Fifth Third Bancorp
Reg. No. 33-58091
Filed under Rule 424(b)(1) and (2)
FIFTH THIRD BANCORP
Registration No. 33-35527
Filed Under R-6 424(b)(1) and (2)
FALLS FINANCIAL, INC.
2335 Second Street
Cuyahoga Falls, Ohio 44222
April 20, 1995
Dear Stockholder:
On behalf of the Board of Directors, we cordially invite you to
attend the special meeting of stockholders (the "Special Meeting")
of Falls Financial, Inc. ("Falls Financial"), which will be held at
10:00 a.m., Eastern Standard Time, on May 24, 1995, at the John S.
Knight Center, 77 East Mill Street, Akron, Ohio.
At the Special Meeting, stockholders will be asked to approve an
Affiliation Agreement and related Plan and Agreement of Merger,
both dated as of December 12, 1994 between Fifth Third Bancorp
("Fifth Third") and Falls Financial (the "Affiliation Agreement"
and the "Merger Agreement", respectively). Pursuant to the
Affiliation Agreement and the Merger Agreement, Falls Financial
will merge into Fifth Third (the "Merger"). At the time the Merger
becomes effective ("Effective Time"), each share of common stock,
$0.01 par value per share, of Falls Financial (the "Falls Financial
Common Stock") shall be converted by virtue of the Merger into
.5226 of a share of Fifth Third Common Stock ("Fifth Third Common
Stock") (the "Exchange Ratio") subject to adjustment depending upon
the "Applicable Market Value Per Share of Fifth Third Common
Stock." The "Applicable Market Value Per Share of Fifth Third
Common Stock" shall be the average of the per share closing prices
of Fifth Third Common Stock as reported on the Nasdaq National
Market for the twenty trading days ending on the fifth trading day
prior to the Effective Time. If the Applicable Market Value Per
Share of Fifth Third Common Stock is not less than $42.30 or not
more than $51.70, then there shall be no adjustment to the Exchange
Ratio. If the Applicable Market Value Per Share of Fifth Third
Common Stock exceeds $51.70, then the Exchange Ratio shall be
adjusted such that each issued and outstanding share of Falls
Financial Common Stock shall be converted into the right to receive
a fraction (expressed in decimal figures carried out to four (4)
places) of a share of Fifth Third Common Stock determined by
dividing $27.02 by the Applicable Market Value Per Share of Fifth
Third Common Stock. Similarly, if the Applicable Market Value Per
Share of Fifth Third Common Stock is less than $42.30, then the
Exchange Ratio shall be adjusted such that each issued and
outstanding share of Falls Financial Common Stock shall be
converted into the right to receive a fraction (expressed in
decimal figures carried to four (4) places) of a share of Fifth
Third Common Stock determined by dividing $22.11 by the Applicable
Market Value Per Share of Fifth Third Common Stock. The Exchange
Ratio shall be adjusted so as to give the Falls Financial
stockholders 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 before the Effective Time. The
Affiliation Agreement and the Merger Agreement may be terminated
and the Merger abandoned at any time prior to the Effective Time
(i) by Falls Financial if the Applicable Market Value Per Share of
Fifth Third Common Stock is $56.40 or greater, and (ii) by Fifth
Third if the Applicable Market Value Per Share of Fifth Third
Common Stock is $37.60 or less. Only whole shares of Fifth Third
Common Stock will be issued. Any stockholder otherwise entitled to
receive a fractional share will receive cash in lieu of such
fractional share based on the Applicable Market Value Per Share of
Fifth Third Common Stock. The proposed Merger is discussed in
detail in the accompanying Proxy Statement and Prospectus, as well
as the Affiliation Agreement and the Merger Agreement which are
appended thereto as Annex A and Annex B, respectively. We urge you
to read the entire Proxy Statement and Prospectus.
YOUR BOARD OF DIRECTORS HAS UNANIMOUSLY APPROVED THE MERGER AND
RECOMMENDS THAT YOU VOTE "FOR" THE MERGER. THE AFFILIATION
AGREEMENT AND THE MERGER AGREEMENT MUST BE APPROVED BY THE
AFFIRMATIVE VOTE OF AT LEAST A MAJORITY OF THE ISSUED AND
OUTSTANDING SHARES OF FALLS FINANCIAL COMMON STOCK ENTITLED TO
VOTE. AN ABSTENTION OR FAILURE TO VOTE HAS THE SAME EFFECT AS A
VOTE AGAINST THE PROPOSED MERGER. IT IS, THEREFORE, IMPORTANT THAT
YOU VOTE ON THE MERGER.
Your vote is very important, regardless of the number of shares you
own. Please sign and return the proxy card in the postage-paid
return envelope provided for your convenience. This will not
prevent you from voting in person, but will assure that your vote
is counted if you are unable to attend the Special Meeting.
Please vote and return your proxy today.
Sincerely,
James J. Little
President and
Chief Executive Officer
IMPORTANT: If your Falls Financial shares are held in the name of
a brokerage firm or nominee, only they can execute a proxy on your
behalf. To assure that your shares are voted, we urge you to
telephone today the individual responsible for your account at your
brokerage firm and obtain instructions on how to direct him or her
to execute a proxy.
If you have any questions or need any help in voting your shares,
please telephone Wayne M. Rice, at Falls Financial, (216) 929-0511,
extension 225.
FALLS FINANCIAL, INC.
NOTICE OF SPECIAL MEETING OF STOCKHOLDERS
To Be Held On May 24, 1995
NOTICE IS HEREBY GIVEN that a special meeting of stockholders
("Special Meeting") of Falls Financial, Inc. ("Falls Financial")
will be held on May 24, 1995, at 10:00 a.m., Eastern Standard Time,
at the John S. Knight Center, 77 East Mill Street, Akron, Ohio.
A Proxy Statement and Prospectus and Proxy Card for the Special
Meeting are enclosed herewith. The Special Meeting is for the
purpose of considering and voting upon the following matters:
A. A proposal to approve an Affiliation Agreement and related Plan
and Agreement of Merger, both dated as of December 12, 1994 between
Fifth Third Bancorp ("Fifth Third") and Falls Financial (the
"Affiliation Agreement" and the "Merger Agreement", respectively).
Pursuant to the Affiliation Agreement and the Merger Agreement,
Falls Financial will merge into Fifth Third (the "Merger"). At the
time the Merger becomes effective ("Effective Time"), each share of
common stock, $0.01 par value per share, of Falls Financial (the
"Falls Financial Common Stock") shall be converted by virtue of the
Merger into .5226 of a share of Fifth Third Common Stock ("Fifth
Third Common Stock") (the "Exchange Ratio") subject to adjustment
depending upon the "Applicable Market Value Per Share of Fifth
Third Common Stock." The "Applicable Market Value Per Share of
Fifth Third Common Stock" shall be the average of the per share
closing prices of Fifth Third Common Stock as reported on the
Nasdaq National Market for the twenty trading days ending on the
fifth trading day prior to the Effective Time. If the Applicable
Market Value Per Share of Fifth Third Common Stock is not less than
$42.30 or not more than $51.70, then there shall be no adjustment
to the Exchange Ratio. If the Applicable Market Value Per Share of
Fifth Third Common Stock exceeds $51.70, then the Exchange Ratio
shall be adjusted such that each issued and outstanding share of
Falls Financial Common Stock shall be converted into the right to
receive a fraction (expressed in decimal figures carried out to
four (4) places) of a share of Fifth Third Common Stock determined
by dividing $27.02 by the Applicable Market Value Per Share of
Fifth Third Common Stock. Similarly, if the Applicable Market
Value Per Share of Fifth Third Common Stock is less than $42.30,
then the Exchange Ratio shall be adjusted such that each issued and
outstanding share of Falls Financial Common Stock shall be
converted into the right to receive a fraction (expressed in
decimal figures carried to four (4) places) of a share of Fifth
Third Common Stock determined by dividing $22.11 by the Applicable
Market Value Per Share of Fifth Third Common Stock. The Exchange
Ratio shall be adjusted so as to give the Falls Financial
stockholders 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 before the Effective Time. The
Affiliation Agreement and the Merger Agreement may be terminated
and the Merger abandoned at any time prior to the Effective Time
(i) by Falls Financial if the Applicable Market Value Per Share of
Fifth Third Common Stock is $56.40 or greater, and (ii) by Fifth
Third if the Applicable Market Value Per Share of Fifth Third
Common Stock is $37.60 or less.
B. Such other business as may properly come before the Special
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 Bylaws of Falls Financial, the Board of Directors
has fixed April 7, 1995 as the record date for the determination
of stockholders entitled to receive notice of, and to vote at, the
Special Meeting and any adjournments thereof. Only holders of
record of Falls Financial 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 AT LEAST A MAJORITY OF THE ISSUED AND
OUTSTANDING SHARES OF FALLS FINANCIAL COMMON STOCK ENTITLED TO VOTE
IS REQUIRED TO APPROVE THE AFFILIATION AGREEMENT AND THE MERGER
AGREEMENT. YOUR VOTE IS IMPORTANT REGARDLESS OF THE NUMBER OF
SHARES WHICH YOU OWN.
EACH STOCKHOLDER, WHETHER HE OR SHE 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 BEFORE IT IS EXERCISED
BY SUBMITTING A LATER DATED PROXY, BY ATTENDING THE SPECIAL MEETING
AND VOTING IN PERSON OR BY GIVING NOTICE OF REVOCATION TO FALLS
FINANCIAL IN A WRITING ADDRESSED TO AND RECEIVED BY THE SECRETARY
OF FALLS FINANCIAL BEFORE THE SPECIAL MEETING.
By Order of the Board of Directors
James J. Little, President and
Chief Executive Officer
Cuyahoga Falls, Ohio
April 20, 1995<PAGE>
FALLS FINANCIAL, INC,. 1,835,000 SHARES FIFTH THIRD BANCORP
2335 Second Street FIFTH THIRD BANCORP Fifth Third Center
Cuyahoga Falls, OH 44222 COMMON STOCK, Cincinnati, OH 45263
(216) 929-0511 NO PAR VALUE (513) 579-5300
PROXY STATEMENT AND PROSPECTUS
This Proxy Statement and Prospectus ("Proxy Statement and
Prospectus") is being furnished to the stockholders of Falls
Financial, Inc. of Cuyahoga Falls ("Falls Financial"), a registered
unitary savings and loan holding company under the Savings and Loan
Holding Company Act of 1967, as amended, in connection with the
solicitation of proxies by the Board of Directors of Falls
Financial for use at a special meeting of stockholders to be held
on May 24, 1995 (the "Special Meeting").
At the Special Meeting, holders of shares of Falls Financial's
common stock, $0.01 par value per share ("Falls Financial Common
Stock"), will be asked to approve an Affiliation Agreement and
related Plan and Agreement of Merger, both dated as of December 12,
1994 between Fifth Third Bancorp ("Fifth Third") and Falls
Financial, Inc. (the "Affiliation Agreement" and the "Merger
Agreement", respectively). Pursuant to the Affiliation Agreement
and the Merger Agreement, Falls Financial shall merge into Fifth
Third (the "Merger"). At the time the Merger becomes effective
("Effective Time"), each share of Falls Financial Common Stock
shall be converted by virtue of the Merger into .5226 of a share of
Fifth Third common stock, no par value per share ("Fifth Third
Common Stock") (the "Exchange Ratio") subject to adjustment
depending upon the "Applicable Market Value Per Share of Fifth
Third Common Stock." The "Applicable Market Value Per Share of
Fifth Third Common Stock" shall be the average of the per share
closing prices of Fifth Third Common Stock as reported on the
Nasdaq National Market for the twenty trading days ending on the
fifth trading day prior to the Effective Time. If the Applicable
Market Value Per Share of Fifth Third Common Stock is not less than
$42.30 or not more than $51.70, then there shall be no adjustment
to the Exchange Ratio. If the Applicable Market Value Per Share of
Fifth Third Common Stock exceeds $51.70, then the Exchange Ratio
shall be adjusted such that each issued and outstanding share of
Falls Financial Common Stock shall be converted into the right to
receive a fraction (expressed in decimal figures carried out to
four (4) places) of a share of Fifth Third Common Stock determined
by dividing $27.02 by the Applicable Market Value Per Share of
Fifth Third Common Stock. Similarly, if the Applicable Market
Value Per Share of Fifth Third Common Stock is less than $42.30,
then the Exchange Ratio shall be adjusted such that each issued and
outstanding share of Falls Financial Common Stock shall be
converted into the right to receive a fraction (expressed in
decimal figures carried to four (4) places) of a share of Fifth
Third Common Stock determined by dividing $22.11 by the Applicable
Market Value Per Share of Fifth Third Common Stock. The Exchange
Ratio shall be adjusted so as to give the Falls Financial
stockholders 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 before the Effective Time. The
Affiliation Agreement and the Merger Agreement may be terminated
and the Merger abandoned at any time prior to the Effective Time
(i) by Falls Financial if the Applicable Market Value Per Share of
Fifth Third Common Stock is $56.40 or greater, and (ii) by Fifth
Third if the Applicable Market Value Per Share of Fifth Third
Common Stock is $37.60 or less. No fractional shares will be
issued. Any stockholder otherwise entitled to receive a fractional
share will receive cash in lieu thereof based upon the Applicable
Market 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 Falls
Financial's stockholders 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 shares of Fifth Third
Common Stock
issuable pursuant to the Merger.
THE SECURITIES OF FIFTH THIRD TO BE ISSUED IN THE MERGER HAVE
NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND EXCHANGE
COMMISSION OR ANY STATE SECURITIES COMMISSION, NOR HAS THE
COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROXY STATEMENT AND PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
THE SHARES OF FIFTH THIRD COMMON STOCK OFFERED HEREBY ARE NOT
SAVINGS ACCOUNTS, DEPOSITS OR OTHER OBLIGATIONS OF A BANK OR
SAVINGS ASSOCIATION AND ARE NOT INSURED BY THE FEDERAL DEPOSIT
INSURANCE CORPORATION OR ANY OTHER GOVERNMENTAL AGENCY.
The date of this Proxy Statement and Prospectus is April 20,
1995.<PAGE>
AVAILABLE INFORMATION
THIS PROXY STATEMENT AND PROSPECTUS INCORPORATES DOCUMENTS BY
REFERENCE WHICH, WITH THE EXCEPTION OF A 1994 ANNUAL REPORT TO
STOCKHOLDERS FOR EACH OF FIFTH THIRD AND FALLS FINANCIAL, 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, FIFTH THIRD CENTER,
CINCINNATI, OHIO 45263 (TELEPHONE NUMBER: (513) 579-5300) WITH
RESPECT TO DOCUMENTS CONCERNING FIFTH THIRD AND FROM WAYNE M. RICE,
SECRETARY, FALLS FINANCIAL, INC., 2335 SECOND STREET, CUYAHOGA
FALLS, OHIO 44221 (TELEPHONE NUMBER: (216) 929-0511) WITH RESPECT
TO DOCUMENTS CONCERNING FALLS FINANCIAL. IN ORDER TO ENSURE TIMELY
DELIVERY OF THE DOCUMENTS, ANY REQUEST SHOULD BE MADE BY MAY 17,
1995.
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 Falls
Financial. 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 and Falls Financial are each subject to the
information requirements of the Securities Exchange Act of 1934, as
amended (the "Exchange Act"), and in accordance therewith, file
reports, proxy statements and other information with the
Commission. Reports, proxy statements and other information filed
by Fifth Third and Falls Financial 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.
Fifth Third Common Stock is traded in the over-the-counter
market and quoted on the Nasdaq National Market under the symbol
"FITB". Documents filed by Fifth Third with the Commission also
can be inspected at the offices of the National Association of
Securities Dealers, Inc., 1735 K Street, N.W., Washington, D.C.
20006. Falls Financial Common Stock is traded in the over-the-
counter market and quoted on the Nasdaq "SmallCap" Market under the
symbol "FFII".
All information contained in this Proxy Statement and
Prospectus with respect to Falls Financial was supplied by Falls
Financial and all information contained or incorporated in this
Proxy Statement and Prospectus with respect to Fifth Third was
supplied by Fifth Third.
Although neither Falls Financial 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 Falls Financial nor Fifth Third can warrant the
accuracy or completeness of such statements or information as they
relate to the other party.
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INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents are hereby incorporated into this Proxy
Statement and Prospectus by reference.
(a) Fifth Third's Annual Report on Form 10-K for the year ended
December 31, 1994;
(b) Pages 1 and 13-36 of Fifth Third's 1994 Annual Report to
Shareholders (enclosed with this Proxy Statement and Prospectus);
(c) Fifth Third's Proxy Statement dated February 10, 1995;
(d) Falls Financial's Annual Report on Form 10-K for the year
ended December 31, 1994; and
(e) Pages 5 - 28 of Falls Financial's 1994 Annual Report to
Stockholders (enclosed with this Proxy Statement and Prospectus).
In addition, all subsequent documents filed with the Commission
by Fifth Third and Falls Financial pursuant to Sections 13(a),
13(c), 14 or 15(d) of the Exchange Act 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.
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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 FALLS FINANCIAL
COMPARATIVE MARKET PRICE AND DIVIDEND DATA
COMPARATIVE PER SHARE DATA
GENERAL INFORMATION
PURPOSES OF THE SPECIAL MEETING
Proposal to Merge Falls Financial into Fifth Third
Recommendation
Vote Required; Shares Entitled to Vote
Voting and Revocation of Proxies
Solicitation of Proxies
TERMS AND CONDITIONS OF THE PROPOSED MERGER
Background of and Reasons for the Merger
Opinion of McDonald and Company Securities, Inc.
Effective Time
Conversion of Shares of Falls Financial Common Stock
Exchange Ratio
Stock Options and Stock Option Plan
No Fractional Shares
Exchange of Certificates
Federal Income Tax Consequences
Accounting Treatment
Rights of Dissenting Stockholders
Conduct Pending Merger; Representations and Warranties
Conditions to Closing
Amendment; Waiver; Termination
Effect on Falls Financial Employees
Interests of Management
Effects of Merger
Transactions With Affiliated Persons
RESALE OF FIFTH THIRD COMMON STOCK BY AFFILIATES
FIFTH THIRD
Description of Business
Capital Requirements for Fifth Third
Bank Holding Companies In General
Acquisitions of Savings Associations by Holding Companies
Additional Information
FALLS FINANCIAL.
Description of Business
Regulation
Additional Information
EFFECT OF GOVERNMENTAL POLICIES
DESCRIPTION OF CAPITAL STOCK AND COMPARATIVE RIGHTS OF STOCKHOLDERS
Voting Rights
Dividends
Preemptive Rights
Rights Upon Liquidation
Indemnification and Personal Liability of Directors and Officers
Stockholders' Meetings; Quorum
Subscription, Conversion, Redemption Rights; Stock Nonassessable
Change of Control Provisions
CERTAIN BENEFICIAL OWNERS OF FIFTH THIRD COMMON STOCK
FIFTH THIRD MANAGEMENT
LEGAL MATTERS
EXPERTS
STOCKHOLDERS' PROPOSALS
OTHER MATTERS
Annexes:
Annex A: Affiliation Agreement dated as of December 12, 1994
between Fifth Third Bancorp and Falls Financial, Inc. (excluding
exhibits)
Annex B: Plan and Agreement of Merger dated as of December 12,
1994 between Fifth Third Bancorp and Falls Financial, Inc.
Annex C: Fairness Opinion of McDonald and Company Securities,
Inc.
Annex D: Section 262 of the General Corporation Law of Delaware
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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 Transaction:
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. Fifth
Third's 10 subsidiary banks operate a general banking business from
353 offices located throughout Ohio, Indiana and Kentucky. Fifth
Third is also a registered multi-savings and loan holding company
and operates two federally-chartered savings banks. At December
31, 1994, on a consolidated basis, Fifth Third had consolidated
assets, deposits and stockholders' equity of approximately $15
billion, $10.6 billion and $1.4 billion, respectively. Fifth Third
Common Stock is traded over-the-counter and is listed on the Nasdaq
National Market under the symbol "FITB." Fifth Third's principal
executive offices are located at Fifth Third Center, Cincinnati,
Ohio 45263, and its telephone number is (513) 579-5300.
Falls Financial: Falls Financial is a registered unitary savings
and loan holding company incorporated under Delaware law. Falls
Financial owns all of the stock of Falls Savings Bank, FSB ("Falls
Savings Bank") which is headquartered in Cuyahoga Falls, Ohio.
Falls Savings Bank has 14 offices in Summit and Portage Counties,
Ohio. At December 31, 1994, Falls Financial, on a consolidated
basis, had total assets, total deposits and stockholders' equity of
approximately $595.6 million, $489.4 million and $50.5 million,
respectively. Falls Financial Common Stock is traded over-the-
counter and is listed on the Nasdaq "SmallCap" Market under the
symbol "FFII". Falls Financial's principal executive offices are
located at 2335 Second Street, Cuyahoga Falls, Ohio 44222, and its
telephone number is (216) 929-0511.
Special Meeting of Falls Financial Stockholders:
Time and Date: 10:00 a.m., Eastern Standard Time, on May 24, 1995
Place: The John S. Knight Center, 77 East Mill Street, Akron, Ohio
Purpose: To consider and vote upon the Affiliation Agreement and
the Merger Agreement which provide for the Merger of Falls
Financial with and into Fifth Third. Pursuant to the Affiliation
Agreement and the Merger Agreement, Falls Financial's stockholders
will receive shares of Fifth Third Common Stock in exchange for
shares of Falls Financial Common Stock. Copies of the Affiliation
Agreement and the Merger Agreement are attached hereto as Annex A
and Annex B, respectively, and are incorporated herein by
reference. See "PURPOSES OF THE SPECIAL MEETING - Proposal to
Merge Falls Financial into Fifth Third."
Required Vote for the Merger, the Affiliation Agreement and the
Merger Agreement; Record Date: Approval of the Affiliation
Agreement and the Merger Agreement requires the affirmative vote of
holders of at least a majority of the 2,976,480 shares of Falls
Financial Common Stock outstanding as of the close of business on
April 7, 1995. 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 - Vote Required; Shares Entitled
to Vote" and " - Voting and Revocation of Proxies."
Beneficial Ownership by Officers and Directors: As of the close of
business on December 31, 1994, the executive officers and directors
of Falls Financial and their affiliates beneficially owned 619,933
shares, or approximately 20.1%, of Falls Financial Common Stock.
This figure includes options for shares of stock which were
exercisable on that date or which will become exercisable upon
approval of the Merger by the stockholders. See "PURPOSES OF THE
SPECIAL MEETING - Vote Required; Shares Entitled to Vote."
Rights of Dissenting Stockholders: Pursuant to Section 262 of the
General Corporation Law of Delaware (Section "262"), stockholders
who make a written demand for appraisal prior to the vote on the
Merger and who do not vote in favor of the Merger may, upon
complying with certain other provisions of such section, exercise
appraisal rights. Failure to comply with the procedures set forth
in Section 262 will result in the loss of appraisal rights. See
"TERMS AND CONDITIONS OF THE PROPOSED MERGER - Rights of Dissenting
Stockholders" and Annex D.
Terms of the Merger:
Conversion of Falls Financial Common Stock; Stock Consideration:
Upon consummation of the Merger, each stockholder of Falls
Financial will receive, for each share of Falls Financial Common
Stock which he or she holds at the Effective Time, .5226 of a share
of Fifth Third Common Stock (the "Exchange Ratio") subject to
adjustment depending upon the "Applicable Market Value Per Share of
Fifth Third Common Stock." The "Applicable Market Value Per Share
of Fifth Third Common Stock" shall be the average of the per share
closing prices of Fifth Third Common Stock as reported on the
Nasdaq National Market for the twenty trading days ending on the
fifth trading day prior to the Effective Time. If the Applicable
Market Value Per share of Fifth Third Common Stock is not less than
$42.30 or not more than $51.70, then there shall be no adjustment
to the Exchange Ratio. If the Applicable Market Value Per Share of
Fifth Third Common Stock exceeds $51.70, then the Exchange Ratio
shall be adjusted such that each issued and outstanding share of
Falls Financial Common Stock shall be converted into the right to
receive a fraction (expressed in decimal figures carried out to
four (4) places) of a share of Fifth Third Common Stock determined
by dividing $27.02 by the Applicable Market Value Per Share of
Fifth Third Common Stock. Similarly, if the Applicable Market
Value Per Share of Fifth Third Common Stock is less than $42.30,
then the Exchange Ratio shall be adjusted such that each issued and
outstanding share of Falls Financial Common Stock shall be
converted into the right to receive a fraction (expressed in
decimal figures carried to four (4) places) of a share of Fifth
Third Common Stock determined by dividing $22.11 by the Applicable
Market Value Per Share of Fifth Third Common Stock. The Exchange
Ratio shall be adjusted so as to give the Falls Financial
stockholders 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 before the Effective Time. The
Affiliation Agreement and the Merger Agreement may be terminated
and the Merger abandoned at any time prior to the Effective Time
(i) by Falls Financial if the Applicable Market Value Per Share of
Fifth Third Common Stock is $56.40 or greater, and (ii) by Fifth
Third if the Applicable Market Value Per Share of Fifth Third
Common Stock is $37.60 or less. See "TERMS AND CONDITIONS OF THE
PROPOSED MERGER - Conversion of Shares of Falls Financial Common
Stock" and "- Exchange Ratio."
No Fractional Shares: No fractional shares will be issued in
connection with the Merger. Falls Financial stockholders will
receive cash in lieu of any fractional shares which they otherwise
would be entitled to receive, based on the Applicable Market Value
Per Share of Fifth Third Common Stock as defined above. See "TERMS
AND CONDITIONS OF THE PROPOSED MERGER - No Fractional Shares."
Conditions of Closing: The Merger is subject to several
significant conditions, including but not limited to, Falls
Financial stockholder approval, and approval by the Board of
Governors of the Federal Reserve System, the Office of Thrift
Supervision and the Ohio Division of Banks, applications for which
have been filed. See "TERMS AND CONDITIONS OF THE PROPOSED MERGER
- - Conditions to Closing."
Merger: Upon consummation of the Merger, Falls Financial will
merge with and into Fifth Third and Falls Financial will cease to
exist as a separate entity. Fifth Third plans to, simultaneously
with the Merger: (i) have its wholly-owned subsidiary, Fifth Third
Bank of Northeastern Ohio, purchase substantially all of the assets
and assume substantially all of the liabilities of Falls Savings
Bank (except certain assets and certain liabilities which will be
maintained as Falls Savings Bank); (ii) move Falls Savings Bank's
main office to the current location of its South Water Street
branch in Kent, Ohio; (iii) change the name of Falls Savings Bank
to Fifth Third Savings Bank of Northern Ohio, F.S.B.; and, (iv)
have Fifth Third Savings Bank of Northern Ohio, F.S.B. pay a
dividend of approximately $19 million to Fifth Third which will, in
turn, be contributed to Fifth Third Bank of Northeastern Ohio. The
consummation of the Merger is not contingent upon the consummation
of these enumerated transactions. See "TERMS AND CONDITIONS OF THE
PROPOSED MERGER - Effects of Merger."
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 July 1995. Falls Financial and Fifth Third each
will have the right to terminate the Affiliation Agreement, among
other reasons, if the Effective Time does not occur on or before
August 31, 1995, unless the failure to consummate is related to the
action or non-action of any regulatory authority and is not
directly related to either Fifth Third's or Falls Financial's
breach of their respective obligations, then on or before October
31, 1995. In the event of termination of the Affiliation Agreement
under certain circumstances including, but not limited to,
circumstances related to a competing offer to acquire Falls
Financial, Falls Financial shall pay Fifth Third $2.2 million. See
"TERMS AND CONDITIONS OF THE PROPOSED MERGER - Effective Time" and
"Termination."
Procedure for Exchange of Shares: Promptly after the Effective
Time, Fifth Third will mail to each stockholder of Falls Financial
a form of transmittal letter and instructions for the surrender of
Falls Financial Common Stock certificates for certificates
representing 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 stockholders of Falls Financial only
after their certificates for Falls Financial 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 Falls Financial's stockholders upon
the exchange of their Falls Financial Common Stock for Fifth Third
Common Stock. See "TERMS AND CONDITIONS OF THE PROPOSED MERGER -
Federal Income Tax Consequences." STOCKHOLDERS ARE URGED TO
CONSULT THEIR OWN TAX ADVISORS AS TO THE SPECIFIC CONSEQUENCES TO
THEM OF THE MERGER UNDER FEDERAL, STATE, LOCAL AND ANY OTHER
APPLICABLE TAX LAWS.
