabilities, such as guarantees,
commitments to extend credit, and legal claims, which are not
reflected in the financial statements. There are none at December
31, 1991 which, in the opinion of management, will result in any
significant losses.
The Bank has been notified, as the co-owner of a tract of real
estate acquired in lieu of foreclosure, that water damage has been
sustained by contiguous property owners as a result of a retaining
wall on the Bank's property. The matter is under investigation to
determine damages and responsibility. No provision has been made
in the financial statements for this matter and the Bank does not
expect to incur a material loss as a result of the above.
11. Related-Party Transactions:
At December 31, 1992, certain officers, directors, and companies in
which they have significant ownership were indebted to the Banks in
the aggregate amount of approximately $1,616,000. All such loans
were made in the ordinary course of business.
The Company leases space for branch operations and loan production
operations from its majority shareholder. Such rents for 1992 and
1991 were $39,333, respectively.
During 1991, The National Bank of Cynthiana purchased "dealer
paper" from companies related to the Company's majority
shareholder. The amount of loans outstanding resultant of these
transactions were approximately $1,318,000 net of unearned interest
at December 31, 1991. During 1992 such loans were sold to an
unrelated bank at a profit of approximately $6,000.
12. Lease Obligations:
The Company leases real estate for its branch and loan production
offices and various equipment under noncancellable agreements which
require certain minimum rentals. The leases expire between August,
1994 and July, 1997. Certain leases contain various renewal
options. The leases require the Company to pay insurance,
maintenance and taxes.
The National Bank of Cynthiana (Subsidiary Bank) entered into a
lease agreement for data processing equipment. The lease agreement
requires the Bank to pay all insurance, maintenance and taxes on
the equipment. There is no residual value at the end of the five-
year lease term.
The future minimum rental commitment as of December 31, 1992 under
the leases is $545,296 which is due as follows:
<TABLE>
<CAPTION>
Operating Leases
Due to
--------------------
Related Other Capital
Party Leases
---------------------------------
<S> <C> <C> <C>
Due in the year ending
December 31,
1993 $36,423 $30,125 $134,458
1994 31,280 30,125 134,458
1995 21,000 17,893 100,843
1996 21,000 11,849
1997 12,250 11,400
--------
369,759
Amount representing interest 47,808
-------- -------- --------
$121,953 $101,392 $321,951
======== ======== ========
</TABLE>
13. Regulatory Matters:
The approval of the Comptroller of the Currency is required if the
total of all dividends declared by a national bank in any calendar
year exceeds the bank's net profits (as defined) for that year
combined with its retained net profits for the preceding two
calendar years. Under this formula, the First National Bank of
Falmouth can declare dividends in 1993 without the approval of the
Comptroller of the Currency of approximately $269,000 in addition
to the net profits in 1993 up to the date of any such dividend
declaration. The National Bank of Cynthiana cannot declare
dividends in 1993 without such approval until its 1993 profits
exceed $129,000.
Each subsidiary bank is required to maintain minimum amounts of
capital to total "risk weighted" assets as defined by banking
regulators. At December 31, 1992, the Banks are required to have
minimum Tier 1 capital and total capital ratios of 4.0 percent and
8.0 percent, respectively. First National Bank of Falmouth's Tier
1 and total capital ratios were 20.7 percent and 21.4 percent,
respectively. The National Bank of Cynthiana's Tier 1 and total
capital ratios were 13.7 percent and 14.9 percent, respectively.
Leverage ratios for the First National Bank of Falmouth and The
National Bank of Cynthiana were 9.9 percent and 8.3 percent
respectively at December 31, 1992.
During The National Bank of Cynthiana's 1991 regulatory
examination, regulators identified several transactions which they
deemed to be violations of banking laws and regulations. One such
issue related to the Bank's purchase of "dealer paper" from
companies related to the Bank's majority shareholder. The
regulators allege such purchases were at below market rates and,
therefore, violate the transactions with affiliates regulations.
Another transaction relates to the Bank's settlement of litigation
(see Note 15) in which the Bank's Chairman and a loan officer were
also named as defendants. In this case, the regulators claim the
Bank improperly indemnified its Chairman and loan officer when
paying the settlement amount.
As a result of these findings, The National Bank of Cynthiana
entered into an agreement with the Office of the Comptroller of the
Currency on April 23, 1992. Among other provisions, the Bank is
required to form a compliance committee, adopt a written
comprehensive conflict of interest policy, establish a
comprehensive internal audit program and implement a program
designed to eliminate criticized assets. The agreement requires
interim progress reporting to determine compliance with the
agreement.
14. Parent Company Financial Statements:
THE NATIONAL BANCORP OF KENTUCKY, INC. (PARENT
ONLY)
BALANCE SHEET
December 31, 1992 and 1991
<TABLE>
<CAPTION>
1992 1991
ASSETS
<S> <C> <C>
Cash $448 $645
Notes receivable 23,000 23,000
Investment in subsidiaries:
The First National Bank of
Falmouth 3,065,301 2,792,715
The National Bank of Cynthiana 5,334,808 4,842,438
Other assets 194,077 131,104
---------- ----------
$8,617,634 $7,789,902
========== ==========
LIABILITIES AND STOCKHOLDER'S EQUITY
Liabilities:
Accounts payable and accrued
expenses $180,654 $59,199
Notes payable - bank 2,752,159 2,256,893
Subordinated promissory notes 739,695
Excess of net assets acquired
over cost 1,818,877 1,876,231
--------- ----------
4,751,690 4,932,018
--------- ----------
Stockholders' Equity:
Preferred stock 23,000 23,000
Common stock 1,426,336 1,426,336
Retained earnings 2,416,608 1,408,548
---------- ----------
3,865,944 2,857,884
---------- ----------
$8,617,634 $7,789,902
========== ==========
</TABLE>
<TABLE>
<CAPTION>
STATEMENT OF OPERATIONS AND RETAINED EARNINGS
for the years ended December 31, 1992 and 1991
1992 1991
<S> <C> <C>
Income:
Dividends from subsidiary banks $342,250 $428,000
Amortization of negative goodwill 57,354 57,354
-------- --------
399,604 485,354
-------- --------
Expenses:
Interest 204,890 271,849
Other 23,400 14,498
-------- --------
228,290 286,347
-------- --------
Income before tax benefit and
equity in undistributed earnings
of subsidiaries 171,314 199,007
Income tax benefit 71,790 74,089
-------- --------
Income before equity in
undistributed earnings of
subsidiaries 243,104 273,096
Equity in undistributed income
(loss) of subsidiaries 764,956 (513,021)
-------- ---------
Net income (loss) 1,008,060 (239,925)
Beginning balance, retained earnings 1,408,548 1,681,317
Dividends paid (32,844)
--------- ---------
Ending retained earnings $2,416,608 $1,408,548
========== ==========
</TABLE>
<TABLE>
<CAPTION>
STATEMENT OF CASH FLOWS
for the years ended December 31, 1992 and 1991
1992 1991
<S> <C> <C>
Cash flows from operating activities:
Interest paid $(208,370) $(294,333)
Cash paid for services and supplies (28,582) (9,457)
Taxes recovered, net 138,933 108,664
Dividends - Subsidiaries 342,250 428,000
---------- ----------
Net cash provided by operating
activities 244,231 232,874
--------- ----------
Cash flows from financing activities:
Dividends paid (32,844)
Principal payments on subordinated
notes (739,695) (140,863)
Principal payment on notes payable,
bank (250,000) (60,000)
Proceeds, notes payable bank 745,267
--------- ----------
Net cash used by
financing activities (244,428) (233,707)
---------- -----------
Net decrease in cash (197) (833)
Cash, beginning of year 645 1,478
Cash, end of year $448 $645
========== ===========
Reconciliation:
Net income (loss) $1,008,060 $(239,925)
Adjustments to reconcile net income
(loss) to net cash provided by
operations:
Amortization (57,354) (57,353)
Undistributed (earnings) loss of
Subsidiaries (764,956) 513,021
(Increase) decrease in other assets (62,973) 34,575
Increase (decrease) in accrued
expenses and other liabilities 121,454 (17,444)
---------- ---------
Net cash provided by operating
activities $244,231 $232,874
======== ========
</TABLE>
15. Settlement of Litigation:
For the year ended December 31, 1991, other operating expenses
include charges of $215,000 resulting from the settlement of
various lawsuits.
16. Other Income:
Fees, commissions and other income includes a one-time
reimbursement of expenses relating to environmental clean-up of
approximately $132,000. The expenditures related to a parcel of
property included in the Bank's other real estate owned.
14. Reclassifications:
Certain items in the 1991 financial statements have been
reclassified to conform with the 1992 presentation. The
reclassifications have no effect on net income or retained
earnings.<PAGE>
ANNEX A
AFFILIATION AGREEMENT
BETWEEN
FIFTH THIRD BANCORP
AND
THE NATIONAL BANCORP OF KENTUCKY, INC.
DATED AS OF DECEMBER 6, 1993
<PAGE>
TABLE OF CONTENTS
Parties and Recitals
I. Obligations of Fifth Third and National Bancorp to be
Performed Prior to the Closing
II. Representations and Warranties of National Bancorp
III. Representations and Warranties of Fifth Third
IV. Obligations of National Bancorp Between the Date of this
Agreement and the Effective Time
V. Cooperation and Other Obligations and Other Covenants
VI. Conditions Precedent to Closing
A. Conditions to the Obligations of Each
of the Parties
B. Conditions to the Obligations of Fifth Third
C. Conditions to the Obligations of National Bancorp
VII. Additional Covenants
VIII. Termination
IX. Closing and Effective Time
X. Amendment
XI. General
XII. Counterparts
Signatures
APPENDICES
Appendix A Agreement of Merger
Appendix B Tax Opinion of Dinsmore & Shohl (form)
Appendix C Opinion of Wyatt, Tarrant & Combs (form)
Appendix D Noncompetition and Nondisturbance
Agreement
(form)
Appendix E Corporate Opinion of Dinsmore & Shohl
(form)
SCHEDULES
Schedule 1 Disclosure Schedule of National Bancorp
<PAGE>
AFFILIATION AGREEMENT
This Affiliation Agreement ("Affiliation Agreement") dated
as
of December 6, 1993 is entered into by and between FIFTH THIRD
BANCORP, a corporation organized and existing under the corporation
laws of the State of Ohio with its principal office located in
Cincinnati, Hamilton County, Ohio ("Fifth Third"), and THE NATIONAL
BANCORP OF KENTUCKY, INC., a corporation organized and existing
under the corporation laws of the State of Kentucky with its
principal office located in Lexington, Fayette County, Kentucky
("National Bancorp").
W I T N E S S E T H:
WHEREAS, Fifth Third is a registered bank holding company
under the Bank Holding Company Act of 1956, as amended, and
National Bancorp is a registered bank holding company under the
Bank Holding Company Act of 1956, as amended, and Fifth Third and
National Bancorp desire to effect a merger under the authority and
provisions of the corporation laws of the State of Ohio and
Kentucky pursuant to which at the Effective Time (as herein defined
in Section IX) National Bancorp will be merged into Fifth Third,
with Fifth Third to be and become the surviving corporation (the
"Merger"); and
WHEREAS, under the terms of the Agreement of Merger
("Agreement of Merger") between Fifth Third and National Bancorp
appended hereto as Appendix A, the terms of which are incorporated
into this Agreement and made a part hereof, each of the issued and
outstanding shares of the Common Stock, without par value, of
National Bancorp which are issued and outstanding (excluding any
treasury shares and preferred shares) immediately prior to the
Effective Time will at the Effective Time be cancelled and
extinguished and in substitution therefor such National Bancorp
shares will, at the Effective Time, be converted into shares of the
Common Stock, without par value, of Fifth Third ("Fifth Third
Common Stock"), all as more fully provided in this Agreement and in
the Agreement of Merger.
NOW, THEREFORE, in consideration of the mutual covenants
herein contained, Fifth Third and National Bancorp, agree together
as follows:
I. Obligations of Fifth Third and National Bancorp to be
Performed Prior to the Closing
A. Fifth Third will, as promptly as practicable, prepare
and
cause to be filed at its expense such applications and other
documents with the Board of Governors of the Federal Reserve
System, the Comptroller of the Currency, the Federal Deposit
Insurance Corporation, the Kentucky Department of Financial
Institutions and any other governmental agencies as are required to
secure the requisite approval of such agencies to the consummation
of the transactions provided for in this Agreement and in the
Agreement of Merger, and also shall prepare and file at its expense
(accounting, legal, investment banking, financial consulting and
associated expenses of National Bancorp and its affiliates
excepted) any registration statements or other documents necessary
to comply with all federal and state securities laws relating to
the registration and issuance of the shares of Fifth Third Common
Stock to the National Bancorp shareholder in this transaction, and
any other laws applicable to the transactions provided for in this
Agreement and the Agreement of Merger and use all reasonable
efforts to secure such approvals. National Bancorp agrees that it
will, as promptly as practicable after request and at its own
expense, provide Fifth Third with all information and documents
concerning National Bancorp and its wholly-owned subsidiaries,
First National Bank of Falmouth ("FNB") and National Bank of
Cynthiana ("NBC; FNB and NBC collectively referred to herein as the
"Bank Subsidiaries"), as shall be required in connection with
preparing such applications, registration statements and other
documents and in connection with securing such approvals. Prior
to filing any such applications, registration statements or other
documents with the applicable governmental agency, Fifth Third
shall provide, at least two days prior to the filing date, copies
thereof to National Bancorp. Fifth Third agrees that it will, as
promptly as practicable after request and at its own expense,
provide National Bancorp with all information and documents
concerning Fifth Third and its subsidiaries as shall be required in
connection with preparing such applications, registration
statements and other documents which are to be prepared and filed
by National Bancorp and in connection with approvals required to be
obtained by National Bancorp hereunder. Prior to filing any such
applications, statements or other documents with the applicable
governmental agency, National Bancorp shall provide, at least two
days prior to the filing date, copies thereof to Fifth Third.
II. Representations and Warranties of National Bancorp
National Bancorp represents and warrants to Fifth Third that
as of the date hereof or as of the indicated date, as appropriate,
and except as otherwise disclosed in Schedule 1 hereto delivered by
National Bancorp to Fifth Third prior to the execution of this
Agreement by Fifth Third:
A. National Bancorp (i) is duly incorporated, validly
existing and in good standing as a corporation under the
corporation laws of the State of Kentucky and is a registered bank
holding company under the Bank Holding Company Act of 1956, as
amended; (ii) is duly authorized to conduct the business in which
it is engaged; (iii) has 2,000 shares, without par value, of Common
Stock ("National Bancorp Common Stock") and 100 shares, $1,000 par
value per share, of Preferred Stock ("National Bancorp Preferred
Stock") authorized pursuant to its Articles of Incorporation, which
are the total number of shares National Bancorp is authorized to
have outstanding; (iv) has no outstanding securities of any kind,
nor any outstanding options, warrants or other rights entitling
another person to acquire any securities of National Bancorp of any
kind, other than (a) 100 shares of National Bancorp Common Stock,
which presently are authorized, duly issued and outstanding and
fully paid and nonassessable, (b) zero shares of National Bancorp
Common Stock which are issued but not outstanding and are held by
National Bancorp as treasury shares and (c) 23 shares of National
Bancorp Preferred Stock, which presently are authorized, duly
issued and outstanding and fully paid and nonassessable; and (v)
except as disclosed in Schedule 1, owns of record and beneficially
free and clear of all liens and encumbrances, all of the 12,000
outstanding shares of the capital stock of FNB, $10 par value per
share, and all of the 50,000 outstanding shares of the capital
stock, $10 par value per share, of NBC. National Bancorp has no
direct or indirect subsidiaries other than the Bank Subsidiaries.
B. Each of the Bank Subsidiaries is duly incorporated,
validly existing and in good standing as a national banking
association under the laws of the United States and has all the
requisite power and authority to conduct the banking business as
now conducted by it; and neither FNB nor NBC has any outstanding
securities of any kind, nor any outstanding options, warrants or
other rights entitling another person to acquire any securities of
FNB or NBC of any kind, other than 12,000 shares of the capital
stock, $10 par value per share, of FNB and other than 50,000 shares
of the capital stock, $10 par value per share, of NBC, all owned of
record and beneficially by National Bancorp, except as disclosed in
Schedule 1.
