<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON APRIL 3, 1998
REGISTRATION NO. 333-48049
================================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
AMENDMENT NO. 1 TO
FORM S-4
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
FIFTH THIRD BANCORP
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
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OHIO 6711 31-0854434
(STATE OR OTHER JURISDICTION OF (PRIMARY STANDARD INDUSTRIAL (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) CLASSIFICATION CODE NUMBER) IDENTIFICATION NO.)
</TABLE>
------------------------
FIFTH THIRD CENTER, CINCINNATI, OHIO 45263
(513) 579-5300
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE,
OF REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
------------------------
PAUL L. REYNOLDS, ESQ.
FIFTH THIRD BANCORP
38 FOUNTAIN SQUARE PLAZA
CINCINNATI, OHIO 45263
(513) 579-5300
(NAME, ADDRESS, INCLUDING ZIP CODE AND TELEPHONE
NUMBER, INCLUDING AREA CODE, OF AGENT FOR SERVICE)
------------------------
COPIES OF COMMUNICATIONS TO:
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RICHARD G. SCHMALZL, ESQ. JAMES S. FLEISCHER, P.C.
H. SAMUEL LIND, ESQ. MICHAEL S. SADOW, P.C.
GRAYDON, HEAD & RITCHEY SILVER, FREEDMAN & TAFF, L.L.P.
1900 FIFTH THIRD CENTER SUITE 700
511 WALNUT STREET 1100 NEW YORK AVENUE
CINCINNATI, OHIO 45202 WASHINGTON, DC 20005
(513) 651-3836 (FAX) (202) 682-0354 (FAX)
</TABLE>
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE OF THE SECURITIES TO THE
PUBLIC: As soon as practicable after this Registration Statement becomes
effective and upon the effective time of the merger ("Merger") of CitFed
Bancorp, Inc. ("CitFed Bancorp") with and into the Registrant pursuant to the
Affiliation Agreement described in the enclosed Proxy Statement/Prospectus
included as Part I of this Registration Statement.
If the securities being registered on this Form are being offered in
connection with the formation of a holding company and there is compliance with
General Instruction G, check the following box. [ ]
CALCULATION OF REGISTRATION FEE
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<CAPTION>
==============================================================================================================================
PROPOSED MAXIMUM PROPOSED MAXIMUM
TITLE OF EACH CLASS AMOUNT TO BE OFFERING PRICE PER AGGREGATE OFFERING AMOUNT OF
OF SECURITIES TO BE REGISTERED REGISTERED(1) UNIT PRICE(2) REGISTRATION FEE
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Common Stock, no par value........ 16,500,000 shares N/A $688,859,888.04 $203,213.67(2)
==============================================================================================================================
</TABLE>
(1) Represents the maximum number of shares of Registrant's Common Stock that
the Registrant expects would be issuable to Stockholders of CitFed Bancorp,
a unitary savings and loan holding company owning all of the outstanding
common stock of Citizens Federal Bank, F.S.B. in the event that certain
adjustments to the merger consideration would be required pursuant to the
Affiliation Agreement, including shares issuable upon the exercise of
outstanding employee stock options or otherwise issuable upon consummation
of the Merger.
(2) Previously paid upon initial filing of this Registration Statement. The
number of shares of Registrant's Common Stock has been increased to reflect
the Registrant's three-for-two stock split declared on March 17, 1998 and
payable on April 15, 1998. Based upon $50.94, the average of the high and
low prices of the common stock, $.01 par value of CitFed Bancorp, as
reported on the Nasdaq National Market on March 9, 1998, in accordance with
Rule 457(f)(1) of the General Rules and Regulations under the Securities Act
of 1933.
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF
THE SECURITIES ACT OF 1933, AS AMENDED, OR UNTIL THIS REGISTRATION STATEMENT
SHALL BECOME EFFECTIVE ON SUCH DATE AS THE SECURITIES AND EXCHANGE COMMISSION,
ACTING PURSUANT TO SAID SECTION 8(a), MAY DETERMINE.
================================================================================
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INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY
OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT BECOMES
EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE
SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE SECURITIES
IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR
TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF ANY SUCH STATE.
SUBJECT TO COMPLETION, DATED APRIL 3, 1998
PROXY STATEMENT FOR
CITFED BANCORP, INC.
SPECIAL MEETING OF STOCKHOLDERS
TO BE HELD ON MAY 15, 1998
------------------------
PROSPECTUS OF FIFTH THIRD BANCORP
16,500,000 SHARES
COMMON STOCK, NO PAR VALUE
------------------------
This Proxy Statement/Prospectus and the accompanying notice and form of
proxy, are first being mailed on or about April 14, 1998 to the stockholders of
CitFed Bancorp, Inc. of Dayton, Ohio ("CitFed Bancorp"), a registered unitary
savings and loan holding company under the Home Owners' Loan Act, in connection
with the solicitation of proxies by the Board of Directors of CitFed Bancorp for
use at a Special Meeting of Stockholders to be held on May 15, 1998 (the
"Special Meeting").
At the Special Meeting, holders of shares of CitFed Bancorp's common stock,
$0.01 par value per share ("CitFed Bancorp Common Stock"), will be asked to
consider and vote upon the adoption of the Affiliation Agreement dated as of
January 13, 1998 between Fifth Third Bancorp ("Fifth Third") and CitFed Bancorp,
a copy of which is attached hereto as Annex A and is incorporated herein by
reference (the "Affiliation Agreement"). If the Affiliation Agreement is
adopted, and if all of the other conditions are satisfied or waived, CitFed
Bancorp will merge into Fifth Third (the "Merger"). At the time the Merger
becomes effective (the "Effective Time"), each share of CitFed Bancorp Common
Stock will be canceled and converted, by virtue of the Merger, into 1.005 (the
"Exchange Ratio") shares of Fifth Third common stock, no par value per share
("Fifth Third Common Stock"). The Exchange Ratio was adjusted in accordance with
the Affiliation Agreement to reflect the three-for-two stock split to be
effected in the form of a stock dividend declared by Fifth Third on March 17,
1998 and to be distributed on April 15, 1998 (the "1998 Fifth Third Stock
Split"). The Exchange Ratio will be adjusted further so as to give the CitFed
Bancorp stockholders the economic benefit of any other stock dividends,
reclassifications, recapitalizations, split-ups, exchanges of shares,
distributions or combinations or subdivisions of Fifth Third Common Stock
effected before the Effective Time. 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 at the Effective Time.
In the event of a substantial decline in the trading price of Fifth Third
Common Stock relative to a group of peer institutions under certain
circumstances as provided in the Affiliation Agreement, the CitFed Bancorp Board
of Directors may elect to terminate the Affiliation Agreement and the Merger. If
such an election were made, Fifth Third would have the option to override such
termination by electing to increase the Exchange Ratio to an amount determined
by a formula set forth in the Affiliation Agreement. See "PROPOSAL -- MERGER OF
CITFED BANCORP INTO FIFTH THIRD -- Termination; Amendment; Waiver."
Under the rules and regulations of the Securities and Exchange Commission
(the "Commission"), the solicitation of CitFed Bancorp's stockholders to adopt
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 (File No. 333-48049) under the Securities
Act of 1933, as amended (the "Securities Act"), with respect to such offering,
and this Proxy Statement/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/Prospectus shall not constitute a prospectus for
public reoffering of the Fifth Third Common Stock issuable pursuant to the
Merger.
THE SECURITIES OF FIFTH THIRD 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/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/Prospectus is April , 1998.
<PAGE> 3
AVAILABLE INFORMATION
THIS PROXY STATEMENT/PROSPECTUS INCORPORATES DOCUMENTS BY REFERENCE WHICH,
WITH THE EXCEPTION OF THE 1997 ANNUAL REPORT TO STOCKHOLDERS FOR FIFTH THIRD,
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 PAUL L. REYNOLDS, ASSISTANT SECRETARY, FIFTH THIRD BANCORP, FIFTH THIRD
CENTER, CINCINNATI, OHIO 45263 (TELEPHONE NUMBER: (513) 579-5300), AS RELATES TO
FIFTH THIRD, AND FROM JOHN H. CURP, SECRETARY, CITFED BANCORP, INC., ONE
CITIZENS FEDERAL CENTRE, DAYTON, OHIO 45402 (TELEPHONE NUMBER: (937) 223-4234),
AS RELATES TO CITFED BANCORP. IN ORDER TO ENSURE TIMELY DELIVERY OF THE
DOCUMENTS, ANY REQUEST SHOULD BE MADE BY MAY 8, 1998.
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/Prospectus, and, if given or made, such information or
representation must not be relied upon as having been authorized by Fifth Third
or CitFed Bancorp. This Proxy Statement/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/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 CitFed Bancorp 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 CitFed Bancorp 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 and CitFed Bancorp each file its reports, proxy statements and other
information with the Commission electronically, and the Commission maintains a
website located at http://www.sec.gov containing such information.
Fifth Third Common Stock and CitFed Bancorp Common Stock are traded on the
Nasdaq National Market tier of the Nasdaq Stock Market (the "Nasdaq National
Market") under the symbols "FITB" and "CTZN", respectively. Documents filed by
Fifth Third and CitFed Bancorp 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.
All information contained or incorporated in this Proxy
Statement/Prospectus with respect to CitFed Bancorp was supplied by CitFed
Bancorp and all information contained or incorporated in this Proxy
Statement/Prospectus with respect to Fifth Third was supplied by Fifth Third.
Although neither CitFed Bancorp nor Fifth Third has any knowledge that
would indicate that any statements or information relating to the other party
contained herein is inaccurate or incomplete, neither CitFed Bancorp nor Fifth
Third can warrant the accuracy or completeness of such statements or information
as they relate to the other party.
2
<PAGE> 4
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents previously filed by Fifth Third with the Commission
(File No. 0- 8076) are hereby incorporated into this Proxy Statement/Prospectus
by reference:
(a) Fifth Third's Annual Report on Form 10-K for the year ended
December 31, 1997;
(b) Pages 1 and 13 through 38 of Fifth Third's 1997 Annual Report to
Stockholders (enclosed with this Proxy Statement/Prospectus);
(c) Fifth Third's Proxy Statement dated February 9, 1998; and
(d) Fifth Third's Current Report on Form 8-K filed March 17, 1998.
The following documents previously filed by CitFed Bancorp with the
Commission (File No. 0-19611) are hereby incorporated into this Proxy
Statement/Prospectus by reference:
(a) CitFed Bancorp's Annual Report on Form 10-K for the year ended
March 31, 1997, including all documents incorporated by reference therein;
(b) CitFed Bancorp's Quarterly Reports on Form 10-Q for the quarters
ended June 30, 1997, September 30, 1997 and December 31, 1997; and
(c) CitFed Bancorp's Current Report on Form 8-K dated January 28, 1998
and Form 8-K/A dated January 30, 1998.
In addition, all subsequent documents filed with the Commission by Fifth
Third and by CitFed Bancorp, respectively, pursuant to Sections 13(a), 13(c), 14
or 15(d) of the Exchange Act prior to the date of the Special Meeting 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/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/Prospectus.
CAUTIONARY STATEMENT CONCERNING FORWARD-LOOKING INFORMATION
This Proxy Statement/Prospectus (including information included or
incorporated by reference herein) contains or may contain forward-looking
statements that involve risks and uncertainties. This Proxy Statement/Prospectus
contains certain forward-looking statements with respect to the financial
condition, results of operations, plans, objectives, future performance and
business of each of Fifth Third and CitFed Bancorp and of Fifth Third on a pro
forma combined basis following the consummation of the Merger, including
statements preceded by, followed by or that include the words "believes,"
"expects," "anticipates" or similar expressions.
These forward-looking statements involve certain risks and uncertainties.
Factors that may cause actual results to differ materially from those
contemplated by such forward-looking statements include, among others, the
following possibilities: (1) expected cost savings from the Merger cannot be
fully realized or realized within the expected time frame; (2) revenues
following the Merger are lower than expected, or deposit attrition, operating
costs or customer loss and business disruption following the Merger are greater
than expected; (3) competitive pressures among depository and other financial
institutions increase significantly; (4) costs or difficulties related to the
integration of the businesses of Fifth Third and CitFed Bancorp are greater than
expected; (5) changes in the interest rate environment reduce margins; (6)
general economic or business conditions, either nationally or in the states in
which Fifth Third will be doing business, are less favorable than expected
resulting in, among other things, a deterioration in credit quality or a reduced
demand for credit; (7) legislative or regulatory changes adversely affect the
businesses in which Fifth Third will be engaged; and (8) changes in the
securities markets.
3
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TABLE OF CONTENTS
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AVAILABLE INFORMATION....................................... 2
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE............. 3
CAUTIONARY STATEMENT CONCERNING FORWARD-LOOKING
STATEMENTS................................................ 3
SUMMARY OF THE PROXY STATEMENT/PROSPECTUS................... 6
THE SPECIAL MEETING......................................... 16
Special Meeting........................................... 16
Purpose of the Meeting.................................... 16
Voting Rights; Vote Required.............................. 16
Proxies and Proxy Solicitation............................ 17
No Appraisal Rights....................................... 18
Stockholder Proposals..................................... 18
PROPOSAL -- MERGER OF CITFED BANCORP INTO FIFTH THIRD....... 18
General................................................... 18
Background of and Reasons for the Merger.................. 19
Opinion of Financial Advisor to CitFed Bancorp............ 21
Effective Time............................................ 25
Effects of Merger......................................... 25
Exchange of Certificates.................................. 26
Federal Income Tax Consequences........................... 27
Accounting Treatment...................................... 28
Conduct Pending Merger; Representations and Warranties.... 28
Conditions to Closing..................................... 29
Termination; Amendment; Waiver............................ 30
Effect on CitFed Bancorp Employees........................ 32
Interests of Certain Persons in the Merger................ 32
Stock Option Agreement.................................... 35
Resale of Fifth Third Common Stock by Affiliates.......... 38
FIFTH THIRD BANCORP......................................... 39
Description of Business................................... 39
Recent Developments....................................... 39
Capital Requirements...................................... 40
General Regulation of Bank Holding Companies.............. 40
General Regulation of Commercial Banks.................... 41
Acquisitions of Savings Associations by Holding
Companies.............................................. 41
Additional Information.................................... 42
CITFED BANCORP, INC. ....................................... 43
Description of Business................................... 43
Additional Information.................................... 43
EFFECTS OF GOVERNMENTAL POLICIES............................ 44
UNAUDITED PRO FORMA FINANCIAL INFORMATION................... 45
SELECTED HISTORICAL FINANCIAL DATA OF FIFTH THIRD........... 51
SELECTED HISTORICAL FINANCIAL DATA OF CITFED BANCORP........ 53
</TABLE>
4
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<TABLE>
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DESCRIPTION OF CAPITAL STOCK AND COMPARATIVE RIGHTS OF STOCKHOLDERS.......................................... 55
Voting Rights.............................................................................................. 55
Dividends.................................................................................................. 56
Preemptive Rights.......................................................................................... 57
Rights Upon Liquidation.................................................................................... 57
Indemnification and Personal Liability of Directors and Officers........................................... 57
Stockholders' Meetings; Quorum............................................................................. 58
Removal of Directors....................................................................................... 58
Amendment to Certificate of Incorporation and Bylaws....................................................... 59
Vacancies on the Board of Directors........................................................................ 60
Advance Notice Requirement for Presentation of New Business and Nominations of Directors at Meeting of
Stockholders............................................................................................ 61
Subscription, Conversion, Redemption Rights; Stock Nonassessable........................................... 61
Change of Control Provisions............................................................................... 61
Stockholder Rights Protection Plan......................................................................... 64
LEGAL MATTERS................................................................................................ 64
EXPERTS...................................................................................................... 64
</TABLE>
ANNEXES:
Annex A: Affiliation Agreement dated as of January 13, 1998 between Fifth
Third Bancorp and CitFed Bancorp, Inc. (excluding exhibits)
Annex B: Stock Option Agreement dated as of January 13, 1998 between CitFed
Bancorp, Inc., as issuer, and Fifth Third Bancorp, as grantee
Annex C: Fairness Opinion of Keefe, Bruyette & Woods, Inc.
5
<PAGE> 7
SUMMARY OF THE PROXY STATEMENT/PROSPECTUS
The following is a summary of certain information contained elsewhere in
this Proxy Statement/Prospectus and the documents incorporated herein by
reference and/or enclosed herewith. This summary is not intended to be a summary
of all information relating to the Merger and should be read in conjunction
with, and is qualified in its entirety by reference to the more detailed
information contained elsewhere in this Proxy Statement/Prospectus, including
the Annexes hereto, and the documents incorporated by reference in, and/or
enclosed with, this Proxy Statement/Prospectus.
Unless otherwise indicated, all information in this Proxy
Statement/Prospectus gives effect to the 1998 Fifth Third Stock Split.
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
nine subsidiary banks operate a general banking
business from 411 offices located throughout Ohio,
Indiana, Kentucky and Florida. At December 31,
1997, on a consolidated basis, Fifth Third had
consolidated assets, deposits and stockholders'
equity of approximately $21.4 billion, $14.9
billion and $2.3 billion, respectively. Fifth Third
Common Stock is traded 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.
CITFED BANCORP: CitFed Bancorp is a registered unitary savings and
loan holding company incorporated under Delaware
law. CitFed Bancorp owns all of the stock of
Citizens Federal Bank, F.S.B. ("Citizens Federal
Bank") which is headquartered in Dayton, Ohio.
Citizens Federal Bank operates its main office and
35 full service branch offices located within the
greater Dayton, Ohio and Butler County, Ohio areas
and 15 loan production offices located in Dayton,
Columbus and Cincinnati, Ohio; Florence, Lexington
and Louisville, Kentucky; Williamsburg and Virginia
Beach, Virginia; Indianapolis, Indiana; and
Charlotte, North Carolina. At December 31, 1997,
CitFed Bancorp, on a consolidated basis, had total
assets, total deposits and stockholders' equity of
approximately $3.5 billion, $1.9 billion and $209.9
million, respectively. CitFed Bancorp Common Stock
is traded on the Nasdaq National Market under the
symbol "CTZN." CitFed Bancorp's principal executive
offices are located at One Citizens Federal Centre,
Dayton, Ohio, and its telephone number is (937)
223-4234.
SPECIAL MEETING OF CITFED BANCORP STOCKHOLDERS:
TIME AND DATE: 2:00 p.m., Eastern Daylight Savings Time, on May
15, 1998
PLACE: Savers Club Auditorium, One Citizens Federal
Centre, Dayton, Ohio.
PURPOSE: To consider and vote upon the proposal to adopt the
Affiliation Agreement which provides for the Merger
of CitFed Bancorp with and into Fifth Third.
Pursuant to the Affiliation Agreement, CitFed
Bancorp's stockholders will receive 1.005 shares,
as adjusted for the 1998 Fifth Third Stock Split,
of Fifth Third Common Stock in exchange for each
share of CitFed Bancorp Common Stock and cash in
lieu of any fractional shares of Fifth Third Common
Stock. See "THE SPECIAL MEETING -- Purpose of the
Meeting," "PROPOSAL -- MERGER OF CITFED BANCORP
INTO
6
<PAGE> 8
FIFTH THIRD" and "FIFTH THIRD BANCORP -- Recent
Developments."
REQUIRED VOTE; RECORD DATE: Adoption of the Affiliation Agreement requires the
affirmative vote of holders of at least a majority
of the 13,087,024 shares of CitFed Bancorp Common
Stock outstanding as of the close of business on
April 3, 1998 (the "Record Date"). Adoption of the
Affiliation Agreement will also authorize the
CitFed Bancorp Board of Directors to exercise its
discretion on whether to proceed with the Merger in
the event CitFed Bancorp has the right to terminate
the Affiliation Agreement. An abstention or failure
to vote has the same effect as voting against the
proposal. Accordingly, stockholders are urged to
sign and return their proxies. See "THE SPECIAL
MEETING -- Voting Rights; Vote Required",
"-- Proxies and Proxy Solicitation" and
"PROPOSAL -- MERGER OF CITFED INTO FIFTH
THIRD -- Termination; Amendment; Waiver."
It is expected that substantially all of the
378,963 shares of CitFed Bancorp (excluding shares
underlying stock options) beneficially owned by
directors and executive officers of CitFed Bancorp,
its subsidiaries and their affiliates at the Record
Date (2.9% of the total outstanding shares at that
date) will be voted for the adoption of the
Affiliation Agreement.
Additionally, as of January 13, 1998, certain Fifth
Third subsidiaries may be deemed to be the
beneficial owners of 383,661 shares of CitFed
Bancorp Common Stock, which shares are held in a
fiduciary capacity (the "Fiduciary Shares"). Fifth
Third has sole voting power with respect to 2,925
of such Fiduciary Shares, shared voting power with
respect to no such Fiduciary Shares, sole
investment power as to 2,925 of such Fiduciary
Shares and shared investment power with respect to
no such Fiduciary Shares. Fifth Third has no voting
or investment power with respect to the remaining
380,736 Fiduciary Shares.
To the best of its knowledge, no executive officer
or director of Fifth Third beneficially owns any
shares of CitFed Bancorp Common Stock.
BENEFICIAL OWNERSHIP BY
OFFICERS AND DIRECTORS: As of the close of business on Record Date, the
executive officers and directors of CitFed Bancorp
and their affiliates (including directors of
Citizens Federal Bank) beneficially owned 378,963
shares, or approximately 2.9%, of CitFed Bancorp
Common Stock. These figures exclude options to
purchase 326,581 shares of CitFed Bancorp Common
Stock which were exercisable on that date or which
will become exercisable within 60 days of such
date. See "CERTAIN BENEFICIAL OWNERS OF CITFED
BANCORP COMMON STOCK."
PROPOSAL -- MERGER OF CITFED BANCORP INTO FIFTH THIRD:
REASONS FOR THE MERGER AND
RECOMMENDATION OF THE
BOARD OF DIRECTORS OF
CITFED BANCORP: The Board of Directors of CitFed Bancorp considered
the terms of the Affiliation Agreement, including
the consideration to be received by CitFed
Bancorp's stockholders in the Merger, in light of
economic, financial, legal, social and market
factors and concluded that the Merger is advisable
and fair to, and in the best interests of, CitFed
Bancorp and its stockholders. The terms of the
Affiliation Agreement are the result of
7
<PAGE> 9
arms' length negotiations between CitFed Bancorp
and Fifth Third. See "PROPOSAL -- MERGER OF CITFED
BANCORP INTO FIFTH THIRD -- Background of and
Reasons for the Merger."
THE BOARD OF DIRECTORS OF CITFED BANCORP RECOMMENDS
UNANIMOUSLY THAT CITFED BANCORP STOCKHOLDERS VOTE
FOR THE ADOPTION OF THE AFFILIATION AGREEMENT.
OPINION OF FINANCIAL
ADVISOR: Keefe, Bruyette & Woods, Inc. ("Keefe Bruyette")
has issued its opinion that, as of the date hereof,
the Exchange Ratio is fair to the stockholders of
CitFed Bancorp from a financial point of view.
THE FULL TEXT OF THE OPINION OF KEEFE BRUYETTE,
WHICH SETS FORTH A DESCRIPTION OF THE PROCEDURES
FOLLOWED, ASSUMPTIONS MADE, MATTERS CONSIDERED AND
LIMITS ON THE REVIEW UNDERTAKEN, IS ATTACHED TO
THIS PROXY STATEMENT/PROSPECTUS AS ANNEX C AND IS
INCORPORATED HEREIN BY REFERENCE. STOCKHOLDERS ARE
URGED TO READ THE OPINION IN ITS ENTIRETY. See
"PROPOSAL -- MERGER OF CITFED BANCORP INTO FIFTH
THIRD -- Opinion of Financial Advisor to CitFed
Bancorp" and Annex C hereto.
EFFECTIVE TIME: Unless the parties agree otherwise, the Effective
Time will occur on a Friday which is as soon as is
reasonably possible following the date on which all
of the conditions precedent to the consummation of
the Merger, 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 Effective
Time will occur in June 1998. CitFed Bancorp 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
September 30, 1998, subject to certain conditions.
See "PROPOSAL -- MERGER OF CITFED BANCORP INTO
FIFTH THIRD -- Effective Time."
TERMS OF THE MERGER:
CONVERSION OF CITFED
BANCORP
COMMON STOCK;
CONSIDERATION: At the Effective Time, each stockholder of CitFed
Bancorp will receive, for each share of CitFed
Bancorp Common Stock canceled and extinguished as a
result of the Merger, the right to receive 1.005
shares of Fifth Third Common Stock (as adjusted for
the 1998 Fifth Third Stock Split) plus cash in lieu
of any fractional shares, if any, of Fifth Third
Common Stock which such stockholder would otherwise
be entitled to receive. Based on the closing price
per share of Fifth Third Common Stock on the Nasdaq
National Market on April , 1998, the value of
1.005 shares of Fifth Third Common Stock was
$ .
The Exchange Ratio will be further adjusted so as
to give the CitFed Bancorp stockholders the
economic benefit of any other stock dividends,
reclassifications, recapitalizations, split-ups,
exchanges of shares, distributions or combinations
or subdivisions of Fifth Third Common Stock
effected before the Effective Time. Additionally,
in the event of a substantial decline in the
trading price of Fifth Third Common Stock relative
to a group of peer institutions under certain
circumstances as provided in the Affiliation
Agreement, the CitFed Bancorp Board of Directors
may have the right to terminate the Affiliation
Agreement. If such right is exercised,
8
<PAGE> 10
Fifth Third would then have the option to increase
the Exchange Ratio in accordance with the formula
set forth in the Affiliation Agreement in lieu of
such termination. See "SUMMARY OF THE PROXY
STATEMENT/PROSPECTUS -- Right to terminate" and
"PROPOSAL -- MERGER OF CITFED BANCORP INTO FIFTH
THIRD -- Effects of Merger" and "-- Termination;
Amendment; Waiver."
THE VALUE OF THE FIFTH THIRD COMMON STOCK TO BE
RECEIVED BY CITFED BANCORP STOCKHOLDERS WILL DEPEND
ON THE MARKET PRICE OF SHARES OF FIFTH THIRD COMMON
STOCK AT THE EFFECTIVE TIME. THE MARKET PRICE OF
FIFTH THIRD COMMON STOCK IS SUBJECT TO CHANGE AT
ALL TIMES BASED ON THE FUTURE FINANCIAL CONDITION
AND OPERATING RESULTS OF FIFTH THIRD, FUTURE MARKET
CONDITIONS AND OTHER FACTORS, AND THE MARKET PRICE
OF FIFTH THIRD COMMON STOCK AT THE EFFECTIVE TIME
MAY BE SUBSTANTIALLY HIGHER OR LOWER THAN RECENT
PRICES.
NO FRACTIONAL SHARES: No fractional shares will be issued in connection
with the Merger. CitFed Bancorp stockholders will
receive cash in lieu of any fractional shares which
they otherwise would be entitled to receive based
on the per share closing price of Fifth Third
Common Stock at the Effective Time. See
"PROPOSAL -- MERGER OF CITFED BANCORP INTO FIFTH
THIRD -- Effects of Merger."
PROCEDURE FOR EXCHANGE
OF SHARES: Promptly after the Effective Time, Fifth Third will
mail to each stockholder of CitFed Bancorp a form
of transmittal letter and instructions for the
surrender of CitFed Bancorp 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 CitFed Bancorp only after their
certificates for CitFed Bancorp Common Stock have
been surrendered in accordance with such
instructions. See "PROPOSAL -- MERGER OF CITFED
BANCORP INTO FIFTH THIRD -- Exchange of
Certificates."
FEDERAL INCOME TAX
CONSEQUENCES: Fifth Third and CitFed Bancorp have structured the
Merger with the intention that no gain or loss
(other than with respect to cash received in lieu
of fractional shares) will be recognized by CitFed
Bancorp's stockholders upon the exchange of their
CitFed Bancorp Common Stock for Fifth Third Common
Stock. See "PROPOSAL -- MERGER OF CITFED BANCORP
INTO FIFTH THIRD -- 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, FOREIGN AND ANY OTHER APPLICABLE TAX
LAWS.
ACCOUNTING: The Merger is intended to qualify for
pooling-of-interests accounting treatment and
consummation of the Merger is conditioned, in part,
upon receipt by both Fifth Third and CitFed Bancorp
of a letter from Deloitte & Touche LLP, independent
public accountants, to the effect that the Merger
will qualify for such treatment. See
"PROPOSAL -- MERGER OF
9
<PAGE> 11
CITFED BANCORP INTO FIFTH THIRD -- Accounting
Treatment" and "FIFTH THIRD BANCORP -- Recent
Developments."
NO APPRAISAL RIGHTS: Pursuant to Section 262 of the Delaware General
Corporation Law ("Section 262"), because CitFed
Bancorp Common Stock is traded on the Nasdaq
National Market as of the Record Date, stockholders
of CitFed Bancorp will not have appraisal rights or
rights as dissenting stockholders in the Merger.
See "THE SPECIAL MEETING -- No Appraisal Rights."
CONDITIONS OF CLOSING: The Merger is subject to the satisfaction of
certain conditions, including but not limited to,
CitFed Bancorp stockholder approval, and approval
by the Board of Governors of the Federal Reserve
System and the Ohio Division of Financial
Institutions. Applications for such regulatory
approvals have been filed. See "PROPOSAL -- MERGER
OF CITFED BANCORP INTO FIFTH THIRD -- Conditions to
Closing."
RIGHT TO TERMINATE: The Affiliation Agreement may be terminated at any
time prior to the Effective Time by written notice
of either Fifth Third or CitFed Bancorp to the
other upon: the mutual written consent of Fifth
Third and CitFed Bancorp; a material breach of the
Affiliation Agreement; a material and adverse
change in the business or financial condition of
either Fifth Third or CitFed Bancorp, in each case
taken as a whole; the failure to close the Merger
by September 30, 1998; the failure of the CitFed
Bancorp stockholders to approve the Affiliation
Agreement; or if any event occurs which renders
impossible one or more conditions to the
obligations of the other party to effect the Merger
and non-compliance is not waived by the unaffected
party.
Additionally, in the event of a substantial decline
in the trading price of Fifth Third Common Stock
relative to a group of peer institutions under
certain circumstances as provided in the
Affiliation Agreement, the CitFed Bancorp Board of
Directors may elect to terminate the Affiliation
Agreement and the Merger. Approval of the proposal
will also authorize the CitFed Bancorp Board of
Directors to exercise its discretion whether to
proceed with the Merger in the event that CitFed
Bancorp has the right to exercise its termination
right as described in the preceding sentence.
CitFed Bancorp expects that the CitFed Bancorp
Board of Directors would exercise such discretion
and decide whether to terminate the Affiliation
Agreement without a resolicitation of stockholders.
If such an election were made, Fifth Third would
have the option to override such termination by
electing to increase the Exchange Ratio to an
amount determined by a formula set forth in the
Affiliation Agreement. See "PROPOSAL -- MERGER OF
CITFED BANCORP INTO FIFTH THIRD -- Termination;
Amendment; Waiver."
EFFECT ON CITFED
BANCORP EMPLOYEES: Fifth Third intends (but is not obligated) to
employ at Fifth Third or other Fifth Third
subsidiaries or affiliates as many of the employees
of CitFed Bancorp and its subsidiaries who desire
such employment within the Fifth Third holding
company system as possible, to the extent of
available positions and consistent with Fifth
Third's standard staffing levels and personnel
policies. The Affiliation Agreement contains
provisions for the treatment of employees of CitFed
Bancorp and its subsidiaries, including provisions
for participation in benefit and retirement plans,
as well as for severance payments in certain
circumstances. See "PROPOSAL --
10
<PAGE> 12
MERGER OF CITFED BANCORP INTO FIFTH THIRD -- Effect
on CitFed Bancorp Employees" and the Affiliation
Agreement attached as Annex A hereto.
INTERESTS OF CERTAIN
PERSONS
IN THE MERGER: Certain members of CitFed Bancorp's management and
the CitFed Bancorp's Board of Directors may be
deemed to have certain interests in the Merger in
addition to their interests as stockholders of
CitFed Bancorp, generally. The CitFed Bancorp Board
of Directors was aware of these interests and
considered them in adopting the Affiliation
Agreement. Set forth below are descriptions of
interests of directors and executive officers of
CitFed Bancorp in the Merger in addition to their
interests as stockholders of CitFed Bancorp
generally.
Fifth Third has agreed to appoint Jerry L. Kirby,
the Chairman, President and Chief Executive Officer
of CitFed Bancorp, and Allen M. Hill, a director of
CitFed Bancorp, to the Fifth Third Board of
Directors upon consummation of the Merger. In the
event their initial terms on the Fifth Third Board
of Directors expires prior to the Fifth Third
annual meeting of stockholders in the year 2001,
Fifth Third has agreed to nominate such person for
a second term on the Fifth Third Board of
Directors. Upon consummation of the Merger, Mr.
Kirby will also be approved as the Chairman of the
Board of Directors of The Fifth Third Bank of
Western Ohio, a wholly owned subsidiary of Fifth
Third and into which Citizens Federal Bank will be
merged.
In April 1996, CitFed Bancorp entered into
employment agreements (the "CitFed Agreements")
with Jerry L. Kirby, William M. Vichich, John H.
Curp, Sebastian J. Melluzzo and Mary L. Larkins
(the "Executive Officers"). The CitFed Agreements
each provide for payment to the employee of 299% of
the employee's "base amount" (five-year average)
compensation under certain circumstances in
connection with a change in control of CitFed
Bancorp. As a consequence of the Merger, Messrs.
Kirby, Vichich, Curp, Melluzzo and Ms. Larkins
shall receive, as of the Effective Time, payments
pursuant to the terms of their respective CitFed
Agreements of $1.8 million, $1.0 million, $621,000,
$455,000 and $767,000, respectively.
The Executive Officers will each enter into new
employment contracts with Fifth Third on the
Closing Date. The employment agreements provide
for, among other things, the payment of salary,
grants of stock options and annual retirement
benefits. See "PROPOSAL -- MERGER OF CITFED BANCORP
INTO FIFTH THIRD -- Interests of Certain Persons in
the Merger."
Each of the Executive Officers has a supplemental
retirement agreement with CitFed Bancorp. Upon
consummation of the Merger, Fifth Third has agreed
to assume the obligations of CitFed Bancorp under
such agreements.
The outstanding CitFed Bancorp options under its
stock option plan will be assumed by Fifth Third.
The number of shares subject to CitFed Bancorp
stock options will be adjusted to allow the holder,
upon exercise, to receive shares of Fifth Third
Common Stock calculated by multiplying the Exchange
Ratio (1.005) by the number of shares of CitFed
Bancorp Common Stock subject to the CitFed Bancorp
stock options, and the
11
<PAGE> 13
exercise price of the CitFed Bancorp stock options
will be adjusted by dividing the exercise price per
share by the Exchange Ratio. All other terms and
conditions of the CitFed Bancorp stock options will
remain unchanged.
CitFed Bancorp will freeze its defined benefit
pension plan as of the Effective Time. Under the
Affiliation Agreement, CitFed Bancorp can make any
necessary amendments or adjustments to ensure that
the excess funding, if any, at the Effective Time
goes to the benefit of participants in the CitFed
Bancorp pension plan and to fully vest all such
benefits to participants, provided such actions do
not adversely affect the qualified status of the
plan.
The officers and directors of CitFed Bancorp will
be provided certain directors' and officers'
liability insurance protection for three years
following the Effective Time, as long as such
insurance may be purchased on the terms specified
in the Affiliation Agreement. Also, Fifth Third has
affirmatively assumed the obligation to indemnify
officers and directors of CitFed Bancorp, Citizens
Federal Bank and their subsidiaries under specified
circumstances. See "PROPOSAL -- MERGER OF CITFED
BANCORP INTO FIFTH THIRD -- Interests of Certain
Persons in the Merger."
STOCK OPTION AGREEMENT: As an inducement and condition to the willingness
of Fifth Third to enter into the Affiliation
Agreement, CitFed Bancorp, as issuer, entered into
a stock option agreement with Fifth Third, as
grantee, dated as of January 13, 1998 (the "Stock
Option Agreement"). The Stock Option Agreement is
attached to this Proxy Statement/Prospectus as
Annex B.
Pursuant to the Stock Option Agreement, CitFed
Bancorp granted to Fifth Third an irrevocable
option (the "Option") to purchase a number of
shares of CitFed Bancorp Common Stock up to 19.9%
of the number of shares of CitFed Common Stock
outstanding immediately after exercise of the
Option for a purchase price of $37.75 per share,
subject to adjustment in certain circumstances.
The Option will generally become exercisable, if,
prior to the termination of the Affiliation
Agreement, a third party makes a proposal to engage
in an acquisition of the issuer and an acquisition
is consummated within 18 months following such
termination. Under certain circumstances Fifth
Third also could elect to sell the Option, and any
shares previously purchased thereunder, back to
CitFed Bancorp at a price generally reflecting the
price offered or paid by the third-party acquiror
for other shares of the issuer. Alternatively,
under certain circumstances, Fifth Third could
surrender the Option to CitFed Bancorp for a cash
payment from CitFed Bancorp of $30,000,000.
The purchase of any shares of CitFed Bancorp Common
Stock pursuant to the Option is subject to
compliance with applicable law, including the
receipt of necessary approvals under the Bank
Holding Company Act of 1956, as amended (the
"BHCA").
Arrangements such as the Stock Option Agreement are
entered into in connection with corporate mergers
and acquisitions in an effort to increase the
likelihood that the transaction will be consummated
in accordance with its terms and to compensate the
grantee for the efforts undertaken and the
expenses, losses and opportunity costs incurred by
it in connection with the
12
<PAGE> 14
transaction if it is not consummated under certain
circumstances involving an acquisition or potential
acquisition of the issuer by a third party. The
Stock Option Agreement was entered into to
accomplish these objectives. The Stock Option
Agreement may have the effect of discouraging
offers by third parties to acquire CitFed Bancorp
prior to the Merger, even if such persons might
have been prepared to offer to pay consideration to
CitFed Bancorp's stockholders that has a higher
current market price than the shares of Fifth Third
Common Stock to be received by such holders
pursuant to the Affiliation Agreement.
To the best knowledge of CitFed Bancorp and Fifth
Third, no event giving rise to the right to
exercise the Option has occurred as of the date of
this Proxy Statement/Prospectus.
See "PROPOSAL -- MERGER OF CITFED BANCORP INTO
FIFTH THIRD -- Background of and Reasons for the
Merger" and "-- Stock Option Agreement" and Annex B
to this Proxy Statement/Prospectus.
MERGER: At the Effective Time, CitFed Bancorp will merge
with and into Fifth Third and CitFed Bancorp will
cease to exist as a separate entity. Immediately
following the Merger, Fifth Third plans to have
Citizens Federal Bank merge with and into Fifth
Third's wholly owned subsidiary, The Fifth Third
Bank of Western Ohio. See "PROPOSAL -- MERGER OF
CITFED BANCORP INTO FIFTH THIRD -- Effects of
Merger."
SECURITIES INVOLVED: For a comparative analysis of CitFed Bancorp Common
Stock and Fifth Third Common Stock, see
"DESCRIPTION OF CAPITAL STOCK AND COMPARATIVE
RIGHTS OF STOCKHOLDERS."
RECENT DEVELOPMENTS: In addition to the Affiliation Agreement, Fifth
Third has also recently agreed to acquire, in two
separate transactions, The Ohio Company and State
Savings Company. Such transactions require the
payment by Fifth Third of consideration having an
aggregate value of approximately $ million.
Fifth Third will pay such consideration by issuing
approximately 1,500,000 shares of Fifth Third
Common Stock to the shareholders of The Ohio
Company and 16,625,340 shares of Fifth Third Common
Stock in the aggregate to the shareholders of State
Savings Company. Fifth Third also plans to issue up
to 4.2 million shares of Fifth Third Common Stock
prior to the Effective Time in order to enable
Fifth Third to account for the Merger as a
pooling-of-interests, which may include shares of
Fifth Third Common Stock issued in The Ohio Company
acquisition if it is completed prior to the
Effective Time. In March 1998, Fifth Third declared
the 1998 Fifth Third Stock Split. See "FIFTH THIRD
BANCORP -- Recent Developments" and
"PROPOSAL -- MERGER OF CITFED BANCORP INTO FIFTH
THIRD -- Effects of Merger."
UNAUDITED PRO FORMA
FINANCIAL INFORMATION: See "UNAUDITED PRO FORMA FINANCIAL INFORMATION."
HISTORICAL FINANCIAL DATA: See "SELECTED HISTORICAL FINANCIAL DATA OF FIFTH
THIRD", the Consolidated Financial Statements and
the Notes thereto for Fifth Third, incorporated
herein by reference, "SELECTED HISTORICAL FINANCIAL
DATA OF CITFED BANCORP" and the Consolidated
Financial Statements and the Notes thereto for
CitFed Bancorp incorporated herein by reference.
13
<PAGE> 15
COMPARATIVE MARKET PRICES
AND DIVIDENDS: Fifth Third Common Stock and CitFed Bancorp Common
Stock are traded on the Nasdaq National Market
under the symbols "FITB" and "CTZN", respectively.
On January 13, 1998, the business day immediately
preceding the public announcement of the execution
of the Affiliation Agreement setting forth the
terms of the Merger and on April , 1998, the most
recent practicable date prior to the printing of
this Proxy Statement/Prospectus, comparative market
prices of Fifth Third Common Stock (as adjusted to
reflect the 1998 Fifth Third Stock Split) and
CitFed Bancorp Common Stock and the equivalent
price per share of CitFed Bancorp Common Stock
giving effect to the Merger, were as follows:
<TABLE>
<CAPTION>
JANUARY 13, 1998 APRIL , 1998
---------------- -------------
<S> <C> <C> <C>
Fifth Third Common
Stock.................. $53.67 $
(Closing sales price)
CitFed Bancorp Common
Stock.................. $37.75 $
(Closing sales price)
Equivalent price per
share of CitFed Bancorp
Common Stock........... $53.94 $
</TABLE>
The following table sets forth (in per share
amounts), for the quarterly periods indicated, the
high and low closing sales prices and the dividends
declared during each quarterly period:
<TABLE>
<CAPTION>
CITFED BANCORP
FIFTH THIRD COMMON STOCK(1) COMMON STOCK(2)
---------------------------- ----------------------------
DIVIDENDS DIVIDENDS
HIGH LOW DECLARED HIGH LOW DECLARED
------ ------ --------- ------ ------ ---------
<S> <C> <C> <C> <C> <C> <C>
1996:
First Calendar Quarter.............. $26.45 $19.33 $0.116 $16.33 $14.78 $0.031
Second Calendar Quarter............. $25.83 $22.00 $0.116 $17.83 $15.11 $0.031
Third Calendar Quarter.............. $25.95 $22.11 $0.129 $18.00 $16.11 $0.036
Fourth Calendar Quarter............. $33.00 $25.55 $0.129 $23.00 $16.78 $0.053
1997:
First Calendar Quarter.............. $39.78 $27.00 $0.129 $24.83 $20.83 $0.053
Second Calendar Quarter............. $38.05 $30.95 $0.147 $26.00 $22.00 $0.053
Third Calendar Quarter.............. $44.33 $36.33 $0.147 $33.92 $25.08 $0.060
Fourth Calendar Quarter............. $55.67 $41.08 $0.147 $43.13 $31.50 $0.090
1998:
First Calendar Quarter ............. $58.83 $49.50 $0.170 $52.88 $37.75 $0.090
Second Calendar Quarter (through
April , 1998).................. $ $ $ $ $ $
</TABLE>
- ---------------
(1) Per share amounts of Fifth Third Common Stock reflect the 1998 Fifth Third
Stock Split.
(2) Per share amounts of CitFed Bancorp Common Stock reflect the three-for-two
stock split effected in the form of a stock dividend declared October 17,
1997 and distributed November 28, 1997.
14
<PAGE> 16
COMPARATIVE PER SHARE DATA: The following table sets forth certain per-share
information for both Fifth Third and CitFed Bancorp
at the dates indicated and for the periods then
ended. The equivalent values of such information
are based on the Exchange Ratio of 1.005 shares of
Fifth Third Common Stock for each share of CitFed
Bancorp Common Stock. Neither CitFed Bancorp nor
Fifth Third can give any assurances that the
following table will accurately reflect figures and
values applicable at the date of consummation of
the Merger.
<TABLE>
<CAPTION>
EQUIVALENT
SHARE
BASIS 1.005
SHARES
CITFED OF FIFTH THIRD
FIFTH THIRD(1) BANCORP COMMON STOCK
------------------------------------ ------------------ ---------------
HISTORICAL PRO FORMA HISTORICAL
----------------- ---------------- ------------------
BASIC DILUTED BASIC DILUTED BASIC DILUTED BASIC DILUTED
------- ------- ------ ------- -------- ------- ----- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
NET INCOME PER SHARE
Twelve months ended December 31,
for Fifth Third, and nine
months ended December 31, for
CitFed Bancorp:
1997......................... $ 1.73 $1.69 $ 1.75 $1.72 $ 1.63 $1.57 $1.74 $1.70
1996......................... 1.43 1.41 1.46 1.43 .70 .67 1.44 1.42
1995......................... 1.29 1.26 1.32 1.28 .91 .87 1.30 1.27
Twelve months ended March 31, for
CitFed Bancorp:
1997......................... -- -- -- -- 1.18 1.14 -- --
1996......................... -- -- -- -- 1.27 1.22 -- --
1995......................... -- -- -- -- .69 .68 -- --
DIVIDENDS DECLARED PER SHARE
Twelve months ended December 31,
for Fifth Third, and nine
months ended December 31, for
CitFed Bancorp:
1997......................... $ .569 -- -- -- $ .2033 .572 --
1996......................... .489 -- -- -- .12 .491 --
1995......................... .427 -- -- -- .0889 .429 --
Twelve months ended March 31, for
CitFed Bancorp:
1997......................... -- -- -- -- .173 -- -- --
1996......................... -- -- -- -- .120 -- -- --
1995......................... -- -- -- -- .102 -- -- --
BOOK VALUE PER SHARE
At December 31:
1997......................... $ 9.78 -- $11.17 $ 16.14 $9.83 --
</TABLE>
- ---------------
(1) Per share amounts of Fifth Third Common Stock reflect the 1998 Fifth Third
Stock Split.
15
<PAGE> 17
THE SPECIAL MEETING
This Proxy Statement/Prospectus and the accompanying form of proxy are
being furnished to the stockholders of CitFed Bancorp in connection with the
solicitation of proxies by the CitFed Bancorp Board of Directors for use at the
Special Meeting and at any adjournment or postponement thereof.
SPECIAL MEETING
Time and Date; Record Date. The Special Meeting will be held at the Savers
Club Auditorium, One Citizens Federal Centre, Dayton, Ohio, on May 15, 1998 at
2:00 p.m., Eastern Daylight Savings Time. This Proxy Statement/Prospectus and
the enclosed Fifth Third 1997 Annual Report to Stockholders are being sent to
holders of record of CitFed Bancorp Common Stock as of April 3, 1998 (the
"Record Date"), and are accompanied by a form of proxy which the CitFed Bancorp
Board of Directors requests that stockholders execute and return to CitFed
Bancorp for use at the Special Meeting and at any and all adjournments or
postponements thereof.
The CitFed Bancorp Board of Directors has fixed the Record Date as of the
close of business on April 3, 1998 as the time for determining holders of CitFed
Bancorp Common Stock who are entitled to notice of and to vote at the Special
Meeting. Only holders of record of CitFed Bancorp Common Stock on the Record
Date will be entitled to notice of and to vote at the Special Meeting. As of the
Record Date, there were outstanding and entitled to vote at the Special Meeting
13,087,024 shares of CitFed Bancorp Common Stock.
PURPOSE OF THE MEETING
At the Special Meeting, holders of CitFed Bancorp Common Stock will
consider and vote upon a proposal to adopt the Affiliation Agreement. Holders of
CitFed Bancorp Common Stock also may consider and vote upon such other matters
as are properly brought before the Special Meeting, including proposals to
adjourn the Special Meeting to permit further solicitation of proxies by the
CitFed Bancorp Board of Directors in the event that there are not sufficient
votes to adopt the Affiliation Agreement at the time of the Special Meeting;
provided, however, that no proxy which is voted against the Affiliation
Agreement will be voted in favor of adjournment to solicit further proxies for
such proposal. As of the date hereof, the CitFed Bancorp Board of Directors
knows of no business that will be presented for consideration at the Special
Meeting, other than the matters described in this Proxy Statement/Prospectus.
THE CITFED BANCORP BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT YOU VOTE
FOR ADOPTION OF THE AFFILIATION AGREEMENT.
VOTING RIGHTS; VOTE REQUIRED
Each holder of record of CitFed Bancorp Common Stock on the Record Date
will be entitled to cast one vote for each share registered in his, her, or its
name on each matter presented for a vote of the stockholders at the Special
Meeting. Such vote may be exercised in person or by a properly executed proxy.
See "-- Proxies and Proxy Solicitation" below. Adoption of the Affiliation
Agreement at the Special Meeting will require the affirmative vote of the
holders of a majority of the outstanding shares of CitFed Bancorp Common Stock
entitled to vote at the Special Meeting. The affirmative vote of a majority of
shares represented at the Special Meeting may authorize the adjournment of the
meeting. For purposes of counting votes on this proposal, failures to vote,
abstentions and broker non-votes (i.e., proxies from brokers or nominees
indicating that such persons have not received instructions from the beneficial
owners or other persons as to certain proposals on which such beneficial owners
or persons are entitled to vote their shares but with respect to which the
brokers or nominees have no discretionary power to vote without such
instructions) will have the same effect as votes against the Affiliation
Agreement. Adoption of the Affiliation Agreement by the stockholders of CitFed
Bancorp is a condition to, and required for, consummation of the Merger. See
"PROPOSAL -- MERGER OF CITFED BANCORP INTO FIFTH THIRD -- Conditions to
Closing."
As of the Record Date, CitFed Bancorp directors and executive officers and
their affiliates beneficially owned 378,963 shares (excluding options underlying
326,581 shares of CitFed Common Stock) or 2.9 percent of
16
<PAGE> 18
the outstanding shares, of CitFed Common Stock entitled to vote at the Special
Meeting. It is expected that substantially all of these shares will be voted for
the Affiliation Agreement.
Pursuant to the Stock Option Agreement, Fifth Third has the right,
exercisable only in certain circumstances, none of which have occurred as of the
date hereof, to acquire up to 3,230,411 shares of CitFed Bancorp Common Stock,
subject to adjustment as provided in the Stock Option Agreement, provided that
in no event shall the number of shares of CitFed Bancorp Common Stock for which
the Option is exercisable exceed 19.9% of the issued and outstanding shares of
CitFed Bancorp Common Stock after the exercise of the Option. If Fifth Third
were to acquire such shares, it would have sole voting power and, subject to
certain restrictions set forth in the Stock Option Agreement, sole power to
dispose or direct the disposition of such shares. Because of the limited
circumstances in which the option granted under the Stock Option Agreement is
exercisable, Fifth Third disclaims beneficial ownership of such shares of CitFed
Bancorp Common Stock subject to the Stock Option Agreement.
Additionally, as of January 13, 1998, certain Fifth Third subsidiaries may
be deemed to be the beneficial owners of 383,661 shares of CitFed Bancorp Common
Stock, which shares are held in a fiduciary capacity (the "Fiduciary Shares").
Fifth Third has sole voting power with respect to 2,925 of such Fiduciary
Shares, shared voting power with respect to no such Fiduciary Shares, sole
investment power as to 2,925 of such Fiduciary Shares and shared investment
power with respect to no such Fiduciary Shares. Fifth Third has no voting or
investment power with respect to the remaining 380,736 Fiduciary Shares. The
Option Shares and the Fiduciary Shares collectively represent approximately
22.3% of the outstanding shares of CitFed Bancorp Common Stock giving effect to
the full exercise of the Option. Fifth Third disclaims beneficial ownership of
all of the Option Shares and all of the Fiduciary Shares.
To the best of its knowledge, no executive officer or director of Fifth
Third beneficially owns any shares of CitFed Bancorp Common Stock.
PROXIES AND PROXY SOLICITATION
If a CitFed Bancorp stockholder properly executes and returns a proxy in
the form distributed by CitFed Bancorp, the proxies named will vote the shares
represented by that proxy at the Special Meeting. Where a stockholder specifies
a choice, the proxy will be voted in accordance with the stockholder's
specification. If no specific direction is given, the proxies will vote the
shares in favor of adoption of the Affiliation Agreement. If other matters are
presented, the shares for which proxies have been received will be voted in
accordance with the discretion of the proxies.
The affirmative vote of a majority of the shares represented at the Special
Meeting may authorize the adjournment of the Special Meeting; provided, however,
that no proxy which is voted against the Affiliation Agreement will be voted in
favor of adjournment to solicit further proxies for such proposal.
Any proxy given pursuant to this solicitation or otherwise may be revoked
by the person giving it at any time before it is voted by delivering to the
Secretary of CitFed Bancorp at One Citizens Federal Centre, Dayton, Ohio 45402,
on or before the taking of the vote at the Special Meeting, a written notice of
revocation bearing a later date than the proxy or a later dated proxy relating
to the same shares of CitFed Bancorp Common Stock or by attending the Special
Meeting and voting in person. Attendance at the Special Meeting will not in
itself constitute the revocation of a proxy.
In addition to solicitation by mail, directors, officers, and employees of
CitFed Bancorp, who will not be specifically compensated for such services, may
solicit proxies from the stockholders of CitFed Bancorp, personally or by
telephone, telegram or other forms of communication. Brokerage houses, nominees,
fiduciaries and other custodians will be requested to forward soliciting
materials to beneficial owners and will be reimbursed for their reasonable
expenses incurred in sending proxy material to beneficial owners. In addition,
CitFed Bancorp has engaged Chase Mellon Shareholder Services ("Chase Mellon") to
assist CitFed Bancorp in distributing proxy materials and contacting record and
beneficial owners of CitFed Bancorp Common Stock. CitFed Bancorp has agreed to
pay Chase Mellon a fee of $6,500.00 plus out-of-pocket expenses for its services
to be rendered on behalf of CitFed Bancorp. CitFed Bancorp will bear its own
expenses in connection with the
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solicitation of proxies for the Special Meeting, except Fifth Third has agreed
to pay all expenses of printing and mailing this Proxy Statement/Prospectus.
HOLDERS OF CITFED BANCORP COMMON STOCK ARE REQUESTED TO COMPLETE, DATE AND
SIGN THE ACCOMPANYING FORM OF PROXY AND TO RETURN IT PROMPTLY TO CITFED IN THE
ENCLOSED POSTAGE-PAID ENVELOPE.
NO APPRAISAL RIGHTS
Holders of CitFed Bancorp Common Stock are not entitled to appraisal rights
under the Delaware General Corporation Law (the "DGCL") in connection with the
Merger. Under Section 262 of the DGCL, appraisal rights are available to
dissenting stockholders in connection with certain mergers or consolidations.
However, unless the certificate of incorporation otherwise provides, which
CitFed Bancorp's certificate of incorporation (the "CitFed Bancorp Certificate
of Incorporation") does not, Section 262 does not provide for appraisal rights
(i) if the shares of the corporation are listed on a national securities
exchange or designated as a national market system security on an inter-dealer
quotations system by the National Association of Securities Dealers, Inc. or
held of record by more than 2,000 stockholders (as long as the stockholders
receive in the merger shares of the surviving corporation or of any other
corporation the shares of which are listed on a national securities exchange or
designated as a national market system security on an inter-dealer quotations
system by the National Association of Securities Dealers, Inc. or held of record
by more than 2,000 stockholders) or (ii) if the corporation is the surviving
corporation and no vote of its stockholders is required on the merger. The
CitFed Bancorp Certificate of Incorporation does not provide for appraisal
rights beyond those specifically provided under the DGCL.
