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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 13D
Under the Securities Exchange Act of 1934
(Amendment No. ____________)*
CITFED BANCORP, INC.
(Name of Issuer)
Common Stock, $ .01 Par Value Per Share
(Title of Class of Securities)
173029109
(CUSIP Number)
Paul L. Reynolds, Esq.
Counsel and Assistant Secretary
Fifth Third Bancorp
Fifth Third Center
Cincinnati, Ohio 45263
(513) 579-5300
(Name, Address and Telephone Number of Person
Authorized to Receive Notices and Communications)
January 13, 1998
(Date of Event which Requires Filing of this Statement)
If the filing person has previously filed a statement on Schedule 13G to report
the acquisition which is the subject of this Schedule 13D, and is filing this
schedule because of Rule 13d-1(b)(3) or (4), check the following box ___.
NOTE: Six copies of this statement, including all exhibits, should be filed with
the Commission. See Rule 13d-1(a) for other parties to whom copies are to be
sent.
*The remainder of this cover page shall be filled out for a reporting person's
initial filing on this form with respect to the subject class of securities, and
for any subsequent amendment containing information which would alter the
disclosures provided in a prior cover page.
The information required in the remainder of this cover page shall not be deemed
to be "filed" for the purpose of Section 18 of the Securities Exchange Act of
1934 ("Act") or otherwise subject to the liabilities of that section of the Act
but shall be subject to all other provisions of the Act (however, see the
Notes).
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CUSIP NO. 173029109
1. NAMES OF REPORTING PERSONS
S.S. or I.R.S. Identification Nos. of Above Persons
Fifth Third Bancorp
31-0854434
2. CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP*
(a) [ ]
N/A (b) [ ]
3. SEC USE ONLY
4. SOURCE OF FUNDS*
WC, OO (See Item 3)
5. CHECK IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT
TO ITEMS 2(d) or 2(e)
----
N/A
6. CITIZENSHIP OR PLACE OF ORGANIZATION
Ohio
NUMBER OF 7. SOLE VOTING POWER
SHARES 3,233,336 (1) (See Item 5)
BENEFICIALLY
OWNED BY 8. SHARED VOTING POWER
EACH 0 (1) (See Item 5)
REPORTING
PERSON 9. SOLE DISPOSITIVE POWER
WITH 3,233,336 (1) (See Item 5)
10. SHARED DISPOSITIVE POWER
0 (1) (See Item 5)
11. AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
3,614,072 (1) (See Item 5)
12. CHECK IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES*
N/A (1)
13. PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
22.3% of Common Stock (2)
14. TYPE OF REPORTING PERSON*
HC
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* (See Instructions)
(1) The reporting person disclaims beneficial ownership of all
such shares pursuant to Rule 13d-4 under the Securities
Exchange Act of 1934, as amended. Beneficial ownership of
3,230,411 of such shares is being reported hereunder solely as
a result of the option (the "Option") granted pursuant to the
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Stock Option Agreement described in Items 4 and 5 hereof.
Fifth Third expressly disclaims any beneficial ownership of
such shares of the Company's Common Stock which are obtainable
by Fifth Third upon exercise of the Option because the Option
is exercisable only in the circumstances set forth in Items 4
and 5, none of which has occurred as of the date hereof. Fifth
Third expressly disclaims any beneficial ownership of the
remaining 383,661 shares of the Company's Common Stock which
are held in a fiduciary capacity by certain subsidiaries of
Fifth Third, 2,925 of which Fifth Third has sole voting and
dispositive powers.
(2) Gives effect to the issuance of the Company's Common Stock subject
to the Option.
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ITEM 1. SECURITY AND ISSUER
The name of the issuer is CitFed Bancorp, Inc., a Delaware corporation (the
"Company"). The address of the principal executive offices of the Company is 1
Citizens Federal Center, Dayton, Ohio 45402. The class of the Company's
securities to which this Schedule 13D relates is its common stock, $ .01 par
value per share ("Common Stock").