C. National Bancorp has furnished to Fifth Third its
audited, consolidated statements of financial condition, statements
of earnings, statements of stockholders' equity and statements of
cash flows as at December 31, 1990, 1991 and 1992 and for the years
then ended, together with the opinions of its independent certified
public accountants associated therewith. National Bancorp also has
furnished to Fifth Third (i) its unaudited, separate statements of
financial condition, statements of earnings, statements of
stockholders' equity and statements of cash flows as at December
31, 1990, 1991 and 1992 and for the years then ended, and (ii) the
unaudited, separate reports of condition and reports of income of
each of FNB and NBC as at December 31, 1990, 1991 and 1992 and for
the years then ended. National Bancorp also has furnished to Fifth
Third (i) its unaudited, consolidated financial statements as at
September 30, 1993, and for the nine months then ended, (ii) the
unaudited, separate financial statements of National Bancorp as at
September 30, 1993, and for the nine months then ended, and (iii)
the unaudited, separate reports of condition and reports of income
of each of FNB and NBC as at September 30, 1993, and for the nine
months then ended. The unaudited, consolidated financial
statements of National Bancorp as at September 30, 1993, and for
the nine months then ended fairly present the consolidated
financial condition of National Bancorp and the Bank Subsidiaries
taken as a whole as of September 30, 1993 and for the nine-month
period covered thereby in conformity with generally accepted
accounting principles, consistently applied (except for the
omission of notes to unaudited statements and year end adjustments
to interim results). Such unaudited, separate financial statements
of National Bancorp and unaudited, separate reports of condition
and reports of income of the Bank Subsidiaries fairly present the
financial condition of National Bancorp and the Bank Subsidiaries
on a separate basis as of September 30, 1993 and for the nine-month
period covered thereby in conformity with generally accepted
accounting principles, consistently applied (except for the
omission of notes to unaudited statements and year end adjustments
to interim results). There are no material liabilities,
obligations or indebtedness of National Bancorp or either of the
Bank Subsidiaries required to be disclosed in the financial
statements so furnished other than the liabilities, obligations or
indebtedness disclosed in such financial statements (including
footnotes). National Bancorp shall furnish Fifth Third with its
audited, consolidated financial statements as at December 31, 1993
and for the year then ended together with the unaudited, separate
financial statements of National Bancorp and unaudited, separate
reports of condition and reports of income of each of the Bank
Subsidiaries as at December 31, 1993 and for the year then ended,
all duly certified by National Bancorp's chief executive officer
and chief financial officer, as soon as such statements are
publicly available, and shall continue to furnish such financial
information for subsequent monthly periods to Fifth Third as soon
as such becomes publicly available until the Closing Date.
D. Except as disclosed in Schedule 1, National Bancorp
and
the Bank Subsidiaries each has good and marketable title to all of
the material properties and assets reflected in its separate
statements of condition as at September 30, 1993 and which are
still owned by it and each has good and marketable title to all
material properties and assets acquired by it after such date and
still owned by it, subject to (i) any liens and encumbrances that
do not materially adversely impair the use of the property, (ii)
statutory liens for taxes not yet due and payable and (iii) minor
defects and irregularities in title that do not materially
adversely impair the use of the property.
E. Except as disclosed in Schedule 1 and for events
relating
to the business environment in general: (i) since September 30,
1993, to the date hereof there have been no material adverse
changes in the financial condition, operations or business of
National Bancorp and the Bank Subsidiaries on a consolidated or
separate basis; (ii) neither National Bancorp's chief executive
officer, Tracy W. Farmer, nor its chief financial officer, Todd
Smith, nor the chief executive officer of each of the Bank
Subsidiaries, Tracy W. Farmer being the chief executive officer of
FNB and Jim Richardson being the chief executive officer of NBC
(collectively the "Executive Officers", in this case and all cases
hereinafter in their capacity as such officers and not personally
and, therefore, they shall have no personal liability whatsoever
hereunder or arising herefrom absent, in the case of Tracy W.
Farmer only, bad faith or fraudulent intent) is aware of any events
which have occurred since September 30, 1993 or which are
reasonably certain to occur in the future and which reasonably can
be expected to result in any material adverse change in the
financial condition, operations or business of National Bancorp and
the Bank Subsidiaries on a consolidated or separate basis; and
(iii) since September 30, 1993, to the date hereof there have been
no material changes in the methods of business operations of
National Bancorp and the Bank Subsidiaries.
F. Except as disclosed in Schedule 1, there are no
actions,
suits, proceedings, investigations or assessments of any kind
pending, or to the best knowledge of the Executive Officers,
threatened against National Bancorp or the Bank Subsidiaries which
reasonably can be expected to result in any material adverse change
in the financial condition, operations or business of National
Bancorp and the Bank Subsidiaries on a consolidated or separate
basis.
G. Except as disclosed in Schedule 1, since September 30,
1993, to the date hereof National Bancorp and the Bank Subsidiaries
each has been operated in the ordinary course of business, has not
made any changes in its respective capital or corporate structures,
nor any material changes in its methods of business operations and
has not provided any increases in employee salaries or benefits
other than in the ordinary course of business. Since September 30,
1993, to the date hereof National Bancorp has not declared or paid
any dividends nor made any distributions of any other kind to its
shareholder, except cash dividends on shares of National Bancorp
Common Stock in amounts and at such times as is in accord with its
historical practice.
H. Except as disclosed in Schedule 1, National Bancorp
and
the Bank Subsidiaries timely have filed all federal, state and
local tax returns required to be filed (after giving effect to all
extensions) by them, respectively, and have paid or provided for
all tax liabilities shown to be due thereon or which have been
assessed against them, respectively. All tax returns filed by
National Bancorp or the Bank Subsidiaries through the date hereof
constitute complete and accurate representations of the tax
liabilities of National Bancorp or the Bank Subsidiaries for such
years and accurately set forth all items (to the extent required to
be included or reflected in such returns) relevant to its future
tax liabilities, including the tax bases of its properties and
assets in all material respects.
I. Except as disclosed in Schedule 1, neither National
Bancorp nor either of the Bank Subsidiaries is a party to (i) any
written employment contracts or written contracts of any other kind
with any of its officers, Directors or employees or (ii) any
material contract, lease or agreement of any other kind which is
not assignable as a result of the merger provided for herein
without the consent of another party, except for contracts, leases
or agreements which do not have terms extending beyond six months
from the date of this Agreement or contracts, leases or agreements
(excluding contracts, leases and agreements pursuant to which
credit has been extended by the Bank Subsidiaries) which do not
require the annual expenditure of more than $10,000.00 thereunder.
Fifth Third acknowledges that NBC has an employment agreement with
Jim Richardson and affirms that it will assume such contract and
the obligations thereunder at the Effective Time.
J. Except as disclosed in Schedule 1, since September 30,
1993, to the date hereof neither of the Bank Subsidiaries has
incurred any unusual or extraordinary loan losses which are
material to National Bancorp and the Bank Subsidiaries on a
consolidated basis; to the best knowledge of the Executive Officers
and in light of each of the Bank Subsidiaries' historical loan loss
experience and its management's analysis of the quality and
performance of its loan portfolio, as of September 30, 1993, its
reserve for loan losses was adequate to absorb all known and
reasonably anticipated losses as of such date.
K. Except as disclosed in Schedule 1, neither National
Bancorp nor either of the Bank Subsidiaries has, directly or
indirectly, dealt with any broker or finder in connection with this
transaction and neither has incurred or will incur any obligation
for any broker's or finder's fee or commission in connection with
the transactions provided for in this Agreement and the Agreement
of Merger.
L. 1. The Directors of National Bancorp, by
resolution
adopted by the unanimous vote of all Directors present at a meeting
duly called and held in accordance with applicable law, have duly
approved this Agreement and the Agreement of Merger, and have
directed that this Agreement and the Agreement of Merger be
submitted to a vote of National Bancorp's sole shareholder at the
annual or a special meeting of the shareholder to be called for
that purpose, all in accordance with and as required by law and in
accordance with the Articles of Incorporation and Bylaws of
National Bancorp.
2. National Bancorp has the corporate power and
authority to enter into this Agreement and the Agreement of Merger
and to carry out its obligations hereunder and thereunder subject
to certain required regulatory and shareholder approvals. This
Agreement and the Agreement of Merger, when executed and delivered,
will have been duly authorized and will constitute valid and
binding obligations of National Bancorp, enforceable in accordance
with their respective terms, except to the extent that (i)
enforceability thereof may be limited by insolvency,
reorganization, liquidation, bankruptcy, readjustment of debt or
other laws of general application relating to or affecting the
enforcement of creditors' rights generally and (ii) the
availability of certain remedies may be precluded by general
principles of equity, subject, however, to the receipt of requisite
regulatory approvals and the approval of National Bancorp's
shareholders.
3. Except as disclosed in Schedule 1, neither the
execution of this Agreement or the Agreement of Merger, nor the
consummation of the transactions contemplated hereby and thereby,
(i) conflicts with, results in a breach of, violates or constitutes
a default under, National Bancorp's Articles of Incorporation or
Bylaws or, to the best knowledge of the Executive Officers, any
federal, state or local law, statute, ordinance, rule, regulation
or court or administrative order, or any agreement, arrangement, or
commitment, to which National Bancorp or either of the Bank
Subsidiaries is subject or bound; (ii) to the best knowledge of the
Executive Officers, results in the creation of or gives any person
the right to create any material lien, charge, encumbrance,
security agreement or any other material rights of others or other
material adverse interest upon any material right, property or
asset belonging to National Bancorp or either of the Bank
Subsidiaries other than such rights as may be given dissenting
shareholders of National Bancorp pursuant to KRS Sections 271B.13-
010 et. seq; (iii) except as disclosed in Schedule 1, terminates or
gives any person the right to terminate, amend, abandon, or refuse
to perform any material agreement, arrangement or commitment to
which National Bancorp or either of the Bank Subsidiaries is a
party or by which National Bancorp's or either of the Bank
Subsidiaries' rights, properties or assets are subject or bound; or
(iv) to the best knowledge of the Executive Officers, accelerates
or modifies, or gives any party thereto the right to accelerate or
modify, the time within which, or the terms according to which,
National Bancorp or either of the Bank Subsidiaries is to perform
any duties or obligations or receive any rights or benefits under
any material agreements, arrangements or commitments. For purposes
of subparagraphs (iii) and (iv) immediately preceding, material
agreements, arrangements or commitments exclude agreements,
arrangements or commitments having a term expiring less than six
months from the date of this Agreement or which do not require the
annual expenditure of more than $10,000 (but shall include all
agreements, arrangements or commitments pursuant to which credit
has been extended by either of the Bank Subsidiaries).
M. Complete and accurate copies of (i) the Articles of
Incorporation and Bylaws of National Bancorp and (ii) the Articles
of Association and Bylaws of each of the Bank Subsidiaries in force
as of the date hereof have been delivered to Fifth Third.
N. To the best knowledge of the Executive Officers and
except as disclosed in Schedule 1, neither National Bancorp nor
either of the Bank Subsidiaries nor any employee, officer or
Director of any of them has engaged in any activity or omitted to
take any action which, in any material way, has resulted or could
result in the knowing violation of (i) any local, state or federal
law (including without limitation the Bank Secrecy Act, the
Community Reinvestment Act, applicable consumer protection and
disclosure laws and regulations, including without limitation,
Truth in Lending, Truth in Savings and similar disclosure laws and
regulations, and equal employment and employment discrimination
laws and regulations) or (ii) any regulation, order, injunction or
decree of any court or governmental body the violation of either of
which could reasonably be expected to have a material adverse
effect on the financial condition of National Bancorp and the Bank
Subsidiaries taken as a whole. To the best knowledge of the
Executive Officers and except as disclosed in Schedule 1, each of
the Bank Subsidiaries possesses all licenses, franchises, permits
and other governmental authorizations necessary for the continued
conduct of its business without material interference or
interruption.
O. To the best knowledge of the Executive Officers and
except as disclosed in Schedule 1, neither this Agreement nor the
Agreement of Merger nor any report, statement, list, certificate or
other information furnished by National Bancorp or either of the
Bank Subsidiaries to Fifth Third or its agents in connection with
this Agreement or any of the transactions contemplated hereby
(including, without limitation, any information which has been or
shall be supplied with respect to their business operations and
financial condition for inclusion in the proxy statement/prospectus
and registration statement relating to the merger) contains or
shall contain (or, in the case of information relating to the proxy
statement/prospectus, at the time it is mailed, in the case of the
registration statement, at the time it becomes effective, and in
the case of the proxy statement/prospectus and the registration
statement, at the time the annual or special meeting of
shareholders of National Bancorp is held to consider the adoption
of this Agreement and the Agreement of Merger) an untrue statement
of a material fact or omits or shall omit to state a material fact
necessary to make the statements contained herein or therein, in
light of the circumstances in which they are made, not misleading.
P. To the best knowledge of the Executive Officers and
except as disclosed in Schedule 1, there are no actions,
proceedings or investigations pending before any environmental
regulatory body, with respect to or threatened against or affecting
National Bancorp or either of the Bank Subsidiaries in respect of
any "facility" owned, leased or operated by any of them (but
excluding any "facility" as to which the sole interest of National
Bancorp or either of the Bank Subsidiaries is that of a lienholder
or mortgagee, but including any "facility" to which title has been
taken pursuant to mortgage foreclosure or similar proceedings and
including any "facility" in which National Bancorp or either of the
Bank Subsidiaries ever participated in the financial management of
such facility to a degree sufficient to influence, or have the
ability to influence, the facility's treatment of hazardous waste)
under the Comprehensive Environmental Response, Compensation and
Liability Act of 1980, as amended ("CERCLA"), or under any Federal,
state, local or municipal statute, ordinance or regulation in
respect thereof, in connection with any release of any toxic or
"hazardous substance", pollutant or contaminant into the
"environment" which, if adversely determined, (a) would require the
payment by National Bancorp or either of the Bank Subsidiaries
and/or require National Bancorp or either of the Bank Subsidiaries
to incur expenses of more than $10,000 (whether or not covered by
insurance) or (b) would otherwise have a material adverse effect on
National Bancorp or either of the Bank Subsidiaries, nor, to the
best knowledge of the Executive Officers, is there any reasonable
basis for the institution of any such actions or proceedings or
investigations which is probable of assertion, nor are there any
such actions or proceedings or investigations in which National
Bancorp or either of the Bank Subsidiaries is a plaintiff or
complainant. To the best knowledge of the Executive Officers,
neither National Bancorp nor either of the Bank Subsidiaries is
liable in any material respect under any applicable law for any
release by National Bancorp or either of the Bank Subsidiaries or
for any release by any other "person" of a hazardous substance
caused by the spilling, leaking, pumping, pouring, emitting,
emptying, discharging, injecting, escaping, leaching, dumping or
disposing of hazardous wastes or other chemical substances,
pollutants or contaminants into the environment, nor is National
Bancorp or either of the Bank Subsidiaries liable for any material
costs (as a result of the acts or omissions of National Bancorp or
either of the Bank Subsidiaries or, to the best knowledge of the
Executive Officers, as a result of the acts or omissions of any
other "person") of any remedial action including, without
limitation, costs arising out of security fencing, alternative
water supplies, temporary evacuation and housing and other
emergency assistance undertaken by any environmental regulatory
body having jurisdiction over National Bancorp or either of the
Bank Subsidiaries to prevent or minimize any actual or threatened
release by National Bancorp or either of the Bank Subsidiaries of
any hazardous wastes or other chemical substances, pollutants and
contaminants into the environment which would endanger the public
health or the environment. All terms contained in quotation marks
in this paragraph and the paragraph immediately following shall
have the meaning ascribed to such terms, and defined in, CERCLA.
To the best knowledge of the Executive Officers and
except as disclosed in Schedule 1, each "facility" owned, leased or
operated by National Bancorp or either of the Bank Subsidiaries
(but excluding any "facility" as to which the sole interest of
National Bancorp or either of the Bank Subsidiaries is that of a
lienholder or mortgagee, but including any "facility" to which
title has been taken pursuant to mortgage foreclosure or similar
proceedings and including any "facility" in which National Bancorp
or either of the Bank Subsidiaries ever participated in the
financial management of such facility to a degree sufficient to
influence, or have the ability to influence, the facility's
treatment of hazardous waste) is, in all material respects, in
compliance with all applicable Federal, state, local or municipal
statutes, ordinances, laws and regulations and all orders, rulings
or other decisions of any court, administrative agency or other
governmental authority relating to the protection of the
environment, except to the extent a failure to comply would not
have a material adverse effect on the business, operations and
financial condition of National Bancorp and the Bank Subsidiaries
taken as a whole.
Q. 1. Benefit Plans. Schedule 1 lists the name and
a
short description of each Benefit Plan (as herein defined),
together with an indication of its funding status (e.g., trust,
insured or general company assets). For purposes hereof, the term
"Benefit Plan" shall mean any plan, program, arrangement or system
of employee or Director benefits maintained by National Bancorp or
either of the Bank Subsidiaries for the benefit of employees,
former employees or Directors of National Bancorp or either of the
Bank Subsidiaries and shall include (a) any qualified retirement
plan such as a pension, profit sharing, stock bonus plan or
employee stock ownership plan, (b) any plan, program or arrangement
providing deferred compensation, bonus deferral or incentive
benefits, whether funded through trust or otherwise, and (c) any
welfare plan, program or policy providing vacation, severance,
salary continuation, supplemental unemployment, disability, life,
health coverage, retiree health, VEBA, medical expense
reimbursement or dependent care assistance benefits, in any such
foregoing case without regard to whether the Benefit Plan
constitutes an employee benefit plan under Section 3(3) of the
Employee Retirement Income Security Act of 1974, as amended
("ERISA"), or the number of employees covered under such Benefit
Plan.
2. Plan Documents, Reports and Filings. Except as
disclosed on Schedule 1, National Bancorp or either of the Bank
Subsidiaries has provided true, complete and correct copies of all
plan documents, if any, comprising each Benefit Plan, together
with, when applicable, (a) the most recent summary plan
description, (b) the most recent actuarial and financial reports
and the most recent annual reports filed with any governmental
agency and (c) all Internal Revenue Service ("IRS") or other
governmental agency rulings and determination letters and any open
requests for IRS rulings or letters with respect to the Benefit
Plans.