STOCKHOLDER PROPOSALS
CitFed Bancorp will hold a 1998 Annual Meeting of Stockholders only if the
Merger is not consummated before the time of such meeting, which is presently
expected to be held in mid-July 1998. In such event, as disclosed in the proxy
materials for CitFed Bancorp's 1997 Annual Meeting of Stockholders, in order to
be eligible for inclusion in CitFed Bancorp's proxy materials for the 1998
Annual Meeting of Stockholders, any stockholder proposal to take action at such
meeting must have been received at the main office of CitFed Bancorp, One
Citizens Federal Centre, Dayton, Ohio 45402, no later than February 10, 1998.
Any such proposal is subject to the requirements of the proxy rules adopted
under the Exchange Act.
PROPOSAL -- MERGER OF CITFED BANCORP INTO FIFTH THIRD
GENERAL
The following description contains, among other information, summaries of
certain provisions of the Affiliation Agreement and is qualified in its entirety
by reference to the full text thereof, a copy of which is appended as Annex A to
this Proxy Statement/Prospectus. All stockholders are urged to read the
Affiliation Agreement in its entirety.
Pursuant to the Affiliation Agreement, each stockholder of CitFed Bancorp
will receive for each share of CitFed Bancorp Common Stock which such
stockholder holds at the Effective Time, the right to receive 1.005 shares of
Fifth Third Common Stock, as adjusted for the 1998 Fifth Third Stock Split.
Based on the closing price per share of Fifth Third Common Stock on the Nasdaq
National Market on April , 1998, the value of 1.005 shares of Fifth Third
Common Stock was $ . The Exchange Ratio was adjusted in accordance with
the Affiliation Agreement to reflect the 1998 Fifth Third Stock Split. The
Exchange Ratio will be further adjusted so as to give the CitFed Bancorp
stockholders the economic benefit of any other stock dividends,
reclassifications, recapitalizations, split-ups, exchanges of shares,
distributions or combinations or subdivisions of Fifth Third Common Stock
effected before the Effective Time. See "PROPOSAL -- MERGER OF CITFED BANCORP
INTO FIFTH THIRD -- Termination; Amendment; Waiver."
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BACKGROUND OF AND REASONS FOR THE MERGER
Since becoming a public company in 1992, CitFed Bancorp has pursued a
strategy of expanding its traditional savings bank mortgage lending and mortgage
banking business through internal growth and diversifying its revenue base to
include asset management and commercial lending. CitFed Bancorp has also sought
to expand its Ohio banking franchise with acquisitions contiguous to its
principal market in Montgomery County and in 1995 completed the successful
acquisition of PSB Holdings in neighboring Greene County. During 1996 and 1997,
CitFed Bancorp pursued several acquisition candidates but was unsuccessful in
reaching an agreement.
Because CitFed Bancorp is the largest banking institution headquartered in
Dayton, Ohio with an estimated 13% market share of deposits in the
Dayton-Springfield Metropolitan Statistical Area and has the leading mortgage
banking business in Montgomery County, CitFed Bancorp has from time to time
received overtures from larger banking institutions interested in expanding into
the Dayton market or combining their existing franchise with CitFed Bancorp. One
of these overtures in the second quarter of 1997 lead to further discussions
with another financial institution. CitFed Bancorp's Executive Committee met in
June 1997 to consider whether to continue discussions with such financial
institution at which meeting the Executive Committee determined that CitFed
Bancorp would be better served to continue to execute its strategic plan,
including its pursuit of acquisition opportunities. On July 28, 1997, CitFed
Bancorp formally retained Keefe Bruyette as its financial advisor to assist in
the planning and execution of acquisition strategies and to advise in
considering the desirability of any future potential strategic alliance or sale
of CitFed Bancorp.
On October 15, 1997, senior executives of Fifth Third initiated a meeting
with Jerry Kirby, the Chairman of CitFed Bancorp, to discuss the benefits of a
strategic alliance between Fifth Third and CitFed Bancorp. At the meeting,
senior executives of Fifth Third outlined Fifth Third's interest in pursuing a
potential strategic alliance of the two companies and asked for a follow-up
meeting to respond to Mr. Kirby's comments that CitFed Bancorp would consider
only a compelling offer. On November 17, 1997, Mr. Kirby and Robert Niehaus,
Executive Vice President of Fifth Third, met to explore the benefits of such an
alliance and to discuss further what CitFed Bancorp would consider as a very
compelling offer. On November 28, 1997, Mr. Kirby met with Mr. Niehaus, where
Mr. Niehaus orally outlined Fifth Third's preliminary proposal for a strategic
alliance with CitFed Bancorp, which proposal included a fixed exchange ratio of
.6565 of a share of Fifth Third Common Stock for each share of CitFed Bancorp
Common Stock.
On December 1, 1997, Mr. Kirby alerted members of CitFed Bancorp's
Executive Committee that CitFed had been approached by a potential interested
suitor and that he intended to meet with the CitFed Bancorp Board of Directors
to discuss the matter further. On December 2nd and 3rd, Mr. Kirby met with each
CitFed Bancorp director individually to advise him of Fifth Third's interest in
negotiating a strategic alliance. At such meetings, Mr. Kirby received the
approval of each CitFed Bancorp director to appoint a committee of the CitFed
Bancorp Board of Directors to assist Mr. Kirby in negotiations with Fifth Third
(the "Committee"). On December 10, 1997, Mr. Kirby received a preliminary
proposal from Fifth Third in writing and on December 12, 1997, Mr. Kirby met
with the Committee to review Fifth Third's written proposal. On December 19,
1997, the CitFed Bancorp Board of Directors held its regularly scheduled meeting
at which the CitFed Bancorp Board of Directors ratified the appointment of the
Committee and authorized the Committee to commence due diligence procedures in
connection with a possible strategic alliance with Fifth Third. On December 19,
1997, Fifth Third and CitFed Bancorp executed a confidentiality agreement, and
thereafter exchanged regulatory and internal reports and business plans.
On December 31, 1997, Mr. Kirby met with Mr. Niehaus to review the written
proposal received from Fifth Third on December 10, 1997. Discussion and
negotiations with respect to the definitive Affiliation Agreement and related
agreements between Fifth Third, CitFed Bancorp, and their financial and legal
advisors, and on-site due diligence by both parties continued during the first
two weeks of January 1998. On January 11, 1998, at CitFed Bancorp's request,
Keefe Bruyette and Salomon Smith Barney, financial advisor to Fifth Third,
discussed by telephone an increase in the exchange ratio. Fifth Third agreed to
increase its fixed exchange ratio to .67 of a share of Fifth Third Common Stock
for each share of CitFed Bancorp Common Stock (based upon Fifth Third's closing
stock price of $79.00 (before the adjustments to reflect the 1998 Fifth Third
Stock Split) per share on
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January 9, 1998, which valued CitFed Bancorp Common Stock at $52.93 per share)
and submitted a formal offer to CitFed Bancorp. Fifth Third also offered a fixed
price alternative of Fifth Third Common Stock valued at $46.67 per CitFed
Bancorp share with a maximum exchange ratio of .6564 if Fifth Third's Common
Stock price were to drop 10% from $79.00 to $71.10 and a minimum exchange ratio
of .537 if Fifth Third's Common Stock price were to rise 10% from $79.00 to
$86.90.
On January 12, 1998, the Committee reviewed the proposed Affiliation
Agreement incorporating the revised offer. Keefe Bruyette reviewed the
alternative merger consideration proposals in detail with the Committee, after
which the Committee voted to recommend the strategic alliance between Fifth
Third and CitFed Bancorp to the CitFed Bancorp Board of Directors, based on a
fixed exchange ratio of .67 of a share Fifth Third Common Stock for each share
of CitFed Bancorp Common Stock. On January 13, 1998, at a meeting of the CitFed
Bancorp Board of Directors that included the participation of Keefe Bruyette and
CitFed Bancorp's outside legal counsel, the CitFed Bancorp Board of Directors
reviewed the terms of the proposed Affiliation Agreement and unanimously
authorized the execution and delivery of the Affiliation Agreement, based on the
fixed exchange ratio proposal of .67 of a share of Fifth Third Common Stock for
each share of CitFed Bancorp Common Stock (which as of the date hereof, has been
adjusted to 1.005 shares of Fifth Third Common Stock to reflect the 1998 Fifth
Third Stock Split). The Board also unanimously approved the execution and
delivery of the related Stock Option Agreement granting Fifth Third an option to
purchase up to 3,230,411 shares of CitFed Bancorp Common Stock (but in no event
to exceed 19.9% of the number of shares of CitFed Bancorp Common Stock
outstanding immediately after exercise of the Option) exercisable under certain
limited circumstances.
The terms of the Affiliation Agreement, including the consideration to be
paid to CitFed Bancorp's stockholders, were the result of arm's-length
negotiations between the representatives of Fifth Third and CitFed Bancorp. In
the course of reaching its determination to approve the Affiliation Agreement,
the CitFed Bancorp Board of Directors, without assigning any relative or
specific weights, considered a number of factors, including the following
material factors: (i) the financial and valuation analyses prepared, and the
oral fairness opinion rendered, by Keefe Bruyette, (ii) the terms of the
Affiliation Agreement and the other documents executed in connection with the
Affiliation Agreement as negotiated (including the transaction structure, the
form and amount of the merger consideration, and the potential impact of the
proposed Affiliation Agreement and the Stock Option Agreement on other
institutions that might have an interest in a business combination with CitFed
Bancorp), (iii) the financial condition, operations and prospects of Fifth Third
and the anticipated effect thereon of the proposed transaction, (iv) industry
and economic factors, (v) the nature and compatibility of Fifth Third's
management and business philosophy, (vi) the prospects for growth and expanded
products and services, and other anticipated impacts on depositors, employees,
customers and communities served by CitFed Bancorp, and (vii) regulatory and
similar factors.
In approving the Affiliation Agreement, the CitFed Bancorp Board of
Directors was aware that (i) the Affiliation Agreement contains certain
provisions prohibiting CitFed Bancorp from initiating, soliciting, or
negotiating other offers or agreements to acquire CitFed Bancorp (see
"-- Conduct Pending Merger; Representations and Warranties"), and (ii) the Stock
Option Agreement may have the effect of discouraging persons who may now, or
prior to the Effective Time, be interested in acquiring all of or a significant
interest in CitFed Bancorp from considering or proposing such an acquisition,
even if such person were prepared to offer to pay consideration to stockholders
of CitFed Bancorp which had a higher current market price than the Merger
Consideration to be received for each share of CitFed Bancorp Common Stock
pursuant to the Affiliation Agreement. See "-- Stock Option Agreement." However,
the CitFed Bancorp Board of Directors was also aware that such terms were
specifically bargained for inducements for Fifth Third to enter into the
Affiliation Agreement, and that the obligation of the CitFed Bancorp Board of
Directors under the Affiliation Agreement to recommend approval of the
Affiliation Agreement by its stockholders was explicitly made subject to, among
other conditions, the fiduciary obligations of the CitFed Bancorp Board of
Directors under applicable law. Accordingly, the Affiliation Agreement permits
the CitFed Bancorp Board of Directors, if required by the exercise of its
fiduciary duties under applicable law, to withdraw, modify or change such
recommendation. See "-- Conduct Pending Merger; Representations and Warranties."
In addition, in connection with its approval of the proposed Merger, the CitFed
Bancorp Board of Directors was advised by Keefe Bruyette that the indicated
value of the Merger exceeded the upper end of Keefe Bruyette's range of
estimates of CitFed Bancorp's stand-alone value (i.e., the market price of
CitFed Bancorp Common Stock if CitFed Bancorp remained an independent
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company). In presenting this advice, Keefe Bruyette stated that these findings
were necessarily based upon economic, market, monetary and other conditions as
they existed and could be evaluated at the time, represented its best business
judgment under the circumstances and should not be construed in any way as a
financial fairness or other form of expert opinion. Keefe Bruyette's fairness
opinion is described below and included as Annex C to this Prospectus/Proxy
Statement. See "-- Opinion of Financial Advisor to CitFed Bancorp."
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 CitFed Bancorp's
service area. Fifth Third's acquisition strategy has generally been to fill in
its markets along the interstate highways in Ohio, Kentucky and Indiana. These
acquisitions are designed to strengthen Fifth Third's ability to compete in
these markets by increasing its presence, consumer access and sales force.
THE BOARD OF DIRECTORS OF CITFED BANCORP UNANIMOUSLY RECOMMENDS THAT THE
STOCKHOLDERS OF CITFED BANCORP VOTE FOR ADOPTION OF THE AFFILIATION AGREEMENT.
OPINION OF FINANCIAL ADVISOR TO CITFED BANCORP
In July 1997, Keefe Bruyette was retained by CitFed Bancorp to assist in
the planning and execution of acquisition strategies and to advise CitFed
Bancorp in considering the desirability of any future potential strategic
alliance or the sale of CitFed Bancorp. Keefe Bruyette, as part of its
investment banking business, is regularly engaged in the evaluation of
businesses and securities in connection with mergers and acquisitions,
negotiated underwritings and distributions of listed and unlisted securities.
Keefe Bruyette is familiar with the market for common stocks of publicly traded
banks, thrifts and bank and thrift holding companies. The CitFed Bancorp Board
of Directors selected Keefe Bruyette on the basis of the firm's reputation and
its experience and expertise in transactions similar to the Merger and its prior
work for and relationship with CitFed Bancorp.
Pursuant to its engagement, Keefe Bruyette was asked to render an opinion
as to the fairness, from a financial point of view, of the consideration to
stockholders of CitFed Bancorp in the Merger (the "Merger Consideration"). The
Exchange Ratio, upon which the Merger Consideration will be based, was
determined through arm's-length negotiations between CitFed Bancorp and Fifth
Third, although CitFed Bancorp was advised during such negotiations by Keefe
Bruyette. On January 13, 1998, at a meeting of the CitFed Bancorp Board of
Directors held to evaluate the proposed Merger, Keefe Bruyette delivered to the
CitFed Bancorp Board of Directors an oral opinion to the effect that, as of such
date, the Exchange Ratio was fair to the stockholders of CitFed Bancorp from a
financial point of view. Keefe Bruyette has delivered to the CitFed Bancorp
Board of Directors its written opinion dated the date of this Proxy
Statement/Prospectus to the effect that as of such date the Exchange Ratio is
fair, from a financial point of view, to the holders of CitFed Bancorp Common
Stock. In connection with its opinion dated the date of this Prospectus/Proxy
Statement, Keefe Bruyette updated certain analyses performed in connection with
its oral opinion and reviewed the assumptions on which such analyses were based
and the factors considered in connection therewith.
Keefe Bruyette's opinion is addressed to the CitFed Bancorp Board of
Directors and does not constitute a recommendation as to how any stockholder of
CitFed Bancorp should vote with respect to the Affiliation Agreement. No
limitations were imposed by the CitFed Bancorp Board of Directors upon Keefe
Bruyette with respect to the investigations made or procedures followed by Keefe
Bruyette in rendering its opinion.
THE FULL TEXT OF THE OPINION OF KEEFE BRUYETTE, WHICH SETS FORTH A
DESCRIPTION OF THE PROCEDURES FOLLOWED, ASSUMPTIONS MADE, MATTERS CONSIDERED AND
LIMITS ON THE REVIEW UNDERTAKEN, IS ATTACHED TO THIS PROXY STATEMENT/PROSPECTUS
AS ANNEX C AND IS INCORPORATED HEREIN BY REFERENCE. STOCKHOLDERS ARE URGED TO
READ THE OPINION IN ITS ENTIRETY. THE FOLLOWING SUMMARY OF THE OPINION IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO THE FULL TEXT OF THE OPINION.
In rendering its opinion, Keefe Bruyette (i) reviewed, among other things,
the Affiliation Agreement, Annual Reports to Stockholders and Annual Reports on
10-K of CitFed Bancorp for the four years ended March 31, 1997 and Annual
Reports to Stockholders and Annual Report on Form 10-K of Fifth Third for the
four years ended December 31, 1996, certain interim reports to stockholders and
Quarterly Reports on Form 10-Q of CitFed Bancorp and certain interim reports to
stockholders and Quarterly Reports on Form 10-Q of Fifth Third, and
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certain internal financial analyses and forecasts for CitFed Bancorp prepared by
management; (ii) held discussions with members of senior management of CitFed
Bancorp and Fifth Third regarding past and current business operations,
regulatory relationships, financial condition and future prospects of the
respective companies; (iii) compared certain financial and stock market
information for Fifth Third with similar information for certain other companies
the securities of which are publicly traded; (iv) reviewed the financial terms
of certain recent business combinations in the savings industry; and (v)
performed such other studies and analyses as it considered appropriate.
In conducting its review and arriving at its opinion, Keefe Bruyette relied
upon and assumed the accuracy and completeness of all of the financial and other
information provided to it or publicly available, and Keefe Bruyette did not
attempt to verify such information independently. Keefe Bruyette relied upon the
management of CitFed Bancorp as to the reasonableness and achievability of the
financial and operating forecasts and projections (and assumptions and bases
therefor) provided to Keefe Bruyette and assumed that such forecasts and
projections reflect the best available estimates and judgments of such
management and that such forecasts and projections will be realized in the
amounts and in the time periods estimated by such management. Keefe Bruyette
also assumed, without independent verification, that the aggregate allowances
for loan losses for CitFed Bancorp and Fifth Third are adequate to cover such
losses. In rendering its opinion, Keefe Bruyette did not make or obtain any
evaluations or appraisals of the property of CitFed Bancorp or Fifth Third, nor
did Keefe Bruyette examine any individual credit files.
The following is a summary of the material financial analyses employed by
Keefe Bruyette in connection with providing its oral opinion of January 13, 1998
and the written opinion as of the date of this Proxy Statement/ Prospectus and
does not purport to be a complete description of all analyses employed by Keefe
Bruyette.
(a) Analysis of the Fifth Third Offer. Keefe Bruyette calculated multiples
which were based on the assumed per share purchase price of $52.93 (derived by
multiplying the Exchange Ratio of 1.005 by $52.67, the last reported sale price
for the Fifth Third Common Stock on January 12, 1998, as adjusted for the 1998
Fifth Third Stock Split) of CitFed Bancorp Common Stock. CitFed Bancorp's
September 30, 1997 stated and tangible book values were $15.92 and $14.47
respectively, and its calendar 1997 and 1998 earnings per share estimates
(provided by CitFed Bancorp) were $2.03 and $2.46, per share, respectively.
Based on this data, the price to stated and fully diluted tangible book value
multiple was 3.32 times and 3.66 times respectively, and the price to the
calendar 1997 and 1998 earnings estimates per share was 26.07 times and 21.52
times respectively.
(b) Analysis of Selected Merger Transactions. Keefe Bruyette reviewed
certain financial data related to 16 thrift holding company acquisitions in the
Midwest region announced from August 2, 1996 to January 5, 1998 (the "Midwest
Thrift Acquisitions") and 11 such acquisitions in the United States announced
from February 28, 1997 to January 5, 1998 (the "Nationwide Thrift
Transactions"). The Midwest Thrift Acquisitions analyzed were as follows: Fifth
Third/State Savings Company; Alliance Bancorp/Southwest Bancshares; Magna Group,
Inc./ Charter Financial, Inc.; Marshall & Ilsley/Advantage Bancorp; Star Banc
Corp/Great Financial Corp.; Commercial Federal/Mid Continent Bancshares; Union
Planters Corp/Sho-Me Financial; Associated Banc-Corp/First Financial Corp;
Charter One Financial/Haverfield Corp.; TCF Financial Corp./Standard Financial;
Marshall & Ilsley/Security Capital Corp; Mercantile Bancorp/Roosevelt Financial;
ABN AMRO Holding/Standard Federal Bank; Pinnacle Financial/Indiana Federal
Corp.; Mutual Savings Bank/First Federal Bancshares; and Hinsdale Financial
Corp./Liberty Bancorp acquisitions. The Nationwide Thrift Acquisitions analyzed
were as follows: Fifth Third/State Savings Company; Marshall & Ilsley/Advantage
Bancorp; Peoples Heritage Financial Group/ CFX Corporation; North Fork
Bancorp/New York Bancorp; HF Ahmanson & Company/Coast Savings Financial; Star
Banc Corp./Great Financial Corp; Charter One Financial/RCSB Financial; TCF
Financial Corp/Standard Financial; Marshall & Ilsley/Security Capital Corp;
Washington Mutual/Great Western Financial; and Summit Bancorp/Collective Bancorp
acquisitions.
For the Midwest Thrift Acquisitions, Keefe Bruyette calculated an average
multiple of price to the targets' earnings (trailing 12 months) as 19.43 times
compared to a multiple of 26.07 times estimated 1997 earnings per share
associated with the Merger; an average premium to the targets' stated book value
of 196% compared to a premium of 332% associated with the Merger; and an average
premium to the targets' tangible book value of 205% compared to a premium of
366% associated with the Merger.
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For the Nationwide Thrift Transactions, Keefe Bruyette calculated an
average multiple of price to the targets' earnings (trailing 12 months) of 19.28
times compared to a multiple of 26.07 times estimated 1997 earnings per share
associated with the Merger; an average premium to the targets' stated book value
of 248% compared to a premium of 332% associated with the Merger; and an average
premium to the targets' tangible book value of 258% compared to a premium of
366% associated with the Merger.
No company or transaction used as a comparison in the above analysis is
identical to CitFed Bancorp or the Merger. Accordingly, an analysis of the
results of the foregoing is not mathematical; rather, it involves complex
considerations and judgments concerning differences in financial and operating
characteristics of the companies and other factors that could affect the public
trading value of the companies to which they are being compared.
(c) Selected Peer Group Analysis. Keefe Bruyette compared the financial
performance and market performance of Fifth Third based on various financial
measures of earnings performance, operating efficiency, capital adequacy and
asset quality and various measures of market performance, including market/book
values, price to earnings and dividend yields to those of a group of comparable
holding companies. For purposes of such analysis, the financial information used
by Keefe Bruyette was as of and for the quarter ended September 30, 1997 and the
market price information was as of January 12, 1998. The companies in the peer
group were nationwide banks which had total assets ranging from approximately $9
billion to $36 billion and included: Comerica Incorporated; State Street
Corporation; Mercantile Bancorporation, Inc.; South Trust Corporation; Summit
Bancorp; BB&T Corporation; Northern Trust Corporation; Huntington Bancshares,
Incorporated; Crestar Financial Corporation; Regions Financial Corporation;
Firstar Corporation; AmSouth Bancorporation; First Security Corporation;
Marshall & Ilsley Corporation; Union Planters Corporation; First Tennessee
National Corporation Star Banc Corporation; First American Corporation; and
Synovus Financial Corp.
Keefe Bruyette's analysis showed the following concerning Fifth Third's
financial performance: that its return on equity on an annualized basis was
20.24% compared with an average of 18.80% for the peer group; that its return on
assets on an annualized basis was 2.03% compared with an average of 1.50% for
the peer group; that its net interest margin on an annualized basis was 4.14%
compared with an average of 4.15% for the peer group; that its efficiency ratio
on an annualized basis was 39.72% compared with an average of 56.34% for the
peer group; that its equity to assets ratio was 10.24% compared to an average of
7.89% for the peer group; that its ratio of nonperforming assets to total loans
and other real estate owned was 0.33% compared to an average of 0.54%for the
peer group; and that its ratio of loan loss reserve to nonperforming loans was
495% compared to an average of 347% for the peer group.
Keefe Bruyette's analysis further showed the following concerning Fifth
Third's market performance: that Fifth Third's price to earnings multiple based
on 1997 and 1998 estimated earnings was 30.98 times and 26.78 times
respectively, compared to an average for the group of 20.30 times and 17.98
times; that its price to book value multiple was 5.71 times, compared to an
average for the group of 3.61 times; and its dividend yield was 1.11%, compared
to an average for the group of 1.91%. For purposes of the above calculations,
all earnings estimates were based upon the published estimates of Keefe
Bruyette's equity research department.
(d) Contribution Analysis. Keefe Bruyette analyzed the relative
contribution of each of Fifth Third and CitFed Bancorp to the pro forma balance
sheet and income statement items of the combined entity, including assets,
common equity, market capitalization, deposits and 1997 estimated net income.
Keefe Bruyette compared the relative contribution of such balance sheet and
income statement items with the estimated pro forma ownership for CitFed Bancorp
stockholders based on an Exchange Ratio of 1.005. The contribution showed that
CitFed Bancorp would contribute approximately, 12.2% of the combined assets,
7.9% of the combined common equity, 9.7% of the combined deposits, and 5.8% of
the combined nine month annualized net income. Based upon an Exchange Ratio in
the Merger of 1.005 shares of Fifth Third Common Stock for each share of CitFed
Bancorp Common Stock, holders of CitFed Bancorp Common Stock would own
approximately 5.0% of the combined company on a fully diluted basis.
(e) Discounted Cash Flow Analysis. Keefe Bruyette estimated the present
value of future cash flows that would accrue to a holder of a share of CitFed
Bancorp Common Stock assuming CitFed Bancorp were to remain independent and the
stockholder held the stock through the year 2003 and then sold it at the end of
year 2003. The analysis was based on several assumptions, including 13.52
million shares outstanding and earnings per
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share in 1998 of $2.46 and 21% earnings per share growth rate thereafter. A 10%
dividend growth rate was assumed for CitFed Bancorp through the year 2003. There
were two different scenarios used in determining a terminal value in 2003. In
one case a market multiple of 15.6x 2003 earnings per share was assumed and in
another scenario an acquisition multiple of 18.0x 2003 earnings per share was
assumed. The terminal valuation and the estimated dividends were discounted at a
rate of 11%, producing a present value of $59.19 and $67.23, respectively, based
on market and acquisition multiples. Keefe Bruyette also presented a table
showing the foregoing analysis on a stand-alone basis with a range of discount
rates from 10% to 15% and a range of market multiples of 13x to 18x 2003
earnings per share, resulting in a range of present values for a share of CitFed
Bancorp Common Stock of $41.50 to $70.73. These values were determined by adding
(i) the present value of the estimated future dividend stream that CitFed
Bancorp could generate over the period beginning 1998 and ending in 2003, and
(ii) the present value of the terminal value of the CitFed Bancorp Common Stock.
Keefe Bruyette also estimated the present value of future cash flows that
would accrue to a holder of a share of CitFed Bancorp Common Stock utilizing the
same assumptions as above except that earnings per share growth rate for CitFed
Bancorp was assumed to be 15%. Again, in one scenario a market multiple of 15.6x
2003 earnings per share was assumed and in another scenario an acquisition
multiple of 18.0x 2003 earnings per share was assumed. The terminal valuation
and the estimated dividends were discounted at a rate of 11%, producing a
present value of $47.31 and $53.55, respectively, based on market and
acquisition multiples. Keefe Bruyette also presented a table showing the
foregoing analysis on a stand-alone basis with a range of discount rates from
10% to 15% and a range of market multiples of 13x to 18x 2003 earnings per
share, resulting in a range of present values for a share of CitFed Bancorp
Common Stock of $33.51 to $56.29. These values were determined by adding (i) the
present value of the estimated future dividend stream that CitFed Bancorp could
generate over the period beginning 1998 and ending in 2003, and (ii) the present
value of the terminal value of the CitFed Bancorp Common Stock.
Keefe Bruyette also estimated the present value of future cash flows that
would accrue to a holder of 1.005 shares of Fifth Third Common Stock assuming
the Merger were to occur and assuming the stockholder held the stock through the
year 2003 and then sold it at the end of 2003. This analysis was based on
several assumptions, including Fifth Third's 1998 earnings per share of $1.97
and a 16% earnings per share growth rate thereafter. A 16% dividend growth rate
was assumed for Fifth Third pro forma through the year 2003. There were two
different scenarios used in determining a terminal value in 2003. In one case a
market multiple of 27x 2003 earnings per share was assumed and in another
scenario an acquisition multiple value of 30x 2003 earnings per share was
assumed. The terminal valuation and the estimated dividends were discounted at a
rate of 11%. The result of this analysis was a present value of $63.58 and
$70.72 (based upon 13.52 million shares outstanding) respectively, based on
market and acquisition multiples. These values were determined by adding (i) the
present value of the estimated future dividend stream from 1.005 shares of Fifth
Third beginning in 1998 and ending in 2003 and (ii) the present value of the
terminal value of 1.005 shares of Fifth Third Common Stock.
Keefe Bruyette stated that the discounted cash flow analysis is a
widely-used valuation methodology but noted that it relies on numerous
assumptions, including asset and earnings growth rates, dividend payout rates,
terminal values and discount rates. The analysis did not purport to be
indicative of the actual values or expected values of CitFed Bancorp Common
Stock.
(f) Other Analysis. Keefe Bruyette also reviewed Fifth Third's five year
and nine months ended September 30, 1997 financial highlights, business segment
financial information, loan composition, deposit composition, historical stock
price performance relative to the S&P 500 and to an index of bank and thrift
stocks, historical price to earnings multiples relative to the Keefe Bank Index
and the S&P 500, the pro-forma deposit market share in the Dayton-Springfield
Metropolitan Statistical Area, pro forma branch locations in Ohio, Indiana and
Kentucky and the pro forma earnings per share and book value projections for
1998 and 1999 pro forma for the Merger of CitFed Bancorp with Fifth Third.
The summary contained herein provides a description of the material
analyses prepared by Keefe Bruyette in connection with the rendering of its
opinion. The summary set forth above does not purport to be a complete
description of the analyses performed by Keefe Bruyette in connection with the
rendering of its opinion. The preparation of a fairness opinion is not
necessarily susceptible to partial analysis or summary description. Keefe
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Bruyette believes that its analyses and the summary set forth above must be
considered as a whole and that selecting portions of its analyses without
considering all analyses, or selecting part of the above summary, without
considering all factors and analyses, would create an incomplete view of the
processes underlying the analyses set forth in Keefe Bruyette's presentations
and opinion. The ranges of valuations resulting from any particular analysis
described above should not be taken to be Keefe Bruyette's view of the actual
value of CitFed Bancorp and Fifth Third. The fact that any specific analysis has
been referred to in the summary above is not meant to indicate that such
analysis was given greater weight than any other analyses.
In performing its analyses, Keefe Bruyette made numerous assumptions with
respect to industry performance, general business and economic conditions and
other matters, many of which are beyond the control of CitFed Bancorp and Fifth
Third. The analyses performed by Keefe Bruyette are not necessarily indicative
of actual values or actual future results which may be significantly more or
less favorable than suggested by such analyses. Such analyses were prepared
solely as part of Keefe Bruyette's analysis of the fairness, from a financial
point of view, of the Exchange Ratio in the Merger. These analyses were provided
to the CitFed Bancorp Board of Directors in connection with the delivery of
Keefe Bruyette's opinion. The analyses do not purport to be appraisals or to
reflect the prices at which a company actually might be sold or the prices at
which any securities may trade at the present time or at any time in the future.
In addition, as described above, Keefe Bruyette's opinion, along with its
presentation to the CitFed Bancorp Board of Directors, was just one of many
factors taken into consideration by the CitFed Bancorp Board of Directors in
unanimously approving the Affiliation Agreement.
Keefe Bruyette, as part of its investment banking business, is continually
engaged in the valuation of banking businesses and their securities in
connection with mergers and acquisitions, negotiated underwritings, competitive
biddings, secondary distributions of listed and unlisted securities, private
placements and valuations for estate, corporate and other purposes. As
specialists in the securities of banking companies, Keefe Bruyette has
experience in, and knowledge of, the valuation of banking enterprises. In the
ordinary course of its business as a broker-dealer, Keefe Bruyette may, from
time to time, purchase securities from, and sell securities to CitFed Bancorp or
Fifth Third and as a market maker in securities Keefe Bruyette may from time to
time have a long or short position in, and buy or sell, debt or equity
securities of CitFed Bancorp or Fifth Third for Keefe Bruyette's own account and
for the accounts of its customers.
CitFed Bancorp has agreed to pay Keefe Bruyette a base fee of .31% of the
market value at closing of the aggregate consideration offered in exchange for
the fully diluted shares of CitFed Bancorp in the Merger (which would be equal
to approximately $2.4 million as of the date of this Proxy
Statement/Prospectus). Pursuant to the Keefe Bruyette engagement agreement,
CitFed Bancorp also agreed to reimburse Keefe Bruyette, from time to time upon
request, for all reasonable out-of-pocket expenses and disbursements, including
fees and reasonable expenses of counsel, incurred in connection with this
retention and to indemnify against certain liabilities, including liabilities
under the federal securities laws.
EFFECTIVE TIME
Unless the parties agree otherwise, the Effective Time will occur on a
Friday which is as soon as is reasonably possible following the date on 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 Effective Time will occur in June 1998, although no
assurance can be given in this regard. CitFed Bancorp and Fifth Third each will
have the right, but not the obligation, to terminate the Affiliation Agreement
if the Effective Time does not occur on or before September 30, 1998, subject to
certain conditions.
EFFECTS OF MERGER
CORPORATE STRUCTURE AND GOVERNANCE. Upon consummation of the Merger,
CitFed Bancorp will merge with and into Fifth Third and CitFed Bancorp will
cease to exist as a separate entity. Immediately following the Merger, Fifth
Third plans to have Citizens Federal Bank merge with and into The Fifth Third
Bank of Western Ohio, a wholly owned subsidiary of Fifth Third.
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The Board of Directors of Fifth Third and The Fifth Third Bank of Western
Ohio after the Merger is consummated will consist of all of the members of such
Boards 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 the applicable Code of Regulations and in accordance with
law. The officers of Fifth Third and The Fifth Third Bank of Western Ohio after
the Merger is consummated will be those officers who are in office at the
Effective Time, subject to the applicable Code of Regulations and in accordance
with law. Fifth Third has agreed to appoint Jerry L. Kirby, the Chairman,
President and Chief Executive Officer of CitFed Bancorp, and Allen M. Hill, a
director of CitFed Bancorp, to the Fifth Third Board of Directors. Additionally,
Mr. Kirby will become the Chairman of the Board of Directors of The Fifth Third
Bank of Western Ohio and William M. Vichich, John H. Curp, Sebastian J. Melluzzo
and Mary L. Larkins will become officers of The Fifth Third Bank of Western
Ohio. See "PROPOSAL -- MERGER OF CITFED BANCORP INTO FIFTH THIRD -- Interests of
Certain Persons in the Merger."
CITFED BANCORP COMMON STOCK. Each of the shares of CitFed Bancorp Common
Stock (excluding treasury shares) then issued and outstanding immediately prior
to the Effective Time will be canceled and converted, by virtue of the Merger
and without further action, into the right to receive 1.005 shares of Fifth
Third Common Stock, subject to adjustment under certain circumstances. Based on
the closing price per share of Fifth Third Common Stock on the Nasdaq National
Market on April , 1998, the value of 1.005 shares of Fifth Third Common Stock
was $ . Under certain circumstances, the Exchange Ratio may be raised
in the event of a substantial decline in the trading price of Fifth Third Common
Stock relative to a group of peer institutions. See "PROPOSAL -- MERGER OF
CITFED BANCORP INTO FIFTH THIRD -- Termination; Amendment; Waiver." The Exchange
Ratio was adjusted in accordance with the Affiliation Agreement to reflect the
1998 Fifth Third Stock Split. The Exchange Ratio will also be adjusted further
so as to give the CitFed Bancorp stockholders the economic benefit of any other
stock dividends, reclassifications, recapitalizations, split-ups, exchanges of
shares, distributions or combinations or subdivisions of Fifth Third Common
Stock effected before the Effective Time. Certificates representing shares of
Fifth Third Common Stock will be distributed to CitFed Bancorp stockholders upon
the surrender of their certificates for shares of CitFed Bancorp Common Stock to
Fifth Third.
THE VALUE OF THE FIFTH THIRD COMMON STOCK TO BE RECEIVED BY CITFED BANCORP
STOCKHOLDERS WILL DEPEND ON THE MARKET PRICE OF SHARES OF FIFTH THIRD COMMON
STOCK AT THE EFFECTIVE TIME. THE MARKET PRICE OF FIFTH THIRD COMMON STOCK IS
SUBJECT TO CHANGE AT ALL TIMES BASED ON THE FUTURE FINANCIAL CONDITION AND
OPERATING RESULTS OF FIFTH THIRD, FUTURE MARKET CONDITIONS AND OTHER FACTORS. ON
JANUARY 13, 1998, THE DATE CITFED BANCORP AND FIFTH THIRD ENTERED THE
AFFILIATION AGREEMENT, FIFTH THIRD'S COMMON STOCK CLOSED AT $53.67 (AS ADJUSTED
TO REFLECT THE 1998 FIFTH THIRD STOCK SPLIT). BETWEEN JANUARY 13 AND APRIL ,
1998, FIFTH THIRD'S COMMON STOCK (AS ADJUSTED TO REFLECT THE 1998 FIFTH THIRD
STOCK SPLIT) TRADED AS HIGH AS $ AND AS LOW AS $ . ON APRIL
, 1998, FIFTH THIRD'S COMMON STOCK CLOSED AT $ (AS ADJUSTED TO
REFLECT THE 1998 FIFTH THIRD STOCK SPLIT). THE MARKET PRICE OF FIFTH THIRD
COMMON STOCK AT THE EFFECTIVE TIME MAY BE SUBSTANTIALLY HIGHER OR LOWER THAN
RECENT PRICES.
NO FRACTIONAL SHARES. Only whole shares of Fifth Third Common Stock will
be issued in connection with the Merger. In lieu of fractional shares, each
holder of CitFed Bancorp Common Stock otherwise entitled to a fractional share
of Fifth Third Common Stock will be paid therefor in cash (without interest) in
an amount equal to the amount of such fraction multiplied by the per share
closing price of Fifth Third Common Stock at the Effective Time. 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 CitFed Bancorp Common Stock will cease to have any rights as
stockholders of CitFed Bancorp and their sole rights will pertain to the right
to receive the shares of Fifth Third Common Stock and cash in lieu of fractional
shares, if any, into which their shares of CitFed Bancorp Common Stock will have
been converted pursuant to the Affiliation Agreement. As
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soon as practicable after the Effective Time, Fifth Third will send to each
former CitFed Bancorp stockholder a letter of transmittal for use in submitting
to Fifth Third, acting as Exchange Agent (the "Exchange Agent"), certificates
(or with instructions for handling lost CitFed Bancorp stock certificates)
formerly representing shares of CitFed Bancorp Common Stock to be exchanged for
certificates representing Fifth Third Common Stock (and, to the extent
applicable, cash in lieu of fractional shares of Fifth Third Common Stock) which
the former stockholders of CitFed Bancorp 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 CitFed Bancorp Common Stock. Any dividends
payable on Fifth Third Common Stock after the Effective Time will be paid to the
Exchange Agent and, upon receipt of the certificates representing shares of
CitFed Bancorp Common Stock, the Exchange Agent will forward to CitFed Bancorp
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).
CITFED BANCORP'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 CitFed Bancorp will be
closed and no transfer of CitFed Bancorp Common Stock will thereafter be made on
such books. If a certificate formerly representing shares of CitFed Bancorp
Common Stock is presented to CitFed Bancorp or Fifth Third, it will be forwarded
to the Exchange Agent for cancellation and exchange for a certificate
representing shares of Fifth Third Common Stock.
FEDERAL INCOME TAX CONSEQUENCES
The following is a description of material federal income tax consequences
applicable to CitFed Bancorp stockholders in connection with the Merger. For
Federal income tax purposes: (i) the Merger will constitute a reorganization
within the meaning of Section 368(a)(1)(A) of the Internal Revenue Code of 1986,
as amended (the "Code"), and Fifth Third and CitFed Bancorp will each be a party
to such reorganization within the meaning of Section 368(b) of the Code; (ii) no
gain or loss will be recognized by CitFed Bancorp as a result of the Merger;
(iii) no gain or loss will be recognized by Fifth Third as a result of the
Merger; (iv) no gain or loss will be recognized by a stockholder of CitFed
Bancorp who receives solely Fifth Third Common Stock in exchange for shares of
CitFed Common Stock pursuant to the terms of the Affiliation Agreement
(disregarding for this purpose any cash received for any fractional share
interest in Fifth Third Common Stock to which the stockholder may be entitled);
(v) the aggregate tax basis of the Fifth Third Common Stock received by a CitFed
Bancorp stockholder who receives solely Fifth Third Common Stock in exchange for
shares of CitFed Common Stock pursuant to the terms of the Affiliation Agreement
will be, in each instance, the same as the aggregate Federal income tax basis of
the CitFed Bancorp Common stock surrendered in exchange therefor (disregarding
for this purpose any cash received in lieu of a fractional share interest); (vi)
the holding period of the Fifth Third Common Stock received by a CitFed Bancorp
stockholder will include, in each case, the period during which the CitFed
Bancorp Common Stock surrendered in exchange therefor was held, provided that
the CitFed Bancorp Common Stock was held as a capital asset by such stockholder
on the date of the exchange; and (vii) a stockholder of CitFed Bancorp Common
Stock who receives cash in lieu of a fractional share of Fifth Third Common
Stock will be deemed to have 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 foregoing discussion is intended only as a summary of the material
Federal income tax consequences of the Merger and does not purport to be a
complete analysis or description of all potential tax effects of the Merger. The
foregoing discussion, for example, does not address the tax consequences that
may be relevant to particular taxpayers in light of their personal circumstances
(for example, individuals who receive Fifth Third Common Stock in exchange for
CitFed Common Stock acquired as a result of the exercise of employee stock
options or otherwise as compensation) or to taxpayers subject to special
treatment under the Code (for example, insurance companies, financial
institutions, dealers in securities, tax-exempt organizations, foreign
corporations, foreign partnerships, or other foreign entities and individuals
who are not citizens or residents of the United States).
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No information is provided herein with respect to the tax consequences, if
any, of the Merger under applicable state, local, foreign, and other tax laws.
The foregoing discussion is based upon the provisions of the Code, applicable
Treasury regulations thereunder, Internal Revenue Service rulings, and judicial
decisions as in effect as of the date hereof. There can be no assurance that
future legislative, administrative, or judicial changes or interpretations will
not affect the accuracy of the statements or conclusions set forth herein. Any
such change could apply retroactively and could affect the accuracy of such
discussion. No rulings have been or will be sought from the Internal Revenue
Service concerning the tax consequences of the Merger.
EACH STOCKHOLDER OF CITFED BANCORP IS URGED TO CONSULT SUCH STOCKHOLDER'S
OWN TAX ADVISOR AS TO THE SPECIFIC TAX CONSEQUENCES TO SUCH STOCKHOLDER OF THE
MERGER, INCLUDING THE APPLICATION OF FEDERAL, STATE, LOCAL, FOREIGN AND OTHER
TAX LAWS.
ACCOUNTING TREATMENT
The Merger is intended to qualify for pooling-of-interests accounting
treatment and consummation of the Merger is conditioned, in part, upon receipt
by both Fifth Third and CitFed Bancorp of a letter from Deloitte & Touche LLP,
independent public accountants, to the effect that the Merger will qualify for
pooling-of-interests accounting treatment. See "UNAUDITED PRO FORMA
INFORMATION." In order to meet the requirements necessary to account for the
Merger as a pooling-of-interests and to satisfy such condition in the
Affiliation Agreement, Fifth Third intends to take certain actions as described
under "FIFTH THIRD BANCORP -- Recent Developments."
CONDUCT PENDING MERGER; REPRESENTATIONS AND WARRANTIES
CitFed Bancorp has agreed, among other things, that prior to the Effective
Time it will carry on its business in the ordinary course. CitFed Bancorp also
has agreed to give Fifth Third and Fifth Third's representatives reasonable
access during business hours to its facilities and personnel. CitFed Bancorp
further has agreed that, without Fifth Third's prior written consent, it will
not, among other things: make any changes in its capital or corporate structures
(other than to redeem the outstanding Rights (as defined herein), see
"-- Conditions to Closing"); issue any additional shares of CitFed Bancorp
Common Stock or any other equity securities, except upon exercise of any stock
options granted prior to the date of the Affiliation Agreement or pursuant to
the Stock Option Agreement; issue as borrower any long term debt (other than
Federal Home Loan Bank ("FHLB") advances having maturities not exceeding one
year) or convertible or other securities of any kind, or right to acquire any of
its securities; or make any material changes in its method of business
operations. CitFed Bancorp also has agreed not to make or become obligated to
make any capital expenditures in excess of the amounts set forth in CitFed
Bancorp's capital expenditures budget as delivered to Fifth Third prior to the
execution of the Affiliation Agreement, or make or renew any agreement for
services to be provided to CitFed Bancorp or any of its subsidiaries or permit
the automatic renewal of any such agreement, except any agreement for services
in the ordinary course of business consistent with past practices, provided that
CitFed Bancorp must consult with Fifth Third prior to the renewal of any such
agreement requiring the annual expenditure of more than $150,000. CitFed Bancorp
additionally has agreed not to: make, declare, pay or set aside for payment any
cash dividends on its stock other than normal and customary cash dividends not
to exceed $.09 per quarter through June 30, 1998 and $.10 per quarter
thereafter, paid in such amounts and at times CitFed Bancorp historically has
paid on its common stock; pay or set aside for payment any stock dividends
(except as described above) or make any other distributions on its stock;
provide any increases in employee salaries or benefits other than in the
ordinary course of business; or sell or otherwise dispose of or encumber any of
the shares of the capital stock of any of its subsidiaries which are now owned
by it.
In addition, CitFed Bancorp agreed in the Affiliation Agreement that,
except with the prior approval of Fifth Third, CitFed Bancorp will not, and will
not permit its representatives to, directly or indirectly, subject to the
exercise by the CitFed Bancorp Board of Directors of their fiduciary duties,
initiate, solicit, negotiate with, encourage discussions with, provide
information to, or agree to a transaction with, any corporation, partnership,
person or other entity or group concerning any merger of CitFed Bancorp,
Citizens Federal Bank or any other CitFed Bancorp subsidiary or any sale of
substantial assets, sale of shares of capital stock (or securities
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convertible or exchangeable into or otherwise evidencing, or any agreement or
instrument evidencing, the right to acquire capital stock) or similar
transaction involving CitFed Bancorp, Citizens Federal Bank or any other CitFed
Bancorp subsidiary (each, an "Acquisition Transaction"). CitFed Bancorp also
agreed to immediately cease and cause to be terminated any activities,
discussions or negotiations concerning, or providing any confidential
information to, or have any discussion with, any person relating to an
Acquisition Transaction. CitFed Bancorp further agreed in the Affiliation
Agreement, promptly to communicate to Fifth Third the terms of any proposal
which it may receive in respect of any Acquisition Transaction and any request
by or indication of interest on the part of any third party with respect to
initiation of any Acquisition Transaction or discussions with respect thereto.
Fifth Third and CitFed Bancorp 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 CitFed Bancorp have the corporate power and authorization
to enter into the proposed transaction, that each will have provided the other
with financial statements and that Fifth Third has enough authorized Fifth Third
Common Stock with which to accomplish the proposed transaction. No
representations or warranties made by either CitFed Bancorp or Fifth Third will
survive beyond the Effective Time. For more detailed information concerning the
representations and warranties made by Fifth Third and CitFed Bancorp to each
other, see the Affiliation Agreement attached hereto as Annex A.
CONDITIONS TO CLOSING
The Affiliation Agreement must be adopted by the affirmative vote of
holders of at least a majority of the outstanding shares of CitFed Bancorp
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") and the Ohio Division of Financial Institutions, 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.
Fifth Third's and CitFed Bancorp's obligations to consummate the Merger are
subject to additional 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 both
institutions having performed all of the obligations required of them under the
Affiliation Agreement.
Fifth Third's obligation to consummate the Merger is further subject to
conditions set forth in the Affiliation Agreement, unless waived by Fifth Third,
including but not limited to, the continuing truth and accuracy in all material
respects of all of the representations and warranties of CitFed Bancorp;
delivery by CitFed Bancorp's counsel of a certain legal opinion addressed to
Fifth Third; the aggregate amount of consolidated stockholders' equity of CitFed
Bancorp immediately prior to the Effective Time, as shown by and reflected on
its books and records of accounts on a consolidated basis in accordance with
generally accepted accounting principles consistently applied, being not less
than $212,000,000 (excluding certain extraordinary events identified in the
Affiliation Agreement); the total issued and outstanding shares of CitFed
Bancorp Common Stock not exceeding 13,522,966 shares; Fifth Third's independent
public accountants shall have reviewed the unaudited consolidated financial
statements of CitFed Bancorp as at the end of the month immediately preceding
the Effective Time, as well as the unaudited separate financial statements of
the subsidiaries of CitFed Bancorp as of the same date, performed such other
auditing procedures as may be requested by Fifth Third and reported in good
faith that they are not aware of any material modifications which would have a
material adverse effect on the financial condition of CitFed Bancorp or any of
its subsidiaries that should be made in order for such financial statements to
(i) be in conformity with generally accepted accounting principles, consistently
applied, excluding the presentation of footnotes, and (ii) accurately state the
financial condition and results of operations of CitFed Bancorp and each of its
subsidiaries, and such modifications, in either case, would have a material
adverse effect on the financial condition of CitFed Bancorp or any of its
subsidiaries; all outstanding stock options to purchase CitFed Bancorp Common
Stock being amended to provide that upon exercise the holder would be entitled
to receive such number of shares of Fifth Third Common Stock as if such options
had been exercised prior to the Effective Time; CitFed Bancorp having taken all
actions necessary to freeze the CitFed Bancorp defined pension plan; receipt by
both Fifth Third and CitFed of a letter from Deloitte & Touche, LLP, independent
public accountants, that the Merger
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will qualify for pooling-of-interests accounting treatment; and CitFed Bancorp
having redeemed the rights granted to holders of CitFed Bancorp Common Stock
(the "Rights") pursuant to the Stockholders Protection Rights Agreement dated
October 21, 1994 between CitFed Bancorp and Chemical Bank (the "Rights Plan") at
a price of $.01 per Right.
CitFed Bancorp's obligation to consummate the Merger is further subject to
conditions set forth in the Affiliation Agreement, unless waived by CitFed
Bancorp, including but not limited to, the continuing truth and accuracy in all
material respects of Fifth Third's representations and warranties; delivery by
counsel employed by The Fifth Third Bank of a certain legal opinion addressed to
CitFed Bancorp; registration by Fifth Third of the shares of Fifth Third Common
Stock to be issued to CitFed Bancorp stockholders and listing of those shares on
the Nasdaq National Market; the execution and delivery by Fifth Third of certain
employment agreements and the payment of or provision for certain severance
payments to employees of CitFed Bancorp by Fifth Third.
TERMINATION; AMENDMENT; WAIVER
The Affiliation Agreement may be terminated and the Merger abandoned at any
time prior to the Effective Time by written notice delivered by Fifth Third to
CitFed Bancorp or by CitFed Bancorp to Fifth Third in the following instances:
(i) by Fifth Third or CitFed Bancorp, if there has been a material
misrepresentation, a material breach of warranty or a material failure to comply
with any covenant on the part of the other party with respect to the
representations, warranties and covenants set forth in the Affiliation Agreement
and such misrepresentation, breach or failure to comply has not been cured
within thirty (30) days after notice, provided the party in default has no right
to terminate for its own default; (ii) by Fifth Third or CitFed Bancorp, in each
case taken as a whole, if the business or assets or financial condition of the
other party have materially and adversely changed from that in existence at
September 30, 1997, other than changes attributable to or resulting from any
change in law, regulation or generally accepted accounting principles, changes
in interest rates, economic, financial or market conditions affecting the
banking or thrift industry generally or changes that may occur as a consequence
of actions or inactions that either party is expressly obligated to take under
the Affiliation Agreement (including without limitation the payment by either
party of its transaction expenses related to the actions contemplated by the
Affiliation Agreement); (iii) by Fifth Third or CitFed Bancorp, if the Merger
has not been consummated by September 30, 1998, provided the terminating party
is not in material breach or default of any representation, warranty or covenant
contained in the Affiliation Agreement on the date of such termination; (iv) by
the mutual written consent of Fifth Third and CitFed Bancorp; (v) automatically
if the CitFed Bancorp stockholders fail to adopt the Affiliation Agreement under
certain circumstances; or (vi) by Fifth Third or CitFed Bancorp, if any event
occurs which renders impossible of satisfaction in any material respect one or
more of the conditions to the obligations of the other party to effect the
Merger, and non-compliance is not waived by the unaffected party.
In addition to the foregoing circumstances under which the Affiliation
Agreement may be terminated, CitFed Bancorp may also have the right to terminate
the Affiliation Agreement under certain circumstances if there is a substantial
decline in the trading price of Fifth Third Common Stock relative to a group of
peer institutions. See "PROPOSAL -- MERGER OF CITFED BANCORP INTO FIFTH
THIRD -- Effects of Merger." The provisions in the Affiliation Agreement
governing such right are complex and designed to permit either a termination of
the Affiliation Agreement or an adjustment to the Exchange Ratio if, and only
if, the market value of Fifth Third Common Stock has declined substantially from
the $53.67 market value on January 13, 1998 and the market value of Fifth Third
Common Stock has declined substantially more than an index of 19 bank stocks on
a comparative basis.
The right of CitFed Bancorp to terminate the Affiliation Agreement in
accordance with the foregoing will exist if both the following occur (the
"Termination Conditions"):
(i) For the 20 trading days ending the tenth trading day before the
Effective Time (the "Determination Date"), the average closing price of
Fifth Third Common Stock as reported on the Nasdaq National Market (the
"Average Closing Price") is less than $42.93; and
(ii) (a) the Average Closing Price divided by $53.67 (the closing
price of Fifth Third Common Stock on January 13, 1998 as adjusted for the
1998 Fifth Third Stock Split) is less than (b) the "Index Ratio", which is
defined as (x) the weighted average closing price of the 19 bank holding
companies identified
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below (the "Index Price") on the Determination Date divided by $49.90 (the
Index Price on January 13, 1998) minus (y) .20.
The 19 bank holding companies are: Northern Trust Corp., Star Banc Corp.,
First Tennessee National Corp., State Street Corp., Marshall & Ilsley Corp.,
BB&T Corporation, Mercantile Bancorp, First American Corp., Summit Bancorp,
South Trust Corp., First Security Corp., Comerica Inc., AmSouth Bancorporation,
Union Planters Corp., Regions Financial Corp., Firstar Corporation, Crestar
Financial Corp., Synovus Financial Corp., and Huntington Bancshares, Inc.
If both of the Termination Conditions exist, then CitFed Bancorp will have
the right to terminate the Affiliation Agreement. If CitFed Bancorp exercises
such right, then Fifth Third will have the right to adjust the Exchange Ratio in
lieu of such termination to the lesser of:
(i) (a) the product of $42.93 multiplied by 1.005 ( the Exchange
Ratio) or the Exchange Ratio as otherwise further adjusted pursuant to the
Affiliation Agreement, divided by (b) the Average Closing Price; and
(ii) (a) the product of the Index Ratio multiplied by 1.005 ( the
Exchange Ratio) or the Exchange Ratio as otherwise further adjusted
pursuant to the Affiliation Agreement, divided by (b) the Average Closing
Price divided by $53.67 (the "Fifth Third Ratio").