Accounting: Consummation of the Merger is conditioned upon receipt
by Fifth Third of a letter from Fifth Third's independent public
accountants to the effect that the Merger will qualify for pooling
of interests accounting treatment. See "TERMS AND CONDITIONS OF
THE PROPOSED MERGER - Accounting Treatment."
Interests of Certain Persons in the Merger: Fifth Third shall use
its best efforts to employ at Fifth Third Bank of Northeastern Ohio
or at a Fifth Third subsidiary or affiliate as many of the
employees of Falls Savings Bank as possible. Each employee of
Falls Savings Bank 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 of Fifth Third. Such employees shall
receive credit for their period of service to Falls Savings Bank
for purposes of determining participation and vesting in all Fifth
Third employee benefit plans, except for vesting in the Fifth Third
Master Retirement Plan and the Fifth Third Master Profit Sharing
Plan, but not for purposes of determining the benefits accrued
thereunder. For purposes of determining vesting under the Fifth
Third Master Retirement Plan and the Fifth Third Master Profit
Sharing Plan, generally only those employees of Falls Savings Bank
who participated in comparable plans sponsored by Falls Financial
or Falls Savings Bank will receive credit for their period of
service to Falls Savings Bank. In addition, three directors of
Falls Financial, agreeable to Fifth Third, shall be appointed by
Fifth Third Bank of Northeastern Ohio to serve on its Board of
Directors. Except as follows, it is not anticipated that Fifth
Third will enter into employment agreements with any officers of
Falls Financial or Falls Savings Bank in connection with the
transactions contemplated by the Affiliation Agreement. In
connection with the Merger, the employment contracts between Falls
Savings Bank and James J. Little, Richard O'Donnell, Rodney W.
Vargo, Wayne M. Rice and Margaret G. Wichman (the "Contract
Officers") shall remain in effect through December 31, 1995,
subject to the provisions of the Affiliation Agreement. Prior to
the Effective Time, Fifth Third will consult with each of the
Contract Officers with respect to whether Fifth Third will offer
such Contract Officer employment with a Fifth Third affiliate, and
if so, with respect to his or her position, title, duties,
compensation levels and location of the facility to which he or she
may be transferred. If the Contract Officer chooses not to accept
such offer of Fifth Third or Fifth Third concludes not to offer
such Contract Officer a position, such Contract Officer shall
receive the severance amount set forth in such Contract Officer's
respective employment contract and shall receive no other severance
benefits otherwise provided in the Affiliation Agreement. In the
event that such Contract Officer accepts the employment offered by
Fifth Third, such Contract Officer shall become an at will employee
of Fifth Third or such other affiliate and the respective contract
shall terminate on the date of such employment. Also, the officers
and directors of Falls Financial will be provided certain
directors' and officers' liability insurance protection for five
years following the Effective Time. See "TERMS AND CONDITIONS OF
THE PROPOSED MERGER - Effect on Falls Financial Employees" and "-
Interests of Management."
Board Recommendation: The Board of Directors of Falls Financial
believes that the terms of the Merger are fair to, and in the best
interests of, Falls Financial stockholders and unanimously
recommends approval of the Merger. See "PURPOSES OF THE SPECIAL
MEETING - Recommendation" and "TERMS AND CONDITIONS OF THE PROPOSED
MERGER - Background and Reasons for the Merger."
Securities Involved: For a comparative analysis of Falls Financial
Common Stock and Fifth Third Common Stock, see "DESCRIPTION OF
CAPITAL STOCK AND COMPARATIVE RIGHTS OF STOCKHOLDERS."
Comparative Market Prices: Fifth Third Common Stock and Falls
Financial Common Stock are traded on the Nasdaq National Market and
"SmallCap" Market, respectively, under the symbols "FITB" and
"FFII", respectively. On December 9, 1994, 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 April 6, 1995, comparative market
prices of Falls Financial Common Stock and Fifth Third Common Stock
were as follows:
December 9, 1994 April 6, 1995
Falls Financial Common Stock $23.00 $24.00
(Last trade)
Fifth Third Common Stock $47.00 $51.50
(Closing sales price)
[THE BALANCE OF THIS PAGE HAS BEEN LEFT INTENTIONALLY BLANK]
<PAGE>
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 1994 Annual Report to Shareholders which
accompanies this Proxy Statement and Prospectus, is incorporated
herein by reference and should be read in conjunction therewith.
See "INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE."
<TABLE>
<CAPTION>
Years Ended December 31,
1994 1993 1992 1991
1990
Summary of Operations: (000's except per share
amounts)
<S> <C> <C> <C> <C>
<C>
Net interest income $516,753 $473,515 $427,870 $363,247
$317,643
Provision for credit losses 35,780 48,037 66,100 62,464
43,479
Net interest income after
provision for credit losses 480,973 425,478 361,770 300,783
274,164
Other operating income 255,908 231,150 206,308 189,002
141,490
Operating expenses 371,545 352,720 316,315 282,844
246,588
Income before income taxes 365,336 303,908 251,763 206,941
169,066
Applicable income taxes 120,877 97,673 79,742 63,987
48,040
Net income $244,459 $206,235 $172,021 $142,954
$121,026
Common Share Data:
Primary net income
per share $3.72 $3.22 $2.74 $2.30
$1.96
Fully diluted net
income per share 3.72 3.22 2.73 2.29
1.96
Cash dividends declared
per share 1.20 1.02 .90 .78
.68
Book value at period end 21.62 19.93 17.22 15.22
13.68
Average shares outstanding:
Primary 66,925 65,338 63,082 62,303
61,698
Fully Diluted 66,925 65,338 63,188 62,527
61,749
Financial Condition
at Period End:
Securities Available for
Sale (1) $1,129,492 $898,074 - -
-
Securities Held to
Maturity 2,507,543 1,776,394 2,419,421
2,625,968 2,002,083
Loans and Leases 10,286,457 9,566,898 8,115,590
6,325,918 6,165,808
Assets 14,957,009 13,128,544 11,390,289
9,981,383 9,344,994
Deposits 10,630,878 9,477,306 8,447,812
7,633,362 7,354,767
Short-Term Borrowings 2,452,218 1,691,744 1,348,105
1,127,768 832,457
Long-Term Debt and
Convertible Subordinated
Notes 178,713 407,864 309,730
52,436 125,798
Stockholders' Equity 1,398,774 1,277,660 1,076,854
944,691 845,325
(1) Amortized cost: December 31, 1994 - $1,203,677,000 and
December 31, 1993 - $878,963,000.
</TABLE>
<TABLE>
<CAPTION>
Years Ended December
31,
1994 1993 1992 1991
1990
<S> <C> <C> <C> <C>
<C>
Profitability Ratios:
Return on average assets 1.77% 1.71% 1.63% 1.50%
1.38%
Return on average
stockholders' equity 18.60 17.80 16.90 15.90
15.00
Net interest margin 4.16 4.39 4.54 4.30
4.17
Overhead ratio (1) 46.60 48.70 48.60 49.50
51.50
Other operating income to
total income (2) 33.10 32.20 31.60 33.20
30.80
Capital Ratios:
Average stockholders' equity
to average assets 9.50 9.61 9.62 9.42
9.21
Tier 1 Capital to
risk-adjusted
assets (3) 11.30 11.50 11.20 12.30
11.50
Total Capital to
risk-adjusted
assets (3) 13.20 13.90 14.10 13.60
12.70
Leverage (4) 9.60 9.60 9.20 9.30
8.90
Credit Quality Ratios:
Reserve for credit losses to
nonperforming assets 570.50 362.80 155.50 68.00
64.00
Reserve for credit losses to
loans and leases outstanding 1.52 1.51 1.50 1.54
1.46
Net charge-offs to average
loans and leases outstanding .18 .31 .64 .89
.66
Nonperforming assets to loans,
leases and other real estate
owned .27 .42 .96 2.24
2.27
NOTE: Above financial information has been restated for the
acquisition of The Cumberland Federal Bancorporation, Inc.,
completed August 26, 1994 and accounted for as a pooling of
interests transaction.
(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>
[THE BALANCE OF THIS PAGE HAS BEEN LEFT INTENTIONALLY
BLANK]
<PAGE>
SELECTED HISTORICAL FINANCIAL DATA OF FALLS FINANCIAL
The following table sets forth certain historical financial data
concerning Falls Financial. This information is based on
information contained in Falls Financial's 1994 Annual Report to
Stockholders
which accompanies this Proxy Statement and Prospectus is
incorporated herein by reference and should be read in conjunction
therewith.
<TABLE>
<CAPTION>
Year-Ended
December 31,
1994 1993 1992 1991
1990
Financial condition
and other data: (In thousands)
<S> <C> <C> <C> <C>
<C>
Total amount of:
Assets $595,595 $537,830 $461,316
$365,722 $322,785
Loans Receivable - net 410,683 345,234 307,526
279,875 252,004
Mortgage-backed securities 112,000 127,250 80,504
44,337 32,581
Investment securities -
available for sale 16,789 22,359 0 0
0
Investment securities
- - held to maturity 23,565 19,577 53,180
17,952 19,968
Deposits 489,405 442,305 410,933
320,511 280,567
Stockholders' equity(1) 50,461 50,327 45,322
40,826 38,049
Year-Ended
December 31,
1994 1993 1992 1991
1990
Earnings and other data (In thousands, except per
share data)
Total interest income $41,123 $39,508 $36,767
$32,662 $29,940
Total interest expense 21,104 19,852 19,963
20,333 19,925
Net interest income 20,019 19,656 16,804
12,329 10,015
Provision for loan losses 250 400 380
276 113
Net interest income after
provision for loan losses 19,769 19,256 16,424
12,053 9,902
Net gain (loss) on sale of assets (22) 42 0
1,521 0
Other noninterest income 1,022 792 550
617 424
Noninterest expense 12,019 10,096 7,778
6,887 6,360
Income before income taxes and
extraordinary item 8,750 9,994 9,196
7,304 3,966
Provision for income tax 2,976 3,429 3,094
2,456 1,300
Income before extraordinary item 5,774 6,565 6,102
4,848 2,666
Extraordinary item
(net of tax impact of $217) 422 0 0
0 0
Net income $5,352 $6,565 $6,102
$4,848 $2,666
Fully diluted earnings per share $1.79 $2.17 $2.05
$1.66 $0.85
Book Value per share 16.96 17.31 15.68
14.24 12.58
Dividends per share 0.63 0.58 0.47
0.35 0.31
(1) Substantially Restricted
</TABLE>
<TABLE>
<CAPTION>
Year-Ended December 31,
1994 1993 1992 1991
1990
Selected financial ratios
and other data:
(In thousands)
<S> <C> <C> <C> <C>
<C>
Performance ratios:
Return on average assets(1) 0.95% 1.28% 1.43% 1.41%
0.86%
Return on average
shareholders' equity(2) 10.57% 13.76% 14.19% 12.31%
7.00%
Interest rate spread(3)
Average during year 3.39% 3.63% 3.62% 3.05%
2.57%
At end of year 2.81% 3.05% 3.59% 3.08%
2.35%
Net interest margin(4) 3.67% 3.96% 4.06% 3.71%
3.35%
Noninterest expense to average assets 2.06% 1.98% 1.82% 2.01%
2.06%
Asset quality ratios:
Nonperforming assets to total assets
at the end of period(5) 0.05% 0.08% 0.15% 0.39%
0.52%
Allowance for losses on loans to
net loans outstanding at end of
period 0.52% 0.53% 0.57% 0.45%
0.39%
Allowance for losses on loans to
nonperforming loans 741.58% 416.45% 66.38%
93.89% 59.27%
Capital Ratios:
Shareholders' equity to total
assets at
end of year 8.47% 9.36% 9.82%
11.16% 11.79%
Average shareholders'
equity to average
assets 8.97% 9.34% 10.08%
11.49% 12.36%
Average interest-earning assets
to average interest bearing
liabilities 107.19% 108.20% 109.06%
110.78% 111.82%
Other data:
Number of full-service offices 14 15 11 11
11
(1) Net income divided by average total assets.
(2) Net income divided by average shareholders' equity.
(3) Difference between rate earned on all interest-earning
assets and rate paid on all interest-bearing liabilities.
(4) Net interest income divided by average interest-earning
assets.
(5) Nonperforming assets consists of nonaccruing loans, accruing
loans which are past due 90 or more days and real estate owned.
</TABLE>
[THE BALANCE OF THIS PAGE HAS BEEN LEFT INTENTIONALLY
BLANK]<PAGE>
COMPARATIVE MARKET PRICE AND DIVIDEND DATA
Fifth Third Common Stock and Falls Financial Common Stock are
traded in the over-the-counter market and quoted on the Nasdaq
National
Market and Nasdaq "SmallCap" Market, respectively. 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,
the
bid and asked prices of Falls Financial Common Stock and the
dividends
declared during each quarterly period.
<TABLE><CAPTION>
Fifth Third Common Stock Falls Financial
Common Stock
High Low Dividends Bid Ask
Dividends
Declared
Declared
<S> <C> <C> <C> <C> <C> <C>
Year Ended
December 31, 1992:
First Calendar Quarter $50.38 $43.00 $0.22 $11.75(1) $10.13(1) $0.10(1)
Second Calendar Quarter $46.75 $40.13 $0.22 $13.50(1) $11.13(1) $0.13(1)
Third Calendar Quarter $52.75 $40.75 $0.22 $14.25(1) $13.25(1) $0.13(1)
Fourth Calendar Quarter $54.00 $46.75 $0.24 $17.50(1) $14.24(1) $0.13(1)
Year Ended
December 31, 1993:
First Calendar Quarter $55.13 $49.88 $0.24 $22.00(1) $17.00(1) $0.13(1)
Second Calendar Quarter $58.50 $50.25 $0.24 $23.00 $20.50 $0.15
Third Calendar Quarter $54.63 $51.25 $0.27 $23.00 $21.00 $0.15
Fourth Calendar Quarter $54.00 $49.75 $0.27 $23.50 $21.50 $0.15
Year Ended
December 31, 1994:
First Calendar Quarter $51.13 $45.13 $0.27 $21.50 $19.00 $0.15
Second Calendar Quarter $55.00 $46.75 $0.31 $20.00 $18.75 $0.16
Third Calendar Quarter $53.25 $49.88 $0.31 $22.00 $19.50 $0.16
Fourth Calendar Quarter $52.50 $46.50 $0.31 $25.00 $22.00 $0.16
Year Ended
December 31, 1995:
First Calendar Quarter $52.75 $47.06 $0.35
$0.16
Second Calendar
Quarter(2) $52.50 $51.50
___________________________
(1) Prices adjusted for the 100% stock dividend in the
form of a 2 for 1 stock split effective March 12, 1993 for
all stockholders of record as of the close of business on
February 26, 1993.
(2) Through April 6, 1995.
</TABLE>
[THE BALANCE OF THIS PAGE HAS BEEN LEFT INTENTIONALLY
BLANK]
COMPARATIVE PER SHARE DATA
The following table sets forth certain per-share information
for both Fifth Third and Falls Financial on an historical basis and
selected unaudited pro forma combined comparative per share data
for Fifth Third and Falls Financial combined. The Merger is
reflected
under the pooling of interests method of accounting, and pro forma
data are derived in accordance with such method. The Fall
Financial pro forma equivalent amounts are presented with respect
to each set
of pro forma information. Such amounts are computed by multiplying
the pro forma amounts by the assumed Exchange Ratio of .5226 shares
of Fifth Third Common Stock for each share of Falls Financial
Common Stock. The pro forma data prior to the Effective Time may
not be indicative of the results that actually would have occurred
if
the Merger had been in effect during the periods presented or which
may
be attained in the future.
<TABLE><CAPTION>
Fifth Third(1) Falls
Financial
Pro Forma Historical Pro Forma(2)
Historical
Equivalent(3)
<S> <C> <C> <C> <C>
Net Income
Per Share
December 31, 1990 $1.96 $1.96 $0.85(4) $1.02
December 31, 1991 2.30 2.33 1.66(4) 1.22
December 31, 1992 2.74 2.78 2.05(4) 1.45
December 31, 1993 3.22 3.31 2.17 1.73
December 31, 1994 3.72 3.78 1.79 1.98
Dividends Declared Per Share
December 31, 1990 $0.68 0.68 0.31(4) 0.36
December 31, 1991 0.78 0.78 0.36(4) 0.41
December 31, 1992 0.90 0.90 0.49(4) 0.47
December 31, 1993 1.02 1.02 0.58 0.53
December 31, 1994 1.20 1.20 0.63 0.63
Book Value Per Share
December 31, 1994 $21.62 $21.85 $16.96 $11.42
Market Value Per Share
on December 9, 1994(5) $47.00 $47.00 $23.00 $24.56
(1) This financial information has been restated for the
acquisition
of The Cumberland Federal Bancorporation, Inc., completed August
26, 1994 and accounted for as a pooling of interests transaction.
(2) Prices adjusted for the 100% stock dividend in the form of a 2
for 1 stock split, effective March 12, 1993 for all stockholders of
record as of the close of business on February 26, 1993.
(3) Pro forma information is based on an assumed Applicable Market
Value Per Share of Fifth Third Common Stock of $47.00 and an
assumed
Exchange Ratio of .5226 shares of Fifth Third Common Stock for each
share of
Falls Financial Common Stock in connection with the Merger of Falls
Financial with and into Fifth Third. See "TERMS AND CONDITIONS OF
THE
PROPOSED MERGER - Exchange Ratio" for further information.
(4) Prices adjusted for the 2 for 1 stock split effected in the
form of a 100% stock dividend paid March 12, 1993 to all
stockholders of
record as of the close of business on February 26, 1993.
(5) December 9, 1994 was the last day of trading preceding the
public announcement of the merger.<PAGE>
</TABLE>
FALLS FINANCIAL, INC.
2335 Second Street
Cuyahoga Falls, Ohio 44222
(216) 929-0511
AND
FIFTH THIRD BANCORP
Fifth Third Center
Cincinnati, Ohio 45263
(513) 579-5300
PROXY STATEMENT AND PROSPECTUS
GENERAL INFORMATION
This Proxy Statement and Prospectus is being furnished to the
stockholders of Falls Financial, Inc. ("Falls Financial") in
connection with the solicitation by the Board of Directors of Falls
Financial of proxies to be used at a special meeting of
stockholders (the "Special Meeting") to be held on May 24, 1995, at
10:00 a.m., Eastern Standard Time, at the John S. Knight Center, 77
East Mill Street, Akron, Ohio, and at any adjournments thereof.
This Proxy Statement and Prospectus, a copy of both Falls
Financial's and Fifth Third's 1994 Annual Report to Stockholders
and the enclosed form of proxy are first being sent to stockholders
of Falls Financial on or about April 20, 1995.
PURPOSES OF THE SPECIAL MEETING
At the Special Meeting, stockholders of Falls Financial will be
asked to approve an Affiliation Agreement and related Plan and
Agreement of Merger, dated as of December 12, 1994 between Fifth
Third Bancorp ("Fifth Third") and Falls Financial (the "Affiliation
Agreement" and the "Merger Agreement", respectively). Pursuant to
the Affiliation Agreement and the Merger Agreement, Falls Financial
will merge into Fifth Third (the "Merger"). See "TERMS AND
CONDITIONS OF THE PROPOSED MERGER" below.
Proposal to Merge Falls Financial into Fifth Third
Pursuant to the Affiliation Agreement and the Merger Agreement,
each stockholder of Falls Financial shall receive for each share of
Falls Financial Common Stock, $0.01 par value per share ("Falls
Financial Common Stock") which such stockholder holds at the
effective time of the Merger (the "Effective Time"), .5226 of a
share of Fifth Third Common Stock, no par value per share ("Fifth
Third Common Stock") (the "Exchange Ratio") subject to adjustment
depending upon the "Applicable Market Value Per Share of Fifth
Third Common Stock." The "Applicable Market Value Per Share of
Fifth Third Common Stock" shall be the average of the per share
closing prices of Fifth Third Common Stock as reported on the
Nasdaq National Market for the twenty trading days ending on the
fifth trading day prior to the Effective Time. If the Applicable
Market Value Per Share of Fifth Third Common Stock is not less than
$42.30 or not more than $51.70, then there shall be no adjustment
to the Exchange Ratio. If the Applicable Market Value Per Share of
Fifth Third Common Stock exceeds $51.70, then the Exchange Ratio
shall be adjusted such that each issued and outstanding share of
Falls Financial Common Stock will be converted into the right to
receive a fraction (expressed in decimal figures carried out to
four (4) places) of a share of Fifth Third Common Stock determined
by dividing $27.02 by the Applicable Market Value Per Share of
Fifth Third Common Stock. Similarly, if the Applicable Market
Value Per Share of Fifth Third Common Stock is less than $42.30,
then the Exchange Ratio shall be adjusted such that each issued and
outstanding share of Falls Financial Common Stock shall be
converted into the right to receive a fraction (expressed in
decimal figures carried to four (4) places) of a share of Fifth
Third Common Stock determined by dividing $22.11 by the Applicable
Market Value Per Share of Fifth Third Common Stock. The Exchange
Ratio shall be adjusted so as to give the Falls Financial
stockholders 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 before the Effective Time. The
Affiliation Agreement and the Merger Agreement may be terminated
and the Merger abandoned at any time prior to the Effective Time
(i) by Falls Financial if the Applicable Market Value Per Share of
Fifth Third Common Stock is $56.40 or greater, and (ii) by Fifth
Third if the Applicable Market Value Per Share of Fifth Third
Common Stock is $37.60 or less. See "TERMS AND CONDITIONS OF THE
PROPOSED MERGER - Exchange Ratio" below.
Recommendation
Falls Financial's Board of Directors has unanimously approved
the Affiliation Agreement and the Merger Agreement and the
transactions contemplated thereby and recommends approval thereof
by the stockholders of Falls Financial. Falls Financial's Board of
Directors believes that the terms of the Merger are fair to, and in
the best interests of, Falls Financial and its stockholders.
FALLS FINANCIAL'S BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE
FOR THE APPROVAL OF THE AFFILIATION AGREEMENT AND THE 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 Falls Financial 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 AT LEAST A MAJORITY OF THE OUTSTANDING SHARES OF FALLS FINANCIAL
COMMON STOCK ENTITLED TO VOTE. Broker non-votes will not be treated
as votes cast and, therefore, will have the same effect as a vote
against the proposal. Holders of record of Falls Financial Common
Stock at the close of business on April 7, 1995 (the "Record
Date") are entitled to receive notice of, and to vote at, the
Special Meeting. At the close of business on the Record Date,
there were 2,976,480 shares of Falls Financial Common Stock
outstanding. Each share of Falls Financial Common Stock will be
entitled to one vote.
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
FOR the approval of the Affiliation Agreement and the Merger
Agreement, 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 it is exercised by
submitting a later dated proxy, by attending the Special Meeting
and voting in person, or by giving notice of revocation to Falls
Financial in a writing addressed to and received by the Secretary
of Falls Financial before the Special 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 Falls Financial may solicit
proxies by mail, telephone, telegraph and personal interviews.
Falls Financial 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 materials to the
beneficial owners of stock held of record by such persons.
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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 appended as Annex A
and Annex B, respectively, to this Proxy Statement and Prospectus
and are incorporated herein by reference.
Background of and Reasons for the Merger
During the first half of 1994, the Board of Directors of Falls
Financial, with the assistance of McDonald and Company Securities,
Inc. ("McDonald and Company"), considered several alternative
strategies for enhancing stockholder value including the options of
remaining as an independent entity or combining with another
financial institution. In June, 1994, McDonald and Company
presented an analysis of Falls Financial's strategic alternatives
and its recommendations to the Merger and Acquisitions Committee of
the Board of Directors. Then, in September, 1994, the Board met to
assess Falls Financial's future prospects. At that time, the
directors again reviewed the recent problems that have confronted
the thrift industry in general, including increasing regulation,
interest rate risk, the prospect of disproportionate deposit
insurance premiums relative to those paid by banks and the effects
of continuing consolidation in the industry. While Falls Financial
has always been well-capitalized and consistently profitable, the
Board was fully aware of the uncertainty that continues to affect
the heavily-regulated thrift industry. The Board also reviewed the
prevailing market for the acquisition of thrift institutions,
knowing that attractive premiums had been paid in recent
transactions.
In light of these various factors, the Board of Directors
decided that the opportunities for increased stockholder value as
an independent entity were limited and, accordingly, chose to
investigate the possibility of a sale of Falls Financial. The
Board also determined that it would be in the best interests of
Falls Financial's stockholders to retain an investment banker to
assist Falls Financial in identifying, evaluating and negotiating
with potential acquirors. Based upon its expertise and experience
in financial institution mergers and acquisitions, the Board of
Directors elected to retain the services of McDonald and Company.
In consultation with McDonald and Company, the directors
evaluated whether the timing was appropriate for a sale of Falls
Financial and ultimately concluded that it was a prudent time to
pursue such a transaction. With McDonald and Company's assistance,
the Mergers and Acquisitions Committee initially identified a
number of thrift and bank holding companies that might have an
interest in Falls Financial. After preliminary contact by McDonald
and Company, the entities which expressed an interest in Falls
Financial executed confidentiality agreements pursuant to which
they received certain financial information and other data relating
to Falls Financial.
A date was established by which each of the interested companies
was to submit an indication of interest to McDonald and Company.
The Mergers and Acquisitions Committee, with analysis prepared by
McDonald and Company, carefully evaluated the six (6) indications
of interest and invited three (3) prospective acquirors to conduct
a due diligence review of Falls Financial.
At the conclusion of the due diligence process, two (2) of the
three (3) remaining prospective acquirors submitted proposals
outlining the terms and conditions upon which each respective
entity would undertake an acquisition of Falls Financial. In both
instances, the proposals involved tax-free mergers and the
consideration was all stock. In addition to the proposed value of
the consideration, the directors also evaluated numerous factors
relative to the ultimate value of the consideration to be received
by the Falls Financial stockholders, including each potential
acquiror's historical and prospective earnings, the pro forma
financial impact and earnings per share dilution, if any, of
acquiring Falls Financial, each entity's ability to achieve cost
savings through economies of scale and consolidation of operations,
the record of successfully consolidating institutions in prior
acquisitions, the pro forma impact on the stockholders of Falls
Financial with respect to earnings and dividends per share, the
liquidity of the acquiror's stock, the benefits of a combination
with a larger financial institution and other relevant factors.
After thoroughly discussing and evaluating all of the pertinent
considerations, the Board determined that an affiliation with Fifth
Third presented the best opportunity for Falls Financial's
stockholders.
In its offer to Falls Financial, Fifth Third proposed that the
exchange ratio to determine the number of shares of Fifth Third
Common Stock to be received in exchange for each share of Falls
Financial Common Stock would be fixed at the time a definitive
agreement was signed. The directors carefully considered the
advantages and disadvantages of establishing an exchange ratio at
the time the Merger Agreement was executed, it being understood
that once a fixed exchange ratio was agreed upon, the ultimate
value of the Fifth Third Common Stock to be received by Falls
Financial stockholders could fluctuate in the period between the
signing of the agreement and the consummation of the Merger. After
carefully considering the risks attendant to a fixed exchange
ratio, the directors determined that using a fixed exchange ratio
with collar and walkaway provisions would be in the best interests
of Falls Financial's stockholders. Fifth Third agreed to structure
the transaction accordingly.
Once the basic structure of the transaction had been agreed
upon, representatives and management of Falls Financial and Fifth
Third negotiated the terms and conditions of the Affiliation
Agreement and the Merger Agreement. The Board of Directors of
Falls Financial then held a special meeting on December 10 and 11,
1994 to review, discuss, and approve the Affiliation Agreement and
the Merger Agreement. The Board of Directors, together with its
financial and legal advisors, reviewed in detail the terms of both
agreements with Fifth Third. On December 11, 1994, McDonald and
Company delivered its oral opinion to Falls Financial's Board of
Directors that, as of such date, the Exchange Ratio was fair to the
holders of Falls Financial Common Stock from a financial point of
view. The Board of Directors then unanimously approved the
Affiliation Agreement and the Merger Agreement and the transactions
contemplated thereby. The Affiliation Agreement and Merger
Agreement were subsequently executed and announced on December 12,
1994.
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 needs of its
customers, including those in Falls Financial's service area.
All of the members of Falls Financials Board of Directors have
indicated their intention to vote their shares of Falls Financial
Common Stock in favor of the Merger. As of December 31, 1994, such
individuals beneficially owned 306,628 shares, or approximately
10.18% of the outstanding shares of Falls Financial Common Stock.