ITEM 2. IDENTITY AND BACKGROUND
(a) - (c) The name of the person filing this Schedule 13D is Fifth Third
Bancorp, a corporation incorporated under the laws of the State of Ohio ("Fifth
Third"). Fifth Third's principal office is located at Fifth Third Center,
Cincinnati, Ohio 45263. Fifth Third is a registered multi-bank holding company
under the Bank Holding Company Act of 1956, as amended.
The name, business address and principal occupation of each director of
Fifth Third are as follows:
<TABLE>
<CAPTION>
Name and Business Address Principal Occupation
- ------------------------- --------------------
<S> <C>
Darryl F. Allen Chairman, President & CEO
Aeroquip- Vickers, Inc. Aeroquip- Vickers, Inc.
3000 Strayer Road
Maumee, Ohio 43537
John F. Barrett President & CEO
President & CEO The Western & Southern Life Insurance
The Western & Southern Life Insurance Company
Company
400 Broadway
Cincinnati, Ohio 45202
Milton C. Boesel, Jr. (Former) Counsel
Ritter, Robinson, McCready & James Ritter, Robinson, McCready & James
525 W. Sophia Street
Maumee, Ohio 43537
Gerald V. Dirvin (Former) Executive Vice President
6335 Shawnee Pines Drive The Procter & Gamble Company
Cincinnati, Ohio 45243
Thomas B. Donnell Chairman
Fifth Third Bank of Northwestern Ohio, N.A. Fifth Third Bank of Northwestern Ohio, N.A.
337 S. Main Street
Findlay, Ohio 45840
</TABLE>
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<TABLE>
<CAPTION>
<S> <C>
Richard T. Farmer Chairman
Cintas Corporation Cintas Corporation
6800 Cintas Blvd.
Cincinnati, Ohio 45262-5737
Ivan W. Gorr (Former) Chairman & CEO
1705 Windsor Place Cooper Tire & Rubber Co.
Findlay, Ohio 45840
October- April:
5618 S. W. 14th Place
Cape Coral, Florida 33914
Joan R. Herschede President & CEO
1144 Edwards Road The Frank Herschede Company
Cincinnati, Ohio 45208-3413
Joseph H. Head, Jr. Chairman & CEO
Atkins & Pearce, Inc. Atkins & Pearce, Inc.
3865 Madison Pike
Covington, Kentucky 41017
William G. Kagler (Former) Chairman of the Executive Committee
18 Hampton Court of the Board of Directors of Skyline Chili, Inc.
Cincinnati, Ohio 45208
James D. Kiggen Chairman
Xtek, Inc. Xtek, Inc.
11451 Reading Road
Cincinnati, Ohio 45241
Mitchel D. Livingston, Ph.D. Vice President for Student Affairs &
University of Cincinnati Human Resources
P.O. Box 210638 University of Cincinnati
Cincinnati, Ohio 45221-0638
Robert B. Morgan President & CEO
Cincinnati Financial Corporation Cincinnati Financial Corporation
6200 S. Gilmore Road
Fairfield, Ohio 45014
</TABLE>
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<TABLE>
<CAPTION>
<S> <C>
James E. Rogers Vice Chairman, President & CEO
Cinergy Corporation Cinergy Corporation
139 East Fourth Street
Cincinnati, Ohio 45202
Brian H. Rowe (Former) President
Chairman Emeritus Chairman Emeritus
G.E. Aircraft Engines G.E. Aircraft Engines
Mail Drop N178
Cincinnati, Ohio 45215-6301
George A. Schaefer, Jr. President & CEO
Fifth Third Bancorp Fifth Third Bancorp
38 Fountain Square Plaza
Cincinnati, Ohio 45263
John J. Schiff, Jr. Chairman
Cincinnati Financial Corporation Cincinnati Financial Corporation
6200 S. Gilmore Road
Fairfield, Ohio 45014
Dennis J. Sullivan, Jr. Executive Counselor
Dan Pinger Public Relations Dan Pinger Public Relations
2245 Gilbert Avenue
Cincinnati, Ohio 45206
Dudley S. Taft President
Taft Broadcasting Company Taft Broadcasting Company
312 Walnut Street, Suite 3550
Cincinnati, Ohio 45202
</TABLE>