The adjustment of the Exchange Ratio in accordance with the foregoing
formula is designed to increase the number of shares of Fifth Third Common Stock
to be issued in exchange for each share of CitFed Bancorp Common Stock if the
Termination Conditions exist.
ILLUSTRATION. For purposes of the following illustration, assume that the
Average Closing Price is $40.00 and that the Index Price on the Determination
Date is $60.00. Under these assumptions, CitFed Bancorp would have the right to
terminate the Affiliation Agreement because both Termination Conditions would be
met, as follows:
(i) the Average Closing Price of $40.00 would be less than $42.93; and
(ii) the Average Closing Price of $40.00 divided by $53.67 would equal
.75 and would be less than the Index Ratio of 1.00.
Fifth Third would then have the right to adjust the Exchange Ratio in lieu
of terminating the Affiliation Agreement to the lesser of the following:
(i) 1.079, which is the product of $42.93 multiplied by the Exchange
Ratio of 1.005, divided by the Average Closing Price of $40.00; and
(ii) 1.340, which is the Index Ratio of 1.00 multiplied by the
Exchange Ratio of 1.005, divided by the Fifth Third Ratio of .75.
Therefore, Fifth Third could elect to increase the exchange ratio to 1.079
and proceed with the Merger. In that event, each share of CitFed Bancorp Common
Stock would be canceled at the Effective Time in exchange for the right to
receive 1.079 shares of Fifth Third Common Stock. Alternatively, Fifth Third
could elect to not increase the Exchange Ratio and the Affiliation Agreement
would terminate.
The average closing price of Fifth Third Common Stock for the 20 trading
days before April , 1998 was $ . Based on this price, neither
Termination Condition would be triggered and CitFed Bancorp would not have had
any right to terminate the Affiliation Agreement.
The determinations of whether the above tests are met, whether to terminate
the Affiliation Agreement and whether to override any such termination are all
subject to market conditions at the Determination Date and accordingly, such
determinations cannot be made until after the date of this Proxy
Statement/Prospectus. If the above tests are met, there can be no assurances as
to whether the CitFed Bancorp Board of Directors will exercise its right to
terminate the Affiliation Agreement or, if so, whether Fifth Third will override
such termination.
The Affiliation 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 at any time before or after approval of
the Merger by CitFed Bancorp stockholders, without further approval of CitFed
Bancorp's stockholders, except that no amendment, modification or supplement may
be effected without CitFed Bancorp stockholder approval if to do so would change
in any manner adverse to such stockholders the consideration
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provided pursuant to the Affiliation Agreement or the tax characterization of
the transactions as structured pursuant to the Affiliation Agreement.
EFFECT ON CITFED BANCORP EMPLOYEES
Fifth Third intends (but is not obligated) to employ at Fifth Third or
other Fifth Third subsidiaries or affiliates as many of the employees of CitFed
Bancorp and its subsidiaries who desire employment within the Fifth Third
holding company system as possible, to the extent of available positions and
consistent with Fifth Third's standard staffing levels and personnel policies.
In this regard, upon consummation of the Merger, The Fifth Third Bank of Western
Ohio will operate Citizens Federal Bank's main office and 35 of its other
existing offices as branches of The Fifth Third Bank of Western Ohio. The
Affiliation Agreement contains provisions for the treatment of employees of
CitFed Bancorp and its subsidiaries, including provisions for participation in
benefit and retirement plans as well as for severance payments in certain
circumstances. See the Affiliation Agreement for more detailed information
concerning the effect of the Merger on employees of CitFed Bancorp and its
Subsidiaries.
INTERESTS OF CERTAIN PERSONS IN THE MERGER
Certain members of CitFed Bancorp's management and the CitFed Bancorp Board
of Directors may be deemed to have certain interests in the Merger in addition
to their interests as stockholders of CitFed Bancorp, generally. The CitFed
Bancorp Board of Directors was aware of these interests and considered them in
adopting the Affiliation Agreement. Set forth below are descriptions of
interests of directors and executive officers of CitFed Bancorp in the Merger in
addition to their interests as stockholders of CitFed Bancorp generally.
POST-MERGER DIRECTORS. Fifth Third has agreed to appoint Jerry L. Kirby,
the Chairman, President and Chief Executive Officer of CitFed Bancorp, and Allen
M. Hill, a director of CitFed Bancorp, to the Fifth Third Board of Directors
upon consummation of the Merger. In the event their initial terms on the Fifth
Third Board of Directors expires prior to the Fifth Third annual meeting of
stockholders in the year 2001, Fifth Third has agreed to nominate such person
for a second term on the Fifth Third Board of Directors. Upon consummation of
the Merger, Mr. Kirby will also be approved as the Chairman of the Board of
Directors of The Fifth Third Bank of Western Ohio, a wholly owned subsidiary of
Fifth Third and into which Citizens Federal Bank will be merged.
EXISTING EMPLOYMENT AGREEMENTS. In April 1996, CitFed Bancorp entered into
employment agreements (the "CitFed Agreements") with Jerry L. Kirby, William M.
Vichich, John H. Curp, Sebastian J. Melluzzo and Mary L. Larkins (the "Executive
Officers"). The CitFed Agreements each provide for payment to the employee of
299% of the employee's "base amount" (five-year average) compensation under
certain circumstances in connection with a change in control of CitFed Bancorp.
As a consequence of the Merger, Messrs. Kirby, Vichich, Curp, Melluzzo and Ms.
Larkins shall receive, as of the Effective Time, payments pursuant to the terms
of their respective CitFed Agreements of $1.8 million, $1.0 million, $621,000,
$455,000 and $767,000, respectively.
NEW EMPLOYMENT CONTRACTS. To attract and retain the services of the
Executive Officers after the Effective Time, Fifth Third will enter into new
employment agreements with the Executive Officers on the Closing Date. These
employment agreements are summarized below.
Under Mr. Kirby's employment agreement, Mr. Kirby will serve as a director
of Fifth Third and as Chairman of the Board of Directors of The Fifth Third Bank
of Western Ohio. Mr. Kirby's employment agreement is for a term of three years
and calls for an annual base salary of $550,000 plus an annual cash bonus of
$150,000. As an inducement for Mr. Kirby to enter into the employment agreement,
he will receive options to acquire 75,000 shares of Fifth Third Common Stock
pursuant to the terms of Fifth Third's existing stock option plan, which options
will vest over a three year period unless accelerated upon termination of his
employment for any reason other than for cause or resignation without good
reason. The vested options are exercisable until ten years from the Effective
Date. Mr. Kirby will also receive an annual benefit upon retirement equal to 17%
of his annual base salary and cash bonus. Retirement benefit payments begin upon
the earlier of retirement from Fifth Third, termination for any reason or three
years from the effective date of the employment agreement (the "Effective
Date"). If he resigns without good reason or is terminated for cause during the
term of the agreement, the present value of the retirement benefit will be
reduced by a percentage equal to the percentage of the contract
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period remaining. Mr. Kirby will also receive a minimum annual payment of 14% of
his annual base salary and cash bonus through his participation in Fifth Third's
Master Profit Sharing Plan or as an additional payment. Mr. Kirby is also
eligible for other normal benefits and programs of Fifth Third commensurate with
his senior management role. Mr. Kirby's employment agreement contains a covenant
not to compete during the Restricted Period with Fifth Third. The Restricted
Period begins on the Effective Date and ends eight years thereafter, or if
later, the termination of Mr. Kirby's services as a director of Fifth Third. Mr.
Kirby will be paid $250,000 per year in monthly installments over five years
beginning upon expiration of the three year term of his agreement as
consideration for his covenant not to compete.
Under Mr. Vichich's employment agreement, Mr. Vichich will serve as an
officer of The Fifth Third Bank of Western Ohio. Mr. Vichich's employment
agreement is for a term of three years and calls for an annual base salary of
$325,000 and an annual cash bonus of $113,750. As an inducement for Mr. Vichich
to enter into the employment agreement, he will receive options to acquire
43,500 shares of Fifth Third Common Stock pursuant to the terms of Fifth Third's
existing stock option plan, which options will vest over a three year period
unless accelerated upon termination of his employment for any reason other than
for cause, or resignation without good reason. Mr. Vichich will also receive an
annual benefit upon retirement equal to 19% of his annual base salary and cash
bonus. Retirement benefit payments begin upon the earlier of retirement from
Fifth Third, termination for any reason or three years from the Effective Date.
If he resigns without good reason or is terminated for cause during the term of
the agreement, the present value of the retirement benefit will be reduced by a
percentage equal to the percentage of the contract period remaining. Mr. Vichich
will also receive a minimum annual payment of 14% of his annual base salary and
cash bonus through his participation in Fifth Third's Master Profit Sharing Plan
or as an additional payment. Mr. Vichich is also eligible for other normal
benefits and programs of Fifth Third commensurate with his senior management
role. Mr. Vichich's employment agreement also provides, that, if terminated for
any reason other than for cause or resignation without good reason, he will
receive his annual base salary, cash bonus and profit sharing for the balance of
the first year plus liquidated damages of $234,750 in lieu of any additional
salary, bonus and profit sharing contribution.
Under Mr. Curp's employment agreement, Mr. Curp will serve as an officer of
The Fifth Third Bank of Western Ohio. Mr. Curp's employment agreement is for a
term of three years and calls for an annual base salary of $189,000 and an
annual cash bonus of $45,000. As an inducement for Mr. Curp to enter into the
employment agreement, he will receive options to acquire 27,000 shares of Fifth
Third Common Stock, pursuant to the terms of Fifth Third's existing stock option
plan, which options will vest over a three year period unless accelerated upon
termination of his employment for any reason other than for cause or resignation
without good reason. Mr. Curp will also receive an annual benefit upon
retirement equal to 16% of his annual base salary and cash bonus. Retirement
benefit payments begin upon the earlier of retirement from Fifth Third,
termination for any reason or three years from the Effective Date. If he resigns
without good reason or is terminated for cause during the term of the agreement,
the present value of the retirement benefit will be reduced by a percentage
equal to the percentage of the contract period remaining. Mr. Curp will also
receive a minimum annual payment of 14% of his annual base salary and cash bonus
through his participation in Fifth Third's Master Profit Sharing Plan or as an
additional payment. Mr. Curp is also eligible for other normal benefits and
programs of Fifth Third commensurate with his senior management role. Mr. Curp's
employment agreement also provides, that, if terminated for any reason other
than cause or resignation without good reason, he will receive his annual base
salary, cash bonus and profit sharing for the balance of the first year plus
liquidated damages of $141,750 in lieu of any additional salary, bonus and
profit sharing contribution.
Under Mr. Melluzzo's employment agreement, Mr. Melluzzo will serve as an
officer of The Fifth Third Bank of Western Ohio. Mr. Meluzzo's employment
agreement is for a term of one year and calls for an annual base salary of
$135,000 and an annual cash bonus of $40,500. As an inducement for Mr. Melluzzo
to enter into the employment agreement, he will receive options to acquire
10,500 shares of Fifth Third Common Stock pursuant to the terms of Fifth Third's
existing stock option plan, which options will vest over a one year period
unless accelerated upon termination of his employment for any reason other than
for cause or resignation without good reason. Mr. Melluzzo will also receive a
minimum annual payment of 14% of his annual base salary and cash bonus through
his participation in Fifth Third's Master Profit Sharing Plan or as an
additional payment. Mr. Melluzzo is also eligible for other normal benefits and
programs of Fifth Third commensurate with his senior
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management role. If Mr. Melluzzo is involuntarily terminated other than for
cause or in the event of his resignation for good reason during the term of this
agreement, he will receive his annual base salary, cash bonus and profit sharing
for the balance of the agreement term. If Mr. Melluzzo dies or becomes totally
disabled while employed during the term of this agreement, he or his estate will
receive the balance of his annual base salary, adjusted in the case of total
disability for any payments made pursuant to a salary continuation or disability
insurance plan of Fifth Third.
Under Ms. Larkins' employment agreement, Ms. Larkins will serve as an
officer of The Fifth Third Bank of Western Ohio. Ms. Larkins's employment
agreement is for a term of three years and calls for an annual base salary of
$240,000 and an annual cash bonus of $30,000. As an inducement for Ms. Larkins
to enter into the employment agreement, she will receive options to acquire
37,500 shares of Fifth Third Common Stock, pursuant to the terms of Fifth
Third's existing stock option plan, which options will vest over a three year
period unless accelerated upon termination of her employment for any reason
other than for cause or resignation without good reason. Ms. Larkins will also
receive an annual benefit upon retirement equal to 20% of her annual base salary
and cash bonus. Retirement benefit payments begin upon the earlier of retirement
from Fifth Third, termination for any reason or three years from the Effective
Date. If she resigns without good reason or is terminated for cause during the
term of the agreement, the present value of the retirement benefit will be
reduced by a percentage equal to the percentage of the contract period
remaining. Ms. Larkins will also receive a minimum annual payment of 14% of her
annual base salary and cash bonus through her participation in Fifth Third's
Master Profit Sharing Plan or as an additional payment. Ms. Larkins is also
eligible for other normal benefits and programs of Fifth Third commensurate with
her senior management role. Ms. Larkins' employment agreement also provides
that, if terminated for any reason other than cause or resignation without good
reason, she will receive her annual base salary, cash bonus and profit sharing
for the balance of the first year plus liquidated damages of $180,000 in lieu of
any additional salary, bonus and profit sharing contribution.
SUPPLEMENTAL RETIREMENT AGREEMENTS. Each of the Executive Officers has a
supplemental retirement agreement with CitFed Bancorp dated September 20, 1996.
Upon consummation of the Merger, Fifth Third has agreed to assume the
obligations of CitFed Bancorp under such agreements.
STOCK OPTION PLAN. The CitFed Bancorp outstanding options under its stock
option plan will be converted by Fifth Third. The number of shares subject to
CitFed Bancorp stock options will be adjusted to allow the holder, upon
exercise, to receive shares of Fifth Third Common Stock calculated by
multiplying the Exchange Ratio (1.005) by the number of shares of CitFed Bancorp
Common Stock subject to the CitFed Bancorp stock options, and the exercise price
of the CitFed Bancorp stock options will be adjusted by dividing the exercise
price per share by the Exchange Ratio. All other terms and conditions of the
CitFed Bancorp stock options will remain unchanged.
DEFINED BENEFIT PENSION PLAN. CitFed Bancorp will freeze its defined
benefit pension plan as of the Effective Time. Under the Affiliation Agreement,
CitFed Bancorp can make any necessary amendments or adjustments to ensure that
the excess funding, if any, at the Effective Time goes to the benefit of
participants in the CitFed Bancorp pension plan and to fully vest all such
benefits to participants, provided such actions do not adversely affect the
qualified status of the plan.
INDEMNIFICATION AND LIABILITY INSURANCE. The Affiliation Agreement
provides that all provisions for indemnification and limitation of liability now
existing in favor of the directors or officers of CitFed Bancorp, Citizens
Federal Bank or any of their subsidiaries, arising under applicable Delaware and
Federal law and under the CitFed Bancorp Certificate of Incorporation and
Bylaws, the Citizens Federal Bank Charter and Bylaws and the organizational
document of any of the other CitFed Bancorp subsidiaries, 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. The Affiliation Agreement further provides that Fifth Third's assumption
of such indemnification obligations shall continue for a period of five years
after the Effective Time, or in the case of claims asserted prior to the fifth
anniversary of the Effective Time, until such matters are finally resolved.
Fifth Third also shall purchase and keep in force for a three-year period a
policy of directors' and officers' liability insurance to provide coverage for
acts or omissions of the type currently covered by CitFed Bancorp's existing
directors' and officers' liability insurance for acts or omissions occurring at
or prior to the Effective Time, but
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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 and the annual cost not to exceed 150% of the annual
cost currently paid for such coverage by CitFed Bancorp and its subsidiaries.
Fifth Third has agreed that all rights to indemnification existing in favor of
officers and directors and employees of Fifth Third affiliates shall be accorded
to officers and directors and employees of CitFed Bancorp 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 only after
the Effective Time. See also "DESCRIPTION OF CAPITAL STOCK AND COMPARATIVE
RIGHTS OF STOCKHOLDERS -- Indemnification and Personal Liability of Directors
and Officers."
STOCK OPTION AGREEMENT
As an inducement and condition to Fifth Third's willingness to enter into
the Affiliation Agreement, CitFed Bancorp entered into the Stock Option
Agreement with Fifth Third. The following description of the Stock Option
Agreement is qualified in its entirety by reference to the text of such Stock
Option Agreement, a copy of which is attached hereto as Annex B and which is
incorporated herein by reference.
Pursuant to the Stock Option Agreement, CitFed Bancorp granted Fifth Third
the Option, which permits Fifth Third to purchase up to 3,230,411 shares of
CitFed Bancorp Common Stock (or up to approximately 19.9% of the number of
shares of CitFed Bancorp Common Stock outstanding immediately after exercise of
the Option). The exercise price of the Option is $37.75 per share, subject to
adjustment under specified circumstances (such exercise price, as so adjusted,
being referred to herein as the "Option Price").
The Option will become exercisable in whole or in part if, but only if,
both an "Initial Triggering Event" and a "Subsequent Triggering Event" occur
with respect to CitFed Bancorp prior to the occurrence of an "Exercise
Termination Event," as such terms are defined below. The purchase of any shares
of CitFed Bancorp Common Stock pursuant to the Option is subject to compliance
with applicable law, including the receipt of necessary approvals under the Bank
Holding Company Act of 1956, as amended ("BHCA").
The Stock Option Agreement generally defines the term "Initial Triggering
Event" to mean any of the following events or transactions:
(i) CitFed Bancorp or any of its subsidiaries, without Fifth Third's
prior written consent, enters into an agreement to engage in an
"Acquisition Transaction" (as defined below) with a third party or the
Board of Directors of CitFed Bancorp recommends that the stockholders of
CitFed Bancorp approve or accept any Acquisition Transaction, other than as
contemplated by the Affiliation Agreement;
(ii) A third party shall have acquired beneficial ownership or the
right to acquire beneficial ownership of 10% or more of the outstanding
shares of CitFed Bancorp Common Stock;
(iii) The stockholders of CitFed Bancorp shall have voted and failed
to approve the Affiliation Agreement at the CitFed Bancorp stockholder
meeting called for such purpose or such meeting has not been held in
violation of the Affiliation Agreement if, prior to such stockholder
meeting (or if such stockholder meeting shall not have been or shall have
been canceled, prior to such termination), it shall have been publicly
announced that any third party shall have made, or disclosed an intention
to make, a proposal to engage in an Acquisition Transaction with respect to
CitFed Bancorp;
(iv) CitFed Bancorp's Board of Directors withdraws or modifies (or
publicly announces its intention to withdraw or modify) in any manner
adverse to Fifth Third its recommendation that the stockholders of CitFed
Bancorp approve the Affiliation Agreement at the CitFed Bancorp stockholder
meeting, or CitFed Bancorp, without Fifth Third's prior written consent,
authorizes, recommends or proposes (or publicly announces its intention to
authorize, recommend or propose) an agreement to engage in an Acquisition
Transaction with a third party;
(v) A third party makes a proposal to CitFed Bancorp or its
stockholders to engage in an Acquisition Transaction and such proposal has
been publicly announced;
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(vi) A third party shall have filed with the Commission a registration
statement with respect to a potential exchange offer that would constitute
an Acquisition Transaction (or filed a preliminary proxy statement with the
Commission with respect to a potential vote by its stockholders to approve
the issuance of shares to be offered in such an exchange offer);
(vii) CitFed Bancorp willfully breaches any covenant or obligation
contained in the Affiliation Agreement in anticipation of engaging in an
Acquisition Transaction, and following such breach Fifth Third would be
entitled to terminate the Affiliation Agreement (whether immediately or
after the giving of notice or passage of time or both); or
(viii) A third party files an application or notice with the OTS or
other federal or state bank regulatory or antitrust authority, which
application or notice has been accepted for processing, for approval to
engage in an Acquisition Transaction.
As used in the Stock Option Agreement, the term "Acquisition Transaction"
means (a) a merger or consolidation or any similar transaction, involving CitFed
Bancorp or any "Significant Subsidiary" (as defined in Rule 1-02 of Regulation
S-X promulgated by the Commission) of CitFed Bancorp (other than mergers,
consolidations or similar transactions involving solely CitFed Bancorp and/or
one or more of its wholly-owned subsidiaries or in which the CitFed Bancorp
stockholders immediately prior to the transaction own at least 50% of the
outstanding CitFed Bancorp Common Stock immediately after the transaction),
provided that any such transaction is not entered into in violation of the terms
of the Affiliation Agreement, (b) a purchase, lease or other acquisition of all
or substantially all of the assets or deposits of CitFed Bancorp or any of its
Significant Subsidiaries or (c) a purchase or other acquisition (including by
merger, consolidation, share exchange or otherwise) of securities representing
10% or more of the voting power of CitFed Bancorp or any of its subsidiaries.
The Stock Option Agreement generally defines the term "Subsequent
Triggering Event" to mean any of the following events or transactions: (i) the
acquisition by a third party of beneficial ownership of 25% or more of the then
outstanding common stock of CitFed Bancorp or (ii) CitFed Bancorp or any of its
subsidiaries, without having received the prior written consent of Fifth Third,
enters into an agreement to engage in an Acquisition Transaction with a third
party or the Board of Directors of CitFed Bancorp recommends that the
stockholders of CitFed Bancorp approve or accept any Acquisition Transaction,
other than as contemplated by the Affiliation Agreement; provided, that for
purposes of the definition of "Subsequent Triggering Event," the percentage
referred to in clause (c) of the definition of "Acquisition Transaction" above
shall be 25% rather than 10%.
The Stock Option Agreement defines the term "Exercise Termination Event" to
mean any of (i) the Effective Time; (ii) termination of the Affiliation
Agreement in accordance with its terms, if such termination occurs prior to the
occurrence of an Initial Triggering Event except a termination by Fifth Third if
there has been a material misrepresentation, a material breach of a warranty or
a material failure to comply with any covenant by CitFed Bancorp and such
misrepresentation, breach or failure has not been cured (if capable of being
cured) within 30 days after CitFed Bancorp's receipt of written notice from
Fifth Third of such default; (iii) the passage of 18 months, subject to
extension in order to obtain required regulatory approvals, to comply with
applicable regulatory waiting periods or to avoid liability under Section 16(b)
of the Exchange Act, after termination of the Affiliation Agreement if such
termination is concurrent with or follows the occurrence of an Initial
Triggering Event or is a termination of the type described in clause (ii) above.
Notwithstanding anything to the contrary contained in the Stock Option
Agreement, the Option may not be exercised at any time when Fifth Third is in
material breach of the Affiliation Agreement such that CitFed Bancorp shall be
entitled to terminate the Affiliation Agreement pursuant to the terms thereof,
and the Stock Option Agreement shall automatically terminate upon the
termination of the Affiliation Agreement by CitFed Bancorp pursuant to the terms
thereof as a result of (i) a material breach by Fifth Third of the Affiliation
Agreement or (ii) the substantial decline of the price of Fifth Third Common
Stock as provided therein.
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If the Option becomes exercisable, it may be exercised in whole or in part
within six months following the applicable Subsequent Triggering Event. Fifth
Third's right to exercise the Option and certain other rights under the Stock
Option Agreement are subject to an extension in order to obtain required
regulatory approvals and comply with applicable regulatory waiting periods and
to avoid liability under Section 16(b) of the Exchange Act. The Option Price and
the number of shares issuable under the Option are subject to adjustment in the
event of specified changes in the capital stock of CitFed Bancorp.
Upon the occurrence of a Subsequent Triggering Event that occurs prior to
an Exercise Termination Event, Fifth Third will have certain registration rights
with respect to the shares of CitFed Bancorp Common Stock issued or issuable
pursuant to the Option.
The Stock Option Agreement also provides that at any time after the
occurrence of a "Repurchase Event" (as defined below), upon request, CitFed
Bancorp shall be obligated to repurchase the Option and all or any part of the
shares ("Option Shares") received upon the full or partial exercise of the
Option from the holder thereof. Such repurchase of the Option shall be at a
price per share equal to the amount by which the "Market/Offer Price" (as
defined below) exceeds the Option Price (as adjusted). A repurchase of Option
Shares shall be at a price per share equal to the Market/Offer Price. The term
Market/Offer Price means the highest of (i) the price per share at which a
tender or exchange offer has been made for CitFed Bancorp Common Stock, (ii) the
price per share of CitFed Bancorp Common Stock that any third party is to pay
pursuant to an agreement with CitFed Bancorp, (iii) the highest closing price
per share of CitFed Bancorp Common Stock within the six-month period immediately
preceding the date that notice to repurchase is given or (iv) in the event of a
sale of all or substantially all of CitFed Bancorp's assets or deposits, the sum
of the price paid for such assets or deposits and the current market value of
the remaining assets (as determined by a nationally recognized investment
banking firm), divided by the number of shares of CitFed Bancorp Common Stock
outstanding at the time of such sale. The term "Repurchase Event" is defined to
mean (i) the acquisition by any third party of beneficial ownership of 50% or
more of the outstanding shares of CitFed Bancorp Common Stock or (ii) the
consummation of an Acquisition Transaction; provided, that for purposes of the
definition of "Repurchase Event," the percentage referred to in clause (c) of
the definition of "Acquisition Transaction" above shall be 50% rather than 10%.
The Stock Option Agreement also provides that Fifth Third may, at any time
following a Repurchase Event and prior to an Exercise Termination Event,
surrender the Option (and any Option Shares obtained upon the exercise thereof
and still held by Fifth Third) for a surrender fee (the "Surrender Fee") equal
to $30.0 million (i) plus, if applicable, Fifth Third's purchase price with
respect to any Option Shares and (ii) minus any net cash received pursuant to
the sale of Option Shares to any third party (less the purchase price of such
Option Shares). Fifth Third may not exercise its right to surrender the Option
and receive the Surrender Fee if CitFed Bancorp has previously repurchased any
Option Shares as described in the preceding paragraph.
Pursuant to the terms of the Stock Option Agreement, in the event that,
prior to an Exercise Termination Event, CitFed Bancorp enters into certain
transactions in which CitFed Bancorp is not the surviving corporation, certain
fundamental changes in the capital stock of CitFed Bancorp occur or CitFed
Bancorp sells all or substantially all of its or certain of its subsidiaries'
assets, the Option shall be converted into a substitute option (the "Substitute
Option"), with terms similar to those of the Option, to purchase capital stock
of the entity that is the effective successor to CitFed Bancorp.
The Stock Option Agreement provides that neither Fifth Third nor CitFed
Bancorp may assign any of its rights or obligations thereunder without the
written consent of the other party, except that in the event a Subsequent
Triggering Event shall have occurred prior to an Exercise Termination Event,
Fifth Third may, subject to certain limitations, assign its rights and
obligations thereunder in whole or in part (subject to extension in certain
cases).
Arrangements such as the Stock Option Agreement are customarily entered
into in connection with corporate mergers and acquisitions in an effort to
increase the likelihood that the transactions will be consummated in accordance
with their terms, and to compensate the grantee for the efforts undertaken and
the expenses, losses and opportunity costs incurred by it in connection with the
transactions if they are not consummated under certain circumstances involving
an acquisition or potential acquisition of the issuer by a third party. The
Stock Option Agreement was entered into to accomplish these objectives. The
existence of the
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Option could significantly increase the cost to a potential acquiror of
acquiring CitFed Bancorp compared to the cost had the Stock Option Agreement not
been entered into. The provisions of the Stock Option Agreement may prevent an
acquiror from accounting for its acquisition of CitFed Bancorp using the
pooling-of-interests method of accounting. Accordingly, the Stock Option
Agreement may have the effect of discouraging or precluding offers by third
parties to acquire CitFed Bancorp prior to the Merger, even if such persons were
prepared to offer to pay consideration to CitFed Bancorp's stockholders which
has a higher current market price than the shares of Fifth Third Common Stock to
be received by such holders pursuant to the Affiliation Agreement.
To the best knowledge of Fifth Third and CitFed Bancorp, no event giving
rise to the right to exercise the Option has occurred as of the date of this
Proxy Statement/Prospectus.
RESALE OF FIFTH THIRD COMMON STOCK BY AFFILIATES
The shares of Fifth Third Common Stock to be issued to stockholders of
CitFed Bancorp in connection with the Merger will be registered under the
Securities Act and will be freely transferable under the Securities Act, except
for shares issued to any stockholder who may be deemed to be an "affiliate" (as
defined under the Securities Act, but generally including directors, certain
executive officers and 10 percent or more stockholders) of CitFed Bancorp or
Fifth Third at the time of the Special Meeting.
Rules 144 and 145 promulgated under the Securities Act restrict the sale of
Fifth Third Common Stock received in the Merger by affiliates and certain of
their family members and related interests. Generally speaking, during the one
year following the Effective Time, affiliates of Fifth Third and CitFed Bancorp
may not resell publicly the Fifth Third Common Stock received by them in
connection with the Merger except in compliance with certain limitations as to
the amount of Fifth Third Common Stock sold in any three-month period and as to
the manner of sale. After the one-year period, such affiliates of CitFed Bancorp
who are not affiliates of Fifth Third may resell their shares without
restriction. The ability of affiliates to resell shares of Fifth Third Common
Stock received in the Merger under Rule 144 or 145 as summarized herein
generally will be subject to Fifth Third having satisfied its Exchange Act
reporting requirements for specified periods prior to the time of sale.
Affiliates also would be permitted to resell Fifth Third Common Stock received
in the Merger pursuant to an effective registration statement under the
Securities Act covering such shares or an available exemption from the
Securities Act registration requirements. This Proxy Statement/Prospectus does
not cover any resales of Fifth Third Common Stock received by persons who may be
deemed to be affiliates of Fifth Third or CitFed Bancorp.
The Affiliation Agreement provides that CitFed Bancorp will use its best
efforts to cause each director, executive officer and other person who is deemed
by CitFed Bancorp to be an affiliate (for purposes of Rule 145 and for purposes
of qualifying the Merger for pooling-of-interests accounting treatment) of
CitFed Bancorp to execute and deliver to Fifth Third a written agreement
intended to ensure compliance with the Securities Act and to ensure that the
Merger will qualify as a pooling-of-interests.
Commission guidelines regarding qualifying for pooling-of-interests
accounting treatment also limit sales by affiliates of Fifth Third and CitFed
Bancorp in the Merger. Commission guidelines indicate that pooling-of-interests
accounting treatment generally will not be challenged on the basis of sales by
affiliates if they do not dispose of any of the shares of either combining
company they owned prior to the consummation of a merger or shares of the
surviving company received in connection with a merger during the period
beginning 30 days before the merger and ending when financial results covering
at least 30 days of post-merger operations of the surviving company have been
published.
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<PAGE> 40
FIFTH THIRD BANCORP
DESCRIPTION OF BUSINESS
Fifth Third is an Ohio corporation organized in 1975 as a bank holding
company registered under the BHCA, and subject to regulation by the Federal
Reserve Board. Fifth Third, with its principal office located in Cincinnati,
owns all of the outstanding stock of nine commercial banks with 411 offices in
Ohio, Kentucky, Indiana and Florida. Those banks are: The Fifth Third Bank, The
Fifth Third Bank of Columbus, The Fifth Third Bank of Northwestern Ohio, N.A.,
The Fifth Third Bank of Southern Ohio, The Fifth Third Bank of Western Ohio,
Fifth Third Bank of Florida, Fifth Third Bank of Northern Kentucky, Inc., Fifth
Third Bank of Kentucky, Inc. and The Fifth Third Bank of Central Indiana.
At December 31, 1997, Fifth Third, its affiliated banks and other
subsidiaries had consolidated total assets of approximately $21.4 billion,
consolidated total deposits of approximately $14.9 billion and consolidated
total stockholders' equity of approximately $2.3 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, Midwest Payment Systems, Inc. ("MPS"), Fifth Third International
Company and Heartland Capital Management, Inc. Fifth Third's affiliates provide
a full range of financial products and services to the retail, commercial,
financial, governmental, educational and medical sectors, including a wide
variety of checking, savings and money market accounts, and credit products such
as credit cards, installment loans, mortgage loans and leasing. Each of the
banking affiliates has deposit insurance provided by the Federal Deposit
Insurance Corporation ("FDIC") through the Bank Insurance Fund ("BIF") and 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(R). The Jeanie system participates in a shared ATM network
called "Money Station(R)," 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(R)," 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 AND COMPARATIVE RIGHTS OF SHAREHOLDERS."
RECENT DEVELOPMENTS
In addition to entering into the Affiliation Agreement with CitFed Bancorp
relating to the Merger, Fifth Third has also recently agreed to acquire The Ohio
Company and State Savings Company. In March 1998, Fifth Third also announced the
1998 Fifth Third Stock Split.
On December 22, 1997, Fifth Third agreed to acquire The Ohio Company, a
company that provides broker/ dealer services, investment banking services and
investment advisory services. A newly formed wholly owned acquisition subsidiary
of Fifth Third will merge with and into The Ohio Company such that The Ohio
Company will become a wholly owned Fifth Third subsidiary upon completion of
that merger. In connection with the acquisition of The Ohio Company, Fifth Third
will issue in exchange for all of the outstanding shares of capital stock of The
Ohio Company such number of shares of Fifth Third Common Stock having a fair
market value of $80.0 million. Based on the fair market value per share of Fifth
Third Common Stock as of April , 1998, approximately 1,500,000 shares of Fifth
Third Common Stock would be issued to the shareholders of The Ohio Company.
Fifth Third expects that its acquisition of The Ohio Company will be completed
in mid-1998 prior to the Effective Time and that such acquisition will be
accounted for as a purchase.
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<PAGE> 41
On January 2, 1998, Fifth Third agreed to acquire State Savings Company
("State Savings"), a savings and loan holding company based in Columbus, Ohio
which owns State Savings Bank, F.S.B. and certain related subsidiaries. State
Savings will merge with and into Fifth Third, and the various State Savings
subsidiaries will become wholly owned subsidiaries of Fifth Third. Subject to
adjustment as provided in the affiliation agreement between Fifth Third and
State Savings, each share of State Savings common stock will be converted into
the right to receive 2,770.89 shares of Fifth Third Common Stock. Based on the
6,000 shares of State Savings common stock outstanding as of January 2, 1998,
Fifth Third would issue approximately 16,625,340 shares of Fifth Third Common
Stock in that merger. Based on the fair market value per share of Fifth Third
Common Stock as of April , 1998, the value of such shares would have an
aggregate value of $ . Fifth Third expects that its acquisition of
State Savings will be completed after The Ohio Company acquisition, but either
prior to or after the Effective Time, and that such acquisition will be
accounted for as a pooling-of-interests.
In order to enable Fifth Third to account for both the Merger and/or the
acquisition of State Savings as a pooling-of-interests, Fifth Third will issue
and sell up to 4.2 million shares of Fifth Third Common Stock prior to the
consummation of such mergers. The number of shares issued for this purpose may
include shares issued in connection with Fifth Third's acquisition of The Ohio
Company, if completed prior to the Effective Time. Fifth Third anticipates that
some or all of the shares of Fifth Third Common Stock issued to enable
pooling-of-interests accounting treatment may be offered pursuant to a
registration statement to be filed with the Commission. The exact number of
shares of Fifth Third Common Stock to be offered, the price and the timing of
any such offering has not yet been determined and will only be made pursuant to
a separate prospectus. In addition, in January 1998, Fifth Third rescinded its
previously announced open market share repurchase programs which would otherwise
preclude pooling-of-interests accounting treatment.
The consummation of the Merger is not contingent upon the closing of either
The Ohio Company acquisition or the State Savings merger. There can be no
assurances that either or both transactions will be successfully consummated.
CAPITAL REQUIREMENTS
The federal banking regulators have issued regulations to implement certain
capital requirements on commercial banks and large bank holding companies, such
as Fifth Third. Under these regulations, commercial banks are required to
maintain a minimum Tier 1 capital ratio to adjusted total assets of 4%. Tier 1
capital generally consists of common stockholders' equity, retained income and
certain non-cumulative perpetual preferred stock and related income, except that
no intangibles and certain purchased mortgage servicing rights and purchased
credit card relationships may be included in capital.
Additionally, commercial banks are required to maintain "total capital"
equal to at least 8% of total risk-weighted assets. For purposes of the
risk-based capital requirement, "total capital" means Tier 1 capital (as
described above) plus "Tier 2 capital," provided that the amount of Tier 2
capital may not exceed the amount of Tier 1 capital, less certain assets. The
components of Tier 2 capital include certain permanent and maturing capital
instruments that do not qualify as Tier 1 capital and general valuation loan and
lease loss allowances up to a maximum of 1.25% of risk-weighted assets.
The Federal Reserve Board has established capital requirements for bank
holding companies that generally parallel the capital requirements for
commercial banks.
Fifth Third, and each of its subsidiary banks, is in compliance with the
current capital requirements. As of December 31, 1997, Fifth Third had a
leverage ratio of 10.16%, its Tier 1 risk-based capital ratio was 12.09% and its
total risk-based capital ratio was 14.70%.
GENERAL REGULATION OF BANK HOLDING COMPANIES
Fifth Third is 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.
40
<PAGE> 42
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 BHCA.
The Federal Reserve Board also may make examinations of a bank holding
company. The BHCA 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 company if, after such acquisition, it would own or control
directly or indirectly, more than 5% of the voting shares of such bank.
The BHCA 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 closely related to banking.
GENERAL REGULATION OF COMMERCIAL BANKS
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 and examination of the Office
of the Comptroller of the Currency. In addition, national banks must be members
of the Federal Reserve System and their deposits are insured by the FDIC. As
such, national banks are subject to certain regulations issued by the FDIC and
Federal Reserve Board. 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 Financial Institutions,
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 BHCA 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 BHCA to
establish a new notice procedure for obtaining Federal Reserve Board approval
under Section 4(a)(2) and 4(c)(8) of the BHCA. 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 BHCA 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
41
<PAGE> 43
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 ("BIF").
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, 1997,
which is incorporated herein by reference, and to the Fifth Third 1997 Annual
Report to Stockholders which accompanies this Proxy Statement/Prospectus. See
"AVAILABLE INFORMATION" and "INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE."
42
<PAGE> 44
CITFED BANCORP, INC.
DESCRIPTION OF BUSINESS
CitFed Bancorp is a Delaware corporation organized in January 1991 and
headquartered in Dayton, Ohio. CitFed Bancorp was formed for the purpose of
becoming a unitary savings and loan holding company of Citizens Federal Bank,
its principal operation subsidiary. CitFed Bancorp and Citizens Federal Bank are
subject to regulation and oversight by the Office of Thrift Supervision.
Citizens Federal Bank is a federally chartered stock savings bank organized in
1934 and headquartered in Dayton, Ohio. Its deposits are insured up to
applicable limits by the FDIC through the Savings Association Insurance Fund.
Citizens Federal Bank serves the Dayton, Ohio and surrounding areas through its
network of 35 full-service retail banking offices located with the greater
Dayton and Butler County, Ohio areas and 15 loan production offices located in
Dayton, Columbus and Cincinnati, Ohio; Florence, Lexington and Louisville,
Kentucky; Williamsburg and Virginia Beach, Virginia; Indianapolis, Indiana; and
Charlotte, North Carolina markets. Based on assets, at December 31, 1997,
Citizens Federal Bank was the fourth largest thrift institution in the State of
Ohio and the largest financial institution headquartered in Dayton, Ohio.
At December 31, 1997, CitFed Bancorp had total assets of $3.5 billion,
deposits of $1.9 billion and stockholders' equity of $209.9 million.
CitFed Bancorp, through its subsidiary, engages primarily in the business
of attracting retail deposits from the general public and investing those funds,
together with borrowings, primarily in one- to four-family residential mortgage
loans. Citizens Federal Bank also acquires funds on a wholesale basis from a
variety of sources, manages a high-quality securities portfolio, services a
significant volume of loans for others, makes consumer, commercial real estate
and commercial non-real estate loans and provides trust services. All mortgage
loans are originated by CitFed Mortgage Corporation of America, Citizens Federal
Bank's wholly owned mortgage banking subsidiary.
CitFed Bancorp is a corporate entity legally separate and distinct from its
affiliates. The principal source of CitFed Bancorp's income is dividends from
Citizens Federal Bank. There are certain regulatory restrictions as to the
extent to which Citizens Federal Bank can pay dividends or otherwise supply
funds to CitFed Bancorp. See "INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE."
The executive offices of CitFed Bancorp and Citizens Federal Bank are
located at One Citizens Federal Centre, Dayton, Ohio 45402. The telephone number
at that address is (937) 223-4234.
ADDITIONAL INFORMATION
For more detailed information about CitFed Bancorp and its subsidiaries,
reference is made to the CitFed Bancorp annual report to stockholders for the
fiscal year ended March 31, 1997 and quarterly reports on Form 10-Q for the
quarters ended June 30, 1997, September 30, 1997 and December 31, 1997, which
are incorporated herein by reference, including the consolidated financial
statements and management's discussion and analysis of financial condition and
results of operations portions thereof. See "AVAILABLE INFORMATION" and
"INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE."
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<PAGE> 45
EFFECT OF GOVERNMENTAL POLICIES
The earnings of both CitFed Bancorp and 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 CitFed Bancorp or Fifth Third and its
subsidiaries.
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<PAGE> 46
UNAUDITED PRO FORMA FINANCIAL INFORMATION
The following unaudited pro forma financial information (the "Pro Forma
Financial Information") is based on the historical financial statements of Fifth
Third (as adjusted to reflect the 1998 Fifth Third Stock Split) and CitFed
Bancorp and has been prepared to illustrate the effects of the acquisitions
described below and the related financing transactions.
The unaudited pro forma balance sheet as of December 31, 1997 assumes the
following transactions were consummated on December 31, 1997: (i) the Merger,
accounted for as a pooling-of-interests, (ii) Fifth Third's acquisition of The
Ohio Company, accounted for as a purchase, (iii) Fifth Third's acquisition of
State Savings Company, accounted for as a pooling-of-interests, and (iv) Fifth
Third's issuance of additional shares of Fifth Third Common Stock.
The unaudited pro forma consolidated statements of income for the years
ended December 31, 1997, 1996 and 1995 give effect to each of the following
transactions as if such transactions had been effective during the periods
shown, except as noted: (i) the Merger, accounted for as a pooling-of-interests,
(ii) Fifth Third's acquisition of The Ohio Company, accounted for as a purchase
as of January 1, 1997, (iii) Fifth Third's acquisition of State Savings Company,
accounted for as a pooling-of-interests, and (iv) Fifth Third's issuance of
additional shares of Fifth Third Common Stock. For the year ended December 31,
1997, the unaudited pro forma consolidated statements of income reflect the
results of operations for CitFed Bancorp for the nine month period ended
December 31, 1997 because its fiscal year will not end until March 31, 1998.
The unaudited Pro Forma Financial Information should be read in conjunction
with Fifth Third's Consolidated Financial Statements and notes thereto
incorporated by reference in this Proxy Statement/Prospectus and CitFed
Bancorp's Consolidated Financial Statements and notes thereto incorporated by
reference in this Proxy Statement/Prospectus.
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<PAGE> 47
FIFTH THIRD BANCORP AND SUBSIDIARIES
UNAUDITED PRO FORMA BALANCE SHEET
AS OF DECEMBER 31, 1997
($000'S)
<TABLE>
<CAPTION>
ADJUSTED
FIFTH THIRD FIFTH THIRD
BANCORP THE OHIO PURCHASE BANCORP
AND COMPANY AND ACCOUNTING AND EQUITY
SUBSIDIARIES SUBSIDIARIES(2) ADJUSTMENTS(2) SUBSIDIARIES OFFERING(3)
------------ --------------- -------------- ------------ -----------
<S> <C> <C> <C> <C> <C>
ASSETS
Cash and Due from Banks.................... $ 720,133 $ 2,955 $ $ 723,088 $
Securities Available for Sale.............. 6,397,077 28,413 (4,310) 6,421,180 146,600
Securities Held to Maturity................ 72,236 72,236
Other Short-Term Investments............... 29,424 29,424
Loans and Leases........................... 13,438,717 13,438,717
Reserve for Credit Losses.................. (200,931) (200,931)
----------- ------- ------- ----------- --------
Net Loans and Leases................... 13,237,786 -- -- 13,237,786 --
Bank Premises and Equipment................ 251,898 8,035 259,933
Accrued Income Receivable.................. 178,803 178,803
Goodwill(1)................................ 61,753 58,251 120,004
Premium on Purchased Deposits(1)........... 244,117 244,117
Other Assets............................... 181,827 53,565 235,392
----------- ------- ------- ----------- --------
Total Assets................................. $21,375,054 $92,968 $53,941 $21,521,963 $146,600
=========== ======= ======= =========== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Total Deposits............................. $14,914,132 $ $ $14,914,132 $
Federal Funds Borrowed..................... 1,253,553 1,253,553
Short-Term Bank Notes...................... 555,000 555,000
Other Short-Term Borrowings................ 1,252,378 11,177 1,263,555
Accrued Taxes, Interest and Expenses....... 505,048 505,048
Other Liabilities.......................... 159,654 42,594 13,138 215,386
Long-Term Debt............................. 457,878 457,878
----------- ------- ------- ----------- --------
Total Liabilities............................ 19,097,643 53,771 13,138 19,164,552 --
STOCKHOLDERS' EQUITY
Common Stock............................... 516,898 3,810 (480) 346,819 6,102
Capital Surplus............................ 483,054 483,054 28,709
Retained Earnings.......................... 1,376,152 35,387 (36,497) 1,548,451
Net Unrealized Gains (Losses) on Securities
Available for Sale....................... 90,876 90,876
Treasury Stock............................. (189,569) 77,780 (111,789) 111,789
----------- ------- ------- ----------- --------
Total Stockholders' Equity................... 2,277,411 39,197 40,803 2,357,411 146,600
----------- ------- ------- ----------- --------
Total Liabilities and Stockholders' Equity... $21,375,054 $92,968 $53,941 $21,521,963 $146,600
=========== ======= ======= =========== ========
</TABLE>
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<PAGE> 48
FIFTH THIRD BANCORP AND SUBSIDIARIES
UNAUDITED PRO FORMA BALANCE SHEET -- (CONTINUED)
<TABLE>
<CAPTION>
STATE SAVINGS CITFED
COMPANY AND BANCORP AND PRO FORMA
SUBSIDIARIES(4) ADJUSTMENTS(4) SUBSIDIARIES(5) ADJUSTMENTS(5) COMBINED
--------------- -------------- --------------- -------------- -----------
<S> <C> <C> <C> <C> <C>
ASSETS
Cash and Due from Banks............... $ 32,487 $ $ 65,089 $ $ 820,664
Securities Available for Sale......... 450,852 1,140,299 8,158,931
Securities Held to Maturity........... 11,357 245,418 329,011
Other Short-Term Investments.......... 114,900 144,324
Loans and Leases...................... 2,146,612 1,808,802 17,394,131
Reserve for Credit Losses............. (34,487) (18,182) (253,600)
---------- -------- ---------- -------- -----------
Net Loans and Leases.............. 2,112,125 -- 1,790,620 -- 17,140,531
Bank Premises and Equipment........... 28,854 20,867
Accrued Income Receivable............. 13,198 19,080 211,081
Goodwill(1)........................... 18,144 138,148
Premium on Purchased Deposits(1)...... 244,117
Other Assets.......................... 38,430 160,780
---------- -------- ---------- -------- -----------
Total Assets............................ $2,802,203 $ -- $3,460,297 $ -- $27,931,063
========== ======== ========== ======== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Total Deposits........................ $2,332,918 $ $1,852,344 $ $19,099,394
Federal Funds Borrowed................ 297,165 1,550,718
Short-Term Bank Notes................. 555,000
Other Short-Term Borrowings........... 40,000 303,000 1,606,555
Accrued Taxes, Interest and
Expenses............................ 13,890 41,879 560,817
Other Liabilities..................... 41,903 257,289
Long-Term Debt........................ 106,821 756,044 1,320,743
---------- -------- ---------- -------- -----------
Total Liabilities....................... 2,535,532 -- 3,250,432 -- 24,950,516
STOCKHOLDERS' EQUITY
Common Stock.......................... 600 36,308 130 28,881 592,249
Capital Surplus....................... (36,308) 57,056 (28,881) 503,630
Retained Earnings..................... 260,433 154,939 1,790,414
Net Unrealized Gains (Losses) on
Securities Available for Sale....... 5,638 (2,260) 94,254
Treasury Stock........................ --
---------- -------- ---------- -------- -----------
Total Stockholders' Equity.............. 266,671 -- 209,865 -- 2,980,547
---------- -------- ---------- -------- -----------
Total Liabilities and Stockholders'
Equity................................ $2,802,203 $ -- $3,460,297 $ -- $27,931,063
========== ======== ========== ======== ===========
</TABLE>
- ---------------
(1) Goodwill and premium on purchased deposits are generally amortized over
periods of up to 25 years.
(2) To record the sale of excluded assets by The Ohio Company prior to the
proposed merger date and to record the purchase of The Ohio Company by Fifth
Third Bancorp, effected through the issuance of approximately 1,500,000
shares of Fifth Third Bancorp Common Stock, $2.22 stated value (assuming a
closing price of $53.33).
(3) To record the issuance of up to 2,748,780 shares of Fifth Third Bancorp
Common Stock, $2.22 stated value, (assuming consideration of $53.33 per
share) prior to the Effective Time and the subsequent investment of the
proceeds into securities.
(4) To record the issuance of 16,625,340 shares of Fifth Third Common Stock,
$2.22 stated value, to effect the merger of State Savings Company into Fifth
Third Bancorp accounted for as a pooling-of-interests.
(5) To record the issuance of 13,067,825 shares of Fifth Third Common Stock,
$2.22 stated value, to effect the merger of CitFed Bancorp into Fifth Third
Bancorp accounted for as a pooling-of-interests.
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<PAGE> 49
FIFTH THIRD BANCORP AND SUBSIDIARIES
UNAUDITED PRO FORMA STATEMENTS OF INCOME
FOR THE YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995
($000'S, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
FIFTH THIRD STATE SAVINGS CITFED THE OHIO
BANCORP COMPANY BANCORP COMPANY PRO FORMA
YEAR ENDED YEAR ENDED 9 MOS. ENDED YEAR ENDED ADJUSTMENTS PRO FORMA
12/31/97 12/31/97 12/31/97 12/31/97(2),(7) (1),(8),(9) 1997
----------- ------------- ------------ ----------------- ----------- ----------
<S> <C> <C> <C> <C> <C> <C>
Interest Income(1)..... $1,478,388 $216,119 $165,482 $ $10,115 $1,870,104
Interest Expense....... 733,426 121,551 112,081 967,058
---------- -------- -------- ------ ------- ----------
Net Interest Income.... 744,962 94,568 53,401 -- 10,115 903,046
Provision for Credit
Losses............... 80,342 6,603 2,700 89,645
---------- -------- -------- ------ ------- ----------
Net Interest
Differential......... 664,620 87,965 50,701 -- 10,115 813,401
Other Operating Income:
Service Charges on
Deposits.......... 94,474 4,550 10,517 109,541
Other Operating
Income............ 350,987 18,541 15,138 68,776 453,442
---------- -------- -------- ------ ------- ----------
Total Other Income..... 445,461 23,091 25,655 68,776 -- 562,983
Operating Expenses:
Salaries, Wages and
Benefits.......... 236,584 30,521 20,102 37,098 324,305
Equipment and
Occupancy
Expenses.......... 58,557 5,029 10,535 5,814 79,935
Other Operating
Expenses(2)....... 211,017 23,562 15,104 16,309 2,330 268,322
---------- -------- -------- ------ ------- ----------
Total Operating
Expenses............. 506,158 59,112 45,741 59,221 2,330 672,562
---------- -------- -------- ------ ------- ----------
Earnings Before
Taxes................ 603,923 51,944 30,615 9,555 7,785 703,822
Applicable Income
Taxes................ 202,686 18,891 9,510 3,194 3,540 237,821
---------- -------- -------- ------ ------- ----------
Net Income............. $ 401,237 $ 33,053 $ 21,105 $6,361 $ 4,245 $ 466,001
========== ======== ======== ====== ======= ==========
Average shares
outstanding(3),(4),(5),(6).. 232,655 33,942 266,597
Average diluted shares
outstanding(3),(4),(5),(6).. 236,526 33,942 270,468
Earnings per share..... $ 1.73 $ 1.75
Diluted earnings per
share................ $ 1.69 $ 1.72
</TABLE>
48
<PAGE> 50
FIFTH THIRD BANCORP AND SUBSIDIARIES
UNAUDITED PRO FORMA STATEMENTS OF INCOME -- (CONTINUED)
<TABLE>
<CAPTION>
FIFTH THIRD STATE SAVINGS CITFED
BANCORP COMPANY BANCORP PRO FORMA
YEAR ENDED YEAR ENDED YEAR ENDED ADJUSTMENTS PRO FORMA
12/31/96 12/31/96 3/31/97 (1),(8),(9) 1996
----------- ------------- ---------- ----------- ----------
<S> <C> <C> <C> <C> <C>
Interest Income(1).................... $1,385,113 $198,628 $190,286 $9,910 $1,783,937
Interest Expense...................... 695,869 112,351 123,367 931,587
---------- -------- -------- ------ ----------
Net Interest Income................... 689,244 86,277 66,919 9,910 852,350
Provision for Credit Losses........... 64,014 1,518 2,850 68,382
---------- -------- -------- ------ ----------
Net Interest Differential............. 625,230 84,759 64,069 9,910 783,968
Other Operating Income:
Service Charges on Deposits......... 83,590 3,755 10,692 98,037
Other Operating Income.............. 284,825 15,593 17,583 318,001
---------- -------- -------- ------ ----------
Total Other Income.................... 368,415 19,348 28,275 -- 416,038
Operating Expenses:
Salaries, Wages and Benefits........ 230,475 24,430 26,249 281,154
Equipment and Occupancy Expenses.... 55,602 4,166 13,283 73,051
Other Operating Expenses(2)......... 207,253 28,233 30,501 265,987
---------- -------- -------- ------ ----------
Total Operating Expenses.............. 493,330 56,829 70,033 -- 620,192
---------- -------- -------- ------ ----------
Earnings Before Taxes................. 500,315 47,278 22,311 9,910 579,814
Applicable Income Taxes............... 165,256 15,155 7,149 3,469 191,029
---------- -------- -------- ------ ----------
Net Income............................ $ 335,059 $ 32,123 $ 15,162 $6,442 $ 388,786
========== ======== ======== ====== ==========
Average shares
outstanding(3),(4),(5),(6).......... 233,987 32,442 266,429
Average diluted shares
outstanding(3),(4),(5),(6).......... 239,405 32,442 271,847
Earnings per share.................... $ 1.43 $ 1.46
Diluted earnings per share............ $ 1.41 $ 1.43
</TABLE>
49
<PAGE> 51
FIFTH THIRD BANCORP AND SUBSIDIARIES
UNAUDITED PRO FORMA STATEMENTS OF INCOME -- (CONTINUED)
<TABLE>
<CAPTION>
FIFTH THIRD STATE SAVINGS CITFED
BANCORP COMPANY BANCORP PRO FORMA
YEAR ENDED YEAR ENDED YEAR ENDED ADJUSTMENTS PRO FORMA
12/31/95 12/31/95 3/31/96 (1),(8),(9) 1995
----------- ------------- ---------- ----------- ----------
<S> <C> <C> <C> <C> <C>
Interest Income(1).................... $1,173,165 $180,561 $165,728 $ 9,646 $1,529,100
Interest Expense...................... 609,733 107,506 107,983 825,222
---------- -------- -------- ------- ----------
Net Interest Income................... 563,432 73,055 57,745 9,646 703,878
Provision for Credit Losses........... 42,962 1,322 1,650 45,934
---------- -------- -------- ------- ----------
Net Interest Differential............. 520,470 71,733 56,095 9,646.... 657,944
Other Operating Income:
Service Charges on Deposits......... 66,344 2,863 7,612 76,819
Other Operating Income.............. 239,371 10,531 17,676 267,578
---------- -------- -------- ------- ----------
Total Other Income.................... 305,715 13,394 25,288 -- 344,397
Operating Expenses:
Salaries, Wages and Benefits........ 195,193 22,683 23,735 241,611
Equipment and Occupancy Expenses.... 45,176 3,957 13,025 62,158
Other Operating Expenses(2)......... 155,248 19,483 21,085 195,816
---------- -------- -------- ------- ----------
Total Operating Expenses.............. 395,617 46,123 57,845 499,585
---
---------- -------- -------- ----------
-------
Earnings Before Taxes................. 430,568 39,004 23,538 9,646.... 502,756
Applicable Income Taxes............... 142,883 12,378 7,402 3,376 166,039
---------- -------- -------- ------- ----------
Net Income............................ $ 287,685 $ 26,626 $ 16,136 $ 6,270 $ 336,717
========== ======== ======== ======= ==========
Average shares
outstanding(3),(4),(5),(6).......... 222,479 32,442 254,921
Average diluted shares
outstanding(3),(4),(5),(6).......... 230,945 32,442 263,387
Earnings per share.................... $ 1.29 $ 1.32
Diluted earnings per share............ $ 1.26 $ 1.28
</TABLE>
- ---------------
ASSUMPTIONS
(1) The proceeds from the equity offering were invested at an estimated
after-tax yield of 4.48%, 4.39%, and 4.28% in 1997, 1996, and 1995,
respectively.