THE BOARD OF DIRECTORS OF FALLS FINANCIAL HAS UNANIMOUSLY
APPROVED THE MERGER AND RECOMMENDS A VOTE IN FAVOR OF THE APPROVAL
OF THE AFFILIATION AGREEMENT AND THE MERGER AGREEMENT.
Opinion of McDonald and Company Securities, Inc.
Falls Financial retained McDonald and Company as its financial
advisor in connection with the Merger, and requested that McDonald
and Company render an opinion to the Board of Directors with
respect to the fairness, from a financial point of view, of the
Exchange Ratio, to the holders of Falls Financial Common Stock. At
the meeting of Falls Financial's Board of Directors on December 11,
1994, the Affiliation Agreement and the Merger Agreement were
approved. At such meeting, McDonald and Company rendered its oral
opinion to the Falls Financial Board of Directors, which it
subsequently confirmed in writing, to the effect that, as of that
date, the Exchange Ratio was fair, from a financial point of view,
to the holders of Falls Financial Common Stock. In addition,
McDonald and Company updated its December 11, 1994 opinion as of
the date of this Proxy Statement and Prospectus stating that, as
of the date of this Proxy Statement and Prospectus, the Exchange
Ratio was fair, from a financial point of view, to the holders of
Falls Financial Common Stock. The updated opinion is attached as
Annex C to this Proxy Statement and Prospectus
THE OPINION OF MCDONALD and COMPANY INCLUDES CERTAIN
QUALIFICATIONS AND ASSUMPTIONS MADE, MATTERS CONSIDERED AND
LIMITATIONS ON THE REVIEWS UNDERTAKEN. THE SUMMARY AND DESCRIPTION
OF THE OPINION OF MCDONALD and COMPANY CONTAINED HEREIN IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO THE FULL TEXT OF THE
OPINION, AND IT IS RECOMMENDED THAT HOLDERS OF FALLS FINANCIAL
COMMON STOCK READ SUCH OPINION IN ITS ENTIRETY. MCDONALD and
COMPANY'S OPINION IS DIRECTED TO THE BOARD OF DIRECTORS OF FALLS
FINANCIAL ONLY AND ADDRESSES ONLY THE EXCHANGE RATIO. SUCH OPINION
SHOULD NOT BE CONSTRUED BY HOLDERS OF FALLS FINANCIAL COMMON STOCK
AS A RECOMMENDATION OF THE MANNER IN WHICH SUCH HOLDERS SHOULD
VOTE.
In arriving at its December 11, 1994 opinion, McDonald and
Company reviewed, among other things, the Affiliation Agreement,
the Merger Agreement and certain related documents (including all
schedules and exhibits), certain publicly available information
relating to the business, financial condition and operations of
Falls Financial and Fifth Third, as well as certain other non-
public information, primarily financial in nature, furnished to it
by Falls Financial and Fifth Third relating to their respective
businesses, earnings and assets. In addition, Falls Financial
furnished McDonald and Company with certain financial forecasts
relating to its operations. McDonald and Company also reviewed
Institutional Brokers Estimate System ("IBES") consensus earnings
estimates for Fifth Third. With respect to the financial forecasts
provided by Falls Financial, McDonald and Company assumed that such
forecasts were reasonably prepared on a basis reflecting the best
currently available estimates and judgments of management. Fifth
Third has informed McDonald and Company that, as a matter of
policy, it neither provides financial forecasts to third parties
nor comments on financial forecasts or projections developed by
third parties. Therefore, with respect to IBES consensus earnings
estimates relating to Fifth Third, McDonald and Company assumed
that such estimates reflect the best judgments of qualified third
parties with full knowledge of all information relating to Fifth
Third's results of operations, financial condition and business
that has been disclosed to the public by Fifth Third, whether in
its reports and other filings with the SEC under applicable
provisions of the federal securities laws, in its press releases or
other communications to the media, or otherwise. McDonald and
Company also reviewed certain publicly available information
concerning the trading of, and the trading market for, Falls
Financial Common Stock and Fifth Third Common Stock and certain
publicly available information concerning comparable companies and
transactions, all as more fully set forth in McDonald and Company's
opinion. In rendering its opinion, McDonald and Company also took
into account its assessment of general economic, market and
financial conditions.
McDonald and Company was not engaged to and has not conducted a
physical inspection of any of the properties or assets of Falls
Financial or Fifth Third and was not engaged to and has not made,
obtained or been furnished with any independent evaluation or
appraisals of any properties, assets or liabilities of Falls
Financial or Fifth Third. McDonald and Company has assumed and
relied upon the accuracy and completeness of the financial and
other information provided to it or publicly available, has relied
upon the representations and warranties of Falls Financial and
Fifth Third made pursuant to the Affiliation Agreement and the
Merger Agreement, and has not independently attempted to verify any
of such information. McDonald and Company also has assumed that
all of the conditions to the Merger and covenants as set forth in
the Affiliation Agreement and the Merger Agreement, including the
tax-free treatment of the Merger to the holders of Falls Financial
Common Stock, would be satisfied and that the Merger would be
consummated on a timely basis in the manner contemplated by the
Affiliation Agreement and the Merger Agreement. No limitations
were imposed by Falls Financial upon McDonald and Company or upon
the scope of its investigation, nor were any specific instructions
given to McDonald and Company in connection with its fairness
opinion. McDonald and Company did not determine or recommend the
Exchange Ratio and did not address Falls Financial's business
decision to effect the Merger or any other terms of the Merger.
In connection with its opinion dated as of the date of this Proxy
Statement and Prospectus, McDonald and Company performed procedures
to update certain of its analyses and reviewed the assumptions on
which such analyses were based and the factors considered in
connection therewith.
McDonald and Company, as part of its investment banking
business, is customarily engaged in the valuation of businesses and
securities in connection with mergers and acquisitions, negotiated
underwriting, secondary distributions of listed and unlisted
securities, private placements and valuations for corporate and
other purposes. McDonald and Company was retained by Falls
Financial based upon, among other things, McDonald and Company's
industry expertise with respect to financial institutions and
because of its substantial experience in transactions similar to
the Merger. McDonald and Company is not affiliated with either
Falls Financial or Fifth Third.
In the ordinary course of business, McDonald and Company makes
a market in Falls Financial Common Stock and Fifth Third Common
Stock and may actively trade the securities of Falls Financial and
Fifth Third for its own account and for the accounts of its
customers. Accordingly, at any time McDonald and Company may hold
a long or short position in such securities. In addition, McDonald
and Company from time to time has provided investment banking
services to Falls Financial and may provide such services to Fifth
Third in the future.
For its services as financial advisor, including the rendering
of its fairness opinion, Falls Financial has paid McDonald and
Company a retainer of $40,000 and a fee of $100,000 upon the
execution of the Affiliation Agreement and the Merger Agreement.
Assuming consummation of the Merger as of April 6, 1995,
McDonald and Company would have received additional payments of
approximately $_____________, $100,000 of which would have been due
upon stockholder approval and the remainder due upon consummation
of the Merger. Falls Financial has also agreed to indemnify
McDonald and Company against certain liabilities, including certain
liabilities under the federal securities laws.
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 July, 1995, although no
assurance can be given in this regard. Falls Financial 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 August 31, 1995, unless the failure to
consummate is related to the action or non-action of any regulatory
authority and is not directly related to either Fifth Third's or
Falls Financial's breach of their respective obligations, then on
or before October 31, 1995.
Fifth Third also wishes to consummate the transactions described
in the next paragraph ("Related Transactions") simultaneously with
the Merger. The Affiliation Agreement, however, does not require
this timing and states that the Related Transactions are
independent of the Merger. Consequently, the consummation of the
Merger is not contingent on the regulatory approval and
consummation of the Related Transactions. The Merger will be
consummated whether or not the Related Transactions are so approved
or consummated.
In the Related Transactions, Fifth Third plans to (i) have Fifth
Third Bank of Northeastern Ohio ("Fifth Third Northeastern"), a
newly-formed and wholly-owned subsidiary of Fifth Third, purchase
substantially all of the assets and assume substantially all of the
liabilities of Falls Savings Bank ("Purchase and Assumption"), (ii)
maintain certain assets and certain liabilities which remain after
the Purchase and Assumption in Falls Savings Bank, which will be
renamed Fifth Third Savings Bank of Northern Ohio, F.S.B., (iii)
move Fifth Third Savings Bank of Northern Ohio, F.S.B.'s (formerly
Falls Savings Bank) main office to the current location of its
South Water Street branch located in Kent, Portage County, Ohio,
and (iv) have Fifth Third Savings Bank of Northern Ohio, F.S.B. pay
a dividend of approximately $19 million to Fifth Third, which will,
in turn be contributed to Fifth Third Bank of Northeastern Ohio.
Prior to the Effective Time, Falls Financial will dissolve all
of its direct or indirect subsidiaries other than Falls Savings
Bank.
Conversion of Shares of Falls Financial Common Stock
Each share of Falls Financial Common Stock (excluding treasury
shares) which is issued and outstanding immediately prior to the
Effective Time will be converted at the Effective Time into Fifth
Third Common Stock and cash in lieu of any fractional shares of
Fifth Third Common Stock. See "Exchange Ratio" below.
The Exchange Ratio shall be adjusted so as to give Falls
Financial 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 Time.
Exchange Ratio
At the Effective Time, each of the shares of Falls Financial
Common Stock (excluding treasury shares) then issued and
outstanding shall be converted by virtue of the Merger and without
further action into .5226 of a share of Fifth Third Common Stock
(the "Exchange Ratio") subject to adjustment depending upon the
"Applicable Market Value Per Share of Fifth Third Common Stock."
The "Applicable Market Value Per Share of Fifth Third Common Stock"
shall be the average of the per share closing prices of Fifth Third
Common Stock as reported on the Nasdaq National Market for the
twenty trading days ending on the fifth trading day prior to the
Effective Time. If the Applicable Market Value Per Share of Fifth
Third Common Stock is not less than $42.30 or not more than $51.70,
then there shall be no adjustment to the Exchange Ratio. If the
Applicable Market Value Per Share of Fifth Third Common Stock
exceeds $51.70, then the Exchange Ratio shall be adjusted such that
each issued and outstanding share of Falls Financial Common Stock
will be converted into the right to receive a fraction (expressed
in decimal figures carried out to four (4) places) of a share of
Fifth Third Common Stock determined by dividing $27.02 by the
Applicable Market Value Per Share of Fifth Third Common Stock.
Similarly, if the Applicable Market Value Per Share of Fifth Third
Common Stock is less than $42.30, then the Exchange Ratio shall be
adjusted such that each issued and outstanding share of Falls
Financial Common Stock shall be converted into the right to receive
a fraction (expressed in decimal figures carried to four (4)
places) of a share of Fifth Third Common Stock determined by
dividing $22.11 by the Applicable Market Value Per Share of Fifth
Third Common Stock. The Exchange Ratio shall be adjusted so as to
give the Falls Financial stockholders 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 before the Effective Time.
The Affiliation Agreement and the Merger Agreement may be
terminated and the Merger abandoned at any time prior to the
Effective Time (i) by Falls Financial if the Applicable Market
Value Per Share of Fifth Third Common Stock is $56.40 or greater,
and (ii) by Fifth Third if the Applicable Market Value Per Share of
Fifth Third Common Stock is $37.60 or less.
Certificates representing shares of Fifth Third Common Stock
will be distributed to Falls Financial stockholders upon the
surrender of their certificates for shares of Falls Financial
Common Stock to Fifth Third.
Stock Options and Stock Option Plan
As of December 31, 1994, there were outstanding options to
purchase 143,806 shares of Falls Financial Common Stock held by
certain directors and officers of Falls Financial and Falls Savings
Bank pursuant to the Falls Financial 1989 Stock Option and
Incentive Plan (the "Stock Option Plan"), all of which are either
presently exercisable or exercisable on approval of the Merger by
Falls Financial's stockholders.
Pursuant to the Affiliation Agreement, all options granted
under the Stock Option Plan shall continue outstanding as an option
to purchase in place of the purchase of shares of Falls Financial
Common Stock, the number of shares (rounded up to the nearest whole
shares) of Fifth Third Common Stock that would have been received
by the optionee in the Merger had the option been exercised in full
for shares of Falls Financial Common Stock immediately prior to the
Effective Time in the manner set forth in the Affiliation
Agreement. In the event, prior to the Effective Time, of any
reclassification, reorganization, recapitalization, stock dividend
or distribution, subdivision, combination or exchange of the
outstanding shares of Fifth Third Common Stock or in case of any
consolidation or merger of Fifth Third with or into any other
corporation, or in the case of any sale or transfer of all or
substantially all of Fifth Third's assets, then, the rights of the
optionees under the Stock Option Plan will be appropriately
adjusted so that the optionees will be in the same position as if
their options had been exercised immediately before such corporate
action or transaction.
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
stockholder of Falls Financial 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 the
Applicable Market Value Per Share of Fifth Third Common Stock. No
such stockholder will be entitled to dividends, voting rights or
other rights in respect of any such fractional share.
Exchange of Certificates
After the Effective Time, holders of certificates previously
representing shares of Falls Financial Common Stock will cease to
have any rights as stockholders of Falls Financial and their sole
rights will pertain to the shares of Fifth Third Common Stock into
which their shares of Falls Financial Common Stock will have been
converted pursuant to the Merger Agreement. As soon as practicable
after the Effective Time, Fifth Third will send to each former
Falls Financial stockholder a letter of transmittal for use in
submitting to Fifth Third (the "Exchange Agent") certificates (or
with instructions for handling lost Falls Financial stock
certificates) formerly representing shares of Falls Financial
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) which the former
stockholders of Falls Financial are entitled to receive as a result
of the Merger. Stockholders who become holders of Fifth Third
Common Stock in the Merger 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 they have surrendered and exchanged their certificates
evidencing ownership of shares of Falls Financial 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 Falls Financial Common
Stock, the Exchange Agent will forward to Falls Financial
stockholders (i) certificates representing their 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). FALLS FINANCIAL'S
STOCKHOLDERS ARE REQUESTED NOT TO SUBMIT STOCK CERTIFICATES UNTIL
THEY HAVE RECEIVED WRITTEN INSTRUCTIONS TO DO SO.
At the Effective Time, the stock transfer books of Falls
Financial will be closed and no transfer of Falls Financial Common
Stock will thereafter be made on such books. If a certificate
formerly representing shares of Falls Financial Common Stock is
presented to Falls Financial 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
Pursuant to the terms of the Affiliation Agreement, Falls
Financial will receive the Opinion of Dinsmore and Shohl, counsel
to Fifth Third, dated the Effective Time, describing the material
federal income tax consequences of the Merger. The following
discussion summarizes the material federal income tax consequences
of the Merger to Falls Financial stockholders.
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. EACH OF FALLS FINANCIAL'S
STOCKHOLDERS SHOULD CONSULT HIS OR HER OWN TAX ADVISOR AS TO THE
SPECIFIC TAX CONSEQUENCES OF THE MERGER TO HIM OR HER, INCLUDING
THE APPLICATION AND EFFECT OF FEDERAL, STATE, LOCAL AND OTHER TAX
LAWS.
The federal income tax consequences to any of Falls Financial's
stockholders depend upon (i) the form of consideration received in
exchange for the shares of Falls Financial Common Stock actually
owned by him or her, and (ii) in the case of any of Falls
Financial's stockholders receiving cash, or a combination of cash
and Fifth Third Common Stock, the type of consideration received in
exchange for shares of Falls Financial Common Stock deemed to be
constructively owned by him or her 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.
Falls Financial Stockholders Receiving Solely Fifth Third Common
Stock. A Falls Financial stockholder who receives solely Fifth
Third Common Stock in exchange for all shares of Falls Financial
Common Stock actually owned by him or her 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 Falls Financial Common Stock surrendered and,
provided the shares of Falls Financial 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 Falls Financial Common
Stock surrendered.
Falls Financial Stockholders Receiving Solely Cash. If all the
shares of Falls Financial Common Stock actually owned and deemed to
be constructively owned under Code Section 318(a) by a Falls
Financial stockholder are exchanged solely for cash upon the
exercise of dissenters' rights, such Falls Financial stockholder
will recognize capital gain or loss (provided he or she held the
shares actually owned by him or her as capital assets at the time
of the exchange) measured by the difference between such
stockholder's tax basis in the shares of Falls Financial Stock
actually owned by him or her and the amount of cash received by him
or her in exchange for such shares.
If a Falls Financial stockholder exchanges all the shares of
Falls Financial Common Stock actually owned by him or her solely
for cash upon the exercise of dissenters' rights but shares of
Falls Financial Stock constructively owned by him or her 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 Falls Financial
Common Stock actually owned by him or her and his or her tax basis
in those shares. If none of the tests is satisfied, 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 Falls Financial shares).
Whether the transaction will be "not essentially equivalent to
a dividend" with respect to a Falls Financial 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 Falls Financial stockholder if:
(i) his or her percentage ownership of Fifth Third Common Stock
after the Merger (considering shares actually and constructively
owned) is less than 50% of all Fifth Third Stock and less than 80%
of
(ii) his or her hypothetical percentage ownership of the total
number of shares of Fifth Third Common Stock immediately after the
Merger if all of the Falls Financial 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
only can be satisfied if all the Falls Financial shares actually
and constructively owned by a Falls Financial 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 Falls Financial stockholder
who receives cash or exercises dissenters' rights for any Falls
Financial shares actually owned by him or her risks having such
amounts treated as a dividend rather than as capital gains if any
shares of Falls Financial 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 stockholder of Falls Financial 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 Falls Financial stockholders consult their personal tax
advisors concerning the consequences of the Merger to them,
including the consequences of the application of state and local
tax laws, if any.
Accounting Treatment
Consummation of the Merger is conditioned upon receipt by Fifth
Third of a letter from Fifth Third's independent public accountants
to the effect that the Merger will qualify for pooling of interests
accounting treatment.
Under pooling of interests accounting, as of the Effective Time,
the assets and liabilities of Falls Financial will be added to
those of Fifth Third at their recorded book values and the
stockholders' equity account of Falls Financial will be included on
Fifth Third's consolidated balance sheet.
Rights of Dissenting Stockholders
Pursuant to Section 262 of the General Corporation Law of
Delaware ("Section 262"), a copy of which is attached to this Proxy
Statement and Prospectus as Annex D, a stockholder of Falls
Financial may dissent from the proposed corporate action to approve
the Affiliation Agreement and Merger Agreement and receive the
right to an appraisal of such stockholder's shares. Upon
compliance with the requirements of such section, a dissenting
stockholder will be entitled to receive payment of the fair value
of his or her shares in accordance with the procedures and subject
to the conditions set forth therein. The following discussion is
not a complete statement of the law relating to appraisal rights
and is qualified in its entirety by reference to Annex D. This
discussion and Annex D should be reviewed carefully by any
stockholder who wishes to preserve the right of appraisal because
failure to comply with the procedures set forth herein and therein
will result in the loss of appraisal rights.
If the Merger is consummated, dissenting stockholders (defined
below) of Falls Financial will be entitled, if they comply with the
provisions of Section 262, to have the fair value of their shares
judicially determined and paid to them. Falls Financial is
required to notify each stockholder entitled to dissenters' rights
that such rights are available, not less than 20 days prior to the
Special Meeting, and include in such notice a copy of Section 262,
which is attached to this Proxy Statement and Prospectus as Annex
D. Any stockholder of Falls Financial intending to enforce his/her
dissenters' rights under Section 262 must object in writing to the
adoption of the Affiliation Agreement and Merger Agreement prior to
the Special Meeting, or at the Special Meeting but before the vote
on the Affiliation Agreement and Merger Agreement, by filing with
the Secretary of Falls Financial a written objection to the Merger
("a notice of election to dissent"), identifying himself/herself
and stating that he/she intends thereby to demand appraisal of
his/her shares. A vote against, or a direction in a proxy to vote
against, the Merger will not in itself constitute a notice of
election to dissent and will not preserve the stockholder's rights
to a judicially determined payment for his/her shares (his/her
"appraisal rights"). If the Merger is approved and adopted at the
Special Meeting, within 10 days after the Effective Time, Falls
Financial must give written notice that the Merger has become
effective to each stockholder who has timely filed a notice of
election to dissent and who has not voted in favor of the Merger (a
"dissenting stockholder"). A stockholder's vote in favor of the
Merger will waive his/her appraisal rights. However, a
stockholder's failure to vote on the Merger will not in itself be
a waiver of his/her appraisal rights if he/she has filed a timely
notice of election to dissent.
A notice of election to dissent may be withdrawn by a
dissenting stockholder at any time within 60 days after the
Effective Time; upon such withdrawal the dissenting stockholder
will be entitled to receive the same consideration received by the
other Falls Financial stockholders. If (i) a dissenting
stockholder timely withdraws his/her notice of election to dissent,
(ii) Falls Financial stockholders do not approve the Merger, (iii)
a court of competent jurisdiction determines that the dissenting
stockholder is not entitled to payment for his/her shares, (iv) no
petition for an appraisal is filed within the time period discussed
below, or (v) a dissenting stockholder otherwise loses his/her
appraisal rights, then such stockholder will be reinstated to any
rights other Falls Financial stockholders then have.
Upon consummation of the Merger, each dissenting stockholder
will cease to have any rights of a stockholder except the right to
be paid the fair value of his/her shares and the right to receive
payments of dividends or other distributions, if any, payable to
stockholders of record prior to the Effective Time and any other
rights under Section 262.
Within 120 days after the Effective Time a dissenting
stockholder may file a petition in the Delaware Court of Chancery
demanding a determination of the value of the shares of all
dissenting stockholders. In addition, a dissenting stockholder is
entitled, during such time period, to request from Falls Financial
a statement as to the number of dissenting stockholders from whom
Falls Financial has received a demand for appraisal and the number
of shares of Common Stock held by such stockholders. Falls
Financial must furnish the statement within 10 days after receipt
of the request therefor. Falls Financial must, within 20 days
after the filing with the Court of Chancery described above, file
with the Register in Chancery a verified list of the names and
addresses of all dissenting stockholders. The Court may then order
that all of the individuals on that list be notified of the time
and place of the hearing on the petition.
At the hearing on the petition, the Court will determine the
stockholders who have complied with Section 262 and have become
entitled to appraisal rights and will determine the value of shares
of Falls Financial Common Stock based on all relevant factors,
exclusive of any element of value attributable to the
accomplishment or expectation of the Merger, together with a fair
rate of interest, if any, to be paid upon the amount determined to
be the fair value. The Court may require all dissenting
stockholders to submit their certificates for Falls Financial
Common Stock to the Register in Chancery for notation as to the
pendency of the appraisal proceeding with respect to such shares.
If any dissenting stockholder fails to submit his/her certificates,
the Court may dismiss the proceedings as to such stockholder.
Upon conclusion of the proceeding, the Court will direct Falls
Financial to pay the fair value of the shares, together with
interest, if any, to the stockholders entitled thereto, upon
surrender of the certificates representing their shares. The costs
of the proceeding may be determined by the Court and divided among
the parties as the Court deems equitable.
Stockholders wishing to exercise their appraisal rights should
consult their own counsel.
Conduct Pending Merger; Representations and Warranties
Falls Financial has agreed, among other things, that prior to
the Effective Time it will carry on its business in the ordinary
course. Falls Financial has agreed to give Fifth Third and Fifth
Third's representatives reasonable access during business hours to
its facilities and personnel. Falls Financial 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
structure; issue any additional shares of Falls Financial Common
Stock, except upon exercise of any presently outstanding stock
options; issue any securities of any kind; or make any material
changes in its method of business operations. Falls Financial also
has agreed not to make or become obligated to make any capital
expenditures in excess of $25,000, nor may it make or renew any
agreement for services to be provided to Falls Financial or permit
the automatic renewal of any such agreement, except any agreement
for services having a term of not more than three months or
requiring the expenditure of not more than $25,000, without Fifth
Third's prior written consent. Falls Financial also has 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
Falls Financial historically has paid them; pay any stock dividends
or make any other distributions on its stock; and provide any
increases in employee salaries or benefits other than in the
ordinary course of business, consistent with past practices.
Fifth Third and Falls Financial also have 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 Falls Financial 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 or warranties made by
either Falls Financial or Fifth Third will survive beyond the
Effective Time. Thereafter, neither Falls Financial, Fifth Third,
nor any officer or director of either of them will have any
liability or obligation with respect to such representations or
warranties, 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 the Merger Agreement must be
approved by the affirmative vote at least a majority of the
outstanding shares of Falls Financial Common Stock entitled to
vote. The Merger also must be approved in writing by the Board of
Governors of the Federal Reserve System (the "Federal Reserve
Board"), the Office of Thrift Supervision ("OTS") and the Ohio
Division of Banks, applications for which have been filed, and must
comply with any applicable waiting periods. No assurance can be
given that the required governmental approvals will be forthcoming.
The obligations of Falls Financial and Fifth Third to consummate
the Merger are also subject to receipt of an opinion of counsel to
Fifth Third with respect to certain tax matters. See "TERMS AND
CONDITIONS OF THE PROPOSED MERGER - Federal Income Tax
Consequences".
Fifth Third's and Falls Financial's obligations to consummate
the Merger are further subject to various other conditions set
forth in the Affiliation Agreement, including, but not limited to,
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 the Merger Agreement and both institutions having
performed all of the obligations required of them under the
Affiliation Agreement and the 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 Falls Financial, Falls
Financial's performance of all of the obligations required of it
under the Affiliation Agreement and the Merger Agreement, delivery
by Falls Financial's counsel of a certain legal opinion addressed
to Fifth Third, Falls Financial's obligation to take the
appropriate actions to freeze its defined benefit and 401(k) plans,
the receipt by Falls Financial of a favorable determination letter
from the Internal Revenue Service that states that such plans
satisfy all qualification requirements, and the aggregate amount of
stockholders' equity of Falls Financial 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 accounting principles consistently applied, being not less
than $50,723,000 (its total stockholders' equity at September 30,
1994) less any adjustments under FAS No. 115 rules and regulations
or adjustments made in anticipation of, or in connection with, the
Merger. At December 31, 1994, Falls Financial's stockholders'
equity was $50,461,000 as a result of adjustments under FAS No. 115
which are permitted by the Affiliation Agreement. Accordingly,
Falls Financial continues to meet this requirement.
Falls Financial'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 the Merger Agreement, delivery by counsel
employed by The Fifth Third Bank of a certain legal opinion
addressed to Falls Financial, registration by Fifth Third of the
shares of Fifth Third Common Stock to be issued to Falls Financial
stockholders and the receipt of a fairness opinion from McDonald
and Company dated as of the date of this Proxy Statement and
Prospectus. The fairness opinion of McDonald and Company dated
April 20, 1995 is attached to this Proxy Statement and
Prospectus as Annex C.
Amendment; Waiver; Termination
The Affiliation Agreement and the Merger Agreement may be
amended, modified or supplemented by the written agreement of each
of the parties, upon the authorization of each company's respective
Board of Directors and without further approval of Falls
Financial's stockholders, except that no amendment, modification or
supplement may be effected without Falls Financial stockholder
approval if to do so would violate any provisions of applicable
law.
The Affiliation Agreement and the 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 Falls
Financial or by Falls Financial to Fifth Third in the following
instances: (1) by Fifth Third or Falls Financial 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 Falls
Financial if the business or assets or financial condition of the
other party have materially and adversely changed from that in
existence at September 30, 1994, except for events relating to the
business environment in general; (3) under certain circumstances by
Fifth Third or Falls Financial if the Merger has not been
consummated by August 31, 1995, unless the failure to consummate is
related to the action or inaction of any regulatory authority whose
approval of the Merger or for the registration of Fifth Third
Common Stock is required, and provided such action or inaction is
not directly related to either Fifth Third's or Falls Financial's
breach of their respective obligations under the Affiliation
Agreement, then on or before October 31, 1995; (4) by Fifth Third
or Falls Financial if the holders of ten percent (10%) or more of
the outstanding shares of Falls Financial Common Stock shall have
perfected their rights as dissenting stockholders pursuant to
Section 262; (5) by Falls Financial if the Applicable Market Value
Per Share of Fifth Third Common Stock is $56.40 or greater; (6) by
Fifth Third if the Applicable Market Value Per Share of Fifth Third
Common Stock is $37.60 or less; (7) by the mutual written consent
of Fifth Third and Falls Financial; or (8) automatically if Falls
Financial stockholders fail to approve the Affiliation Agreement
and the Merger Agreement.