The name, business address and principal occupation of each executive
officer of Fifth Third are as follows:
<TABLE>
<CAPTION>
Name and Business Address Principal Occupation
- ------------------------- --------------------
<S> <C>
George A. Schaefer, Jr. President and Chief Executive Officer
Fifth Third Center
Cincinnati, Ohio 45263
James J. Hudepohl Executive Vice President
Fifth Third Center
Cincinnati, Ohio 45263
</TABLE>
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<TABLE>
<CAPTION>
<S> <C>
Steve J. Schrantz Executive Vice President
Fifth Third Center
Cincinnati, Ohio 45263
Michael D. Baker Executive Vice President
Fifth Third Center
Cincinnati, Ohio 45263
P. Michael Brumm Executive Vice President
Fifth Third Center
Cincinnati, Ohio 45263
Robert P. Niehaus Executive Vice President
Fifth Third Center
Cincinnati, Ohio 45263
Michael K. Keating Executive Vice President and Secretary
Fifth Third Center
Cincinnati, Ohio 45263
James R. Gaunt Executive Vice President
401 S. Fourth Avenue
Louisville, Kentucky 40202
Robert J. King Jr. Executive Vice President
1403 E. Ninth Street
Cleveland, Ohio 44114
Roger W. Dean Controller
Fifth Third Center
Cincinnati, Ohio 45263
Neal E. Arnold Senior Vice President and Chief Financial
Fifth Third Center Officer
Cincinnati, Ohio 45263
Paul Reynolds Counsel and Assistant Secretary
Fifth Third Center
Cincinnati, Ohio 45263
Gerald L. Wissel Executive Vice President and Auditor
Fifth Third Center
Cincinnati, Ohio 45263
</TABLE>
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(d) - (e) During the last five years, neither Fifth Third, nor to the best
of Fifth Third's knowledge, any of the directors or executive officers of Fifth
Third, have been convicted in a criminal proceeding (excluding traffic
violations or similar misdemeanors) or was a party to a civil proceeding of a
judicial or administrative body of competent jurisdiction and as a result of
such proceeding was or is subject to a judgment, decree or final order enjoining
future violations of, or prohibiting or mandating activities subject to, federal
or state securities laws or finding any violation with respect to such laws.
(f) All individuals described in this Item 2 are United States citizens.
ITEM 3. SOURCE AND AMOUNT OF FUNDS OR OTHER CONSIDERATION
Pursuant to the Stock Option Agreement described in Items 4 and 5 (the
"Stock Option Agreement"), the Company has granted to Fifth Third an option (the
"Option") to purchase up to 3,230,411 shares of Common Stock at a price of
$37.75 per share, exercisable only upon the occurrence of certain events. The
exercise of the Option to purchase the full number of shares of Common Stock
currently covered thereby would require aggregate funds of $121,948,015. If
Fifth Third were to purchase shares of Common Stock pursuant to the Stock Option
Agreement, Fifth Third currently anticipates that such funds would be provided
from Fifth Third's working capital, dividends from Fifth Third subsidiaries
and/or by borrowings from other sources yet to be determined.
ITEM 4. PURPOSE OF TRANSACTION
On January 13, 1998, the Company and Fifth Third entered into an
Affiliation Agreement (the "Affiliation Agreement"), pursuant to which the
Company will be merged with and into Fifth Third and Citizens Federal Bank,
F.S.B., a wholly- owned subsidiary of the Company, will be merged with and into
The Fifth Third Bank of Western Ohio, a wholly- owned subsidiary of Fifth Third
(the "Merger").