3. Qualified Retirement Plan Compliance. With
respect
to each Benefit Plan which is an employee pension benefit plan (as
defined in Section 3(2) of ERISA) and which is intended to be
qualified under Section 401(a) of the Internal Revenue Code of
1986, as amended (the "Code") (a "Qualified Benefit Plan"), except
as disclosed on Schedule 1: (a) the IRS has issued a determination
letter which determined that such Qualified Benefit Plan satisfied
the requirements of Section 401(a) of the Code, and such
determination letter has not been revoked or threatened to be
revoked by the IRS; (b) such Qualified Benefit Plan is in material
compliance with all qualification requirements of Section 401(a) of
the Code and has met the requirements of Section 1140 of the Tax
Reform Act of 1986 ("TRA 1986"); (c) such Qualified Benefit Plan is
in substantial compliance with all applicable notice, reporting and
disclosure requirements of ERISA and the Code; and (d) any
previously terminated Qualified Benefit Plan was terminated in
material compliance with the requirements of ERISA and the Code,
has received a favorable IRS determination letter therefor and the
liabilities of such Qualified Benefit Plan were fully satisfied.
4. Welfare Plan Compliance. With respect to
each
Benefit Plan which is an employee welfare benefit plan (as defined
in Section 3(1) of ERISA) (a "Welfare Benefit Plan"), except as
disclosed on Schedule 1: (a) such Welfare Benefit Plan, if intended
to provide favorable tax benefits to plan participants, has been in
substantial compliance with the Code provisions therefor; (b) such
Welfare Benefit Plan has been operated in substantial compliance
with all applicable notice, reporting and disclosure requirements
of ERISA and the Code; and (c) such Welfare Benefit Plan, if a
group health plan subject to Section 4980B of the Code (COBRA), has
been operated in substantial compliance with such COBRA
requirements.
5. Prohibited Transactions. To the best knowledge
of
the Executive Officers, no prohibited transaction under Section 406
of ERISA and not exempt under Section 408 of ERISA has occurred
with respect to any Benefit Plan which would result, with respect
to any person, in (a) the imposition, directly or indirectly, of a
material excise tax under Section 4975 of the Code or (b) material
fiduciary liability under Section 409 of ERISA.
6. Lawsuits or Claims. No material actions, suits
or
claims (other than routine claims for benefits) are pending or, to
the best knowledge of the Executive Officers, threatened against
any Benefit Plan or against National Bancorp or either of the Bank
Subsidiaries with respect to any Benefit Plan.
7. Disclosure of Unfunded Liabilities. All
material
Unfunded Liabilities with respect to each Benefit Plan have been
recorded and disclosed on the most recent financial statements of
National Bancorp and the Bank Subsidiaries or, if not, have been
disclosed in Schedule 1. For purposes hereof, the term "Unfunded
Liabilities" shall mean any amounts properly accrued to date under
(i) generally accepted accounting principles in effect as of the
date of this Agreement (GAAP), or (ii) amounts not yet accrued for
GAAP purposes but for which an obligation exists for payment in the
future which is attributable to any Benefit Plan, including but not
limited to (a) severance pay benefits, (b) deferred compensation or
unpaid bonuses, (c) any liabilities on account of the change in
control which will result from this Agreement, including any
potential nondeductible payments or 20% excise tax under Section
4999 of the Code relating to excess parachute payments under
Section 280G of the Code, (d) any unpaid pension contributions,
authorized but unpaid profit sharing contributions or contributions
under Section 401(k) and Section 401(m) of the Code, (e) retiree
health benefit coverage and (f) unpaid premiums for contributions
required under any group health plan to maintain such plan's
coverage through the Effective Time.
8. Defined Benefit Pension Plan Liabilities.
Except as
disclosed on Schedule 1, neither National Bancorp, the Bank
Subsidiaries nor any current or previous controlled group member of
National Bancorp or the Bank Subsidiaries currently maintains or
participates in, or has ever maintained or participated in a
pension plan (whether a money purchase pension plan, money purchase
pension or defined benefit plan) including a multiemployer plan (as
defined in Section 3(37) of ERISA).
9. Independent Trustee. To the best knowledge of
the
Executive Officers, National Bancorp and the Bank Subsidiaries (a)
have not incurred any asserted or unasserted material liability for
breach of duties assumed in connection with acting as an
independent trustee of any employee pension plan (as defined in
Section 3(2) of ERISA) which is intended to be qualified under
Section 401(a) of the Code and which is maintained by an employer
unrelated in ownership to National Bancorp or either of the Bank
Subsidiaries, (b) have not authorized nor knowingly participated in
a material prohibited transaction under Section 406 of ERISA and
not exempt under Section 408 of ERISA and (c) have not received
notice of any material actions, suits or claims (other than routine
claims for benefits) pending or threatened against the unrelated
employer or against them.
10. Material. For purposes of this Paragraph Q as
a
whole, the term "material" in connection with a liability shall
mean a liability or loss, taxes, penalties, interest and related
legal fees in the total amount of $15,000 or more, with such
determination being made on the basis of the aggregate affected
participants of a Benefit Plan and not with respect to any single
participant.
R. Except as set forth on Schedule 1, the investment
portfolios of National Bancorp and the Bank Subsidiaries consist of
securities in marketable form. Except as disclosed in Schedule 1,
since September 30, 1993 to the date hereof neither National
Bancorp nor either of the Bank Subsidiaries has incurred any
unusual or extraordinary losses in its investment portfolio, and,
except for events relating to the business environment in general,
including market fluctuations, the Executive Officers are not aware
of any events which are reasonably certain to occur in the future
and which reasonably can be expected to result in any material
adverse change in the quality or performance of National Bancorp's
and the Bank Subsidiaries' investment portfolio on a consolidated
basis.
S. Except as disclosed in Schedule 1, there are no
actions,
suits, claims, proceedings, investigations or assessments of any
kind pending, or to the best knowledge of the Executive Officers,
threatened against any of the Directors or officers of National
Bancorp or the Bank Subsidiaries in their capacities as such, and
no Director or officer of National Bancorp or the Bank Subsidiaries
currently is being indemnified or seeking to be indemnified by
either National Bancorp or the Bank Subsidiaries pursuant to
applicable law or National Bancorp's Articles of Incorporation or
Bylaws or either of the Bank Subsidiaries' Articles of Association
or Bylaws.
All representations and warranties contained in this
Section II shall expire at the Effective Time, and, thereafter,
neither National Bancorp, the Bank Subsidiaries nor Tracy W.
Farmer, as an officer or Director of either of them, shall have any
liability or obligation with respect thereto, except for any
misrepresentations, breaches of warranties or violations of
covenants that were made with intent to defraud.
III. Representations and Warranties of Fifth Third
Fifth Third represents and warrants to National Bancorp that
as of the date hereof or as of the indicated date, as appropriate:
A. Fifth Third is duly incorporated, validly existing and
in
good standing as a corporation under the corporation laws of the
State of Ohio, is a registered bank holding company under the Bank
Holding Company Act of 1956, as amended, and is duly authorized to
conduct the business in which it is engaged.
B. Pursuant to Fifth Third's Second Amended Articles of
Incorporation, as amended, the total number of shares of capital
stock it is authorized to have outstanding is 100,500,000 of which
100,000,000 shares are classified as Common Stock without par value
("Fifth Third Common Stock") and 500,000 shares are classified as
Preferred Stock without par value. As of the close of business on
October 31, 1993, 59,998,827 shares of Fifth Third Common Stock
were issued and outstanding and no shares were held in its
treasury. As of the date of this Agreement, no shares of its
Preferred Stock have been issued. Fifth Third does not have
outstanding any stock options, subscription rights, warrants or
other securities entitling the holders to subscribe for or purchase
any shares of its capital stock other than options granted and to
be granted to employees and Directors under its stock option plans
and $143,750,000 of 4.25% Convertible Subordinated Notes due
January
15, 1998 (the "Notes"). At October 31, 1993, 1,443,002 shares of
Fifth Third Common Stock were reserved for issuance in connection
with outstanding options under its stock option plans and 945,382
shares were reserved for issuance under options to be granted in
the future. The Notes are convertible at any time prior to
maturity at the option of each holder thereof, unless previously
redeemed, into shares of Fifth Third Common Stock at a conversion
price of $63-5/8 per share of Fifth Third Common Stock (equivalent
to a conversion rate of approximately 15.72 shares per $1,000
principal amount of the Notes), subject to adjustment for stock
splits, stock dividends and similar stock distributions. If all of
the Notes were converted, Fifth Third would issue a maximum of
approximately 2,259,750 shares of Fifth Third Common Stock to the
holders of the Notes.
C. All shares of Fifth Third Common Stock to be received
by
the shareholder of National Bancorp as a result of the merger
pursuant to the terms of this Agreement and the Agreement of Merger
shall be, upon transfer or issuance, validly issued, fully paid and
non-assessable, and will not, upon such transfer or issuance, be
subject to the preemptive rights of any shareholder of Fifth Third.
D. Fifth Third has furnished to National Bancorp its
consolidated financial statements as at December 31, 1990, December
31, 1991 and December 31, 1992 and for the respective years then
ended together with the opinions of its independent public
accountants associated therewith. In addition, Fifth Third has
furnished to National Bancorp its unaudited consolidated financial
statements as at September 30, 1993 and for the nine months then
ended. Such consolidated financial statements fairly present the
consolidated financial condition of Fifth Third as of their
respective dates and for the respective periods covered thereby in
conformity with generally accepted accounting principles
consistently followed throughout the periods covered thereby
(except for the omission of notes to unaudited statements and
yearend adjustments to interim results). Neither Fifth Third nor
any significant subsidiaries of Fifth Third have any material
liabilities, obligations or indebtedness required to be disclosed
in such financial statements other than the liabilities,
obligations and indebtedness disclosed in such financial statements
(including footnotes). Fifth Third shall furnish National Bancorp
with its audited consolidated financial statements as at December
31, 1993 and for the year then ended together with the opinion of
its independent public accountants associated therewith as soon as
such statements publicly are available, and shall continue to
furnish unaudited consolidated financial information for subsequent
calendar quarter periods to National Bancorp as soon as such
becomes publicly available until the Closing Date.
E. Except for events relating to the business environment
in
general: (i) since September 30, 1993, to the date hereof there
have been no material adverse changes in the consolidated financial
condition, operations or business of Fifth Third; (ii) the chief
executive officer and the chief financial officer of Fifth Third
are not aware of any events which have occurred since September 30,
1993 or which are reasonably certain to occur in the future and
which reasonably can be expected to result in any material adverse
change in the consolidated financial condition, operations or
business of Fifth Third; and (iii) since September 30, 1993, to the
date hereof there have been no material changes in the methods of
business operations of Fifth Third and its subsidiaries.
F. 1. The Board of Directors of Fifth Third has
approved
this Agreement and the Agreement of Merger, including reserving for
issuance to the National Bancorp shareholder in accordance with
this Agreement and the Agreement of Merger a sufficient number of
shares of Fifth Third Common Stock. Approval and adoption of this
Agreement and the Agreement of Merger by the shareholders of Fifth
Third is not required under Ohio law or under the Second Amended
Articles of Incorporation, as amended, or Code of Regulations of
Fifth Third.
2. Fifth Third has the corporate power and
authority to
enter into this Agreement and the Agreement of Merger and to carry
out its obligations hereunder and thereunder subject to certain
required regulatory approvals. This Agreement and the Agreement of
Merger when executed and delivered, will have been duly authorized
and will constitute valid and binding obligations of Fifth Third,
enforceable in accordance with their terms except to the extent
that (i) enforceability thereof may be limited by insolvency,
reorganization, liquidation, bankruptcy, readjustment of debt or
other laws of general application relating to or affecting the
enforcement of creditors' rights generally and (ii) the
availability of certain remedies may be precluded by general
principles of equity, subject, however, to the receipt of requisite
regulatory approvals.
3. Neither the execution of this Agreement or the
Agreement of Merger nor the consummation of the transactions
contemplated hereby and thereby, does or will (i) conflict with,
result in a breach of, violate or constitute a default, under Fifth
Third's Second Amended Articles of Incorporation, as amended, or
Code of Regulations or, to the best knowledge of its chief
executive officer and chief financial officer, any federal,
foreign, state or local law, statute, ordinance, rule, regulation
or court or administrative order, or any agreement, arrangement, or
commitment to which Fifth Third is subject or bound; (ii) to the
best knowledge of the chief executive officer and chief financial
officer of Fifth Third, result in the creation of or give any
person the right to create any material lien, charge, encumbrance,
security agreement or any other material rights of others or other
material adverse interest upon any material right, property or
asset belonging to Fifth Third or any of its subsidiaries other
than such rights as may be given the shareholders of National
Bancorp pursuant to the provisions of KRS Sections 271B.13-010 et.
seq; (iii) terminate or give any person the right to terminate,
amend, abandon, or refuse to perform any material agreement,
arrangement or commitment to which Fifth Third is a party or by
which Fifth Third's rights, properties or assets are subject or
bound; or (iv) accelerate or modify, or give any party thereto the
right to accelerate or modify, the time within which, or the terms
according to which, Fifth Third is to perform any duties or
obligations or receive any rights or benefits under any material
agreements, arrangements or commitments.
G. Complete and accurate copies of (i) the Second Amended
Articles of Incorporation, as amended, and Code of Regulations of
Fifth Third in force as of the date hereof have been delivered to
National Bancorp.
H. To the best knowledge of the chief executive officer
and
chief financial officer of Fifth Third, neither Fifth Third nor any
of its subsidiaries has engaged in any activity or omitted to take
any action which, in any material way, has resulted or could result
in the knowing violation of (i) any local, state or federal law or
(ii) any regulation, order, injunction or decree of any court or
governmental body, the violation of either of which could
reasonably be expected to have a material adverse effect on the
financial condition of Fifth Third and its subsidiaries taken as a
whole. To the best knowledge of the chief executive officer and
chief financial officer of Fifth Third, Fifth Third and its
subsidiaries possess all licenses, franchises, permits and other
governmental authorizations necessary for the continued conduct of
their businesses without material interference or interruption.
I. 1. To the best knowledge of the chief executive
officer
and chief financial officer of Fifth Third, neither this Agreement
or the Agreement of Merger nor any report, statement, list,
certificate or other information furnished or to be furnished by
Fifth Third to National Bancorp or its agents in connection with
this Agreement or any of the transactions contemplated hereby
(including, without limitation, any information which has been or
shall be supplied with respect to its business operations and
financial condition for inclusion in the proxy statement/prospectus
and registration statement relating to the merger) contains or
shall contain (in the case of information relating to the proxy
statement/prospectus, at the time it is mailed, and, in the case of
the registration statement, at the time it becomes effective and,
in the case of the proxy statement/prospectus and the registration
statement, at the time the annual or special meeting of
shareholders of National Bancorp is held to consider the adoption
of this Agreement and the Agreement of Merger) an untrue statement
of a material fact or omits or shall omit to state a material fact
necessary to make the statements contained herein or therein, in
light of the circumstances in which they are made, not misleading.
2. Fifth Third has furnished to National Bancorp
or its
agents true and complete copies (including all exhibits and all
documents incorporated by reference) of the following documents as
filed by Fifth Third with the SEC:
(a) Fifth Third's Annual Report on Form 10-K
for
the years ended December 31, 1990, 1991 and 1992;
(b) Fifth Third's Quarterly Reports on Form
10-Q
for the quarters ended March 31, 1993, June 30, 1993 and September
30, 1993;
(c) any Current Report on Form 8-K with
respect to
any event occurring after December 31, 1992 and prior to the date
of this Agreement, of which there have been none through the date
hereof;
(d) any report filed by Fifth Third to amend
or
modify any of the reports described above; and
(e) all proxy statements prepared in
connection
with meetings of Fifth Third's shareholders held subsequent to
December 31, 1992.
The information set forth in the documents described in this
subsection 2 (including all exhibits thereto and all documents
incorporated therein by reference) did not, as of the dates on
which such reports were filed with the SEC, (a) contain any untrue
statement of a material fact, (b) omit any material fact required
to be stated therein or necessary to make the statements contained
therein, in light of the circumstances under which they were made,
not misleading, or (c) omit any material exhibit required to be
filed therewith. Prior to the date hereof no event has occurred
subsequent to December 31, 1992 which Fifth Third is required to
describe in a Current Report on Form 8-K. Fifth Third timely shall
furnish National Bancorp with copies of all reports filed by Fifth
Third with the SEC subsequent to the date of this Agreement and
until the Closing Date.
J. There are no actions, suits, proceedings,
investigations
or assessments of any kind pending or, to the best knowledge of the
chief executive officer and chief financial officer of Fifth Third,
threatened against Fifth Third or any Fifth Third subsidiary, which
reasonably can be expected to result in any material adverse change
in the consolidated financial condition, operations or business of
Fifth Third.
K. Since September 30, 1993, to the date hereof none of
Fifth Third's banking subsidiaries and thrift subsidiary has
incurred any unusual or extraordinary loan losses which would be
material to Fifth Third on a consolidated basis; and to the best
knowledge and belief of the chief executive officer and chief
financial officer of Fifth Third, and in the light of such banking
subsidiaries' and thrift subsidiary's historical loan loss
experience and their managements' analyses of the quality and
performance of their respective loan portfolios, as of September
30, 1993 their consolidated reserves for loan losses are adequate
to absorb all known and reasonably anticipated losses as of such
date.
L. Fifth Third and its subsidiaries have filed all
federal,
state and local tax returns required to be filed (after giving
effect to all extensions) by them, respectively, and have paid or
provided for all tax liabilities shown to be due thereon or which
have been assessed against them, respectively.