Falls Financial shall pay Fifth Third a fee of $2.2 million
promptly following termination of the Affiliation Agreement after
the first to occur of any of the following events:
(i) (A) the stockholders of Falls Financial shall not have
approved the Merger on or before October 31, 1995 if, prior thereto
or the termination date of the Affiliation Agreement, whichever is
earlier, Fifth Third is not in breach of its material obligations
under the Affiliation Agreement or Merger Agreement, and (B) after
any person (other than Fifth Third or any affiliate of Fifth Third
or any person or entity acting in concert with Fifth Third or such
affiliate (a "Fifth Third Entity")) shall have "commenced" (as such
term is defined in Rule 14d-2 under the Securities Exchange Act of
1934 (the "Exchange Act")) a tender offer or exchange offer to
purchase shares of Falls Financial Common Stock such that, upon
consummation of such offer, such person would have Beneficial
Ownership (as defined below) or the right to acquire Beneficial
Ownership of twenty-five percent (25%) or more of the voting power
of Falls Financial and (b) within twelve (12) months after the
earliest of the date of the Falls Financial stockholders' meeting
at which the Merger is submitted for approval and voted upon, the
date the Affiliation Agreement is terminated or October 31, 1995,
any person (other than a Fifth Third Entity) shall have entered
into a written understanding in principle or an agreement to
consolidate or merge with Falls Financial, to acquire all or
substantially all of Falls Financial's assets or stock, or to
engage in a similar transaction;
(ii) (A) if, prior to the termination date of the Affiliation
Agreement, Fifth Third is not in breach of its obligations under
the Affiliation Agreement or Merger Agreement, and any person
(other than a Fifth Third Entity) shall have acquired Beneficial
Ownership or the right to acquire Beneficial Ownership of twenty-
five percent (25%) or more of the voting power of Falls Financial
and (B) within twelve (12) months after the earliest of the date of
the Falls Financial stockholders' meeting at which the Merger is
submitted for approval and voted upon, the date the Affiliation
Agreement is terminated or October 31, 1995, any person (other than
a Fifth Third Entity) shall have entered into a written
understanding in principle or an agreement to consolidate or merge
with Falls Financial, to acquire all or substantially all of Falls
Financial's assets or stock, or to engage in a similar transaction;
(iii) (A) the stockholders of Falls Financial shall not have
approved the Merger on or before October 31, 1995, if, prior
thereto or the termination date of this Agreement, whichever is
earlier, Fifth Third is not in breach of its obligations under the
Affiliation Agreement or Merger Agreement, and (B) subsequent to
the date hereof any person (other than a Fifth Third Entity) shall
have publicly announced a bona fide interest in (x) acquiring Falls
Financial by merger, consolidation, purchase of all or
substantially all of its assets or any other similar transaction or
(y) making an offer described in clause (i) above and in either
such case, within twelve (12) months after the earlier of the date
of the Falls Financial stockholders' meeting at which the Merger is
submitted for approval and voted upon or October 31, 1995, such
person (other than a Fifth Third Entity) shall have entered into a
written understanding in principle or an agreement to consolidate
or merge with Falls Financial, to acquire all or substantially all
of Falls Financial's assets or stock, or to engage in a similar
transaction;
(iv) (A) the stockholders of Falls Financial shall not have
approved the Merger on or before October 31, 1995, if, prior
thereto or the termination date of this Agreement, whichever is
earlier, Fifth Third is not in breach of its obligations under the
Affiliation Agreement or Merger Agreement, and (B) any person, with
respect to Falls Financial Common Stock, shall have publicly
solicited proxies or written consents or become a "participant" in
any "solicitation" (as such terms are defined in Regulation 14A
under the Exchange Act) in opposition to the Merger and within
twelve (12) months after the earlier of the date of the Falls
Financial stockholders' meeting at which the Merger is submitted
for approval and voted upon or October 31, 1995, such person (other
than a Fifth Third Entity) shall have entered into a written
understanding in principle or an agreement to consolidate or merge
with Falls Financial, to acquire all or substantially all of Falls
Financial's assets or stock, or to engage in a similar transaction;
(v) unless Fifth Third is in breach of its obligations under the
Affiliation Agreement or Merger Agreement, the Board of Directors
of Falls Financial, other than as required in the exercise of its
fiduciary duties (as determined in good faith by such directors),
fails to make, withdraws, or modifies in a manner adverse to Fifth
Third, its recommendation that stockholders of Falls Financial vote
to approve the Merger before the date of the Falls Financial
stockholders' meeting at which the Merger is to be submitted for
approval and voted upon and where Falls Financial has not
terminated this Agreement pursuant to the provisions of Section
VIII of the Affiliation Agreement; or
(vi) unless Fifth Third is in breach of its obligations under the
Affiliation Agreement or Merger Agreement, at or prior to the Falls
Financial stockholders' meeting at which the Merger is submitted
for approval and voted upon or prior to the termination date of the
Affiliation Agreement, whichever is earlier, a person (other than
a Fifth Third Entity) enters into a written understanding in
principle or an agreement to consolidate or merge with Falls
Financial, to acquire all or substantially all of Falls Financial's
assets or to engage in a similar transaction.
As used in paragraphs (i) - (vi) above, Beneficial Ownership
shall have the meaning ascribed to it in Rule 13d-3 under the
Exchange Act.
Effect on Falls Financial Employees
Fifth Third intends, but is not obligated, to employ at a Fifth
Third subsidiary or affiliate as many of the employees of Falls
Financial as possible. In this regard, upon consummation of the
Merger, Fifth Third Bank of Northeastern Ohio will operate, except
for the Kent branch, Falls Financial's existing offices as branches
of Fifth Third Bank of Northeastern Ohio. Fifth Third Savings Bank
of Northern Ohio, F.S.B. will operate such Kent branch as its main
and sole office. In addition, Fifth Third Bank of Northeastern
Ohio currently operates a number of existing bank branches in the
Cleveland Metropolitan area. Each employee of Falls Financial 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 Fifth Third
employees. Such employees shall receive credit for their period of
service to Falls Financial for purposes of determining
participation and vesting in all Fifth Third employee benefit
plans, except for vesting in the Fifth Third Master Retirement Plan
and the Fifth Third Master Profit Sharing Plan, but not for
purposes of determining the benefits accrued thereunder. For
purposes of determining vesting under the Fifth Third Master
Retirement Plan and the Fifth Third Master Profit Sharing Plan,
generally only those employees of Falls Savings Bank who
participated in comparable plans sponsored by Falls Financial or
Falls Savings Bank will receive credit for their period of service
to Falls Savings Bank. The employees of Falls Savings Bank
retained by Fifth Third after the Effective Time will be paid
salaries by Fifth Third commensurate with the salary levels of
comparable Fifth Third employees, subject, on an ongoing basis, to
acceptable performance.
Any employee whose employment is terminated by Fifth Third in
connection with the Merger or within six months after the Closing
Date or who voluntarily resigns after being notified by Fifth Third
that, as a condition of employment, such employee must work at a
location more than 50 miles from such employee's former location of
employment or that such employee's salary or responsibilities will
be materially changed 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 (24) week's pay; and, in the case of an
hourly employee, one weeks pay for each year of service up to a
maximum of six (6) weeks pay, plus applicable COBRA benefits.
Employees who leave of their own free will shall not be entitled to
severance pay. 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 follows, it is not anticipated that Fifth Third will
enter into employment agreements with any officers of Falls
Financial in connection with the transactions contemplated by the
Affiliation Agreement. In connection with the Merger, the
employment contracts between Falls Savings Bank and James J.
Little, Richard O'Donnell, Rodney W. Vargo, Wayne M. Rice and
Margaret G. Wichman (the "Contract Officers") shall remain in
effect through December 31, 1995, subject to the provisions of the
Affiliation Agreement. Prior to the Effective Time, Fifth Third
will consult with each of the Contract Officers with respect to
whether Fifth Third will offer such Contract Officer employment
with a Fifth Third affiliate, and if so, with respect to his or her
position, title, duties, compensation levels and location of the
facility to which he or she may be transferred. If the Contract
Officer chooses not to accept such offer of Fifth Third or Fifth
Third concludes not to offer such Contract Officer a position, such
Contract Officer shall receive the severance amount set forth in
such Contract Officer's respective employment contract and shall
receive no other severance benefits otherwise provided in the
Affiliation Agreement. In the event that such Contract Officer
accepts the employment offered by Fifth Third, such Contract
Officer shall become an at will employee of Fifth Third or such
other affiliate and the respective contract shall terminate on the
date of such employment. The officers and directors of Falls
Financial will be provided certain directors' and officers'
liability insurance protection for five years following the
Effective Time. See "TERMS AND CONDITIONS OF THE PROPOSED MERGER
- -
Effect on Falls Financial Employees."
The Affiliation Agreement provides that all provisions for
indemnification and limitation of liability now existing in favor
of the employees, agents, directors or officers of Falls Financial
as provided by regulation or in its Certificate of Incorporation or
Bylaws 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 and for a
period of five years thereafter, or in the case of matters
occurring prior to the Effective Time which have not been resolved
prior to the fifth anniversary of the Effective Time, until such
matters are finally resolved. Fifth Third shall also purchase and
keep in force for such five-year period directors' and officers'
liability insurance to provide coverage for acts or omissions of
the type and in the amount currently covered by Falls Financial's
existing directors' and officers' liability insurance for acts or
omissions occurring on or prior to the Effective Time, excluding
claims pending or threatened against Falls Financial. In addition,
for actions occurring after the Effective Time, Fifth Third shall
provide to the officers and directors of Falls Financial who become
officers and directors of any Fifth Third affiliate after
consummation of the Merger, the same directors' and officers'
liability insurance that is provided throughout the Fifth Third
holding company system. Fifth Third agrees that all rights to
indemnification existing in favor of officers and directors of
Fifth Third affiliates shall be accorded to officers and directors
of Falls Financial who become affiliated with any Fifth Third
affiliate in such capacities after the Effective Time and that such
indemnification will relate to covered actions or inactions prior
to, as well as after, the Effective Time.
Effects of Merger
Upon consummation of the Merger, Falls Financial will merge with
and into Fifth Third and Falls Financial will cease to exist as a
separate entity. In Related Transactions, Fifth Third plans to,
simultaneously with the Merger: (i) have its wholly-owned
subsidiary, Fifth Third Bank of Northeastern Ohio, purchase
substantially all of the assets and assume substantially all of the
liabilities of Falls Savings Bank (except certain assets and
liabilities which will remain those of Falls Savings Bank); (ii)
move Falls Savings Bank's main office to the current location of
its Kent branch; (iii) change the name of Falls Savings Bank to
Fifth Third Savings Bank of Northern Ohio, F.S.B.; and (iv) have
Fifth Third Savings Bank of Northern Ohio, F.S.B. pay a dividend of
approximately $19 million to Fifth Third which will, in turn, be
contributed to Fifth Third Bank of Northeastern Ohio. The
consummation of the Merger is not contingent upon the consummation
of the Related Transactions.
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 who are in office at the Effective Time, each of
whom will continue to serve as directors for the term for which
such directors were elected, subject to its Code of Regulations and
in accordance with law. The officers of Fifth Third after the
Merger is consummated will be those officers of Fifth Third who are
in office at the Effective Time, subject to its Code of Regulations
and in accordance with law. In addition, three directors of Falls
Financial agreeable to Fifth Third shall be appointed by Fifth
Third Bank of Northeastern Ohio to serve on its Board of Directors.
Transactions With Affiliated Persons
Pursuant to the Affiliation Agreement, Falls Savings Bank has
entered into an agreement with Midwest Payment Systems, Inc.
("MPS"), a subsidiary of The Fifth Third Bank, Fifth Third's
largest subsidiary bank, to convert all of its electronic funds
transfer related services to MPS and the Jeanie system. Such
agreement shall be effective at or prior to the Effective Time.
Similarly, Falls Savings Bank will enter into an agreement with
Fifth Third or an affiliate of Fifth Third which will provide for
the transfer to such entity of the performance of any and all data
processing services, including but not limited to, item processing
and application processing. Such agreement shall be effective at
the Effective Time.
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 Falls Financial stockholders who may be deemed to be
an "affiliate" of Fifth Third or Falls Financial for purposes of
Rule 145 promulgated under the Securities Act of 1933, as amended
(the "Securities Act"). Directors, executive officers or holders
of 10% or more of the outstanding shares of Falls Financial Common
Stock may be deemed to be affiliates of Falls Financial 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 Falls Financial 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 and the rules and regulations promulgated
thereunder. Generally, under Rule 145(d), an affiliate of Falls
Financial 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 Falls
Financial 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 Falls Financial 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.
The foregoing is only a general statement of the restrictions
on the disposition of the shares of Fifth Third Common Stock to be
issued in the Merger. Accordingly, those stockholders of Falls
Financial who may be affiliates of Falls Financial 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 "Bank Holding Company Act"), and subject to
regulation by the Federal Reserve Board. Fifth Third, with its
principal office located in Cincinnati, is a multi-bank, two-
tiered, holding company that owns all of the outstanding stock of
six commercial banks with 253 offices in 29 counties in Ohio.
Those banks are: The Fifth Third Bank, The Fifth Third Bank of
Northwestern Ohio, N.A., Fifth Third Bank of Northeastern Ohio, The
Fifth Third Bank of Western Ohio, The Fifth Third Bank of Southern
Ohio and The Fifth Third Bank of Columbus. Fifth Third also owns,
directly or indirectly, all of the outstanding capital stock of two
commercial banks with 74 offices in nineteen counties in Kentucky.
Those banks are: The Fifth Third Bank of Northern Kentucky, Inc.
and Fifth Third Bank of Kentucky, Inc. (owned by Fifth Third
through a wholly-owned, second-tier holding company, Fifth Third
Kentucky Bank Holding Company ("5/3 KBHC")). Further, Fifth Third
owns all the outstanding capital stock of two commercial banks
which maintain 27 offices in six counties in Indiana. Those banks
are: The Fifth Third Bank of Southeastern Indiana and The Fifth
Third Bank of Central Indiana.
In addition, Fifth Third is a multi-savings and loan holding
company registered under the Savings and Loan Holding Company Act
of 1967, as amended, owning all of the outstanding capital stock of
Fifth Third Trust Co. and Savings Bank, F.S.B. ("5/3 Naples"), a
federally-chartered savings bank located in Naples, Florida and,
indirectly, all of the outstanding capital stock of Fifth Third
Savings Bank of Western Kentucky, F.S.B., a federally-chartered
savings bank located in Mayfield, Kentucky (owned by Fifth Third
through 5/3 KBHC). As a savings and loan holding company, Fifth
Third is registered with and subject to regulation by the OTS.
On January 20, 1995, Fifth Third, through its wholly-owned
subsidiary, The Fifth Third Bank, consummated its acquisition of
Mutual Federal Savings Bank of Miamisburg, A Stock Savings Bank
("Mutual Federal"). Mutual Federal was merged into The Fifth Third
Bank. The former offices of Mutual Federal were retained and are
being operated as full-service banking centers of The Fifth Third
Bank. The total amount of deposits involved in the transaction was
$59 million.
On August 26, 1994, Fifth Third consummated its acquisition of
The Cumberland Federal Bancorporation, Inc., a savings and loan
holding company, and its wholly owned subsidiary, The Cumberland
Federal Savings Bank ("Cumberland FSB"). In a related transaction,
Fifth Third Bank of Kentucky, Inc. ("Fifth Third Kentucky"), a
wholly-owned subsidiary of 5/3 KBHC, acquired all branch offices
except one and acquired substantially all of the assets and assumed
substantially all of the liabilities of Cumberland FSB. Then,
Cumberland FSB, became owned by 5/3 KBHC, changed its name to Fifth
Third Savings Bank of Western Kentucky, FSB ("Western Kentucky")
and moved its main office to Mayfield, Kentucky. The acquired
offices of Cumberland FSB are operated as branches of Fifth Third
Kentucky, except that Fifth Third later sold three of such
branches. The total amount of deposits assumed by Fifth Third
Kentucky in such transaction was $793 million and that remaining in
Western Kentucky was $31 million. Prior to the Cumberland
transaction, Fifth Third was a unitary savings and loan holding
company which owned all of the outstanding stock of 5/3 Naples
which has one office in Naples, Florida.
On June 3, 1994, Fifth Third completed the acquisition of The
National Bancorp of Kentucky, Inc. Pursuant to that transaction,
The National Bancorp of Kentucky, Inc. was merged into Fifth Third,
and The National Bancorp of Kentucky, Inc.'s wholly owned
subsidiaries, The First National Bank of Falmouth, Falmouth,
Kentucky ("FNB") and The National Bank of Cynthiana, Cynthiana,
Kentucky ("NBC"), became wholly owned subsidiaries of Fifth Third.
Simultaneously with the merger, FNB was merged with and into Fifth
Third Bank of Northern Kentucky, Inc. and NBC was merged with and
into Fifth Third Bank of Central Kentucky, Inc., n/k/a Fifth Third
Bank of Kentucky, Inc. The total amount of deposits transferred to
Fifth Third's subsidiaries was approximately $80 million.
On May 20, 1994, Fifth Third, through three of its affiliate
banks, completed the purchase of certain assets and the assumption
of certain liabilities of Citizens Federal Bank, a Federal Savings
Bank, Miami, Florida ("Citizens"). The three affiliates acquired
all of the assets and assumed all of the liabilities of eight
branches of Citizens located throughout Ohio. Seven of the eight
branches are being operated as full-service banking centers and one
branch was closed.
Fifth Third has either filed or will file applications or
notices, as required, to consolidate by merger its two commercial
banks located in Indiana into a single commercial bank.
At December 31, 1994, Fifth Third, its affiliated banks and other
subsidiaries had consolidated total assets of $15 billion,
consolidated total deposits of $10.6 billion and consolidated total
stockholders' equity of $1.4 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. Those subsidiaries consist of The
Fifth Third Company, Fifth Third Securities, Inc., The Fifth Third
Leasing Company, Fifth Third Community Development Company, Midwest
Payment Systems, Inc. and Fountain Square Insurance Company. 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 FDIC through the Bank Insurance Fund ("BIF"), and
the savings bank affiliates have 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. The Jeanie system
participates in a shared ATM network called "Money Station," which
includes several Ohio bank holding companies and over 1,000 ATM's.
The "Money Station" network participates in another shared ATM
network called "PLUS System," which is a nationwide network with
over 17,000 participating ATM's. The Fifth Third Bank, through its
wholly-owned subsidiary, MPS, 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 its 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."
Capital Requirements for Fifth Third
The Federal Reserve Board, the Office of the Comptroller of the
Currency and the Federal Deposit Insurance Corporation (the "FDIC")
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 stockholders' 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, a 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, 1994, Fifth Third had a
leverage ratio of 9.62%, its Tier 1 Risk-based capital ratio was
11.26% and its total Risk-based capital ratio was 13.21%.
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 a bank holding company, Fifth Third is 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 also may make examinations of a holding
company and each of its subsidiaries. The Bank Holding Company 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 Bank Holding Company 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 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 FDIC 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 Ohio, by the Ohio Division of Banks, in the
case of banks chartered in Kentucky, by the Kentucky Department of
Financial Institutions, and in the case of banks chartered in
Indiana, by the Indiana Department of Financial Institutions.
Acquisitions of Savings Associations By Holding Companies
Section 4 of the Bank Holding Company Act of 1956 (12 U.S.C.
1843) ("BHC Act") prohibits bank holding companies from acquiring
or retaining shares of any company that is not a bank or is not
engaging in any activity other than managing and controlling banks,
except under certain circumstances. The primary exception permits
bank holding companies to conduct activities and acquire companies
solely in activities the Federal Reserve Board has determined in to
be closely related to banking and a proper incident thereto.
Section 346 of the Reigle Community Development and Regulatory
Improvement Act of 1994 ("Section 346") amends amended Section 4 of
the BHC Act to establish a new notice procedure for obtaining
Federal Reserve Board approval under Section 4(a)(2) and 4(c)(8) of
the BHC Act. Under Section 346, a proposal requiring Federal
Reserve Board approval under Section 4(a)(2) or 4(c)(8) may be
consummated 60 days after providing the Federal Reserve Board with
complete written notice of the proposal, unless the notice period
is extended as provided in the statute. Section 346 also permits
proposals to be consummated at any time during this notice period
if approved by the Federal Reserve Board during this period. This
interim rule replaced the application procedures of Section 4(c)(8)
of the BHC Act with a new notice procedure and streamlined the
procedures for obtaining Federal Reserve Board approval for
nonbanking proposals in several respects. The interim rule
contemplates action by the Federal Reserve Board on nonbanking
proposals involving listed activities (including the acquisition of
a thrift or thrift assets) within 30 days after a notice containing
all of the information required by the rule has been received by
the Federal Reserve Board. In approving the activities contained
in such a notice, the Federal Reserve Board is precluded from
opposing any restrictions on transactions between the bank holding
company and the acquired savings association, except as required by
Section 23A or 23B of the Federal Reserve Act or any other
applicable law.
Section 18(c) of the Federal Deposit Insurance Act ("FDI Act")
(12 U.S.C. 1828(c)) authorizes the Federal Reserve Board to approve
the application of a bank to effect a merger, consolidation,
acquisition of assets or assumption of deposit liabilities, and,
incident thereto, to establish a branch or branches pursuant to
Section 9 of the Federal Reserve Act (12 U.S.C. 321) and Section
5(d)(3) of the FDI Act (12 U.S.C. 1815(d)(3)) authorizes the
Federal Reserve Board to approve the application of a bank to
effect a merger, consolidation or acquisition of assets or
assumption of deposit liabilities of a savings association by a
bank that is insured by the Bank Insurance Fund.
Additional Information
For more detailed information about Fifth Third, reference is
made to the Fifth Third Annual Report on Form 10-K for the year
ended December 31, 1994, which is incorporated herein by reference
and the Fifth Third Annual Report to Shareholders which accompanies
this Proxy Statement and Prospectus. See "AVAILABLE INFORMATION"
and "INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE."
FALLS FINANCIAL, INC.
Description of Business
Falls Financial was incorporated under the laws of the State of
Delaware in August 1989 for the purpose of acting as a holding
company that acquired all of the outstanding stock of Falls Savings
Bank issued upon its conversion from the mutual to the stock form
(the "Conversion"). Falls Financial applied and received the
approval of the Office of Thrift Supervision ("OTS") to acquire all
of the common stock of the Falls Savings Bank outstanding upon
completion of the Conversion. On December 11, 1989, Falls
Financial acquired all of the outstanding stock of Falls Savings
Bank issued in connection with Falls Savings Bank's Conversion.
As a Delaware corporation, Falls Financial is authorized to
engage in any activity that is permitted by the Delaware General
Corporation Law. Falls Financial is a registered unitary savings
and loan holding company under the Savings and Loan Holding Company
Act of 1967. At December 31, 1994, assets of Falls Financial
consisted primarily of the stock of Falls Savings Bank, the stock
of Falls Corporation, a Delaware investment holding company, and
the stock of Second FSL Corporation, an Ohio corporation engaged in
real estate development activities. At December 31, 1994, Falls
Financial had $595.6 million in assets and stockholders' equity of
approximately $50.5 million.
Falls Savings Bank is a federally chartered savings bank
headquartered in Cuyahoga Falls, Ohio, with 14 offices, with its
main office, being located in Cuyahoga Falls, and the other offices
in the cities of Akron, Barberton, Hudson, Tallmadge, Stow and Kent
in Summit and Portage Counties, Ohio, its primary market area.
Falls Savings Bank began operations as an Ohio chartered, mutual
building and loan association in 1888. Falls Savings Bank
converted to a federally-chartered mutual savings bank in September
1989 and at such time changed its name from The Falls Savings and
Loan Association.
Falls Savings Bank's deposits are insured by the Savings
Association Insurance Fund ("SAIF") to the maximum extent permitted
by the Federal Deposit Insurance Corporation ("FDIC"). Falls
Savings Bank is subject to examination and regulation by the
Director of the OTS and the FDIC. Falls Savings Bank is a member
of the Federal Home Loan Bank ("FHLB") of Cincinnati, which is one
of the 12 regional banks comprising the FHLB System. Falls Savings
Bank is also subject to regulation by the Board of Governors of the
Federal Reserve System (The "Federal Reserve Board").
Falls Financial through its subsidiary, Falls Savings Bank, is
principally engaged in the business of attracting deposits from the
general public and using such deposits and other funds to originate
conventional first mortgage real estate loans secured by owner
occupied one to four family residential properties located in its
primary market area. Falls Savings Bank, also to a lesser extent,
originates multi-family and commercial real estate loans and
construction and development loans secured by properties located in
its primary market area. In addition, over the past three years,
Falls Savings Bank has placed increased emphasis on the origination
of consumer loans to take advantage of the generally higher yields
and more frequent repricing of these loans compared to residential
loans.
During 1990, Falls Financial organized and capitalized Falls
Corporation with approximately $9.4 million in mortgage-backed
securities, which had previously been dividended from Falls Savings
Bank. Falls Corporation was formed to maintain these investments
and to reinvest the proceeds thereon. At December 31, 1994, Falls
Financial's investment in Falls Corporation amounted to $9.7
million.
During 1991, Falls Financial acquired Second FSL Corporation
from Falls Savings Bank. This transaction was undertaken in light
of the adoption of a regulation which required, in connection with
the calculation of Falls Savings Bank's capital requirements, a
reduction from Falls Savings Bank's capital for investments in
subsidiaries engaged in activities which are not permissible for
national banks. Second FSL Corporation was formed in 1987 to own
and develop real estate. At December 31, 1994, Falls Financial's
investment in Second FSL Corporation amounted to $551,000.
The principal source of Falls Financial's income on its
consolidated statements is from Falls Savings Bank and Falls
Corporation. There are certain regulatory restrictions as to the
extent to which Falls Savings Bank can pay dividends or otherwise
supply funds to Falls Financial. See "DESCRIPTION OF CAPITAL
STOCK".
Regulation
On August 9, 1989, FIRREA was enacted into law. FIRREA
substantially changed the regulatory structure and oversight for
all savings associations, including Falls Savings Bank, and their
holding companies. Prior to FIRREA, Falls Savings Bank was
chartered and regulated by the Federal Home Loan Bank Board (the
"FHLBB"), and its deposits were insured by the Federal Savings and
Loan Insurance Corporation (the "FSLIC"). The FHLBB was abolished
by FIRREA and its regulatory authority was transferred to the
Director of the OTS (the "Director"). In addition, the FSLIC was
abolished and its functions transferred to the FDIC. The FDIC now
administers two separate insurance funds, which are not commingled:
one primarily for federally insured banks and one primarily for
federally insured savings associations. The fund for banks is
called the Bank Insurance Fund" ("BIF"), and the fund for savings
associations is called the "Savings Association Insurance Fund"
("SAIF"). As the federal insurer of savings associations, the FDIC
determines whether to grant insurance to newly-chartered savings
associations, has authority to prohibit unsafe or unsound
activities and has enforcement powers over savings associations
(usually in conjunction with the OTS or on its own if the OTS does
not undertake enforcement action). The FDIC also has the authority
to examine insured savings associations.
Falls Savings Bank, as a federally chartered stock savings
association, is a member of the Federal Home Loan Bank ("FHLB")
System and its deposits are insured by SAIF, which is administered
by the FDIC. Falls Savings Bank is subject to extensive regulation
by the OTS. Examinations of Falls Savings Bank are now conducted
by the OTS which has, in conjunction with the FDIC in certain
situations, enforcement powers. In addition, federal savings
associations must file reports with various governmental agencies,
and may not enter into certain transactions unless certain
regulatory tests are met or governmental approval is obtained.
This supervision and regulation is intended primarily for the
protection of depositors and federal deposit insurance funds.
Falls Savings Bank is also subject to certain reserve requirements
under regulations of the Federal Reserve Board.
Pursuant to FIRREA, the OTS has adopted a regulation establishing
a schedule for the assessment of fees upon all savings associations
to fund the operations of the OTS. The regulation also contains a
schedule establishing fees for the various types of applications
and filings made by savings associations with the OTS. The general
assessment, to be paid on a semiannual basis, is based upon the
savings association's total assets, including consolidated
subsidiaries, as reported in a recent quarterly thrift financial
report. Effective January 1, 1993, the assessment rate ranged from
.0172761% of assets for associations with $67 million in assets or
less to .0045864% for associations with assets in excess of $35
billion.