(2) Goodwill recognized in The Ohio Company purchase will be amortized over 25
years.
(3) The approximate 1,500,000 shares issued in The Ohio Company transaction,
accounted for as a purchase, were issued January 1, 1997.
(4) The approximate 2,748,780 shares issued in the proposed equity offering were
issued as of January 1, 1995.
(5) The 16,625,340 shares issued in the State Savings Company transaction,
accounted for as a pooling-of-interests, were issued as of January 1, 1995.
(6) The 13,067,825 shares issued in the CitFed Bancorp transaction, accounted
for as a pooling-of-interests, were issued as of January 1, 1995.
(7) Does not give effect to the 1997 discontinued operations of The Ohio
Company.
(8) Does not give effect to non-recurring merger related charges which will be
expensed prior to consummation of the business combinations.
(9) Does not give effect to any cost savings which may be achieved after
consummation of the business combinations.
50
<PAGE> 52
SELECTED HISTORICAL FINANCIAL DATA OF FIFTH THIRD
The following table sets forth certain historical financial data concerning
Fifth Third for the five years ended December 31, 1997. All information is based
on information contained in Fifth Third's 1997 Annual Report to Stockholders.
The Fifth Third Annual Report accompanies this Proxy Statement/Prospectus, and
all such financial information 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,
----------------------------------------------------
1997 1996 1995 1994 1993
-------- ------- ------- ------- -------
($000'S EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C> <C>
SUMMARY OF OPERATIONS:
Net interest income..................... $744,962 689,244 563,432 516,753 473,515
Provision for credit losses............. 80,342 64,014 42,962 35,780 48,037
-------- ------- ------- ------- -------
Net interest income after provision for
credit losses......................... 664,620 625,230 520,470 480,973 425,478
Other operating income.................. 445,461 368,415 305,715 255,908 231,150
Operating expenses(1)................... 506,158 493,330 395,617 371,545 352,720
-------- ------- ------- ------- -------
Income before income taxes.............. 603,923 500,315 430,568 365,336 303,908
Applicable income taxes................. 202,686 165,256 142,883 120,877 97,673
-------- ------- ------- ------- -------
Net income.............................. $401,237 335,059 287,685 244,459 206,235
======== ======= ======= ======= =======
COMMON SHARE DATA:(2)
Earnings per share...................... $ 1.73 1.43 1.29 1.13 .97
Diluted earnings per share.............. 1.69 1.41 1.26 1.10 .95
Cash dividends declared per share....... .569 .489 .427 .356 .302
Book value at period end................ 9.78 9.00 7.63 6.40 5.91
Average shares outstanding (000's): 232,655 233,987 222,479 217,305 211,440
Average diluted shares outstanding
(000's): 236,526 239,405 230,945 225,873 220,517
</TABLE>
- ---------------
(1) Operating expenses for 1996 include the impact of the special SAIF
assessment of $16.6 million pretax ($10.8 million after tax or $.04 per
share).
(2) Per share amounts and shares outstanding reflect the 1998 Fifth Third Stock
Split.
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
---------------------------------------------------------------
1997 1996 1995 1994 1993
----------- ---------- ---------- ---------- ----------
($000'S EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C> <C>
FINANCIAL CONDITION
AT PERIOD END:
Securities....................... $ 6,469,313 6,400,685 4,338,269 3,637,035 2,674,468
Loans and leases................. $13,438,717 12,514,792 11,690,643 10,286,457 9,566,898
Assets........................... $21,375,054 20,548,998 17,052,883 14,957,009 13,128,544
Deposits......................... $14,914,132 14,374,656 12,485,780 10,630,878 9,477,306
Short-term borrowings............ $ 3,060,931 3,265,432 2,005,495 2,452,218 1,691,744
Long-term debt and convertible
subordinated notes............. $ 457,878 277,661 425,396 178,713 407,864
Stockholders' equity............. $ 2,277,411 2,144,125 1,724,575 1,398,774 1,277,660
</TABLE>
51
<PAGE> 53
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
---------------------------------------------------------------
1997 1996 1995 1994 1993
----------- ---------- ---------- ---------- ----------
($000'S EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C> <C>
RATIOS:
PROFITABILITY RATIOS:
Return on average assets(1)...... 1.96% 1.72 1.78 1.77 1.71
Return on average stockholders'
equity(1)...................... 19.6% 17.2 18.1 18.6 17.8
Net interest margin.............. 4.11% 3.99 3.90 4.16 4.39
Overhead ratio(1)(2)............. 41.0% 45.0 43.9 46.6 48.6
Other operating income to total
income(3)...................... 37.1% 34.6 34.8 33.1 32.2
CAPITAL RATIOS:
Average stockholders' equity to
average assets................. 10.03% 9.99 9.82 9.50 9.61
Tier 1 risk-adjusted capital..... 12.09% 11.37 11.03 11.26 11.50
Total risk-adjusted capital...... 14.70% 14.06 14.33 13.21 13.85
Tier 1 leverage.................. 10.16% 9.22 9.47 9.62 9.59
RATIO OF EARNINGS TO FIXED
CHARGES:(4)
Including deposit interest....... 1.82 1.71 1.70 1.89 1.89
Excluding deposit interest....... 3.92 3.93 3.49 4.75 5.77
CREDIT QUALITY RATIOS:
Reserve for credit losses to
nonperforming assets........... 516.84% 531.48 436.06 570.50 362.84
Reserve for credit losses to
loans and leases outstanding... 1.50% 1.50 1.52 1.52 1.51
Net charge-offs to average loans
and leases outstanding......... .54% .49 .27 .18 .31
Nonperforming assets to loans,
leases and other real estate
owned.......................... .29% .28 .35 .27 .42
</TABLE>
- ---------------
(1) Operating expenses for 1996 include the impact of the special SAIF
assessment of $16.6 million pretax ($10.8 million after tax or $.04 per
share). For comparability, excluding the impact of this assessment, return
on average assets, return on average equity and the overhead ratio would
have been 1.78%, 17.8% and 43.5%, respectively.
(2) Operating expenses divided by the sum of taxable equivalent net interest
income and other operating income.
(3) Other operating income excluding securities gains and losses as a percent of
net interest income and other operating income excluding securities gains
and losses.
(4) Earnings represent income before income taxes plus fixed charges. Fixed
charges include interest expense and the proportion deemed representative of
the interest factor of rental expense.
52
<PAGE> 54
SELECTED HISTORICAL FINANCIAL DATA OF CITFED BANCORP
The following table sets forth certain historical financial data concerning
CitFed Bancorp. This information is based on information contained in CitFed
Bancorp's 1997 Annual Report to Stockholders for the fiscal year ended March 31,
1997, and Quarterly Reports on Form 10-Q for the nine month periods ended
December 31, 1997 and 1996, respectively, all of which are available on request
and are incorporated by reference in this Proxy Statement/Prospectus and should
be read in conjunction therewith.
<TABLE>
<CAPTION>
NINE MONTHS ENDED
DECEMBER 31, YEARS ENDED MARCH 31,
----------------------- -------------------------------------------------------------
1997 1996 1997 1996 1995 1994 1993
---------- ---------- ---------- ---------- ---------- ---------- ---------
($000'S EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C> <C> <C> <C>
SUMMARY OF OPERATIONS:
Net interest income........ $ 53,401 $ 49,702 $ 66,919 $ 57,745 $ 53,327 $ 52,831 $ 53,224
Provision for credit
losses................. 2,700 2,400 2,850 1,650 3,153 4,858 6,004
---------- ---------- ---------- ---------- ---------- ---------- ---------
Net interest income after
provision for credit
losses................... 50,701 47,302 64,069 56,095 50,174 47,973 47,220
Other operating income..... 25,655 21,459 28,275 25,288 14,743 16,433 17,663
Operating expenses(1).... 45,741 55,449 70,033 57,845 51,778 46,198 46,193
---------- ---------- ---------- ---------- ---------- ---------- ---------
Income before income
taxes.................. 30,615 13,312 22,311 23,538 13,139 18,208 18,690
Applicable income taxes.... 9,510 4,379 7,149 7,402 4,336 6,049 8,760
Cumulative effect of a
change in accounting
principle(2)............. -- -- -- -- -- 1,500 (496)
---------- ---------- ---------- ---------- ---------- ---------- ---------
Net income................. $ 21,105 8,933 15,162 16,136 8,803 13,659 9,434
========== ========== ========== ========== ========== ========== =========
COMMON SHARE DATA:(3)
Earnings per share......... $ 1.63 0.70 1.18 1.27 0.69 .97 .92
Diluted earnings per share
before accounting
change................... $ 1.57 0.67 1.14 1.22 0.68 0.83 0.90
Diluted earnings per
share.................... $ 1.57 0.67 1.14 1.22 0.68 0.94 0.90
Cash dividends declared per
share.................... $ 0.20 0.12 0.17 0.12 0.10 0.07 --
Book value at period end... $ 16.14 14.36 14.40 13.61 12.63 12.12 13.01
Average shares
outstanding.............. 12,969,298 12,836,902 12,846,728 12,695,582 12,727,903 12,710,996 9,309,357
Average diluted shares
outstanding.............. 12,432,690 13,338,083 13,346,702 13,231,088 13,017,924 13,040,082 9,507,661
</TABLE>
- ---------------
(1) Operating expenses for the fiscal year ended March 31, 1997 include the
impact of the special SAIF assessment of $10.3 million pretax ($7.2 million
after tax or $.54 per diluted share).
(2) Includes the effect of the change in accounting principle of adopting
Statement of Financial Accounting Standard No. 109, "Accounting for Income
Taxes".
(3) Per share amounts and shares outstanding reflect the three-for-two stock
split effected in the form of a stock dividend declared October 17, 1997 and
distributed November 28, 1997.
53
<PAGE> 55
<TABLE>
<CAPTION>
NINE MONTHS
ENDED DECEMBER 31, YEARS ENDED MARCH 31,
--------------------- ---------------------------------------------------------
1997 1996 1997 1996 1995 1994 1993
--------- --------- --------- --------- --------- --------- ---------
($000'S EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C> <C> <C> <C>
FINANCIAL CONDITION AT PERIOD
END:
Securities...................... 1,385,717 1,053,666 1,016,059 844,422 687,150 777,198 787,542
Loans and leases................ 1,790,620 1,615,215 1,673,957 1,521,500 1,378,261 1,070,705 908,192
Assets.......................... 3,460,297 2,918,160 2,937,269 2,597,886 2,293,861 2,030,739 1,882,957
Deposits........................ 1,852,344 1,606,669 1,683,998 1,649,265 1,575,201 1,375,914 1,421,855
Short-term borrowings........... 353,165 276,137 229,038 45,607 239,238 66,366 336
Long-term debt and convertible
subordinated notes............ 1,003,044 814,672 803,817 702,454 290,061 416,724 318,993
Stockholders' equity............ 209,865 184,944 185,987 174,109 159,616 155,288 121,105
RATIOS:
PROFITABILITY RATIOS:
Return on average assets(1)..... 0.89% 0.44 .55 .68 .42 .69 .50
Return on average stockholders'
equity(1)..................... 13.99% 6.70 8.43 9.62 5.67 10.32 8.12
Net interest margin............. 2.37% 2.61 2.58 2.60 2.71 2.84 2.99
Overhead ratio (1)(2)........... 56.24% 75.87 71.25 67.69 67.71 66.28 64.86
Other operating income to total
income(3)..................... 32.40% 30.16 29.62 30.36 27.84 21.61 22.44
CAPITAL RATIOS:
Average stockholders' equity to
average assets................ 6.34% 6.57 6.53 7.05 7.41 6.73 6.10
Tier 1 risk-adjusted capital.... 12.23% 12.25 12.64 13.25 13.40 15.73 N/A
Total risk-adjusted capital..... 13.36% 13.39 13.78 14.43 14.60 16.90 N/A
Tier 1 leverage................. 6.16% 6.23 6.42 6.80 6.97 7.45 N/A
RATIO OF EARNINGS TO FIXED
CHARGES:(4)
Including deposit interest...... 1.27% 1.14 1.18 1.21 1.16 1.25 1.22
Excluding deposit interest...... 1.58% 1.35 1.41 1.64 1.41 1.97 2.37
CREDIT QUALITY RATIOS:
Reserve for credit losses to
nonperforming assets.......... 136.09% 103.31 128.08 74.34 132.83 72.44 38.96
Reserve for credit losses to
loans and leases
outstanding................... 1.06% 0.99 1.02 1.12 1.15 1.24 1.13
Net charge-offs (recoveries) to
average loans and leases
outstanding................... 0.07% 0.19 .15 .08 (.01) .22 .32
Nonperforming assets to loans,
leases and other real estate
owned......................... 0.78% 0.95 .79 1.50 .86 1.70 2.86
</TABLE>
- ---------------
(1) Operating expenses for the fiscal year ended March 31, 1997 include the
impact of the special SAIF assessment of $10.3 million pretax ($7.2 million
after tax or $.54 per diluted share). For comparability, excluding the
impact of this assessment, return on averages assets, return on average
equity and the overhead ratio would have been .81%, 12.40% and 60.53%,
respectively.
(2) Operating expenses divided by the sum of taxable equivalent net interest
income and other operating income.
(3) Other operating income excluding securities gains and losses as a percent of
net interest income and other operating income excluding securities gains
and losses.
(4) Earnings represent income before income taxes plus fixed charges. Fixed
charges include interest expense and the proportion deemed representative of
the interest factor of rental expense.
54
<PAGE> 56
DESCRIPTION OF CAPITAL STOCK AND
COMPARATIVE RIGHTS OF STOCKHOLDERS
Fifth Third is authorized to issue 300,000,000 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, 1997, Fifth Third had outstanding
232,836,842 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 stockholders, (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.
CitFed Bancorp is authorized to issue 20,000,000 shares of CitFed Bancorp
Common Stock, and 5,000,000 shares, $.01 par value per share, of preferred stock
("CitFed Bancorp Preferred Stock"). As of the Record Date, CitFed Bancorp had
outstanding 13,087,024 shares of CitFed Bancorp Common Stock, and options to
purchase a total of 435,942 shares of CitFed Bancorp Common Stock, and no shares
of CitFed Bancorp Preferred Stock. The Board of Directors of CitFed Bancorp may,
pursuant to Article Fourth of its Certificate of Incorporation, (a) provide for
the specific terms of CitFed Bancorp Preferred Stock to be issued in series, and
(b) state the rights, preferences, limitations and relative, participating,
optional or other special rights of the shares of each such series, and the
qualifications, limitations or restrictions thereof.
Set forth below is a description of Fifth Third Common Stock and CitFed
Bancorp Common Stock. This description and analysis are brief summaries of
relevant provisions of the Second Amended Articles of Incorporation, as amended,
and Code of Regulations of Fifth Third, the Certificate of Incorporation and
Bylaws of CitFed Bancorp and the relevant provisions of Ohio and Delaware law,
and are qualified in their entirety by reference to such documents.
VOTING RIGHTS
Holders of both Fifth Third Common Stock and CitFed Bancorp Common Stock
are entitled to one vote per share on all matters submitted to a vote of
stockholders. The CitFed Bancorp Certificate of Incorporation, however, imposes
a voting limitation on any record owner who beneficially owns in excess of 10%
of the outstanding shares of CitFed Bancorp Common Stock (the "Limit") by
prohibiting such owner to vote the shares held in excess of the Limit. This
provision would make it impractical for a third party to acquire beneficial
ownership of more than 10% of the outstanding voting stock of CitFed Bancorp
without first receiving stockholder and regulatory approvals, since any party
who acquired shares in excess of the 10% threshold would lose all significant
rights associated with the voting of such shares.
The Code of Regulations of Fifth Third and the Certificate of Incorporation
and Bylaws of CitFed Bancorp 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 the Boards of Directors of Fifth Third
and CitFed Bancorp may make it more difficult for a stockholder to acquire
immediate control of either Company and remove management by means of a hostile
takeover. Since the terms of approximately one-third of the incumbent directors
expire each year, at least two annual elections are necessary for the
stockholders to replace a majority of the directors, whereas a majority of the
directors of a non-classified board of directors may be replaced in one annual
election.
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
55
<PAGE> 57
the outstanding shares of Fifth Third Common Stock. CitFed Bancorp's Certificate
of Incorporation affords its Board of Directors the same ability.
The holders of Fifth Third Common Stock have the right to vote cumulatively
in the election of directors. Under applicable Ohio law, unless a corporation's
articles of incorporation are amended to provide that no stockholder of the
corporation may cumulate his or her voting power, each stockholder has the right
to vote cumulatively in the election of directors of such corporation if (i)
written notice is given by any stockholder of such corporation to the President,
a Vice President or the Secretary of such corporation, not less than forty-eight
hours before the time fixed for holding the meeting at which directors are to be
elected, indicating that such stockholder 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 Chairman or the Secretary or by
or on behalf of the stockholder giving such notice. In such event, each
stockholder 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 stockholder
sees fit. The availability of cumulative voting rights enhances the ability of
minority stockholders to obtain representation on the Board of Directors.
Pursuant to CitFed Bancorp's Certificate of Incorporation, the stockholders
of CitFed Bancorp do not have the right to vote cumulatively in the election of
directors.
Generally actions required to be taken by Fifth Third stockholders 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. Actions required to be taken by CitFed Bancorp stockholders
under Delaware law require the affirmative vote of holders of a majority of the
shares of CitFed Bancorp entitled to vote. CitFed Bancorp's Certificate of
Incorporation does contain a super majority voting provision requiring the
affirmative vote of at least 66 2/3% of the outstanding shares entitled to vote
and a majority of the outstanding shares held by disinterested persons, with
respect to certain business combinations with "related persons" (generally
defined to include a person who beneficially owns 10% or more of the outstanding
shares of the CitFed Bancorp Common Stock). The Certificate of Incorporation of
CitFed Bancorp also requires approval by 80% of all of the outstanding shares
entitled to vote to amend certain provisions of the Certificate of
Incorporation. Such super-majority provisions enable the holders of more than
20% of the voting stock to prevent amendments to governing documents, even if
they were favored by the holders of a majority of the voting stock. With respect
to Fifth Third, no vote of its stockholders is required to approve the Merger.
DIVIDENDS
Holders of Fifth Third Common Stock and CitFed Bancorp Common Stock are
each entitled to dividends as and when declared by the respective Boards of
Directors of each institution out of funds legally available for the payment of
dividends. Fifth Third and CitFed Bancorp 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 Boards of Directors shall determine.
Most of the revenues of Fifth Third and CitFed Bancorp available for
payment of dividends derive from amounts paid to each such corporation by its
respective subsidiaries. Under applicable banking law, the total of all
dividends declared in any calendar year by a national bank or a state-chartered
bank may not, without the approval of the Comptroller of the Currency, 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, like Citizens Federal Bank, 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 generally authorized to pay dividends during
a calendar year up to the greater of 100% of their net income during the
calendar year plus the amount that would reduce by one-half their surplus
capital or 75% of net income during the most recent four quarters (minus
dividends previously paid over that period).
56
<PAGE> 58
The affiliates of Fifth Third include both state and nationally chartered
banks. Under the applicable regulatory limitations, during the year 1998, the
affiliates of Fifth Third could declare aggregate dividends limited to their
1998 eligible net profits, as defined, and their retained 1997 and 1996 net
income, without the approval of their respective regulators. The Comptroller of
the Currency, banking authorities of the States of Ohio, Indiana, Kentucky and
Florida, 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 CitFed Bancorp 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. 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 CitFed Bancorp, and their respective affiliates, may pay.
PREEMPTIVE RIGHTS
Neither CitFed Bancorp stockholders nor Fifth Third stockholders are
entitled to preemptive rights with respect to any shares or other securities of
CitFed Bancorp or Fifth Third, respectively, that may be issued.
RIGHTS UPON LIQUIDATION
In the event of any liquidation, dissolution or winding up of CitFed
Bancorp, the holders of CitFed Bancorp Common Stock would be entitled to
receive, after payment or provision for payment of all debts and liabilities of
CitFed Bancorp (including the payment of all fees, taxes and other expenses
incidental thereto), the remaining assets of CitFed Bancorp available for
distribution. If CitFed Bancorp Preferred Stock is issued, the holders thereof
may have priority over the holders of CitFed Bancorp Common Stock in the event
of liquidation or dissolution. With respect to Fifth Third, Fifth Third
stockholders 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. CitFed Bancorp's Certificate of Incorporation also provides
for the indemnification of each director and officer of the corporation as well
as employees and agents of CitFed Bancorp, to the fullest extent permitted by
Delaware law. Fifth Third and CitFed Bancorp do not have any additional
indemnification agreements with their directors or executive officers.
Under Delaware law, subject to certain exceptions, a director is protected
from monetary liability for breaches of his or her duty of care. Delaware law
provides for such a limitation on director liability if the certificate of
incorporation contains a provision to that effect. The CitFed Bancorp
Certificate of Incorporation contains such a provision. Such a provision does
not, however, eliminate or limit director liability for a breach of the
director's duty of loyalty to the corporation or its shareholders or for acts or
omissions not in good faith or which involve intentional misconduct or a knowing
violation of law, for willful or negligent conduct in paying dividends or
repurchasing stock out of other than legally available funds, or for any
transaction from which the
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director derived 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. If the Merger is consummated, Fifth Third will assume all such
obligations of CitFed Bancorp for the indemnification of its officers and
directors. See "PROPOSAL -- MERGER OF CITFED BANCORP INTO FIFTH
THIRD -- Interests of Certain Persons in the Merger."
STOCKHOLDERS' MEETINGS; QUORUM
Special meetings of Fifth Third's stockholders may be called at any time by
the Board of Directors or by the stockholders 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 or purposes of the meeting. Special
meetings of CitFed Bancorp's stockholders may only be called pursuant to a
resolution adopted by a majority of its Board of Directors. The CitFed Bancorp
Bylaws also provide that stockholder action may be taken only at an annual or
special meeting of stockholders and not by written consent. These provisions
may, among other things, discourage stockholder attempts to disrupt the business
of CitFed Bancorp between annual meetings, deter hostile takeovers by making it
more difficult for a person or entity to obtain immediate control of CitFed
Bancorp between meetings, and prevent stockholders from using a special meeting
as a forum to address certain other matters.
The presence in person or by proxy of the holders of a majority of the
shares of stock entitled to vote at a meeting on every matter that is to be
voted on constitutes a quorum under the Code of Regulations of Fifth Third. The
Bylaws of CitFed Bancorp provide that the presence in person or by proxy of the
holders of a majority of the aggregate number of outstanding shares entitled to
vote at the meeting constitutes a quorum for a meeting.
REMOVAL OF DIRECTORS
The Delaware General Corporation Law (the "DGCL") provides that directors
serving on a classified board may be removed only for cause unless the
corporation's charter provides otherwise. Under the CitFed Bancorp Certificate
of Incorporation, subject to the rights of the holders of any series of
preferred stock then outstanding, any directors, or the entire Board of
Directors, may be removed from office at any time, but only for cause and only
by affirmative vote of the holders of at least 80% of the voting power of all of
the then-outstanding shares of capital stock of the corporation entitled to vote
generally in the election of directors, voting together as a single class. The
CitFed Bancorp Certificate of Incorporation further states that, notwithstanding
the foregoing, any director who has at any time been disqualified (for reasons
enumerated in the Certificate of Incorporation) from office may be removed from
office by the affirmative vote of the holders of at least a majority of the
voting power of all of the then-outstanding shares of capital stock of CitFed
Bancorp entitled to vote generally in the election of directors, voting together
as a single class.
Ohio law provides that the directors may remove any director: (1) if by
order of court he has been found to be of unsound mind, or if he is adjudicated
a bankrupt; (2) if within sixty days, or within such other period of time as is
prescribed in the articles or the regulations, from the date of his election he
does not qualify by accepting in writing his election to such office or by
acting at a meeting of the directors, and by acquiring the qualifications
specified in the articles or the regulations; or if, for such period as is
prescribed in the articles or the regulations, he ceases to hold the required
qualifications; (3) where, as in the case of Fifth Third, the shareholders have
a right to vote cumulatively in the election of directors, then, unless the
articles or the regulations expressly provide that no director may be removed
from office or that removal of directors requires a greater vote than that
specified in this division, all the directors, all the directors of a particular
class, or any individual director may be removed from office, without assigning
any cause, by the vote of the holders of a majority of the voting power
entitling them to elect directors in place of those to be removed, except that,
unless all the directors, or all the directors of a particular class, are
removed, no individual director shall be removed if the votes of a sufficient
number of shares are cast against his removal that, if cumulatively voted at an
election of all the directors, or all the directors of a particular class, as
the case may be, would be sufficient to elect at least one director.
Fifth Third's Code of Regulations provide that no director shall be removed
without cause during his term of office and that any director may be removed for
cause at any time by the action of the holders of record of a
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majority of the outstanding shares of Fifth Third Common Stock entitled to vote
thereon at a meeting of the stockholders, and the vacancy in the Board of
Directors caused by such removal may be filled by action of the stockholders at
such meeting or any subsequent meeting.
AMENDMENT TO CERTIFICATE OF INCORPORATION AND BYLAWS
Amendments to CitFed Bancorp's Certificate of Incorporation must be
approved by two-thirds of its Board of Directors and also by a majority of the
outstanding shares of the corporation's voting stock, provided, however, that
approval by at least 80% of the outstanding voting stock is generally required
for certain provisions (i.e., provisions relating to number, classification,
election and removal of directors; amendment of bylaws; call of special
stockholder meetings; voting limitation; offers to acquire and acquisitions of
control; director liability; certain business combinations; power of
indemnification; and amendments to provisions relating to the foregoing).
The CitFed Bancorp Bylaws may be amended by a majority vote of its Boards
of Directors or the affirmative vote of at least 80% of the total votes eligible
to be voted at a duly constituted meeting of its stockholders.
Ohio law provides that except in certain circumstances, amendments to a
corporation's articles of incorporation must be adopted by the affirmative vote
of the holders of shares entitling them to exercise two-thirds of the voting
power of the corporation on the proposal or, if the articles provide or permit,
by the affirmative vote of a greater or lesser proportion, but not less than a
majority, of such voting power, and by such affirmative vote of the holders of
shares of any particular class as is required by the articles. If, at the time
an amendment to eliminate cumulative voting rights is acted upon by the
shareholders, a corporation does not have issued and outstanding shares that are
listed on a national securities exchange or are regularly quoted in an over-
the-counter market by one or more members of a national or affiliated securities
association, that amendment shall not be adopted if the votes of a sufficient
number of shares are cast against the amendment that, if cumulatively voted at
an election of all the directors, or all the directors of a particular class, as
the case may be, would at the time the amendment is acted upon by the
shareholders be sufficient to elect at least one director.
Regardless of limitations or restrictions in the articles on the voting
rights of the shares of any class, the holders of shares of a particular class,
and in the cases specified in (6), (7), and (8) below, the holders of shares of
every class, shall be entitled to vote as a class on the adoption of an
amendment that does any of the following: (1) increases or decreases the par
value of the issued shares of the particular class; (2) changes issued shares of
the particular class, whether with or without par value, into a lesser number of
shares of the same class or into the same or a different number of shares of any
other class, with or without par value, theretofore or then authorized; (3)
changes the express terms, or adds express terms, of the shares of the
particular class in any manner substantially prejudicial to the holders of the
shares; (4) changes the express terms of issued shares of any class senior to
the particular class in any manner substantially prejudicial to the holders of
shares of the particular class; (5) authorizes shares of another class that are
convertible into, or authorizes the conversion of shares of another class into,
shares of the particular class, or authorizes the directors to fix or alter
conversion rights of shares of another class that are convertible into shares of
the particular class; (6) provides, in the case of an amendment described in
clause (1) or (2) of this section, that the stated capital of the corporation
shall be reduced or eliminated as a result of the amendment, or provides, in the
case of an amendment described in clause (5) of this section, that the stated
capital of the corporation shall be reduced or eliminated upon the exercise of
such conversion rights, provided that any such reduction or elimination is
consistent with section 1701.30 of the Revised Code; (7) changes substantially
the purposes of the corporation, or provides that thereafter an amendment to the
articles may be adopted that changes substantially the purposes of the
corporation; (8) changes a corporation into a nonprofit corporation.
Whenever under the provisions listed above, the holders of shares of any
particular class are entitled to vote as a class on the adoption of an
amendment, such amendment, in order to be adopted, must receive the affirmative
vote of the holders of at least two-thirds or, if the articles provide or
permit, a greater or lesser proportion, but not less than a majority, of the
shares of such class. If the proposed amendment would authorize any particular
corporate action that, under any applicable provision of law or under the
existing articles, could be authorized
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only by or pursuant to a specified vote of shareholders, such amendment, in
order to be adopted, must receive the affirmative vote so specified.
Except for amendments by the Board of Directors concerning the fixing of
the terms of any series of Fifth Third Preferred Stock, Fifth Third's Second
Amended Articles of Incorporation, as amended, contain no other provisions
concerning amendments.
Ohio law provides that the code of regulations of a corporation may be
amended, or new regulations may be adopted, by the shareholders at a meeting
held for that purpose, by the affirmative vote of the holders of shares
entitling them to exercise a majority of the voting power of the corporation on
the proposal, or may be amended, or new regulations may be adopted, without a
meeting by the written consent of the holders of shares entitling them to
exercise two-thirds of the voting power on the proposal, or if the articles or
regulations so provide or permit, by the affirmative vote or written consent of
the holders of shares entitling them to exercise a greater or lesser proportion
but not less than a majority of the voting power.
Fifth Third's Code of Regulations provide that, except for certain
provisions regarding the election and removal of directors (which may only be
amended by the vote or consent of two-thirds of the voting power of Fifth
Third), the Code of Regulations may be altered, amended or repealed at a meeting
held for such purpose by the affirmative vote of the holders of shares of Fifth
Third Common Stock entitling them to exercise a majority of the voting power of
Fifth Third on the proposal, or may be adopted without a meeting by the written
consent of the holders of shares of Fifth Third Common Stock entitling them to
exercise two-thirds of the voting power of Fifth Third on the proposal.
VACANCIES ON THE BOARD OF DIRECTORS
The CitFed Bancorp Certificate of Incorporation provides that vacancies in
CitFed Bancorp's Board of Directors, whether occurring by reason of an increase
in the number of directors, by resignation or otherwise, may be filled by the
CitFed Bancorp Board acting by a vote of a majority of directors then in office,
even if less than a quorum. The overall effect of such a provision may be to
prevent a person or entity from immediately acquiring control of CitFed Bancorp
through an increase in the number of CitFed Bancorp directors followed by
election of that person's or entity's nominees to fill the newly created
vacancies. Furthermore, the ability of the CitFed Bancorp Board to fill
vacancies resulting from newly created directorships could allow the Board to
retain control of CitFed Bancorp by creating new directorships and filling the
vacancies created thereby.
Ohio law provides that, unless the articles or the regulations otherwise
provide, the remaining directors, though less than a majority of the whole
authorized number of directors, may, by the vote of a majority of their number,
fill any vacancy in the board for the unexpired term. A vacancy exists if the
shareholders increase the authorized number of directors but fail at the meeting
at which such increase is authorized, or an adjournment of that meeting, to
elect the additional directors provided for, or if the shareholders fail at any
time to elect the whole authorized number of directors. In case of any removal
of a director pursuant to clause (3) in "-- Removal of Directors" above, a new
director may be elected at the same meeting for the unexpired term of each
director removed. Failure to elect a director to fill the unexpired term of any
director removed is deemed to create a vacancy in the board.
Fifth Third's Code of Regulations provide that, except for vacancies
created by the removal of a director (which is filled as stated above in
"-- Removal of Directors"), in the case of any increase in the number of
directors, or any vacancy created by the death, resignation or otherwise of a
director, the additional director or directors may be elected, or, as the case
may be, the vacancy or vacancies may be filled either: (a) by the Board of
Directors at any meeting by the affirmative vote of a majority of the remaining
directors (though less than a quorum), or (b) by the holders of Fifth Third
Common Stock entitled to vote thereon, either at an annual meeting of
stockholders or at a special meeting called for that purpose.
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ADVANCE NOTICE REQUIREMENTS FOR PRESENTATION OF NEW BUSINESS AND NOMINATIONS OF
DIRECTORS
AT MEETING OF STOCKHOLDERS
The CitFed Bancorp Bylaws generally provide that any stockholder desiring
to make a proposal for new business at a meeting of stockholders or nominate
candidates for election of directors must submit written notice which must be
received at the executive offices of CitFed Bancorp at least 70 days in advance
of the meeting. Adequate advance notice of stockholder proposals and nominations
gives management time to evaluate such proposals and nominations and to
determine whether to recommend to the stockholders that such proposals be
adopted. In certain circumstances, such provisions could make it more difficult
to oppose management's proposals or nominations if stockholders believe such
proposals or nominations are not in their best interests. Fifth Third does not
have any similar provisions.
SUBSCRIPTION, CONVERSION, REDEMPTION RIGHTS; STOCK NONASSESSABLE
Neither Fifth Third Common Stock nor CitFed Bancorp Common Stock has
subscription or conversion rights, and there are no mandatory redemption
provisions applicable thereto. Shares of Fifth Third Common Stock issued to
stockholders of CitFed Bancorp pursuant to the Affiliation Agreement will be
validly issued, fully paid and non-assessable, and will not, upon such issuance,
be subject to preemptive rights of any stockholder of Fifth Third.
CHANGE OF CONTROL PROVISIONS
The Articles of Incorporation and Code of Regulations of Fifth Third and
the Certificate of Incorporation and Bylaws of CitFed Bancorp 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. The ability of each of Fifth Third and CitFed Bancorp to issue
shares of Fifth Third Common Stock and CitFed Preferred Stock, respectively, may
have the effect of delaying, deferring or preventing a change in control of the
company. CitFed Bancorp's Certificate of Incorporation grants CitFed Bancorp's
Board of Directors the authority to issue 5,000,000 shares of CitFed Bancorp
Preferred Stock and to fix the designations, powers, preferences and rights of
such shares and the qualifications, limitations or restrictions applicable
thereto. CitFed Bancorp'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 CitFed Bancorp Common Stock.
OHIO CONTROL SHARE ACQUISITION ACT. Section 1701.831 of the Ohio Revised
Code, the Ohio Control Share Acquisition Act (the "Control Share Act"), provides
that any "control share acquisition" of an Ohio issuing public corporation shall
be made only with the prior authorization of the shareholders of the issuing
public corporation in accordance with the provisions of the Control Share Act. A
"control share acquisition" is defined under the Control Share Act to mean the
acquisition, directly or indirectly, by any person of shares of an issuing
public corporation that, when added to all other shares of the issuing public
corporation such person owns, would entitle such person, directly or indirectly,
to exercise voting power in the election of directors within the following
ranges: more than 20%, more than 33 1/3%, and a majority.
The Control Share Act also requires that the acquiring person must deliver
an acquiring person statement to the Ohio issuing public corporation. The Ohio
issuing public corporation must then call a special meeting of its shareholders
to vote upon the proposed acquisition within 50 days after receipt of such
acquiring person statement, unless the acquiring person agrees to a later date.
The Control Share Act further specifies that the shareholders of the Ohio
issuing public corporation must approve the proposed control share acquisition
by certain percentages at a special meeting of shareholders at which a quorum is
present. In order to comply with the Control Share Act, the acquiring person may
only acquire the Ohio issuing public corporation upon the affirmative vote of
(i) a majority of the voting power of the Ohio issuing public corporation that
is represented in person or by proxy at the special meeting, and (ii) a majority
of the voting power of the Ohio issuing public corporation that is represented
in person or by proxy at the special meeting excluding those shares of the Ohio
issuing public corporation deemed to be "interested shares" for purposes of the
Control Share Act.
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"Interested shares" are defined under the Control Share Act to mean shares
in respect of which the voting power is controlled by any of the following
persons: (1) an acquiring person; (2) any officer of the Ohio issuing public
corporation; and (3) any employee who is also a director of the Ohio issuing
public corporation. "Interested shares" also include shares of the Ohio issuing
public corporation that are acquired by any person after the date of the first
public disclosure of the proposed merger and the date of the special meeting, if
either (i) the aggregate consideration paid by such person, and any person
acting in concert with him, for such shares exceeds $250,000, or (ii) the number
of shares acquired by such person, and any person acting in concert with him,
exceeds one-half of one percent of the outstanding shares of the Ohio issuing
public corporation.
OHIO MERGER MORATORIUM STATUTE. Chapter 1704 of the Ohio Revised Code
prohibits an "Issuing Public Corporation" from engaging in a "Chapter 1704
Transaction" with an "Interested Shareholder" for a period of three years
following the date on which the person become an Interested Shareholder unless,
prior to such date, the directors of the Issuing Public Corporation approve
either the Chapter 1704 Transaction or the acquisition of shares pursuant to
which such person became an Interested Shareholder. Fifth Third is an Issuing
Public Corporation for purposes of the statute. An Interested Shareholder is any
person who is the beneficial owner of a sufficient number of shares to allow
such person, directly or indirectly, alone or with others, including affiliates
and associates, to exercise or direct the exercise of 10% of the voting power of
the Issuing Public Corporation in the election of directors.
A Chapter 1704 Transaction includes any merger, consolidation, combination,
or majority share acquisition between or involving an Issuing Public Corporation
and an Interested Shareholder or an affiliate or associate of an Interested
Shareholder. A Chapter 1704 Transaction also includes certain transfers of
property, dividends, and issuance or transfers of shares, from or by an Issuing
Public Corporation or a subsidiary of an Issuing Public Corporation to, with, or
for the benefit of an Interested Shareholder or an affiliate or associate of an
Interested Shareholder unless such transaction is in the ordinary course of
business of the Issuing Public Corporation on terms no more favorable to the
Interested Shareholder than those acceptable to third parties as demonstrated by
contemporaneous transactions. Finally, Chapter 1704 Transactions include certain
transactions which (a) increase the proportionate share ownership of an
Interested Shareholder, (b) result in the adoption of a plan or proposal for the
dissolution, winding up of the affairs, or liquidation of the Issuing Public
Corporation if such plan is proposed by or on behalf of the Interested
Shareholder, or (c) pledge or extend the credit or financial resources of the
Issuing Public Corporation to or for the benefit of the Interested Shareholder.
After the initial three-year moratorium has expired, an Issuing Public
Corporation may engage in a Chapter 1704 Transaction if (a) the acquisition of
shares pursuant to which the person became an Interested Shareholder received
the prior approval of the board of directors of the Issuing Public corporation,
(b) the Chapter 1704 Transaction is approved by the affirmative vote of the
holders of shares representing at least two-thirds of the voting power of the
Issuing Public Corporation and by the holders of shares representing at least a
majority of voting shares which are not beneficially owned by an Interested
Shareholder or an affiliate or associate of an Interested Shareholder, or (c)
the Chapter 1704 Transaction meets certain statutory tests designed to ensure
that it be economically fair to all shareholders.
OHIO TENDER OFFER PROCEDURES. Ohio law also provides that an offeror may
not make a tender offer or request or invitation for tenders that would result
in the offeror beneficially owning more than ten percent of any class of the
target company's equity securities unless such offeror files certain information
with the Ohio Division of Securities (the "Securities Division") and provides
such information to the target company and the offerees within Ohio. The
Securities Division may suspend the continuation of the control bid if the
Securities Division determines that the offeror's filed information does not
provide full disclosure to the offerees of all material information concerning
the control bid. The statute also provides that an offeror may not acquire any
equity security of a target company within two years of the offeror's previous
acquisition of any equity security of the same target company pursuant to a
control bid unless the Ohio offerees may sell such security to the offeror on
substantially the same terms as provided by the previous control bid. The
statute does not apply to a transaction if either the offeror or the target
company is a savings and loan or bank holding company and the proposed
transaction requires federal regulatory approval. Accordingly, this provision
does not apply to the Merger.
DELAWARE PROVISIONS REGARDING BUSINESS COMBINATIONS. In connection with
certain "Business Combinations" (as defined below) and related transactions
between CitFed Bancorp and a "Related Person" (which
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generally includes any person or entity owning or controlling more than 10% of
the outstanding voting stock of CitFed Bancorp), the CitFed Bancorp Certificate
of Incorporation provides that any Business Combination involving any Related
Person must be approved by at least two-thirds of all outstanding shares of
voting stock, voting together as a single class, unless the transaction (i) is
authorized by a majority of the directors of the CitFed Bancorp Board of
Directors who are unaffiliated with the Related Person and who were directors
prior to the time that the Related Person became a Related Person, or (ii) meets
certain fair price requirements. If the CitFed Bancorp Board gives such approval
or such fair price requirements are met, only the affirmative vote of the
majority of the outstanding stock, voting as a single class, would be required.
The CitFed Bancorp Certificate of Incorporation defines Business
Combination as: (i) any merger or consolidation of CitFed Bancorp or any of its
subsidiaries with or into any Related Person; (ii) any sale, lease, exchange,
mortgage, pledge, transfer, or other disposition other than in the ordinary
course of business to or with a Related Person of any assets of CitFed Bancorp
having an aggregate fair market value equal to or exceeding 25% or more of the
combined assets of CitFed Bancorp and its subsidiaries; (iii) the issuance or
transfer by CitFed Bancorp of any securities to any Related Person in exchange
for cash, securities or other property (or combination thereof) having an
aggregate fair market value equal to or exceeding 25% of the combined assets of
CitFed Bancorp and its subsidiaries, except pursuant to an employee benefit plan
of CitFed Bancorp; (iv) the adoption of any plan or proposal for the liquidation
or dissolution of CitFed Bancorp or any of its subsidiaries proposed by, or on
behalf of, a Related Person; or (v) any reclassification, recapitalization,
merger or consolidation of CitFed Bancorp with any of its subsidiaries or any
other transaction that would have the effect of increasing the voting power of a
Related Person.
Under Delaware law, absent such a super majority voting provision, Business
Combinations, including mergers, consolidations and sales of substantially all
of the assets of CitFed Bancorp must be approved by the vote of the holders of a
majority of the outstanding shares of CitFed Bancorp Common Stock, subject to
certain exceptions. The increased stockholder vote required to approve a
Business Combination may have the effect of foreclosing mergers and other
business combinations which a majority of stockholders deem desirable and may
place the power to prevent such a merger or combination in the hands of a
minority of stockholders.
Delaware's anti-takeover provisions are embodied in Section 203 of the DGCL
("Section 203"). Section 203 provides that certain "business combinations"
between a Delaware corporation whose stock generally is publicly traded or held
of record by more than 2,000 shareholders and an "interested stockholder" are
prohibited for a three-year period following the date that such stockholder
became an interested stockholder, unless (i) the corporation has elected in its
certificate of incorporation not to be governed by Section 203, (ii) the
business combination was approved by the Board of Directors of the corporation
before the other party to the business combination became an interested
stockholder, (iii) upon consummation of the transaction that made it an
interested stockholder, the interested stockholder owned at least 85% of the
voting stock of the corporation outstanding at the commencement of the
transaction (excluding voting stock owned by directors who are also officers or
held in employee benefit plans in which the employees do not have a confidential
right to tender or vote stock held by the plan) or (iv) the business combination
was approved by the Board of Directors of the corporation and ratified by
two-thirds of the voting stock which the interested stockholder did not own. The
three-year prohibition also does not apply to certain business combinations
proposed by an interested stockholder following the announcement or notification
of certain extraordinary transactions involving the corporation and a person who
had not been an interested stockholder during the previous three years or who
became an interest stockholder with the approval of the majority of the
corporation's directors.
The term "business combination" is defined generally to include mergers or
consolidations between a Delaware corporation and an interested stockholder,
transactions with an interested stockholder involving the assets or stock of the
corporation or its majority-owned subsidiaries and transaction which increase an
interested stockholder's percentage ownership of stock. The term "interested
stockholder" is defined generally as a stockholder who, together with affiliates
and associates, owns (or, within three years prior, did own) 15% or more of a
Delaware corporations' voting stock. Section 203 could prohibit or delay a
merger, takeover or other change in control of the Company and therefore could
discourage attempts to acquire the Company. The CitFed Bancorp Certificate of
Incorporation does not contain a provision electing not to be governed by the
Section 203.
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STOCKHOLDER RIGHTS PROTECTION PLAN
On October 21, 1994, the CitFed Bancorp Board of Directors adopted a
Stockholder Protection Rights Plan (the "Rights Plan") and declared a dividend
of one right ("Right") for each share of CitFed Bancorp Common Stock to
stockholders of record as of October 24, 1994. The Rights Plan provides
stockholders of CitFed Bancorp Common Stock with the right to purchase
additional shares of CitFed Bancorp or those of an acquiring entity at a
discount to the then-market value upon the occurrence of certain events which
threaten CitFed Bancorp's ability to act in the best interest of its
stockholders. The Rights may be redeemed by the CitFed Bancorp Board for $0.01
per Right if the CitFed Bancorp Board deems it in the best interest of the
stockholders to terminate the Rights Plan. The Rights expire on October 24,
2004, unless earlier redeemed. CitFed Bancorp, as a condition to consummation of
the Merger, will redeem all of the outstanding Rights in accordance with the
Rights Plan. Fifth Third has not adopted any plan similar to the Rights Plan.
LEGAL MATTERS
Certain legal matters will be passed upon for CitFed Bancorp by Silver,
Freedman & Taff, L.L.P., Washington, D.C. 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 CitFed Bancorp in connection with the Merger have
been duly authorized and, if issued pursuant to the Affiliation Agreement, will
be validly issued, fully paid and non-assessable under the current laws of the
State of Ohio.
EXPERTS
The consolidated financial statements incorporated in this Proxy
Statement/Prospectus by reference from Fifth Third Bancorp's Annual Report on
Form 10-K for the year ended December 31, 1997 have been audited by Deloitte &
Touche LLP, independent auditors, as stated in their report, which is
incorporated herein by reference, 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 incorporated in this Proxy
Statement/Prospectus by reference from CitFed Bancorp, Inc.'s Annual Report on
Form 10-K for the year ended March 31, 1997 have been audited by Deloitte &
Touche LLP, independent auditors, as stated in their report (which expresses an
unqualified opinion and includes an explanatory paragraph referring to CitFed
Bancorp's change in its method of accounting for mortgage servicing rights in
fiscal 1997 to conform with Statement of Financial Accounting Standards No. 122
and No. 125 and change in its method of accounting for impaired loans in fiscal
1996 to conform with Statement of Financial Accounting Standards No. 114), and
have been so incorporated in reliance upon the report of such firm given upon
their authority as experts in accounting and auditing.
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ANNEX A
AFFILIATION AGREEMENT DATED AS OF JANUARY 13, 1998
BETWEEN
FIFTH THIRD BANCORP
AND
CITFED BANCORP
<PAGE> 67
ANNEX A
AFFILIATION AGREEMENT
This Affiliation Agreement ("Affiliation Agreement") dated as of January
13, 1998 is entered into by and between FIFTH THIRD BANCORP, a corporation
organized and existing under the corporation laws of the State of Ohio with its
principal office located in Cincinnati, Hamilton County, Ohio ("Fifth Third"),
and CITFED BANCORP., INC., a corporation organized and existing under the
corporation laws of the State of Delaware, with its principal office located in
Dayton, Montgomery County, Ohio ("CitFed Bancorp").
W I T N E S S E T H:
WHEREAS, Fifth Third is a registered bank holding company under the Bank
Holding Company Act of 1956, as amended, and CitFed Bancorp is a unitary savings
and loan holding company under Section 10 of the Home Owners Loan Act, as
amended ("HOLA"), and Fifth Third and CitFed Bancorp desire to effect a merger
under the authority and provisions of the corporation laws of the States of Ohio
and Delaware pursuant to which at the Effective Time (as herein defined in
Section IX) CitFed Bancorp will be merged into Fifth Third, with Fifth Third to
be and become the surviving corporation (the "Merger");
WHEREAS, CitFed Bancorp owns all of the outstanding stock of Citizens
Federal Bank, F.S.B. ("Thrift Subsidiary") which, at the Effective Time, will be
merged with and into Fifth Third's wholly-owned subsidiary The Fifth Third Bank
of Western Ohio, an Ohio banking corporation ("Fifth Third Bank") with Fifth
Third Bank to become the surviving corporation (the "Subsidiary Merger");
WHEREAS, under the terms of this Agreement each of the issued and
outstanding shares of the common stock, $.01 par value per share, of CitFed
Bancorp which are issued and outstanding (excluding any treasury shares and
preferred shares) immediately prior to the Effective Time will at the Effective
Time be canceled and extinguished and in substitution therefor such CitFed
Bancorp shares will, at the Effective Time, be converted into the right to
receive shares of the common stock, without par value, of Fifth Third ("Fifth
Third Common Stock"), all as more fully provided in this Agreement; and
WHEREAS, as a condition and inducement to Fifth Third's willingness to
enter into this Agreement, CitFed Bancorp and Fifth Third are entering into a
Stock Option Agreement substantially in the form of Appendix B hereto (the
"Stock Option Agreement").
NOW, THEREFORE, in consideration of the mutual covenants herein contained,
Fifth Third and CitFed Bancorp, agree together as follows:
I. MODE OF EFFECTUATING CONVERSION OF SHARES
A. At the Effective Time (as defined in Article IX), all of the shares of
Fifth Third Common Stock that are issued and outstanding or held by Fifth Third
as treasury shares immediately prior to the Effective Time will remain unchanged
and will remain outstanding or as treasury shares, as the case may be, of the
Surviving Corporation (as defined in Section I.F.). Any stock options,
subscription rights, warrants or other securities outstanding immediately prior
to the Effective Time, entitling the holders to subscribe for purchase of any
shares of the capital stock of any class of Fifth Third, and any securities
outstanding at such time that are convertible into shares of the capital stock
of any class of Fifth Third will remain unchanged and will remain outstanding,
with the holders thereof entitled to subscribe for, purchase or convert their
securities into the number of shares of the class of capital stock of Fifth
Third to which they are entitled under the terms of the governing documents.
B. Each of the shares of the common stock, $.01 par value per share, of
CitFed Bancorp ("CitFed Bancorp Common Stock") that is issued and outstanding
immediately prior to the Effective Time will, at the Effective Time, be
converted by virtue of the Merger and without further action, into the right to
receive .67 shares of Fifth Third Common Stock (the "Exchange Ratio"), subject
to adjustment as provided in Section I.E. herein. All issued and outstanding
shares of the preferred stock of CitFed Bancorp, if any, shall be canceled at
the Effective Time.
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C. At the Effective Time, all of the shares of CitFed Bancorp Common Stock,
whether issued or unissued (including treasury shares), will be canceled and
extinguished and the holders of certificates for shares thereof shall cease to
have any rights as shareholders of CitFed Bancorp, except as aforesaid, their
sole rights as shareholders shall pertain to the Fifth Third Common Stock and
cash in lieu of fractional shares, if any (as described in the immediately
succeeding paragraph), into which their CitFed Bancorp Common Stock shall have
been converted by virtue of the Merger.
D. After the Effective Time, each holder of a certificate or certificates
for shares of CitFed Bancorp Common Stock, upon surrender of the same duly
transmitted to Fifth Third Trust Department, as Exchange Agent (or in lieu of
surrendering such certificates in the case of lost, stolen, destroyed or mislaid
certificates, upon execution of such documentation as may be reasonably required
by Fifth Third), shall be entitled to receive in exchange therefor a certificate
or certificates representing the number of whole shares of Fifth Third Common
Stock into which such holder's shares of CitFed Bancorp Common Stock shall have
been converted by the Merger, plus a cash payment for any fraction of a share to
which the holder is entitled, in lieu of such fraction of a share, equal in
amount to the product resulting from multiplying such fraction by the per share
closing price of Fifth Third Common Stock as reported on the Nasdaq National
Market on the date the Merger becomes effective (the "Applicable Market Value
Per Share of Fifth Third Common Stock"). Within seven (7) business days after
the Effective Time, the Exchange Agent will send a notice and transmittal form
to each CitFed Bancorp shareholder of record at the Effective Time advising such
shareholder of the effectiveness of the Merger and the procedures for
surrendering to the Exchange Agent outstanding certificates formerly evidencing
CitFed Bancorp Common Stock in exchange for new certificates of Fifth Third
Common Stock. Until so surrendered, each outstanding certificate that prior to
the Effective Time represented shares of CitFed Bancorp Common Stock shall be
deemed for all corporate purposes to represent the right to receive the number
of full shares of Fifth Third Common Stock (and cash in lieu of fractional
shares) into which the same shall have been converted; provided, however, that
dividends or distributions otherwise payable with respect to shares of Fifth
Third Common Stock into which CitFed Bancorp Common Stock shall have been so
converted shall be paid with respect to such shares only when the certificate or
certificates evidencing shares of CitFed Bancorp Common Stock shall have been so
surrendered (or in lieu of surrendering such certificates in the case of lost,
stolen, destroyed or mislaid certificates, upon execution of such documentation
as may be reasonably required by Fifth Third) and thereupon any such dividends
and distributions shall be paid, without interest, to the holder entitled
thereto subject however to the operation of any applicable escheat or similar
laws relating to unclaimed funds.
E. The Exchange Ratio shall be adjusted so as to give the CitFed Bancorp
shareholders the economic benefit of any stock dividends, reclassifications,
recapitalizations, split-ups, exchanges of shares, distributions or combinations
or subdivisions of Fifth Third Common Stock effected between the date of this
Agreement and the Effective Time. In the event between the date of this
Agreement and the Effective Time, Fifth Third has engaged in either the
distribution of any of its assets (other than regular quarterly cash dividends),
or caused the distribution of capital stock in a company which holds any
asset(s) previously held by Fifth Third or in any affiliate thereof, to the
Fifth Third shareholders, then the Exchange Ratio shall be increased in such
amount so that the equivalent fair market value of such transaction shall also
be distributed to the CitFed Bancorp shareholders, as of the Effective Time.