M. Fifth Third has not, directly or indirectly, dealt
with
any broker or finder in connection with this transaction and has
not incurred and will not incur any obligation for any broker's or
finder's fee or commission in connection with the transactions
provided for in this Agreement and the Agreement of Merger.
N. Fifth Third has no unfunded liabilities with respect
to
any Benefit Plan (as such term is defined in subparagraph Q.1. of
Section II hereof, but applied to Fifth Third, its subsidiaries and
affiliates) that are material, either individually or in the
aggregate, to Fifth Third on a consolidated basis and that have not
been recorded and disclosed as required by generally accepted
accounting principles (GAAP) in the most recent year-end, audited
financial statements of Fifth Third supplied to National Bancorp
pursuant to Paragraph D of Section III hereof.
O. The investment portfolios of Fifth Third and its
subsidiaries and affiliates consist of securities in marketable
form. Since September 30, 1993, to the date hereof Fifth Third and
its affiliates, on a consolidated basis, have not incurred any
unusual or extraordinary losses in their respective investment
portfolios, and, except for events relating to the business
environment in general, including market fluctuations, the
management of Fifth Third is not aware of any events which are
reasonably certain to occur in the future and which reasonably can
be expected to result in any material adverse change in the quality
or performance of the investment portfolios of Fifth Third and its
affiliates on a consolidated basis.
All representations and warranties contained in this
Section III shall expire at the Effective Time, and, thereafter,
neither Fifth Third nor any officer or Director of Fifth Third
shall have any further liability or obligation with respect
thereto, except for any misrepresentations, breaches of warranties
or violations of covenants that were made with intent to defraud.
IV. Obligations of National Bancorp Between the Date of this
Agreement and the Effective Time
A. National Bancorp, in consultation with Fifth Third,
will
take all action necessary to call and hold its annual or a special
meeting of its shareholder within 45 days after the Fifth Third
registration statement relating to this transaction has been
declared effective by the SEC and under all applicable state
securities laws for the purpose of approving and adopting this
Agreement, the Agreement of Merger and any other documents or
actions necessary to the consummation of the merger provided for
herein pursuant to law. The Board of Directors of National Bancorp
intends to inform the shareholder of National Bancorp in the proxy
materials relating to the annual or special meeting that all
Directors of National Bancorp intend to vote all shares of National
Bancorp Common Stock which they own of record or have voting
control over in favor of approving this Agreement, the Agreement of
Merger and any such other necessary documents or actions, and all
Directors will recommend approval of this Agreement and the
Agreement of Merger to the sole shareholder of National Bancorp,
subject only to such Directors' fiduciary obligations and their
review of Fifth Third's registration statement to be filed with the
SEC described in the next sentence and their reasonable
satisfaction with the information set forth therein. National
Bancorp shall cooperate with Fifth Third in the preparation of such
proxy materials which shall be included and filed with, as a part
of, Fifth Third's registration statement on Form S-4 (or any such
other appropriate form) filed with the SEC for the registration of
the shares of Fifth Third Common Stock to be issued to the National
Bancorp shareholder pursuant to the transactions contemplated by
this Agreement and the Agreement of Merger.
B. (i) The merger between National Bancorp and Fifth
Third
is intended to be structured to qualify for treatment under present
accounting rules as a pooling of interests and National Bancorp
agrees to take no action which would disqualify this treatment
under generally accepted accounting principles. Consistent with
generally accepted accounting principles, National Bancorp agrees
that on or before the Effective Time based on a review of the Bank
Subsidiaries' loan losses, current classified assets and
commercial, multi-family and residential mortgage loans, National
Bancorp will work with Fifth Third with the goal of establishing
collection procedures, internal valuation reviews, credit policies
and practices and general valuation allowances which are consistent
with the guidelines used within the Fifth Third holding company
system. Fifth Third shall provide such assistance and direction to
National Bancorp as is necessary in conforming to such policies,
practices and procedures; and (ii) from the date of this Agreement
until the Effective Time, National Bancorp and the Bank
Subsidiaries each will be operated in the ordinary course of
business, and neither of them will, without the prior written
consent of Fifth Third, which consent shall not be unreasonably
withheld: make any changes in its capital or corporate structures;
issue any additional shares of its Common Stock; issue any other
equity securities, or issue as borrower any long term debt or
convertible or other securities of any kind, or rights to acquire
any of its securities; make any material changes in its method of
business operations; make, enter into any agreement to make, or
become obligated to make, any capital expenditures in excess of
$10,000; make, enter into or renew any agreement for services to be
provided to National Bancorp or the Bank Subsidiaries or permit the
automatic renewal of any such agreement, except any agreement for
services having a term of not more than three months or requiring
the expenditure of not more than $2,500 (for this purpose the
phrase "permit the automatic renewal" includes the failure to send
a notice of termination of such a contract if such failure would
constitute a renewal); open for business any branch office which
has been approved by the appropriate regulatory authorities but not
yet opened or apply to the appropriate regulatory authorities to
establish a new branch office or expand any existing branch office;
acquire, become obligated to acquire, or enter into any agreement
to acquire, any banking or non-banking company or any branch
offices of any such companies; declare or pay any cash dividends on
its stock other than normal and customary cash dividends paid in
such amounts and at such times as National Bancorp historically has
done on its Common Stock, provided this covenant shall only apply
to National Bancorp; pay any stock dividends or make any other
distributions on its stock other than cash dividends as described
in the immediately preceding clause; and provide any increases in
employee salaries or benefits other than in the ordinary course of
business or as described in Schedule 1. National Bancorp agrees
that it will not sell or otherwise dispose of or encumber any of
the shares of the capital stock of the Bank Subsidiaries which are
now owned by it.
V. Cooperation and Other Obligations and Other Covenants
A. Each of the parties hereto agrees to use its best
efforts
and to cooperate with the other party in all reasonable respects in
order to carry out and consummate the transactions contemplated by
this Agreement and the Agreement of Merger at the earliest
practicable time including, without limitation, the filing of
applications, notices and other documents with, and obtaining
approval from, appropriate governmental regulatory agencies.
B. National Bancorp agrees to permit Fifth Third, its
officers, employees, accountants, agents and attorneys, and Fifth
Third agrees to permit National Bancorp, its officers, employees,
accountants, agents and attorneys, to have reasonable access during
business hours to their respective books, records and properties,
and those of the Bank Subsidiaries and The Fifth Third Bank as
well, for the purpose of making a detailed examination, or updating
and amplifying prior examinations, of the financial condition,
assets, liabilities, legal compliance, affairs and the conduct of
the business of National Bancorp and the Bank Subsidiaries or Fifth
Third and The Fifth Third Bank, as the case may be, prior to the
Effective Time, and also to permit the monitoring of the foregoing
on an ongoing basis (such rights of examination and monitoring to
be subject to the confidentiality obligations set forth in
Paragraph VII.D. hereof); provided, however, that any such
examination by Fifth Third or National Bancorp shall not mitigate
in any way any material misrepresentation or material breach of
warranty hereunder discovered in the course of or subsequent to
such examination and prior to the Effective Time.
VI. Conditions Precedent to Closing
A. Conditions to the Obligations of Each of the Parties:
The obligation of each of the parties hereto to
consummate the transactions provided for herein and in the
Agreement of Merger is subject to the fulfillment on or prior to
the Effective Time of each of the following conditions:
1. The shareholder of National Bancorp shall have
duly
approved and adopted this Agreement and the Agreement of Merger in
accordance with and as required by law and in accordance with its
Articles of Incorporation and Bylaws, and all of the issued and
outstanding shares of National Bancorp Preferred Stock shall be
redeemed by National Bancorp immediately prior to Closing in
exchange for cancellation of the promissory notes constituting the
original consideration therefor.
2. All necessary governmental and regulatory
orders,
consents, clearances and approvals and requirements shall have been
secured and satisfied for the consummation of such transactions,
including without limitation, those of the Federal Reserve System,
the Comptroller of the Currency, the Kentucky Department of
Financial Institutions and the Federal Deposit Insurance
Corporation to the extent required.
3. Dinsmore & Shohl, counsel for Fifth Third, or
other
counsel reasonably acceptable to Fifth Third and National Bancorp,
shall have delivered an opinion as to certain federal tax aspects
of the transaction addressed to National Bancorp and Tracy W.
Farmer in substantially the form appended hereto as Appendix B.
4. Prior to or at the Effective Time, no material
investigation by any state or federal agency shall have been
threatened or instituted seeking to enjoin or prohibit, or
enjoining or prohibiting, the transactions contemplated hereby and
no material action or proceeding shall have been threatened or
instituted before any court or government body or authority,
seeking to enjoin or prohibit, or enjoining or prohibiting, the
transactions contemplated hereby other than investigations, actions
and proceedings which have been withdrawn prior to or at the
Effective Time without material adverse effect to Fifth Third or
National Bancorp and other than regularly-scheduled regulatory
examinations.
5. Any waiting period mandated by law in respect
of the
final approval by any applicable Federal regulator(s) of the
transaction contemplated herein shall have expired.
B. Conditions to the Obligations of Fifth Third:
The obligation of Fifth Third to consummate the
transactions provided for herein and in the Agreement of Merger are
subject to the fulfillment at or prior to the Effective Time of
each of the following conditions unless waived by Fifth Third in a
writing delivered to National Bancorp which specifically refers to
the condition or conditions being waived:
1. All of the representations and warranties of
National Bancorp set forth in Section II of this Agreement shall be
true and correct in all material respects as of the date of this
Agreement and at and as of the Closing Date (as hereinafter
defined) as if each such representation and warranty was given on
and as of the Closing Date, except (i) for any such representations
and warranties made as of a specified date, which shall be true and
correct in all material respects as of such date and (ii) for
breaches of representations and warranties which would not have, or
would not reasonably be expected to have, a material adverse effect
on the business or operations of National Bancorp and the Bank
Subsidiaries taken as a whole.
2. National Bancorp shall have performed all of
the
obligations required of it under the terms of this Agreement and
the Agreement of Merger in all material respects, except for
breaches of obligations which would not have, or would not
reasonably be expected to have, any material adverse effect on the
business or operations of National Bancorp and the Bank
Subsidiaries taken as a whole.
3. Wyatt, Tarrant & Combs, counsel for National
Bancorp
and the Bank Subsidiaries, shall have delivered an opinion
addressed to Fifth Third in substantially the form appended hereto
as Appendix C.
4. All retirement plans of National Bancorp, FNB
or NBC
shall have received from the Internal Revenue Service a favorable
determination of the qualified status of each such plan on or
before the Closing Date, to the extent any such determinations
already have not been received, and copies of such favorable
determination letters shall be provided to Fifth Third on or before
the Closing Date.
5. The aggregate amount of shareholders' equity
(including Common Stock, Additional Paid-In Capital and Retained
Earnings and excluding Treasury Stock) of National Bancorp and the
Bank Subsidiaries immediately prior to the Effective Time, as shown
by and reflected in its books and records of accounts on a
consolidated basis in accordance with generally accepted
principles, consistently applied, shall not be less than
$9,160,000, its total shareholders' equity as at October 31, 1993.
The separate shareholders' equity of National Bancorp immediately
prior to the Effective Time, as shown by and reflected in its books
and records of accounts on a separate basis in accordance with
generally accepted accounting principles, consistently applied,
shall not be less than $5,031,000, its separate shareholders'
equity at October 31, 1993.
6. Fifth Third's independent certified public
accountants shall have reviewed the unaudited consolidated
financial statements of National Bancorp as at the end of the month
immediately preceding the Effective Time, as well as the unaudited
separate financial statements of each of the Bank Subsidiaries as
of the same date, performed such other auditing procedures as may
be requested by Fifth Third and reported that they are not aware of
any material modifications that should be made in order for such
financial statements to (i) be in conformity with generally
accepted accounting principles, consistently applied, excluding the
presentation of footnotes, and (ii) accurately state the financial
condition and results of operations of National Bancorp and each of
the Bank Subsidiaries, and such modifications, in either case,
would have a material adverse effect on the financial condition of
National Bancorp or either of the Bank Subsidiaries.
7. The receipt of a certificate from National
Bancorp
and each of the Bank Subsidiaries, executed by the chief executive
officer and chief financial officer of National Bancorp and the
chief executive officer of each of the Bank Subsidiaries, dated the
Closing Date, certifying to their best knowledge and belief that:
(i) all of the representations and warranties set forth in Section
II hereof were true and correct when given in all material
respects, except (y) for any such representations and warranties
made as of a specified date, which shall be true and correct in all
material respects as of such date and (z) for breaches of
representations and warranties which would not have, or would not
reasonably be expected to have, a material adverse effect on the
business or operations of National Bancorp and the Bank
Subsidiaries taken as a whole; (ii) all of such representations and
warranties are also true and correct in all material respects at
and as of the Closing Date, except for breaches of obligations
which would not have, or would not reasonably be expected to have,
any material adverse effect on the business or operations of
National Bancorp and the Bank Subsidiaries taken as a whole; and
(iii) it has met and fully complied in all material respects with
all of the obligations required of it under the terms of this
Agreement and the Agreement of Merger.
8. The total issued and outstanding shares of
National
Bancorp Common Stock shall not exceed 100 shares.
9. Fifth Third shall have received a letter from
Deloitte & Touche, Fifth Third's independent public accountants, to
the effect that the Merger will qualify for "pooling of interests"
accounting treatment.
10. Tracy W. Farmer shall enter into a five year
noncompetition and nondisclosure agreement with Fifth Third
substantially in the form of agreement appended hereto as Appendix
D.
C. Conditions to the Obligations of National Bancorp:
The obligation of National Bancorp to consummate the
transactions provided for herein and in the Agreement of Merger is
subject to the fulfillment at or prior to the Effective Time of
each of the following conditions unless waived by National Bancorp
in a writing delivered to Fifth Third which specifically refers to
the condition or conditions being waived:
1. All of the representations and warranties of
Fifth
Third set forth in Section III of this Agreement shall be true and
correct in all material respects as of the date of this Agreement
and at and as of the Closing Date as if each such representation
and warranty was given on and as of the Closing Date, except (i)
for any such representations and warranties made as of a specified
date, which shall be true and correct in all material respects as
of such date and (ii) for breaches of representations and
warranties which would not have, or would not reasonably be
expected to have, a material adverse effect on the consolidated
business or operations of Fifth Third.
2. Fifth Third shall have performed all of the
obligations required of it under the terms of this Agreement and
the Agreement of Merger in all material respects, except for
breaches of obligations which would not have, or would not
reasonably be expected to have, any material adverse effect on the
consolidated business or operations of Fifth Third.
3. Dinsmore & Shohl, counsel for Fifth Third,
shall
have delivered an opinion addressed to National Bancorp and Tracy
W. Farmer in substantially the form appended hereto as Appendix E.
4. The receipt of a certificate from Fifth Third,
executed by its chief executive officer and chief financial
officer, dated the Closing Date, certifying to their best knowledge
and belief that: (i) all of the representations and warranties set
forth in Section III were true and correct when given, except (y)
for any such representations and warranties made as of a specified
date, which shall be true and correct in all material respects as
of such date and (z) for breaches of representations and warranties
which would not have, or would not reasonably be expected to have,
a material adverse effect on the consolidated business or
operations of Fifth Third; (ii) all of such representations and
warranties, with the exception of III.B., are also true and correct
in all material respects at and as of the Closing Date, except for
breaches of obligations which would not have, or would not
reasonably be expected to have, any material adverse effect on the
consolidated business or operations of Fifth Third; and (iii) Fifth
Third has met and fully complied in all material respects with all
of the obligations required of it under the terms of this Agreement
and the Agreement of Merger.
5. Fifth Third shall have registered its shares of
Common Stock to be issued to the National Bancorp shareholder
hereunder and pursuant to the Agreement of Merger with the SEC
pursuant to the Securities Act of 1933, as amended, and with all
applicable state securities authorities. The registration
statement with respect thereto shall have been declared effective
by the SEC and all applicable state securities authorities and no
stop order shall have been issued. The shares of Fifth Third
Common Stock to be issued to the National Bancorp shareholder
hereunder shall have been authorized for trading on the National
Market System of the National Association of Securities Dealers
upon official notice of issuance.
VII. Additional Covenants
A. It is the intent of the parties hereto that FNB shall
be
merged with and into The Fifth Third Bank of Northern Kentucky,
Inc., Florence, Kentucky ("5/3 NK"), and NBC shall be merged with
and into The Fifth Third Bank of Central Kentucky, Inc., Lexington,
Kentucky ("5/3 Lexington"), both to be effective immediately after
the Effective Time. The parties hereto agree to cooperate with one
another to effect such mergers. Upon consummation of such mergers,
the separate corporate existence of the Bank Subsidiaries shall
cease by operation of law.
B. 1. Fifth Third shall use its best efforts to
employ at
5/3 NK or 5/3 Lexington or at Fifth Third or other Fifth Third
subsidiaries or affiliates as many of the National Bancorp, FNB and
NBC employees who desire employment within the Fifth Third holding
company system as possible, to the extent of available positions
and consistent with Fifth Third's standard staffing levels and
personnel policies. Each employee of National Bancorp, FNB or NBC
who becomes an employee of Fifth Third or any of its subsidiaries
or affiliates at or immediately subsequent to the Merger shall be
entitled to participate in all employee benefit plans sponsored by
Fifth Third or its subsidiaries or affiliates on the same terms and
to the same extent as similarly situated employees. Such employees
shall receive credit for their period of service to National
Bancorp, FNB and NBC for purposes of determining participation and
vesting in all Fifth Third employee benefit plans (except for
vesting in the Fifth Third Master Retirement Plan) but not for
purposes of determining the benefits accrued thereunder.