The Federal Deposit Insurance Corporation Improvement Act of
1991 ("FDICIA") became effective December 19, 1991. Among other
things, FDICIA requires that on-site examinations of Falls Savings
Bank by the OTS occur at least once every 18 months (unless the
FDIC has conducted a full-scope examination during the period in
question) and, after 1993, under certain limited circumstances,
once every 12 months. FDICIA also 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 OTS and the other 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
shareholder 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. The OTS is also charged by FDICIA with prescribing
standards for federally insured savings associations and their
holding companies specifying (a) a maximum ratio of classified
assets to capital; (b) minimum earnings sufficient to absorb losses
without impairing capital; and (c) to the extent feasible, a
minimum ratio of market value to book value for publicly traded
shares of the association or its holding company. Such standards
went into effect in December, 1993. The OTS, along with the other
banking agencies with respect to similar standards they must
establish, have sought comments from the industry on the substance
of such standards. The impact of these standards on the operations
of Falls Financial and Falls Savings Bank cannot be ascertained
until the final standards are issued. In addition, legislation was
recently adopted which limited compensation standards to situations
involving safety or soundness concerns or enforcement proceedings.
FDICIA also required the OTS and other 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, 18 months following the enactment of FDICIA, the
OTS and other 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.
Additional Information
For more detailed information about Falls Financial, reference
is made to the Falls Financial Annual Report on Form 10-K for the
year ended December 31, 1994, which is incorporated herein by
reference and the Falls Financial 1994 Annual Report to
Stockholders which accompanies this Proxy Statement and Prospectus.
See "AVAILABLE INFORMATION" and "INCORPORATION OF CERTAIN DOCUMENTS
BY REFERENCE."
EFFECT OF GOVERNMENTAL POLICIES
The earnings of both Falls Financial and of Fifth Third and its
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 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 that 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 Falls Financial
or Fifth Third and its subsidiaries.
DESCRIPTION OF CAPITAL STOCK AND COMPARATIVE RIGHTS OF STOCKHOLDERS
Fifth Third is authorized to issue 140,000,000 shares of Fifth
Third Common Stock, no par value, and 500,000 shares of preferred
stock, no par value ("Fifth Third Preferred Stock"). As of
December 31, 1994, Fifth Third had outstanding 64,709,304 shares of
Fifth Third Common Stock and no shares of Fifth Third Preferred
Stock. Pursuant to Article Fourth of Fifth Third's Second 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.
Falls Financial is authorized to issue 5,000,000 shares of Falls
Financial Common Stock, of which 2,976,130 shares were issued and
outstanding, and options to purchase a total of 143,806 shares were
outstanding, as of December 31, 1994. In addition, Falls Financial
is also authorized to issue 1,000,000 shares of preferred stock,
$0.01 par value ("Falls Financial Preferred Stock"), none of which
are outstanding. The Board of Directors of Falls Financial may,
pursuant to its Certificate of Incorporation, (a) divide into one
or more new series the authorized shares of Falls Financial
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, redemption rights (including sinking fund
provisions), liquidation preferences, conversion rights and voting
rights.
Set forth below is a description of Fifth Third Common Stock and
Falls Financial Common Stock. This description and analysis are
brief summaries of relevant provisions of the Articles of
Incorporation of Fifth Third and Certificate of Incorporation of
Falls Financial and are qualified in their entirety by reference to
such documents and to the parties' respective Code of Regulations
and Bylaws, respectively.
Voting Rights
Holders of both Fifth Third Common Stock and Falls Financial
Common Stock are entitled to one vote per share on all matters
submitted to a vote of shareholders. Falls Financial's Certificate
of Incorporation, however, does not permit a record owner of Falls
Financial Common Stock to cast votes on any matter with respect to
any shares beneficially owned, directly or indirectly, by another
person to the extent such shares are in excess of 10% of the
outstanding Falls Financial Common Stock.
The Code of Regulations of Fifth Third and the Bylaws of Falls
Financial respectively provide for the division of their respective
Boards of Directors into three classes of approximately equal size.
Directors of each Board of Directors are elected for three-year
terms, and the terms of office of approximately one-third of the
members of the classified Board of Directors expire each year.
This classification of Fifth Third's Board may make it more
difficult for a shareholder to acquire control of Fifth Third and
remove management by means of a hostile takeover.
Fifth Third's Second Amended Articles of Incorporation, as
amended, contains another potential anti-takeover device. As
stated above, Fifth Third is authorized to issue 500,000 shares of
Fifth Third Preferred Stock, and its Board of Directors may
designate various characteristics and rights of such stock,
including conversion rights. Accordingly, as an anti-takeover
measure, Fifth Third's Board of Directors may authorize the
conversion of shares of Fifth Third Preferred Stock into any number
of shares of Fifth Third Common Stock and thus dilute the
outstanding shares of Fifth Third Common Stock.
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, indicating 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 or she
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.
Under Delaware law, Falls Financial's Certificate of
Incorporation could provide for cumulative voting in the election
of directors. Pursuant to the Falls Financial Certificate of
Incorporation and Bylaws, however, stockholders of Falls Financial
do not have the right to vote cumulatively in the election of
directors.
Generally actions required to be taken by Falls Financial
Stockholders under Delaware law, including action on the Merger,
require the affirmative vote of the holders of a majority of the
shares of Falls Financial entitled to vote. Falls Financial's
Certificate of Incorporation does contain a super majority voting
provision, requiring the affirmative vote of the holders of at
least 80% of the outstanding shares of each class entitled to vote,
with respect to certain business combinations with interested
stockholders and amending certain provisions of the Certificate of
Incorporation. Any special meeting called to effectuate such
amendment may be called only upon the direction of Falls
Financial's Board of Directors. With respect to Fifth Third, no
vote of its shareholders is required to approve the Merger.
Generally actions required to be taken by Fifth Third shareholders
require the affirmative vote of the holders of a majority of the
shares of Fifth Third entitled to vote, except for certain actions
which by statute require a two-thirds vote.
Dividends
Holders of Fifth Third Common Stock and Falls Financial 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. Fifth Third and
Falls Financial have, in the past, declared and paid dividends on
a quarterly basis, and intend to continue to do so in the immediate
future in such amounts as their respective Board of Directors shall
determine.
Most of the revenues of Fifth Third and Falls Financial
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, the Federal
Reserve Board, or the FDIC, 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. Under the law applicable to
federally-chartered savings associations, the amount of dividends
which a savings association may make without the approval of the
OTS depends upon the amount of capital possessed by such savings
association. Savings associations, which have capital immediately
prior to, and on a pro forma basis after giving effect to, a
proposed dividend that is equal to or greater than the amount of
their fully phased-in capital requirements, are authorized to pay
dividends during a calendar year up to one hundred percent of their
net income during the calendar year plus the amount that would
reduce by one-half their surplus capital. Some associations that
have capital immediately prior to, and on a pro forma basis after
giving effect to, a proposed dividend that is equal to or in excess
of their minimum capital requirement, but less than their fully
phased-in capital requirements, may pay dividends equal to 75% of
net income during the most recent four quarters (minus dividends
previously paid over that period). Savings associations which have
capital immediately prior to, or on a pro forma basis after giving
effect to, a proposed dividend that is less than the amount of
their minimum capital requirements, are not authorized to pay any
dividend unless such association receives prior approval from the
OTS or unless such association is operating in compliance with an
OTS approved capital plan and the dividend payment is consistent
with such capital plan.
The affiliates of Fifth Third include both state and nationally
chartered banks and two federally-chartered savings banks. Under
the applicable regulatory limitations, during the year 1995, the
affiliates of Fifth Third could declare aggregate dividends limited
to their 1995 eligible net profits, as defined, and $271,979,000,
the retained 1994 and 1993 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 OTS, 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. Neither Falls
Financial nor any 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 the
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 of the
Currency 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 Falls Financial, and their respective
affiliates, may pay.
Preemptive Rights
The Certificate of Incorporation of Falls Financial provides that
the holders of capital stock of Falls Financial are not entitled to
preemptive rights with respect to any shares or other securities of
Falls Financial that may be issued. Shareholders of Fifth Third
also have no preemptive rights.
Rights Upon Liquidation
In the event of any liquidation, dissolution or winding up of
Falls Financial, the holders of Falls Financial's Common Stock
would be entitled to receive, after payment or provision for
payment of all debts and liabilities of Falls Financial (including
all deposit accounts and accrued interest thereon) and after
distribution of the balance in the special liquidation account
established at the time Falls Financial converted to stock form,
all assets of Falls Financial available for distribution. In the
event of liquidation, dissolution or winding up of Falls Financial,
the holders of Falls Financial 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 Falls Financial available for
distribution. If Falls Financial Preferred Stock is issued, the
holders thereof may have a priority over the holders of Falls
Financial Common Stock in the event of liquidation or dissolution.
With respect to Fifth Third, except for the reference to such
special liquidation account, Fifth Third shareholders have
identical rights on liquidation, dissolution or winding up, subject
to identical considerations in the event of any issuance of Fifth
Third Preferred Stock.
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
or she may become involved by reason of his or her being or having
been a director or officer. Generally, Ohio law 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 or her conduct was unlawful, so long as no judgment or
other final adjudication adverse to such person establishes that
his or her acts or omissions (i) were in breach of his or her 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.
Falls Financial's Certificate of Incorporation also provides for
indemnification to the fullest extent permitted by Delaware law.
The applicable Delaware law similarly provides that a corporation
may indemnify each director and officer against all reasonable
expenses and liabilities incurred by or imposed on him or her in
connection with any proceeding or threatened proceeding in which
the director or officer may become involved by reason of his or her
being or having been a director or officer so long as he or she
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 or proceeding, had no reasonable
cause to believe his or her conduct was unlawful. Under the
applicable Delaware law, no indemnification may be made in respect
of any claim or matter as to which such person is adjudged liable
to the corporation unless an appropriate court deems it proper. If
the Merger is consummated, Fifth Third will assume all such
obligations of Falls Financial and Falls Savings Bank officers and
directors.
Falls Financial's Certificate of Incorporation further provides
that Falls Financial may purchase and maintain insurance against
liability that may be asserted against any director, officer,
employee or agent. Further, the Certificate of Incorporation
limits the personal liability of directors, except that a director
will be personally liable for (i) breach of a director's duty of
loyalty to the corporation or its stockholders, (ii) acts or
omissions not in good faith or which involve intentional misconduct
or a knowing violation of law, (iii) violation of certain Delaware
law pertaining to unlawful payment of dividends or unlawful stock
purchases by directors, or (iv) any transaction from which the
director derived an improper personal benefit.
Shareholders' Meetings; Quorum
Special meetings of Fifth Third's shareholders may be called at
any time by the Board of Directors or by 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 Falls Financial's
stockholders may be called at any time, only by the Board of
Directors, pursuant to a resolution adopted by a majority of the
total number of directors which the Falls Financial would have if
there were no vacancies.
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 capital stock voting at a meeting constitutes a quorum
under the respective Code of Regulations and Bylaws of each
institution.
Subscription, Conversion, Redemption Rights; Stock Nonassessable
Neither Fifth Third Common Stock nor Falls Financial 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
Falls Financial pursuant to the Affiliation Agreement and the
Merger Agreement will be validly issued, fully paid and
non-assessable, and will not, upon such issuance, be subject to
preemptive rights of any shareholder of Fifth Third.
Change of Control Provisions
Fifth Third's Articles of Incorporation and Code of Regulations
and Falls Financial's Certificate of Incorporation and Bylaws,
respectively, 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. Falls Financial's Certificate of Incorporation
grants Falls Financial's Board of Directors the authority to issue
1,000,000 shares of Falls Financial Preferred Stock and to fix the
designations, powers, preferences and rights of such shares and the
qualifications, limitations, or restrictions applicable thereto.
Falls Financial's Certificate of Incorporation also contains a
super majority voting provision discussed under "Voting Rights"
above, which may discourage the acquisition of the beneficial
ownership, directly or indirectly, of more than 10% of Falls
Financial Common Stock.
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 and Falls Financial's Code of Regulations
and Bylaws, respectively, provide for the election of directors on
a classified basis.
The Ohio corporation statute also includes a provision which
permits a corporation's board of directors, when determining
whether an acquisition proposal or any other matter is in the best
interest of the corporation, to take into consideration the
interests of the corporation's employees, suppliers, creditors and
customers, the economy of the state and the nation, community and
societal considerations and the long-term and short-term interests
of the corporation and its shareholders, including the possibility
that such interests may be best served by the continued
independence of the corporation. Falls Financial's Certificate of
Incorporation contains a provision which permits the Board of
Directors to take into consideration similar factors when
evaluating an acquisition proposal.
CERTAIN BENEFICIAL OWNERS OF FIFTH THIRD COMMON 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, 1994:
Name and Address Amount and Nature Percent of Class
of Beneficial Owner of Ownership
Cincinnati Financial 13,082,905(1) 20.21
Corporation
6200 South Gilmore
Fairfield, Ohio 45014
Fifth Third Bancorp 5,991,457(2) 9.26
Subsidiary Banks
Fifth Third Center
Cincinnati, Ohio 45263
The Western-Southern 4,425,255(3) 6.84
Life Insurance Company
400 Broadway
Cincinnati, Ohio 45202
Ruane, Cunniff and Co. 3,623,022 5.60
767 Fifth Avenue,
Suite 4701
New York, New York 10153
(1) Cincinnati Financial Corporation owns 9,890,700 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 beneficially owns 12,965 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 3,520,630 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) The Western-Southern Life Insurance Co. owns 664,722 shares of
Fifth Third Common Stock. Waslic Delaware Company, II, a
subsidiary of The Western-Southern Life Insurance Co., owns
3,746,850 shares. In addition, Mr. John F. Barrett, a director,
President and Chief Executive Officer of The Western-Southern Life
Insurance Co., and a director of Fifth Third, individually
beneficially owns 13,683 shares.
Fifth Third, its directors, executive officers and their affiliates
owned no shares of Falls Financial Common Stock outstanding on
December 31, 1994.
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<PAGE>
FIFTH THIRD MANAGEMENT
The names and ages of the Directors and certain 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, 1994, are as follows:
Shares of Fifth
Third
Common Stock
Beneficially
Owned at
December 31,
1994 (3)(6)
Name, Age and Principal Director of Number
Percent
Occupation During Past Fifth Third of
Five Years; Other Since(2) Shares of
Directorships(1) Owned
Class
Directors
John F. Barrett, 45, President, 1988 13,683 .0211
CEO and Director of The Western-
Southern Life Insurance Co. since
March, 1994. Formerly President
and COO, The Western-Southern Life
Insurance Co. Director of Cincinnati
Bell Inc.(4)
Milton C. Boesel, Jr., 66,
Counsel, 1989 10,158 .0157
Ritter, Robinson, McReady and James,
Attorneys at Law, Toledo, Ohio, formerly
Ritter, Boesel and Robinson.
Clement L. Buenger, 68,
Retired Chairman, 1971 265,100 .4097
Fifth Third and The 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 and Electric Company.
Nolan W. Carson, 70,
of Counsel, Dinsmore 1982 28,052 .0434
and Shohl, Attorneys at Law and Counsel to
Fifth Third since December, 1994. Formerly,
Mr. Carson was a Partner, Dinsmore and Shohl.
Gerald V. Dirvin, 57,
Retired April, 1994 1989 7,850 .0121
as Director and Executive Vice President
of The Procter and Gamble Company, manufacturers
of household and consumer products which
position Mr. Dirvin held since January, 1990.
Formerly Mr. Dirvin was Senior Vice President.
Director of Cintas Corporation and Northern
Telecom Ltd.
Thomas B. Donnell, 48,
Chairman, The Fifth 1984 138,597 .2142
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.
Richard T. Farmer, 60,
Chairman, Chief 1982 27,655 .0427
Executive Officer and Director,
Cintas Corporation, a service
company that designs,
manufactures and implements
corporate identity
uniform programs. Director of
Safety-Kleen Corp.
John D. Geary, 68,
Retired as President, 1977 20,288 .0314
Midland Enterprises Inc.,
a company engaged in inland
waterway transportation.
Ivan W. Gorr, 65,
Retired in October, 1994 1991 4,852 .0075
as Chairman and Chief
Executive Officer of
Cooper Tire and Rubber Company,
a manufacturer of tires and
rubber products. Director of
Amcast Industrial Corporation,
Arvin Industries, Inc.,
Cooper Tire and Rubber
Company and OHM Corporation.
Joseph H. Head, Jr., 62,
Chairman, Chief 1987 44,188 .0683
Executive Officer and Director,
Atkins and Pearce, Inc.,
manufacturer of industrial
textiles, since January, 1990.
Previously, Mr. Head was a partner
with Graydon, Head and Ritchey,
Counsel to The Fifth Third Bank.
Director of Baldwin Piano and Organ, Co.
Joan R. Herschede, 55,
President and Chief 1991 4,050 .0063
Executive Officer of The
Frank Herschede Company,
retailer of jewelry, china,
crystal and silver.
William G. Kagler, 62,
Chairman of the 1983 14,145 .0219
Executive Committee
of the Board, and
Director of Skyline Chili, Inc., a
restaurant chain and frozen food product
manufacturer, since November, 1994.
Formerly, Mr. Kagler was Chairman, CEO
and Director of Skyline Chili, Inc., 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. Director
of The Union Central Life Insurance Company,
The Ryland Group, Inc. and The Future Now, Inc.
William J. Keating, 67,
retired Chairman and 1980 41,949 .0648
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.
James D. Kiggen, 62,
Chairman, President, 1982 22,819 .0353
Chief Executive Officer
and Director, Xtek,
Inc., manufacturer of
hardened steel parts.
Director of Cincinnati Bell, Inc.
and United States Playing Card Co.
Robert B. Morgan, 60,
President, Chief 1986 12,965 .0200
Executive Officer and 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.(4)
Michael H. Norris, 58,
Retired as President 1985 14,587 .0225
and Director, The Deerfield
Manufacturing Co.,
a fabricator of sheet metal
stampings, deep
drawn parts and assemblies, and retired as
Group Vice President and Director of the
Ralph J. Stolle Company since January, 1994.
Brian H. Rowe, 63,
Chairman, GE Aircraft 1980 13,873 .0214
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.
George A. Schaefer, Jr., 49,
President and 1988 212,517 .3284
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. Director of Community
Mutual Insurance Company.
John J. Schiff, Jr., 51,
Chairman and 1983 65,440 .1011
Director, John J. and Thomas
R. Schiff and Co., Inc.,
an insurance agency. Chairman and
Director of Cincinnati Financial
Corp. and Cincinnati Insurance
Co. Director of Cincinnati
Gas and Electric Company, Standard
Register Co. and Cincinnati Bengals.(4)
Dennis J. Sullivan, Jr., 62,
Executive 1984 19,764 .0305
Counselor of Dan Pinger
Public Relations,
Inc., a public relations agency,
since February, 1993. Formerly
Director, Executive Vice President
and Chief Financial Officer of
Cincinnati Bell, Inc. and Cincinnati Bell
Telephone Company. Director of
Community Mutual Insurance Company,
Access Corporation
and The Future Now, Inc.
Dudley S. Taft, 54,
President and Director, 1981 19,273 .0298
Taft Broadcasting Company,
owner and operator
of television broadcasting
stations. Director
of The Union Central Life
Insurance Company,
Cincinnati Gas and Electric
Company, United
States Playing Card Co.,
and The Future Now, Inc.
Executive Officers
Michael D. Baker, 44,
Senior Vice President ---- 47,432 .0733
of Fifth Third since March,
1993, and Senior
Vice President of The Fifth Third Bank.
Michael K. Keating, 39,
Senior Vice ---- 22,851 .0353
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. Mr. Keating is a son
of Mr. William J. Keating, Director.
George W. Landry, 53,
Executive Vice ---- 93,873 .1451
President of Fifth Third
and The Fifth Third
Bank.
Stephen J. Schrantz, 45,
Executive Vice ---- 62,401 .0964
President of Fifth Third and
The Fifth Third Bank.
Director of The Frank
Herschede Company.
All Directors and
Executive Officers as a
Group (25 persons)(5) ---- 1,228,3621.8983
(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. All of the
Directors are also directors of The Fifth Third Bank, except for
Messrs. Boesel, Donnell and Gorr, who are members of the Board of
Directors
of The Fifth Third Bank of Northwestern Ohio, N.A.
(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 COMMON 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 COMMON 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. Baker, 15,313; Mr. Barrett, 7,125; Mr. Boesel, 7,125;
Mr. Buenger, 1,500; Mr. Carson, 15,000; Mr. Dirvin, 7,125; Mr. Donnell,
3,375; 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, 12,500; Mr. W. Keating, 1,500; Mr. Kiggen, 12,188;
Mr. Landry, 37,875; Mr. Morgan, 12,188; Mr. Norris,4,587;
Mr. Rowe, 9,188; Mr. Schaefer, 102,500; Mr. Schiff, 3,750;
Mr. Schrantz, 35,625; Mr. Sullivan, 1,500; and Mr. Taft, 1,500.
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LEGAL MATTERS
Certain legal matters will be passed upon for Falls Financial by
Squire, Sanders and Dempsey, Columbus, Ohio. Counsel employed by
The Fifth Third Bank has rendered his opinion that the shares of
Fifth Third Common Stock to be issued to the stockholders of Falls
Financial in connection with the Merger have been duly authorized
and, if issued pursuant to the Affiliation Agreement and the Merger
Agreement, will be validly issued, fully paid and non-assessable
under the current laws of the State of Ohio. Dinsmore and Shohl,
Cincinnati, Ohio, will render its opinion with respect to certain
federal income tax consequences of the Merger to Fifth Third, Falls
Financial and the stockholders of Falls Financial. At March 1,
1995, attorneys at Dinsmore and Shohl beneficially owned 33,837
shares of Fifth Third Common Stock.
EXPERTS
The financial statements incorporated in this Proxy Statement and
Prospectus by reference from Fifth Third's 1994 Annual Report to
Shareholders which accompanies this Proxy Statement and Prospectus
have been audited by Deloitte and Touche LLP, 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 Falls Financial for
the year ended December 31, 1994 included in the Falls Financial
1994 Annual Report to Stockholders which accompanies this Proxy
Statement and Prospectus, have been audited by KPMG Peat Marwick
LLP, 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 income taxes) and have been so incorporated in
reliance upon the report of such firm given upon their authority as
experts in accounting and auditing.
STOCKHOLDERS' PROPOSALS
If the Merger fails to be consummated, any stockholder proposal,
in order to be eligible for inclusion in the proxy materials for
Falls Financial's Annual Meeting of Stockholders to be held in
April, 1996, must be received by Falls Financial on or before
November 15, 1995, at its principal executive offices, 2335 Second
Street, Cuyahoga Falls, Ohio 44222-0113. The Board of Directors
will review any stockholder proposals that are filed as required
and will determine whether such proposals meet applicable criteria
for inclusion in its 1996 proxy statement for consideration at the
1996 Annual Meeting of Stockholders.
OTHER MATTERS
The Board of Directors of Falls Financial 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.
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ANNEX A
AFFILIATION AGREEMENT
This Affiliation Agreement (the "Agreement") dated as of December
12, 1994 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 FALLS FINANCIAL, INC.,
a corporation organized and existing under the corporation laws of
the State of Delaware, with its principal office located in
Cuyahoga Falls, Summit County, Ohio ("Falls").
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 Falls is a
registered unitary savings and loan holding company under Section
10 of the Home Owner's Loan Act, as amended, and Fifth Third and
Falls desire to effect a merger under the authority and provisions
of the corporation laws of the State of Ohio pursuant to which at
the Effective Time (as herein defined in Section IX) Falls 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 Plan and Agreement of Merger
("Agreement of Merger") between Fifth Third and Falls 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, $.01 par value per share,
of Falls 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 Falls 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 Falls agree together as follows:
I. Obligations of Fifth Third and Falls 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
Office of Thrift Supervision, the Federal Deposit Insurance
Corporation, the Ohio Division of Banks 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 Falls 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 issued to Falls 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. Falls agrees that it will, as
promptly as practicable after request and at its own expense,
provide Fifth Third with all information and documents concerning
Falls and all of its wholly-owned subsidiaries, including
specifically, but without limitation, Falls Savings Bank, FSB
("Thrift Subsidiary") and any of its 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 agencies, Fifth Third shall provide, at least two days
prior to the filing date, copies thereof to Falls.
II. Representations and Warranties of Falls.
Falls 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 Falls to
Fifth Third prior to the execution of this Agreement by Fifth
Third:
A. Falls (i) is duly incorporated, validly existing and in good
standing as a corporation under the corporation laws of the State
of Delaware and is a registered unitary savings and loan holding
company under the Savings and Loan Holding Company Act of 1967, as
amended, recodified by the Financial Institutions Reform, Recovery
and Enforcement Act of 1989, as Section 10 of the Home Owner's Loan
Act, 12 U.S.C. Section 1467a et seq.; (ii) is duly authorized to
conduct the business in which it is engaged; (iii) has 5,000,000
shares, $.01 par value per share, of Common Stock ("Falls Common
Stock") and 1,000,000 shares, $.01 par value per share, of
Preferred Stock ("Falls Preferred Stock") authorized pursuant to
its Certificate of Incorporation, which are the total number of
shares Falls 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 Falls of any kind, other than (a) 2,976,130 shares of
Falls Common Stock, which presently are authorized, duly issued and
outstanding and fully paid and nonassessable, (b) 204,352 shares of
Falls Common Stock which are issued but not outstanding and are
held by Falls as treasury shares, and (c) options to purchase a
total of 143,806 shares of Falls Common Stock, which options were
granted to and are presently held by the employees, officers and
Directors of Thrift Subsidiary and will be exercisable at the
Effective Time (the "Stock Options"); and (v) owns of record and
beneficially free and clear of all liens and encumbrances, all of
the 1,564,000 outstanding shares of the capital stock of the Thrift
Subsidiary, $.01 par value per share. Neither Falls nor Thrift
Subsidiary have direct or indirect subsidiaries other than those
disclosed in Schedule 1, which disclosure shall include any joint
ventures Falls, Thrift Subsidiary or affiliates of either of them
are engaged in with any other person or entity (collectively the
"Subsidiaries").
B. Thrift Subsidiary is duly incorporated, validly existing and in
good standing as a Federal Savings Bank under the laws of the
United States, and has all the requisite power and authority to
conduct the banking business as now conducted by it; and Thrift
Subsidiary has no outstanding securities of any kind, nor any
outstanding options, warrants or other rights entitling another
person to acquire any securities of the Thrift Subsidiary of any
kind, other than 1,564,000 shares of the capital stock, $.01 par
value per share, all owned of record and beneficially by Falls.
C. Falls 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, 1991, 1992 and 1993 and for the years then ended,
together with the opinions of its independent certified public
accountants associated therewith. Falls 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, 1991, 1992
and 1993 and for the years then ended, and (ii) the unaudited,
separate reports of condition and reports of income of Thrift
Subsidiary as at December 31, 1991, 1992 and 1993 and for the years
then ended. Falls also has furnished to Fifth Third (i) its
unaudited, consolidated financial statements as at September 30,
1994, and for the nine months then ended, (ii) the unaudited,
separate financial statements of Falls as at September 30, 1994,
and for the nine months then ended, and (iii) the unaudited,
separate reports of condition and reports of income of Thrift
Subsidiary as at September 30, 1994, and for the nine months then
ended. The unaudited, consolidated financial statements of Falls
as at September 30, 1994, and for the nine months then ended fairly
present the consolidated financial condition of Falls and Thrift
Subsidiary taken as whole as of September 30, 1994, 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 Falls and unaudited, separate reports of
condition and reports of income of Thrift Subsidiary fairly present
the financial condition of Falls and Thrift Subsidiary as of
September 30, 1994 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 Falls or
Thrift Subsidiary required to be disclosed in the financial
statements so furnished other than the liabilities, obligations or
indebtedness disclosed in such financial statements (including
footnotes). Falls shall furnish Fifth Third with its audited,
consolidated financial statements as at December 31, 1994 and for
the year then ended together with the unaudited, separate financial
statements of the Thrift Subsidiary and unaudited, separate reports
of condition and reports of income of Thrift Subsidiary as at
December 31, 1994 and for the year then ended, all duly certified
by Falls' 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 available until the
Closing Date.
D. Falls and Thrift Subsidiary have good title to all of the
material properties and assets reflected in its separate statement
of condition as at September 30, 1994 and which are still owned by
each and each has good 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, 1994,
to the date hereof there have been no material adverse changes in
the financial condition, operations or business of Falls and Thrift
Subsidiary on a consolidated or separate basis; (ii) neither Falls'
chief executive officer nor its chief financial officer
(collectively the "Executive Officers", in this case and all cases
hereinafter in their capacity as such officers and not personally)
is aware of any events which have occurred since September 30, 1994
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 Falls and
Thrift Subsidiary on a consolidated or separate basis; and (iii)
since September 30, 1994, to the date hereof there have been no
material changes in the methods of business operations of Falls and
Thrift Subsidiary.