Notwithstanding the provisions of this Section I.E., no adjustment to the
Exchange Ratio will be required in the event Fifth Third issues shares of Fifth
Third Common Stock in order to effect a pooling-of-interests transaction or
issue shares in another merger or acquisition transaction prior to the Effective
Time or is required to divest any of its assets as a condition to obtaining any
regulatory approval required to consummate the Merger or any other merger or
acquisition transaction.
F. When all necessary documents have been filed and recorded in accordance
with the laws of the States of Ohio and Delaware, and the Merger becomes
effective, the separate existence of CitFed Bancorp shall cease and CitFed
Bancorp shall be merged into Fifth Third (which will be the "Surviving
Corporation"), and which shall continue its corporate existence under the laws
of the State of Ohio under the name "Fifth Third Bancorp".
G. The Second Amended Articles of Incorporation, as amended, of Fifth Third
of record with the Secretary of State of Ohio as of the Effective Time shall be
the Articles of Incorporation of the Surviving Corporation, until further
amended as provided by law.
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H. The Directors of Fifth Third who are in office at the Effective Time
shall be the directors of the Surviving Corporation, each of whom shall continue
to serve as a Director for the term for which he was elected, subject to the
Code of Regulations of the Surviving Corporation and in accordance with law. The
officers of Fifth Third who are in office at the time the Merger becomes
effective shall be the officers of the Surviving Corporation, subject to the
Code of Regulations of the Surviving Corporation and in accordance with law.
I. The Code of Regulations of Fifth Third at the Effective Time shall be
the Code of Regulations of the Surviving Corporation, until amended as provided
therein and in accordance with law.
J. At the Effective Time, the effect of the Merger shall be as provided by
the applicable provisions of the laws of Ohio and Delaware. Without limiting the
generality of the foregoing, and subject thereto, at the Effective Time: the
separate existence of CitFed Bancorp shall cease; Fifth Third, as the Surviving
Corporation, shall possess all assets and property of every description, and
every interest therein, wherever located, and the rights, privileges,
immunities, powers, franchises and authority, of a public as well as a private
nature, of each of Fifth Third and CitFed Bancorp, and all obligations owing by
or due each of Fifth Third and CitFed Bancorp shall be vested in, and become the
obligations of, Fifth Third, as the Surviving Corporation, without further act
or deed; and all rights of creditors of each of Fifth Third and CitFed Bancorp
shall be preserved unimpaired, and all liens upon the property of each of Fifth
Third and CitFed Bancorp shall be preserved unimpaired, on only the property
affected by such liens immediately prior to the Effective Time.
K. From time to time as and when requested by the Surviving Corporation, or
by its successors or assigns, the officers and Directors of CitFed Bancorp in
office at the Effective Time shall execute and deliver such instruments and
shall take or cause to be taken such further or other action as shall be
necessary in order to vest or perfect in the Surviving Corporation or to confirm
of record or otherwise, title to, and possession of, all the assets, property,
interests, rights, privileges, immunities, powers, franchises and authority of
CitFed Bancorp and otherwise to carry out the purposes of this Agreement.
L. This Agreement shall be filed (only if necessary) and recorded along
with Articles or a Certificate of Merger in accordance with the requirements of
the laws of the States of Ohio and Delaware. This Agreement (if necessary) or
the applicable Articles or Certificate of Merger shall not be filed with the
Secretary of the State of Ohio and the Secretary of State of Delaware until, but
shall be filed promptly after, all of the conditions precedent to consummating
the Merger as contained in Article VI of this Agreement shall have been fully
met or effectively waived.
M. The Merger is intended to be a reorganization within the meaning of
Section 368(a) of the Internal Revenue Code of 1986, as amended (the "Code"),
and this Agreement is intended to be a "plan of reorganization" within the
meaning of the regulations promulgated under the code and for purposes of
Sections 354 and 361 of the Code.
N. The Merger is intended to qualify for pooling-of-interests accounting
treatment.
II. REPRESENTATIONS AND WARRANTIES OF CITFED BANCORP
CitFed Bancorp represents and warrants to Fifth Third that as of the date
hereof or as of the indicated date, as appropriate, and except as otherwise
disclosed in Schedule 1 hereto delivered by CitFed Bancorp to Fifth Third prior
to the execution of this Agreement by Fifth Third:
A. CitFed Bancorp (i) is duly incorporated, validly existing and in good
standing as a corporation under the corporation laws of the State of Delaware
and is a registered unitary savings and loan holding company under the HOLA;
(ii) is duly authorized to conduct the business in which it is engaged; (iii)
has 20,000,000 shares, $.01 par value per share, of CitFed Bancorp Common Stock
and 5,000,000 shares, $.01 par value per share, of preferred stock ("CitFed
Bancorp Preferred Stock") authorized pursuant to its Certificate of
Incorporation, which are the total number of shares CitFed Bancorp is authorized
to have outstanding; (iv) has no outstanding securities of any kind, nor any
outstanding options, warrants or other rights entitling another person to
acquire any securities of CitFed Bancorp of any kind, other than (a) 13,002,811
shares of CitFed Bancorp Common Stock, which presently are authorized, duly
issued and outstanding and fully paid and nonassessable, (b) options to purchase
a total of 520,155 shares of CitFed Bancorp Common Stock which were granted to
and are currently held by the
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employees, officers and directors of CitFed Bancorp and/or its subsidiaries, (c)
the option granted to Fifth Third pursuant to the Stock Option Agreement, and
(d) rights granted to holders of CitFed Bancorp Common Stock (the "Rights")
pursuant to the Stockholder Protection Rights Agreement dated October 21, 1994
between the Company and Chemical Bank (the "Rights Plan"), and (e) CitFed
Bancorp's 8.25% Subordinated Notes due September 1, 2003; (v)owns of record and
beneficially free and clear of all liens and encumbrances, all of the 4,025,000
outstanding shares of the capital stock of the Thrift Subsidiary, $.01 par value
per share; (vi) owns of record and beneficially free and clear of all liens and
encumbrances, all of the 750 outstanding shares of the capital stock of CitFed
Mortgage Corporation of America ("CMCA"), no par value per share; (vii) directly
or through a subsidiary, owns of record and beneficially free and clear of all
liens and encumbrances, all of the 10 outstanding shares of the capital stock of
Dayton Financial Services, Inc. ("DFSI"), $50.00 par value per share; (viii)
directly or through a subsidiary, owns of record and beneficially free and clear
of all liens and encumbrances, all of the 75 outstanding shares of the capital
stock of CF Property Management, Inc., doing business as "CitFed Investment
Group" ("CIG"), no par value per share; and (ix) directly or through a
subsidiary, owns of record and beneficially free and clear of all liens and
encumbrances, all of the 247 outstanding shares of the Class B, non-voting
common stock, no par value per share of CFX Insurance Strategies Agency, Inc.
("CFX"). The following three individuals own one share each of Class A voting
common stock, no par value, each of which is subject to a stock redemption
agreement at a purchase price of $500.00 per share: Jerry L. Kirby, Joseph E.
Balmer and Lamar E. Smith. Other than as set forth herein or in Schedule 1,
CitFed Bancorp does not own (other than in a bona fide fiduciary capacity or in
satisfaction of a debt previously contracted) beneficially, directly or
indirectly any shares of any equity securities or similar interests of any
person or any interest in a partnership or joint venture of any kind (except for
marketable securities and Federal Home Loan Bank stock). CitFed Bancorp has no
direct or indirect subsidiaries other than Thrift Subsidiary, CMCA, DFSI, CIG
and CFX (the Thrift Subsidiary, CMCA, DFSI, CIG and CFX are collectively
referred to herein as the "Subsidiaries").
B. 1. Thrift Subsidiary is duly incorporated, validly existing and in good
standing as a federal savings bank under the laws of the United States, and has
all the requisite power and authority to conduct the banking business as now
conducted by it; and Thrift Subsidiary does not have any outstanding securities
of any kind, nor any outstanding options, warrants or other rights entitling
another person to acquire any securities of any of the Thrift Subsidiary of any
kind, other than 4,025,000 shares of the capital stock, $.01 par value per
share, all owned of record and beneficially by CitFed Bancorp.
2. CMCA is duly incorporated, validly existing and in good standing as a
corporation under the laws of Ohio, and has all the requisite power and
authority to conduct the business as now conducted by it; and CMCA does not have
any outstanding securities of any kind, nor any outstanding options, warrants or
other rights entitling another person to acquire any securities of CMCA of any
kind, other than 750 shares of the capital stock, no par value per share, all
owned of record and beneficially by CitFed Bancorp or another Subsidiary.
3. DFSI is duly incorporated, validly existing and in good standing as a
corporation under the laws of Ohio, and has all the requisite power and
authority to conduct the business as now conducted by it; and DFSI does not have
any outstanding securities of any kind, nor any outstanding options, warrants or
other rights entitling another person to acquire any securities of DFSI of any
kind, other than 10 shares of the capital stock, $50.00 par value per share, all
owned of record and beneficially by CitFed Bancorp or another Subsidiary.
4. CIG is duly incorporated, validly existing and in good standing as a
corporation under the laws of Ohio, and has all the requisite power and
authority to conduct the business as now conducted by it; and CIG does not have
any outstanding securities of any kind, nor any outstanding options, warrants or
other rights entitling another person to acquire any securities of CIG of any
kind, other than 75 shares of the capital stock, no par value per share, all
owned of record and beneficially by CitFed Bancorp or another Subsidiary.
5. CFX is duly incorporated, validly existing and in good standing as a
corporation under the laws of Ohio, and has all the requisite power and
authority to conduct the business as now conducted by it; and CFX does not have
any outstanding securities of any kind, nor any outstanding options, warrants or
other rights entitling another person to acquire any securities of CFX of any
kind, other than 247 shares of the Class B, non-voting common stock, no par
value per share, all owned of record and beneficially by CitFed Bancorp or
another Subsidiary, and
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three shares of the Class A voting common stock, no par value per share, one
share of which is owned of record and beneficially by each of Jerry L. Kirby,
Joseph E. Balmer and Lamar E. Smith, for purposes of complying with applicable
insurance laws and regulations.
C. CitFed Bancorp has previously furnished to Fifth Third its audited,
consolidated balance sheets, statements of operations, statements of
stockholders' equity and cash flows as at March 31, 1995, 1996, and 1997 and for
the years ended on March 31, 1996 and 1997, together with the opinions of its
independent certified public accountants associated therewith. CitFed Bancorp
also has previously furnished to Fifth Third the Thrift Financial Reports of the
Thrift Subsidiary as at March 31, 1997 as filed with the Office of Thrift
Supervision ("OTS"). CitFed Bancorp also has furnished to Fifth Third (i) its
unaudited, consolidated financial statements as at June 30, 1997 and September
30, 1997, and for the three and six months then ended, and (ii) the Thrift
Financial Reports as filed with the OTS of the Thrift Subsidiary for the
quarters ended June 30, 1997 and September 30, 1997. Such audited and unaudited
consolidated financial statements of CitFed Bancorp fairly present the
consolidated financial condition of CitFed Bancorp as of the date thereof, and
for the years or periods covered thereby in conformity with generally accepted
accounting principles, consistently applied (except as stated therein and except
for the omission of notes to unaudited statements and year-end adjustments to
interim results). There are no material liabilities, obligations or indebtedness
of CitFed Bancorp or the Subsidiaries required to be disclosed in the financial
statements so furnished other than the liabilities, obligations or indebtedness
disclosed in such financial statements (including footnotes). CitFed Bancorp
shall furnish Fifth Third with unaudited, consolidated financial statements as
at December 31, 1997, and for the quarter then ended as soon as practicable, and
shall continue to furnish such financial information for subsequent monthly and
quarterly periods to Fifth Third as soon as practicable until the Closing Date.
In the event that the Closing Date does not occur before March 31, 1998, CitFed
Bancorp shall furnish Fifth Third with its audited, consolidated financial
statements as at March 31, 1998 and for the year then ended as soon as they are
reasonably available.
D. CitFed Bancorp and the Subsidiaries have good and marketable title to
all of the material properties and assets reflected in their separate statements
of financial condition as at March 31, 1997, and which are still owned by each
and each has good and marketable title to all material properties and assets
acquired by it after such date and still owned by it, subject to (i) any liens
and encumbrances that do not materially adversely impair the use of the
property, (ii) statutory liens for taxes not yet due and payable and (iii) minor
defects and irregularities in title that do not materially adversely impair the
use of the property.
E. Except for events relating to the business environment in general: (i)
Since March 31, 1997, to the date hereof there have been no material adverse
changes in the financial condition, operations or business of CitFed Bancorp and
the Subsidiaries on a consolidated or separate basis; (ii) CitFed Bancorp is not
aware of any events which have occurred since March 31, 1997 to the date hereof
or which as of the date hereof are reasonably certain to occur in the future and
which reasonably can be expected to result in any material adverse change in the
financial condition, operations or business of CitFed Bancorp and the
Subsidiaries on a consolidated or separate basis; and (iii) since March 31,
1997, to the date hereof there have been no material changes in the methods of
business operations of CitFed Bancorp and the Subsidiaries.
F. There are no actions, suits, proceedings, investigations or assessments
of any kind pending, or to the best knowledge of CitFed Bancorp, threatened
against CitFed Bancorp or any of the Subsidiaries which reasonably can be
expected to result in any material adverse change in the financial condition,
operations or business of CitFed Bancorp and the Subsidiaries on a consolidated
or separate basis.
G. Since March 31, 1997, to the date hereof CitFed Bancorp and each of the
Subsidiaries has been operated in the ordinary course of business, has not made
any changes in its respective capital or corporate structures, nor any material
changes in its methods of business operations and has not provided any increases
in employee salaries or benefits other than in the ordinary course of business.
Since March 31, 1997, to the date hereof CitFed Bancorp has not declared or paid
any dividends nor made any distributions of any other kind to its shareholders
other than its regular quarterly cash dividends.
H. CitFed Bancorp and each of the Subsidiaries have timely filed all
federal, state and local tax returns required to be filed (after giving effect
to all extensions) by them, respectively, and have paid or provided for all tax
liabilities shown to be due thereon or which have been assessed against them,
respectively. To the best
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knowledge of CitFed Bancorp, all tax returns filed by CitFed Bancorp or the
Subsidiaries through the date hereof constitute complete and accurate
representations of the tax liabilities of CitFed Bancorp and each of the
Subsidiaries for such years and accurately set forth all items (to the extent
required to be included or reflected in such returns) relevant to its future tax
liabilities, including the tax basis of its properties and assets in all
material respects. Neither CitFed Bancorp nor any of the Subsidiaries is
currently under audit nor has any of them been contacted for an audit and
neither CitFed Bancorp nor any of the Subsidiaries is engaged in any appeal
proceeding in connection with any state, Federal, or local tax filing. As of the
date hereof, neither CitFed Bancorp nor any of the Subsidiaries has reason to
believe that any condition exists with respect to the business or operation of
CitFed Bancorp or the Subsidiaries that might prevent or impede the Merger from
qualifying as a reorganization within the meaning of Section 368(a) of the Code
or for pooling-of-interests accounting treatment.
I. Neither CitFed Bancorp nor any of the Subsidiaries is a party to (i) any
written employment contracts or written contracts of any other kind with any of
its officers, directors or employees or (ii) any material contract, lease or
agreement of any other kind which is not assignable as a result of the merger
provided for herein without the consent of another party, except for contracts,
leases or agreements which do not have terms extending beyond six months from
the date of this Agreement or contracts, leases or agreements (excluding
contracts, leases and agreements pursuant to which credit has been extended by
any of the Subsidiaries) which do not require the annual expenditure of more
than $250,000.00 thereunder.
J. Since March 31, 1997, to the date hereof none of the Subsidiaries has
incurred any unusual or extraordinary loan losses which are material to CitFed
Bancorp and the Subsidiaries on a consolidated basis; to the best knowledge of
CitFed Bancorp and in light of the Subsidiaries' historical loan loss experience
and the Subsidiaries' management's analysis of the quality and performance of
its loan portfolio, as of September 30, 1997, reserves for loan losses were, in
the opinion of CitFed Bancorp, adequate to absorb all known and reasonably
anticipated losses as of such date.
K. Neither CitFed Bancorp nor any of the Subsidiaries has, directly or
indirectly, dealt with any broker or finder in connection with this transaction
and none of them has incurred or will incur any obligation for any broker's or
finder's fee or commission in connection with the transactions provided for in
this Agreement. CitFed Bancorp shall be solely responsible for payment of any
fees to any broker or finder purporting to represent CitFed Bancorp in the
transactions provided for in this Agreement.
L. 1. The directors of CitFed Bancorp, by resolution adopted by the
unanimous vote of all directors present at a meeting duly called and held in
accordance with applicable law, (a) have duly approved this Agreement, the Stock
Option Agreement and the transactions contemplated herein and therein, (b) have
directed that this Agreement be submitted to a vote of CitFed Bancorp's
shareholders at the annual or a special meeting of the shareholders to be called
for that purpose, and (c) have approved, and taken all action required by the
terms of the Rights Plan, to authorize the redemption of such Rights prior to or
at the Effective Time subject only to the payment of $.01 per Right to each
holder of a Right, all in accordance with and as required by law and in
accordance with the Certificate of Incorporation and Bylaws of CitFed Bancorp,
and with respect to clause (c), the Rights Plan
2. CitFed Bancorp has the corporate power and authority to enter into this
Agreement and to carry out its obligations hereunder subject to certain required
regulatory and shareholder approvals. This Agreement, when executed and
delivered, will have been duly authorized and will constitute the valid and
binding obligation of CitFed Bancorp, enforceable against CitFed Bancorp in
accordance with its terms, except to the extent that (i) enforceability thereof
may be limited by insolvency, reorganization, liquidation, bankruptcy,
readjustment of debt or other laws of general application relating to or
affecting the enforcement of creditors' rights generally and (ii) the
availability of certain remedies may be precluded by general principles of
equity; subject, however, to the receipt of requisite regulatory approvals and
the approval of CitFed Bancorp's shareholders.
3. Neither the execution of this Agreement, nor the consummation of the
transactions contemplated hereby, (i) conflicts with, results in a breach of,
violates or constitutes a default under, CitFed Bancorp's Certificate of
Incorporation or Bylaws or, to the best knowledge of CitFed Bancorp, any
federal, state or local law, statute, ordinance, rule, regulation or court or
administrative order to which CitFed Bancorp or any of the Subsidiaries is
subject or bound; (ii) to the best knowledge of CitFed Bancorp, results in the
creation of or gives any person the
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right to create any material lien, charge, encumbrance, or security agreement or
any other material rights of others or other material adverse interest upon any
material right, property or asset belonging to CitFed Bancorp or any of the
Subsidiaries; (iii) conflicts with, results in a breach of, violates or
constitutes a default under, terminates or gives any person the right to
terminate, amend, abandon, or refuse to perform, any material agreement,
arrangement or commitment to which CitFed Bancorp or any of the Subsidiaries is
a party or by which CitFed Bancorp's or any of the Subsidiaries' rights,
properties or assets are subject or bound; or (iv) to the best knowledge of
CitFed Bancorp, accelerates or modifies, or gives any party thereto the right to
accelerate or modify, the time within which, or the terms according to which,
CitFed Bancorp or any of the Subsidiaries is to perform any duties or
obligations or receive any rights or benefits under any material agreements,
arrangements or commitments. For purposes of subparagraphs (iii) and (iv)
immediately preceding, material agreements, arrangements or commitments exclude
agreements, arrangements or commitments having a term expiring less than six
months from the date of this Agreement or which do not require the annual
expenditure of more than $250,000 (but shall include all agreements,
arrangements or commitments pursuant to which credit has been extended by any of
the Subsidiaries).
M. Complete and accurate copies of the (i) Certificate of Incorporation and
Bylaws of CitFed Bancorp and (ii) the Charter and Bylaws of the Thrift
Subsidiary in force as of the date hereof have been delivered to Fifth Third.
N. To the best knowledge of CitFed Bancorp, neither CitFed Bancorp nor any
of the Subsidiaries nor any employee, officer or director of any of them has
knowingly engaged in any activity or knowingly omitted to take any action which,
in any material way, has resulted or could result in the violation of (i) any
local, state or federal law (including without limitation the Bank Secrecy Act,
the Community Reinvestment Act, applicable consumer protection and disclosure
laws and regulations, including without limitation, Truth in Lending, Truth in
Savings and similar disclosure laws and regulations, and equal employment and
employment discrimination laws and regulations) or (ii) any regulation, order,
injunction or decree of any court or governmental body, the violation of either
of which could reasonably be expected to have a material adverse effect on the
financial condition of CitFed Bancorp or any of the Subsidiaries. To the best
knowledge of CitFed Bancorp and each of the Subsidiaries possesses all licenses,
franchises, permits and other governmental authorizations necessary for the
continued conduct of its business without material interference or interruption.
O. To the best knowledge of CitFed Bancorp, neither this Agreement nor any
report, statement, list, certificate or other information furnished by CitFed
Bancorp or any of the Subsidiaries to Fifth Third or its agents pursuant to this
Agreement (including, without limitation, any information which shall be
supplied with respect to their business operations and financial condition for
inclusion in the proxy statement/prospectus and registration statement relating
to the merger) contains or shall contain (or, in the case of information
relating to the proxy statement/prospectus, at the time it is mailed, in the
case of the registration statement, at the time it becomes effective and in the
case of the proxy statement/prospectus and the registration statement, at the
time the annual or special meeting of shareholders of CitFed Bancorp is held to
consider the adoption of this Agreement) an untrue statement of material fact or
omits or shall omit to state a material fact necessary to make the statements
contained herein or therein, in light of the circumstances in which they are
made, not misleading.
P. There are no actions, proceedings or investigations pending before any
environmental regulatory body, with respect to or threatened against or
affecting CitFed Bancorp or any of the Subsidiaries in respect to any "facility"
owned, leased or operated by any of them (but excluding any "facility" as to
which sole interest of CitFed Bancorp or any of the subsidiaries is that of a
lienholder or mortgagee, but including any "facility" to which title has been
taken pursuant to mortgage foreclosure or similar proceedings and including any
"facility" in which CitFed Bancorp or any of the Subsidiaries ever participated
in the financial management of such facility to a degree sufficient to
influence, or have the ability to influence, the facility's treatment of
hazardous waste) under the Comprehensive Environmental Response, Compensation
and Liability Act of 1980, as amended ("CERCLA"), or under any Federal, state,
local or municipal statue, ordinance or regulation in respect thereof, in
connection with any release of any toxic or "hazardous substance", pollutant or
contaminant into the "environment" which, if adversely determined, (a) would
require the payment by CitFed Bancorp or any of the Subsidiaries and/or require
CitFed Bancorp or any of the Subsidiaries to incur expenses of more that
$2,000,000 (whether or not covered by insurance) or (b) would otherwise have a
material adverse effect on CitFed Bancorp
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any of the Subsidiaries, nor, to the best knowledge of CitFed Bancorp after
reasonable inquiry, is there any reasonable basis for the institution of any
such actions or proceedings or investigations which is probable of assertion,
nor are there any such actions or proceedings or investigations in which CitFed
Bancorp or any of the Subsidiaries is a plaintiff or compliant. Neither CitFed
Bancorp nor any of the Subsidiaries is liable in any material respect under any
applicable law for any release by any of them or for any release by any other
"person" of a hazardous substance caused by the spilling, leaking, pumping,
pouring, emitting, emptying, discharging, injecting, escaping, leaching, dumping
or disposing of hazardous wastes or other chemical substances, pollutants or
contaminants into the environment, nor is CitFed Bancorp or any of the
Subsidiaries liable for any material costs (as a result of the acts or omissions
of CitFed Bancorp or any of the Subsidiaries or, to the best knowledge of CitFed
Bancorp, as a result of the acts or omissions of any other "person" of any
remedial action including, without limitation, costs arising out of security,
fencing, alternative water supplies, temporary evacuation and housing and other
emergency assistance undertaken by any environmental regulatory body having
jurisdiction over CitFed Bancorp or any of the Subsidiaries to prevent or
minimize any actual or threatened release by CitFed Bancorp or any of the
Subsidiaries of any hazardous wastes or other chemical substances, pollutants
and contaminants into the environment which would endanger the public health or
the environment. To the best knowledge of CitFed Bancorp, no underground storage
tank presently is located on, nor has any such tank ever been located on, any
property owned by CitFed Bancorp or any of the Subsidiaries or any "facility"
where CitFed Bancorp or any of the Subsidiaries has exercised any significant
management role. All terms contained in quotation marks in this paragraph and
the paragraph immediately following shall have the meaning ascribed to such
terms, and defined in, CERCLA; in addition, toxic or hazardous substances, as
used in this paragraph and all paragraphs of this Section II.P., shall mean any
material or substance that is defined or classified as a "hazardous substance"
pursuant to section 101 of CERCLA or Section 311 of the Federal Water Pollution
Control Act (33 U.S.C. Section 1321); a "hazardous waste" pursuant to Section
1004 or Section 3001 of the Resource Conservation and Recovery Act (42 U.S.C.
Sections 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); or a "hazardous material" under the
Hazardous Materials Transportation Uniform Safety Act of 1990 (49 U.S.C. App.
Section 1802(4)).
To the best knowledge of CitFed Bancorp each "facility" owned, leased or
operated by CitFed Bancorp or any of the Subsidiaries (but excluding any
"facility" as to which the sole interest of CitFed Bancorp or any of the
Subsidiaries is that of a lienholder or mortgagee, but including any "facility"
to which title has been taken pursuant to mortgage foreclosure or similar
proceedings and including any "facility" in which CitFed Bancorp or any of the
Subsidiaries ever participated in the financial management of such facility to a
degree sufficient to influence, or have the ability to influence, the facility's
treatment of hazardous waste) is, in all material respects, in compliance with
all applicable Federal, state, local or municipal statutes, ordinances, laws and
regulations and all orders, rulings or other decisions of any court,
administrative agency or other governmental authority relating to the protection
of the environment, except to the extent a failure to comply would not have a
material adverse effect on the business, operations and financial condition of
CitFed Bancorp and the Subsidiaries taken as a whole.
Q. 1. Benefit Plans. Schedule 1 lists the name and a short description of
each Benefit Plan (as herein defined), together with an indication of its
funding status (e.g., trust, insured or general company assets). For purposes
hereof, the term "Benefit Plan" shall mean any plan, program, arrangement or
system of employee or director benefits maintained by CitFed Bancorp or any of
the Subsidiaries for the benefit of employees, former employees or Directors of
CitFed Bancorp or any of the Subsidiaries and shall include (a) any qualified
retirement plan such as a pension, profit sharing, stock bonus plan or employee
stock ownership plan ("ESOP"), (b) any plan, program or arrangement providing
deferred compensation, bonus deferral or incentive benefits, whether funded
through trust or otherwise, and (c) any welfare plan, program or policy
providing vacation, severance, salary continuation, supplemental unemployment,
disability, life, health coverage, retiree health, Voluntary Employees'
Beneficiary Association, medical expense reimbursement or dependent care
assistance benefits, in any such foregoing case without regard to whether the
Benefit Plan constitutes an employee benefit plan under Section 3(3) of the
Employee Retirement Income Security Act of 1974, as amended ("ERISA"), or the
number of employees covered under such Benefit Plan.
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2. Plan Documents, Reports and Filings. Except as disclosed on Schedule 1,
CitFed Bancorp or the Subsidiaries has provided true, complete and correct
copies of all plan documents, if any, comprising each Benefit Plan, together
with, when applicable, (a) the most recent summary plan description, (b) the
most recent actuarial and financial reports and the most recent annual reports
filed with any governmental agency and (c) all Internal Revenue Service ("IRS")
or other governmental agency rulings and determination letters or any open
requests for IRS rulings or letters with respect to Benefit Plans.
3. Qualified Retirement Plan Compliance. With respect to each Benefit Plan
which is an employee pension benefit plan (as defined in section 3(2) of ERISA)
other than any such plan that meets the "top-hat" exception under section 201(1)
of ERISA (a "Qualified Benefit Plan"), except as disclosed on Schedule 1: (a)
the IRS has issued a determination letter which determined that such Qualified
Benefit Plan satisfied the requirements of section 401(a) of the Internal
Revenue Code of 1986, as amended through the date hereof (the "Code"), as
amended by all of the laws referred to in Section 1 of Revenue Procedure 93-39,
such determination letter has not been revoked or threatened to be revoked by
the IRS, and the scope of such determination letter is complete and does not
exclude consideration of any of the requirements or matters referred to in
sections 4.02 through 4.04 of Revenue Procedure 93-39; (b) to the best knowledge
of CitFed Bancorp, such Qualified Benefit Plan is in material compliance with
all qualification requirements of Section 401(a) of the Code; (c) to the best
knowledge of CitFed Bancorp, such Qualified Benefit Plan is in substantial
compliance with all notice, reporting and disclosure requirements of ERISA and
the Code; (d) any Qualified Benefit Plan which is an ESOP as defined in Section
4975(e)(7) of the Code (an "ESOP Qualified Benefit Plan") is in material
compliance with the applicable qualification requirements of Section 409 of the
Code; and (e) any previously terminated Qualified Benefit Plan was terminated in
material compliance with the requirements of ERISA and the Code, has received a
favorable determination letter therefor, and the liabilities of such Qualified
Benefit Plan and the requirements of the Pension Benefit Guaranty Corporation
("PBGC") were fully satisfied.
4. Welfare Plan Compliance. With respect to each Benefit Plan which is an
employee welfare benefit plan (as defined in Section 3(1) of ERISA) (a "Welfare
Benefit Plan"), except as noted on Schedule 1: (a) such Welfare Benefit Plan, if
it is intended to provide favorable tax benefits to plan participants, has been,
to the best knowledge of CitFed Bancorp, in compliance with applicable Code
provisions; (b) such Welfare Benefit Plan has been, to the best knowledge of
CitFed Bancorp, operated in substantial compliance with all applicable notice,
reporting and disclosure requirements of ERISA and the Code; and (c) such
Welfare Benefit Plan, if a group health plan subject to the requirements of
Section 4980B of the Code ("COBRA"), has been, to the best knowledge of CitFed
Bancorp, operated in substantial compliance with such COBRA requirements.
5. Prohibited Transactions. To the best knowledge of CitFed Bancorp, no
prohibited transaction under Section 406 of ERISA and not exempt under Section
408 of ERISA has occurred with respect to any Benefit Plan which would result,
with respect to any person, in (a) the imposition, directly or indirectly, of a
material excise tax under Section 4975 of the Code or (b) material fiduciary
liability under Section 409 of ERISA. No ESOP Qualified Benefit Plan is
leveraged.
6. Lawsuits or Claims. No material actions, suits or claims (other than
routine claims of benefits) are pending or, to the best knowledge of CitFed
Bancorp, threatened against any Benefit Plan or against CitFed Bancorp or any of
the Subsidiaries with respect to any Benefit Plan.
7. Disclosure of Unfunded Liabilities. All material Unfunded Liabilities
with respect to each Benefit Plan have been recorded and disclosed on the most
recent financial statement of CitFed Bancorp and the Subsidiaries or, if not, in
Schedule 1. For purposes hereof, the term "Unfunded Liabilities" shall mean any
amounts properly accrued to date under generally accepted accounting principles
in effect as of the date of this Agreement (GAAP), or amounts not yet accrued
for GAAP purposes but for which an obligation (which has legally accrued and
cannot legally be eliminated and which is subject to reasonable estimate) exists
for payment in the future which is attributable to any Benefit Plan, including
but not limited to (a) severance pay benefits, (b) deferred compensation or
unpaid bonuses, (c) any liabilities on account of the change in control which
will result from this Agreement, including any potential 20% excise tax under
Section 4999 of the Code relating to excess parachute payments under Section
280G of the Code, (d) any unpaid pension contributions for the current plan year
or any accumulated funding deficiency under Section 412 of the Code and related
penalties under Section 4971 of the
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Code, including unpaid pension contributions or funding deficiencies owed by
members of a controlled group of corporations which includes CitFed Bancorp or
any of the Subsidiaries and for which CitFed Bancorp or any of the Subsidiaries
is liable under applicable law, (e) any authorized but unpaid profit sharing
contributions or contributions under Section 401(k) and Section 401(m) of the
Code, (f) retiree health benefit coverage and (g) unpaid premiums for
contributions required under any group health plan to maintain such plan's
coverage through the Effective Time.
8. Defined Benefit Pension Plan Liabilities. CitFed Bancorp and each of
the Subsidiaries (or any pension plan maintained by any of them) have not
incurred any material liability to the PBGC or the IRS with respect to any
Benefit Plan which is a defined benefit pension plan, except for the payment of
PBGC premiums pursuant to Section 4007 of ERISA, all of which if due prior to
the date of this Agreement have been fully paid, and no PBGC reportable event
under Section 4043 of ERISA has occurred with respect to any such pension plan.
Except as otherwise disclosed in Schedule 1, the benefit liabilities, as defined
in Section 4001(a)(16) of ERISA, of each Benefit Plan subject to Title IV of
ERISA, using the actuarial assumptions that would be used by the PBGC in the
event of termination of such plan, do not exceed the fair market value of the
assets of such plan. Neither CitFed Bancorp, any of the Subsidiaries nor any
controlled group member of CitFed Bancorp or any of the Subsidiaries
participates in, or has incurred any liability under Sections 4201, 4063 or 4064
of ERISA for a complete or partial withdrawal from a multiple employer plan or a
multiemployer plan (as defined in Section 3(37) of ERISA).
9. Independent Trustee. CitFed Bancorp and the Subsidiaries (a) have not
incurred any asserted or, to the best knowledge of CitFed Bancorp, unasserted
material liability for breach of duties assumed in connection with acting as an
independent trustee of any employee pension plan (as defined in Section 3(2) of
ERISA) which is intended to be qualified under Section 401(a) of the Code and
which is maintained by an employer unrelated in ownership to CitFed Bancorp or
any of the Subsidiaries, (b) have not authorized nor knowingly participated in a
material prohibited transaction under Section 406 of ERISA and not exempt under
Section 408 of ERISA and (c) have not received notice of any material actions,
suits or claims (other than routine claims for benefits) pending or threatened
against the unrelated employer or against them.
10. Retiree Benefits. Except as listed on Schedule 1 and identified as
"Retiree Liability", neither CitFed Bancorp nor any of the Subsidiaries have any
obligation to provide medical benefits, or life insurance benefits to or with
respect to retirees, former employees or any of their relatives.
11. Right to Amend and Terminate. Except as listed on Schedule 1, CitFed
Bancorp or one of the Subsidiaries has all power and authority necessary to
amend or terminate each Qualified Benefit Plan without incurring any penalty or
liability provided that, in the case of an employee pension benefit plan (as
defined in section 3(2) of ERISA), benefits accrued as of the date of amendment
or termination are not reduced.
R. The investment portfolios of CitFed Bancorp and each of the Subsidiaries
consist of securities in marketable form. Since March 31, 1997 to the date
hereof neither CitFed Bancorp nor any of the Subsidiaries has incurred any
unusual or extraordinary losses in its investment portfolio, and, except for
events relating to the business environment in general, including market
fluctuations, CitFed Bancorp is not aware of any events which are reasonably
certain to occur in the future and which reasonably can be expected to result in
any material adverse change in the quality or performance of CitFed Bancorp's
and the Subsidiaries' investment portfolio on a consolidated basis.
S. There are no actions, suits, claims, proceedings, investigations or
assessments of any kind pending, or to the best knowledge of CitFed Bancorp,
threatened against any of the directors or officers of CitFed Bancorp or any of
the Subsidiaries in their capacities as such, and no director or officer of
CitFed Bancorp or any of the Subsidiaries currently is being indemnified or
seeking to be indemnified by either CitFed Bancorp or any of the Subsidiaries
pursuant to applicable law or CitFed Bancorp's Certificate of Incorporation or
Bylaws or the Thrift Subsidiary's Charter or Bylaws, or the organization
documents of any of the other Subsidiaries.
T. There is no "business combination," "moratorium," "control share," or
other state antitakeover statute or regulation or any agreement to which CitFed
Bancorp is a party which (i) prohibits or restricts CitFed Bancorp's ability to
perform its obligations under this Agreement, or its ability to consummate the
transactions contemplated hereby, (ii) would have the effect of invalidating or
voiding this Agreement, or any provisions
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hereof, or (iii) would subject Fifth Third to any impediment or condition in
connection with the exercise of any of its rights under this Agreement.
U. CitFed Bancorp has taken all action required to be taken by it in order
to exempt this Agreement and the Stock Option Agreement (as hereinafter defined)
and the transactions contemplated hereby and thereby from, and this Agreement
and the Stock Option Agreement are exempt from the requirements of any such law
or regulation, including, without limitation, the laws of the State of Delaware,
including Section 203 of the General Corporation Law of the State of Delaware.
V. All interest rate swaps, caps, floors and option agreements and other
interest rate risk management arrangements, whether entered into for CitFed
Bancorp's own account or for the account of one or more of the Subsidiaries or
their customers, were entered into (i) in accordance with prudent banking
practices and all applicable laws, rules, regulations and regulatory policies
and (ii) with counterparties believed to be financially responsible at the time;
and each of them constitutes the valid and legally binding obligation of CitFed
Bancorp or one of the Subsidiaries, enforceable in accordance with its terms
(except as such enforceability may be limited by applicable bankruptcy,
insolvency, reorganization, moratorium, fraudulent transfer and similar laws of
general applicability relating to or affecting creditors' rights or by general
equity principles), and are in full force and effect. Neither CitFed Bancorp or
any of the Subsidiaries, nor to CitFed Bancorp's knowledge any other party
thereto, is in breach of any of its obligations under any such agreement or
arrangement.
III. REPRESENTATIONS AND WARRANTIES OF FIFTH THIRD
Fifth Third represents and warrants to CitFed Bancorp that as of the date
hereof or as of the indicated date, as appropriate:
A. Fifth Third is duly incorporated, validly existing and in good standing
as a corporation under the corporation laws of the State of Ohio, is a
registered bank holding company under the Bank Holding Company Act of 1956, as
amended, and is duly authorized to conduct the business in which it is engaged,
and The Fifth Third Bank is duly incorporated, validly existing and in good
standing as a corporation under the laws of the State of Ohio and is duly
authorized to conduct the business in which it is engaged.
B. Pursuant to Fifth Third's Second Amended Articles of Incorporation, as
amended, the total number of shares of capital stock it is authorized to have
outstanding is 300,500,000 of which 300,000,000 shares are classified as Fifth
Third Common Stock and 500,000 shares are classified as preferred stock without
par value ("Fifth Third Preferred Stock"). As of the close of business on
November 30, 1997, 155,163,554 shares of Fifth Third Common Stock were issued
and outstanding and 3,677,597 shares were held in its treasury. As of the date
of this Agreement, no shares of Fifth Third Preferred Stock have been issued.
Fifth Third does not have outstanding any stock options, subscription rights,
warrants or other securities entitling the holders to subscribe for or purchase
any shares of its capital stock other than options granted and to be granted to
employees and directors under its stock option plans. At November 30, 1997,
7,059,640 shares of Fifth Third Common Stock were reserved for issuance in
connection with outstanding options granted under its stock option plans and
2,116,683 shares were reserved for issuance under options to be granted in the
future.
C. All shares of Fifth Third Common Stock to be received by the
shareholders of CitFed Bancorp as a result of the Merger shall be, upon transfer
or issuance, validly issued, fully paid and nonassessable, and will not, upon
such transfer or issuance, be subject to the preemptive rights of any
shareholder of Fifth Third.
D. Fifth Third has furnished to CitFed Bancorp its audited consolidated
financial statements as at December 31, 1994, December 31, 1995 and December 31,
1996 and for the respective years then ended together with the opinions of its
independent public accountants associated therewith. Such consolidated financial
statements fairly present the consolidated financial condition of Fifth Third as
of their respective dates and for the respective periods covered thereby in
conformity with generally accepted accounting principles consistently followed
throughout the periods covered thereby. Neither Fifth Third nor any significant
subsidiaries of Fifth Third have any material liabilities, obligations or
indebtedness required to be disclosed in such financial statements other than
the liabilities, obligations and indebtedness disclosed in such financial
statements (including footnotes). Fifth Third will furnish to CitFed Bancorp its
audited consolidated financial statements as at
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December 31, 1997 and for the year then ended together with the opinions of its
independent public accountants associated therewith as soon as such statements
are publicly available. Fifth Third has also furnished to CitFed Bancorp its
unaudited consolidated financial statements as at September 30, 1997, and for
the nine (9) months then ended, and shall continue to furnish information for
subsequent calendar quarter periods to CitFed Bancorp as soon as such becomes
publicly available until the Closing Date.
E. Except for events relating to the business environment in general, the
effects of any acquisition transactions publicly announced by Fifth Third, and
the issuance by Fifth Third Capital Trust I of its 8.136% Capital Securities,
Series A and the related issuance by Fifth Third of its 8.136% Junior
Subordinated Deferrable Interest Debentures, Series A: (i) since December 31,
1996, to the date hereof there have been no material adverse changes in the
consolidated financial condition, operations or business of Fifth Third; (ii)
the chief executive officer and the chief financial officer of Fifth Third are
not aware of any events which have occurred since December 31, 1996, or which
are reasonably certain to occur in the future and which reasonably can be
expected to result in any material adverse change in the consolidated financial
condition, operations or business of Fifth Third; and (iii) since December 31,
1996, to the date hereof there have been no material changes in the methods of
business operations of Fifth Third and its subsidiaries.
F. 1. The Executive Committee of the Board of Directors of Fifth Third, by
resolution adopted by the members present at a meeting duly called and held, at
which meeting a quorum was at all times present and acting, has approved this
Agreement, including reserving for issuance to CitFed Bancorp shareholders in
accordance with this Agreement, a sufficient number of shares of Fifth Third
Common Stock. Approval and adoption of this Agreement by the shareholders of
Fifth Third is not required under Ohio law or under the Second Amended Articles
of Incorporation, as amended, or Code of Regulations of Fifth Third. No other
corporate action is necessary or required, including but not limited to approval
of this Agreement or the transaction contemplated herein by the Board of
Directors of Fifth Third.
2. Fifth Third has corporate power and authority to enter into this
Agreement and to carry out its obligations hereunder subject to certain required
regulatory approvals. This Agreement, when executed and delivered, will have
been duly authorized and will constitute the valid and binding obligation of
Fifth Third, enforceable in accordance with its terms, except to the extent that
(i) enforceability thereof may be limited by insolvency, reorganization,
liquidation, bankruptcy, readjustment of debt or other laws of general
application relating to or affecting the enforcement of creditors' rights
generally and (ii) the availability of certain remedies may be precluded by
general principles of equity; subject, however, to the receipt of requisite
regulatory approvals.
3. Neither the execution of this Agreement nor the consummation of the
transactions contemplated hereby, (i) conflicts with, results in a breach of,
violates or constitutes a default under, Fifth Third's Second Amended Articles
of Incorporation, as amended, or Code of Regulations or, to the best knowledge
of its chief executive officer and chief financial officer, any federal,
foreign, state or local law, statute, ordinance, rule, regulation or court or
administrative orders to which Fifth Third is subject or bound; (ii) to the best
knowledge of the chief executive officer and chief financial officer of Fifth
Third, result in the creation of or give any person the right to create any
material lien, charge, encumbrance, security agreement or any other material
rights of others or other material adverse interest upon any material right,
property or asset belonging to Fifth Third or any of its subsidiaries other than
such rights as may be given the shareholders of CitFed Bancorp pursuant to the
provisions of Sections 1701.84 and 1701.85 of the Ohio Revised Code; (iii)
conflicts with, results in a breach of, violates or constitutes a default under,
terminate or give any person the right to terminate, amend, abandon, or refuse
to perform, any material agreement, arrangement or commitment to which Fifth
Third is a party or by which Fifth Third's rights, properties or assets are
subject or bound; or (iv) accelerate or modify, or give any party thereto the
right to accelerate or modify, the time within which, or the terms according to
which, Fifth Third is to perform any duties or obligations or receive any rights
or benefits under any material agreement, arrangements or commitments.
G. Complete and accurate copies of (i) the Second Amended Articles of
Incorporation, as amended, and (ii) the Code of Regulations of Fifth Third in
force as of the date hereof have been delivered to CitFed Bancorp.
H. To the best knowledge of the chief executive officer and chief financial
officer of Fifth Third, neither Fifth Third nor any of its subsidiaries, nor any
employee, officer or director of any of them, has knowingly
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engaged in any activity or omitted to take any action which, in any material
way, has resulted or could result in the violation of (i) any local, state or
federal law or (ii) any regulation, order, injunction or decree of any court or
governmental body, the violation of either of which could reasonably be expected
to have a material adverse effect on the financial condition Fifth Third and its
subsidiaries taken as a whole. To the best knowledge of Fifth Third, Fifth Third
and its subsidiaries possess all licenses, franchises, permits and other
governmental authorizations necessary for the continued conduct of their
businesses without material interference or interruption.
I. 1. To the best knowledge of Fifth Third, neither this Agreement nor any
report, statement, list, certificate or other information furnished or to be
furnished by Fifth Third to CitFed Bancorp or its agents pursuant to this
Agreement (including, without limitation, any information which shall be
supplied with respect to its business operations and financial condition for
inclusion in the proxy statement/prospectus and registration statement relating
to the merger) contains or shall contain (in the case of information relating to
the proxy statement/prospectus, at the time it is mailed, and, in the case of
the registration statement, at the time it becomes effective and, in the case of
the proxy statement/prospectus and the registration statement, at the time the
annual or special meeting of shareholders of CitFed Bancorp is held to consider
the adoption of this Agreement) an untrue statement of a material fact or omits
or shall omit to state a material fact necessary to make the statements
contained herein or therein, in light of the circumstances in which they are
made, not misleading.
2. Fifth Third has furnished to CitFed Bancorp or its agents true and
complete copies (including all exhibits and all documents incorporated by
reference) of the following documents as filed by Fifth Third with the SEC:
a. Fifth Third's Annual Report on Form 10-K for the year ended
December 31, 1996;
b. Fifth Third's Quarterly Reports on From 10-Q for the quarters ended
March 31, 1997, June 30, 1997 and September 30, 1997;
c. any Current Report on Form 8-K with respect to any event occurring
after December 31, 1996, and prior to the date of this Agreement,
including, but not limited to, Fifth Third's Form 8-K dated March 20, 1997;
d. any report filed by Fifth Third to amend or modify any of the
reports described above; and
e. all proxy statements prepared in connection with meetings of Fifth
Third's shareholders held or to be held subsequent to December 31, 1996.
The information set forth in the documents described in this Section III.I.2.
(including all exhibits thereto and all documents incorporated therein by
reference) did not, as of the dates on which such reports were filed with the
SEC and/or mailed to shareholders, (a) contain any untrue statement of a
material fact, (b) omit any material fact required to be stated therein or
necessary to make the statements contained therein, in light of the
circumstances under which they were made, not misleading, or (c) omit any
material exhibit required to be filed therewith. Prior to the date hereof no
event has occurred subsequent to September 30, 1997 which Fifth Third is
required to describe in a Current Report on Form 8-K other than the Current
Reports heretofore furnished by Fifth Third to CitFed Bancorp. Fifth Third
timely shall furnish CitFed Bancorp with copies of all reports filed by Fifth
Third with the SEC subsequent to the date of this Agreement and until the
Closing Date.
J. There are no actions, suits, proceedings, investigations or assessments
of any kind pending or, to the best knowledge of Fifth Third, threatened against
Fifth Third or any Fifth Third subsidiary, which reasonably can be expected to
result in any material adverse change in the consolidated financial condition,
operations or business of Fifth Third.
K. Since December 31, 1996, to the date hereof, none of Fifth Third's
banking subsidiaries and thrift subsidiaries has incurred any unusual or
extraordinary loan losses which would be material to Fifth Third on a
consolidated basis; and to the best knowledge and belief of the chief executive
officer and chief financial officer of Fifth Third, and in the light of such
banking subsidiaries' and thrift subsidiary's historical loan loss experience
and their managements' analysis of the quality and performance of their
respective loan portfolios, as of September 30, 1997, their consolidated
reserves for loan losses are adequate to absorb all known and reasonably
anticipated losses as of such date.
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L. Fifth Third and its subsidiaries have filed all federal, state and local
tax returns required to be filed (after giving effect to all extensions) by
them, respectively, and have paid or provided for all tax liabilities shown to
be due thereon or which have been assessed against them, respectively. To the
best knowledge of Fifth Third, all tax returns filed by Fifth Third and its
subsidiaries through the date hereof constitute complete and accurate
representations of the tax liabilities of Fifth Third and each of such
subsidiaries for such years and accurately set forth all items (to the extent
required to be included or reflected in such returns) relevant to its future tax
liabilities, including the tax basis of its properties and assets in all
material respects. Neither Fifth Third nor any of its subsidiaries is currently
under audit nor has any of them been contacted for an audit and neither Fifth
Third nor any of its subsidiaries is engaged in any appeal proceeding in
connection with any state, Federal, or local tax filing, which audit or appeal,
if decided adversely to Fifth Third, would have a material adverse affect on
Fifth Third or any of its subsidiaries.
M. Except for dealings with Salomon Brothers Inc and Smith Barney Inc.
(collectively doing business as "Salomon Smith Barney"), Fifth Third has not,
directly or indirectly, dealt with any broker or finder in connection with this
transaction and has not incurred and will not incur any obligation for any
broker's or finder's fee or commission in connection with the transactions
provided for in this Agreement. Fifth Third shall be solely responsible for
payment to Salomon Smith Barney of any fees incurred in connection with the
transactions provided for in this Agreement.
N. Fifth Third has no unfunded liabilities with respect to any Benefit Plan
(as such term is defined in Section II.Q.1. hereof, but applied to Fifth Third,
its subsidiaries and affiliates) that are material, either individually or in
the aggregate, to Fifth Third on a consolidated basis and that have not been
recorded and disclosed as required by generally accepted accounting principles
(GAAP) in the most recent year-end, audited financial statements of Fifth Third
supplied to CitFed Bancorp pursuant to Section III.D. hereof.
O. The investment portfolios of Fifth Third and its subsidiaries and
affiliates consist of securities in marketable form. Since December 31, 1996, to
the date hereof Fifth Third and its affiliates, on a consolidated basis, have
not incurred any unusual or extraordinary losses in their respective investment
portfolios, and, except for events relating to the business environment in
general, including market fluctuations, the management of Fifth Third is not
aware of any events which are reasonably certain to occur in the future and
which reasonably can be expected to result in any material adverse change in the
quality or performance of the investment portfolios of Fifth Third and its
affiliates on a consolidated basis.
P. As of the date hereof, Fifth Third has no reason to believe that any
condition exists with respect to the business or operation of Fifth Third that
might prevent or impede the Merger from qualifying as a reorganization within
the meaning of Section 368(a) of the Code or (other than the reissuance of
shares of Fifth Third Common Stock held as treasury shares) for
pooling-of-interests accounting treatment.
Q. There is no "business combination," "moratorium," "control share," or
other state antitakeover statute or regulation or any agreement to which Fifth
Third is a party which (i) prohibits or restricts Fifth Third's ability to
perform its obligations under this Agreement, or its ability to consummate the
transactions contemplated hereby, (ii) would have the effect of invalidating or
voiding this Agreement, or any provisions hereof, or (iii) would subject CitFed
Bancorp to any impediment or condition in connection with the exercise of any of
its rights under this Agreement.
R. Fifth Third and its subsidiaries have good and marketable title to all
of the material properties and assets reflected in their separate statements of
financial condition as at December 31, 1996, and which are still owned by each
and each has good and marketable title to all material properties and assets
acquired by it after such date and still owned by it, subject to (i) any liens
and encumbrances that do not materially adversely impair the use of the
property, (ii) statutory liens for taxes not yet due and payable and (iii) minor
defects and irregularities in title that do not materially adversely impair the
use of the property.
S. There are no actions, proceedings or investigations pending before any
environmental regulatory body, with respect to or threatened against or
affecting Fifth Third or any of its subsidiaries in respect to any "facility"
owned, leased or operated by any of them (but excluding any "facility" as to
which sole interest of Fifth Third or any of its subsidiaries is that of a
lienholder or mortgagee, but including any "facility" to which title has been
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taken pursuant to mortgage foreclosure or similar proceedings and including any
"facility" in which Fifth Third or any of its subsidiaries ever participated in
the financial management of such facility to a degree sufficient to influence,
or have the ability to influence, the facility's treatment of hazardous waste)
under the Comprehensive Environmental Response, Compensation and Liability Act
of 1980, as amended ("CERCLA"), or under any Federal, state, local or municipal
statue, ordinance or regulation in respect thereof, in connection with any
release of any toxic or "hazardous substance", pollutant or contaminant into the
"environment" which, if adversely determined, (a) would require the payment by
Fifth Third or any of its Subsidiaries and/or require Fifth Third or any of its
subsidiaries to incur expenses of more than $2,000,000 (whether or not covered
by insurance) or (b) would otherwise have a material adverse effect on Fifth
Third or any of its Subsidiaries, nor, to the best knowledge of Fifth Third
after reasonable inquiry, is there any reasonable basis for the institution of
any such actions or proceedings or investigations which is probable of
assertion, nor are there any such actions or proceedings or investigations in
which Fifth Third or any of its subsidiaries is a plaintiff or complainant.
Neither Fifth Third nor any of its subsidiaries is liable in any material
respect under any applicable law for any release by any of them or for any
release by any other "person" of a hazardous substance caused by the spilling,
leaking, pumping, pouring, emitting, emptying, discharging, injecting, escaping,
leaching, dumping or disposing of hazardous wastes or other chemical substances,
pollutants or contaminants into the environment, nor is Fifth Third or any of
its subsidiaries liable for any material costs (as a result of the acts or
omissions of Fifth Third or any of its subsidiaries or, to the best knowledge of
Fifth Third, as a result of the acts or omissions of any other "person") of any
remedial action including, without limitation, costs arising out of security
fencing, alternative water supplies, temporary evacuation and housing and other
emergency assistance undertaken by any environmental regulatory body having
jurisdiction over Fifth Third or any of its subsidiaries to prevent or minimize
any actual or threatened release by Fifth Third or any of its subsidiaries of
any hazardous wastes or other chemical substances, pollutants and contaminants
into the environment which would endanger the public health or the environment.
To the best knowledge of Fifth Third, no underground storage tank presently is
located on, nor has any such tank ever been located on, any property owned by
Fifth Third or any of its subsidiaries or any "facility" where Fifth Third or
any of its subsidiaries has exercised any significant management role. All terms
contained in quotation marks in this paragraph and the paragraph immediately
following shall have the meaning ascribed to such terms, and defined in, CERCLA;
in addition, toxic or hazardous substances, as used in this paragraph and all
paragraphs of this Section II.P., shall mean any material or substance that is
defined or classified as a "hazardous substance" pursuant to section 101 of
CERCLA or Section 311 of the Federal Water Pollution Control Act (33 U.S.C.