As a result of the Merger, each outstanding share of Common Stock
(excluding treasury and certain other shares) will be converted into .67 shares
of common stock of Fifth Third ("Fifth Third Common Stock"), and a cash payment
for any fraction of a share of Fifth Third Common Stock to which any holder of
Common Stock would be entitled pursuant to the Merger in lieu of such fraction
of a share. This Exchange Ratio is subject to change: (i) so as to give the
Company's 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 before the Effective Time of the Merger and (ii) upon the occurrence of
certain events relating to the Average Closing Price of Fifth Third Common
Stock. Consummation of the Merger would result in the Common Stock ceasing to be
authorized to be quoted on the Nasdaq Stock Market, Inc.'s National Market
System ("NASDAQ") and the termination of registration of such securities
pursuant to the Securities Act of 1933, as amended.
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The Merger will be a tax-free reorganization and will be accounted for as a
pooling-of-interests. The Merger is subject to a number of conditions set forth
in the Affiliation Agreement. The Affiliation Agreement is included as Exhibit
2.1 hereto and is hereby incorporated herein by reference.
As a condition and inducement to Fifth Third's entering into the
Affiliation Agreement, the Company entered into the Stock Option Agreement with
Fifth Third. Pursuant to the Stock Option Agreement, the Company has granted to
Fifth Third an option to purchase up to 3,230,411 shares (the "Option Shares")
of Common Stock at a price of $37.75 per share, exercisable only upon the
occurrence of certain events. Under certain circumstances set forth in the Stock
Option Agreement, Fifth Third, as grantee of the Option, may surrender the
Option to the Company in exchange for a Substitute Option or for payment as
provided in the Stock Option Agreement. The Stock Option Agreement is included
as Exhibit 4.1 hereto and is hereby incorporated herein by reference.
Pursuant to the Affiliation Agreement, upon consummation of the Merger, 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 Fifth Third, as the Surviving Corporation, and the
Code of Regulations of Fifth Third at the Effective Time shall be the Code of
Regulations of the Surviving Corporation, until each is amended as provided
therein and in accordance with law. Also pursuant to the Affiliation Agreement,
upon consummation of the Merger, the directors and officers of Fifth Third in
office at the Effective Time of the Merger shall continue to be the directors
and officers of the Surviving Corporation. Additionally, in the Affiliation
Agreement, Fifth Third has agreed 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.
Pursuant to the Affiliation Agreement, the Company has agreed, during the
period prior to the Effective Time, that neither it nor its Subsidiaries shall,
among other things, issue any additional shares of its Common Stock other than
pursuant to the exercise of options granted prior to the date of the Affiliation
Agreement 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 of the Affiliation Agreement; 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, 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 the Company historically has done on its
common stock, provided this covenant shall only apply to the Company and
provided further that notwithstanding anything to the contrary herein, Fifth
Third and the Company shall cooperate in selecting the Effective Time to ensure
that the holders of Common Stock do not become entitled to receive both a
dividend in respect of their Common Stock and a dividend in respect of the Fifth
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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;
or 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. The Company has also agreed 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.
All outstanding stock options under the Company's stock option plan as of
the Effective Time (the "Existing Stock Options") will 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 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 the Company. Fifth Third
shall continue the separate existence of the Company's stock option plan,
provided, however, that Fifth Third may, in its sole discretion, combine the
Company's 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.
The Affiliation Agreement may be terminated by either Fifth Third or the
Company if the Merger 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 in the Affiliation Agreement on
the date of such termination.
Except as set forth in this Item 4, Fifth Third has no plans or proposals
which relate to or would result in any of the matters set forth in clauses (a)
through (j) of Item 4 of Schedule 13D.
The preceding summary of certain provisions of the Affiliation Agreement
and the Stock Option Agreement, copies of which are filed as exhibits hereto, is
not intended to be complete and is qualified in its entirety by reference to the
full text of such agreements.