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
Falls or Thrift Subsidiary which reasonably can be expected to
result in any material adverse change in the financial condition,
operations or business of Falls and Thrift Subsidiary on a
consolidated or separate basis.
G. Except as disclosed in Schedule 1, since September 30, 1994, to
the date hereof Falls and Thrift Subsidiary each has been operated
in the ordinary course of business, has not made any material
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, 1994, to
the date hereof Falls has not declared or paid any dividends nor
made any distributions of any other kind to its shareholders,
except cash dividends on shares of Falls Common Stock in amounts
and at such times as in accord with its historical practice.
H. Except as disclosed in Schedule 1, Falls and Thrift Subsidiary
have timely filed all federal, state and local tax returns required
to be filed (after giving effect to all extensions) by them,
respectively, and have paid or provided for all tax liabilities
shown to be due thereon or which have been assessed against them,
respectively. All tax returns filed by Falls or Thrift Subsidiary
through the date hereof constitute complete and accurate
representations of the tax liabilities of Falls and Thrift
Subsidiary 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 Falls nor Thrift
Subsidiary 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 Thrift
Subsidiary) which do not require the annual expenditure of more
than $25,000 thereunder.
J. Except as disclosed in Schedule 1, since September 30, 1994, to
the date hereof Thrift Subsidiary has not incurred any unusual or
extraordinary loan losses which are material to Falls and Thrift
Subsidiary on a consolidated basis; to the best knowledge of the
Executive Officers and in light of Thrift Subsidiary's historical
loan loss experience and its management's analysis of the quality
and performance of its loan portfolio, its reserve for loan losses
is adequate based on management's policies and procedures.
K. Falls has not, directly or indirectly, other than McDonald and
Company Securities, Inc., 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.
L. 1. The Directors of Falls, 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
Falls' shareholders at the annual or a special meeting of the
shareholders to be called for that purpose, all in accordance with
and as required by law and in accordance with the Certificate of
Incorporation and Bylaws of Falls.
2. Falls 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 Falls, 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 or
the rights of creditors of savings and loan 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 subject,
however, to the receipt of requisite regulatory approvals and the
approval of Falls' 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, Falls' Certificate 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 Falls or Thrift Subsidiary 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, or security agreement or any other
material rights of others or other material adverse interest upon
any material right, property or asset belonging to Falls or Thrift
Subsidiary other than such rights as may be given dissenting
shareholders of Falls pursuant to Section 262 of the Delaware
Corporation Law; (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 Falls or Thrift Subsidiary is a party or by
which Falls' or Thrift Subsidiary's 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, Falls or Thrift Subsidiary 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 expenditure of more than $25,000 (but shall include all
agreements, arrangements or commitments pursuant to which credit
has been extended by Thrift Subsidiary).
M. Complete and accurate copies of the (i) Certificate of
Incorporation and Bylaws of Falls and (ii) the Federal Stock
Charter and Bylaws of Thrift Subsidiary in force as of the date
hereof have been delivered to Fifth Third.
N. To the best knowledge of the Executive Officers of Falls and
except as disclosed in Schedule 1, neither Falls nor Thrift
Subsidiary nor any employee, officer or Director of any of them has
knowingly engaged in any activity or knowingly omitted to take any
action which, in any material way, has resulted or could result in
the violation of (i) any local, state or federal law (including
without limitation the Bank Secrecy Act, the Community Reinvestment
Act, applicable consumer protection and disclosure laws and
regulations, including without limitation, Truth in Lending, Truth
in Savings and similar disclosure laws and regulations, and equal
employment and employment discrimination laws and regulations) or
(ii) any regulation, order, injunction or decree of any court or
governmental body the violation of either of which could reasonably
be expected to have a material adverse effect on the financial
condition of Falls and Thrift Subsidiary. To the best knowledge of
the Executive Officers and except as disclosed in Schedule 1,
Thrift Subsidiary possesses all licenses, franchises, permits and
other governmental authorizations necessary for the continued
conduct of its business without material interference or
interruption.
O. 1. 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 Falls or the Thrift Subsidiary 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 (the "SEC Documentation"))
contains any information that is incorrect in any material respect
and, in the case of the SEC Documentation 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 Falls is held to consider the adoption of this
Agreement and the Agreement of Merger) an untrue statement of
material fact or omits or shall omit to state a material fact
necessary to make the statements contained herein or therein, in
light of the circumstances in which they are made, not misleading.
2. Falls has furnished to Fifth Third or its agents true and
complete copies (including all exhibits and all documents
incorporated by reference) of the following documents as filed by
Falls with the Securities and Exchange Commission ("SEC"):
a. Falls' Annual Report on Form 10-K for the years ended December
31, 1991, 1992 and 1993;
b. Falls' Quarterly Report on Form 10-Q for the quarters ended
March 31, June 30 and September 30, 1994;
c. Any Current Report on Form 8-K with respect to any event
occurring after December 31, 1993 and prior to the date of this
Agreement;
d. Any report filed by Falls to amend or modify any of the reports
described above; and
e. All proxy statements prepared in connection with meetings of
Falls' shareholders held subsequent to December 31, 1993.
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 later of the
dates on which such reports were filed with the SEC or declared
effective by the SEC, and do not as of the date of this Agreement
(i) contain any untrue statement of material fact, (ii) 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 (iii) omit any
material exhibit required to be filed therewith. Prior to the date
hereof, no event has occurred subsequent to December 31, 1993,
which Falls is required to describe in a Current Report on Form 8-K
other than the Current Reports heretofore furnished by Falls to
Fifth Third. Falls timely shall furnish Fifth Third with copies of
all reports filed by Falls with the SEC subsequent to the date of
this Agreement until the Closing Date.
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 Falls, Thrift
Subsidiary or any of the subsidiaries in respect to any "facility"
owned, leased or operated by any of them (but excluding any
"facility" as to which sole interest of Falls, Thrift Subsidiary or
any of the Subsidiaries is that of a lienholder or mortgagee, but
including any "facility" to which title has been taken pursuant to
mortgage foreclosure or similar proceedings and including any
"facility" in which Falls, Thrift Subsidiary or any of the
subsidiary 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 Falls, Thrift Subsidiary or any of the Subsidiaries
and/or require Falls, Thrift Subsidiary or any of the Subsidiaries
to incur expenses of more than $25,000 (whether or not covered by
insurance) or (b) would otherwise have a material adverse effect on
Falls, Thrift Subsidiary or any of the 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 Falls,
Thrift Subsidiary or any of the 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 Falls, Thrift Subsidiary or any of the
Subsidiaries liable for any material costs (as a result of the acts
or omissions of Falls, Thrift Subsidiary or any of the 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 Falls,
Thrift Subsidiary or any of the Subsidiaries to prevent or minimize
any actual or threatened release by Falls, Thrift Subsidiary or any
of the Subsidiaries of any hazardous wastes or other chemical
substances, pollutants and contaminants into the environment which
would endanger the public health or the environment. 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 Falls, Thrift Subsidiary or any of the Subsidiaries (but
excluding any "facility" as to which the sole interest of Falls,
Thrift Subsidiary or any of the Subsidiaries is that of a
lienholder or mortgagee, but including any "facility" to which
title has been taken pursuant to mortgage foreclosure or similar
proceedings and including any "facility" in which Falls, Thrift
Subsidiary or any of the Subsidiaries ever participated in the
financial management of such facility to a degree sufficient to
influence, or have the ability to influence, the facility's
treatment of hazardous waste) is, in all material respects, in
compliance with all applicable Federal, state, local or municipal
statutes, ordinances, laws and regulations and all orders, rulings
or other decisions of any court, administrative agency or other
governmental authority relating to the protection of the
environment, except to the extent a failure to comply would not
have a material adverse effect on the business, operations and
financial condition of Falls and Thrift Subsidiary taken as a
whole. Except as disclosed in Schedule 1, no underground storage
tank presently is located on, nor, to the best knowledge of the
Executive Officers, has any such tank ever been located on, any
property owned by Falls, Thrift Subsidiary or any of the Subsidiary
or any "facility" where Falls, Thrift Subsidiary or any of the
Subsidiaries has exercised any significant management role. All
terms contained in quotation marks in this paragraph shall have the
meanings ascribed to such terms in and defined in, CERCLA; in
addition, toxic or hazardous substances, as used in this paragraph
and all paragraphs of this Section P, shall mean any material or
substance that is defined or classified as a "hazardous substance"
pursuant to section 101 of CERCLA or Section 311 of the Federal
Water Pollution Control Act (33 U.S.C. Section 1321); a "hazardous
waste" pursuant to Section 1004 or Section 3001 of the Resource
Conservation and Recovery Act (42 U.S.C. Section 6803, 6921); a
"toxic pollutant" under Section 307(a)(1) of the Federal Water
Pollution Control Act (33 U.S.C. Section 1317(a)(1)); a "hazardous
air pollutant" under Section 112 of the Clean Air Act (42 U.S.C.
Section 7412); a "pesticide" under Section 1 of the Federal
Insecticide, Fungicide, and Rodenticide Act (7 U.S.C. Section 136);
a "solid waste" pursuant to Section 3734.01 of Ohio's Solid and
Hazardous Wastes Law (O.R.C. Section 3734.01); "petroleum" under
Section 9001 of the Resource Conservation and Recovery Act (42
U.S.C. Section 6991) and Section 3787.87 of Ohio's Petroleum
Underground Storage Tank Laws (O.R.C. Section 3737.87); "industrial
waste" or "other wastes" under Section 6111.01 of the Ohio Water
Pollution Control Act (O.R.C. Section 6111.01); or "medical wastes"
or "infectious wastes" pursuant to section 3734.01 of Ohio's Solid
and Hazardous Wastes Laws (O.R.C. Section 3734.01); or a "hazardous
material" under the Hazardous Materials Transportation Uniform
Safety Act of 1990 (49 U.S.C. App. Section 1802(4)).
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 Falls or Thrift
Subsidiary for the benefit of employees, former employees or
Directors of Falls or Thrift Subsidiary and shall include (a) any
qualified retirement plan such as a pension, profit sharing, stock
bonus plan or employee stock ownership plan ("ESOP"), (b) any plan,
program or arrangement providing deferred compensation, bonus
deferral or incentive benefits, whether funded through trust or
otherwise, and (c) any welfare plan, program or policy providing
vacation, severance, salary continuation, supplemental
unemployment, disability, life, health coverage, retiree health,
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, Falls or Thrift Subsidiary 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 of any
open requests for IRS rulings or letters with respect to Benefit
Plans.
3. Qualified Retirement Plan Compliance. With respect to each
Benefit Plan which is an employee pension benefit plan (as defined
in Section 3(2) of ERISA) 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, as amended by all
of the laws referenced to in Section 1 of Revenue Procedure 93-39,
such determination letter has not been revoked or threatened to be
revoked by the IRS and the scope of such determination letter is
complete and does not exclude consideration of any of the
requirements or matters referred to in Section 4.02 through 4.04 of
Revenue Procedures 93-39; (b) such Qualified Benefit Plan is in
material compliance with all qualification requirements of Section
401(a) of the Code and meets the requirements of Section 1140 of
the Tax Reform Act of 1986 ("TRA 1986") and the requirements which
are treated by the IRS as if Section 1140 of the TRA 1986 applied
to them; (c) such Qualified Benefit Plan has been operated in
substantial compliance with all notice, reporting and disclosure
requirements of ERISA which apply to employee pension benefit
plans; (d) any Qualified Benefit Plan which is an ESOP as defined
in Section 4975(e)(7) of the Code (an "ESOP Qualified Benefit
Plan") is in material compliance with the applicable qualification
requirements of Section 409 of the Code; and (e) with respect to
such Qualified Benefit Plan, if it was terminated or is currently
in the process of being terminated, has been or is being terminated
in material compliance with the requirements of the Code, including
but not limited to, extending 100% vesting to all participants upon
termination and the amendment and restatement of such Qualified
Benefit Plan for compliance with TRA 1986 and all applicable
subsequent legislation affecting the qualified status of the
Qualified Benefit Plan, and the liabilities of such Qualified
Benefit Plan, if already terminated, were fully satisfied or, if
such Plan is in the process of termination, are not greater than
the assets held under such Plan.
4. Welfare Plan Compliance. With respect to each Benefit Plan
which is an employee welfare benefit plan (as defined in Section
3(1) of ERISA) (a "Welfare Benefit Plan"), except as noted on
Schedule 1: (a) to the extent such Welfare Benefit Plan is
intended to provide benefits to plan participants that are not
subject to federal income tax so long as specific provisions of the
Code are met, to the best knowledge of the Executive Officers, such
Welfare Benefit Plan currently meets such Code provisions; (b) such
Welfare Benefit Plan has been operated in substantial compliance
with all notice, reporting and disclosure requirements of ERISA
which apply to employee welfare benefit plans; and (c) such Welfare
Benefit Plan, if a group health plan subject to the requirements of
Section 4980B of the Code, has been operated in substantial
compliance with such 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. No ESOP Qualified
Benefit Plan is leveraged.
6. Lawsuits or Claims. No material actions, suits or claims
(other than routine claims of benefits) are pending or, to the best
knowledge of the Executive Officers, threatened against any Benefit
Plan or against Falls or Thrift Subsidiary with respect to any
Benefit Plan.
7. Disclosure of Unfunded Liabilities. All material Unfunded
Liabilities, as hereinafter defined, with respect to each Benefit
Plan have been recorded and disclosed on the most recent financial
statement of Falls and Thrift Subsidiary or, if not, 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 (which has legally accrued and cannot legally
be eliminated and which is subject to reasonable estimate) exists
for payment in the future which is attributable to any Benefit
Plan, including but not limited to (a) severance pay benefits, (b)
deferred compensation or unpaid bonuses, (c) any liabilities on
account of the change in control which will result from this
Agreement, including any potential 20% excise tax under Section
4999 of the Code relating to excess parachute payments under
Section 280G of the Code, (d) any unpaid pension contributions for
the current plan year or any accumulated funding deficiency under
Section 412 of the Code and related penalties under Section 4971 of
the Code, including unpaid pension contributions of funding
deficiencies owed by members of a controlled group of corporations
which includes Falls or Thrift Subsidiary and for which Falls or
Thrift Subsidiary is liable under applicable law, (e) authorized
but unpaid profit sharing contributions or contributions under
Section 401(k) and Section 401(m) of the Code, (f) former employee
or Director health benefit or life insurance coverage and (g)
unpaid premiums for contributions required under any group health
plan to maintain such plan's coverage through the Effective Time.
8. Defined Benefit Pension Plan Liabilities. Falls and Thrift
Subsidiary (or any pension plan maintained by any of them) have not
incurred any material liability to the Pension Benefit Guaranty
Corporation ("PBGC") or the IRS with respect to any Benefit Plan
which is a defined benefit pension plan, except for the payment of
PBGC premiums pursuant to Section 4007 of ERISA, all of which if
due prior to the date of this Agreement have been fully paid, and
no PBGC reportable event under Section 4043(b) of ERISA has
occurred with respect to any such pension plan. Except as
otherwise disclosed in Schedule 1, the benefit liabilities, as
defined in Section 4001(a)(16) of ERISA, of each Benefit Plan
subject to Title IV of ERISA, using the actuarial assumptions that
would be used by the PBGC in the event of termination of such plan,
do not exceed the fair market value of the assets of such plan.
Neither Falls, Thrift Subsidiary nor any controlled group member of
Falls or Thrift Subsidiary participates in, or has incurred any
liability under Sections 4201, 4063 or ERISA for a complete or
partial withdrawal from, a multiple employer plan or a multi-
employer plan (as defined in Section 3(37) of ERISA).
9. Independent Trustee. To the best knowledge of the Executive
Officers, Falls and Thrift Subsidiary (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 Falls
or Thrift Subsidiary, (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 $25,000 or more, with such
determination being made on the basis of the aggregate affected
participants or a Benefit Plan and not with respect to any single
participant.
R. The investment portfolios of Falls and Thrift Subsidiary
consist of securities in marketable form. Except as disclosed in
Schedule 1, since September 30, 1994 to the date hereof neither
Falls nor Thrift Subsidiary 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 Falls' and Thrift
Subsidiary's 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 Falls or
Thrift Subsidiary in their capacities as such, and no Director or
officer of Falls or Thrift Subsidiary currently is being
indemnified or seeking to be indemnified by either Falls or Thrift
Subsidiary pursuant to applicable law or Falls' Certificate of
Incorporation or Bylaws or Thrift Subsidiary's Federal Stock
Charter or Bylaws.
All representations, warranties and covenants contained in this
Section II shall expire at the Effective Time, and, thereafter,
neither Falls nor any officer or director of Falls 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 Falls 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
September 30, 1994, 64,566,812 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 1/4% Convertible Subordinated Notes due
January 15, 1998 (the "Notes"). At September 30, 1994, 1,823,906
shares of Fifth Third Common Stock were reserved for issuance in
connection with outstanding options granted under it stock option
plans and 567,302 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
shareholders of Falls, 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 Falls its consolidated financial
statements as at December 31, 1991, December 31, 1992 and December
31, 1993 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 Falls its
unaudited consolidated financial statements as at September 30,
1994 and for the nine months then ended. Such unaudited
consolidated financial statements fairly present the consolidated
financial condition of Fifth Third as of their respective dates and
for the respective periods covered thereby in conformity with
generally accepted accounting principles consistently followed
throughout the periods covered thereby. Neither Fifth Third nor
any significant subsidiaries of Fifth Third have any material
liabilities, obligations or indebtedness required to be disclosed
in such financial statements other than the liabilities,
obligations and indebtedness disclosed in such financial statements
(including footnotes). Fifth Third shall furnish to Falls its
audited consolidated financial statements as at December 31, 1994
and for the year then ended as soon as such statements publicly are
available, and shall continue to furnish information for subsequent
calendar quarter periods to Falls 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, 1994, 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,
1994, 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, 1994, to the
date hereof there have been no material changes in the methods of
business operations of Fifth Third and its subsidiaries.
F. 1. The Executive Committee of the Board of Directors of Fifth
Third, by resolution adopted by the members present at a meeting
duly called and held on December 8, 1994, at which meeting a quorum
was at all times present and acting, has approved this Agreement
and the Agreement of Merger, including reserving for issuance to
Falls shareholders in accordance with this Agreement and the
Agreement of Merger a sufficient number of shares of Fifth Third
Common Stock. The full Board of Directors of Fifth Third is
expected to ratify such actions of its Executive Committee at its
regularly-scheduled quarterly Board meeting on December 20, 1994.
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 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 Falls pursuant to the provisions of Section 262
of the Delaware Corporation Law; (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 agreement, arrangements or commitments.
G. Complete and accurate copies of (i) the Second Amended Articles
of Incorporation, as amended, and (ii) the Code of Regulations of
Fifth Third in force as of the date hereof have been delivered to
Falls.
H. To the best knowledge of the chief executive officer and chief
financial officer of Fifth Third, neither Fifth Third nor any of
its subsidiaries nor any employee, officer or Director of any of
them has knowingly engaged in any activity or omitted to take any
action which, in any material way, has resulted or could result in
the violation of (i) any local, state or federal law or (ii) any
regulation, order, injunction or decree of any court or
governmental body, the violation of either of which could
reasonably be expected to have a material adverse effect on the
financial condition Fifth Third and its subsidiaries taken as a
whole. To the best knowledge of 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.
Fifth Third shall comply, and as of the Closing Date (as
hereinafter defined) Fifth Third shall have complied, with all
applicable laws, rules and regulations in connection with the
registration and issuance of the shares of Fifth Third Common Stock
in connection with the Merger contemplated hereby.
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 Falls 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 Falls 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 Falls or its agents true and
complete copies (including all exhibits and all documents
incorporated by reference) of the following documents as filed by
Fifth Third with the SEC:
a. Fifth Third's Annual Report on Form 10-K for the year ended
December 31, 1993;
b. Fifth Third's Quarterly Reports on From 10-Q for the quarters
ended March 31, 1994, June 30, 1994 and September 30, 1994;
c. any Current Report on Form 8-K with respect to any event
occurring after December 31, 1993 and prior to the date of this
Agreement;
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, 1993.
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, 1993 which Fifth Third is required to
describe in a Current Report on Form 8-K other than the Current
Reports heretofore furnished by Fifth Third to Falls. Fifth Third
timely shall furnish Falls will 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, 1994, to the date hereof, none of Fifth
Third's banking subsidiaries or thrift subsidiaries has incurred
any unusual or extraordinary loan losses which would be material to
Fifth Third on a consolidated basis; and to the best knowledge and
belief of the chief executive officer and chief financial officer
of Fifth Third, and in the light of such banking subsidiaries' and
thrift subsidiary's historical loan loss experience and their
managements' analysis of the quality and performance of their
respective loan portfolios, as of September 30, 1994 their
consolidated reserves for loan losses are adequate to absorb all
known and reasonably anticipated losses as of such date.
L. Fifth Third timely has filed all federal, state and local tax
returns required to be filed (after giving effect to all
extensions) by it and has paid or provided for all tax liabilities
shown to be due thereon or which have been assessed against it.
All tax returns filed by Fifth Third through the date hereof
constitute complete and accurate representations of the tax
liabilities of Fifth Third 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.
M. Fifth Third has not, directly or indirectly, other than J.P.
Morgan Securities Inc., 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 Falls 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, 1994, to the date hereof Fifth Third and its
affiliates, on a consolidated basis, have not incurred any unusual
or extraordinary losses in their respective investment portfolios,
and, except for events relating to the business environment in
general, including market fluctuations, the management of Fifth
third is not aware of any events which are reasonably certain to
occur in the future and which reasonably can be expected to result
in any material adverse change in the quality or performance of the
investment portfolios of Fifth Third and its affiliates on a
consolidated basis.
P. Fifth Third and its subsidiaries have good title to all the
material properties and assets reflected in Fifth Third's
consolidated statement of condition as at September 30, 1994, and
which are still owned by them and each has good 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.
Q. Since September 30, 1994, to the date hereof, Fifth Third has
been operated in the ordinary course of business, has not made any
material changes in its 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, 1994, to
the date hereof, Fifth Third has not declared or paid any dividends
nor made any distributions of any other kind to its shareholders,
except cash dividends on shares of Fifth Third Common Stock in
amounts and at such time as in accord with its historical practice.
R. To the best knowledge of the chief executive officer and chief
financial officer of Fifth Third, there are no actions, proceedings
or investigations pending before any environmental regulatory body,
with respect to or threatened against or affecting Fifth Third or
any of its subsidiaries in respect to any "facility" owned, leased
or operated by any of them (but excluding any "facility" as to
which sole interest of Fifth Third or any of its subsidiaries is
that of a lienholder or mortgagee, but including any "facility" to
which title has been taken pursuant to mortgage foreclosure or
similar proceedings and including any "facility" in which Fifth
Third or any of its subsidiaries ever participated in the financial
management of such facility to a degree sufficient to influence, or
have the ability to influence, the facility's treatment of
hazardous waste) under the Comprehensive Environmental Response,
Compensation and Liability Act of 1980, as amended ("CERCLA"), or
under any Federal, state, local or municipal 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 Fifth Third or any of its subsidiaries and/or
require Fifth Third or any of its subsidiaries to incur expenses of
more than $25,000 (whether or not covered by insurance) or (b)
would otherwise have a material adverse effect on Fifth Third or
any of its subsidiaries, nor, to the best knowledge of the chief
executive officer and chief financial officer of Fifth Third, is
there any reasonable basis for the institution of any such actions
or proceedings or investigations which is probable of assertion,
nor are there any such actions or proceedings or investigations in
which Fifth Third or any of its subsidiaries or for any release by
any other "person" of a hazardous substance caused by the spilling,
leaking, pumping, pouring, emitting, emptying, discharging,
injecting, escaping, leaching, dumping or disposing of hazardous
wastes or other chemical substances, pollutants or contaminants
into the environment, nor is Fifth Third or any of its subsidiaries
liable for any material costs (as a result of the acts or omissions
of Fifth Third or any of its subsidiaries or, to the best knowledge
of the chief executive officer and chief financial officer of Fifth
Third, as a result of the acts or omissions of any other "person")
of any remedial action including, without limitation, costs arising
out of security fencing, alternative water supplies, temporary
evacuation and housing and other emergency assistance undertaken by
any environmental regulatory body having jurisdiction over Fifth
Third or any of its subsidiaries to prevent or minimize any actual
or threatened release by Fifth Third or any of its subsidiaries of
any hazardous wastes or other chemical substances, pollutants and
contaminants into the environment which would endanger the public
health or the environment. 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 chief executive officer and chief
financial officer of Fifth Third, each "facility" owned, leased or
operated by Fifth Third or any of its subsidiaries (but excluding
any "facility" as to which the sole interest of Fifth Third or any
of its subsidiaries is that of a lienholder or mortgagee, but
including any "facility" to which title has been taken pursuant to
mortgage foreclosure or similar proceedings and including any
"facility" in which Fifth Third or any of its subsidiaries ever
participated in the financial management of such facility to a
degree sufficient to influence, or have the ability to influence,
the facility's treatment of hazardous waste) is, in all material
respects, in compliance with all applicable Federal, state, local
or municipal statutes, ordinances, laws and regulations and all
orders, rulings or other decisions of any court, administrative
agency or other governmental authority relating to the protection
of the environment, except to the extent a failure to comply would
not have a material adverse effect on the business, operations and
financial condition of Fifth Third and its subsidiaries taken as a
whole. No underground storage tank presently is located on, nor,
to the best knowledge of the chief executive officer and chief
financial officer of Fifth Third, has any such tank ever been
located on, any property owned by Fifth Third or any of its
subsidiaries or any "facility" where Fifth Third or any of its
subsidiaries has exercised any significant management role, except
for underground storage tanks previously removed from 740 N. Cable
Road, Lima, Ohio and 1601 Sylvania Road, Toledo, Ohio. All terms
contained in quotation marks in this paragraph and all paragraphs
of this Section R shall have the meanings ascribed to such terms in
and defined in, CERCLA; in addition, toxic or hazardous substances,
as used in this Paragraph R, shall mean any material or substance
that is defined or classified as a "hazardous substance" pursuant
to section 101 of CERCLA or Section 311 of the Federal Water
Pollution Control Act (33 U.S.C. Section 1321); a "hazardous waste"
pursuant to Section 1004 or Section 3001 of the Resource
Conservation and Recovery Act (42 U.S.C. Section Section 6803,
6921); a "toxic pollutant" under Section 307(a)(1) of the Federal
Water Pollution Control Act (33 U.S.C. Section 1317(a)(1)); a
"hazardous air pollutant" under Section 112 of the Clean Air Act
(42 U.S.C. Section 7412); a "pesticide" under Section 1 of the
Federal Insecticide, Fungicide, and Rodenticide Act (7 U.S.C.
Section 136); a "solid waste" pursuant to Section 3734.01 of Ohio's
Solid and Hazardous Wastes Law (O.R.C. Section 3734.01);
"petroleum" under Section 9001 of the Resource Conservation and
Recovery Act (42 U.S.C. Section 6991) and Section 3787.87 of Ohio's
Petroleum Underground Storage Tank Laws (O.R.C. Section 3737.87);
"industrial waste" or "other wastes" under Section 6111.01 of the
Ohio Water Pollution Control Act (O.R.C. Section 6111.01); or
"medical wastes" or "infectious wastes" pursuant to section 3734.01
of Ohio's Solid and Hazardous Wastes Laws (O.R.C. Section 3734.01);
or a "hazardous material" under the Hazardous Materials
Transportation Uniform Safety Act of 1990 (49 U.S.C. App. Section
1802(4)).
S. There are no actions, suits, claims, 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 any of the Directors or
officers of Fifth Third or any subsidiary or affiliate of it in
their capacities as such, and no Director or officer of Fifth Third
currently is being indemnified or seeking to be indemnified by
Fifth Third or any subsidiary pursuant to applicable law or Fifth
Third's Articles of Incorporation or Code of Regulations or the
Articles, Charter or Code of Regulations or Bylaws of any
subsidiary.
T. After consultation with Deloitte and Touche, the chief
financial officer of Fifth Third is not aware of any facts or
circumstances that would prevent the Merger from qualifying for
"pooling of interests" accounting treatment.
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 Falls Between the Date of this Agreement and
the Effective Time.