Section 1321); a "hazardous waste" pursuant to Section 1004 or Section 3001 of
the Resource Conservation and Recovery Act (42 U.S.C. Sections 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); or a "hazardous material" under the Hazardous Materials Transportation
Uniform Safety Act of 1990 (49 U.S.C. App. Section 1802(4)).
To the best knowledge of Fifth Third each "facility" owned, leased or operated
by Fifth Third or any of its subsidiaries (but excluding any "facility" as to
which the sole interest of Fifth Third or any of its subsidiaries is that of a
lienholder or mortgagee, but including any "facility" to which title has been
taken pursuant to mortgage foreclosure or similar proceedings and including any
"facility" in which Fifth Third or any of its subsidiaries ever participated in
the financial management of such facility to a degree sufficient to influence,
or have the ability to influence, the facility's treatment of hazardous waste)
is, in all material respects, in compliance with all applicable Federal, state,
local or municipal statutes, ordinances, laws and regulations and all orders,
rulings or other decisions of any court, administrative agency or other
governmental authority relating to the protection of the environment, except to
the extent a failure to comply would not have a material adverse effect on the
business, operations and financial condition of Fifth Third and its subsidiaries
taken as a whole.
T. All representations and warranties contained in this Section III shall
expire at the Effective Time, and thereafter, neither Fifth Third nor any
officer or Director of Fifth Third shall have any further liability or
obligation with respect thereto, except for any misrepresentations, breaches of
warranties or violations of covenants that were made with intent to defraud.
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IV. OBLIGATIONS OF CITFED BANCORP BETWEEN THE DATE OF THIS AGREEMENT AND THE
EFFECTIVE TIME
A. CitFed Bancorp, in consultation with Fifth Third, will take all actions
necessary to call and hold its annual or a special meeting of its shareholders
as soon as practicable after the Fifth Third registration statement relating to
the shares of Fifth Third Common Stock to be issued in the Merger has been
declared effective by the SEC and under all applicable state securities laws for
the purpose of adopting this Agreement and any other documents or actions
necessary to the consummation of the Merger provided for herein pursuant to law.
The Board of Directors of CitFed Bancorp intends to inform the shareholders of
CitFed Bancorp in the proxy materials relating to the annual or special meeting
that all directors of CitFed Bancorp presently intend to vote all shares of
CitFed Bancorp Common Stock which they own of record in favor of approving this
Agreement and any such other necessary documents or actions, and all Directors
will recommend approval of this Agreement to the other shareholders of CitFed
Bancorp, subject only to such Directors' fiduciary obligations, receipt of an
updated fairness opinion from Keefe, Bruyette & Woods, Inc. dated as of the date
immediately prior to the date of the Proxy Statement, and their review of Fifth
Third's registration statement to be filed with the SEC as set forth in Section
V herein, and their reasonable satisfaction with the information set forth
therein.
B. (i) The Merger is intended to be structured to qualify for treatment
under present accounting rules as a pooling of interests and CitFed Bancorp
agrees to take no action which would disqualify the Merger for such treatment
under generally accepted accounting principles. Consistent with generally
accepted accounting principles, CitFed Bancorp agrees that on or before the
Effective Time based on a review of the Subsidiaries loan losses, current
classified assets and commercial, multi-family and residential mortgage loans
and investment portfolio, CitFed Bancorp will work with Fifth Third with the
goal of establishing collection procedures, internal valuation reviews, credit
policies and practices and general valuation allowances which are consistent
with the guidelines used within the Fifth Third holding company system
(collectively, "Fifth Third Procedures"), and CitFed Bancorp agrees to work with
Fifth Third after the execution of this Agreement and prior to the Effective
Time so that the Fifth Third Procedures can be implemented by CitFed Bancorp,
after all conditions to closing the Merger have been satisfied, so as to be in
place on the Effective Time. Fifth Third shall provide such assistance and
direction to CitFed Bancorp as is necessary in conforming to such polices,
practices, procedures and asset dispositions which are mutually agreeable
between the date of this Agreement until the Effective Time; and (ii) from the
date of this Agreement until the Effective Time, CitFed Bancorp and the
Subsidiaries each will be operated in the ordinary course of business, and none
of them will, without the prior written consent of Fifth Third, which consent
shall not be unreasonably withheld: make any changes in its Certificate of
Incorporation, Bylaws, capital or corporate structures (other than to redeem the
outstanding Rights); issue any additional shares of its Common Stock other than
pursuant to the exercise of options granted prior to the date hereof or pursuant
to the Stock Option Agreement; issue any other equity securities, other than
pursuant to the exercise of options granted prior to the date hereof; or, issue
as borrower any long term debt (other than Federal Home Loan Bank advances
having maturities not exceeding one year) or convertible or other securities of
any kind, or right to acquire any of its securities; make any material changes
in its method of business operations; make, enter into any agreement to make, or
become obligated to make, any capital expenditures in excess of the amounts set
forth in CitFed Bancorp's capital expenditures budget as delivered to Fifth
Third prior to the date hereof; make, enter into or renew any agreement for
services to be provided to CitFed Bancorp or the Subsidiaries or permit the
automatic renewal of any such agreement, except any agreement for services in
the ordinary course of business consistent with past practices, provided that
CitFed Bancorp will consult with Fifth Third prior to the renewal of any such
agreement requiring the annual expenditure of more than $150,000 (for this
purpose the phrase "permit the automatic renewal" includes the failure to send a
notice of termination of such contract if such failure would constitute a
renewal); open for business any branch office which has been approved by the
appropriate regulatory authorities but not yet opened or apply to the
appropriate regulatory authorities to establish a new branch office or expand
any existing branch office; acquire, become obligated to acquire, or enter into
any agreement to acquire, any banking or non-banking company or any branch
offices of any such companies; make, declare, pay or set aside for payment any
cash dividends on its own stock other than normal and customary cash dividends
not to exceed $0.09 per quarter through June 30, 1998, and $0.10 per quarter
thereafter, paid in such amounts and at such times as CitFed Bancorp
historically has done on its common stock, provided this covenant shall only
apply to CitFed Bancorp and provided further that notwithstanding anything to
the contrary herein, Fifth Third and CitFed Bancorp shall cooperate in selecting
the Effective Time to ensure that the holders of CitFed Bancorp
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Common Stock do not become entitled to receive both a dividend in respect of
their CitFed Bancorp Common Stock and a dividend in respect of the Fifth Third
Common Stock or fail to be entitled to receive any dividend with respect to any
quarterly period or portion thereof in which the Effective Time occurs; make,
declare, pay or set aside for payment any stock dividends or make any other
distributions on its stock other than cash dividends as described in the
immediately preceding clause; change or otherwise amend any Benefit Plans other
than as required by law or as contemplated herein; and provide any increases in
employee salaries or benefits other than in the ordinary course of business.
CitFed Bancorp agrees that it will not sell or otherwise dispose of or encumber
any of the shares of the capital stock of any of the Subsidiaries which are now
owned by it.
C. Except as required by applicable law or regulation, CitFed Bancorp and
the Subsidiaries shall not (a) implement or adopt any material change in their
interest rate risk management policies, procedures or practices; (b) fail to
follow its existing policies or practices with respect to managing their
exposure to interest rate risk; or (c) fail to use commercially reasonable means
to avoid any material increase in their aggregate exposure to interest rate
risk.
D. Not later than the 15th day prior to the mailing of CitFed Bancorp's
proxy statement with respect to the Merger, CitFed Bancorp shall deliver to
Fifth Third a list of each person that, to the best of its knowledge, is or is
reasonably likely to be, as of the date of the annual or special meeting called
to approve the Merger, deemed an "affiliate" of it as that term is used in Rule
145 under the Securities Act of 1933, as amended, or SEC Accounting Series
Releases 130 and 135 (the "CitFed Affiliates"). CitFed Bancorp shall use its
best efforts to cause each CitFed Affiliate to execute and deliver to Fifth
Third on or before the mailing of such proxy statement an agreement in the form
of Appendix IV.D hereto.
V. COOPERATION AND OTHER OBLIGATIONS AND OTHER COVENANTS
A. Fifth Third will prepare and cause to be filed at its expense such
applications and other documents with the Board of Governors of the Federal
Reserve System, the Federal Deposit Insurance Corporation, the Ohio Division of
Banks, the OTS, and any other governmental agencies as are required to secure
the requisite approval of such agencies to the consummation of the transactions
provided for in this Agreement, and the parties shall cooperate in the
preparation of an appropriate registration statement, including the prospectus,
proxy statement, and such other documents necessary to comply with all federal
and state securities laws relating to the registration and issuance of the
shares of Fifth Third Common Stock to be issued to the shareholders of CitFed
Bancorp in this transaction (the expenses thereof, other than accounting, legal,
investment banking, financial consulting and associated expenses of CitFed
Bancorp and its affiliates, to be paid by Fifth Third), and any other laws
applicable to the transactions provided for in this Agreement. Fifth Third shall
use all reasonable efforts to file all regulatory applications within forty-five
(45) days of the date of this Agreement and the Registration/Proxy Statement
within sixty(60) days of the date of this Agreement, and to secure all such
approvals as promptly as practicable. CitFed Bancorp agrees that it will, as
promptly as practicable after request and at its own expense, provide Fifth
Third with all information and documents concerning CitFed Bancorp and the
Subsidiaries, as shall be required in connection with preparing such
applications, registration statements and other documents and in connection with
securing such approvals. Prior to filing any such applications or other
documents with the applicable governmental agencies, Fifth Third shall provide
copies thereof to CitFed Bancorp. CitFed Bancorp shall have the right to review,
comment on and approve the proxy statement and any amendments thereto included
in the registration statement in an appropriate manner prior to being filed.
CitFed Bancorp also shall have the right to review and comment on all regulatory
applications and responses in an appropriate manner prior to being filed. Fifth
Third agrees that it will, as promptly as practicable after request and at its
own expense, provide CitFed Bancorp with all information and documents
concerning Fifth Third and its subsidiaries as shall be required in connection
with preparing such applications, registration statements and other documents
which are to be prepared and filed by CitFed Bancorp and in connection with
approvals required to be obtained by CitFed Bancorp hereunder. Prior to filing
any such applications, statements or other documents with the applicable
governmental agency, CitFed Bancorp shall provide copies thereof to Fifth Third.
B. Fifth Third will take no action or omit to take any action that could
(i) delay consummation of the Merger, (ii) diminish the likelihood of the Merger
receiving all regulatory approvals or otherwise being
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consummated; or (iii) prevent the Merger from qualifying as a reorganization
under Section 368(a) of the Code or for treatment under present accounting rules
as a pooling-of-interests.
C. Each of the parties hereto agrees to use its best efforts and to
cooperate with the other party in all reasonable respects in order to carry out
and consummate the transactions contemplated by this Agreement at the earliest
practicable time including, without limitation, the filing of applications,
notices and other documents with, and obtaining approval from, appropriate
governmental regulatory agencies.
D. CitFed Bancorp agrees to permit Fifth Third, its officers, employees,
accountants, agents and attorneys, and Fifth Third agrees to permit CitFed
Bancorp, its officers, employees, accountants, agents and attorneys, to have
reasonable access during business hours to their respective books, records and
properties, and those of their respective subsidiaries, for the purpose of
making a detailed examination, or updating and amplifying prior examinations, of
the financial condition, assets, liabilities, legal compliance, affairs and the
conduct of the business of CitFed Bancorp and the Subsidiaries or Fifth Third
and its subsidiaries, as the case may be, prior to the Effective Time, and also
to permit the monitoring of the foregoing on an ongoing basis (such rights of
examination and monitoring to be subject to the confidentiality obligations set
forth in Section VII.D. hereof); provided, however, that any such examination by
Fifth Third or CitFed Bancorp shall not relieve Fifth Third or CitFed Bancorp
from any responsibility or liability for any material misrepresentation or
material breach of warranty hereunder discovered in the course of or
subsequently to such examination and prior to the Effective Time.
E. All outstanding stock options under the CitFed Bancorp stock option plan
as of the Effective Time (the "Existing Stock Options") shall be amended to
provide that (i) upon exercise such holder shall receive that number of shares
of Fifth Third Common Stock determined by multiplying the Exchange Ratio by the
number of shares of CitFed Bancorp Common Stock subject to the Existing Stock
Option, and (ii) the exercise price under such Existing Stock Option will be
determined by dividing the exercise price per share under the Existing Stock
Option in effect immediately prior to the Effective Time by the Exchange Ratio,
and rounding the exercise price thus determined to the nearest whole cent (a
half-cent shall be rounded to the next higher whole cent). All other terms and
conditions of the Existing Stock Options shall remain in full force and effect,
except as the context may require the substitution of Fifth Third for CitFed
Bancorp. Fifth Third shall continue the separate existence of the CitFed Stock
Option Plan, provided, however, that Fifth Third may, in its sole discretion,
combine the CitFed Bancorp Stock Option Plan as a separate and distinct part of
any other stock based employee incentive plan that Fifth Third may utilize from
time to time. All such actions shall be taken consistent with Section 424(a) of
the Code and the applicable regulations thereunder.
F. (1) CitFed Bancorp and its Subsidiaries, if applicable, shall take all
actions necessary to freeze the CitFed defined benefit pension plan as of the
Effective Time. In conjunction therewith, CitFed Bancorp and its Subsidiaries,
if applicable, may at any time make amendments to the CitFed defined benefit
pension plan to adjust the formula and qualifications for determining benefits
thereunder in a manner selected by it to assure that any excess funding in such
plan as of the Effective Time (calculated on a plan termination basis and as
agreed to by Fifth Third's actuaries) inures solely to the benefit of
participants in such plan or their beneficiaries and to fully vest all benefits
of participants as of the Effective Time, provided that such changes are
undertaken in a manner that does not adversely affect the qualified status of
such plan. Excess funding shall be determined as of the Effective Time
disregarding and without reduction for cash balance credits implemented at the
request of Fifth Third pursuant to Section V.F.5 below.
(2) Neither CitFed Bancorp nor any of its Subsidiaries, without the advance
written consent of Fifth Third shall (1) except to the extent necessary to carry
out the terms of this Agreement, or as required by applicable law, adopt any
amendments to the Qualified Benefit Plans after the date of this Agreement; or
(2) make any contributions to any Qualified Benefit Plan after the date of this
Agreement, except in the ordinary course of business consistent with past
practices.
(3) CitFed Bancorp or one or more of the Subsidiaries shall provide to
Fifth Third at least sixty (60) days prior to the Effective Time, documentation
reasonably satisfactory to Fifth Third demonstrating that the requirements of
Sections 404, 412, 415, 401(k) and (m) of the Code have been satisfied by all of
its Qualified Benefit Plans.
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(4) With respect to any Benefit Plan that provides for vesting of benefits,
there shall be no discretionary acceleration of vesting without Fifth Third's
consent whether or not such discretionary acceleration of vesting is provided
under the terms of the Benefit Plan; provided that a Benefit Plan which pursuant
to its terms provides for an acceleration of vesting upon a change of control of
CitFed Bancorp shall not be deemed to involve a discretionary acceleration of
vesting and vesting thereunder shall accelerate as of the Effective Time.
(5) If Fifth Third so requests, CitFed Bancorp or one or more of the
Subsidiaries shall have amended CitFed Bancorp's defined benefit plan in the
manner directed by Fifth Third in order to provide for employees of CitFed
Bancorp and the Subsidiaries such cash balance credits as Fifth Third determines
would approximate the projected profit sharing plan contributions such employees
would receive after closing under the Fifth Third Bancorp Master Profit Sharing
Plan for a number of years determined by Fifth Third.
VI. CONDITIONS PRECEDENT TO CLOSING
A. Conditions to the Obligations of Each of the Parties:
The obligation of each of the parties hereto to consummate the transactions
provided for herein is subject to the fulfillment on or prior to the Effective
Time of each of the following conditions:
1. The shareholders of CitFed Bancorp shall have duly adopted this
Agreement in accordance with and as required by law and in accordance with
its Certificate of Incorporation and Bylaws.
2. All necessary governmental and regulatory orders, consents,
clearances and approvals and requirements shall have been secured and
satisfied for the consummation of such transactions, including without
limitation, those of the Federal Reserve System, the Ohio Division of
Banks, the OTS and the Federal Deposit Insurance Corporation to the extent
required.
3. Prior to or at the Effective Time, no material investigation by any
state or federal agency shall have been threatened or instituted seeking to
enjoin or prohibit, or enjoining or prohibiting, the transactions
contemplated hereby and no material governmental action or proceeding shall
have been threatened or instituted before any court or government body or
authority, seeking to enjoin or prohibit, or enjoining or prohibiting, the
transactions contemplated hereby other than investigations, actions and
proceedings which have been withdrawn prior to or at the Effective Time
without material adverse effect to Fifth Third or CitFed Bancorp and other
than regularly-scheduled regulatory examinations.
4. Any waiting period mandated by law in respect of the final approval
by any applicable Federal regulator(s) of the transaction contemplated
herein shall have expired.
B. Conditions to the Obligations of Fifth Third:
The obligation of Fifth Third to consummate the transactions provided for
herein is subject to the fulfillment at or prior to the Effective Time of each
of the following conditions unless waived by Fifth Third in a writing delivered
to CitFed Bancorp which specifically refers to the condition or conditions being
waived:
1. All of the representations and warranties of CitFed Bancorp set
forth in Section II of this Agreement shall be true and correct in all
material respects as of the date of this Agreement and at and as of the
Closing Date (as hereinafter defined) as if each such representation and
warranty was given on and as of the Closing Date, except (i) for any such
representations and warranties made as of a specified date, which shall be
true and correct in all material respects as of such date and (ii) for
inaccuracies of representations and warranties which would not have, or
would not reasonably be expected to have, a material adverse effect on the
business or operations of CitFed Bancorp or the Subsidiaries taken as a
whole.
2. CitFed Bancorp shall have performed all of the obligations required
of it under the terms of this Agreement in all material respects, except
for breaches of obligations which would not have, or would not reasonably
be expected to have, any material adverse effect on the business or
operations of CitFed Bancorp and the Subsidiaries taken as a whole.
3. Silver, Freedman & Taff, L.L.P., counsel for CitFed Bancorp and the
Subsidiaries, shall have delivered an opinion addressed to Fifth Third in
substantially the form appended hereto as Appendix A.
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4. The aggregate amount of consolidated shareholders' equity
(including Common Stock, Additional Paid-In Capital and Retained Earnings
and excluding Treasury Stock) of CitFed Bancorp immediately prior to the
Effective Time, as shown by and reflected in its books and records of
accounts on a consolidated basis in accordance with generally accepted
accounting principles, consistently applied, shall not be less than
$212,000,000. For purposes of this paragraph VI.B.4., any expenses or
accruals after the date hereof relating to (i) the adjustments contemplated
by paragraph IV.B. of this Agreement, (ii) expenses associated with this
Agreement or the Merger; or (iii) expenses or losses associated with the
valuing of CitFed Bancorp or the Subsidiaries' investments at current
market value as required by generally accepted accounting principles
(including without limitation the requirement of accounting rule SFAS 115)
shall be excluded for purposes of calculation of CitFed Bancorp's
shareholders' equity as contemplated herein.
5. Fifth Third's independent certified public accountants shall have
reviewed the unaudited consolidated financial statements of CitFed Bancorp
as at the end of the month immediately preceding the Effective Time, as
well as the unaudited separate financial statements of the Subsidiaries as
of the same date, performed such other auditing procedures as may be
requested by Fifth Third and reported in good faith that they are not aware
of any material modifications which would have a material adverse effect on
the financial condition of CitFed Bancorp or any of the Subsidiaries that
should be made in order for such financial statements to (i) be in
conformity with generally accepted accounting principles, consistently
applied, excluding the presentation of footnotes, and (ii) accurately state
the financial condition and results of operations of CitFed Bancorp and
each of the Subsidiaries, and such modifications, in either case, would
have a material adverse effect on the financial condition of CitFed Bancorp
or any of the Subsidiaries.
6. The receipt of a certificate from CitFed Bancorp and each of the
Subsidiaries, executed by the chief executive officer and chief financial
officer of each, dated the Closing Date, certifying to their best knowledge
and belief that: (i) all of the representations and warranties set forth in
Section II hereof were true and correct as of the date of this Agreement
and as of the Closing Date in all material respects, except (y) for any
such representations and warranties made as of a specified date, which
shall be true and correct in all material respects as of such date and (z)
for inaccuracies of representations and warranties which would not have, or
would not reasonably be expected to have, a material adverse effect on the
business or operations of CitFed Bancorp and the Subsidiaries taken as a
whole; and (ii) it has met and fully complied in all material respects with
all of the obligations required of it under the terms of this Agreement,
except for breaches of obligations which would not have, or would not
reasonably be expected to have, any material adverse effect on the business
or operations of CitFed Bancorp and the Subsidiaries taken as a whole.
7. The total issued and outstanding shares of CitFed Bancorp Common
Stock shall not exceed 13,522,966 shares on a fully diluted basis ,
including shares that may be issued upon the exercise of the Existing Stock
Options.
8. Fifth Third shall have received a letter from Deloitte & Touche,
LLP, as Fifth Third's independent public accountant, and CitFed shall have
received a letter from Deloitte & Touche, LLP, as CitFed's independent
public accountant, to the effect that the Merger will qualify for "pooling
of interest" accounting treatment.
9. Simultaneously with the execution of this Agreement, CitFed Bancorp
shall have executed and delivered to Fifth Third the Stock Option Agreement
granting Fifth Third a stock option to acquire 19.9% of shares of CitFed
Bancorp Common Stock in accordance with the terms thereof.
10. CitFed Bancorp shall have redeemed the Rights at a price of $.01
per Right, in the manner required by the Rights Plan.
C. Conditions to the Obligations of CitFed Bancorp:
The obligation of CitFed Bancorp to consummate the transactions provided
for herein is subject to the fulfillment at or prior to the Effective Time of
each of the following conditions unless waived by CitFed Bancorp in a writing
delivered to Fifth Third which specifically refers to the condition or
conditions being waived:
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1. All of the representations and warranties of Fifth Third set forth
in Section III of this Agreement shall be true and correct in all material
respects as of the date of this Agreement and at and as of the Closing Date
as if each such representation and warranty was given on and as of the
Closing Date, except (i) for any such representations and warranties made
as of a specified date, which shall be true and correct in all material
respects as of such date and (ii) for inaccuracies of representations and
warranties which would not have, or would not reasonably be expected to
have, a material adverse effect on the consolidated business or operations
of Fifth Third.
2. Fifth Third shall have performed all of the obligations required of
it under the terms of this Agreement in all material respects, except for
breaches of obligations which would not have, or would not reasonably be
expected to have, any material adverse effect on the consolidated business
or operations of Fifth Third.
3. Paul L. Reynolds, counsel for Fifth Third, shall have delivered an
opinion addressed to CitFed Bancorp in substantially the form appended
hereto as Appendix C.
4. The receipt of a certificate from Fifth Third, executed by its
chief executive officer and chief financial officer, dated the Closing
Date, certifying to their best knowledge and belief that: (i) all of the
representations and warranties set forth in Section III were true and
correct as of the date of this Agreement and as of the Closing Date, except
(y) for any such representations and warranties made as of a specified
date, which shall be true and correct in all material respects as of such
date and (z) for inaccuracies of representations and warranties which would
not have, or would not reasonably be expected to have, a material adverse
effect on the consolidated business or operations of Fifth Third; and, (ii)
Fifth Third has met and fully complied in all material respects with all of
the obligations required of it under the terms of this Agreement, except
for breaches of obligations which would not have, or would not reasonably
be expected to have, any material adverse effect on the business or
operations of Fifth Third.
5. Fifth Third shall have registered its shares of Common Stock to be
issued to the CitFed Bancorp shareholders hereunder with the SEC pursuant
to the Securities Act of 1933, as amended, and with all applicable state
securities authorities. The registration statement with respect thereto
shall have been declared effective by the SEC and all applicable state
securities authorities and no stop order shall have been issued. The shares
of Fifth Third Common Stock to be issued to the CitFed Bancorp shareholders
hereunder shall have been authorized for trading on the Nasdaq National
Market upon official notice of issuance.
6. Fifth Third shall have executed and delivered the Fifth Third
Employment Contracts (as defined in Section VII.B.4 below) and provide, or
make provision for payment of any and all severance payments described in
Section VII below.
VII. ADDITIONAL COVENANTS
A. The Thrift Subsidiary shall be merged with and into Fifth Third Bank, to
be effective the Effective Time. The parties hereto agree to cooperate with one
another to effect the Subsidiary Merger. Upon consummation of the Subsidiary
Merger, the separate corporate existence of the Thrift Subsidiary shall cease by
operation of law.
B. 1. (a) Fifth Third intends (but is not obligated) to employ at Fifth
Third or other Fifth Third subsidiaries or affiliates as many of the CitFed
Bancorp and the Subsidiaries employees who desire employment within the Fifth
Third holding company system as possible, to the extent of available positions
and consistent with Fifth Third's standard staffing levels and personnel
policies; provided that such continuing employees will not be subject to any
exclusion or penalty for preexisting conditions that were covered under the
Subsidiaries' health and welfare plan immediately prior to the Effective Time or
any waiting period relating to coverage under Fifth Third's health and welfare
plan. Except as provided in (b) below, each employee of CitFed Bancorp and the
Subsidiaries who becomes an employee of Fifth Third or any of its subsidiaries
or affiliates at or immediately subsequent to the Merger shall be entitled to
participate in all employee benefit plans sponsored by Fifth Third or its
subsidiaries or affiliates on the same terms and to the same extent as similarly
situated employees. Fifth Third shall merge the CitFed Federal Savings Bank
401(k) Profit Sharing Plan into the Fifth Third Bancorp Master Profit Sharing
Plan on or as soon as reasonably practicable after the Effective Time if Fifth
Third determines in
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good faith that such merger will not jeopardize the tax exempt status of the
Fifth Third Bancorp Master Profit Sharing Plan. Except as provided in (b) below,
if the CitFed Federal Savings Bank 401(k) Profit Sharing Plan is merged into the
Fifth Third Bancorp Master Profit Sharing Plan, then upon said merger, service
taken into account under the CitFed Federal Savings Bank 401(k) Profit Sharing
Plan shall count as service taken into account for all purposes under the Fifth
Third Bancorp Master Profit Sharing Plan. If the CitFed Federal Savings Bank
401(k) Profit Sharing Plan is not merged into the Fifth Third Bancorp Master
Profit Sharing Plan as of the Effective Time, it shall either (i) be continued
on a separate plan basis to the extent permissible under the Code and ERISA
until a subsequent merger of such plans takes place and the CitFed Federal
Savings Bank 401(k) Profit Sharing Plan shall in such case be amended as of the
Effective Time so as to provide employer contribution levels on a comparable and
equivalent basis to the benefits being provided under the Fifth Third Bancorp
Master Profit Sharing Plan but subject to the provisions of Section V.F.5
hereof, or (ii) be terminated retroactive to the Effective Time and all
continuing employees of CitFed Bancorp and its Subsidiaries shall become
participants in the Fifth Third Bancorp Master Profit Sharing Plan at or as soon
as practicable after the Effective Time and shall be given credit for past
service for eligibility and vesting but not for benefit accrual purposes but
subject to the provisions of Section V.F.5 hereof. Employees shall receive past
service credit under the Fifth Third Bancorp Master Retirement Plan for
eligibility and vesting but not for benefit accrual purposes. For all other
purposes other than the qualified benefit plans discussed above, prior service
with CitFed Bancorp or any of the Subsidiaries shall be taken into account for
purposes of determining eligibility and vesting, if applicable, of benefits and
the level or amount of benefits in the case of vacation, sick pay and other
benefits generally available to employees within the Fifth Third holding company
system on a uniform or classification basis.
(b) If, in accordance with Section V.F.5, Fifth Third requests CitFed
Bancorp or one or more of the Subsidiaries to amend the CitFed Bancorp defined
benefit plan, employees of CitFed Bancorp and the Subsidiaries who become
employees of Fifth Third or any of its subsidiaries or affiliates at or
immediately subsequent to the Merger shall be subject to reduced employer
contribution levels under the Fifth Third Bancorp Master Profit Sharing Plan or
the continuing CitFed Federal Savings Bank 401(k) Profit Sharing Plan for such
period of time as Fifth Third determines such employees have received cash
balance credits under the CitFed Bancorp defined benefit plan to equitably
adjust for the value of such cash balance credits.
2. Any officer of CitFed Bancorp or any of the Subsidiaries who has an
employment or severance agreement with CitFed Bancorp or any of the Subsidiaries
(each a "Contract Officer") shall receive as of the Effective Time, the
severance or termination payments provided for in their respective employment
agreements as of December 18, 1997 ("Contract Payments") as their sole severance
payments from CitFed Bancorp and Fifth Third in connection with the Merger and
in the case of officers with employment agreements, in the amounts set forth in
Appendix VII.B.2(b). As a condition to receiving their Contract Payments each
Contract Officer shall sign and deliver to Fifth Third a termination and release
agreement, except as to any obligation of Fifth Third to make future payments
under such agreements. All such agreements shall be in the form attached hereto
as Appendix VII.B.2(a).
3. Subject to normal credit evaluation and standard loan guidelines, a
Fifth Third subsidiary bank will provide financing to qualified option holders
to allow them to fully exercise all outstanding options as set forth herein.
4. Fifth Third agrees to enter into an employment contract effective as of
the Effective Time with each of Jerry L. Kirby, William M. Vichich, Mary L.
Larkins, John H. Curp, Gerald E. Miller, Sebastion J. Melluzzo, Nancy A. Hussong
and Richard E. Berg in the form of Appendices VII.B.4(a), (b), (c), (d), (e),
(f), (g) and (h), respectively, providing for the payments described therein
(each a "Fifth Third Employment Contract" and collectively, the "Fifth Third
Employment Contracts").
5. Fifth Third agrees (a) to offer to appoint each of Jerry L. Kirby and
Allen M. Hill to the Fifth Third Board of Directors and, if such person's
initial term on the Fifth Third Board of Directors expires prior to the Fifth
Third annual meeting of stockholders in the year 2001, to nominate such person
for a second term on the Board of Directors, and (b) to offer to appoint Jerry
L. Kirby as the Chairman of the Board of Fifth Third Bank of Western Ohio.
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6. Those employees of CitFed Bancorp and the Subsidiaries who do not have
an employment or severance agreement and who are not to be employed by Fifth
Third or its subsidiaries, or who are terminated or voluntarily resign after
being notified that as a condition of employment such employee must work at a
location more than thirty (30) miles from such employee's former location of
employment or that such employee's salary will be decreased, in any case and in
both cases, within six months after the Effective Time, and who sign and deliver
a termination and release agreement in the form attached as Appendix VII.B.6
hereto, shall be entitled to severance pay in accordance with the applicable
written policy of CitFed Bancorp or the applicable Subsidiary as in effect on
the date hereof.
7. Fifth Third agrees to allow CitFed Bancorp to renew the severance
agreements with Messrs. Collier, Weeks and Hilt on April 1, 1998 for a period of
one year, such renewed agreements to be on the same terms and conditions as are
currently in place other than for the expiration date.
8. Fifth Third agrees that it will honor, assume and perform the
obligations of CitFed Bancorp and/or its Subsidiaries under supplemental
retirement agreements or plans dated December 28, 1993 including Amendments No.
1 thereto between CitFed Bancorp and the Thrift Subsidiary or another Subsidiary
with each of Jerry L. Kirby, William M. Vichich, Mary L. Morris-Larkins, John H.
Curp, Richard Berg and Gerald E. Miller (the "SERPs") and the associated
Executive Insurance Agreements dated December 28, 1993 and the First Amendments
thereto, and in the case of retirees Hazel L. Eichelberger and Donald D. Brown
their respective Amended and Restated Supplemental Benefits Agreement and
Amended and Restated Insurance Agreement, each dated December 19,1997. Final
Average Compensation under the SERPs shall be calculated as of March 31, 1998,
and Compensation applicable to the period after March 31, 1998 shall not be
taken into account for purposes of calculating Final Average Compensation. Years
of Service for purposes of increasing benefit percentage accruals under the
SERPs shall not be taken into account after March 31, 1998. The parties will
cooperate with each other to assure that payments under the SERPs do not result
in an "excess parachute payment" (as defined in Section 280G of the Code) and to
diminish the likelihood of any payments under the SERPs result in a "parachute
payment" (as defined in Section 280G of the Code) in connection with or arising
from the Merger. CitFed Bancorp and/or its Subsidiaries may amend the Executive
Life Insurance Agreements to provide for post employment termination death
benefits provided any such amendment does not result in an additional financial
expense and does not violate the covenants of CitFed Bancorp contained in the
first sentence of Section IV.B.(i). Capitalized terms used in this paragraph
that are not otherwise defined in this Agreement shall have the meaning ascribed
to them under the SERPs.
C. (i) From and after the Effective Time, Fifth Third shall assume the
obligations of CitFed Bancorp and the Subsidiaries arising under applicable
Delaware and Federal law in existence as of the date hereof or as amended prior
to the Effective Time and under the CitFed Bancorp Certificate of Incorporation
and Bylaws; the Thrift Subsidiary Charter or Bylaws; and the organizational
documents of any of the other Subsidiaries, as in effect on the date hereof to
indemnify, defend and hold harmless each person who is now, or has been at any
time prior to the date hereof or who become, prior to the Effective Time, an
officer, director or employee of CitFed Bancorp, or any of the Subsidiaries (the
"Indemnified Parties") against losses, claims, damages, costs, expenses
(including reasonable attorneys' fees), liabilities or judgements or amounts
that are paid in settlement (which settlement shall require the prior written
consent of Fifth Third) of or in connection with any claim, action, suit,
proceeding or investigation (a "Claim") in which an Indemnified Party is, or is
threatened to be made, a party or a witness based in whole or in part on or
arising in whole or in part out of the fact that such person is or was a
director or officer of CitFed Bancorp, of any of the Subsidiaries if such Claim
pertains to any matter or fact arising, existing or occurring prior to the
Effective Time (including, without limitation, the Merger and the transactions
contemplated by this Agreement), regardless of whether such Claim is asserted or
claimed prior to, at or after the Effective Time. Fifth Third's assumption of
the indemnification obligations of CitFed Bancorp, or any of the Subsidiaries as
provided herein shall continue for a period of five years after the Effective
Time or, in the case of claims asserted prior to the fifth anniversary of the
Effective Time until such matters are finally resolved. Any Indemnified Party
wishing to claim indemnification under this provision, upon learning of any
Claim shall notify Fifth Third (but the failure to so notify Fifth Third shall
not relieve Fifth Third from any liability which Fifth Third may have under this
section except to the extent Fifth Third is materially prejudiced thereby).
Notwithstanding the foregoing, the Indemnified Parties as a group may retain
only one law firm to represent them
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with resect to each matter under this section unless there is, under applicable
standards of professional conduct, a conflict on any one significant issue
between the positions of any two or more Indemnified parties.
(ii) From and after the Effective Time, the directors, officers and
employees of CitFed Bancorp and its Subsidiaries who become directors, officers
or employees of Fifth Third or any of its subsidiaries, except for the
indemnification rights set forth in subparagraph (i) above, shall have
indemnification rights with prospective application only. The prospective
indemnification rights shall consist of such rights to which directors, officers
or employees of Fifth Third or the subsidiary by which such person is employed
are entitled under the provisions of the Articles of Incorporation of Fifth
Third or similar governing documents of Fifth Third or its applicable
subsidiaries, as in effect from time to time after the Effective Time, as
applicable, and provisions of applicable law as in effect form time to time
after the Effective Time.
(iii) The obligations of Fifth Third provided under this Section VII.C. are
intended to benefit, and be enforceable against Fifth Third directly by, the
Indemnified parties, and shall be binding on all respective successors of Fifth
Third.
(iv) Fifth Third shall also purchase and keep in force for a three year
period, a policy of directors' and officers' liability insurance to provide
coverage for acts or omissions of the type currently covered by CitFed Bancorp's
existing directors' and officers' liability insurance for acts or omission
occurring on or prior to the Effective Time, but only to the extent such
insurance may be purchased or kept in full force on commercially reasonable
terms taking into account the cost thereof and the benefits provided thereby. It
is agreed that such costs shall be commercially reasonable so long as the annual
cost does not exceed 150% of the annual cost currently paid for such coverage by
CitFed Bancorp and its Subsidiaries.
D. Fifth Third will not disclose to others, shall not use in respect of its
(or any of its subsidiaries) business operations, and will hold in confidence,
to the extent legally permissible, any non-public, confidential information
disclosed to it by CitFed Bancorp concerning CitFed Bancorp or the Subsidiaries.
CitFed Bancorp will not disclose to others, shall not use in respect of its (or
any of its subsidiaries) business operations, and will hold in confidence, to
the extent legally permissible, any non-public, confidential information
disclosed to it concerning Fifth Third or any of its affiliates. In the event
the Merger is not completed, all non-public financial statements, documents and
materials, and all copies thereof, shall be returned to CitFed Bancorp or Fifth
Third, as the case may be, and shall not be used by Fifth Third or CitFed
Bancorp, as the case may be, in any way detrimental to CitFed Bancorp or Fifth
Third.
E. All notices under this Agreement shall be in writing and shall be
sufficient in all respects if delivered in person or mailed by certified mail,
return receipt requested, with postage prepaid and addressed, if to CitFed
Bancorp to Jerry L. Kirby, Chairman, President and Chief Executive Officer,
CitFed Bancorp, Inc., One Citizens Federal Centre, Dayton, Ohio 45402, with a
copy to Silver, Freedman & Taff, L.L.P., Attention: James S. Fleischer, Esq. and
Barry P. Taff, Esq.; 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 General Counsel, Fifth Third Bank, 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, together with the written instruments specifically
referred to herein and such other written agreements delivered by Fifth Third or
CitFed Bancorp to each other pursuant hereto constitute the entire agreement
between the parties with regard to the transactions contemplated herein and
supersede any prior agreements, whether oral or in writing, including all prior
letters and summary term sheets. This Agreement may be hereafter amended only by
a written instrument executed by each of the parties pursuant to Section X
hereof.
G. During the period from the date of this Agreement to the Effective Time,
except with the prior approval of Fifth Third, CitFed Bancorp shall not, and
shall not permit its representatives to, directly or indirectly, subject to the
exercise by the directors of CitFed Bancorp of their fiduciary duties, initiate,
solicit, negotiate with, encourage discussions with, provide information to, or
agree to a transaction with, any corporation, partnership, person or other
entity or group concerning any merger of either CitFed Bancorp or any of the
Subsidiaries or any sale of substantial assets, sale of shares of capital stock
(or securities convertible or exchangeable into or
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otherwise evidencing, or any agreement or instrument evidencing, the right to
acquire capital stock) or similar transaction involving CitFed Bancorp or any of
the Subsidiaries (any such transaction being referred to herein as an
"Acquisition Transaction"). CitFed Bancorp shall immediately cease and cause to
be terminated any activities, discussions or negotiations concerning, or provide
any confidential information to, or have any discussion with, any person
relating to any Acquisition Transaction. CitFed Bancorp promptly shall
communicate to Fifth Third the terms of any proposal which it may receive in
respect of an Acquisition Transaction and any request by or indication of
interest on the part of any third party with respect to initiation of any
Acquisition Transaction or discussions with respect thereto.
H. Fifth Third and CitFed Bancorp shall each indemnify and hold the other
harmless for any claim, liability or expense (including reasonable attorneys'
fees) arising from a misstatement or omission in the applications submitted to
regulatory agencies for approval of the transaction contemplated by this
Agreement relating to the indemnifying party which is based or made in reliance
upon any representation, warranty, or covenant of such party in this Agreement
or any certification, document, or other information furnished or to be
furnished by such party pursuant to this Agreement. From and after Closing Date,
this Section VII.H. shall be of no further force or effect.
I. Following the satisfaction of all conditions to closing the Merger,
other than the expiration of any waiting period required by any regulatory
agency after its approval of the Merger is issued before the transaction may be
consummated and conditions which are only capable of being satisfied at closing,
upon the request of Fifth Third and at the sole option of Fifth Third, CitFed
Bancorp and the Subsidiaries shall execute and deliver to Midwest Payment
Systems, Inc. ("MPS") an agreement to convert all electronic funds transfer
("EFT") related services to MPS and the Jeanie(R) system. Such Agreement shall
provide that MPS will be the exclusive provider of such services to CitFed
Bancorp and the Subsidiaries for a period of five (5) years from the date such
agreements are executed. Fifth Third agrees that the cost of the conversion of
CitFed Bancorp and the Subsidiaries to EFT provided by MPS and conversion to the
Jeanie(R) system (including, without limitation, the cost of all card reissue,
signage and penalties relating to terminating its current EFT relationships)
will be paid by Fifth Third. Fifth Third further agrees that the costs and fees
to CitFed Bancorp and the Bank Subsidiaries for the Jeanie(R) service shall not
exceed those charged by the current EFT service provider of CitFed Bancorp and
the Subsidiaries, subject to any increases in such costs and fees which would
otherwise be permitted under their current EFT processing agreements. In no
event shall CitFed Bancorp or the Subsidiaries be required to take any actions
pursuant to this Section VII.I. or otherwise under this Agreement that are
contrary to any applicable law, regulation, rule or order or which constitute a
breach of the fiduciary duties of the directors of CitFed Bancorp or the
Subsidiaries.
J. Following the satisfaction of all conditions to closing the Merger,
other than the expiration of any waiting period required by any regulatory
agency after its approval of the Merger is issued before the transaction may be
consummated and conditions which are only capable of being satisfied at closing,
(a) CitFed Bancorp and the Subsidiaries shall deliver an agreement with Fifth
Third or an affiliate of Fifth Third which will provide the transfer to any such
entity of the performance of any and all data processing services, including,
without limitation, items processing and application processing, and (b) at
Fifth Third's discretion, CitFed Bancorp and the Subsidiaries shall notify any
and all vendors currently providing such services of such transfer. CitFed
Bancorp and the Subsidiaries shall fully cooperate with Fifth Third in the
preparation for such transfer. In the event that Fifth Third determines that a
third party should provide such services to CitFed Bancorp and/or the
Subsidiaries, CitFed Bancorp and the Subsidiaries, as applicable, agree to have
such services provided after the Effective Time by the third party recommended
for such purposes by Fifth Third. In the event this Agreement is terminated
pursuant to Section VIII hereof for any reason except a material breach or
default by CitFed Bancorp, and if, in such instance, CitFed Bancorp desires to
convert to another provider of data processing services, including, without
limitation, item processing and application processing, Fifth Third shall pay
all costs and expenses associated with such conversion.
K. Fifth Third and CitFed Bancorp shall agree with each other as to the
form and substance of any press release related to this Agreement or the
transactions contemplated hereby, and shall consult with each other as to the
form and substance of other public disclosures related thereto, provided,
however, that nothing contained herein shall prohibit either party from making
any disclosure which its counsel deems required by law.
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L. Each party hereto shall bear and pay all costs and expenses incurred by
it in connection with the transactions contemplated by this Agreement,
including, without limitation, fees, costs and expenses of its own financial
consultants, investment bankers, accountants and counsel, without reduction or
modification in the number of shares of Fifth Third Common Stock to be issued
hereunder. The expenses of printing and mailing the prospectus/proxy statement
shall be paid by Fifth Third.
M. 1. Between the date hereof and the Closing Date, CitFed Bancorp shall
promptly advise Fifth Third in writing of any fact that, if existing or known at
the date hereof, would have been required to be set forth or disclosed in or
pursuant to this Agreement or of any fact that, if existing or known at the date
hereof, would have made any of the representations contained herein untrue to
any material extent, and which in each case, would be likely to have a material
adverse effect on CitFed Bancorp and its Subsidiaries, taken as a whole;
provided, however, that no information so disclosed to Fifth Third shall be
deemed an admission by CitFed Bancorp that such fact would be likely to have a
material adverse effect on CitFed Bancorp and its Subsidiaries, taken as a
whole, nor shall such information so disclosed to Fifth Third be deemed an
exception to any representation, warranty or covenant made by CitFed Bancorp
herein unless Fifth Third, in its sole discretion, agrees in writing to accept
such an exception.
2. Between the date hereof and the Closing Date, Fifth Third shall promptly
advise CitFed Bancorp in writing of any fact that, if existing or known at the
date hereof, would have been required to be set forth or disclosed in or
pursuant to this Agreement or of any fact that, if existing or known at the date
hereof, would have made any of the representations contained herein untrue to
any material extent, and which in each case, would be likely to have a material
adverse effect on CitFed Bancorp and its subsidiaries, taken as a whole;
provided, however, that no information so disclosed to Cit Fed Bancorp shall be
deemed an admission by Fifth Third that such fact would be likely to have a
material adverse effect on Fifth Third and its subsidiaries, taken as a whole,
nor shall such information so disclosed to CitFed Bancorp shall be deemed an
exception to any representation, warranty or covenant made by Fifth Third unless
CitFed Bancorp, in its sole discretion, agrees in writing to accept such an
exception.
VIII. TERMINATION
A. This Agreement may be terminated at any time prior to the Effective Time
by written notice delivered by Fifth Third to CitFed Bancorp or by CitFed
Bancorp to Fifth Third in the following instances:
1. By Fifth Third or CitFed Bancorp, if there has been to the extent
contemplated in Section VI.B.1. and 2. and Section VI.C.1. and 2. herein, a
material misrepresentation, a material breach of warranty or a material
failure to comply with any covenant on the part of the other party with
respect to the representations, warranties, and covenants set forth herein
and such misrepresentations, breach or failure to comply has not been cured
(if capable of cure) within thirty (30) days after receipt of written
notice, provided, the party in default shall have no right to terminate for
its own default.
2. By Fifth Third or CitFed Bancorp if the business or assets or
financial condition of the other party, in each case taken as a whole,
shall have materially and adversely changed from that in existence at
September 30, 1997, other than any such change attributable to or resulting
from any change in law, regulation or generally accepted accounting
principles, changes in interest rates, economic, financial or market
conditions affecting the banking or thrift industry generally or changes
that may occur as a consequence of actions or inactions that either party
hereto is expressly obligated to take under this Agreement (including
without limitation the payment by either party of its transaction expenses
related to the actions contemplated by this Agreement).
3. By Fifth Third or CitFed Bancorp, if the merger transaction
contemplated herein has not been consummated by September 30, 1998,
provided the terminating party is not in material breach or default of any
representations, warranty or covenant contained herein on the date of such
termination.
4. By the mutual written consent of Fifth Third and CitFed Bancorp.
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5. By Fifth Third if any event occurs which renders impossible of
satisfaction in any material respect one or more of the conditions to the
obligations of Fifth Third to effect the Merger set forth in Sections VI.A.
and B. herein and non-compliance is not waived by Fifth Third.
6. By CitFed Bancorp if any event occurs which renders impossible of
satisfaction in any material respect one or more of the conditions to the
obligations of CitFed Bancorp to effect the Merger as set forth in Sections
VI.A. and C. herein and non-compliance is not waived by CitFed Bancorp.
7. By CitFed Bancorp if it determines by a vote of the majority of the
members of its Board of Directors, and notifies Fifth Third, at any time
during the five (5) day period commencing two (2) business days after the
Determination Date and if both of the following conditions are satisfied:
(i) the Average Closing Price of Fifth Third Common Stock is less
than $64.40 (adjusted as set forth in the last sentence of this
paragraph VIII.A.7.); and
(ii) (x) the number obtained by dividing the Average Closing Price
on the Determination Date by the Starting Price (such number being
referred to herein as the "Fifth Third Ratio") shall be less than (y)
the number obtained by dividing the Index Price on the Determination
Date by the Index Price on the Starting Date and subtracting 0.20 from
the quotient in this clause (ii)(y) (such number being referred to
herein as the "Index Ratio");
If CitFed Bancorp elects to terminate this Agreement pursuant to this
Section VIII.A.7., it shall give notice to Fifth Third within the aforementioned
five (5) day period, provided such notice may be withdrawn at any time. During
the five (5) day period commencing with its receipt of such notice, Fifth Third
shall have the option of adjusting the Exchange Ratio to equal the lesser of (i)
a number equal to a quotient (rounded to the nearest one-thousandth), the
numerator of which is the product of $64.40 multiplied by the Exchange Ratio (as
then in effect) and the denominator of which is the Average Closing Price, and
(ii) a number equal to a quotient (rounded to the nearest onethousandth), the
numerator of which is the Index Ratio multiplied by the Exchange Ratio (as then
in effect) and the denominator of which is the Fifth Third Ratio. If Fifth Third
makes an election contemplated by the preceding sentence, within such five-day
period, it shall give prompt written notice to CitFed Bancorp of such election
and the revised Exchange Ratio, whereupon no termination shall have occurred
pursuant to this Section VIII.A.7 and this Agreement shall remain in effect in
accordance with its terms (except as the Exchange Ratio shall have been so
modified), and any references in this Agreement to "Exchange Ratio" shall
thereafter be deemed to refer to the Exchange Ratio as adjusted pursuant to this
Section VIII.A.7.
For purposes of this Paragraph VIII.A.7, the following terms shall have the
meaning indicated:
"Average Closing Price" shall mean the average of the per share closing
prices of the Fifth Third Common Stock as reported on the NASDAQ National
Market System for the 20 consecutive trading days ending on the
Determination Date as reported by The Wall Street Journal, expressed in
decimal figures carried to five figures.
"Determination Date" means the tenth (10th) trading day prior to the
Closing Date.
"Index Group" means the nineteen (19) bank holding companies listed below,
the common stock of all of which shall be publicly traded and as to which
there shall not have been a publicly announced proposal since the Starting
Date and before the Determination Date for any such company to be acquired
or for such company to acquire another company or companies in transactions
with a value exceeding 25% of the acquiror's market capitalization. In the
event that any such company is removed from the Index Group, the weights
(which shall be determined based upon the number of outstanding shares of
common stock) shall be redistributed proportionately for purposes of
determining the Index Price. The nineteen (19) bank holding companies and
the weights attributed to them are as follows:
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<PAGE> 94
<TABLE>
<CAPTION>
SHARES
OUTSTANDING
AS OF
BANK HOLDING COMPANY 9/30/97 WEIGHTING %
-------------------- ----------- -----------
($ MILLION)
<S> <C> <C>
Northern Trust Corp......................................... 109,139.3 4.89
Star Banc Corp.............................................. 85,296.2 3.82
First Tennessee National Corp............................... 64,059.8 2.87
State Street Corp........................................... 160,808.0 7.20
Marshall & Ilsley Corp...................................... 88,872.4 3.98
BB&T Corporation............................................ 134,308.5 6.02
Mercantile Bancorp.......................................... 130,289.0 5.83
First American Corp......................................... 58,379.1 2.61
Summit Bancorp.............................................. 175,735.2 7.87
South Trust Corp............................................ 99,793.6 4.47
First Security Corp......................................... 115,838.0 5.19
Comerica Inc................................................ 105,239.7 4.71
AmSouth Bancorporation...................................... 80,706.2 3.61
Union Planters Corp......................................... 67,211.6 3.01
Regions Financial Corp...................................... 136,320.5 6.11
Firstar Corporation......................................... 144,655.2 6.48
Crestar Financial Corp...................................... 110,188.1 4.93
Synovus Financial Corp...................................... 174,984.1 7.84
Huntington Bancshares, Inc.................................. 191,133.7 8.56
------
100.00%
</TABLE>
"Index Price," on a given date, means the weighted average (weighted in
accordance with the Weighting Factors above, which were calculated with
reference to the outstanding shares listed above) of the closing prices on
such date of the common stock of the companies comprising the Index Group.
"Starting Date" means January 13, 1998.
"Starting Price" means $80.50 per share.
If Fifth Third or any company belonging to the Index Group declares or
effects a stock dividend, reclassification, recapitalization, split-up,
combination, exchange of shares or similar transaction between the Starting Date
and the Determination Date, the prices for the common stock of such company
shall be appropriately adjusted for the purposes of applying this Paragraph
VIII.A.7.
B. If CitFed Bancorp shareholders, acting at a meeting held for the purpose
of voting upon this Agreement, fail to adopt the Agreement in the manner
required by law, then this Agreement shall be deemed to be automatically
terminated, provided that CitFed Bancorp must be in compliance with Section
IV.A.
C. Upon termination as provided in this Section, this Agreement, except for
the provisions of Sections VII.D., H., J. and K. hereof shall be void and of no
further force or effect, and, except as provided in Section VII.H. hereof,
neither party hereto not in material breach or default of its representations,
warranties and covenants hereunder shall have any liability of any kind to the
other party including but not limited to liability for expenses incurred by the
other party in connection with this transaction; provided that no such
termination shall relieve a breaching party from liability for any uncured
willful breach of a covenant, undertaking, representation or warranty giving
rise to such termination.
D. Fifth Third and CitFed Bancorp agree that irreparable damage would occur
and that neither Fifth Third nor CitFed Bancorp would have any adequate remedy
at law in the event that any of the provisions of this Agreement are not
performed in accordance with their specific terms or were otherwise breached. If
any action is brought by either party to enforce this Agreement, the other party
shall waive the defense that there is an adequate
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<PAGE> 95
remedy at law. It is accordingly agreed that the parties shall be entitled to an
injunction or injunctions to prevent breaches of this Agreement and to enforce
specifically the terms and provisions of this Agreement in any federal court
located in the State of Ohio or in Ohio state court, this being in addition to
any other remedy to which they are entitled at law or in equity.
IX. CLOSING AND EFFECTIVE TIME
The consummation of the transactions contemplated by this Agreement shall
take place at a closing to be held at the offices of Fifth Third in Cincinnati,
Ohio on a Friday which is as soon as is reasonably possible following the date
that all of the conditions precedent to closing set forth in Section VI hereof,
including the waiting period required by any banking or bank holding company
regulatory agency after its approval of the Merger is issued before the
transaction may be consummated, have been fully met or effectively waived (the
"Closing Date"). Fifth Third agrees that upon the satisfaction of such
conditions, it will not willfully delay the closing to a date after Fifth
Third's next dividend record date, provided, however, Fifth Third shall not be
required to take any extraordinary action to effect such closing nor to effect
such closing at a time that Fifth Third reasonably believes would be adverse to
the interests of Fifth Third and its stockholders. Pursuant to the filing of
articles or a certificate of merger (which shall be acceptable to CitFed Bancorp
and Fifth Third) with the Secretaries of the States of Ohio and Delaware in
accordance with law and this Agreement, the Merger provided for herein shall
become effective at the close of business on said day (the "Effective Time"). By
mutual agreement of the parties, the closing may be held at any other time or
place or on any other date and the effectiveness of the Merger (and the
Effective Time) may be changed by such mutual agreement. None of the
representations, warranties and agreements in this Agreement or in any
instrument delivered pursuant to this Agreement shall survive the Effective
Time, except for agreements of the parties which by their terms are intended to
be performed after the Effective Time.
X. AMENDMENT
This Agreement may be amended, modified or supplemented by the written
agreement of CitFed Bancorp and Fifth Third upon the authorization of each
company's respective Board of Directors at any time before or after adoption of
this Agreement by the shareholders of CitFed Bancorp, but after any such
adoption by the shareholders of CitFed Bancorp no amendment shall be made
(without further shareholder action) which changes in any manner adverse to such
shareholders the form or amount of consideration to be provided to such
shareholders pursuant to this Agreement, or the tax characterization of the
transactions as structured pursuant to this Agreement.