2. Any employee who will not be hired by Fifth
Third
shall be terminated by National Bancorp immediately prior to the
Effective Time shall be entitled to severance pay equal to, in the
case of a salaried employee, one week's pay for each year of
service up to a maximum of twelve week's pay, and, in the case of
an hourly employee, one week's pay for each year of service up to
a maximum of six week's pay, plus applicable COBRA benefits. Fifth
Third shall provide sufficient notification to National Bancorp of
those employees it will not be hiring in order that such employees
by National Bancorp can be given appropriate notice of termination
in advance of the effectiveness there of. Nothing contained in
this Paragraph VII.B.2 shall be construed or interpreted to limit
or modify in any way Fifth Third's at will employment policy.
3. The University of Kentucky basketball season
tickets
purchased by National Bancorp shall be assigned to Tracy W. Farmer
for his own use at his own expense.
C. All provisions for indemnification and limitation of
liability now existing in favor of the employees, agents, Directors
or officers of National Bancorp or any of its subsidiaries as
provided by regulation or in their respective certificate or
articles of incorporation or by-laws shall survive the Merger,
shall be assumed by Fifth Third and shall continue in full force
and effect with respect to acts or omissions occurring on or prior
to the Effective Time for a period of two years thereafter, or in
the case of matters occurring prior to the Effective Time which
have not been resolved prior to the second anniversary of the
Effective Time, until such matters are finally resolved. Fifth
Third also shall purchase and keep in force for such two year
period, directors' and officers' liability insurance to provide
coverage for acts or omissions of the type and in the amount
currently covered by National Bancorp's existing directors' and
officers' liability insurance for acts or omissions occurring on or
prior to the Effective Time.
D. Fifth Third will not disclose to others and will hold
in
confidence any non-public, confidential information disclosed to it
by National Bancorp concerning National Bancorp or the Bank
Subsidiaries. National Bancorp will not disclose to others and
will hold in confidence any non-public, confidential information
disclosed to it concerning Fifth Third or any of its affiliates.
In the event the Merger is not completed, all non-public financial
statements, documents and materials, and all copies thereof, shall
be returned to National Bancorp or Fifth Third, as the case may be,
and shall not be used by Fifth Third or National Bancorp, as the
case may be, in any way detrimental to National Bancorp or Fifth
Third.
E. All notices under this Agreement or under the
Agreement
of Merger shall be in writing and shall be sufficient in all
respects if delivered in person or mailed by certified mail, return
receipt requested, with postage prepaid and addressed, if to
National Bancorp to Mr. Tracy W. Farmer, President and Chief
Executive Officer, The National Bancorp of Kentucky, Inc., 2560
Richmond Road, Lexington, Kentucky 40509, with a copy to Stewart E.
Conner, Esq., Wyatt, Tarrant & Combs, Citizens Plaza, Louisville,
Kentucky 40202; if to Fifth Third, to Mr. George A. Schaefer, Jr.,
President and Chief Executive Officer, Fifth Third Bancorp, 38
Fountain Square Plaza, Cincinnati, Ohio 45263, with a copy to Paul
L. Reynolds, Esq., Vice President and Counsel, Fifth Third Bancorp,
Legal Division, 38 Fountain Square Plaza, 2nd Floor, Cincinnati,
Ohio 45263 and another copy to S. Richard Arnold, Esq., Dinsmore &
Shohl, 1900 Chemed Center, 255 E. Fifth Street, Cincinnati, Ohio
45202-3172. Such notices shall be deemed to be received when
delivered in person or when deposited in the mail by certified
mail, return receipt requested with postage prepaid.
F. This Agreement and the Agreement of Merger (which
together shall constitute a single agreement), together with the
written instruments specifically referred to herein and such other
written agreements delivered by Fifth Third or National Bancorp to
each other pursuant hereto constitute the entire agreement between
the parties with regard to the transactions contemplated herein and
in the Agreement of Merger and supersede any prior agreements,
whether oral or in writing, including that certain letter from
Fifth Third to Mr. Tracy W. Farmer dated November 22, 1993. This
Agreement and the Agreement of Merger may be hereafter amended only
by a written instrument executed by each of the parties pursuant to
Section X hereof.
G. During the period from the date of this Agreement to
the
Effective Time, except with the prior approval of Fifth Third,
National Bancorp shall not, and shall not permit its
representatives to, directly or indirectly, subject to the exercise
by the Directors of National Bancorp of their fiduciary duties,
initiate, solicit, negotiate with, encourage discussions with,
provide information to, or agree to a transaction with, any
corporation, partnership, person or other entity or group
concerning any merger in which neither National Bancorp nor either
of the Bank Subsidiaries is the acquiror or any sale of substantial
assets, sale of shares of capital stock (or securities convertible
or exchangeable into or otherwise evidencing, or any agreement or
instrument evidencing, the right to acquire capital stock) or
similar transaction involving National Bancorp or the Bank
Subsidiaries (any such transaction being referred to herein as an
"Acquisition Transaction"). Subject to the exercise by the
Directors of National Bancorp of their fiduciary duties, National
Bancorp promptly shall communicate to Fifth Third the terms of any
proposal which it may receive in respect of an Acquisition
Transaction and any request by or indication of interest on the
part of any third party with respect to initiation of any
Acquisition Transaction or discussions with respect thereto.
H. Fifth Third and National Bancorp shall each indemnify
and
hold the other harmless for any claim, liability or expense
(including reasonable attorneys' fees) arising from a misstatement
or omission in the applications submitted to regulatory agencies
for approval of the transaction contemplated by this Agreement and
the Agreement of Merger relating to the indemnifying party which is
based or made in reliance upon any representation, warranty, or
covenant of such party in this Agreement or any certification,
document, or other information furnished or to be furnished by such
party pursuant to this Agreement. From and after the Closing Date,
this subsection shall be of no further force or effect.
I. 1. Upon the request of Fifth Third and at the sole
option of Fifth Third, National Bancorp and the Bank Subsidiaries
shall execute and deliver to Midwest Payment Systems, Inc. ("MPS")
an agreement to convert all electronic funds transfer ("EFT")
related services to MPS and the Jeanie (Registered) system. Such
Agreement shall provide that MPS will be the exclusive provider of
such services to National Bancorp and the Bank Subsidiaries for a
period of five (5) years from the date such agreements are
executed. Fifth Third agrees that the cost of the conversion of
National Bancorp or the Bank Subsidiaries to EFT provided by MPS
and conversion to the Jeanie (Registered) system (including,
without limitation, the cost of all card reissue, signage and
penalties relating to terminating its current EFT relationships)
will be paid by Fifth Third. Fifth Third further agrees that the
costs and fees to National Bancorp and the Bank Subsidiaries for
the Jeanie (Registered) service shall not exceed those charged by
the current EFT service provider of National Bancorp and the Bank
Subsidiaries, subject to any increases in such costs and fees which
would otherwise be permitted under their current EFT processing
agreements. In the event this Agreement is terminated pursuant to
Section VIII hereof for any reason, and if, in such instance,
National Bancorp desires to convert to another provider of EFT
services, Fifth Third shall pay all costs and expenses associated
with such conversion, provided, however, such costs and expenses
are reasonable when compared to costs and expenses ordinarily
charged in the EFT services industry. In no event shall National
Bancorp or the Bank Subsidiaries be required to take any actions
pursuant to this Paragraph I or otherwise under this Agreement or
the Agreement of Merger that are contrary to any applicable law,
regulation, rule or order or which constitute a breach of the
fiduciary duties of the directors of National Bancorp or the Bank
Subsidiaries.
2. Upon the request of Fifth Third and at the sole
option of Fifth Third, National Bancorp and the Bank Subsidiaries
will contract with Fifth Third or an affiliate of Fifth Third for
the provision of any and all data processing services including,
without limitation, item processing and application processing.
Fifth Third agrees that Fifth Third will assume any and all expense
related to the conversion to such Fifth Third services and that the
costs and fees payable by National Bancorp and the Bank
Subsidiaries for such services shall not exceed the costs and fees
payable by National Bancorp and the Bank Subsidiaries under
existing agreements for such services, subject to any increases in
such cost and fees which would otherwise be permitted under their
current agreements for such services. In the event that Fifth
Third determines that a third party should provide such services to
National Bancorp and the Bank Subsidiaries, National Bancorp and
the Bank Subsidiaries agree to have such services provided by the
third party recommended for such purpose by Fifth Third provided
that the cost and fees for such services do not exceed those
currently being paid, or which may otherwise be payable by National
Bancorp and the Bank Subsidiaries under existing agreements. In
the event this Agreement is terminated pursuant to Section VIII
hereof for any reason, and if, in such instance, National Bancorp
desires to convert to another provider of data processing services,
Fifth Third shall pay all costs and expenses associated with such
conversion, provided, however, such costs and expenses are
reasonable when compared to costs and expenses ordinarily charged
in the data processing industry. In no event shall National
Bancorp or the Bank Subsidiaries be required to take any actions
pursuant to this Paragraph I.2. or otherwise under this Agreement
or the Agreement of Merger that are contrary to any applicable law,
regulation, rule or order or which constitute a breach of the
fiduciary duties of the directors of National Bancorp or the Bank
Subsidiaries.
J. Fifth Third and National Bancorp agree that each will
use
its best efforts to secure the regulatory approvals necessary to
consummate the transactions contemplated herein at the earliest
practicable time, and National Bancorp agrees to cooperate with
Fifth Third and Fifth Third agrees to cooperate with National
Bancorp in all reasonable respects in securing such approvals.
K. Fifth Third and National Bancorp shall agree with each
other as to the form and substance of any press release related to
this Agreement and the Agreement of Merger or the transactions
contemplated hereby and thereby, and shall consult with each other
as to the form and substance of other public disclosures related
thereto, provided, however, that nothing contained herein shall
prohibit either party from making any disclosure which its counsel
deems to be required by law.
L. Each party hereto shall bear and pay all costs and
expenses incurred by it in connection with the transactions
contemplated by this Agreement and the Agreement of Merger,
including, without limitation, fees, costs and expenses of its own
financial consultants, investment bankers, accountants and counsel,
without reduction or modification in the number of shares of Fifth
Third Common Stock to be issued hereunder.
M. 1. Between the date hereof and the Closing Date,
National Bancorp shall promptly advise Fifth Third in writing of
any fact that, if existing or known at the date hereof, would have
been required to be set forth or disclosed in or pursuant to this
Agreement or of any fact that, if existing or known at the date
hereof, would have made any of the representations contained herein
untrue to any material extent.
2. Between the date hereof and the Closing Date,
Fifth
Third shall promptly advise National Bancorp in writing of any fact
that, if existing or known at the date hereof, would have been
required to be set forth or disclosed in or pursuant to this
Agreement or of any fact that, if existing or known at the date
hereof, would have made any of the representations contained herein
untrue to any material extent.
N. Fifth Third shall pay-off at Closing up to $2,403,000
in
principal amount of National Bancorp indebtedness to National City
Bank, plus accrued interest, and, so long as no additional amount
is due in order to satisfy in full such indebtedness, obtain all
releases of liens, guaranties and the like securing such
indebtedness.
VIII. Termination
A. This Agreement and the Agreement of Merger may be
terminated at any time prior to the Effective Time by written
notice delivered by Fifth Third to National Bancorp or by National
Bancorp to Fifth Third in the following instances:
1. By Fifth Third or National Bancorp, if there
has
been a material misrepresentation, a material breach of warranty or
a material failure to comply with any covenant on the part of any
party with respect to the representations, warranties, and
covenants set forth herein and such misrepresentation, breach or
failure to comply has not been cured (if capable of cure) within
ten (10) days after receipt of written notice, provided, the party
in default shall have no right to terminate for its own default.
2. By Fifth Third or National Bancorp, if the
business
or assets or financial condition of the other party shall have
materially and adversely changed from that in existence at
September 30, 1993.
3. By Fifth Third or National Bancorp, if the
merger
transaction contemplated herein has not been consummated by
September 30, 1994, provided the terminating party is not in
material breach or default of any representation, warranty or
covenant contained herein on the date of such termination.
4. By the mutual written consent of Fifth Third
and
National Bancorp.
B. If the National Bancorp shareholder, acting at a
meeting
held for the purpose of voting upon this Agreement and the
Agreement of Merger, fail to approve such agreements in the manner
required by law, then this Agreement and the Agreement of Merger
shall be deemed to be automatically terminated.
C. Upon termination as provided in this Section, this
Agreement and the Agreement of Merger, except for the provisions of
Paragraphs D, I and K of Section VII hereof shall be void and of no
further force or effect, and, except as provided in Paragraph I of
Section VII hereof, neither party hereto shall have any liability
of any kind to the other party including but not limited to
liability for expenses incurred by the other party in connection
with this transaction; provided that no such termination shall
relieve National Bancorp from liability for any breach of Paragraph
G of Section VII hereof.
IX. Closing and Effective Time
The consummation of the transactions contemplated by this
Agreement and the Agreement of Merger shall take place at a closing
to be held at 9:00 A.M. at the offices of Fifth Third in
Cincinnati, Ohio on the last business day of the month in which all
of the conditions precedent to closing set forth in Section VI
hereof, including the 30-day waiting period required by any banking
or bank holding company regulatory agency after its approval of the
Merger is issued before the transaction may be consummated, have
been fully met or effectively waived (the "Closing Date").
Pursuant to the filing of articles or a certificate of merger
(which shall be acceptable to National Bancorp and Fifth Third)
with the Secretaries of State of Ohio and Kentucky in accordance
with law, this Agreement and the Agreement of Merger, the Merger
provided for herein and in the Agreement of Merger shall become
effective at the close of business on said day (the "Effective
Time"). By mutual agreement of the parties, the closing may be
held at any other time or place or on any other date and the
effectiveness of the Merger (and the Effective Time) may be changed
by such mutual agreement.
X. Amendment
This Agreement may be amended, modified or supplemented by
the
written agreement of National Bancorp and Fifth Third upon the
authorization of each company's respective Board of Directors and
without further approval of National Bancorp's shareholders, except
that no such amendment, modification or supplement may be effected
without National Bancorp shareholder approval if to do so would
violate any applicable provisions of Ohio or Kentucky corporate
law.
XI. General
This Agreement was made in the State of Ohio and shall be
interpreted under the laws of the United States and the
Commonwealth of Kentucky. This Agreement and all of the provisions
hereof shall be binding upon and inure to the benefit of the
parties hereto and their respective successors and permitted
assigns but none of the provisions hereof shall inure to the
benefit of any other person, firm or corporation whomsoever.
Neither this Agreement nor any of the rights, interests or
obligations hereunder shall be assigned or transferred by operation
of law or otherwise by any party hereto without the prior written
consent of the other party; provided, however, that the merger,
consolidation or sale of all or substantially all of the assets of
Fifth Third shall not be deemed an assignment hereunder if Fifth
Third is the surviving corporation in such merger, consolidation or
sale of all or substantially all of the assets of Fifth Third and
its Common Stock shall thereafter continue to be publicly traded
and issuable to National Bancorp shareholders pursuant to the terms
of this Agreement and the Agreement of Merger.
XII. Counterparts
This Agreement may be executed in any number of
counterparts,
each of which shall be deemed an original for all purposes but such
counterparts taken together shall constitute one and the same
instrument.
IN WITNESS WHEREOF, the parties hereto have executed this
Affiliation Agreement as of the date hereinabove set forth.
FIFTH THIRD BANCORP
(SEAL) By:
George A. Schaefer, Jr.
President and Chief
Executive
Officer
Attest:
Michael K. Keating
Assistant Secretary
THE NATIONAL BANCORP OF KENTUCKY,
INC.
(SEAL) By:
Tracy W. Farmer
President and Chief
Executive
Officer
Attest:
Rhonda Brown
Secretary
<PAGE>
AGREEMENT OF MERGER
OF
THE NATIONAL BANCORP OF KENTUCKY, INC.
(a Kentucky Corporation)
with and into
FIFTH THIRD BANCORP
(an Ohio Corporation)
under the name
FIFTH THIRD BANCORP
Dated as of December 6, 1993
<PAGE>
TABLE OF CONTENTS
PARTIES AND RECITALS
ARTICLE I JURISDICTIONS
ARTICLE II THE MERGER
ARTICLE III ARTICLES OF INCORPORATION
ARTICLE IV DIRECTORS AND OFFICERS
ARTICLE V REGULATIONS
ARTICLE VI SERVICE OF PROCESS
ARTICLE VII MODE OF EFFECTUATING CONVERSION OF SHARES
ARTICLE VIII VESTING OF PROPERTIES AND OTHER MATTERS
ARTICLE IX REPRESENTATIONS AND AGREEMENTS OF SURVIVING CORPORATION
ARTICLE X APPROVAL AND ADOPTION BY DIRECTORS AND SHAREHOLDERS;
EFFECTIVE TIME
ARTICLE XI AMENDMENT; TERMINATION; ASSIGNMENT
SIGNATURES<PAGE>
AGREEMENT OF MERGER
of
THE NATIONAL BANCORP OF KENTUCKY, INC.