A. Falls, after consultation with Fifth Third, will take all
action necessary to call and hold its annual or a special meeting
of its shareholders for the purpose of approving 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. Subject only to (i) Falls' Board of Directors
review of Fifth Third's registration statement to be filed with the
SEC described in this subparagraph and their reasonable
satisfaction with the information set forth therein and (ii) the
exercise of their fiduciary duties, the Board of Directors of Falls
intends to inform the shareholders of Falls in the proxy materials
relating to the annual or special meeting that all Directors of
Falls intend to vote all shares of Falls 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 other
shareholders of Falls. Falls 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 reappropriate form) filed with the SEC
for the registration of the shares of Fifth Third Common Stock to
be issued to the Falls shareholders pursuant to the transactions
contemplated by this Agreement and the Agreement of Merger.
B. (i) The merger between Falls and Fifth Third is intended to be
structured to qualify for treatment under present accounting rules
as a pooling of interests and Falls and Fifth Third agree to take
no action which would disqualify this treatment under generally
accepted accounting principles. Consistent with generally accepted
accounting principles, Falls agrees that on or before the Effective
Time based on a review of Thrift Subsidiary's loan losses, current
classified assets and commercial, multi-family and residential
mortgage loans, Falls 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 to the extent permitted by law and
consistent with the fiduciary duties of the directors and other
officers of Falls and Thrift Subsidiary at such times as reasonably
requested by Fifth Third; provided, however, that neither Falls nor
Thrift Subsidiary shall be obligated to make any such changes or
adjustments until the following conditions have been satisfied:
(i) each of the conditions precedent to closing specified in
paragraphs 1., 2. and 4. of Section VI.A of this Agreement and
paragraph 8 of Section VI.B. of this Agreement shall have been
satisfied and (ii) Fifth Third shall certify to Falls in writing
that, as of the date as of which such request is being made, Fifth
Third is aware of no facts or circumstances which would permit
Fifth Third to terminate this Agreement pursuant to Section VII of
this Agreement. Fifth Third shall provide such assistance and
direction to Falls as is necessary in conforming to such polices,
practices and procedures; and (ii) from the date of this Agreement
until the Effective Time, Falls and Thrift Subsidiary 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 except upon exercise of the presently outstanding
stock options to purchase up to 143,806 shares of Falls Common
Stock for the purchase price set forth in the applicable stock
option agreements; issue any other equity securities, or issue as
borrower any long term debt or convertible or other securities of
any kind, or right to acquire any of its securities; make any
material changes in its method of business operations; make, enter
into any agreement to make, or become obligated to make, any
capital expenditures in excess of $25,000 other than those
previously disclosed in Schedule 1; make, enter into or review any
agreement for services to be provided to Falls or Thrift Subsidiary
or permit the automatic renewal of any such agreement, except any
agreement for services having a term of not more than three months
or requiring the expenditure of not more than $25,000 (for this
purpose the phrase "permit the automatic renewal" includes the
failure to send a notice of termination of such contract if such
failure would constitute a renewal); open for business any branch
office which has been approved by the appropriate regulatory
authorities but not yet opened or apply to the appropriate
regulatory authorities to establish a new branch office or expand
any existing branch office; acquire, become obligated to acquire,
or enter into any agreement to acquire, any banking or non-banking
company or any branch offices of any such companies; declare or pay
any cash dividends on its own stock other than normal and customary
cash dividends paid in such amounts and at such times as Falls
historically has done on its Common stock, provided this covenant
shall only apply to Falls; and pay any stock dividends or make any
other distributions on its stock. Notwithstanding the foregoing,
Falls may (i) increase the amount of its quarterly cash dividend
during the second quarter of 1995 in an amount as Falls
historically has done, and (ii) provide for increases in employee
salaries and benefits in the ordinary course of business,
consistent with past practices.
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. It is
Fifth Third's intention to retain the Thrift Subsidiary's charter
and to continue to operate at least one of Thrift Subsidiary's
offices thereunder and pursuant thereto, the remainder of the
assets will be transferred via an asset sale to another subsidiary
of Fifth Third. The parties agree to work together, at Fifth
Third's discretion, to effectuate such a transaction, but Fifth
Third acknowledges that any delay in effecting the retention of the
Thrift Subsidiary's Charter shall have no bearing on the Closing
Date of the Merger.
B. Falls agrees to permit Fifth Third, its officers, employees,
accountants, agents and attorneys, and Fifth Third agrees to permit
Falls, its officers, employees, accountants, agents and attorneys
to have reasonable access during business hours to their books,
records and properties, and those of Thrift Subsidiary 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 Falls and Thrift Subsidiary or Fifth Third and its
subsidiaries and affiliates, 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 Falls or Fifth Third shall not relieve Falls or
Fifth Third from any responsibility or liability for any material
misrepresentation or material breach of warranty hereunder
discovered in the course of or subsequently to such examination and
prior to the Effective Time.
C. At the Effective Time, each outstanding option under the Falls
Financial Stock Option Plan (the "Option Plan") shall continue
outstanding as an option to purchase, in place of the purchase of
shares of Falls Common Stock, the number of shares (rounded up to
the nearest whole share) of Fifth Third Common Stock that would
have been received by the optionee pursuant to paragraph 1(b) of
Article VII of the Agreement of Merger had the option been
exercised in full (without regard to any limitations contained
therein for exercise) for shares of Falls Common Stock immediately
prior to the Effective Time upon the same terms and conditions,
including without limitation, payment in full of the contractual
exercise price, under the relevant option as were applicable
immediately prior to the Effective Time (except that all options
shall be immediately exercisable). Fifth Third and Falls agree to
take such actions as shall be necessary to give effect to the
foregoing.
At all times after the Effective Time, Fifth Third shall reserve
for issuance such number of shares of Fifth Third Common Stock as
necessary so as to permit the exercise of options granted under the
Option Plan in the manner contemplated by this Agreement and the
instruments pursuant to which such options were granted. Fifth
Third shall make all filings required under federal and state
securities laws, including without limitation, filing a
registration statement on Form S-8 (or such other form as may be
appropriate) with the SEC within at least sixty (60) days following
the Closing Date, so as to permit the exercise of such options and
the sale of the shares received by the optionee upon such exercise.
In case, prior to the Effective Time, of any reclassification,
reorganization, recapitalization, stock dividend or distribution,
subdivision, combination or exchange of the outstanding shares of
Fifth Third Common Stock or in case of any consolidation or merger
of Fifth Third with or into any other corporation, or in the case
of any sale or transfer of all or substantially all of Fifth
Third's assets, then, the rights of the optionees under the Option
Plan shall be appropriately adjusted so that the optionees will be
in the same position as if their options had been exercised
immediately before such corporate action or transaction. The
provisions hereof shall similarly apply to successive
reclassification, reorganizations, recapitalization, stock
dividends or distributions, subdivisions, combinations or
exchanges, consolidations, mergers, sales or transfers.
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 shareholders of Falls 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 Certificate of
Incorporation and Bylaws.
2. All necessary governmental and regulatory orders, consents,
clearances and approvals and requirements shall have been secured
and satisfied for the consummation of such transactions, including
without limitation, those of the Federal Reserve System, the Office
of Thrift Supervision, the Ohio Division of Banks and the Federal
Deposit Insurance Corporation to the extent required.
3. Dinsmore and Shohl, counsel for Fifth Third, or other counsel
reasonably acceptable to Fifth Third and Falls, shall have
delivered an opinion as to certain federal tax aspects of the
transaction addressed to Falls 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 Falls 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 obligations 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 Falls which specifically refers to the condition or
conditions being waived:
1. All of the representations and warranties of Falls 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 Falls or Thrift Subsidiary taken as a
whole.
2. Falls 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 Falls and
the Bank subsidiaries taken as a whole.
3. Squire, Sanders and Dempsey, counsel for Falls and Thrift
Subsidiary, shall have delivered an opinion addressed to Fifth
Third in substantially the form appended hereto as Appendix C.
4. Falls and Thrift Subsidiary shall have:
(i) taken all actions necessary to freeze their defined benefit
plan as of a date at least 60 days preceding the Effective Time
such that no further benefits shall accrue under that plan (except
for any minimum top-heavy benefits required under Section 416 of
the Code) in such a way that after said freeze, the unfunded
pension liability on a termination basis of said defined benefit
plan (as determined by Fifth Third's actuaries and including top-
heavy benefits) is not in excess of $800,000;
(ii) a. no later than January 1, 1995, applied to the Internal
Revenue Service for a favorable determination letter in which the
Internal Revenue Service will determine that such defined benefit
plan, as a whole, satisfies all qualification requirements (without
caveat or qualification), including all amendments to the Code
through the date of this Agreement. Said application for a
determination letter shall be with respect to all amendments to the
defined benefit plan including any amendments necessary to freeze
the plan;
b.used its best efforts to secure, as soon as possible,
after January 1, 1995, said favorable determination letter;
(iii) without the advance written consent of Fifth Third:
a. not have made any contributions to the defined benefit
plan after the date of this Agreement;
b. not have adopted any amendments to the defined benefit
plan after the date of this Agreement; and,
c. the consent for which shall not be unreasonably
withheld, not have made any distributions from the defined benefit
plan after the date of this Agreement.
(iv) if Fifth Third has requested, developed a plan
and timetable for terminating and funding the defined benefit plan
and, with the advance written approval of Fifth Third, have
proceeded with the implementation of said termination plan and
timetable;
(v) taken all actions necessary to freeze their 401(k)
plan as of a date at least 60 days preceding the Effective Time
such that no further contributions (including employee 401(k)
contributions) shall be made under that plan (except for any
minimum top-heavy contributions required under Section 416 of the
Code);
(vi) received from the Internal Revenue Service (and
shall have furnished to Fifth Third), a favorable determination
letter in which the Internal Revenue Service has determined that
such 401(k) plan, as a whole, satisfies all qualification
requirements (without caveat or qualification), including all
amendments to the Code through the date of this Agreement. Said
IRS determination letter shall cover all amendments to the 401(k)
plan including any amendments necessary to freeze the plan;
(vii) without the advance written consent of Fifth
Third:
a. not adopted any amendments to the 401(k) plan
after the date of this Agreement; and
b. the consent for which shall not be
unreasonably withheld, not made any distributions from the 401(k)
plan after the date of this Agreement.
c. not have made any contributions to the 401(k)
plan after the date of this Agreement, except for 401(k) employee
contributions, employer matching contributions (not to exceed the
historic rate of matching contribution) and a profit sharing
contribution not to exceed 2% of compensation from January 1, 1995
through the date the 401(k) plan is frozen.
(viii) provided to Fifth Third at least 60 days prior
to the Effective Time any and all documentation Fifth Third shall
reasonably request to determine that the requirements of Sections
404, 412, 415 and 416 of the Code have been satisfied with respect
to each qualified plan maintained or ever maintained by Falls or
Thrift Subsidiary; and that the requirements of Sections 401(k) and
(m) of the Code have been satisfied by such plans as are subject to
these sections.
(ix) provided to Fifth Third at least 60 days prior to
the Effective Time any and all documentation Fifth Third shall
reasonably request to demonstrate that none of the qualified plans
maintained by Falls or Thrift Subsidiary are considered "top-heavy
plans" within the meaning of Section 416 of the Code for 1995.
5. The aggregate amount of Shareholders' Equity (including Common
Stock, Additional Paid-In Capital and Retained Earnings and
excluding Treasury Stock) of Falls 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
$50,723,000, its total shareholders' equity as at September 30,
1994 with the exception of any adjustments under FAS 115 rules and
regulations or adjustment or actions requested by Fifth Third that
adversely impact Shareholders' Equity as defined in this
subparagraph.
6. The receipt of a certificate from Falls, executed by the 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 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 Falls and Thrift Subsidiary 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 Falls and Thrift Subsidiary taken as
a show; 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.
7. The total issued and outstanding shares of Falls Common Stock
shall not exceed 3,119,936 shares which includes any shares
issuable upon the exercise of any outstanding Stock Option.
8. Fifth Third shall have received a letter from Deloitte and
Touche, Fifth Third's independent public accountants, to the effect
that the Merger will qualify for "pooling of interests" accounting
treatment.
C. Conditions to the Obligations of Falls:
The obligation of Falls 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 Falls 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. Counsel for Fifth Third, shall have delivered an opinion
addressed to Falls in substantially the form appended hereto as
Appendix D.
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 Falls shareholders 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 Falls
shareholders hereunder shall have been authorized for trading on
the National Market System of the National Association of
Securities Dealers upon official notice of issuance.
6. The receipt of a fairness opinion from McDonald and Company
Securities, Inc., dated as of a date reasonably proximate to the
effective date of the registration statement described in Section
5 immediately preceding stating that as of the date of such
opinion, the exchange ratio pursuant to this Agreement and the
Agreement of Merger is fair to Falls' shareholders from a financial
point of view.
VII. Additional Covenants
A. It is Fifth Third's intention to merge the Thrift Subsidiary
with and into Fifth Third Bank of Northeastern Ohio ("5/3"), a
corporation to be established under a new charter issued subsequent
to the date of this Agreement, to be effective the Effective Time
but Fifth Third acknowledges that any delay in effecting the
establishment of 5/3 shall have no bearing on the Closing Date of
the Merger. Falls shall recommend three (3) individuals who are
currently Directors of Falls to serve as Directors of 5/3 who shall
be reasonably acceptable to Fifth Third.
B. 1. It is Fifth Third's intention (but not obligation) to
employ in 5/3 as many of Thrift Subsidiary's employees as possible.
Falls shall cause senior management of Thrift Subsidiary to
recommend to Fifth Third the employees it feels should be hired by
5/3. Any hiring decisions are exclusively those of Fifth Third and
5/3 and shall be made in accordance with Fifth Third's and 5/3's
standard employment criteria. Additional employment opportunities
with Fifth Third may be available at other locations with
additional Fifth Third affiliates. If so, Fifth Third will
consider for employment at these additional locations any other of
Thrift Subsidiary's employees who are willing to consider
employment at such other locations. Any hiring decisions are
exclusively those of Fifth Third and shall be made in accordance
with its standard employment criteria. For purpose of determining
vesting under Fifth Third's Master Profit Sharing Plan, employees
who at any time actively participated in the 401(k) plan sponsored
by Falls or the Thrift Subsidiary, shall be credited with their
period of service to Falls and the Thrift Subsidiary. For purposes
of determining vesting (but not benefit accrual) under Fifth
Third's Master Retirement Plan, employees who are active
participants in the defined benefit plan sponsored by Falls or
Thrift Subsidiary (or who would be but for that plan having been
frozen) shall receive credit for their period of service taken into
account under said defined benefit plan for vesting purposes (or
which would have been taken into account had that plan not been
frozen). For purposes of determining participation in all other
Fifth Third employee benefit plans, each employee of Thrift
Subsidiary who becomes an employee of Fifth Third or any of its
subsidiaries or affiliates at or immediately subsequent to the
Merger shall receive credit for their period of service to Thrift
Subsidiary.
2. All Thrift Subsidiary's employees hired by Fifth Third (or an
affiliate, including 5/3) shall receive the standard package of
Fifth Third employee benefits which are in place throughout the
Fifth Third holding company system. These benefits include group
health and major medical insurance, group life insurance, pension
and profit sharing participation, free checking and traveler's
checks and other customary benefits. Thrift Subsidiary's employees
hired by Fifth Third (or an affiliate, including 5/3) shall be
employed on an at will basis and shall be entitled to participate
immediately following the Closing Date 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 Thrift Subsidiary for purposes of determining
participation and vesting in all Fifth Third employee benefit plans
but not for purposes of determining the benefits accrued
thereunder. An employee's entitlement to benefits under such Fifth
Third Plans shall be subject to the Code of Section 415 limits
thereunder.
3. Any employee of Thrift Subsidiary whose employment is
terminated by Thrift Subsidiary or Fifth Third in connection with
the merger or within six (6) months after the Closing Date 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 (12) 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 (24) 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 (6) week's pay, plus applicable COBRA benefits. Employees who
leave of their own free will shall not be entitled to any severance
pay. Nothing contained in this Paragraph 3 shall be construed or
interpreted to limit or modify in any way Fifth Third's at will
employment policy. Notwithstanding the foregoing, any person who
leaves the employ of Fifth Third due to a material change in his or
her compensation, responsibilities, the location of the facility to
which he or she may be transferred, provided it is in excess of 50
miles from the location to which such employee had been assigned,
or any other material terms and conditions of his or her
employment, within six (6) months after the Closing Date, shall be
entitled to severance pay as though such person's employment had
been terminated in connection with the merger.
4. The employees of Thrift Subsidiary retained by Fifth Third
after the Closing Date will be paid salaries by Fifth Third
commensurate with the salary levels of comparable Fifth Third
employees, subject, on an ongoing basis, to acceptable performance.
5. The employment contracts between Falls and/or Thrift Subsidiary
and certain of their officers (the "Contract Officers") as
described in Schedule 1 hereto, shall remain in effect through
December 31, 1995, subject to the provisions of this paragraph 5.
Prior to the Effective Date, Fifth Third will consult with each of
the Contract Officers with respect to whether Fifth Third will
offer such Contract Officer employment with a Fifth Third affiliate
including 5/3, and if so, with respect to their position, title,
duties, compensation levels and location of the facility to which
he or she may be transferred. If Contract Officer chooses not to
accept such offer of Fifth Third, or Fifth Third concludes not to
offer such Contract Officer a position, such Contract Officer shall
receive the severance amount set forth in such Contract Officer's
respective employment contract and shall receive no other severance
benefits otherwise provided in this Agreement. In the event that
such Contract Officer accepts the employment offered by Fifth
Third, such Contract Officer shall become an at will employee of
5/3 or such other affiliate in accordance with subparagraphs 2 and
3 of this Section VII.B and the respective contract shall terminate
on the date of such employment.
6. Fifth Third, through one of its bank subsidiaries, shall
consider, based on compliance with current standards of
creditworthiness, advancing loans not later than the termination of
the 401(k) benefit plan to certain of Thrift Subsidiary's employees
to replace currently outstanding loans extended to such employees
by the 401(k) benefit plan currently offered by Falls.
C. All provisions for indemnification and limitation of liability
now existing in favor of the employees, agents, Directors or
officers of Falls or 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 five years thereafter, or in the case of matters occurring prior
to the Effective Time which have not been resolved prior to the
fifth anniversary of the Effective Time, until such matters are
finally resolved. Fifth Third shall also purchase and keep in
force for such five year period, directors' and officers' liability
insurance to provide coverage for acts or omissions of the type and
in the amount currently covered by Falls' and Thrift Subsidiary's
existing directors' and officers' (and covering such former
directors and officers of Falls and Thrift Subsidiary whether or
not they remain as officers or directors of Fifth Third or any of
its subsidiaries) 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.
D. Fifth Third will not disclose to others and will hold in
confidence any non-public, confidential information disclosed to it
by Falls concerning Falls or the Thrift Subsidiary. Falls 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 Falls or Fifth Third, as
the case may be, and shall not be used by Fifth Third or Falls, as
the case may be, in any way detrimental to Falls or Fifth Third.
E. All notices under this Agreement or under the Agreement of
Merger shall be in wiring 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 Falls to James
J. Little, President and Chief Executive Officer, Falls Financial,
Inc., 2335 Second Street, Cuyahoga Falls, Ohio 44221, with a copy
to James P. Mulroy, Esq., Squire, Sanders and Dempsey, 1300
Huntington Center, 41 South High Street, Columbus, Ohio 43215; 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. 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 Falls 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 the
Board of Directors of Falls, dated December 2, 1994. 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. Each of Falls and the Thrift Subsidiary shall not, directly or
indirectly, and shall cause their respective Executive Officers,
directors, employees, agents and advisors not to, directly or
indirectly, solicit or initiate any proposals or offers from any
person, or discuss or negotiate with any such person, relating to
any acquisition or purchase of all or a material amount of the
assets of, or any equity securities of, or any merger consolidation
or business combination with, Falls or the Thrift Subsidiary (such
transactions are referred to herein as "Acquisition Transactions"),
provided, however, that nothing contained in this paragraph G shall
prohibit (i) Falls or the Thrift Subsidiary, as the case may be,
from furnishing information to, or entering into discussions or
negotiations with, any person or entity that makes an unsolicited
proposal of an Acquisition Transaction if and to the extent that
(a) the Board of Directors of Falls, after consultation with and
based upon the written advice of legal counsel, determines in good
faith that such action is required for the directors of Falls to
fulfill their fiduciary duties and obligations to the Falls
stockholders and other constituencies under Delaware law, taking
into consideration the bidding procedures engaged in connection
with the transactions contemplated hereby and (b) prior to
furnishing such information to, or entering into discussions or
negotiations with, such person or entity, Falls provides immediate
written notice to Fifth Third to the effect that it is furnishing
information to, or entering into discussions or negotiations with,
such person or entity, or (ii) the Board of Directors of Falls from
failing to make, withdrawing or modifying its recommendation
referred to in Section IV.A following receipt of a proposal for an
Acquisition Transaction if the Board of Directors of Falls, after
consultation with and based upon the written advice of legal
counsel, determines in good faith that such action is required for
the directors of Falls to fulfill their fiduciary duties and
obligations to the Falls stockholders and other constituencies
under Delaware law, taking into consideration the bidding
procedures engaged in connection with the transactions contemplated
hereby.
H. (a) Falls shall pay Fifth Third a fee of $2.2 million promptly
following termination of this Agreement after the first to occur of
any of the following events:
(i) (A) the shareholders of Falls shall not have approved
the Merger on or before October 31, 1995 if, prior thereto or the
termination date of this Agreement, whichever is earlier, Fifth
Third is not in breach of its material obligations hereunder or
under the Agreement of Merger, and (B) after any person (other than
Fifth Third or any affiliate of Fifth Third or any person or entity
acting in concert with Fifth Third or such affiliate (a "Fifth
Third Entity")) shall have "commenced" (as such term is defined in
Rule 14d-2 under the Securities Exchange Act of 1934 (the "Exchange
Act")) a tender offer or exchange offer to purchase shares of Falls
Common Stock such that, upon consummation of such offer, such
person would have Beneficial Ownership (as defined below) or the
right to acquire Beneficial Ownership of twenty-five percent (25%)
or more of the voting power of Falls and (b) within twelve (12)
months after the earliest of the date of the Falls shareholders'
meeting at which the Merger is submitted for approval and voted
upon, the date this Agreement is terminated or October 31, 1995,
any person (other than a Fifth Third Entity) shall have entered
into a written understanding in principle or an agreement to
consolidate or merge with Falls, to acquire all or substantially
all of Falls' assets or stock, or to engage in a similar
transaction;
(ii) (A) if, prior to the termination date of this
Agreement, Fifth Third is not in breach of its obligations
hereunder or under the Agreement of Merger, and any person (other
than a Fifth Third Entity) shall have acquired Beneficial Ownership
or the right to acquire Beneficial Ownership of twenty-five percent
(25%) or more of the voting power of Falls and (B) within twelve
(12) months after the earliest of the date of the Falls'
shareholders' meeting at which the Merger is submitted for approval
and voted upon, the date this Agreement is terminated or October
31, 1995, any person (other than a Fifth Third Entity) shall have
entered into a written understanding in principle or an agreement
to consolidate or merge with Falls, to acquire all or substantially
all of Falls' assets or stock, or to engage in a similar
transaction;
(iii) (A) the shareholders of Falls shall not have approved
the Merger on or before October 31, 1995, if, prior thereto or the
termination date of this Agreement, whichever is earlier, Fifth
Third is not in breach of its obligations hereunder or under the
Agreement of Merger, and (B) subsequent to the date hereof any
person (other than a Fifth Third Entity) shall have publicly
announced a bona fide interest in (x) acquiring Falls by merger,
consolidation, purchase of all or substantially all of its assets
or any other similar transaction or (y) making an offer described
in clause (i) above and in either such case, within twelve (12)
months after the earlier of the date of the Falls shareholders'
meeting at which the Merger is submitted for approval and voted
upon or October 31, 1995, such person (other than a Fifth Third
Entity) shall have entered into a written understanding in
principle or an agreement to consolidate or merge with Falls, to
acquire all or substantially all of Falls' assets or stock, or to
engage in a similar transaction;
(iv) (A) the shareholders of Falls shall not have
approved the Merger on or before October 31, 1995, if, prior
thereto or the termination date of this Agreement, whichever is
earlier, Fifth Third is not in breach of its obligations hereunder
or under the Agreement of Merger, and (B) any person, with respect
to Falls Common Stock, shall have publicly solicited proxies or
written consents or become a "participant" in any "solicitation"
(as such terms are defined in Regulation 14A under the Exchange
Act) in opposition to the Merger and within twelve (12) months
after the earlier of the date of the Falls' shareholders' meeting
at which the Merger is submitted for approval and voted upon or
October 31, 1995, such person (other than a Fifth Third Entity)
shall have entered into a written understanding in principle or an
agreement to consolidate or merge with Falls, to acquire all or
substantially all of Falls' assets or stock, or to engage in a
similar transaction;
(v) unless Fifth Third is in breach of its obligations
hereunder or under the Agreement of Merger, the Board of Directors
of Falls, other than as required in the exercise of its fiduciary
duties (as determined in good faith by such directors), fails to
make, withdraws, or modifies in a manner adverse to Fifth Third,
its recommendation that shareholders of Falls vote to approve the
Merger before the date of the Falls' shareholders' meeting at which
the Merger is to be submitted for approval and voted upon and where
Falls has not terminated this Agreement pursuant to the provisions
of Section VIII hereof; or
(vi) unless Fifth Third is in breach of its obligations
hereunder or under the Agreement of Merger, at or prior to the
Falls' shareholders' meeting at which the Merger is submitted for
approval and voted upon or prior to the termination date of this
Agreement, whichever is earlier, a person (other than a Fifth Third
Entity) enters into a written understanding in principle or an
agreement to consolidate or merge with Falls, to acquire all or
substantially all of Falls' assets or to engage in a similar
transaction.
(b) As used in this Paragraph H, Beneficial Ownership
shall have the meaning ascribed to it in Rule 13d-3 under the
Exchange Act.
I. Fifth Third and Falls 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 Closing Date, this subsection shall
be of no further force or effect.
J. 1. Effective on the Closing Date, but executed in advance of the
Closing Date, Falls shall deliver to Midwest Payment Systems, Inc.
("MPS") an agreement to convert all electronic funds transfer
("EFT") related services and the Jeanie system to MPS, which
conversion shall be accomplished on or immediately following the
Closing Date. Such agreement shall state that it shall terminate
in the event there is no closing. After the date hereof, at Fifth
Third's discretion, Falls shall notify any and all vendors
currently providing such services of such conversion. Falls shall
fully cooperate with Fifth Third in the preparation for such
conversion.
2. Effective on the Closing Date, but executed in advance of the
Closing Date, Falls shall deliver an agreement with Fifth Third or
an affiliate of Fifth Third which will provide for the transfer to
any such entity of the performance of any and all data processing
services including, without limitation, item processing and
application processing, which services by any such entity will
begin on or immediately following the Closing Date. Such agreement
shall state that it shall terminate in the event there is no
closing. After the date hereof, at Fifth Third's discretion, Falls
shall notify any and all vendors currently providing such services
of such transfer. Falls shall fully cooperate with Fifth Third in
the preparation for such transfer. In the event that Fifth Third
determines that a third party should provide such services to
Falls, Falls agrees to have such services provided after the
Closing Date by the third party recommended for such purposes by
Fifth Third.
K. Fifth Third and Falls 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 Falls agrees to cooperate with Fifth Third and Fifth Third
agrees to cooperate with Falls in all reasonable respects in
securing such approvals.
L. Fifth Third and Falls 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 necessary.
M. 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.
N. 1. Between the date hereof and the Closing Date, Falls 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 Falls 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.
O. Within thirty (30) days from the date of this Agreement, Fifth
Third shall perform such additional reviews or investigations as
Fifth Third deems necessary to determine any potential liability,
loss, cost or expense resulting from the matters disclosed by Falls
on Schedule 1 hereto and relating to Section II.P of this
Agreement.
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 Falls or by Falls to Fifth Third in the following
instances:
1. By Fifth Third or Falls, 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 misrepresentations, 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 Falls 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, 1994,
except for events relating to the business environment in general.
3. By the vote of a majority of the Board of Directors of either
Fifth Third or Falls if Falls has conducted any meeting of
shareholders necessary to approve the Merger on or before June 23,
1995, and the merger transaction contemplated herein shall not have
been consummated on or before August 31, 1995, unless the failure
to consummate by such date is related to the action or inaction of
any regulatory authority whose approval of this merger transaction
or the registration of the Fifth Third Common Stock as described in
subparagraph VI.C.5 is required, and such action or inaction is not
directly related to either Fifth Third's or Falls' breach of their
respective obligations under this Agreement then on or before
October 31, 1995.