ITEM 5. INTEREST IN SECURITIES OF THE ISSUER
(a) and (b). 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 Common Stock, subject
to adjustment as provided in the Stock Option Agreement, provided that in no
event shall the number of shares of Common Stock for which the Option is
exercisable exceed 19.9% of the issued and outstanding shares of Common Stock.
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
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Agreement is exercisable, Fifth Third disclaims beneficial ownership of such
shares of Common Stock subject to the Stock Option Agreement.
As of January 13, 1998, certain Fifth Third subsidiaries may be deemed to
be the beneficial owners of 383,661 shares of 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
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 Common Stock.
(c) Except to the extent of transactions in a fiduciary capacity, there
have been no transactions in shares of Common Stock by Fifth Third, or, to the
best knowledge of Fifth Third, any of Fifth Third's executive officers and
directors effected during the past sixty days.
(d) As described in paragraph (a) and (b) above, Fifth Third and various
subsidiaries of Fifth Third may be deemed to be beneficial owners of shares of
Common Stock in trust accounts for customers with sole or no investment powers.
The beneficiaries of such trust accounts have the power to direct the payment of
dividends and proceeds from the sale of such shares.
(e) Not applicable.
ITEM 6. CONTRACTS, ARRANGEMENTS, UNDERSTANDINGS OR RELATIONSHIPS WITH
RESPECT TO SECURITIES OF THE ISSUER
A copy of the Stock Option Agreement is included as Exhibit 4.1 hereto and
is hereby incorporated herein by reference. The rights and obligations of the
Company and Fifth Third under the Stock Option Agreement are subject to all
required regulatory approvals.
A copy of the Affiliation Agreement is included as Exhibit 2.1 hereto and
is hereby incorporated herein by reference.
Except as set forth in Items 3, 4, 5 and 6 neither Fifth Third nor, to the
best knowledge of Fifth Third, any of its directors or executive officers, has
any contracts, arrangements, understandings or relationships (legal or
otherwise) with any other person with respect to any securities of the Company.
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ITEM 7. MATERIAL TO BE FILED AS EXHIBITS
2.1 Affiliation Agreement dated as of January 13, 1998, by and between Fifth
Third Bancorp and CitFed Bancorp, Inc. (omitting schedules and exhibits not
deemed material).
4.1 Stock Option Agreement dated as of January 13, 1998, by and between CitFed
Bancorp, Inc., as issuer, and Fifth Third Bancorp., as grantee (omitting
schedules and exhibits not deemed material).
SIGNATURE
After reasonable inquiry and to the best of my knowledge and belief, I
certify that the information set forth in this statement is true, complete and
correct.
FIFTH THIRD BANCORP
By: /s/ Paul L. Reynolds
-----------------------------
Paul L. Reynolds, Counsel and
Assistant Secretary
Date: January 23, 1998
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EXHIBIT 2.1
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:
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I. MODE OF EFFECTUATING CONVERSION OF SHARES
A. At the Effective Time (as defined in Article IX), all of the shares of Fifth
Third Common Stock that are issued and outstanding or held by Fifth Third as
treasury shares immediately prior to the Effective Time will remain unchanged
and will remain outstanding or as treasury shares, as the case may be, of the
Surviving Corporation (as defined in Section I.F.). Any stock options,
subscription rights, warrants or other securities outstanding immediately prior
to the Effective Time, entitling the holders to subscribe for purchase of any
shares of the capital stock of any class of Fifth Third, and any securities
outstanding at such time that are convertible into shares of the capital stock
of any class of Fifth Third will remain unchanged and will remain outstanding,
with the holders thereof entitled to subscribe for, purchase or convert their
securities into the number of shares of the class of capital stock of Fifth
Third to which they are entitled under the terms of the governing documents.