(a Kentucky Corporation)
with and into
FIFTH THIRD BANCORP
(an Ohio Corporation)
under the name
FIFTH THIRD BANCORP
THIS AGREEMENT OF MERGER (the "Agreement of Merger") dated
as
of December 6, 1993, between THE NATIONAL BANCORP OF KENTUCKY,
INC., Lexington, Fayette County, Kentucky, a Kentucky corporation
(hereinafter called "National Bancorp"), and FIFTH THIRD BANCORP,
Cincinnati, Hamilton County, Ohio, an Ohio corporation (hereinafter
sometimes called the "Surviving Corporation" or "Fifth Third"),
National Bancorp and Fifth Third being hereinafter sometimes
collectively called "the Constituent Corporations";
W I T N E S S E T H:
WHEREAS, the Constituent Corporations deem it advisable for
their benefit respectively, and for the benefit of their respective
shareholders, that National Bancorp merge into Fifth Third pursuant
to this Agreement and the applicable provisions of the laws of the
States of Ohio and Kentucky;
NOW, THEREFORE, the Constituent Corporations hereby agree
each
with the other, in accordance with the applicable provisions of the
laws of the States of Ohio and Kentucky, that National Bancorp
shall merge into Fifth Third with Fifth Third as the Surviving
Corporation and that the terms and conditions of such merger (the
"Merger") hereby agreed upon and the mode of carrying the same into
effect are and shall be as follows:
ARTICLE I
JURISDICTIONS
The jurisdictions under the laws of which each of the
Constituent Corporations exists are as follows: Fifth Third is a
corporation which exists under the laws of the State of Ohio and
National Bancorp is a corporation which exists under the laws of
the State of Kentucky.
ARTICLE II
THE MERGER
When this Agreement shall have been approved and adopted and
shall have been filed and recorded along with other necessary
documents in accordance with the laws of the States of Ohio and
Kentucky, and the Merger becomes effective, the separate existence
of National Bancorp shall cease and National Bancorp shall be
merged into Fifth Third which will be the Surviving Corporation and
which shall continue its corporate existence under the laws of the
State of Ohio under the name "Fifth Third Bancorp".
ARTICLE III
ARTICLES OF INCORPORATION
The Second Amended Articles of Incorporation, as amended, of
Fifth Third of record with the Secretary of State of Ohio at the
time the Merger becomes effective in accordance with the provisions
of Section 4 of Article X hereof (which are incorporated by
reference herein and made a part of this Agreement of Merger as
though set out in full in the body hereof) shall be the Articles of
Incorporation of the Surviving Corporation, until further amended
as provided by law.
ARTICLE IV
DIRECTORS AND OFFICERS
The Directors of Fifth Third who are in office at the time
the
Merger becomes effective shall be the directors of the Surviving
Corporation, each of whom shall continue to serve as a Director for
the term for which he was elected, subject to the Regulations of
the Surviving Corporation and in accordance with law. The officers
of Fifth Third who are in office at the time the Merger becomes
effective shall be the officers of the Surviving Corporation,
subject to the Regulations of the Surviving Corporation and in
accordance with law.
ARTICLE V
REGULATIONS
The Regulations of Fifth Third at the time the Merger
becomes
effective shall be the Regulations of the Surviving Corporation,
until amended as provided therein and in accordance with law.
ARTICLE VI
SERVICE OF PROCESS
The names and addresses of the statutory agents of each of
the
Constituent Corporations and the Surviving Corporation upon whom
any process, notice or demand may be served are as follows: the
statutory agent for Fifth Third, one of the Constituent
Corporations and the Surviving Corporation, is George A. Schaefer,
Jr., 38 Fountain Square Plaza, Cincinnati, Hamilton County, Ohio
45263; the statutory agent for National Bancorp, one of the
Constituent Corporations, is Hall Kinney, 2560 Richmond Road,
Lexington, Kentucky 40509.
ARTICLE VII
MODE OF EFFECTUATING CONVERSION OF SHARES
1. At the time the Merger becomes effective:
(a) All of the shares of the Common Stock without
par
value of Fifth Third ("Fifth Third Common Stock") that are issued
and outstanding or held by Fifth Third as treasury shares
immediately prior to the time the Merger becomes effective will
remain unchanged and will remain outstanding or as treasury shares,
as the case may be, when the Merger becomes effective as shares of
the Common Stock without par value of the Surviving Corporation.
Any stock options, subscription rights, warrants or other
securities outstanding immediately prior to the time the Merger
becomes effective, entitling the holders to subscribe for or
purchase any shares of the capital stock of any class of Fifth
Third, and any securities outstanding at such time that are
convertible into shares of the capital stock of any class of Fifth
Third will remain unchanged and will remain outstanding when the
Merger becomes effective with the holders thereof entitled to
subscribe for, purchase or convert their securities into the number
of shares of the class of capital stock of Fifth Third to which
they are entitled under the terms of the governing documents.
(b) Each of the shares of the Common Stock, without
par
value, of National Bancorp ("National Bancorp Common Stock") (not
including shares held as treasury shares) that is issued and
outstanding immediately prior to the time the Merger becomes
effective will, when the Merger becomes effective, be converted by
virtue of the Merger and without further action, into 2,540.924
shares of Fifth Third Common Stock.
2. At the time the Merger becomes effective, all of the
shares of National Bancorp Common Stock, whether issued or unissued
(including treasury shares), will be cancelled and extinguished and
the holders of certificates for shares thereof shall cease to have
any rights as shareholders of National Bancorp, except such rights,
if any, as they may be entitled to under the provisions of KRS
Sections 271B.13-010 et. seq with respect to the rights of
dissenting shareholders, and, except as aforesaid, their sole
rights as shareholders shall pertain to the Fifth Third Common
Stock and cash in lieu of fractional shares, if any (as described
in the immediately succeeding paragraph), into which their National
Bancorp Common Stock shall have been converted by virtue of the
Merger.
3. After the time the Merger becomes effective, each
holder
of a certificate or certificates for shares of National Bancorp
Common Stock, upon surrender of the same duly transmitted to Fifth
Third (or in lieu of surrendering such certificates in the case of
lost, stolen, destroyed or mislaid certificates, upon execution of
such documentation as may be reasonably required by Fifth Third),
shall be entitled to receive in exchange therefor a certificate or
certificates representing the number of whole shares of Fifth Third
Common Stock into which such holder's shares of National Bancorp
Common Stock shall have been converted by the Merger, plus a cash
payment for any fraction of a share to which the holder is
entitled, in lieu of such fraction of a share, equal in amount to
the product resulting from multiplying such fraction by $51.163.
Until so surrendered, each outstanding certificate that prior to
the time the Merger becomes effective represented shares of
National Bancorp Common Stock shall be deemed for all corporate
purposes to evidence ownership of the number of full shares of
Fifth Third Common Stock into which the same shall have been
converted; provided, however, that dividends or distributions
otherwise payable with respect to shares of Fifth Third Common
Stock into which National Bancorp Common Stock shall have been so
converted shall be paid with respect to such shares only when the
certificate or certificates evidencing shares of National Bancorp
Common Stock shall have been so surrendered (or in lieu of
surrendering such certificates in the case of lost, stolen,
destroyed or mislaid certificates, upon execution of such
documentation as may be reasonably required by Fifth Third) and
thereupon any such dividends and distributions shall be paid,
without interest, to the holder entitled thereto subject however to
the operation of any applicable escheat or similar laws relating to
unclaimed funds.
4. The exchange ratio referred to in Section 1(b) of this
Article VII shall be adjusted so as to give the National Bancorp
shareholders the economic benefit of any stock dividends,
reclassifications, recapitalizations, split-ups, exchanges of
shares, distributions or combinations or subdivisions of Fifth
Third Common Stock effected between the date of this Agreement and
the time the Merger becomes effective.
ARTICLE VIII
VESTING OF PROPERTIES AND OTHER MATTERS
1. At the time the Merger becomes effective, the effect
shall be as provided by the applicable provisions of the laws of
Ohio and Kentucky. Without limiting the generality of the
foregoing, and subject thereto, at the time the Merger becomes
effective: the separate existence of National Bancorp shall cease;
the Surviving Corporation shall possess all assets and property of
every description, and every interest therein, wherever located,
and the rights, privileges, immunities, powers, franchises and
authority, of a public as well as of a private nature, of each of
the Constituent Corporations, and all obligations owing by or due
each of the Constituent Corporations, shall be vested in, and
become the obligations of, the Surviving Corporation, without
further act or deed, including without limitation any liability to
dissenting shareholders under KRS Sections 271B.13-010 et. seq; and
all rights of creditors of each Constituent Corporation shall be
preserved unimpaired, and all liens upon the property of each of
the Constituent Corporations shall be preserved unimpaired, on only
the property affected by such liens immediately prior to the time
the Merger becomes effective.
2. From time to time as and when requested by the
Surviving
Corporation, or by its successors or assigns, the officers and
Directors of National Bancorp in office at the time the Merger
becomes effective shall execute and deliver such instruments and
shall take or cause to be taken such further or other action as
shall be necessary in order to vest or perfect in the Surviving
Corporation or to confirm of record or otherwise, title to, and
possession of, all the assets, property, interests, rights,
privileges, immunities, powers, franchises and authority of
National Bancorp and otherwise to carry out the purposes of this
Agreement.
ARTICLE IX
REPRESENTATIONS AND AGREEMENTS OF SURVIVING
CORPORATION
1. Fifth Third, the Surviving Corporation, agrees that it
may be served with process in Kentucky in any proceeding for the
enforcement of any obligation of National Bancorp, one of the
Constituent Corporations, and in any proceeding for the enforcement
of the rights of a dissenting shareholder of National Bancorp
against the Surviving Corporation.
2. Fifth Third, the Surviving Corporation, irrevocably
appoints the Secretary of State of Kentucky as its agent to accept
service of process in any such proceeding referred to in Section 1
of this Article IX. The address of Fifth Third to which a copy of
such process should be mailed by the Secretary of State of Kentucky
is set forth in Article VI of this Agreement.
3. Fifth Third, the Surviving Corporation, agrees that it
will promptly pay to any dissenting shareholders of National
Bancorp, one of the Constituent Corporations, the amount, if any,
to which they shall be entitled under the provisions of KRS
Sections 271B.13-010 et. seq with respect to the rights of
dissenting shareholders.
ARTICLE X
APPROVAL AND ADOPTION BY DIRECTORS AND
SHAREHOLDERS;
EFFECTIVE TIME
1. Fifth Third, the Surviving Corporation, represents
and
warrants that the Board of Directors of Fifth Third duly has
approved this Agreement of Merger; Division (D) of Section 1701.78
of the Ohio Revised Code does not require adoption of this
Agreement of Merger by the shareholders of Fifth Third; and
pursuant to Division (H) of Section 1701.78 of the Ohio Revised
Code, the approval of this Agreement of Merger by the Directors of
Fifth Third shall constitute adoption by Fifth Third.
2. National Bancorp, one of the Constituent
Corporations,
represents and warrants that the Directors of National Bancorp have
by resolution adopted by them, approved this Agreement of Merger
and directed that this Agreement of Merger be submitted to a vote
of the shareholder entitled to vote in respect thereof at a meeting
of the shareholder held for such purpose. Notice of such meeting
as required by the provisions of the Kentucky corporate law and the
Bylaws of National Bancorp shall be duly given.
3. National Bancorp, one of the Constituent
Corporations,
represents and warrants that this Agreement of Merger is required
to be approved and adopted by the affirmative vote of the holders
of a majority of the issued and outstanding shares of National
Bancorp entitled to vote in respect thereof, in accordance with the
provisions of the Kentucky corporate law and the Articles of
Incorporation and Bylaws of National Bancorp.
4. This Agreement shall be filed and recorded along with
Articles or a Certificate of Merger in accordance with the
requirements of the laws of the States of Ohio and Kentucky and
shall become effective at the close of business on the day this
Agreement and other necessary documents are filed (unless another
date is specified in the Articles or Certificate of Merger) with
the Secretaries of State of Ohio and Kentucky. This Agreement
shall not be filed with the Secretaries of State of Ohio and
Kentucky until, but shall be filed promptly after, all of the
conditions precedent to consummating the Merger as contained in
Section VI of the Affiliation Agreement shall have been fully met
or effectively waived, the filing of this Agreement of Merger being
an acknowledgement that such conditions precedent have been fully
met or effectively waived.
ARTICLE XI
AMENDMENT; TERMINATION; ASSIGNMENT
1. At any time prior to the time the Merger becomes
effective, the Constituent Corporations may, from time to time,
amend this Agreement of Merger by mutual agreement authorized by
their respective Boards of Directors or Executive Committees (and
whether before or after the shareholder of National Bancorp has
approved and adopted this Agreement of Merger) to facilitate the
performance thereof, to augment the intention of the parties in
carrying out the transactions provided for herein, to clarify any
ambiguities herein or to comply with any applicable regulation,
order or requirement of any governmental authority; provided,
however, that any such amendment shall be effected under, and
strictly in accordance with, the provisions of Section X of the
Affiliation Agreement.
2. This Agreement of Merger may be terminated by the
parties
hereto prior to the time it becomes effective under the
circumstances provided in, and strictly in accordance with the
provisions of, Section VIII of the Affiliation Agreement.
3. This Agreement of Merger and all of the provisions
hereof
shall be binding upon and inure to the benefit of the parties
hereto and their respective successors and permitted assigns but
none of the provisions hereof shall inure to the benefit of any
other person, firm or corporation whomsoever. Neither this
Agreement of Merger nor any of the rights, interests or obligations
hereunder shall be assigned or transferred by operation of law or
otherwise by either of the parties hereto without the prior written
consent of the other party; provided, however, that the merger,
consolidation or sale of all or substantially all of the assets of
Fifth Third shall not be deemed an assignment hereunder if Fifth
Third is the surviving corporation in such merger, consolidation or
sale of all or substantially all of the assets of Fifth Third and
its Common Stock shall thereafter continue to be publicly traded
and issuable to National Bancorp shareholders pursuant to the terms
of this Agreement of Merger and the Affiliation Agreement.
4. This Agreement may be executed in any number of
counterparts, each of which shall be deemed an original for all
purposes but such counterparts taken together shall constitute one
and the same instrument.
IN WITNESS WHEREOF, the parties hereto have executed this
Agreement as of the day and year first above written.
FIFTH THIRD BANCORP
(SEAL) By:
George A. Schaefer, Jr.
President and Chief Executive
Officer
Attest:
Michael K. Keating
Assistant Secretary
THE NATIONAL BANCORP OF KENTUCKY,
INC.
(SEAL) By:
Tracy W. Farmer
President and Chief
Executive
Officer
Attest:
Rhonda Brown
Secretary
<PAGE>
<PAGE>
ANNEX C
KENTUCKY 1988 BUSINESS CORPORATION ACT
Dissenters' Rights
Right to Dissent and Obtain Payment for Shares
271B.13-010 DEFINITIONS. -- As used in this subtitle:
(1) "Corporation" means the issuer of the shares held by
a
dissenter before the corporate action, or the surviving or
acquiring corporation by merger or share exchange of that issuer.
(2) "Dissenter" means a shareholder who is entitled to
dissent from corporate action under KRS 271B.13-020 and who
exercises that right when and in the manner required by KRS
271B.13-200 to 271B.13-280.
(3) "Fair value," with respect to a dissenter's shares,
means
the value of the shares immediately before the effectuation of the
corporate action to which the dissenter objects, excluding any
appreciation or depreciation in anticipation of the corporate
action unless exclusion would be inequitable. In any transaction
subject to the requirements of KRS 271B.12-210 or exempted by KRS
271B.12-220(2), "fair value" shall be at least an amount required
to be paid under KRS 271B.12-220(2) in order to be exempt from the
requirements of KRS 271B.12-210.
(4) "Interest" means interest from the effective date of
the
corporate action until the date of payment, at the average rate
currently paid by the corporation on its principal bank loans or,
if none, at a rate that is fair and equitable under all the
circumstances.
(5) "Record shareholder" means the person in whose name
shares are registered in the records of a corporation or the
beneficial owner of shares to the extent of the rights granted by
a nominee certificate on file with a corporation.
(6) "Beneficial shareholder" means the person who is a
beneficial owner of shares held in a voting trust or by a nominee
as the record shareholder.
(7) "Shareholder" means the record shareholder or the
beneficial shareholder.
271B.13-020 RIGHT TO DISSENT. -- (1) A shareholder shall
be
entitled to dissent from, and obtain payment of the fair value of
his shares in the event of, any of the following corporate actions:
(a) Consummation of a plan of merger to which the
corporation
is a party:
1. If shareholder approval is required for the merger by
KRS
271B.11-040 or the articles of incorporation and the shareholder is
entitled to vote on the merger; or
2. If the corporation is a subsidiary that is merged with
its parent under KRS 271B.11-040;
(b) Consummation of a plan of share exchange to which the
corporation is a party as the corporation whose shares will be
acquired, if the shareholder is entitled to vote on the plan;
(c) Consummation of a sale or exchange of all, or
substantially all, of the property of the corporation other than in
the usual and regular course of business, if the shareholder is
entitled to vote on the sale or exchange, including a sale in
dissolution, but not including a sale pursuant to court order or a
sale for cash pursuant to a plan by which all or substantially all
of the net proceeds of the sale will be distributed to the
shareholders within one (1) year after the date of sale;
(d) An amendment of the articles of incorporation that
materially and adversely affects rights in respect of a dissenter's
shares because it:
1. Alters or abolishes a preferential right of the shares
to
a distribution or in dissolution;
2. Creates, alters, or abolishes a right in respect of
redemption, including a provision respecting a sinking fund for the
redemption or repurchase, of the shares;
3. Excludes or limits the right of the shares to vote on
any
matter other than a limitation by dilution through issuance of
shares or other securities with similar voting rights; or
4. Reduces the number of shares owned by the shareholder
to
a fraction of a share if the fractional share so created is to be
acquired for cash under KRS 271B.6-040;
(e) Any transaction subject to the requirements of KRS
271B.12-210 or exempted by KRS 271B.12-220(2); or
(f) Any corporate action taken pursuant to a shareholder
vote
to the extent the articles of incorporation, bylaws, or a
resolution of the board of directors provides that voting or
nonvoting shareholders are entitled to dissent and obtain payment
for their shares.