XI. GENERAL
This Agreement was made in the State of Ohio and shall be interpreted under
the laws of the United States and the State of Ohio. This Agreement and all of
the provisions hereof shall be binding upon and inure to the benefit of the
parties hereto and their respective successors and permitted assigns but except
as specifically set forth herein or as contemplated in Sections V.D., V.E.1, and
VII, none of the provisions hereof shall be binding upon and inure to the
benefit of any other person, firm or corporation whomsoever. Neither this
Agreement nor any of the rights, interests or obligations hereunder shall be
assigned or transferred by operation of law or otherwise by any party hereto
without the prior written consent of the other party hereto; provided, however,
that the merger or consolidation of Fifth Third shall not be deemed an
assignment hereunder if Fifth Third is the surviving corporation in such merger
or consolidation and its Common Stock shall thereafter continue to be publicly
traded and issuable to CitFed Bancorp shareholders pursuant to the terms of this
Agreement.
XII. COUNTERPARTS
This Agreement may be executed in any number of counterparts, each of which
shall be deemed an original for all purposes but such counterparts taken
together shall constitute one and the same instrument.
[Signatures on Next Page]
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<PAGE> 96
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/ PAUL L. REYNOLDS
----------------------------------
Paul L. Reynolds
Assistant Secretary
CITFED BANCORP, INC.
(SEAL) By: /s/ JERRY L. KIRBY
------------------------------------
Name: Jerry L. Kirby
Title: Chairman and CEO
Attest: /s/ JOHN H. CURP
----------------------------------
Name: John H. Curp
Title: Secretary
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<PAGE> 97
ANNEX B
STOCK OPTION AGREEMENT DATED AS OF JANUARY 13, 1998
BETWEEN
FIFTH THIRD BANCORP, AS GRANTEE,
AND
CITFED BANCORP, AS ISSUER
<PAGE> 98
ANNEX B
STOCK OPTION AGREEMENT
STOCK OPTION AGREEMENT, dated as of January 13, 1998, between CITFED
BANCORP., INC., a corporation organized and existing under the corporation laws
of the State of Delaware ("Issuer"), and FIFTH THIRD BANCORP, an Ohio
corporation ("Grantee").
W I T N E S S E T H:
WHEREAS, Grantee and Issuer have entered into an Affiliation Agreement (the
"Merger Agreement");
WHEREAS, as an inducement to the willingness of Grantee to continue to
pursue the transactions contemplated by the Merger Agreement, Issuer has agreed
to grant Grantee the Option (as hereinafter defined); and
WHEREAS, the Board of Directors of Issuer has approved the grant of the
Option and the Merger Agreement prior to the date hereof;
NOW, THEREFORE, in consideration of the foregoing and the mutual covenants
and agreements set forth herein and in the Merger Agreement, the parties hereto
agree as follows:
1. (a) Issuer hereby grants to Grantee an unconditional, irrevocable option
(the "Option") to purchase, subject to the terms hereof, up to an aggregate of
3,230,411 fully paid and nonassessable shares of the common stock, par value
$.01 per share, of Issuer ("Common Stock") at a price per share equal to the
last reported sale price per share of Common Stock as reported on the NASDAQ
National Market System on January 13, 1998; provided, however, that in the event
Issuer issues or agrees to issue any shares of Common Stock (other than shares
of Common Stock issued pursuant to stock options granted prior to the date
hereof) at a price less than such price per share (as adjusted pursuant to
subsection (b) of Section 5), such price shall be equal to such lesser price
(such price, as adjusted if applicable, the "Option Price"); provided, further,
that in no event shall the number of shares for which this Option is exercisable
exceed 19.9% of the issued and outstanding shares of Common Stock. The number of
shares of Common Stock that may be received upon the exercise of the Option and
the Option Price are subject to adjustment as herein set forth.
(b) In the event that any additional shares of Common Stock are issued or
otherwise become outstanding after the date of this Agreement (other than
pursuant to this Agreement and other than pursuant to an event described in
Section 5(a) hereof), the number of shares of Common Stock subject to the Option
shall be increased so that, after such issuance, such number together with any
shares of Common Stock previously issued pursuant hereto, equals 19.9% of the
number of shares of Common Stock then issued and outstanding without giving
effect to any shares subject or issued pursuant to the Option. Nothing contained
in this Section l(b) or elsewhere in this Agreement shall be deemed to authorize
Issuer to issue shares in breach any provision of the Merger Agreement.
2. (a) The Holder (as hereinafter defined) may exercise the Option, in
whole or part, if, but only if, both an Initial Triggering Event (as hereinafter
defined) and a Subsequent Triggering Event (as hereinafter defined) shall have
occurred prior to the occurrence of an Exercise Termination Event (as
hereinafter defined), provided that the Holder shall have sent the written
notice of such exercise (as provided in subsection (e) of this Section 2) within
six (6) months following such Subsequent Triggering Event (or such later period
as provided in Section 10). Each of the following shall be an Exercise
Termination Event: (i) the Effective Time of the Merger; (ii) termination of the
Merger Agreement in accordance with the provisions thereof if such termination
occurs prior to the occurrence of an Initial Triggering Event except a
termination by Grantee pursuant to Section VIII(A)(1) of the Merger Agreement
(but only if the breach giving rise to the termination was willful) (a "Listed
Termination"); or (iii) the passage of eighteen (18) months (or such longer
period as provided in Section 10) after termination of the Merger Agreement if
such termination follows the occurrence of an Initial Triggering Event or is a
Listed Termination. The term "Holder" shall mean the holder or holders of the
Option. Notwithstanding anything to the contrary contained herein, the Option
may not be exercised at any time when Grantee shall be in material breach of the
Merger Agreement such that Issuer shall be entitled to terminate the Merger
Agreement pursuant to Section
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<PAGE> 99
VIII(A)(1) thereof and (ii) this Agreement shall automatically terminate upon
the proper termination of the Merger Agreement by Issuer pursuant to either (x)
Section VIII(A)(1) thereof as a result of the material breach by Grantee or (y)
Section VIII.A.7.
(b) The term "Initial Triggering Event" shall mean any of the following
events or transactions occurring on or after the date hereof:
(i) Issuer or any Significant Subsidiary (as defined in Rule 1-02 of
Regulation S-X promulgated by the Securities and Exchange Commission (the
"SEC")) (an "Issuer Subsidiary"), without having received Grantee's prior
written consent, shall have entered into an agreement to engage in an
Acquisition Transaction (as hereinafter defined) with any person (the term
"person" for purposes of this Agreement having the meaning assigned thereto
in Sections 3(a)(9) and 13(d)(3) of the Securities Exchange Act of 1934, as
amended (the "1934 Act"), and the rules and regulations thereunder) other
than Grantee or any of its Subsidiaries (each a "Grantee Subsidiary") or
the Board of Directors of Issuer (the "Issuer Board") shall have
recommended that the shareholders of Issuer approve or accept any
Acquisition Transaction other than as contemplated by the Merger Agreement.
For purposes of this Agreement, (a) "Acquisition Transaction" shall mean
(x) a merger or consolidation, or any similar transaction, involving Issuer
or any Issuer Subsidiary (other than mergers, consolidations or similar
transactions (i) involving solely Issuer and/or one or more wholly-owned
(except for directors' qualifying shares and a de minimis number of other
shares) Subsidiaries of the Issuer, provided, any such transaction is not
entered into in violation of the terms of the Merger Agreement or (ii) in
which the shareholders of Issuer immediately prior to the completion of
such transaction own at least 50% of the Common Stock of the Issuer (or the
resulting or surviving entity in such transaction) immediately after
completion of such transaction, provided any such transaction is not
entered into in violation of the terms of the Merger Agreement), (y) a
purchase, lease or other acquisition of all or any substantial part of the
assets or deposits of Issuer or any Issuer Subsidiary, or (z) a purchase or
other acquisition (including by way of merger, consolidation, share
exchange or otherwise) of securities representing 10% or more of the voting
power of Issuer or any Issuer Subsidiary and (b) "Subsidiary" shall have
the meaning set forth in Rule 12b-2 under the 1934 Act;
(ii) Any person other than the Grantee or any Grantee Subsidiary shall
have acquired beneficial ownership or the right to acquire beneficial
ownership of 10% or more of the outstanding shares of Common Stock (the
term "beneficial ownership" for purposes of this Agreement having the
meaning assigned thereto in Section 13(d) of the 1934 Act, and the rules
and regulations thereunder);
(iii) The shareholders of Issuer shall have voted and failed to adopt
the Merger Agreement at a meeting which has been held for that purpose or
any adjournment or postponement thereof, or such meeting shall not have
been held in violation of the Merger Agreement or shall have been cancelled
prior to termination of the Merger Agreement if, prior to such meeting (or
if such meeting shall not have been held or shall have been cancelled,
prior to such termination), it shall have been publicly announced that any
person (other than Grantee or any of its Subsidiaries) shall have made, or
publicly disclosed an intention to make, a proposal to engage in an
Acquisition Transaction;
(iv) The Issuer Board shall have withdrawn or modified (or publicly
announced its intention to withdraw or modify) in any manner adverse in any
respect to Grantee its recommendation that the shareholders of Issuer
approve the transactions contemplated by the Merger Agreement, or Issuer or
any Issuer Subsidiary shall have authorized, recommended, proposed (or
publicly announced its intention to authorize, recommend or propose) an
agreement to engage in an Acquisition Transaction with any person other
than Grantee or a Grantee Subsidiary;
(v) Any person other than Grantee or any Grantee Subsidiary shall have
filed with the SEC a registration statement or tender offer materials with
respect to a potential exchange or tender offer that would constitute an
Acquisition Transaction (or filed a preliminary proxy statement with the
SEC with respect to a potential vote by its shareholders to approve the
issuance of shares to be offered in such an exchange offer);
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<PAGE> 100
(vi) Issuer shall have willfully breached any covenant or obligation
contained in the Merger Agreement in anticipation of engaging in an
Acquisition Transaction, and following such breach Grantee would be
entitled to terminate the Merger Agreement (whether immediately or after
the giving of notice or passage of time or both);
(vii) Any person other than Grantee or any Grantee Subsidiary shall
have filed an application or notice with the Office of Thrift Supervision
(the "OTS") or other federal or state bank regulatory or antitrust
authority, which application or notice has been accepted for processing,
for approval to engage in an Acquisition Transaction; or
(viii) Any person other than Grantee or any Grantee Subsidiary shall
have made a proposal to Issuer or its shareholders to engage in an
Acquisition Transaction and such proposal shall have been publicly
announced.
(c) The term "Subsequent Triggering Event" shall mean any of the following
events or transactions occurring after the date hereof:
(i) The acquisition by any person (other than Grantee or any Grantee
Subsidiary) of beneficial ownership of 25% or more of the then outstanding
Common Stock; or
(ii) The occurrence of the Initial Triggering Event described in
clause (i) of subsection (b) of this Section 2, except that the percentage
referred to in clause (z) of the second sentence thereof shall be 25%.
(d) Issuer shall notify Grantee promptly in writing of the occurrence of
any Initial Triggering Event or Subsequent Triggering Event (together, a
"Triggering Event"), it being understood that the giving of such notice by
Issuer shall not be a condition to the right of the Holder to exercise the
Option.
(e) In the event the Holder is entitled to and wishes to exercise the
Option (or any portion thereof), it shall send to Issuer a written notice (the
date of which being herein referred to as the "Notice Date") specifying (i) the
total number of shares it will purchase pursuant to such exercise and (ii) a
place and date not earlier than three business days nor later than 60 business
days from the Notice Date for the closing of such purchase (the "Closing Date");
provided, that if prior notification to or approval of the OTS or any other
regulatory or antitrust agency is required in connection with such purchase, the
Holder shall promptly file the required notice or application for approval,
shall promptly notify Issuer of such filing, and shall expeditiously process the
same and the period of time that otherwise would run pursuant to this sentence
shall run instead from the date on which any required notification periods have
expired or been terminated or such approvals have been obtained and any
requisite waiting period or periods shall have passed. Any exercise of the
Option shall be deemed to occur on the Notice Date relating thereto.
(f) At the closing referred to in subsection (e) of this Section 2, the
Holder shall (i) pay to Issuer the aggregate purchase price for the shares of
Common Stock purchased pursuant to the exercise of the Option in immediately
available funds by wire transfer to a bank account designated by Issuer and (ii)
present and surrender this Agreement to Issuer at its principal executive
offices, provided that the failure or refusal of the Issuer to designate such a
bank account or accept surrender of this Agreement shall not preclude the Holder
from exercising the Option.
(g) At such closing, simultaneously with the delivery of immediately
available funds as provided in subsection (f) of this Section 2, Issuer shall
deliver to the Holder a certificate or certificates representing the number of
shares of Common Stock purchased by the Holder and, if the Option should be
exercised in part only, a new Option evidencing the rights of the Holder thereof
to purchase the balance of the shares purchasable hereunder.
(h) Certificates for Common Stock delivered at a closing hereunder may be
endorsed with a restrictive legend that shall read substantially as follows:
"The transfer of the shares represented by this certificate is subject
to certain provisions of an agreement, dated as of January 13, 1998,
between the registered holder hereof and Issuer and to resale restrictions
arising under the Securities Act of 1933, as amended. A copy of such
agreement is on file at the
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<PAGE> 101
principal office of Issuer and will be provided to the holder hereof
without charge upon receipt by Issuer of a written request therefor."
It is understood and agreed that: (i) the reference to the resale restrictions
of the Securities Act of 1933, as amended (the "1933 Act") in the above legend
shall be removed by delivery of substitute certificate(s) without such reference
if the Holder shall have delivered to Issuer a copy of a letter from the staff
of the SEC, or an opinion of counsel, in form and substance reasonably
satisfactory to Issuer, to the effect that such legend is not required for
purposes of the 1933 Act; (ii) the reference to the provisions of this Agreement
in the above legend shall be removed by delivery of substitute certificate(s)
without such reference if the shares have been sold or transferred in compliance
with the provisions of this Agreement and under circumstances that do not
require the retention of such reference in the opinion of Counsel to the Holder;
and (iii) the legend shall be removed in its entirety if the conditions in the
preceding clauses (i) and (ii) are both satisfied. In addition, such
certificates shall bear any other legend as may be required by law.
(i) Upon the giving by the Holder to Issuer of the written notice of
exercise of the Option provided for under subsection (e) of this Section 2 and
the tender of the applicable purchase price in immediately available funds, the
Holder shall be deemed subject to the receipt of any necessary regulatory
approvals to be the holder of record of the shares of Common Stock issuable upon
such exercise, notwithstanding that the stock transfer books of Issuer shall
then be closed or that certificates representing such shares of Common Stock
shall not then be actually delivered to the Holder. Issuer shall pay all
expenses, and any and all United States federal, state and local taxes and other
charges that may be payable in connection with the preparation, issue and
delivery of stock certificates under this Section 2 in the name of the Holder or
its assignee, transferee or designee.
3. Issuer agrees: (i) that it shall at all times maintain, free from
preemptive rights, sufficient authorized but unissued or treasury shares of
Common Stock so that the Option may be exercised without additional
authorization of Common Stock after giving effect to all other options,
warrants, convertible securities and other rights to purchase Common Stock; (ii)
that it will not, by charter amendment or through reorganization, consolidation,
merger, dissolution or sale of assets, or by any other voluntary act, avoid or
seek to avoid the observance or performance of any of the covenants,
stipulations or conditions to be observed or performed hereunder by Issuer;
(iii) promptly to take all action as may from time to time be required
(including (x) complying with all applicable premerger notification, reporting
and waiting period requirements specified in 15 U.S.C. Section 18a and
regulations promulgated thereunder and (y) in the event, under the Savings and
Loan Holding Company Act ("SLHCA"), or the Change in Bank Control Act of 1978,
as amended, or any state or other federal banking law, prior approval of or
notice to the OTS or to any state or other federal regulatory authority is
necessary before the Option may be exercised, cooperating fully with the Holder
in preparing such applications or notices and providing such information to the
OTS or such state or other federal regulatory authority as they may require) in
order to permit the Holder to exercise the Option and Issuer duly and
effectively to issue shares of Common Stock pursuant hereto; and (iv) promptly
to take all action provided herein to protect the rights of the Holder against
dilution.
4. This Agreement (and the Option granted hereby) are exchangeable, without
expense, at the option of the Holder, upon presentation and surrender of this
Agreement at the principal office of Issuer, for other Agreements providing for
Options of different denominations entitling the holder thereof to purchase, on
the same terms and subject to the same conditions as are set forth herein, in
the aggregate the same number of shares of Common Stock purchasable hereunder.
The terms "Agreement" and "Option" as used herein include any Agreements and
related Options for which this Agreement (and the Option granted hereby) may be
exchanged. Upon receipt by Issuer of evidence reasonably satisfactory to it of
the loss, theft, destruction or mutilation of this Agreement, and (in the case
of loss, theft or destruction) of reasonably satisfactory indemnification, and
upon surrender and cancellation of this Agreement, if mutilated, Issuer will
execute and deliver a new Agreement of like tenor and date. Any such new
Agreement executed and delivered shall constitute an additional contractual
obligation on the part of Issuer, whether or not the Agreement so lost, stolen,
destroyed or mutilated shall at any time be enforceable by anyone.
5. In addition to the adjustment in the number of shares of Common Stock
that are purchasable upon exercise of the Option pursuant to Section 1 of this
Agreement, the number of shares of Common Stock
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<PAGE> 102
purchasable upon the exercise of the Option and the Option Price shall be
subject to adjustment from time to time as provided in this Section 5.
(a) In the event of any change in, or distributions in respect of, the
Common Stock by reason of stock dividends, split-ups, mergers,
recapitalizations, combinations, subdivisions, conversions, exchanges of shares
or the like, the type and number of shares of Common Stock purchasable upon
exercise hereof shall be appropriately adjusted and proper provision shall be
made so that, in the event that any additional shares of Common Stock are to be
issued or otherwise become outstanding as a result of any such change (other
than pursuant to an exercise of the Option), the number of shares of Common
Stock that remain subject to the Option shall be increased so that, after such
issuance and together with shares of Common Stock previously issued pursuant to
the exercise of the Option (as adjusted on account of any of the foregoing
changes in the Common Stock), it equals 19.9% of the number of shares of Common
Stock then issued and outstanding.
(b) Whenever the number of shares of Common Stock purchasable upon exercise
hereof is adjusted as provided in this Section 5, the Option Price shall be
adjusted by multiplying the Option Price by a fraction, the numerator of which
shall be equal to the number of shares of Common Stock purchasable prior to the
adjustment and the denominator of which shall be equal to the number of shares
of Common Stock purchasable after the adjustment.
6. Upon the occurrence of a Subsequent Triggering Event that occurs prior
to an Exercise Termination Event, Issuer shall, at the request of Grantee
delivered within twelve (12) months (or such later period as provided in Section
10) of such Subsequent Triggering Event (whether on its own behalf or on behalf
of any subsequent holder of this Option (or part thereof) or any of the shares
of Common Stock issued pursuant hereto), promptly prepare, file and keep current
a registration statement under the 1933 Act covering any shares issued and
issuable pursuant to this Option and shall use its reasonable best efforts to
cause such registration statement to become effective and remain current in
order to permit the sale or other disposition of any shares of Common Stock
issued upon total or partial exercise of this Option ("Option Shares") in
accordance with any plan of disposition requested by Grantee. Issuer will use
its reasonable best efforts to cause such registration statement promptly to
become effective and then to remain effective for such period not in excess of
180 days from the day such registration statement first becomes effective or
such shorter time as may be reasonably necessary to effect such sales or other
dispositions. Grantee shall have the right to demand two such registrations. The
Issuer shall bear the costs of such registrations (including, but not limited
to, Issuer's attorneys' fees, printing costs and filing fees, except for
underwriting discounts or commissions, brokers' fees and the fees and
disbursements of Grantee's counsel related thereto). The foregoing
notwithstanding, if, at the time of any request by Grantee for registration of
Option Shares as provided above, Issuer is in registration with respect to an
underwritten public offering by Issuer of shares of Common Stock, and if in the
good faith judgment of the managing underwriter or managing underwriters, or, if
none, the sole underwriter or underwriters, of such offering the offer and sale
of the Option Shares would interfere with the successful marketing of the shares
of Common Stock offered by Issuer, the number of Option Shares otherwise to be
covered in the registration statement contemplated hereby may be reduced;
provided, however, that after any such required reduction the number of Option
Shares to be included in such offering for the account of the Holder shall
constitute at least 25% of the total number of shares to be sold by the Holder
and Issuer in the aggregate; and provided further, however, that if such
reduction occurs, then Issuer shall file a registration statement for the
balance as promptly as practicable thereafter as to which no reduction pursuant
to this Section 6 shall be permitted or occur and the Holder shall thereafter be
entitled to one additional registration and the twelve (12) month period
referred to in the first sentence of this section shall be increased to
twenty-four (24) months. Each such Holder shall provide all information
reasonably requested by Issuer for inclusion in any registration statement to be
filed hereunder. If requested by any such Holder in connection with such
registration, Issuer shall become a party to any underwriting agreement relating
to the sale of such shares, but only to the extent of obligating itself in
respect of representations, warranties, indemnities and other agreements
customarily included in such underwriting agreements for Issuer. Upon receiving
any request under this Section 6 from any Holder, Issuer agrees to send a copy
thereof to any other person known to Issuer to be entitled to registration
rights under this Section 6, in each case by promptly mailing the same, postage
prepaid, to the address of record of the persons entitled to receive such
copies. Notwithstanding anything to the contrary contained herein, in no event
shall the number of registrations that Issuer is obligated to effect be
increased by
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reason of the fact that there shall be more than one Holder as a result of any
assignment or division of this Agreement.
7. (a) At any time after the occurrence of a Repurchase Event (as defined
below) (i) at the request of the Holder, delivered prior to an Exercise
Termination Event (or such later period as provided in Section 10), Issuer (or
any successor thereto) shall repurchase the Option from the Holder at a price
(the "Option Repurchase Price") equal to the amount by which (A) the
market/offer price (as defined below) exceeds (B) the Option Price, multiplied
by the number of shares for which this Option may then be exercised and (ii) at
the request of the owner of Option Shares from time to time (the "Owner"),
delivered prior to an Exercise Termination Event (or such later period as
provided in Section 10), Issuer (or any successor thereto) shall repurchase such
number of the Option Shares from the Owner as the Owner shall designate at a
price (the "Option Share Repurchase Price") equal to the market/offer price
multiplied by the number of Option Shares so designated. The term "market/offer
price" shall mean the highest of (i) the price per share of Common Stock at
which a tender or exchange offer therefor has been made, (ii) the price per
share of Common Stock to be paid by any third party pursuant to an agreement
with Issuer, (iii) the highest closing price for shares of Common Stock within
the six-month period immediately preceding the date the Holder gives notice of
the required repurchase of this Option or the Owner gives notice of the required
repurchase of Option Shares, as the case may be, or (iv) in the event of a sale
of all or any substantial part of Issuer's assets or deposits, the sum of the
net price paid in such sale for such assets or deposits and the current market
value of the remaining net assets of Issuer as determined by a nationally
recognized investment banking firm selected by the Holder or the Owner, as the
case may be, and reasonably acceptable to Issuer, divided by the number of
shares of Common Stock of Issuer outstanding at the time of such sale. In
determining the market/offer price, the value of consideration other than cash
shall be determined by a nationally recognized investment banking firm selected
by the Holder or Owner, as the case may be, and reasonably acceptable to Issuer.
(b) The Holder and the Owner, as the case may be, may exercise its right to
require Issuer to repurchase the Option and any Option Shares pursuant to this
Section 7 by surrendering for such purpose to Issuer, at its principal office, a
copy of this Agreement or certificates for Option Shares, as applicable,
accompanied by a written notice or notices stating that the Holder or the Owner,
as the case may be, elects to require Issuer to repurchase this Option and/or
the Option Shares in accordance with the provisions of this Section 7. As
promptly as practicable, and in any event within five business days after the
surrender of the Option and/or certificates representing Option Shares and the
receipt of such notice or notices relating thereto, Issuer shall deliver or
cause to be delivered to the Holder the Option Repurchase Price and/or to the
Owner the Option Share Repurchase Price therefor or the portion thereof that
Issuer is not then prohibited under applicable law and regulation from so
delivering.
(c) To the extent that Issuer is prohibited under applicable law or
regulation, or as a consequence of administrative policy, from repurchasing the
Option and/or the Option Shares in full, Issuer shall immediately so notify the
Holder and/or the Owner and thereafter deliver or cause to be delivered, from
time to time, to the Holder and/or the Owner, as appropriate, the portion of the
Option Repurchase Price and the Option Share Repurchase Price, respectively,
that it is no longer prohibited from delivering, within five business days after
the date on which Issuer is no longer so prohibited; provided, however, that if
Issuer at any time after delivery of a notice of repurchase pursuant to
paragraph (b) of this Section 7 is prohibited under applicable law or
regulation, or as a consequence of administrative policy, from delivering to the
Holder and/or the Owner, as appropriate, the Option Repurchase Price and the
Option Share Repurchase Price, respectively, in full (and Issuer hereby
undertakes to use its reasonable best efforts to obtain all required regulatory
and legal approvals and to file any required notices as promptly as practicable
in order to accomplish such repurchase), the Holder or Owner may revoke its
notice of repurchase of the Option and/or the Option Shares whether in whole or
to the extent of the prohibition, whereupon, in the latter case, Issuer shall
promptly (i) deliver to the Holder and/or the Owner, as appropriate, that
portion of the Option Repurchase Price and/or the Option Share Repurchase Price
that Issuer is not prohibited from delivering; and (ii) deliver, as appropriate,
either (A) to the Holder, a new Agreement evidencing the right of the Holder to
purchase that number of shares of Common Stock obtained by multiplying the
number of shares of Common Stock for which the surrendered Agreement was
exercisable at the time of delivery of the notice of repurchase by a fraction,
the numerator of which is the Option Repurchase Price less the
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portion thereof theretofore delivered to the Holder and the denominator of which
is the Option Repurchase Price, and/or (B) to the Owner, a certificate for the
Option Shares it is then so prohibited from repurchasing. If an Exercise
Termination Event shall have occurred prior to the date of the notice by Issuer
described in the first sentence of this subsection (c), or shall be scheduled to
occur at any time before the expiration of a period ending on the thirtieth day
after such date, the Holder shall nonetheless have the right to exercise the
Option until the expiration of such 30-day period.
(d) For purposes of this Section 7, a "Repurchase Event" shall be deemed to
have occurred upon the occurrence of any of the following events or transactions
after the date hereof:
(i) the acquisition by any person (other than Grantee or any Grantee
Subsidiary) of beneficial ownership of 50% or more of the then outstanding
Common Stock; or
(ii) the consummation of any Acquisition Transaction described in
Section 2(b)(i) hereof, except that the percentage referred to in clause
(z) shall be 50%.
8. (a) In the event that prior to an Exercise Termination Event, Issuer
shall enter into an agreement (i) to consolidate with or merge into any person,
other than Grantee or a Grantee Subsidiary, or engage in a plan of exchange with
any person, other than Grantee or a Grantee Subsidiary and Issuer shall not be
the continuing or surviving corporation of such consolidation or merger or the
acquiror in such plan of exchange, (ii) to permit any person, other than Grantee
or a Grantee Subsidiary, to merge into Issuer or be acquired by Issuer in a plan
of exchange and Issuer shall be the continuing or surviving or acquiring
corporation, but, in connection with such merger or plan of exchange, the then
outstanding shares of Common Stock shall be changed into or exchanged for stock
or other securities of any other person or cash or any other property or the
then outstanding shares of Common Stock shall after such merger or plan of
exchange represent less than 50% of the outstanding shares and share equivalents
of the merged or acquiring company, or (iii) to sell or otherwise transfer all
or a substantial part of its or the Issuer Subsidiary's assets or deposits to
any person, other than Grantee or a Grantee Subsidiary, then, and in each such
case, the agreement governing such transaction shall make proper provision so
that the Option shall, upon the consummation of any such transaction and upon
the terms and conditions set forth herein, be converted into, or exchanged for,
an option (the "Substitute Option"), at the election of the Holder, of either
(x) the Acquiring Corporation (as hereinafter defined) or (y) any person that
controls the Acquiring Corporation.
(b) The following terms have the meanings indicated:
(i) "Acquiring Corporation" shall mean (i) the continuing or surviving
person of a consolidation or merger with Issuer (if other than Issuer),
(ii) the acquiring person in a plan of exchange in which Issuer is
acquired, (iii) the Issuer in a merger or plan of exchange in which Issuer
is the continuing or surviving or acquiring person, and (iv) the transferee
of all or a substantial part of Issuer's assets or deposits (or the assets
or deposits of the Issuer Subsidiary).
(ii) "Substitute Common Stock" shall mean the common stock issued by
the issuer of the Substitute Option upon exercise of the Substitute Option.
(iii) "Assigned Value" shall mean the market/offer price, as defined
in Section 7.
(iv) "Average Price" shall mean the average closing price of a share
of the Substitute Common Stock for one year immediately preceding the
consolidation, merger or sale in question, but in no event higher than the
closing price of the shares of Substitute Common Stock on the day preceding
such consolidation, merger or sale; provided that if Issuer is the issuer
of the Substitute Option, the Average Price shall be computed with respect
to a share of common stock issued by the person merging into Issuer or by
any company which controls or is controlled by such person, as the Holder
may elect.
(c) The Substitute Option shall have the same terms as the Option, provided
that if the terms of the Substitute Option cannot, for legal reasons, be the
same as the Option, such terms shall be as similar as possible and in no event
less advantageous to the Holder. The issuer of the Substitute Option shall also
enter into an agreement with the then Holder or Holders of the Substitute Option
in substantially the same form as this Agreement (after giving effect for such
purpose to the provisions of Section 9), which agreement shall be applicable to
the Substitute Option.
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(d) The Substitute Option shall be exercisable for such number of shares of
Substitute Common Stock as is equal to the Assigned Value multiplied by the
number of shares of Common Stock for which the Option was exercisable
immediately prior to the event described in the first sentence of Section 8(a),
divided by the Average Price. The exercise price of the Substitute Option per
share of Substitute Common Stock shall then be equal to the Option Price
multiplied by a fraction, the numerator of which shall be the number of shares
of Common Stock for which the Option was exercisable immediately prior to the
event described in the first sentence of Section 8(a) and the denominator of
which shall be the number of shares of Substitute Common Stock for which the
Substitute Option is exercisable.
(e) In no event, pursuant to any of the foregoing paragraphs, shall the
Substitute Option be exercisable for more than 19.9% of the shares of Substitute
Common Stock outstanding prior to exercise of the Substitute Option. In the
event that the Substitute Option would be exercisable for more than 19.9% of the
shares of Substitute Common Stock outstanding prior to exercise but for this
clause (e), the issuer of the Substitute Option (the "Substitute Option Issuer")
shall make a cash payment to Holder equal to the excess of (i) the value of the
Substitute Option without giving effect to the limitation in this clause (e)
over (ii) the value of the Substitute Option after giving effect to the
limitation in this clause (e). This difference in value shall be determined by a
nationally recognized investment banking firm selected by the Holder.
(f) Issuer shall not enter into any transaction described in subsection (a)
of this Section 8 unless the Acquiring Corporation and any person that controls
the Acquiring Corporation assume in writing all the obligations of Issuer
hereunder.
9. (a) At the request of the holder of the Substitute Option (the
"Substitute Option Holder"), the issuer of the Substitute Option (the
"Substitute Option Issuer") shall repurchase the Substitute Option from the
Substitute Option Holder at a price (the "Substitute Option Repurchase Price")
equal to the amount by which (i) the Highest Closing Price (as hereinafter
defined) exceeds (ii) the exercise price of the Substitute Option, multiplied by
the number of shares of Substitute Common Stock for which the Substitute Option
may then be exercised, and at the request of the owner (the "Substitute Share
Owner") of shares of Substitute Common Stock (the "Substitute Shares"), the
Substitute Option Issuer shall repurchase the Substitute Shares at a price (the
"Substitute Share Repurchase Price") equal to the Highest Closing Price
multiplied by the number of Substitute Shares so designated. The term "Highest
Closing Price" shall mean the highest closing price for shares of Substitute
Common Stock within the six-month period immediately preceding the date the
Substitute Option Holder gives notice of the required repurchase of the
Substitute Option or the Substitute Share Owner gives notice of the required
repurchase of the Substitute Shares, as applicable.
(b) The Substitute Option Holder and the Substitute Share Owner, as the
case may be, may exercise its respective rights to require the Substitute Option
Issuer to repurchase the Substitute Option and the Substitute Shares pursuant to
this Section 9 by surrendering for such purpose to the Substitute Option Issuer,
at its principal office, the agreement for such Substitute Option (or, in the
absence of such an agreement, a copy of this Agreement) and/or certificates for
Substitute Shares accompanied by a written notice or notices stating that the
Substitute Option Holder or the Substitute Share Owner, as the case may be,
elects to require the Substitute Option Issuer to repurchase the Substitute
Option and/or the Substitute Shares in accordance with the provisions of this
Section 9. As promptly as practicable and in any event within five business days
after the surrender of the Substitute Option and/or certificates representing
Substitute Shares and the receipt of such notice or notices relating thereto,
the Substitute Option Issuer shall deliver or cause to be delivered to the
Substitute Option Holder the Substitute Option Repurchase Price and/or to the
Substitute Share Owner the Substitute Share Repurchase Price therefor or the
portion thereof which the Substitute Option Issuer is not then prohibited under
applicable law and regulation from so delivering.
(c) To the extent that the Substitute Option Issuer is prohibited under
applicable law or regulation, or as a consequence of administrative policy, from
repurchasing the Substitute Option and/or the Substitute Shares in part or in
full, the Substitute Option Issuer shall immediately so notify the Substitute
Option Holder and/or the Substitute Share Owner and thereafter deliver or cause
to be delivered, from time to time, to the Substitute Option Holder and/or the
Substitute Share Owner, as appropriate, the portion of the Substitute Option
Repurchase Price and/or the Substitute Share Repurchase Price, respectively,
which it is no longer prohibited from delivering,
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within five (5) business days after the date on which the Substitute Option
Issuer is no longer so prohibited; provided, however, that if the Substitute
Option Issuer is at any time after delivery of a notice of repurchase pursuant
to subsection (b) of this Section 9 prohibited under applicable law or
regulation, or as a consequence of administrative policy, from delivering to the
Substitute Option Holder and/or the Substitute Share Owner, as appropriate, the
Substitute Option Repurchase Price and the Substitute Share Repurchase Price,
respectively, in full (and the Substitute Option Issuer shall use its reasonable
best efforts to receive all required regulatory and legal approvals as promptly
as practicable in order to accomplish such repurchase), the Substitute Option
Holder and/or Substitute Share Owner may revoke its notice of repurchase of the
Substitute Option or the Substitute Shares either in whole or to the extent of
prohibition, whereupon, in the latter case, the Substitute Option Issuer shall
promptly (i) deliver to the Substitute Option Holder or Substitute Share Owner,
as appropriate, that portion of the Substitute Option Repurchase Price or the
Substitute Share Repurchase Price that the Substitute Option Issuer is not
prohibited from delivering; and (ii) deliver, as appropriate, either (A) to the
Substitute Option Holder, a new Substitute Option evidencing the right of the
Substitute Option Holder to purchase that number of shares of the Substitute
Common Stock obtained by multiplying the number of shares of the Substitute
Common Stock for which the surrendered Substitute Option was exercisable at the
time of delivery of the notice of repurchase by a fraction, the numerator of
which is the Substitute Option Repurchase Price less the portion thereof
theretofore delivered to the Substitute Option Holder and the denominator of
which is the Substitute Option Repurchase Price, and/or (B) to the Substitute
Share Owner, a certificate for the Substitute Option Shares it is then so
prohibited from repurchasing. If an Exercise Termination Event shall have
occurred prior to the date of the notice by the Substitute Option Issuer
described in the first sentence of this subsection (c), or shall be scheduled to
occur at any time before the expiration of a period ending on the thirtieth day
after such date, the Substitute Option Holder shall nevertheless have the right
to exercise the Substitute Option until the expiration of such 30-day period.
10. The 30-day, 6-month, 12-month, 18-month or 24-month periods for
exercise of certain rights under Sections 2, 6, 7, 9, 12 and 14 shall be
extended: (i) to the extent necessary to obtain all regulatory approvals for the
exercise of such rights (for so long as the Holder, Owner, Substitute Option
Holder or Substitute Share Owner, as the case may be, is using commercially
reasonable efforts to obtain such regulatory approvals), and for the expiration
of all statutory waiting periods; and (ii) to the extent necessary to avoid
liability under Section 16(b) of the 1934 Act by reason of such exercise.
11. Issuer hereby represents and warrants to Grantee as follows:
(a) Issuer has full corporate power and authority to execute and deliver
this Agreement and to consummate the transactions contemplated hereby. The
execution and delivery of this Agreement and the consummation of the
transactions contemplated hereby have been duly and validly authorized by the
Issuer Board prior to the date hereof and no other corporate proceedings on the
part of Issuer are necessary to authorize this Agreement or to consummate the
transactions so contemplated. This Agreement has been duly and validly executed
and delivered by Issuer.
(b) Issuer has taken all necessary corporate action to authorize and
reserve and to permit it to issue, and at all times from the date hereof through
the termination of this Agreement in accordance with its terms will have
reserved for issuance upon the exercise of the Option, that number of shares of
Common Stock equal to the maximum number of shares of Common Stock at any time
and from time to time issuable hereunder, and all such shares, upon issuance
pursuant thereto, will be duly authorized, validly issued, fully paid,
nonassessable, and will be delivered free and clear of all claims, liens,
encumbrance and security interests and not subject to any preemptive rights.
12. Neither of the parties hereto may assign any of its rights or
obligations under this Agreement or the Option created hereunder to any other
person, without the express written consent of the other party, except that in
the event a Subsequent Triggering Event shall have occurred prior to an Exercise
Termination Event, Grantee, subject to the express provisions hereof, may assign
in whole or in part its rights and obligations hereunder; provided, however,
that until the date 15 days following the date on which the OTS has approved an
application by Grantee to acquire the shares of Common Stock subject to the
Option, Grantee may not assign its rights under the Option except in (i) a
widely dispersed public distribution, (ii) a private placement in which no one
party
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acquires the right to purchase in excess of 2% of the voting shares of Issuer,
(iii) an assignment to a single party (e.g., a broker or investment banker) for
the purpose of conducting a widely dispersed public distribution on Grantee's
behalf or (iv) any other manner approved by the OTS.
13. Each of Grantee and Issuer will use its reasonable best efforts to make
all filings with, and to obtain consents of, all third parties and governmental
authorities necessary to the consummation of the transactions contemplated by
this Agreement, including, without limitation, applying to the OTS under the
SLHCA for approval to acquire the shares issuable hereunder, but Grantee shall
not be obligated to apply to state banking authorities for approval to acquire
the shares of Common Stock issuable hereunder until such time, if ever, as it
deems appropriate to do so.
14. (a) Grantee may, at any time following a Repurchase Event and prior to
the occurrence of an Exercise Termination Event (or such later period as
provided in Section 10), relinquish the Option (together with any Option Shares
issued to and then owned by Grantee) to Issuer in exchange for a cash fee equal
to the Surrender Price; provided, however, that Grantee may not exercise its
rights pursuant to this Section 14 if Issuer has repurchased the Option (or any
portion thereof) or any Option Shares pursuant to Section 7. The "Surrender
Price" shall be equal to $30 million (i) plus, if applicable, Grantee's purchase
price with respect to any Option Shares and (ii) minus, if applicable, the
excess of (B) the net cash amounts, if any, received by Grantee pursuant to the
arms' length sale of Option Shares (or any other securities into which such
Option Shares were converted or exchanged) to any unaffiliated party, over (B)
Grantee's purchase price of such Option Shares.
(b) Grantee may exercise its right to relinquish the Option and any Option
Shares pursuant to this Section 14 by surrendering to Issuer, at its principal
office, a copy of this Agreement together with certificates for Option Shares,
if any, accompanied by a written notice stating (i) that Grantee elects to
relinquish the Option and Option Shares, if any, in accordance with the
provisions of this Section 14 and (ii) the Surrender Price. The Surrender Price
shall be payable in immediately available funds on or before the second business
day following receipt of such notice by Issuer.
(c) To the extent that Issuer is prohibited under applicable law or
regulation, or as a consequence of administrative policy, from paying the
Surrender Price to Grantee in full, Issuer shall immediately so notify Grantee
and thereafter deliver or cause to be delivered, from time to time, to Grantee,
the portion of the Surrender Price that it is no longer prohibited from paying,
within five business days after the date on which Issuer is no longer so
prohibited; provided, however, that if Issuer at any time after delivery of a
notice of surrender pursuant to paragraph (b) of this Section 14 is prohibited
under applicable law or regulation, or as a consequence of administrative
policy, from paying to Grantee the Surrender Price in full, (i) Issuer shall (A)
use its reasonable best efforts to obtain all required regulatory and legal
approvals and to file any required notices as promptly as practicable in order
to make such payments, (B) within five days of the submission or receipt of any
documents relating to any such regulatory and legal approvals, provide Grantee
with copies of the same, and (c) keep Grantee advised of both the status of any
such request for regulatory and legal approvals, as well as any discussions with
any relevant regulatory or other third party reasonably related to the same and
(ii) Grantee may revoke such notice of surrender by delivery of a notice of
revocation to Issuer and, upon delivery of such notice of revocation, the
Exercise Termination Date shall be extended to a date six months from the date
on which the Exercise Termination Date would have occurred if not for the
provisions of this Section 14(c) (during which period Grantee may exercise any
of its rights hereunder, including any and all rights pursuant to this Section
14).
15. The parties hereto acknowledge that damages would be an inadequate
remedy for a breach of this Agreement by either party hereto and that the
obligations of the parties hereto shall be enforceable by either party hereto
through injunctive or other equitable relief. In connection therewith both
parties waive the posting of any bond or similar requirement.
16. If any term, provision, covenant or restriction contained in this
Agreement is held by a court or a federal or state regulatory agency of
competent jurisdiction to be invalid, void or unenforceable, the remainder of
the terms, provisions and covenants and restrictions contained in this Agreement
shall remain in full force and effect, and shall in no way be affected, impaired
or invalidated. If for any reason such court or regulatory agency determines
that the Holder is not permitted to acquire, or Issuer is not permitted to
repurchase pursuant to Section 7, the full number of shares of Common Stock
provided in Section 1(a) hereof (as adjusted pursuant to
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Section 1(b) or Section 5 hereof), it is the express intention of Issuer to
allow the Holder to acquire or to require Issuer to repurchase such lesser
number of shares as may be permissible, without any amendment or modification
hereof.
17. All notices, requests, claims, demands and other communications
hereunder shall be deemed to have been duly given when delivered in person, by
fax, telecopy, or by registered or certified mail (postage prepaid, return
receipt requested) at the respective addresses of the parties set forth in the
Merger Agreement.
18. This Agreement shall be governed by and construed in accordance with
the laws of the State of Delaware, without regard to the conflict of law
principles thereof (except to the extent that mandatory provisions of Federal
law are applicable).
19. This Agreement may be executed in two or more counterparts, each of
which shall be deemed to be an original, but all of which shall constitute one
and the same agreement.
20. Except as otherwise expressly provided herein, each of the parties
hereto shall bear and pay all costs and expenses incurred by it or on its behalf
in connection with the transactions contemplated hereunder, including fees and
expenses of its own financial consultants, investment bankers, accountants and
counsel.
21. Except as otherwise expressly provided herein or in the Merger
Agreement, this Agreement contains the entire agreement between the parties with
respect to the transactions contemplated hereunder and supersedes all prior
arrangements or understandings with respect thereof, written or oral. The terms
and conditions of this Agreement shall inure to the benefit of and be binding
upon the parties hereto and their respective successors and permitted assignees.
Nothing in this Agreement, expressed or implied, is intended to confer upon any
party, other than the parties hereto, and their respective successors except as
assignees, any rights, remedies, obligations or liabilities under or by reason
of this Agreement, except as expressly provided herein.
22. Capitalized terms used in this Agreement and not defined herein shall
have the meanings assigned thereto in the Merger Agreement.
23. Grantee agrees that for so long as this Option Agreement is in effect
and for a period of one year following the termination of this Option Agreement
pursuant to Section 2(a) hereof, Grantee shall not seek to engage in an
Acquisition Transaction with Issuer or an Issuer Subsidiary absent the approval
of Issuer's Board of Directors.
IN WITNESS WHEREOF, each of the parties has caused this Agreement to be
executed on its behalf by its officers thereunto duly authorized, all as of the
date first above written.
FIFTH THIRD BANCORP
By: /s/ GEORGE A. SCHAEFER, JR.
------------------------------------
Its: President and Chief Executive
Officer
------------------------------------
CITFED BANCORP, INC.
By: /s/ JERRY L. KIRBY
------------------------------------
Its: President and CEO
------------------------------------
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ANNEX C
FAIRNESS OPINION OF KEEFE, BRUYETTE AND WOODS, INC.
April , 1998
Board of Directors
CitFed Bancorp, Inc.
One Citizens Federal Centre
Dayton, OH 45402
Members of the Board:
You have requested our opinion as investment bankers as to the fairness,
from a financial point of view, to the common stockholders of CitFed Bancorp
Inc. ("CitFed Bancorp") of the consideration to be received by such stockholders
in the proposed merger (the "Merger") of CitFed Bancorp with and into Fifth
Third Bancorp. ("Fifth Third"), pursuant to the Affiliation Agreement
("Agreement") dated as of January 13, 1998, between CitFed Bancorp and Fifth
Third (the "Agreement"). Under the terms of the Merger, stockholders of CitFed
Bancorp will receive 1.005 shares of Fifth Third's common stock, subject to
adjustment as described in the Agreement (the "Exchange Ratio") for each of
their shares of common stock, par value $.01 per share of CitFed Bancorp. It is
our understanding that the Merger will be accounted for as a pooling accounting
transaction under generally accepted accounting practices.
Keefe, Bruyette & Woods, Inc. as part of its investment banking business,
is continually engaged in the valuation of banking businesses and their
securities in connection with mergers and acquisitions, negotiated
underwritings, competitive biddings, secondary distributions of listed and
unlisted securities, private placements and valuations for estate, corporate and
other purposes. As specialists in the securities of banking companies, we have
experience in, and knowledge of, the valuation of banking enterprises. In the
ordinary course of our business as a broker-dealer, we may, from time to time,
purchase securities from, and sell securities to, CitFed Bancorp and Fifth Third
and as a market maker in securities we may from time to time have a long or
short position in, and buy or sell, debt or equity securities of CitFed Bancorp
and Fifth Third for our own account and for the accounts of our customers. We
have acted exclusively for the Board of Directors of CitFed Bancorp in rendering
this fairness opinion and will receive a fee from CitFed Bancorp for our
services.
In rendering our opinion, we have (i) reviewed, among other things, the
Affiliation Agreement, Annual Reports to stockholders and Annual Reports on Form
10-K of CitFed Bancorp for the four years ended March 31, 1997 and Annual
Reports to stock holders and Annual Reports on Form 10-K of Fifth Third for the
four years ended December 31, 1996, certain interim reports to stockholders and
Quarterly Reports on Form 10-Q of CitFed Bancorp and certain interim reports and
Quarterly Reports on Form 10-Q of Fifth Third and certain internal financial
analyses and forecasts for CitFed Bancorp prepared by management; (ii) held
discussions with members of senior management of CitFed Bancorp and Fifth Third
regarding past and current business operations, regulatory relationships,
financial condition and future prospects of the respective companies; (iii)
compared certain financial and stock market information for Fifth Third with
similar information for certain other companies the securities of which are
publicly traded; (iv) reviewed the financial terms of certain recent business
combinations in the savings industry; and (v) performed such other studies and
analyses as we considered appropriate.
<PAGE> 110
CitFed Bancorp Inc.
Board of Directors
Page 2
In conducting our review and arriving at our opinion, we have relied upon
and assumed the accuracy and completeness of all of the financial and other
information provided to us or publicly available and we have not assumed any
responsibility for independently verifying any of such information. We have
relied upon the management of CitFed Bancorp as to the reasonableness and
achievability of the financial and operating forecasts and projections (and the
assumptions and bases therefor) provided to us, and we have assumed that such
forecasts and projections reflect the best currently available estimates and
judgments of CitFed Bancorp and that such forecasts and projections will be
realized in the amounts and in the time periods currently estimated by such
management. We have also assumed, without independent verification, that the
aggregate allowances for loan losses for CitFed Bancorp and Fifth Third are
adequate to cover such losses. In rendering our opinion, we have not made or
obtained any evaluations or appraisals of the property of CitFed Bancorp or
Fifth Third, nor have we examined any individual credit files.
We have considered such financial and other factors as we have deemed
appropriate under the circumstances, including among others the following: (i)
the historical and current financial position and results of operations of
CitFed Bancorp and Fifth Third; (ii) the assets and liabilities of CitFed
Bancorp and Fifth Third; and (iii) the nature and terms of certain other merger
transactions involving thrift and bank holding companies. We have also taken
into account our assessment of general economic, market and financial conditions
and our experience in other transactions, as well as our experience in
securities valuation and our knowledge of the banking industry generally. Our
opinion is necessarily based upon conditions as they exist and can be evaluated
on the date hereof and the information made available to us through the date
hereof.
Based upon and subject to the foregoing, it is our opinion that, as of the
date hereof, the Exchange Ratio is fair, from a financial point of view, to the
common stockholders of CitFed Bancorp.
Very truly yours,
KEEFE, BRUYETTE & WOODS, INC.
<PAGE> 111
INFORMATION NOT REQUIRED IN PROSPECTUS
INDEMNIFICATION OF DIRECTORS AND OFFICERS
Section 1701.13(E) of the Ohio Revised Code provides that a corporation may
indemnify or agree to indemnify any person who was or is a party, or is
threatened to be made a party, to any threatened, pending, or completed action,
suit, or proceeding, whether civil, criminal, administrative, or investigative,
other than an action by or in the right of the corporation, by reason of the
fact that he is or was a director, officer, employee, or agent of the
corporation, or is or was serving at the request of the corporation as a
director, trustee, officer, employee, member, manager, or agent of another
corporation, domestic or foreign, nonprofit or for profit, a limited liability
company, or a partnership, joint venture, trust, or other enterprise, against
expenses, including attorney's fees, judgments, fines, and amounts paid in
settlement actually and reasonably incurred by him in connection with such
action, suit, or proceeding, if he acted in good faith and in a manner he
reasonably believed to be in or not opposed to the best interests of the
corporation, and, with respect to any criminal action or proceeding, if he had
no reasonable cause to believe his conduct was unlawful. The termination of any
action, suit, or proceeding by judgment, order, settlement, or conviction, or
upon a plea of nolo contendere or its equivalent, shall not, of itself, create a
presumption that the person did not act in good faith and in a manner he
reasonably believed to be in or not opposed to the best interests of the
corporation, and, with respect to any criminal action or proceeding, that he had
reasonable cause to believe that his conduct was unlawful. Section 1701.13(E)(2)
further specifies that a corporation may indemnify or agree to indemnify any
person who was or is a party, or is threatened to be made a party, to any
threatened, pending, or completed action or suit by or in the right of the
corporation to procure a judgment in its favor, by reason of the fact that he is
or was a director, officer, employee, or agent of the corporation, or is or was
serving at the request of the corporation as a director, trustee, officer,
employee, member, manager, or agent of another corporation, domestic or foreign,
nonprofit or for profit, a limited liability company, or a partnership, joint
venture, trust, or other enterprise, against expenses, including attorney's
fees, actually and reasonably incurred by him in connection with the defense or
settlement of such action or suit, if he acted in good faith and in a manner he
reasonably believed to be in or not opposed to the best interests of the
corporation, except that no indemnification shall be made in respect of (a) any
claim, issue, or matter as to which such person shall have been adjudged to be
liable for negligence or misconduct in the performance of his duty to the
corporation unless, and only to the extent, that the court of common pleas or
the court in which such action or suit was brought determines, upon application,
that, despite the adjudication of liability, but in view of all the
circumstances of the case, such person is fairly and reasonably entitled to
indemnity for such expenses as the court of common pleas or such other court
shall deem proper, and (b) any action or suit in which the only liability
asserted against a director is pursuant to Section 1701.95 of the Ohio Revised
Code concerning unlawful loans, dividends and distribution of assets. In
addition, Section 1701.13(E) requires a corporation to pay any expenses,
including attorney's fees, of a director in defending an action, suit, or
proceeding referred to above as they are incurred, in advance of the final
disposition of the action, suit, or proceeding, upon receipt of an undertaking
by or on behalf of the director in which he agrees to both (i) repay such amount
if it is proved by clear and convincing evidence that his action or failure to
act involved an act or omission undertaken with deliberate intent to cause
injury to the corporation or undertaken with reckless disregard for the best
interests of the corporation and (ii) reasonably cooperate with the corporation
concerning the action, suit, or proceeding. The indemnification provided by
Section 1701.13(E) shall not be deemed exclusive of any other rights to which
those seeking indemnification may be entitled under the Second Amended Articles
of Incorporation or Code of Regulations of Fifth Third.
The Code of Regulations of Fifth Third provides that Fifth Third shall
indemnify each director and each officer of Fifth Third, and each person
employed by Fifth Third who serves at the written request of the President of
Fifth Third as a director, trustee, officer, employee or agent of another
corporation, domestic or foreign, nonprofit or for profit, to the full extent
permitted by Ohio law. Fifth Third may indemnify assistant officers, employees
and others by action of the Board of Directors to the extent permitted by Ohio
law.
Fifth Third carries directors' and officers' liability insurance coverage
which insures its directors and officers and the directors and officers of its
subsidiaries in certain circumstances.