4. By Fifth Third or Falls if the holder of ten percent (10%) or
more of the outstanding shares of Falls Common stock shall have
perfected their rights as dissenting shareholders pursuant to
Section 262 of the Delaware Corporation Law.
5. By Falls if the Applicable Market Value Per Share of Fifth
Third Common Stock (as defined in the Agreement of Merger) is
$56.40 or greater.
6. By Fifth Third if the Applicable Market Value Per Share of
Fifth Third Common Stock (as defined in the Agreement of Merger) is
$37.60 or less.
7. By Fifth Third if prior to thirty (30) days from the date of
this Agreement Fifth Third notifies Falls, in writing, the review
described in paragraph O of Section VII has revealed a substantial
likelihood of any liability, loss, cost or expense to Falls in
excess of an aggregate of $1,000,000 for the remediation of any
contamination.
8. By the mutual written consent of Fifth Third and Falls.
B. If Falls' shareholders, 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 Paragraph
D of Section VII hereof, shall be void and of no further force or
effect, and, neither party hereto not in material breach or default
of its representations, warranties and covenants hereunder shall
have any liability of any kind to the other party including but not
limited to liability for expenses incurred by the other party in
connection with this transaction.
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 Falls and Fifth Third) with the Secretaries of State
of Ohio and Delaware and 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 Falls and Fifth Third upon the authorization
of each company's respective Board of Directors and without further
approval of Falls' shareholders, except that no such amendment,
modification or supplement may be effected without Falls
shareholder approval if to do so would violate any applicable
provisions of Delaware 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 State of
Ohio. This Agreement and all of the provisions hereof shall be
binding upon and inure to the benefit of the parties hereto and
their respective successors and permitted assigns but none of the
provisions hereof hall 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 Falls 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.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this
Affiliation Agreement as of the date hereinabove set forth.
FIFTH THIRD BANCORP
(SEAL) By:/s/ George A. Schaefer, Jr.
George A. Schaefer, Jr.
President and Chief Executive
Officer
Attest: /s/ Michael K. Keating
Michael K. Keating
Secretary
FALLS FINANCIAL, INC.
By:/s/ James J. Little
James J. Little
President and Chief Executive
Officer
Attest: /s/ Wayne M. Rice
Wayne M. Rice
Secretary
<PAGE>
ANNEX B
PLAN AND AGREEMENT OF MERGER
of
FALLS FINANCIAL, INC.
(a Delaware 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 12, 1994, between FALLS FINANCIAL, INC., a Delaware
corporation (hereinafter called "Falls"), and FIFTH THIRD BANCORP,
Cincinnati, Hamilton County, Ohio, an Ohio corporation (hereinafter
sometimes called the "Surviving Corporation" or "Fifth Third"),
Falls 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 Falls merge into Fifth Third pursuant to this
Agreement of Merger and the applicable provisions of the laws of
the State of Ohio and the State of Delaware.
NOW, THEREFORE, the Constituent Corporations hereby agree each with
the other, in accordance with the applicable provisions of the laws
of the State of Ohio and the State of Delaware, that Falls 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 Falls is a
corporation which exists under the laws of the State of Delaware.
ARTICLE II
THE MERGER
When this Agreement of Merger shall have been approved and adopted
and it, or a valid Certificate of Merger, shall have been filed and
recorded along with other necessary documents in accordance with
the laws of the State of Ohio and the State of Delaware, and the
Merger becomes effective, the separate existence of Falls shall
cease and Falls 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 thereof (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 Falls, one of the Constituent
Corporations, is The Corporation Trust Company, 1209 Orange Street,
City of Wilmington, County of New Castle, Delaware.
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 issued and outstanding share of Common Stock, $.01 par
value per share, of Falls ("Falls Common Stock") shall be cancelled
as of the Effective Time and shall be converted into the right to
receive .5226 of a share of Fifth Third Common Stock ("Exchange
Ratio"), subject to adjustment, if any, as set forth in Article
VII, sections 1(c) and (d) and Article VII Section 4 hereof.
(c) If the Applicable Market Value Per Share of Fifth Third
Common Stock (as hereinafter defined) is more than ten percent
(10%) above or below $47.00, then the Exchange Ratio shall be
adjusted in accordance with this subsection. Accordingly, if the
Applicable Market Value Per Share of Fifth Third Common Stock
exceeds $51.70, then the Exchange Ratio shall be adjusted such that
each issued and outstanding share of Falls Common Stock shall be
converted into the right to receive a fraction (expressed in
decimal figures carried to four (4) places) of a share of Fifth
Third Common Stock determined by dividing $27.02 by the Applicable
Market Value Per Share of Fifth Third Common Stock. Similarly, if
the Applicable Market Value Per Share of Fifth Third Common Stock
is less than $42.30, then the Exchange Ratio shall be adjusted such
that each issued and outstanding share of Falls Common Stock shall
be converted into the right to receive a fraction (expressed in
decimal figures carried to four (4) places) of a share of Fifth
Third Common Stock determined by dividing $22.11 by the Applicable
Market Value Per Share of Fifth Third Common Stock. If the
Applicable Market Value Per Share of Fifth Third Common Stock is
not less than $42.30 or not more than $51.70, then there shall be
no adjustment to the Exchange Ratio.
(d) The "Applicable Market Value Per Share of Fifth Third Common
Stock" is the average of the per share closing prices of Fifth
Third Common Stock as reported on the NASDAQ National Market System
for the twenty trading days ending on the fifth (5th) trading day
prior to the time the Merger becomes effective ("Valuation
Period").
(e) Any stock options outstanding immediately prior to the time
the Merger becomes effective, entitling the holders thereof to
purchase shares of Falls Common Stock will remain unchanged and
will remain outstanding when the Merger becomes effective, except
that, upon the effective time of the Merger, the holders thereof
shall become entitled to purchase the number of shares of Fifth
Third Common Stock to which such holders would have been entitled
to receive pursuant to Section 1 of this Article VII, if,
immediately preceding the time the Merger became effective, such
securities were converted into such number of shares of Falls
Common Stock to which the holders would be entitled under the terms
of the governing documents for such securities, disregarding for
purposes of this paragraph any limitations on exercise or vesting
thereof.
2. At the time the Merger becomes effective, all of the shares of
Falls 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 Falls, except such rights, if any, as they may be
entitled to under the provisions of Section 262 of the Delaware
Corporation Law 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 their Falls 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 Falls Common Stock, upon
surrender or 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 Falls Common Stock
shall have been converted by the Merger, plus a cash payment for
any fraction of a share to which the holder is entitled, in lieu of
such fraction of a share, equal in amount to the product resulting
from multiplying such fraction by the Applicable Market Value Per
Share of Fifth Third Common Stock determined in accordance with the
provisions of paragraph 1(b) of this Article VII. Until so
surrendered, each outstanding certificate that prior to the time
the Merger becomes effective represented shares of Falls 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 Falls Common Stock
shall have been so converted shall be paid with respect to such
shares only when the certificate or certificates evidencing shares
of Falls 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 of this Article VII
shall be adjusted so as to give the Falls 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 of Merger 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 the State
of Ohio and the State of Delaware. Without limiting the generality
of the foregoing, and subject thereto, at the time the Merger
becomes effective: the separate existence of Falls 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 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 Section 262 of the Delaware Corporation Law; 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 Falls 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 Falls and otherwise
to carry out the purposes of this Agreement of Merger.
ARTICLE IX
REPRESENTATIONS AND AGREEMENTS OF SURVIVING CORPORATION
1. Fifth Third, the Surviving Corporation, agrees that it may be
served with process in Ohio in any proceeding for the enforcement
of any obligation of Falls, one of the Constituent Corporations,
and in any proceeding for the enforcement of the rights of a
dissenting stockholder of Falls against the Surviving Corporation.
2. Fifth Third, the Surviving Corporation, irrevocably appoints
the Secretary of State of Ohio as its agent to accept service of
process in any such proceedings 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 Ohio is set
forth in Article VI of this Agreement of Merger.
3. Fifth Third, the Surviving Corporation, agrees that it will
promptly pay to any dissenting stockholders of Falls, one of the
Constituent Corporations, the amount, if any, to which they shall
be entitled under the provisions of Section 262 of the Delaware
Corporation Law with respect to the rights of dissenting
stockholders.
4. Fifth Third, the Surviving Corporation, agrees that it may be
served with process in the State of Delaware in any proceeding for
enforcement of any obligation of any constituent corporation of the
State of Delaware, as well as for enforcement of any obligation of
Falls and any obligation of Fifth Third arising from the Merger,
including any suit or other proceeding to enforce the right of any
stockholders of Falls as determined in appraisal proceedings
pursuant to Section 262 of the Delaware Corporation Law, and does
hereby irrevocably appoint the Secretary of State of the State of
Delaware as its agent in any such suit or other proceeding. Copies
of any such service shall be mailed to Fifth Third at the address
specified in Article VI of this Agreement of Merger.
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. Falls, one of the Constituent Corporations, represents and
warrants that the Board of Directors of Falls has by resolution
adopted by it, approved this Agreement of Merger and directed that
this Agreement of Merger be submitted to a vote of the stockholders
entitled to vote in respect thereof at a meeting of the
stockholders held for such purpose. Notice of such meeting as
required by the provisions of the Delaware Corporation Law, the
Certificate of Incorporation and the Bylaws of Falls shall be duly
given.
3. Falls, 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 Falls entitled to vote in
respect thereof, in accordance with the provisions of the Delaware
Corporation Law and the Certificate of Incorporation and Bylaws of
Falls.
4. A Certificate of Merger, properly completed in accordance with
applicable provisions of law and this Agreement of Merger, shall be
filed and recorded in accordance with the requirements of the laws
of the State of Ohio and the State of Delaware and shall become
effective at the close of business on the day such Certificate and
other necessary documents are filed (unless another date is
specified in the Certificate of Merger) with the Secretary of State
of Ohio. Such Certificate of Merger shall not be filed with the
Secretary of State of Ohio and the Secretary of the State of
Delaware until, but shall be filed promptly after, all of the
conditions precedent to consummating the Merger as contained in
Section VI of the Affiliate Agreement shall have been fully met or
effectively waived, the filing of such Certificate 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 stockholders of Falls have 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 Falls stockholders 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:/s/ George A. Schaefer, Jr.
George A. Schaefer, Jr.
President and Chief Executive Officer
Attest:/s/ Michael K. Keating
Michael K. Keating
Secretary
FALLS FINANCIAL, INC.
By:/s/ James J. Little
Name:James J. Little
Title:President and Chief Executive Officer
Attest:/s/ Wayne M. Rice
Name:Wayne M. Rice
Title:Secretary
<PAGE>
ANNEX C
Fairness Opinion of McDonald and Company Securities,
Inc.
April 20, 1995
Board of Directors
Falls Financial, Inc.
2335 Second Street
Cuyahoga Falls, OH 44222-0113
Gentlemen:
You have requested our opinion with respect to the fairness, from
a financial point of view, as of the date hereof, to the holders of
common stock, $0.01 par value per share ("Falls Financial Common"),
of Falls Financial, Inc. ("Falls Financial") of the exchange ratio
(the "Exchange Ratio") as set forth in Section 7.1(b) of the Plan
and Agreement of Merger, dated December 12, 1994 (the "Merger
Agreement"), by and among Fifth Third Bancorp ("Fifth Third") and
Falls Financial. The Exchange Ratio provides for the exchange of
each share of Falls Financial Common for .5226 share of Fifth Third
common stock, no par value per share ("Fifth Third Common Stock").
The Merger Agreement provides for the merger (the "Merger") of
Falls Financial with and into Fifth Third, pursuant to which, among
other things, at the effective date of the Merger (as defined in
the Merger Agreement), outstanding shares of Falls Financial Common
shall be cancelled and converted into the right to receive shares
of Fifth Third Common at the Exchange Ratio. The terms and
conditions of the Merger are more fully set forth in the Merger
Agreement and the Affiliation Agreement.
McDonald and Company Securities, Inc., as part of its investment
banking business, is customarily engaged in the valuation of
businesses and their securities in connection with mergers and
acquisitions, negotiated underwritings, secondary distributions of
listed and unlisted securities, private placements and valuations
for estate, corporate and other purposes.
We have acted as Falls Financial's financial advisor in connection
with, and have participated in certain of the negotiations leading
to, the execution of the Merger Agreement. In connection with
rendering our opinion set forth herein, we have among other things:
(i) Reviewed Falls Financial's Annual Reports to Stockholders and
Annual Reports on Form 10-K for each of the three years ended
December 31, 1994, including the audited financial statements
contained therein, as well as Falls Financial's Quarterly Reports
on Form 10-Q for each of the three month periods ended March 31,
1994, June 30, 1994 and September 30, 1994;
(ii) Reviewed Fifth Third's Annual Reports to Shareholders and
Annual Reports on Form 10-K for each of the three years ended
December 31, 1994, including the audited financial statements
contained therein, as well as Fifth Third's Quarterly Reports on
Form 10-Q for each of the three month periods ended March 31, 1994,
June 30, 1994 and September 30, 1994;
(iii) Reviewed certain other non-public information, primarily
financial in nature, relating to the respective businesses,
earnings and assets of Falls Financial and Fifth Third furnished to
us and prepared by Falls Financial and Fifth Third (such
information included, with respect to Falls Financial, financial
forecasts relating to its results of operations during future
periods);
(iv) Reviewed, with respect to Fifth Third, consensus earnings
estimates for future periods as reported by Institutional Brokers
Estimate System ("IBES").
(v) Participated in meetings and telephone conferences with
members of senior management of Falls Financial and meetings and
telephone conferences with members of senior management of Fifth
Third concerning the financial condition, business and assets of
the respective companies (such meetings and conferences also
addressed certain financial forecasts furnished to McDonald and
Company Securities, Inc. by Falls Financial management), as well
as other matters we believe relevant to our inquiry;
(vi) Reviewed certain stock market information for Falls Financial
Common and Fifth Third Common, and compared it with similar
information for certain companies, the securities of which are
publicly traded;
(vii) Compared the results of operations and financial condition
of Falls Financial with that of certain companies which we deemed
to be relevant for purposes of this opinion;
(viii) Reviewed the financial terms, to the extent publicly
available, of certain acquisition transactions which we deemed to
be relevant for purposes of this opinion;
(ix) Reviewed the Merger Agreement and Affiliation Agreement and
their schedules and exhibits and certain related documents; and
(x) Performed such other analyses as we have deemed appropriate.
In our review and analysis and in arriving at our opinion, we have
assumed and relied upon the accuracy and completeness of all of the
financial and other information reviewed by us and have relied upon
the accuracy and completeness of the representations and warranties
of Falls Financial and Fifth Third contained in the Affiliation
Agreement and Merger Agreement, without undertaking any
responsibility for independent investigation or verification of
such matters. We were not engaged to and have not conducted a
physical inspection of any of the assets, properties or facilities
of either Falls Financial or Fifth Third, nor have we made or
obtained or been furnished with any independent evaluation or
appraisal of any of such assets, properties or facilities or any of
the liabilities of either Falls Financial or Fifth Third. With
respect to financial forecasts provided to us by management of
Falls Financial, we have assumed that such forecasts have been
reasonably prepared on a basis reflecting the best currently
available estimates and judgments of the management of Falls
Financial as to the future performance of Falls Financial. Fifth
Third has informed us that, as a matter of policy, it neither
provides financial forecasts to third parties nor comments on
financial forecasts or projections developed by third parties.
Therefore, with respect to IBES consensus earnings estimates
relating to Fifth Third, we assumed that such estimates reflect the
best judgments of qualified third parties with full knowledge of
all information relating to Fifth Third's results of operations,
financial condition and business that has been disclosed to the
public by Fifth Third, whether in its reports and other filings
with the SEC under applicable provisions of the federal securities
laws, in its press releases or other communications to the media,
or otherwise. We express no view as to such financial forecasts or
the assumptions on which they are based. We have also assumed that
all of the conditions to the consummation of the Merger, as set
forth in the Merger Agreement, including the tax-free treatment of
the Merger to the holders of Falls Financial Common, would be
satisfied and that the Merger would be consummated on a timely
basis in the manner contemplated by the Merger Agreement and the
Affiliation Agreement.
We will receive a fee for our services as financial advisor to
Falls Financial, a significant portion of which is contingent upon
closing of the Merger.
In the ordinary course of business, we may actively trade
securities of both Falls Financial and Fifth Third for our own
account and for the accounts of customers and, accordingly, we may
at any time hold a long or short position in such securities.
This opinion is based on economic and market conditions and other
circumstances existing on, and information made available as of,
the date hereof. In addition, our opinion is, in any event,
limited to the fairness to Falls Financial's stockholders, as of
the date hereof, from a financial point of view, of the Exchange
Ratio, and does not address Falls Financial's underlying business
decision to effect the Merger or any other terms of the Merger and
does not constitute a recommendation to any Falls Financial
stockholder as to how such stockholder should vote with respect to
the Merger. This opinion does not represent our opinion as to what
the value of Falls Financial Common or Fifth Third Common may be at
the effective date of the Merger or as to the prospects of Fifth
Third's business, nor are we making any recommendation to Falls
Financial's stockholders with respect to the advisability of
disposing or retaining Fifth Third Common received pursuant to the
Merger.
This opinion has been prepared solely for the confidential use of
the Board of Directors and senior management of Falls Financial and
will not be reproduced, summarized, described or referred to or
given to any other person without our prior written consent.
Notwithstanding the foregoing, this opinion may be included in a
proxy statement to be mailed to the holders of Falls Financial
Common in connection with the Merger, provided that this opinion
will be reproduced in such proxy statement in full, and any
description of or reference to us or our actions, or any summary of
the opinion in such proxy statement will be in a form acceptable to
us and our counsel.
Based upon and subject to the foregoing, it is our opinion that, as
of the date hereof, the Exchange Ratio, pursuant to the Merger
Agreement, is fair to the holders of Falls Financial Common from a
financial point of view.
Very truly yours,
/s/ McDonald and Company Securities, Inc.
McDONALD and COMPANY SECURITIES, INC. <PAGE>
ANNEX D
Section 262. Appraisal rights
(a) Any stockholder of a corporation of this State who holds
shares of stock on the date of the making of a demand pursuant to
the provisions of subsection (d) of this section with respect to
such shares, who continuously holds such shares through the
effective date of the merger or consolidation, who has otherwise
complied with the provisions of subsection (d) of this Section and
who has neither voted in favor of the merger or consolidation nor
consented thereto in writing pursuant to Section 228 of this
Chapter shall be entitled to an appraisal by the Court of Chancery
of the fair value of his shares of stock under the circumstances
described in subsections(b) and (c) of this Section. As used in
this Section, the word "stockholder" means a holder of record of
stock in a stock corporation and also a member of record of a non-
stock corporation; the words "stock" and "share" mean and include
what is ordinarily meant by those words and also membership or
membership interest of a member of a non-stock corporation.
(b) Appraisal rights shall be available for the shares of any
class or series of stock of a constituent corporation in a merger
or consolidation to be effected pursuant to Sections 251, 252, 254,
257, 258 or 263 of this Chapter;
(1) provided, however, that no appraisal rights under this Section
shall be available for the shares of any class or series of stock
which, at the record date fixed to determine the stockholders
entitled to receive notice of and to vote at the meeting of
stockholders to act upon the agreement of merger or consolidation,
were either (i) listed on a national securities exchange or (ii)
held of record by more than 2,000 stockholders; and further
provided that no appraisal rights shall be available for any shares
of stock of the constituent corporation surviving a merger if the
merger did not require for its approval the vote of the
stockholders of the surviving corporation as provided in subsection
(f) of Section 251 of this Chapter.
(2) Notwithstanding the provisions of subsection (b)(1) of this
Section, appraisal rights under this Section shall be available for
the shares of any class or series of stock of a constituent
corporation if the holders thereof are required by the terms of an
agreement of merger or consolidation pursuant to Sections 251, 252,
254, 257 and 258 of this Chapter to accept for such stock anything
except (i) shares of stock of the corporation surviving or
resulting from such merger or consolidation; (ii) shares of stock
of any other corporation which at the effective date of the merger
or consolidation will be either listed on a national securities
exchange or held of record by more than 2,000 stockholders; (iii)
cash in lieu of fractional shares of the corporations described in
the foregoing clauses(i) and (ii); or (iv) any combination of the
shares of stock and cash in lieu of fractional shares described in
the foregoing clauses (i), (ii) and (iii) of this subsection.
(3) In the event all of the stock of a subsidiary Delaware
corporation party to a merger effected under Section 253 of this
chapter is not owned by the parent corporation immediately prior to
the merger, appraisal rights shall be available for the shares of
the subsidiary Delaware Corporation.
(c) Any corporation may provide in its certificate of
incorporation that appraisal rights under this Section shall be
available for the shares of any class or series of its stock as a
result of an amendment to its certificate of incorporation, any
merger or consolidation in which the corporation is a constituent
corporation or the sale of all or substantially all of the assets
of the corporation. If the certificate of incorporation contains
such a provision, the procedures of this Section, including those
set forth in subsections (d) and (e), shall apply as nearly as is
practicable.
(d) Appraisal rights shall be perfected as follows:
(1) If a proposed merger or consolidation for which appraisal
rights are provided under this Section is to be submitted for
approval at a meeting of stockholders, the corporation, not less
than 20 days prior to the meeting shall notify each of its
stockholders who was such on the record date for such meeting with
respect to shares for which appraisal rights are available pursuant
to subsections (b) or (c) hereof that appraisal rights are
available for any or all of the shares of the constituent
corporations, and shall include in such notice a copy of this
Section. Each stockholder electing to demand the appraisal of his
shares shall deliver to the corporation, before the taking of the
vote on the merger or consolidation, a written demand for appraisal
of his shares. Such demand will be sufficient if it reasonably
informs the corporation of the identify of the stockholder and that
the stockholder intends thereby to demand the appraisal of his
shares. A proxy or vote against the merger or consolidation shall
not constitute such a demand. A stockholder electing to take such
action must do so by a separate written demand as herein provided.
Within 10 days after the effective date of such merger or
consolidation, the surviving or resulting corporation shall notify
each stockholder of each constituent corporation who has complied
with the provisions of this subsection and has not voted in favor
of or consented to the merger or consolidation of the date that the
merger or consolidation has become effective; or
(2) If the merger or consolidation was approved pursuant to
Section 228 or Section 253 of this Chapter, the surviving or
resulting corporation, either before the effective date of the
merger or consolidation or within 10 days thereafter, shall notify
each of the stockholders entitled to appraisal rights of the
effective date of the merger or consolidation and that appraisal
rights are available for any or all of the shares of the
constituent corporation, and shall include in such notice a copy of
this Section. The notice shall be sent by certified or registered
mail, return receipt requested, addressed to the stockholder at his
address as it appears on the records of the corporation. Any
stockholder entitled to appraisal rights may, within 20 days after
the date of mailing of the notice, demand in writing from the
surviving or resulting corporation the appraisal of his shares.
Such demand will be sufficient if it reasonably informs the
corporation of the identify of the stockholder and that the
stockholder intends thereby to demand the appraisal of his shares.
(e) Within 120 days after the effective date of the merger or
consolidation, the surviving or resulting corporation or any
stockholder who has complied with the provisions of subsections (a)
and (b) hereof and who is otherwise entitled to appraisal rights,
may file a petition in the Court of Chancery demanding a
determination of the value of the stock of all such stockholders.
Notwithstanding the foregoing, at any time within 60 days after the
effective date of the merger or consolidation, any stockholder
shall have the right to withdraw his demand for appraisal and to
accept the terms offered upon the merger or consolidation. Within
120 days after the effective date of the merger or consolidation,
any stockholder who has complied with the requirements of
subsections (a) and (d) hereof, upon written request, shall be
entitled to receive from the corporation surviving the merger or
resulting from the consolidation a statement setting forth the
aggregate number of shares not voted in favor of the merger or
consolidation and with respect to which demands for appraisal have
been received and the aggregate number of holders of such shares.
Such written statement shall be mailed to the stockholder within 10
days after his written request for such a statement is received by
the surviving or resulting corporation or within 10 days after
expiration of the period for delivery of demands for appraisal
under subsection (d) hereof, whichever is later.
(f) Upon the filing of any such petition by a stockholder, service
of a copy thereof shall be made upon the surviving or resulting
corporation, which shall within 20 days after such service file in
the office of the Register in Chancery in which the petition was
filed a duly verified list containing the names and addresses of
all stockholders who have demanded payment for their shares and
with whom agreements as to the value of their shares have not been
reached by the surviving or resulting corporation. If the petition
shall be filed by the surviving or resulting corporation, the
petition shall be accompanied by such a duly verified list. The
Register in Chancery, if so ordered by the Court, shall give notice
of the time and place fixed for the hearing of such petition by
registered or certified mail to the surviving or resulting
corporation and to the stockholders shown on the list at the
addresses therein stated. Such notice shall also be given by one
or more publications at least one week before the day of the
hearing, in a newspaper of general circulation published in the
City of Wilmington, Delaware or such publication as the Court deems
advisable. The forms of the notices by mail and by publication
shall be approved by the Court, and the costs thereof shall be
borne by the surviving or resulting corporation.
(g) At the hearing on such petition, the Court shall determine the
stockholders who have complied with the provisions of this Section
and who have become entitled to appraisal rights. The Court may
require the stockholders who have demanded an appraisal for their
shares and who hold stock represented by certificates to submit
their certificates of stock to the Register in Chancery for
notation thereon of the pendency of the appraisal proceedings; and
if any stockholder fails to comply with such direction, the Court
may dismiss the proceedings as to such stockholder.
(h) After determining the stockholders entitled to an appraisal,
the Court shall appraise the shares, determining their fair value
exclusive of any element of value arising from the accomplishment
or expectation of the merger or consolidation, together with a fair
rate of interest, if any, to be paid upon the amount determined to
be the fair value. In determining such fair value, the Court shall
take into account all relevant factors. In determining the fair
rate of interest, the Court may consider all relevant factors,
including the rate of interest which the surviving or resulting
corporation would have had to pay to borrow money during the
pendency of the proceeding. Upon application by the surviving or
resulting corporation or by any stockholder entitled to participate
in the appraisal proceeding, the Court may, in its discretion,
permit discovery or other pretrial proceedings and may proceed to
trial upon the appraisal prior to the final determination of the
stockholder entitled to an appraisal. Any stockholder whose name
appears on the list filed by the surviving or resulting corporation
pursuant to subsection (f) of this Section and who has submitted
his certificates of stock to the Register in Chancery, if such is
required, may participate fully in all proceedings until it is
finally determined that he is not entitled to appraisal rights
under this Section.
(i) The Court shall direct the payment of the fair value of the
shares, together with interest, if any, by the surviving or
resulting corporation to the stockholders entitled thereto.
Interest may be simple or compound, as the Court may direct.
Payment shall be so made to each such stockholder, in the case of
holders of uncertificated stock forthwith, and in the case of
holders of shares represented by certificates upon the surrender to
the corporation of the certificates representing such stock. The
Court's decree may be enforced as other decrees in the Court of
Chancery may be enforced, whether such surviving or resulting
corporation be a corporation of this State or of any other state.
(j) The costs of the proceeding may be determined by the Court and
taxed upon the parties as the Court deems equitable in the
circumstances. Upon application of a stockholder, the Court may
order all or a portion of the expenses incurred by any stockholder
in connection with the appraisal proceeding, including, without
limitation, reasonable attorney's fees and the fees and expenses of
experts, to be charged pro rata against the value of all of the
shares entitled to an appraisal.
(k) From and after the effective date of the merger or
consolidation, no stockholder who has demanded his appraisal rights
a provided in subsection (d) of this Section shall be entitled to
vote such stock for any purpose or to receive payment of dividends
or other distributions on the stock (except dividends or other
distributions payable to stockholders of record at a date which is
prior to the effective date of the merger or consolidation);
provided, however, that if no petition for an appraisal shall be
filed within the time provided in subsection (e) of this Section,
or if such stockholder shall deliver to the surviving or resulting
corporation a written withdrawal of his demand for an appraisal and
an acceptance of the merger or consolidation, either within 60 days
after the effective date of the merger or consolidation as provided
in subsection (e) of this Section or thereafter with the written
approval of the corporation, then the right of such stockholder to
an appraisal shall cease. Notwithstanding the foregoing, no
appraisal proceeding in the Court of Chancery shall be dismissed as
to any stockholder without the approval of the Court, and such
approval may be conditioned upon such terms as the Court deemed
just.
(1) The shares of the surviving or resulting corporation into
which the shares of such objecting stockholders would have been
converted had they assented to the merger or consolidation shall
have the status of authorized and unissued shares of the surviving
or resulting corporation.