(2) A shareholder entitled to dissent and obtain payment
for
his shares under this chapter shall not challenge the corporate
action creating his entitlement unless the action is unlawful or
fraudulent with respect to the shareholder or the corporation.
271B.13-030 DISSENT BY NOMINEE AND BENEFICIAL OWNERS. --
(1)
A record shareholder may assert dissenters' rights as to fewer than
all the shares registered in his name only if he shall dissent with
respect to all shares beneficially owned by any one (1) person and
notify the corporation in writing of the name and address of each
person on whose behalf he asserts dissenters' rights. The rights
of a partial dissenter under this subsection shall be determined as
if the shares as to which he dissents and his other shares were
registered in the names of different shareholders.
(2) A beneficial shareholder may assert dissenters' rights
as
to shares held on his behalf only if:
(a) He submits to the corporation the record shareholder's
written consent to the dissent not later than the time the
beneficial shareholder asserts dissenters' rights; and
(b) He does so with respect to all shares of which he is
the
beneficial shareholder or over which he has power to direct the
vote.
Procedure for Exercise of Dissenters' Rights
271B.13-200 NOTICE OF DISSENTERS' RIGHTS. -- (1) If
proposed
corporate action creating dissenters' rights under KRS 271B.13-020
is submitted to a vote at a shareholders' meeting, the meeting
notice must state that shareholders are or may be entitled to
assert dissenters' rights under this subtitle and the corporation
shall undertake to provide a copy of this subtitle to any
shareholder entitled to vote at the shareholders' meeting upon
request of that shareholder.
(2) If corporate action creating dissenters' rights under
KRS
271B.13-020 is taken without a vote of shareholders, the
corporation shall notify in writing all shareholders entitled to
assert dissenters' rights that the action was taken and send them
the dissenters' notice described in KRS 271B.13-220.
271B.13-210 NOTICE OF INTENT TO DEMAND PAYMENT. -- (1) If
proposed corporate action creating dissenters' rights under KRS
271B.13-020 is submitted to a vote at a shareholders' meeting, a
shareholder who wishes to assert dissenters' rights:
(a) Shall deliver to the corporation before the vote is
taken
written notice of his intent to demand payment for his shares if
the proposed action is effectuated; and
(b) Shall not vote his shares in favor of the proposed
action.
(2) A shareholder who does not satisfy the requirements of
subsection (1) of this section shall not be entitled to payment for
his shares under this chapter.
271B.13-220 DISSENTERS' NOTICE. -- (1) If proposed
corporate
action creating dissenters' rights under KRS 271B.13-020 is
authorized at a shareholders' meeting, the corporation shall
deliver a written dissenters' notice to all shareholders who
satisfied the requirements of KRS 271B.13-210.
(2) The dissenters' notice shall be sent no later than ten
(10) days after the date the proposed corporate action was
authorized by the shareholders, or, if no shareholder authorization
was obtained, by the board of directors, and shall:
(a) State where the payment demand must be sent and where
and
when certificates for certificated shares must be deposited;
(b) Inform holders of uncertificated shares to what extent
transfer of the shares will be restricted after the payment demand
is received;
(c) Supply a form for demanding payment that includes the
date of the first announcement to news media or to shareholders of
the terms of the proposed corporate action and requires that the
person asserting dissenters' rights certify whether or not he
acquired beneficial ownership of the shares before that date;
(d) Set a date by which the corporation must receive the
payment demand, which date may not be fewer than thirty (30), nor
more than sixty (60) days after the date the notice provided in
subsection (1) of this section is delivered; and
(e) Be accompanied by a copy of this subtitle.
271B.13-230 DUTY TO DEMAND PAYMENT. -- (1) A shareholder
who
is sent a dissenters' notice described in KRS 271B.13-220 shall
demand payment, certify whether he acquired beneficial ownership of
the shares before the date required to be set forth in the
dissenters' notice pursuant to subsection (2)(c) of KRS 271B.13-
220, and deposit his certificates in accordance with the terms of
the notice.
(2) The shareholder who demands payment and deposits his
share certificates under subsection (1) of this section shall
retain all other rights of a shareholder until these rights are
cancelled or modified by the taking of the proposed corporate
action.
(3) A shareholder who does not demand payment or deposit
his
share certificates where required, each by the date set in the
dissenters' notice, shall not be entitled to payment for his shares
under this subtitle.
271B.13-240 SHARE RESTRICTIONS. -- (1) The corporation may
restrict the transfer of uncertificated shares from the date the
demand for their payment is received until the proposed corporate
action is taken or the restrictions released under KRS 271B.13-260.
(2) The person for whom dissenters' rights are asserted as
to
uncertificated shares shall retain all other rights of a
shareholder until these rights are cancelled or modified by the
taking of the proposed corporate action.
271B.13-250 PAYMENT. -- (1) Except as provided in KRS
271B.13-270, as soon as the proposed corporate action is taken, or
upon receipt of a payment demand, the corporation shall pay each
dissenter who complied with KRS 271B.13-230 the amount the
corporation estimates to be the fair value of his shares, plus
accrued interest.
(2) The payment shall be accompanied by:
(a) The corporation's balance sheet as of the end of a
fiscal
year ending not more than sixteen (16) months before the date of
payment, an income statement for that year, a statement of changes
in shareholders' equity for that year, and the latest available
interim financial statements, if any;
(b) A statement of the corporation's estimate of the fair
value of the shares;
(c) An explanation of how the interest was calculated; and
(d) A statement of the dissenter's right to demand payment
under KRS 271B.13-280.
271B.13-270 FAILURE TO TAKE ACTION. -- (1) If the
corporation does not take the proposed action within sixty (60)
days after the date set for demanding payment and depositing share
certificates, the corporation shall return the deposited
certificates and release the transfer restrictions imposed on
uncertificated shares.
(2) If after returning deposited certificates and
releasing
transfer restrictions, the corporation takes the proposed action,
it shall send a new dissenters' notice under KRS 271B.13-220 and
repeat the payment demand procedure.
271B.13-270 AFTER-ACQUIRED SHARES. -- (1) A corporation
may
elect to withhold payment required by KRS 271B.13-250 from a
dissenter unless he was the beneficial owner of the shares before
the date set forth in the dissenters' notice as the date of the
first announcement to news media or to shareholders of the terms of
the proposed corporate action.
(2) To the extent the corporation elects to withhold
payment
under subsection (1) of this section, after taking the proposed
corporate action, it shall estimate the fair value of the shares,
plus accrued interest, and shall pay this amount to each dissenter
who agrees to accept it in full satisfaction of his demand. The
corporation shall send with its offer a statement of its estimate
of the fair value of the shares, an explanation of how the interest
was calculated, and a statement of the dissenters' right to demand
payment under KRS 271B.13-280.
271B.13-290 PROCEDURE IF SHAREHOLDER DISSATISFIED WITH
PAYMENT OR OFFER. -- (1) A dissenter may notify the corporation in
writing of his own estimate of the fair value of his shares and
amount of interest due, and demand payment of his estimate (less
any payment under KRS 271B.13-250), or reject the corporation's
offer under KRS 271B.13-270 and demand payment of the fair value of
his shares and interest due, if:
(a) The dissenter believes that the amount paid under KRS
271B.13-250 or offered under KRS 271B.13-270 is less than the fair
value of his shares or that the interest due is incorrectly
calculated;
(b) The corporation fails to make payment under KRS
271B.13-
250 within sixty (60) days after the date set for demanding
payment; or
(c) The corporation, having failed to take the proposed
action, does not return the deposited certificates or release the
transfer restrictions imposed on uncertificated shares within sixty
(60) days after the date set for demanding payment.
(2) A dissenter waives his right to demand payment under
this
section unless he shall notify the corporation of his demand in
writing under subsection (1) of this section within thirty (30)
days after the corporation made or offered payment for his shares.
Judicial Appraisal of Shares
271B.13-300 COURT ACTION. -- (1) If a demand for payment
under KRS 271B.13-280 remains unsettled, the corporation shall
commence a proceeding within sixty (60) days after receiving the
payment demand and petition the court to determine the fair value
of the shares and accrued interest. If the corporation does not
commence the proceeding within the sixty (60) day period, it shall
pay each dissenter whose demand remains unsettled the amount
demanded.
(2) The corporation shall commence the proceeding in the
circuit court of the county where a corporation's principal office
(or, if none in this state, its registered office) is located. If
the corporation is a foreign corporation without a registered
office in this state, it shall commence the proceeding in the
county in this state where the registered office of the domestic
corporation merged with or whose shares were acquired by the
foreign corporation was located.
(3) The corporation shall make all dissenters (whether or
not
residents of this state) whose demands remain unsettled parties to
the proceeding as in an action against their shares and all parties
shall be served with a copy of the petition. Nonresidents may be
served by registered or certified mail or by publication as
provided by law.
(4) The jurisdiction of the court in which the proceeding
is
commenced under subsection (2) of this section shall be plenary and
exclusive. The court may appoint one (1) or more persons as
appraisers to receive evidence and recommend decision on the
question of fair value. The appraisers have the powers described
in the order appointing them, or in any amendment to it. The
dissenters shall be entitled to the same discovery rights as
parties in other civil proceedings.
(5) Each dissenter made a party to the proceeding shall be
entitled to judgment:
(a) For the amount, if any, by which the court finds the
fair
value of his shares, plus interest, exceeds the amount paid by the
corporation; or
(b) For the fair value, plus accrued interest, of his
after-
acquired shares for which the corporation elected to withhold
payment under KRS 271B.13-270.
271B.13-310 COURT COSTS AND COUNSEL FEES. -- (1) The court
in an appraisal proceeding commenced under KRS 271B.13-300 shall
determine all costs of the proceeding, including the reasonable
compensation and expenses of appraisers appointed by the court.
The court shall assess the costs against the corporation, except
that the court may assess costs against all or some of the
dissenters, in amounts the court finds equitable, to the extent the
court finds the dissenters acted arbitrarily, vexatiously, or not
in good faith in demanding payment under KRS 271B.13-280.
(2) The court may also assess the fees and expenses of
counsel and experts for the respective parties, in amounts the
court finds equitable:
(a) Against the corporation and in favor of any or all
dissenters, if the court finds the corporation did not
substantially comply with the requirements of KRS 271B.13-200 to
271B.13-280; or
(b) Against either the corporation or a dissenter, in
favor
of any other party, if the court finds that the party against whom
the fees and expenses are assessed acted arbitrarily, vexatiously,
or not in good faith with respect to the rights provided by this
subtitle.
(3) If the court finds that the services of counsel for
any
dissenter were of substantial benefit to other dissenters similarly
situated, and that the fees for those services should not be
assessed against the corporation, the court may award to these
counsel reasonable fees to be paid out of the amounts awarded the
dissenters who were benefited.<PAGE>
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Indemnification of Directors and Officers
Section 1701.13 of the Ohio Revised Code provides that a
Corporation may indemnify or agree to indemnify any person who was
or is a party, or is threatened to be made a party, to any
threatened, pending, or completed action, suit or proceeding,
whether civil, criminal, administrative or investigative, other
than an action by or in the right of the corporation, by reason of
the fact that he is or was a director, officer, employee, or agent
of the corporation, or is or was serving at the request of the
corporation as a director, trustee, officer, employee, or agent of
another corporation, domestic or foreign, nonprofit or for profit,
partnership, joint venture, trust or other enterprise against
expenses, including attorneys' fees, judgments, fines, and amounts
paid in settlement actually and reasonably incurred by him in
connection with such action, suit or proceeding if he acted in good
faith and in a manner he reasonably believed to be in or not
opposed to the best interests of the corporation, and with respect
to any criminal action or proceeding, had no reasonable cause to
believe his conduct was unlawful. The termination of any action,
suit or proceeding by judgment, order, settlement or conviction, or
upon a plea of nolo contendre or its equivalent, shall not, of
itself, create a presumption that the person did not act in good
faith and in a manner he reasonably believed to be in or not
opposed to the best interests of the corporation and with respect
to any criminal action or proceeding he had reasonable cause to
believe that his conduct was unlawful. Section 1701.13 further
specifies that a corporation may indemnify or agree to indemnify
any person who was or is a party, or is threatened to be made a
party, to any threatened, pending, or completed action or suit by
or in the right of the corporation to procure a judgment in its
favor by reason of the fact that he is or was a director, officer,
employee, or agent of the corporation, or is or was serving at the
request of the corporation as a director, trustee, officer,
employee, or agent of another corporation, domestic or foreign,
nonprofit or for profit partnership, joint venture, trust or other
enterprise against expenses, including attorneys' fees actually and
reasonably incurred by him in connection with the defense or
settlement of such action or suit if he acted in good faith and in
a manner he reasonably believed to be in or not opposed to the best
interests of the corporation, except that no indemnification shall
be made in respect of any claim, issue, or matter as to which such
person shall have been adjudged to be liable for negligence or
misconduct in the performance of his duty to the corporation
unless, and only to the extent that the court of common pleas, or
the court in which such action or suit was brought, determines upon
application that, despite the adjudication of liability, but in
view of all the circumstances of the case, such person is fairly
and reasonably entitled to indemnity for such expenses as the court
of common pleas or such other court shall deem proper. In
addition, Section 1701.13 of the Ohio Revised Code requires a
corporation to pay any expenses, including attorney's fees, of a
director in defending an action, suit or proceeding referred to
above as they are incurred, in advance of the final disposition of
the action, suit or proceeding, upon receipt of an undertaking by
or on behalf of the director in which he agrees to both (i) repay
such amount if it is proved by clear and convincing evidence that
his action or failure to act involved an act or omission undertaken
with deliberate intent to cause injury to the corporation or
undertaken with reckless disregard for the best interests of the
corporation and (ii) reasonably cooperate with the corporation
concerning the action, suit or proceeding. The indemnification
provided by Section 1701.13 shall not be deemed exclusive of any
other rights to which those seeking indemnification may be entitled
under the articles or regulations of the Registrant.
The Code of Regulations of Fifth Third provides that Fifth Third
shall indemnify each director and each officer of Fifth Third, and
each person employed by Fifth Third who serves at the written
request of the President of Fifth Third as a director, trustee,
officer, employee or agent of another corporation, domestic or
foreign, non profit or for profit, to the full extent permitted by
Ohio law. The Registrant may indemnify assistant officers,
employees and others by action of the Board of Directors to the
extent permitted by Ohio law.
The Registrant carries directors' and officers' liability insurance
coverage which insures its directors and officers and the directors
and officers of its subsidiaries in certain circumstances.
<TABLE>
Exhibits and Financial Statement Schedules
<CAPTION>
Document Exhibit Page Number
in Sequential
Numbering
System
<S> <C> <C>
Affiliation Agreement and
Agreement of Merger dated as of
December 6, 1993, by and between
Fifth Third and National
(excluding exhibits) (set forth
in Annex A and Annex B to the
Proxy Statement and Prospectus
included in this Registration
Statement) 2
Seconded Amended Articles of
Incorporation of Fifth Third
Bancorp, as amended 3.1 Incorporated by
Reference(1)
Code of Regulations of Fifth
Third Bancorp, as amended 3.2 Incorporated by
Reference(1)
Form of opinion of Dinsmore
& Shohl as to the legality of
the securities being issued 5
Form of opinion of Dinsmore &
Shohl as to tax matters 8
Fifth Third Bancorp 1982 Stock
Option Plan 10.1 Incorporated
by Reference(2)
Fifth Third Bancorp 1987 Stock
Option Plan 10.2 Incorporated by
Reference(3)
Fifth Third Bancorp Unfunded
Deferred Compensation Plan for
Non-Employee Directors 10.3 Incorporated by
Reference(4)
Fifth Third Bancorp Nonqualified
Deferred Compensation Plan 10.4 Incorporated by
Reference(5)
Fifth Third Bancorp 1990 Stock
Option Plan 10.5 Incorporated by
Reference(6)
1993 Annual Report to
Shareholders of Fifth Third
Bancorp 13.1 Incorporated by
Reference
Fifth Third Bancorp Quarterly
Report on Form 10-K then
ended at December 31, 1993 and
for the year then ended 13.2 Incorporated by
Reference
Subsidiaries of Fifth Third
Bancorp 22(6) Incorporated by
Reference(7)
Consent of Deloitte & Touche 23.1
Consent of Experts and Counsel 23.4(8)
A power of attorney where various
individuals authorize the signing
of their names to any and all
amendments to this Registration
Statement and other documents
submitted in connection therewith
is contained on the first page
of the Signature pages following
Part II of this Registration
Statement 25
<FN>
(1) Filed with the Securities and Exchange Commission as an exhibit
to a Registration Statement on Form S-4, Registration No. 33-63966.
(2) Filed with the Securities and Exchange Commission as an exhibit
to a Registration Statement on Form S-2, Registration No. 2-98550,
which is effective.