II-1
<PAGE> 112
EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
<TABLE>
<CAPTION>
PAGE NUMBER IN SEQUENTIAL
DOCUMENT EXHIBIT NUMBERING SYSTEM
-------- ------- -------------------------
<S> <C> <C>
Affiliation Agreement (excluding exhibits) and related
Agreement of Merger, both dated as of January 13, 1998
by and between Fifth Third Bancorp and CitFed Bancorp,
Inc. (set forth in Annex A to the Proxy
Statement/Prospectus included in this Registration
Statement).............................................. 2.1 Included in Annex A
Affiliation Agreement (excluding exhibits) and related
Agreement of Merger, both dated as of January 2, 1998 by
and between Fifth Third Bancorp and State Savings
Company................................................. 2.2 Incorporated by Reference(1)
Seconded Amended Articles of Incorporation of Fifth
Third Bancorp, as amended............................... 3.1 Incorporated by Reference(2)
Code of Regulations of Fifth Third Bancorp, as
amended................................................. 3.2 Incorporated by Reference(2)
Stock Option Agreement (excluding exhibits) dated as of
January 13, 1998 between CitFed Bancorp, Inc., as issuer
and Fifth Third Bancorp, as grantee (set forth in Annex
B to the Proxy Statement/Prospectus, included in this
Registration Statement)................................. 4 Included in Annex B
Opinion of counsel employed by Fifth Third Bancorp as to
the legality of the securities being issued............. 5
Fifth Third Bancorp 1982 Stock Option Plan.............. 10.1 Incorporated by Reference(3)
Fifth Third Bancorp 1987 Stock Option Plan.............. 10.2 Incorporated by Reference(4)
Fifth Third Bancorp Unfunded Deferred Compensation Plan
for Non-Employee Directors.............................. 10.3 Incorporated by Reference(5)
Fifth Third Bancorp Nonqualified Deferred Compensation
Plan.................................................... 10.4 Incorporated by Reference(6)
Fifth Third Bancorp 1990 Stock Option Plan.............. 10.5 Incorporated by Reference(7)
Fifth Third Bancorp Variable Compensation Plan.......... 10.6 Incorporated by Reference(8)
Fifth Third Bancorp 1998 Long-Term Incentive Stock
Plan.................................................... 10.7 Incorporated by Reference(8)
Form of Employment Agreement between Fifth Third Bancorp
and Jerry L. Kirby...................................... 10.8
Form of Employment Agreement between Fifth Third Bancorp
and David E. Reese...................................... 10.9 Incorporated by Reference(1)
Form of Employment Agreement between Fifth Third Bancorp
and Donald B. Shackelford............................... 10.10 Incorporated by Reference(1)
1997 Annual Report to Stockholders of Fifth Third
Bancorp................................................. 13 Incorporated by Reference
Subsidiaries of Fifth Third Bancorp..................... 21 Incorporated by Reference(8)
Consent of Deloitte & Touche LLP (with respect to Fifth
Third Bancorp).......................................... 23.1
Consent of Deloitte & Touche LLP (with respect to CitFed
Bancorp, Inc.).......................................... 23.2
Consent of Keefe, Bruyette & Woods, Inc. ............... 23.3
Consent of counsel employed by Fifth Third Bancorp...... 23.5 Included in Exhibit 5
A power of attorney where various individuals authorize
the signing of their names to any and all amendments to
this Registration Statement and other documents
submitted in connection herewith........................ 24 *
Fairness Opinion of Keefe, Bruyette & Woods, Inc. (set
forth in Annex C to the Proxy Statement/Prospectus
included in this Registration Statement)................ 99.1 Included in Annex C
Form of Proxy Card...................................... 99.2
Form of Letter to CitFed Bancorp Stockholders........... 99.3
Form of Notice of Special Meeting of CitFed Bancorp
Stockholders.......................................... 99.4
</TABLE>
II-2
<PAGE> 113
<TABLE>
<CAPTION>
PAGE NUMBER IN SEQUENTIAL
DOCUMENT EXHIBIT NUMBERING SYSTEM
-------- ------- -------------------------
<S> <C> <C>
Consent of Jerry L. Kirby............................... 99.5
Consent of Allen M. Hill................................ 99.6
</TABLE>
- ---------------
* Previously filed.
(1) Filed with the Securities and Exchange Commission as an exhibit to a
Registration Statement on Form S-4, Registration No. 333-48033.
(2) Filed with the Securities and Exchange Commission as an exhibit to a
Registration Statement on Form S-4, Registration No. 33-63966.
(3) Filed with the Securities and Exchange Commission as an exhibit to a
Registration Statement on Form S-2, Registration No. 2-98550.
(4) Filed with the Securities and Exchange Commission as an exhibit to a
Registration Statement on Form S-2, Registration No. 33-13252.
(5) Incorporated by reference to the Registrant's Annual Report on Form 10-K
filed for the year ended December 31, 1985.
(6) Filed with the Securities and Exchange Commission as Exhibit 10.4 to a
Registration Statement on Form S-4, Registration No. 33-21139.
(7) Filed with the Securities and Exchange Commission as an exhibit to a
Registration Statement on Form S-8, Registration No. 33-34075.
(8) Incorporated by reference to the Registrant's Proxy Statement dated February
9, 1998.
(9) Incorporated by reference to the Registrant's Annual Report on Form 10-K
filed for the year ended December 31, 1997.
UNDERTAKINGS
(1) The undersigned registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act of 1933, each filing of the
registrant's annual report pursuant to section 13(a) or section 15(d) of the
Securities Exchange Act of 1934 (and, where applicable, each filing of an
employee benefit plan's annual report pursuant to section 15(d) of the
Securities Exchange Act of 1934) that is incorporated by reference in the
registration statement shall be deemed to be a new registration statement
relating to the securities offered therein, and the offering of such securities
at that time shall be deemed to be the initial bona fide offering thereof.
(2) The undersigned registrant hereby undertakes as follows: that prior to
any public reoffering of the securities registered hereunder through use of a
prospectus which is part of this registration statement, by any person or party
who is deemed to be an underwriter within the meaning of Rule 145(c), the issuer
undertakes that such reoffering prospectus will contain the information called
for by the applicable registration form with respect to reofferings by persons
who may be deemed underwriters, in addition to the information called for by the
other Items of the applicable form.
(3) The registrant undertakes that every prospectus (i) that is filed
pursuant to paragraph (2) immediately preceding, or (ii) that purports to meet
the requirements of section 10(a)(3) of the Securities Act of 1933 and is used
in connection with an offering of securities subject to Rule 415, will be filed
as a part of an amendment to the registration statement and will not be used
until such amendment is effective, and that, for purposes of determining any
liability under the Securities Act of 1933, each such post-effective amendment
shall be deemed to be a new registration statement relating to the securities
offered therein, and the offering of such securities at that time shall be
deemed to be the initial bona fide offering thereof.
(4) Insofar as indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to directors, officers and controlling persons of
the registrant pursuant to the foregoing provisions, or otherwise, the
registrant has been advised that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as expressed in the
Securities Act of 1933 and is, therefore, unenforceable. In the event that a
claim for indemnification against such liabilities (other than the payment by
the registrant of expenses incurred or paid by a director, officer or
controlling person of the registrant in the successful defense of any
II-3
<PAGE> 114
action, suit or proceeding) is asserted by such director, officer or controlling
person in connection with the securities being registered, the registrant will,
unless in the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question whether
such indemnification by it is against public policy as expressed in the
Securities Act of 1933 and will be governed by the final adjudication of such
issue.
(5) The undersigned Registrant hereby undertakes to supply by means of a
post-effective amendment all information concerning a transaction, and the
company being acquired involved therein, that was not the subject of and
included in the registration statement when it became effective.
(6) The undersigned Registrant hereby undertakes to deliver or cause to be
delivered with the prospectus, to each person to whom the prospectus is sent or
given, the latest annual report to security holders that is incorporated by
reference in the prospectus and furnished pursuant to and meeting the
requirements of Rule 14a-3 or Rule 14c-3 under the Securities Exchange Act of
1934; and, where interim financial information required to be presented by
Article 3 of Regulation S-X are not set forth in the prospectus, to deliver, or
cause to be delivered to each person to whom the prospectus is sent or given,
the latest quarterly report that is specifically incorporated by reference in
the prospectus to provide such interim financial information.
(7) The undersigned Registrant hereby undertakes to respond to requests for
information that is incorporated by reference into the prospectus pursuant to
Items 4, 10(b), 11 or 13 of this Form within one business day of receipt of such
request, and to send the incorporated documents by first class mail or other
equally prompt means. This includes information contained in documents filed
subsequent to the effective date of the registration statement through the date
of responding to the request.
II-4
<PAGE> 115
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
certifies that it has reasonable grounds to believe that it meets all the
requirements for filing on Form S-4, and has duly caused this Amendment No. 1 to
Registration Statement No. 333-48049 to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of Cincinnati, State of
Ohio, on April 2, 1998.
FIFTH THIRD BANCORP
/s/ GEORGE A. SCHAEFER, JR.
--------------------------------------
By: George A. Schaefer, Jr.
President and Chief Executive Officer
Pursuant to the requirements of the Securities Act of 1933, this Amendment
No. 1 to Registration Statement No. 333-48049 has been signed by the following
persons in the capacities and on the dates indicated.
<TABLE>
<C> <S>
Principal Executive Officer:
/s/ GEORGE A. SCHAEFER, JR. Date: April 2, 1998
- -----------------------------------------------------
George A. Schaefer, Jr.
President and Chief Executive Officer
Principal Financial Officer:
/s/ NEAL E. ARNOLD Date: April 2, 1998
- -----------------------------------------------------
Neal E. Arnold
Chief Financial Officer and Treasurer
Principal Accounting Officer:
/s/ ROGER W. DEAN Date: April 2, 1998
- -----------------------------------------------------
Roger W. Dean
Controller
</TABLE>
II-5
<PAGE> 116
<TABLE>
<C> <S>
Directors of the Company:
/s/ DARRYL F. ALLEN* Date: April 2, 1998
- ------------------------------------------------------
Darryl F. Allen
Date:
- ------------------------------------------------------
John F. Barrett
Date:
- ------------------------------------------------------
Milton C. Boesel, Jr.
/s/ GERALD V. DIRVIN* Date: April 2, 1998
- ------------------------------------------------------
Gerald V. Dirvin
/s/ THOMAS B. DONNELL* Date: April 2, 1998
- ------------------------------------------------------
Thomas B. Donnell
/s/ RICHARD T. FARMER* Date: April 2, 1998
- ------------------------------------------------------
Richard T. Farmer
/s/ IVAN W. GORR* Date: April 2, 1998
- ------------------------------------------------------
Ivan W. Gorr
/s/ JOSEPH H. HEAD, JR.* Date: April 2, 1998
- ------------------------------------------------------
Joseph H. Head, Jr.
/s/ JOAN R. HERSCHEDE* Date: April 2, 1998
- ------------------------------------------------------
Joan R. Herschede
/s/ WILLIAM G. KAGLER* Date: April 2, 1998
- ------------------------------------------------------
William G. Kagler
/s/ JAMES D. KIGGEN* Date: April 2, 1998
- ------------------------------------------------------
James D. Kiggen
</TABLE>
II-6
<PAGE> 117
<TABLE>
<C> <S>
/s/ MITCHEL LIVINGSTON* Date: April 2, 1998
- ------------------------------------------------------
Mitchel Livingston
/s/ ROBERT B. MORGAN* Date: April 2, 1998
- ------------------------------------------------------
Robert B. Morgan
/s/ JAMES E. ROGERS* Date: April 2, 1998
- ------------------------------------------------------
James E. Rogers
/s/ BRIAN H. ROWE* Date: April 2, 1998
- ------------------------------------------------------
Brian H. Rowe
/s/ GEORGE A. SCHAEFER, JR. Date: April 2, 1998
- ------------------------------------------------------
George A. Schaefer, Jr.
/s/ JOHN J. SCHIFF, JR.* Date: April 2, 1998
- ------------------------------------------------------
John J. Schiff, Jr.
/s/ DENNIS J. SULLIVAN, JR.* Date: April 2, 1998
- ------------------------------------------------------
Dennis J. Sullivan, Jr.
/s/ DUDLEY S. TAFT* Date: April 2, 1998
- ------------------------------------------------------
Dudley S. Taft
*By /s/ GEORGE A. SCHAEFER, JR.
- ------------------------------------------------------
George A. Schaefer, Jr.
as attorney-in-fact pursuant
to a power of attorney
previously filed
</TABLE>
II-7
<PAGE> 1
EXHIBIT 5
FIFTH THIRD BANCORP
April 2, 1998
Fifth Third Bancorp
38 Fountain Square Plaza
Cincinnati, Ohio 45263
RE: Issuance of 16,500,000 Shares of Common Stock of Fifth Third Bancorp
Pursuant to Registration Statement on Form S-4 (File No. 333-48049)
filed with the Securities and Exchange Commission
-------------------------------------------------
Gentlemen:
I have acted as counsel to Fifth Third Bancorp, an Ohio corporation
(the "Company"), in connection with the issuance of up to 16,500,000 Shares of
Common Stock pursuant to the merger of CitFed Bancorp, Inc. with and into the
Company (the "Merger"), as set forth in the Form S-4 Registration Statement
(File No. 333-48049), as amended (the "Registration Statement"), filed by the
Company with the Securities and Exchange Commission.
As counsel for the Company I have made such legal and factual
examinations and inquiries as I deem advisable for the purpose of rendering this
opinion. In addition, I have examined such documents and materials, including
the Certificate of Incorporation, Bylaws, and other corporate records of the
Company, as I have deemed necessary for the purpose of this opinion.
On the basis of the foregoing, I express the opinion that the
16,500,000 Shares of Common Stock of the Company registered for issuance
pursuant to the Registration Statement, or such lesser number of Shares as may
be actually issued by the Company in connection with the Merger and/or the
acquisition, currently are validly authorized and, when issued as contemplated
by the Registration Statement, will be legally issued, fully paid and
nonassessable shares of Common Stock of the Company.
<PAGE> 2
I hereby consent to the filing of this opinion as part of the
above-referenced Registration Statement and amendments thereto and to the
reference to me in the Prospectus Information Statement under the caption "Legal
Matters."
Very truly yours,
FIFTH THIRD BANCORP
By: /s/ Paul L. Reynolds
--------------------------
Paul L. Reynolds, Counsel
<PAGE> 1
EXHIBIT 10.8
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT (the "Agreement") is made and entered into as of ,
1998, by and between FIFTH THIRD BANCORP, an Ohio corporation (the "Company")
and JERRY L. KIRBY (the "Employee").
W I T N E S S E T H :
WHEREAS, the services of the Employee are of a special, unique and unusual
character which gives them distinctive value and the Company desires that the
Employee continue after the merger of CitFed Bancorp, Inc. ("CitFed") into the
Company to render services to the Company, in accordance with the terms and
conditions set forth herein; and,
WHEREAS, the Employee desires to be employed by the Company pursuant to the
terms of this Agreement.
NOW, THEREFORE, in consideration of the premises and of the mutual benefits and
covenants contained herein, it is hereby agreed as follows:
1. EMPLOYMENT. The Company hereby employs the Employee and the Employee
hereby accepts employment with the Company, all in accordance with the
terms and conditions hereof on the date hereof (the "Effective Date")
and expiring on the date three (3) years from the Effective Date (the
"Expiration Date") or the Employee's employment with the Company is
terminated as hereinafter provided. The term of the Employee's
employment as set forth above is referred to herein as the "Employment
Period".
2. DUTIES.
2.1 During the Employment Period, the Employee shall be employed by the
Company in the position of Chairman, The Fifth Third Bank of Western
Ohio (the "Bank") and shall be subject to the general supervision,
direction and control of the Board of Directors of the Company (the
"Board"). The Employee shall also be appointed as a director of the
Company and as a director of The Fifth Third Bank of Western Ohio. The
Employee shall perform such duties as are customary and appropriate in
such capacities or offices.
2.2 During the Employment Period, the Employee shall devote Employee's
substantial business time, energies, attention and ability to the
business of the Company, and shall faithfully and diligently perform the
duties of Employee's employment with the Company and of any office or
offices held by Employee in the Company, provided that there shall be no
set time or minimum time during which Employee shall perform such
services. It is understood and agreed that, without prior written
approval from the Board (which approval shall not be unreasonably
withheld), the Employee may
<PAGE> 2
not engage in any other business activities during the period of
Employee's employment by the Company, whether or not for profit or other
pecuniary advantage. Notwithstanding the foregoing, (a) nothing
contained in this Section 2.2 shall preclude the Employee from any
investment or activity that existed at the time of this Agreement and
which was disclosed by the Employee to the Company; (b) the Employee may
make personal financial investments after the date of this Agreement
which do not involve any active participation on Employee's part if such
investments are made in compliance with Section 5.2 below, and (c) the
Employee may engage in charitable, educational, religious, civic, trade
associations and similar types of activities, and (d) the Employee may
serve on the board of directors of such other entities as may be
approved by the Board; provided, however, that any such activities
described in item (c) above must be reported promptly to the Board, and
any such activities described in items (c) and (d) above (i) must not
interfere with the business of the Company or any Affiliate (as defined
in Section 2.3 below) or the performance of the Employee's duties under
this Agreement, and (ii) must not conflict with the Company's or any
Affiliate's policies concerning conflicts of interest. Any director's or
other fees received by the Employee related to activities described in
(a) and (d) above may be retained by such Employee.
2.3 For purposes of this Agreement, an "Affiliate" of any person shall
mean any other person directly or indirectly controlling or controlled
by or under direct or indirect common control with such specified
person. For the purposes of this definition, "control" when used with
respect to any specified person means the power to direct the management
and policies of such person, directly or indirectly, whether through the
ownership of voting securities, by contract or otherwise; and the terms
"controlling" and "controlled" have meanings correlative to the
foregoing. The term "person", for purposes of this definition, shall
include any corporation, partnership, limited liability company, trust
or other entity but shall not include any individual. The Employee
acknowledges that all references to an "Affiliate" of the Company shall
include, without limitation, any of its direct or indirect wholly owned
or majority-owned subsidiaries.
3. COMPENSATION.
3.1 As consideration for the services that the Employee shall render
hereunder, the Employee shall be entitled to the following, subject to
the provisions of Section 4:
(a) Annual Salary - During the Employment Period Employee will
receive an annual salary of $550,000 ("Annual Base
Salary"). The Annual Base Salary will be payable in
accordance with the standard payroll practices of the
Company.
-2-
<PAGE> 3
(b) Annual Bonus - During the Employment Period Employee will
receive from the Company an annual bonus of $150,000.
(c) Incentive Award - On the Effective Date, the Company will
grant the Employee an option to acquire 75,000 shares of
the Company's stock (an "Option") pursuant to the terms of
the Company's existing Stock Option Plan. The Option will
have an exercise price equal to the fair market value of
the stock subject thereto on the date of grant, will vest
in four equal installments over a three year period and
will vest immediately in the event of termination of this
Agreement or termination of the employment of the Employee
for any reason other than Termination for Cause or
resignation of the Employee (other than Resignation for
Good Reason). To the extent vested, the Option will remain
exercisable until ten (10) years from the date of grant,
notwithstanding termination of the employment of the
Employee for any reason other than Termination for Cause
and notwithstanding any provision of such Plan.
(d) Retirement Benefit - The Company shall provide a
Retirement Benefit to the Employee that will provide an
annual benefit equal to 17% of the Employee's Annual
Salary and Annual Bonus. The Employee shall be paid from
the Retirement Benefit after the Expiration Date, or upon
termination of employment for any reason if earlier.
Employee shall be paid the annual Retirement Benefit on
such terms as may be selected by the Employee for his life
(and if selected by Employee, for the life of his
surviving spouse with appropriate reduction in the annual
payment to result in the same present value). If this
Agreement terminates pursuant to the resignation of the
Employee (other than for Resignation for Good Reason
pursuant to Section 4.4) or pursuant to Section 4.3
(Termination for Cause) hereof, the then present value of
Employee's Retirement Benefit as set forth in this Section
3.1(d) will be reduced by a percentage equal to the
percentage of the Employment Period remaining at the time
of termination. The reduction described in the preceding
sentence shall not occur in any circumstance other than
such a resignation or Termination for Cause. The
Retirement Benefit payable to Employee under this Section
3.1(d) shall be in addition to (and shall not be offset
by) any benefit payable from any retirement or deferred
compensation plan maintained by the Company or previously
maintained by CitFed or its affiliates.
(e) The Employee shall be entitled to participate on a
non-discriminatory basis with all other similarly situated
employees of the Company, in any 401(k), insurance or
medical insurance plan, or other benefit plan adopted by
the Company, or an Affiliate of the Company and in effect
from time to time, including, without limitation the
Company's Master Profit Sharing Plan (the
<PAGE> 4
"Profit Sharing Plan"), to the extent that such plan is
made available to similarly situated employees of the
Company and the Employee is eligible to participate in
such plan under the applicable provisions thereof.
Notwithstanding any other provision of this Agreement,
in the event that the vested contribution to the
Employee under the Profit Sharing Plan does not equal or
exceed at least 14% of the total of the Employee's Base
Salary and Bonus for the prior year, the Company will
provide Employee with an additional benefit such that
the total vested benefit provided to Employee with
respect to the Profit Sharing Plan and such additional
benefit totals at least 14% of Employee's Base Salary
and Bonus for the prior year.
(f) The Employee shall be entitled to participate in any
benefit plan or program made available to senior
management employees and/or directors of the Company, in
accordance with the terms and conditions of such plan or
program.
(g) Notwithstanding any provision contained herein or in the
Affiliation Agreement, except for benefits under any
severance plan and/or change-in-control agreement which
have been fully paid and satisfied, the Employee shall
retain any benefit that he had accrued under any employee
benefit plan sponsored by CitFed or any of its affiliates
as of the day preceding the Effective Time (as defined in
the Affiliation Agreement between the Company and CitFed
dated as of January 13, 1998 (the "Affiliation
Agreement")). By way of example, and not by way of
limitation, the Employee shall be entitled to all pension,
retirement and/or deferred compensation accrued under such
plans or as of such date and Employee shall specifically,
without limitation, be entitled to all post-retirement
health benefits provided in the Supplemental Executive
Retirement Plan maintained by CitFed prior to the date
hereof.
3.2 The Employee shall be entitled to reimbursement privileges with
respect to reasonable business expenses in accordance with the
Company's standard reimbursement policy for employees of the Company.
3.3 The Employee agrees that, unless otherwise approved in writing by
the Board, the Employee shall not receive any additional compensation
for serving as an officer or director of the Company.
4. TERMINATION. Employment under this Agreement shall terminate prior to
the Expiration Date upon the occurrence of any of the following events:
4.1 MUTUAL AGREEMENT. The parties mutually agree to the termination of
the Employee's employment with the Company under this Agreement. In the
event of
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<PAGE> 5
such termination (other than pursuant to the sole decision of Employee
to resign other than a Resignation for Good Reason pursuant to Section
4.4) the parties shall mutually agree as to the treatment of
compensation and benefits to be paid hereunder.
4.2 DEATH OR TOTAL DISABILITY.
(a) The Employee's employment with the Company under this
Agreement shall terminate in the event of the death or Total
Disability (as defined below) of the Employee.
(b) The Employee's right to receive Annual Salary under
Section 3.1(a) shall terminate at the end of the month during
which death or Total Disability occurs; provided, however,
that whether or not a Total Disability of the Employee shall
have occurred, any payments pursuant to a salary continuation
or disability insurance plan of the Company shall be deducted
from any salary which may otherwise be paid to the Employee
during the period of the Employee's illness or incapacity;
and, provided further, that Employee (or his designated
beneficiary or estate) shall be entitled to receive any
compensation that was awarded to the Employee prior to the
date of termination but remains unpaid and in any event
Employee shall be entitled to receive (if Employee has not
already received) at least one year's Annual Salary, Bonus and
Profit Sharing (and other benefits as provided in Section
3.1(e) above) under this Agreement. In addition, Employee (or
Employee's estate) shall continue to receive the Non-Compete
payment provided in Section 5.1(e). All Retirement Benefits as
described in Section 3.1(d) will be paid (with no reduction in
the present value amount contained in such Section) in the
event of death or Total Disability in accordance with the
payment option selected by the Employee and all other benefits
and the Option described in Section 3.1(c) will vest and will
be exercisable in accordance with Section 3.1(c) and all other
benefits will be exercisable in accordance with the applicable
Plans.
(c) For the purposes of this Agreement, "Total Disability"
shall be deemed to have the meaning set forth in any long term
disability insurance plans in which Employee participates, or,
if no such plan is in place, when the Employee shall have been
unable to perform the duties of the Employee's employment by
reason of illness or incapacity for a period of ninety (90)
consecutive days or for a period of one hundred twenty (120)
days in any period of fifty-two (52) consecutive weeks, all as
determined in good faith by the Board.
4.3 TERMINATION FOR CAUSE.
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<PAGE> 6
(a) The Employee's employment with the Company under this
Agreement may be terminated by the Company for Cause, at
any time upon written notice from the Company to the
Employee. For purposes of this Agreement, the term "Cause"
shall be defined as: (i) intentional misconduct and/or
gross negligence by the Employee that has a material
adverse affect on the Company or the Bank, monetarily or
otherwise, or (ii) material breach of any provision of
this Agreement by Employee. No act by the Employee shall
be considered intentional unless the Employee acted or
failed to act with an absence of good faith and without a
reasonable belief that his action or failure to act was in
the best interest of the Company. Notwithstanding the
foregoing, the Employee shall not be deemed to have been
Terminated for Cause unless and until there shall have
been delivered to the Employee a copy of a resolution,
duly adopted by the affirmative vote of not less than
three-quarters of the entire membership of the Board at a
meeting of the Board duly called and held for such purpose
(after reasonable notice to the Employee and an
opportunity for the Employee, together with the Employee's
counsel , to be heard before the Board), stating that in
the good faith opinion of the Board the Employee has
engaged in conduct described in the preceding sentence and
specifying the particulars thereof in detail.
(b) Upon any termination pursuant to Section 4.3(a) the
Employee (i) shall be entitled to all accrued but unpaid
Annual Salary under Section 3.1(a) through the date of
termination, and (ii) shall forfeit all entitlements to
unpaid Annual Salary related benefits but, subject to
reduction of the amount as set forth therein, shall
continue to receive the Retirement Benefits described in
Paragraph 3.1(d) above and all benefits vested in the
Employee prior to termination (unless the applicable
benefits plan provides for loss of vested benefits in the
event of a termination for Cause) and shall continue to
receive the Non-Compete payment pursuant to Section
5.1(e). In the event that the Fifth Third Stock Option
Plan provides for expiration of the Option (or any portion
thereof) in the event of termination for Cause, Employee
shall be given sufficient notice and the opportunity to
exercise the outstanding Option (or any portion thereof)
prior to the effective date of such termination for Cause.
4.4 TERMINATION OTHER THAN FOR CAUSE; RESIGNATION BY THE EMPLOYEE
FOR GOOD REASON. If the Company terminates the Employee's
employment for any reason other than Cause (as defined in
Section 4.3) or in the event of the Employee's Resignation for
Good Reason, the Employee shall be entitled to receive all
payments and benefits described in this Agreement, including,
but not limited to, Annual Salary, as described in Section
3.1(a); Annual Bonus described in Section 3.1(b); the
Incentive Award, as described in Section
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<PAGE> 7
3.1(c); the Retirement Benefits, as described in Section 3.1(d),
with no reduction in the present value amount contained in such
Section; the Profit Sharing or such additional benefit described
in Section 3.1(e); and the Non-Compete payment described in
Section 5.1(e). Notwithstanding any provision contained in the
Fifth Third Stock Option Plan, if the Employee's employment is
terminated pursuant to this Section 4.4, he shall be entitled to
exercise all of the options granted to him under Section 3.1(c)
(both vested and, if applicable, unvested) at any time prior to
the date which is ten (10) years from the date on which such
options were granted. For purposes of this Agreement,
"Resignation for Good Reason" shall mean the termination of this
Agreement by the Employee in the event that (i) Employee is
required to move to a new principal work location that is more
than 25 miles from Employee's work location while with CitFed,
or (ii) Employee's duties under this Agreement are subject to a
substantial reduction, or (iii) the breach of this Agreement by
the Company, or (iv) there is a substantial reduction in the
benefits provided to the Employee by the Company, or (v) the
Employee is not appointed or elected to the Board of Directors
of the Company and as Chairman of the Board of Directors of the
Bank.
5. RESTRICTED ACTIVITIES. In consideration of the benefits to be derived
by the Employee under this Agreement, and to preserve the goodwill
associated with the business of the Company, the Employee hereby agrees
to the following restrictions on the Employee's business activities:
5.1 (a) As a separate and independent covenant, the Employee agrees
that, during the Restricted Period (as defined below), the
Employee shall not directly or indirectly, whether for his own
account or for the account of any other person, firm,
corporation, or other business organization, (i) in the states
of Ohio, Kentucky, Indiana, Florida or Arizona, engage in
providing Banking Services (as defined below) on behalf of any
other business organization which is a competitor of the
Company; (ii) provide Banking Services to any Client (as defined
below), (iii) make any statement or take any actions that may
interfere with the Company's or any Affiliate's business
relationships with any Client, (iv) contact either directly or
indirectly any Client or otherwise induce or attempt to induce
any Client to enter into any business relationship with any
person or firm other than the Company or an Affiliate relating
to Banking Business of any type, (v) endeavor or entice away
from the Company any person who the Employee has actual
knowledge that such person is, or was at any time during the
period the Employee was employed by the Company or during the
Restricted Period, employed by or associated with the Company as
an executive, officer, employee, manager, salesperson,
consultant, independent contractor, representative or other
agent, or (vi) take any actions
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<PAGE> 8
that may interfere with the Company's property rights in lists
of Clients or otherwise diminish the value of such lists to the
Company. Notwithstanding any provision contained in this Section
5.1(a), the restrictions contained herein shall not be
applicable to any activity of the Employee or any activity of
his spouse which existed at the time of this Agreement and which
was disclosed by the Employee to the Company.
(b) The term "Restricted Period" shall mean the period beginning
on the Effective Date and ending five (5) years after the
Expiration Date, or if later, the termination of his services as
a director of the Company.
(c) The term "Banking Services" shall mean retail or commercial
deposit or lending business, asset management and all other
services which are customarily provided by banks or which are
otherwise provided by the Company or its affiliates.
(d) For all purposes of this Agreement, the term "Client" shall
mean all persons or entities who are or were clients of the
Company at the date of termination of employment or at any time
during the two year period prior to the date of termination of
Employee's employment, any potential clients who to Employee's
actual knowledge, have been identified and contacted by a
representative of the Company. The term "Client" shall not
include any member of the Employee's immediate family, as
defined under Rule 16a-1 of the Securities Exchange Act of 1934,
as amended (the "Exchange Act") or any trust of which the
Employee or any member of his immediate family (as defined in
Rule 16a-1 of the Exchange Act) is a trustee or beneficiary.
(e) As separate consideration for the covenants contained in
this Section 5.1, the Employee shall receive an annual payment
equal to $250,000 per year (the "Non-Compete" payment). The
Non-Compete payment shall be paid in monthly installments
beginning on the Expiration Date and continuing for a period of
five (5) years thereafter. Regardless of any other provision of
this Agreement, the Non-Compete payment shall be paid
notwithstanding the resignation, death, disability or
termination (whether or not for Cause) of the Employee.
5.2 As a separate and independent covenant, the Employee agrees that,
during the Restricted Period (as defined above), the Employee shall
not, either for the Employee's own account or on behalf of any person
or entity with which the Employee is associated or affiliated, without
prior written approval from the Board, directly or indirectly, own,
share in earnings of, or interest in the capital stock of any person,
firm or business organization which shall do or attempt to do any of
the activities described in Section 5.1, except in accordance with the
Employee Investment Criteria
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<PAGE> 9
set forth below. For purposes hereof, Employee Investment Criteria
shall mean an investment in capital stock which meets all of the
following criteria: (a) such capital stock is listed on any
national or regional securities exchange or has been registered
under Section 12(g) of the Exchange Act or constitutes securities
of open end investment companies; (b) such investment does not
exceed, in the case of any class of the capital stock of any one
issuer, five percent (5%) of the issued and outstanding shares;
and (c) such investment is in compliance with the Company's code
of ethics. Notwithstanding any provisions contained in this
Section 5.2, the restrictions contained herein shall not be
applicable to any investment of the Employee or any investment of
any person or entity with which the Employee is associated or
affiliated which existed at the time of this Agreement and which
was disclosed by the Employee to the Company.
5.3 The Employee agrees that, if Employee should breach any of the
covenants of Section 5.1 or 5.2 above, the Restricted Periods for all
such sections shall be extended by the length of time during which the
Employee is in breach of any such covenant.
5.4 The Employee and the Company agree that the periods of time and the
scope applicable to the covenants of Sections 5.1 and 5.2 are
reasonable and necessary to protect the legitimate business interests
of the Company without unduly limiting the Employee's ability to obtain
employment or otherwise earn a living at the same general level of
economic benefit as anticipated by this Agreement. However, if such
period or scope should be adjudged unreasonable in any judicial or
other dispute resolution proceeding, then the period of time or scope
shall be reduced by the extent deemed unreasonable, so that these
covenants may be enforced during such period and for such scope as are
adjudged to be reasonable.
5.5 It is understood by and between the parties hereto that the
covenants by the Employee set forth in this Section 5 are an essential
element of this Agreement and that, but for the agreement of the
Employee to comply with such covenants, the Company would not have
entered into this Agreement and would not have entered into the
Affiliation Agreement. The Company and the Employee have independently
consulted with their respective counsel and have been advised in all
respects concerning the reasonableness and propriety of such covenants,
with specific regard to the nature of the business conducted by the
Company and its Affiliates.
6. CONFIDENTIALITY. The Employee agrees that the Employee will not,
directly or indirectly, either during the period of the Employee's
employment with the Company or any time thereafter, divulge or use any
information regarding the business of the Company or any of its
Affiliates (including, without limitation, confidential records, Client
and customer lists, computer software, data, documents, operational
methods, pricing and investment policies and trade know-how and
secrets) compiled by, created by, obtained by, or furnished to, the
Employee while the Employee is
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<PAGE> 10
employed by or associated with the Company; provided, however, that
this obligation to maintain confidentiality shall not apply to any such
information which (a) was already in the Employee's possession prior to
his employment with the Company or its predecessor, (b) is or become
generally available to the public other than as a result of disclosure
by the Employee in violation of this Agreement, or (c) is disclosed to
the Employee on a nonconfidential basis from a source other than the
Company and not known by the Employee to be subject to a
confidentiality agreement between such source and the Company. All
materials, records and documents (whether in writing or other tangible
form, including electronic media) made by the Employee or coming into
the Employee's possession concerning the business or affairs of the
Company or any of its Affiliates shall be the sole property of the
Company and its Affiliates. Upon the termination of the Employee's
employment hereunder for any reason or upon the request of the Company
during the Employment Period, the Employee shall promptly deliver such
materials, records and documents, and all copies thereof, to the
Company or to any Affiliate designated by the Company. The Employee's
covenants contained in this Section 6 shall survive any termination of
the Employee's employment with the Company hereunder for any reason,
and shall be enforceable as provided in Section 7 following such
termination.
7. SPECIFIC PERFORMANCE. The Employee's covenants contained in Sections 5
and 6 shall survive any termination of the Employee's employment with
the Company hereunder for any reason, and shall be enforceable
following such termination. Without intending to limit the remedies
available to the Company, the Employee agrees that damages at law will
be an insufficient remedy to the Company in the event that Employee
violates any of the terms of Sections 5 and 6 and that the Company may
apply for and is entitled to injunctive relief in any court of
competent jurisdiction to restrain the breach or threatened breach of,
or otherwise to specifically enforce, any of the covenants of such
Sections, in each case without proof of actual damages. Notwithstanding
any provision contained herein, in the event that the Employee violates
any of the terms of Sections 5 or 6, he shall not (except if such
violation constitutes grounds for Termination for Cause and results in
reduction of benefits in the event of termination prior to the
Expiration Date as set forth in such sections) forfeit any portion of
either his Retirement Benefit, as described in Section 3.1(d); or his
Incentive Award, as described in Section 3.1(c).
8. COMPLIANCE WITH OTHER AGREEMENTS. The Employee represents and warrants
to the Company that the execution of this Agreement by the Employee and
the Employee's performance of the Employee's obligations hereunder will
not, with or without the giving of notice and/or the passage of time,
conflict with, result in the breach of any provision of or the
termination of, or constitute a default under, any agreement to which
the Employee is a party or by which the Employee is or may be bound.
9. ASSIGNMENT. Neither party shall have the right to assign this Agreement
or any rights
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<PAGE> 11
or obligations hereunder without the prior written consent of the other
party; provided, however, that the Company shall require any successor
or assign (whether direct or indirect, by purchase, merger,
consolidation, operation of law or otherwise) to all or substantially
all of the business and/or assets of the Company, by an assumption
agreement in form and substance satisfactory to the Employee, to
expressly assume and agree to perform this Agreement in the same manner
and to the same extent that the Company would be required to perform if
no such succession or assignment had taken place. Failure of the
Company to obtain such an assumption agreement prior to the
effectiveness of any such succession or assignment shall be a breach of
this Agreement and shall entitle the Employee to compensation and
benefits from the Company in the same amount and on the same terms that
he would be entitle to hereunder if he terminated his employment for
Good Reason. For purposes of implementing the provisions of this
Section 9, the date on which any such succession becomes effective
shall be deemed the date of termination of this Agreement.
10. SEVERABILITY. The provisions of this Agreement are severable, and if
any one or more provisions may be determined to be illegal or otherwise
unenforceable, in whole or in part, the remaining provisions, and any
partially unenforceable provisions to the extent enforceable, shall
nevertheless be binding and enforceable.
11. WAIVERS. Neither this Agreement nor any term or condition hereof or
right hereunder may be waived or shall be deemed to have been waived or
modified in whole or in party by any party or by the forbearance of any
party to exercise any of its rights hereunder, except by written
instrument executed by or on behalf of that party. The waiver by either
party of a breach by the other party of any of the provisions of this
Agreement shall not operate or be construed as a waiver of any
subsequent breach by the other party.
12. NOTICES. All notices, requests, demands and other communications which
are required or may be given under this Agreement shall be in writing
and shall be deemed effective (a) when delivered personally, (b) when
sent by confirmed facsimile, (c) one (1) day after deposit with a
commercial overnight courier with written verification of receipt, or
(d) three (3) days after deposit in the United States mail by certified
mail postage prepaid. All communications will be sent to the party to
whom they are directed at the addresses set forth below:
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<PAGE> 12
(a) If to Employee:
(b) If to the Company: Fifth Third Bancorp
38 Fountain Square Plaza
Cincinnati, Ohio 45263
Attention: President & CEO
With Copies to: Fifth Third Bancorp
38 Fountain Square Plaza
Cincinnati, Ohio 45263
Attention: General Counsel
Any party may change the address to which such notices are to be sent
by giving the other parties notice thereof in the manner set forth.
13. ENTIRE AGREEMENT. This Agreement contains the entire agreement between
the parties and supersedes all prior agreements and understandings,
oral or written, between the parties hereto with respect to the subject
matter hereof. Without limitation, nothing in this Agreement shall be
construed as giving Employee any right to be retained in the employ of
the Company beyond the expiration of the Employment Period, and
Employee specifically acknowledges that if Employee continues to be
employed by the Company thereafter, Employee shall be an
employee-at-will of the Company.
14. EFFECTIVENESS OF AGREEMENT. This Agreement shall become effective as of
the date hereof.
15. NO AMENDMENTS. This Agreement may not be modified or amended except by
an instrument or instruments in writing signed by the party against
whom enforcement of any such modification or amendment is sought.
16. SECTION AND OTHER HEADINGS. The section and other headings contained in
this Agreement are for reference purposes only and shall not be deemed
to be a part of this Agreement or to affect the meaning or
interpretation of this Agreement.
17. GENDER. Any masculine personal pronoun shall be considered to mean the
corresponding feminine personal pronoun, as the context requires.
18. COUNTERPARTS. This Agreement may be executed in any number of
counterparts, each of which shall be deemed to be an original, but all
of which together shall constitute one and the same instrument.
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<PAGE> 13
19. GOVERNING LAW. This Agreement shall be governed by and construed in
accordance with the laws of the State of Ohio, without giving effect to
the conflicts of law principles hereof.
20. ARBITRATION. Any disputes between the Company and the Employee under
this Agreement shall be submitted to final and binding arbitration
before a panel of three arbitrators in Dayton, Ohio in accordance with
the rules of the American Arbitration Association then in effect. Any
legal costs incurred by the Employee shall be reimbursed by the Company
as and when paid by the Employee in an amount up to but not to exceed
$50,000. If the Employee does not prevail in any such dispute the
Employee shall reimburse the Company for all legal expenses advanced to
the Employee and the Employee shall also be responsible for the
Company's legal expenses in an amount up to $50,000.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement on the day
and year first above written.
FIFTH THIRD BANCORP
By:
-----------------------------------
Its:
----------------------------------
EMPLOYEE
----------------------------------
Jerry L. Kirby
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<PAGE> 1
Exhibit 23.1
INDEPENDENT AUDITORS' CONSENT
We consent to the incorporation by reference in this Amendment No. 1 to
Registration Statement No. 333-48049 of Fifth Third Bancorp on Form S-4 of our
report dated January 15, 1998, incorporated by reference in the Annual Report on
Form 10-K of Fifth Third Bancorp for the year ended December 31, 1997 and to the
reference to us under the heading "Experts" in the Prospectus, which is part of
this Registration Statement.
Deloitte & Touche LLP
Cincinnati, Ohio
April 2, 1998
<PAGE> 1
Exhibit 23.2
INDEPENDENT AUDITORS' CONSENT
We consent to the incorporation by reference in this Amendment No. 1 to
Registration Statement No. 333-48049 of Fifth Third Bancorp on Form S-4 of our
report dated May 19, 1997 (which expresses an unqualified opinion and includes
an explanatory paragraph referring to CitFed Bancorp's change in its method of
accounting for mortgage servicing rights in fiscal 1997 to conform with
Statement of Financial Accounting Standards No. 122 and No. 125 and change in
its method of accounting for impaired loans in fiscal 1996 to conform with
Statement of Financial Accounting Standards No. 114), appearing in the annual
report on Form 10-K of CitFed Bancorp, Inc. and subsidiaries for the year ended
March 31, 1997, and to the reference to us under the heading "Experts" in the
Prospectus, which is part of this Registration Statement.
Deloitte & Touche LLP
Dayton, Ohio
April 1, 1998
<PAGE> 1
EXHIBIT 23.3
CONSENT OF KEEFE, BRUYETTE & WOODS, INC.
We hereby consent to the inclusion of our opinion letter to the Board of
Directors of CitFed Bancorp, Inc. ("CitFed") as Annex C to the Proxy
Statement/Prospectus relating to the proposed merger of CitFed with and into
Fifth Third Bancorp contained in the Registration Statement on Form S-4, as
amended (File No. 333-48049), and to the references to our firm and such opinion
in such Proxy Statement/Prospectus. In giving such consent, we do not
admit that we come within the category of persons whose consent is required
under Section 7 of the Securities Act of 1933, as amended (the "Act"), or the
rules and regulations of the Securities and Exchange Commission thereunder (the
"Regulations"), nor do we admit that we are experts with respect to any part of
such Registration Statement within the meaning of the term "experts" as used in
the Act or the Regulations.
KEEFE, BRUYETTE & WOODS, INC.
/s/ ROBERT J. STAPLETON
-----------------------------
Robert J. Stapleton
Managing Director
April 2, 1998
<PAGE> 1
Exhibit 99.2
REVOCABLE PROXY
CITFED BANCORP, INC.
DAYTON, OHIO
SPECIAL MEETING OF STOCKHOLDERS
May ____, 1998
The undersigned being a stockholder of CitFed Bancorp, Inc. ("CitFed
Bancorp"), hereby appoints Jerry L. Kirby and ______________________, Directors
of CitFed Bancorp, with full powers of substitution, to act as proxies for the
undersigned, to vote all shares of common stock of CitFed Bancorp ("CitFed
Bancorp") which the undersigned is entitled to vote at the special meeting of
stockholders (the "Special Meeting"), to be held at Savers Club Auditorium,
One Citizens Federal Centre in Dayton, Ohio on May 15, 1998 at 2:00 P.M., and
at any and all adjournments thereof. The affirmative vote of a majority of the
shares represented at the Special Meeting may authorize the adjournment of the
Special Meeting; provided, however, that no proxy which is voted against the
Affiliation Agreement will be voted in favor of adjournment to solicit further
proxies for the Affiliation Agreement.
1. Proposal to Adopt Affiliation Agreement FOR AGAINST ABSTAIN
Proposal to adopt an Affiliation Agreement
dated as of January 13, 1998 between Fifth
Third Bancorp ("Fifth Third") and CitFed
Bancorp
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE PROPOSAL TO ADOPT
THE AFFILIATION AGREEMENT.
<PAGE> 2
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS. THIS PROXY WILL
BE VOTED AS DIRECTED, BUT IF NO INSTRUCTIONS ARE SPECIFIED, THIS
PROXY WILL BE VOTED FOR THE PROPOSAL STATED. IF ANY OTHER BUSINESS IS
PRESENTED AT THE SPECIAL MEETING, THIS PROXY WILL BE VOTED BY THOSE NAMED IN
THIS PROXY IN ACCORDANCE WITH THE DETERMINATION OF A MAJORITY OF THE BOARD OF
DIRECTORS. AT THE PRESENT TIME, THE BOARD OF DIRECTORS KNOWS OF NO OTHER
BUSINESS TO BE PRESENTED AT THE SPECIAL MEETING. THIS PROXY CONFERS
DISCRETIONARY AUTHORITY ON THE HOLDERS THEREOF TO VOTE WITH RESPECT TO MATTERS
INCIDENT TO THE CONDUCT OF THE SPECIAL MEETING.
Should the undersigned be present and elect to vote at the Special Meeting
or at any adjournment thereof and after notification to the Secretary of CitFed
Bancorp at the Special Meeting of the stockholder's decision to terminate this
proxy, then the powers of said attorneys and proxies shall be deemed terminated
an of no further force and effect.
The undersigned acknowledges receipt from CitFed Bancorp prior to the
execution of this proxy of Notice of the Special Meeting and a Proxy Statement/
Prospectus dated April __, 1998.
PLEASE COMPLETE, DATE, SIGN AND MAIL THIS
PROXY PROMPTLY IN THE ACCOMPANYING POSTAGE
PREPAID ENVELOPE.
Dated: _______________________, 1998
Number of Shares: __________________________
____________________________________________
PRINT NAME OF STOCKHOLDER
____________________________________________
SIGNATURE OF STOCKHOLDER
____________________________________________
PRINT NAME OF STOCKHOLDER
____________________________________________
SIGNATURE OF STOCKHOLDER
PLEASE SIGN EXACTLY AS YOUR NAME APPEARS ON
THE ENVELOPE IN WHICH THIS CARD WAS
ENTITLED. WHEN SIGNING AS ATTORNEY,
EXECUTOR, TRUSTEE OR GUARDIAN, PLEASE GIVE
YOUR FULL TITLE. IF SHARES ARE HELD JOINTLY,
EACH HOLDER SHOULD SIGN.
<PAGE> 1
Exhibit 99.3
CITFED BANCORP, INC.
ONE CITIZENS FEDERAL CENTRE
DAYTON, OHIO 45402
April 14, 1998
Dear Stockholder:
On behalf of the Board of Directors, I cordially invite you to attend a
Special Meeting of Stockholders (the "Special Meeting") of CitFed Bancorp, Inc.
("CitFed Bancorp"), which will be held at 2:00 p.m., Eastern Daylight
Savings Time, on May 15, 1998, at the Savers Club Auditorium, One Citizens
Federal Centre, Dayton, Ohio.
At the Special Meeting, you will be asked to consider and vote upon a
proposal to adopt the Affiliation Agreement dated as of January 13, 1998 between
Fifth Third Bancorp ("Fifth Third") and CitFed Bancorp (the "Affiliation
Agreement"). Pursuant to the Affiliation Agreement, CitFed Bancorp will merge
into Fifth Third (the "Merger"). The consummation of the Merger is subject to
various conditions, including the receipt of stockholder approval and of all
required regulatory approvals.
At the time the Merger becomes effective (the "Effective Time"), each share
of common stock of CitFed Bancorp (the "CitFed Bancorp Common Stock") will be
canceled and converted, by virtue of the Merger, into the right to receive 1.005
(the "Exchange Ratio") shares of common stock of Fifth Third ("Fifth Third
Common Stock"), subject to adjustment in certain circumstances. The Exchange
Ratio was adjusted subsequent to the execution of the Affiliation Agreement to
reflect the three-for-two stock split of Fifth Third Common Stock declared on
March 17, 1998 and payable on April 15, 1998. The Exchange Ratio will be further
adjusted so as to give the CitFed Bancorp stockholders the economic benefit of
any other stock dividends, reclassifications, recapitalizations, split-ups,
exchanges of shares, distributions or combinations or subdivisions of Fifth
Third Common Stock effected before the Effective Time. Based on the closing
price per share of Fifth Third Common Stock on the Nasdaq National Market on
April , 1998, the value of 1.005 shares of Fifth Third Common Stock was
$ . The actual value of the Fifth Third Common Stock to be received by
CitFed Bancorp stockholders will depend on the market price of Fifth Third
Common Stock at the Effective Time.
The proposed Merger is discussed in detail in the accompanying Proxy
Statement/Prospectus, as well as in the Affiliation Agreement which is appended
thereto as Annex A.
YOUR BOARD OF DIRECTORS HAS UNANIMOUSLY APPROVED THE MERGER AND RECOMMENDS
THAT YOU VOTE "FOR" THE PROPOSAL TO ADOPT THE AFFILIATION AGREEMENT. APPROVAL OF
THE PROPOSAL WILL ALSO AUTHORIZE THE BOARD OF DIRECTORS TO EXERCISE ITS
DISCRETION WHETHER TO PROCEED WITH THE MERGER IN THE EVENT THAT CITFED BANCORP
HAS THE RIGHT TO EXERCISE ITS TERMINATION RIGHT AS DESCRIBED IN THE PROXY
STATEMENT/PROSPECTUS. CITFED BANCORP EXPECTS THAT THE CITFED BANCORP BOARD OF
DIRECTORS WOULD EXERCISE SUCH DISCRETION AND DECIDE WHETHER TO TERMINATE THE
AFFILIATION AGREEMENT WITHOUT A RESOLICITATION OF STOCKHOLDERS.
<PAGE> 2
THE AFFILIATION AGREEMENT MUST BE ADOPTED BY THE AFFIRMATIVE VOTE OF AT
LEAST A MAJORITY OF THE ISSUED AND OUTSTANDING SHARES OF CITFED BANCORP COMMON
STOCK ENTITLED TO VOTE. AN ABSTENTION OR FAILURE TO VOTE HAS THE SAME EFFECT AS
A VOTE AGAINST THE PROPOSAL. IT IS, THEREFORE, IMPORTANT THAT YOU VOTE.
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,
Jerry L. Kirby
Chairman and Chief Executive Officer
IMPORTANT: If your shares of CitFed Bancorp Common Stock 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 John H. Curp, Secretary, at CitFed Bancorp, (937) 223-4234.
<PAGE> 1
Exhibit 99.4
CITFED BANCORP, INC.
NOTICE OF SPECIAL MEETING OF STOCKHOLDERS
TO BE HELD ON MAY 15, 1998
NOTICE IS HEREBY GIVEN that a Special Meeting of Stockholders ("Special
Meeting") of CitFed Bancorp, Inc. ("CitFed Bancorp") will be held on May 15,
1998, at 2:00 p.m., Eastern Daylight Savings Time, at the Savers Club
Auditorium, One Citizens Federal Centre, Dayton, Ohio.
A Proxy Statement/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:
1. A proposal to adopt the Affiliation Agreement dated as of January
13, 1998 between Fifth Third Bancorp ("Fifth Third") and CitFed Bancorp
(the "Affiliation Agreement"). Pursuant to the Affiliation Agreement,
CitFed Bancorp will merge into Fifth Third (the "Merger"). At the time the
Merger becomes effective (the "Effective Time"), each share of common
stock, $0.01 par value per share, of CitFed Bancorp (the "CitFed Bancorp
Common Stock") will be converted by virtue of the Merger into the right to
receive 1.005 (the "Exchange Ratio") shares of common stock, without par
value, of Fifth Third ("Fifth Third Common Stock"). The Exchange Ratio has
been adjusted to reflect the three-for-two stock split of the Fifth Third
Common Stock declared on March 17, 1998 and payable on April 15, 1998 and
is subject to further adjustment in certain circumstances. Consummation of
the Merger is subject to various conditions, including the receipt of
stockholder approval and of all required regulatory approvals, as set forth
in the Affiliation Agreement.
In the event of a substantial decline in the trading price of Fifth
Third Common Stock relative to a group of peer institutions under certain
circumstances as provided in the Affiliation Agreement, the CitFed Bancorp
Board of Directors may elect to terminate the Affiliation Agreement and the
Merger. Approval of the proposal will also authorize the CitFed Bancorp
Board of Directors to exercise its discretion whether to proceed with the
Merger in the event that CitFed Bancorp has the right to exercise its
termination right as described in the preceding sentence. If such an
election were made, Fifth Third would have the option to override such
termination by electing to increase the Exchange Ratio to an amount
determined by a formula set forth in the Affiliation Agreement. See
"PROPOSAL-MERGER OF CITFED BANCORP INTO FIFTH THIRD-Termination; Amendment;
Waiver" in the accompanying Proxy Statement/Prospectus.
2. 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 CitFed Bancorp, the Board of Directors has fixed
April 3, 1998 as the record date (the "Record Date"), for the determination of
Stockholders entitled to receive notice of, and to vote at, the Special Meeting
and any adjournments thereof. Any action may be taken on any of the foregoing
proposals at the Special Meeting on the date specified above, or on any date or
dates less than 30 days later to which, by original or later adjournment, the
meeting may be adjourned. Only holders of record of CitFed Bancorp Common Stock
at the close of business on the Record 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 CITFED BANCORP COMMON STOCK ENTITLED TO VOTE IS REQUIRED TO ADOPT THE
AFFILIATION AGREEMENT. IN THE EVENT THERE ARE NOT SUFFICIENT VOTES TO APPROVE
THE FOREGOING PROPOSAL AT THE TIME OF THE MEETING, THE MEETING MAY BE ADJOURNED
BY A MAJORITY OF THE VOTES CAST IN ORDER TO PERMIT FURTHER SOLICITATION OF
PROXIES BY CITFED BANCORP; PROVIDED, HOWEVER, THAT NO PROXY WHICH IS VOTED
AGAINST THE AFFILIATION AGREEMENT WILL BE VOTED IN FAVOR OF ADJOURNMENT TO
SOLICIT FURTHER PROXIES FOR SUCH PROPOSAL.
APPROVAL OF THE PROPOSAL WILL ALSO AUTHORIZE THE BOARD OF DIRECTORS TO
EXERCISE ITS DISCRETION WHETHER TO PROCEED WITH THE MERGER IN THE EVENT THAT
CITFED BANCORP HAS THE RIGHT TO EXERCISE ITS TERMINATION RIGHT AS DESCRIBED
ABOVE. CITFED BANCORP EXPECTS THAT THE CITFED BANCORP BOARD OF
<PAGE> 2
DIRECTORS WOULD EXERCISE SUCH DISCRETION AND DECIDE WHETHER TO TERMINATE THE
AFFILIATION AGREEMENT WITHOUT A RESOLICITATION OF STOCKHOLDERS.
YOUR VOTE IS IMPORTANT REGARDLESS OF THE NUMBER OF SHARES YOU OWN. EACH
STOCKHOLDER, WHETHER OR NOT 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 CITFED
BANCORP IN A WRITING ADDRESSED TO AND RECEIVED BY THE SECRETARY OF CITFED
BANCORP BEFORE THE SPECIAL MEETING.
By Order of the Board of Directors
Jerry L. Kirby, Chairman
and Chief Executive Officer
Dayton, Ohio
April 14, 1998
<PAGE> 1
EXHIBIT 99.5
CONSENT OF PROPOSED DIRECTOR
The undersigned hereby consents to the inclusion of his name in the Proxy
Statement/Prospectus constituting a part of this Registration Statement on Form
S-4 as a person to become a director of Fifth Third Bancorp ("Fifth Third")
following the consummation of the merger of CitFed Bancorp, Inc. with and into
Fifth Third.
Signature: /s/ Jerry L. Kirby
-----------------------------
Jerry L. Kirby
Date: March 31, 1998
<PAGE> 1
EXHIBIT 99.6
CONSENT OF PROPOSED DIRECTOR
The undersigned hereby consents to the inclusion of his name in the Proxy
Statement/Prospectus constituting a part of this Registration Statement on Form
S-4 as a person to become a director of Fifth Third Bancorp ("Fifth Third")
following the consummation of the merger of CitFed Bancorp, Inc. with and into
Fifth Third.
Signature: /s/ Allen M. Hill
---------------------------
Allen M. Hill
Date: March 31, 1998