(3) Filed with the Securities and Exchange Commission as an exhibit
to a Registration Statement on Form S-2, Registration No. 33-13252,
which is effective.
(4) Incorporated by reference to the Registrant's Annual Report on
Form 10-K filed for fiscal year ended December 31, 1985.
(5) Filed with the Securities and Exchange Commission as Exhibit
10.4 to a Registration Statement on Form S-4, Registration No.
33-21139, declared effective April 20, 1988.
(6) Filed with the Securities and Exchange Commission as an exhibit
to a Registration Statement on Form S-8, Registration No. 33-34075,
which is effective.
(7) Incorporated by reference to the Registrant's Annual Report on
Form 10-K filed for fiscal year ended December 31, 1992.
(8) The consents of counsel are contained in their opinions.
</FN>
</TABLE>
Undertakings
(1)The undersigned Registrant hereby undertakes that, for purposes
of determining any liability under the Securities Act of 1933, each
filing of the Registrant's annual report pursuant to section 13(a)
or section 15(d) of the Securities Exchange Act of 1934 (and, where
applicable, each filing of an employee benefit plan's annual report
pursuant to section 15(d) of the Securities Exchange Act of 1934)
that is incorporated by reference in the registration statement
shall be deemed to be a new registration statement relating to the
securities offered therein, and the offering of such securities at
that time shall be deemed to be the initial bona fide offering
thereof.
(2)The undersigned Registrant hereby undertakes as follows: that
prior to any public reoffering of the securities registered
hereunder through use of a prospectus which is part of this
registration statement by any person or party who is deemed to be
an underwriter within the meaning of Rule 145(c), the issuer
undertakes that such reoffering prospectus will contain the
information called for by the applicable registration form with
respect to reofferings by persons who may be deemed underwriters,
in addition to the information called for by the other Items of the
applicable form.
(3)The Registrant undertakes that every prospectus (i) that is
filed pursuant to paragraph (2) immediately preceding, or (ii) that
purports to meet the requirements of section 10(a)(3) of the
Securities Act of 1933 and is used in connection with an offering
of securities subject to Rule 415, will be filed as a part of an
amendment to the Registration Statement and will not be used until
such amendment is effective, and that, for purposes of determining
any liability under the Securities Act of 1933, each such
post-effective amendment shall be deemed to be a new registration
statement relating to the securities offering therein, and the
offering of such securities at that time shall be deemed to be the
initial bona fide offering thereof.
(4)Insofar as indemnification for liabilities arising under the
Securities Act of 1933 (the "Act") may be permitted to directors,
officers and controlling persons of the Registrant pursuant to the
foregoing provisions, or otherwise, the Registrant has been advised
that in the opinion of the Securities and Exchange Commission such
indemnification is against public policy as expressed in the Act
and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by
the Registrant of expenses incurred or paid by a director, officer
or controlling person of the Registrant in the successful defense
of any action, suit or proceeding) is asserted by such director,
officer or controlling person in connection with the securities
being registered, the Registrant will, unless in the opinion of its
counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question whether
such indemnification by it is against public policy as expressed in
the Act and will be governed by the final adjudication of such
issue.
(5)The undersigned Registrant hereby undertakes to supply by means
of a post-effective amendment all information concerning a
transaction, and the company being acquired involved therein, that
was not the subject of and included in the registration statement
when it became effective.
(6)The undersigned Registrant hereby undertakes to deliver or cause
to be delivered with the prospectus, to each person to whom the
prospectus is sent or given, the latest annual report to security
holders that is incorporated by reference in the prospectus and
furnished pursuant to and meeting the requirements of Rule 14a-3 or
Rule 14c-3 under the Securities Exchange Act of 1934; and, where
interim financial information required to be presented by Article
3 of Regulation S-X are not set forth in the prospectus, to
deliver, or cause to be delivered to each person to whom the
prospectus is sent or given, the latest quarterly report that is
specifically incorporated by reference in the prospectus to provide
such interim financial information.
(7)The undersigned Registrant hereby undertakes to respond to
requests for information that is incorporated by reference into the
prospectus pursuant to Items 4, 10(b), 11 or 13 of this Form within
one business day of receipt of such request, and to send the
incorporated documents by first class mail or other equally prompt
means. This includes information contained in documents filed
subsequent to the effective date of the registration statement
through the date of responding to the request.<PAGE>
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the
Registrant certifies that it has reasonable grounds to believe that
it meets all the requirements for filing on Form S-4 and has duly
caused this registration statement to be signed on its behalf by
the undersigned, thereunto duly authorized, in the City of
Cincinnati, State of Ohio, on March 30, 1994.
FIFTH THIRD BANCORP
By:/S/ George A. Schaefer, Jr.
George A. Schaefer, Jr.
President and Chief Executive
Officer
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature
appears below constitutes and appoints GEORGE A. SCHAEFER, JR. his
true and lawful attorney-in-fact and agent, with full power of
substitution and resubstitution, for him and in his name, place and
stead, in any and all capacities, to sign any and all amendments to
this Registration Statement, and to file the same, with all
exhibits thereto, and other documents in connection therewith, with
the Securities and Exchange Commission, granting unto said
attorney-in-fact and agent full power and authority to do and
perform each and every act and thing requisite and necessary to be
done in and about the premises, as fully to all intents and
purposes as he might or could do in person and agent, or his
substitute or substitutes, may lawfully do or cause to be done by
virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this
registration statement has been signed by the following persons in
the capacities and on the dates indicated.
Principal Executive Officer:
/S/ George A. Schaefer, Jr. President and March 30, 1994
George A. Schaefer, Jr. Chief
Executive
Officer
/S/ P. Michael Brumm Senior Vice March 30, 1994
P. Michael Brumm President and
Chief
Financial
Officer
Directors of the Company:
/S/ John F. Barrett March 30, 1994
John F. Barrett
________, 1994
J. Kenneth Blackwell
________, 1994
Milton C. Boesel, Jr.
/S/ Clement L. Buenger March 30, 1994
Clement L. Buenger
/S/ Nolan W. Carson March 30, 1994
Nolan W. Carson
/S/ Thomas L. Dahl March 30, 1994
Thomas L. Dahl
/S/ Gerald V. Dirvin March 30, 1994
Gerald V. Dirvin
________, 1994
Thomas B. Donnell
/S/ Richard T. Farmer March 30, 1994
Richard T. Farmer
/S/ John D. Geary March 30, 1994
John D. Geary
March 30, 1994
Ivan W. Gorr
/S/ Joseph H. Head, Jr. March 30, 1994
Joseph H. Head, Jr.
/S/ Joan R. Herschede March 30, 1994
Joan R. Herschede
/S/ William G. Kagler March 30, 1994
William G. Kagler
/S/ William J. Keating March 30, 1994
William J. Keating
/S/ James D. Kiggen March 30, 1994
James D. Kiggen
/S/ Robert B. Morgan March 30, 1994
Robert B. Morgan
/S/ Michael H. Norris March 30, 1994
Michael H. Norris
________, 1994
Brian H. Rowe
/S/ George A. Schaefer, Jr. March 30, 1994
George A. Schaefer, Jr.
/S/ John J. Schiff, Jr. March 30, 1994
John J. Schiff, Jr.
________, 1994
Stephen Stranahan
/S/ Dennis J. Sullivan, Jr. March 30, 1994
Dennis J. Sullivan, Jr.
/S/ Dudley S. Taft March 30, 1994
Dudley S. Taft
[Form of Corporate Opinion of Dinsmore & Shohl]
, 1994
THE FOLLOWING OPINION IS INTENDED TO BE RENDERED UPON THE CLOSING
OF THE TRANSACTION DESCRIBED THEREIN IN SUBSTANTIALLY THE FORM
PRESENTED, ASSUMING NO CHANGES IN THE FACTS OR THE LAW UPON WHICH
SUCH OPINION IS BASED, AND SUBJECT TO RECEIPT, REVIEW AND APPROVAL
OF FINAL DOCUMENTS
The National Bancorp of Kentucky, Inc.
2560 Richmond Road
Lexington, Kentucky 40509
Mr. Tracy W. Farmer
2560 Richmond Road
Lexington, Kentucky 40509
Gentlemen:
We have acted as counsel to Fifth Third Bancorp in connection
with the transactions provided for in the Affiliation Agreement
dated as of December __, 1993 ("Affiliation Agreement") by and
between Fifth Third Bancorp ("Fifth Third") and The National
Bancorp of Kentucky, Inc. ("National Bancorp") and the Agreement of
Merger dated as of December __, 1993 by and between Fifth Third and
National Bancorp ("Agreement of Merger"). This opinion is rendered
to you pursuant to paragraph 3 of Section VI.C. of the Affiliation
Agreement.
We have examined and are familiar with originals or copies,
certified or otherwise, identified to our satisfaction, of such
statutes, regulations, documents, corporate records, and
certificates of public officials and corporate officers as we have
deemed necessary for the purposes of this opinion, including but
not limited to the following: (a) the Second Amended Articles of
Incorporation of Fifth Third, as amended; (b) the Code of
Regulations, as amended, of Fifth Third; and (c) the record of all
actions taken by the Board of Directors of Fifth Third in
connection with any matters covered by this opinion.
We have made such examination of Kentucky, Ohio and Federal
law as we deem relevant for the purposes of this opinion, but we
have not made any review of the laws of any state other than
Kentucky and Ohio. Accordingly, we express no opinion as to the
laws of any state or jurisdiction other than the United States of
America and the States of Kentucky and Ohio.
Based upon and subject to the foregoing, we are of the opinion
that:
1. Fifth Third is duly incorporated, validly existing and in
good standing as a corporation under the laws of Ohio, and has all
the requisite power and authority to enter into and consummate the
transactions provided for in the Affiliation Agreement and the
Agreement of Merger.
2. Fifth Third is a registered bank holding company under
the Bank Holding Company Act of 1956, as amended, and it has all
requisite corporate power and authority to conduct the business in
which it is engaged and as now conducted.
3. The Affiliation Agreement and the Agreement of Merger and
the transactions provided for therein have been duly approved by
the Board of Directors of Fifth Third, and no action is required to
be taken by the shareholders of Fifth Third to authorize, approve
or adopt the Affiliation Agreement or the Agreement of Merger or
the transactions provided for therein.
4. The Affiliation Agreement and the Agreement of Merger
have been duly executed and delivered by Fifth Third and constitute
valid and binding obligations of Fifth Third enforceable against
Fifth Third in accordance with their respective terms, except to
the extent that (i) enforceability thereof may be limited by
bankruptcy, insolvency, moratorium, fraudulent conveyance or other
laws relating to or from time to time affecting the enforcement of
creditors' rights generally or the rights of creditors of bank
holding companies, the accounts of whose subsidiaries are insured
by the Federal Deposit Insurance Corporation and (ii) the
availability of certain remedies may be precluded by general
principles of equity.
5. The execution, delivery and performance of the
Affiliation Agreement and the Agreement of Merger do not violate
the Articles of Incorporation or Code of Regulations of Fifth
Third.
6. Fifth Third has taken all necessary and required
corporate action to authorize the issuance or transfer of the
shares of its Common Stock to be received by the holder of the
Common Stock of National Bancorp as a result of the merger of
National Bancorp with and into Fifth Third and, when so issued or
transferred, such shares will be legally and validly issued and
outstanding, fully paid and nonassessable and will not upon such
transfer or issuance be subject to the preemptive rights of any
shareholder of Fifth Third, and such shares have been registered
under the Securities Act of 1933, as amended.
7. The registration statement filed with the Securities and
Exchange Commission under the Securities Act of 1933, as amended,
Registration No. (the "Registration Statement"), by Fifth
Third to register the shares of Common Stock of Fifth Third being
offered to the shareholder of National Bancorp in the merger
provided for in the Affiliation Agreement and the Agreement of
Merger has been declared effective and no stop order has been
issued and no proceeding for that purpose has been initiated or, to
our best knowledge, contemplated or threatened by the Securities
and Exchange Commission.
8. The Registration Statement and the proxy statement/
prospectus included therein at the time it became effective
complied as to form with the requirements of the Securities Act of
1933, as amended, and the rules and regulations thereunder.
9. All necessary approvals for the transactions provided for
in the Affiliation Agreement and the Agreement of Merger have been
obtained from the appropriate regulatory authorities and are in
full force and effect.
Very truly yours,
DINSMORE & SHOHL
/S/ S. Richard Arnold
S. Richard Arnold
SRA/je
Enclosure
_______________, 1994
THE FOLLOWING OPINION IS INTENDED TO BE RENDERED UPON THE CLOSING
OF THE TRANSACTION DESCRIBED HEREIN IN SUBSTANTIALLY THE FORM
PRESENTED, ASSUMING NO CHANGES IN THE FACTS OR THE LAW UPON WHICH
SUCH OPINION IS BASED, AND SUBJECT TO RECEIPT, REVIEW AND APPROVAL
OF FINAL DOCUMENTS
Fifth Third Bancorp
38 Fountain Square Plaza
Cincinnati, Ohio 45263
The National Bancorp of Kentucky, Inc.
2560 Richmond Road
Lexington, Kentucky 40509
Mr Tracy W. Farmer
2560 Richmond Road
Lexington, Kentucky 40509
Dear Sirs:
As counsel for Fifth Third Bancorp, we have been requested to
render our opinion with respect to certain Federal income tax
consequences of the merger of The National Bancorp of Kentucky,
Inc. ("National Bancorp") with and into Fifth Third Bancorp ("Fifth
Third") as more fully described in the Affiliation Agreement dated
as of December __, 1993 between Fifth Third and National Bancorp
and the Agreement of Merger dated as of December __, 1993 between
Fifth Third and National Bancorp.
We have reviewed the terms of the proposed transaction as set
forth in the Affiliation Agreement and the Agreement of Merger and
have received representations from certain executive officers of
Fifth Third and National Bancorp relating to various factual
matters relevant to the opinions expressed herein. Our opinion is
based on the Affiliation Agreement and the Agreement of Merger, the
facts set forth in such representations and on our analysis of the
applicable provisions of the Internal Revenue Code of 1986, as
amended (the "Code"), Treasury Regulations, Internal Revenue
Service Rulings and judicial decisions interpreting the Code as in
effect on the date hereof. We have not independently verified the
factual matters set forth in the representations.
Based upon and subject to the foregoing, our opinion is as
follows:
1. The merger of National Bancorp with and into Fifth Third
will constitute a reorganization within the meaning of
Section 368(a)(1)(A) of the Code and, for purposes
thereof, Fifth Third and National Bancorp will each
qualify as a "party to a reorganization" within the
meaning of Section 368(b) of the Code;
2. No gain or loss will be recognized by National Bancorp as
a consequence of the merger;
3. No gain or loss will be recognized by Fifth Third on the
receipt by Fifth Third of substantially all the assets of
National Bancorp and the assumption by Fifth Third of
National Bancorp's liabilities;
4. No gain or loss will be recognized by the sole
shareholder of National Bancorp on the receipt of Fifth
Third common stock in exchange for his shares of National
Bancorp common stock pursuant to the Agreement of Merger
(disregarding for this purpose any cash received for
fractional share interests to which he may be entitled).
Any consideration other than Fifth Third common stock (or
cash in lieu of a fractional share of Fifth Third common
stock) that is received by such sole shareholder in
exchange for his shares of National Bancorp stock shall
be subject to the tax treatment required under Section
356(a) of the Code;
5. The tax basis of the Fifth Third common stock including
any fractional share received by the National Bancorp
shareholder in the merger will be, in each instance, the
same as the federal income tax basis of the National
Bancorp common stock surrendered in exchange therefor
decreased by the amount of any cash received in lieu of
a fractional share interest and increased by the amount
of cash received that was treated as a dividend (if any)
and the amount of gain recognized on such exchange (if
any);
6. The holding period of Fifth Third common stock (including
any fractional share) received by the National Bancorp
shareholder will include the period during which the
National Bancorp common stock surrendered in exchange
therefor was held, provided that the National Bancorp
common stock was held as a capital asset by such
shareholder on the date of the exchange; and
7. If the holder of National Bancorp common stock receives
cash in lieu of a fractional share of Fifth Third common
stock, he will be treated as having received such
fractional share of Fifth Third common stock and then as
having received such cash in redemption of such
fractional share subject to the provisions of Section 302
of the Code.
We consent to the filing of the form of this opinion as an
exhibit to the Registration Statement filed in connection with the
merger.
Very truly yours,
DINSMORE & SHOHL
By: /S/ J. Michael Cooney
J. Michael Cooney
JMC/je
INDEPENDENT AUDITOR'S CONSENT
We consent to the incorporation by reference in this Registration
Statement of Fifth Third Bancorp on Form S-4 of our report dated
January 14, 1994 (which expresses an unqualified opinion and
includes an explanatory paragraph relating to a change in the
method of accounting for debt and equity securities), incorporated
by reference in the Annual Report on Form 10-K of Fifth Third
Bancorp for the year ended December 31, 1993 and to the reference
to us under the heading "Experts" in the Prospectus, which is part
of this Registration Statement.
/S/ Deloitte & Touche
Cincinnati, Ohio
March 25, 1994
INDEPENDENT AUDITORS' CONSENT
We consent to the inclusion in this Registration Statement of Fifth
Third Bancorp on Form S-4 of our reports dated February 15, 1994
and February 12, 1993, and the reference to us made under the
heading "Experts" in the Prospectus which is part of this
Registration Statement.
/S/ Clines & Satterly, P.S.C.
Lexington, Kentucky
March 29, 1993