B. Each of the shares of the common stock, $.01 par value per share, of CitFed
Bancorp ("CitFed Bancorp Common Stock") that is issued and outstanding
immediately prior to the Effective Time will, at the Effective Time, be
converted by virtue of the Merger and without further action, into the right to
receive .67 shares of Fifth Third Common Stock (the "Exchange Ratio"), subject
to adjustment as provided in Section I.E. herein. All issued and outstanding
shares of the preferred stock of CitFed Bancorp, if any, shall be canceled at
the Effective Time.
C. At the Effective Time, all of the shares of CitFed Bancorp Common Stock,
whether issued or unissued (including treasury shares), will be canceled and
extinguished and the holders of certificates for shares thereof shall cease to
have any rights as shareholders of CitFed Bancorp, except as aforesaid, their
sole rights as shareholders shall pertain to the Fifth Third Common Stock and
cash in lieu of fractional shares, if any (as described in the immediately
succeeding paragraph), into which their CitFed Bancorp Common Stock shall have
been converted by virtue of the Merger.
D. After the Effective Time, each holder of a certificate or certificates for
shares of CitFed Bancorp Common Stock, upon surrender of the same duly
transmitted to Fifth Third Trust Department, as Exchange Agent (or in lieu of
surrendering such certificates in the case of lost, stolen, destroyed or mislaid
certificates, upon execution of such documentation as may be reasonably required
by Fifth Third), shall be entitled to receive in exchange therefor a certificate
or certificates representing the number of whole shares of Fifth Third Common
Stock into which such holder's shares of CitFed Bancorp Common Stock shall have
been converted by the Merger, plus a cash payment for any fraction of a share to
which the holder is entitled, in lieu of such fraction of a share, equal in
amount to the product resulting from multiplying such fraction by the per share
closing price of Fifth Third Common Stock as reported on the Nasdaq National
Market on the date the Merger becomes effective (the "Applicable Market Value
Per Share of Fifth Third Common Stock"). Within seven (7) business days after
the Effective Time, the Exchange Agent will send a notice and transmittal form
to each CitFed Bancorp shareholder of record at the Effective Time advising such
shareholder of the effectiveness of the Merger and the procedures for
surrendering to the Exchange Agent outstanding certificates formerly evidencing
CitFed Bancorp Common Stock in exchange for
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new certificates of Fifth Third Common Stock. Until so surrendered, each
outstanding certificate that prior to the Effective Time represented shares of
CitFed Bancorp Common Stock shall be deemed for all corporate purposes to
represent the right to receive the number of full shares of Fifth Third Common
Stock (and cash in lieu of fractional shares) into which the same shall have
been converted; provided, however, that dividends or distributions otherwise
payable with respect to shares of Fifth Third Common Stock into which CitFed
Bancorp Common Stock shall have been so converted shall be paid with respect to
such shares only when the certificate or certificates evidencing shares of
CitFed Bancorp Common Stock shall have been so surrendered (or in lieu of
surrendering such certificates in the case of lost, stolen, destroyed or mislaid
certificates, upon execution of such documentation as may be reasonably required
by Fifth Third) and thereupon any such dividends and distributions shall be
paid, without interest, to the holder entitled thereto subject however to the
operation of any applicable escheat or similar laws relating to unclaimed funds.
E. The Exchange Ratio shall be adjusted so as to give the CitFed Bancorp
shareholders the economic benefit of any stock dividends, reclassifications,
recapitalizations, split-ups, exchanges of shares, distributions or combinations
or subdivisions of Fifth Third Common Stock effected between the date of this
Agreement and the Effective Time. In the event between the date of this
Agreement and the Effective Time, Fifth Third has engaged in either the
distribution of any of its assets (other than regular quarterly cash dividends),
or caused the distribution of capital stock in a company which holds any
asset(s) previously held by Fifth Third or in any affiliate thereof, to the
Fifth Third shareholders, then the Exchange Ratio shall be increased in such
amount so that the equivalent fair market value of such transaction shall also
be distributed to the CitFed Bancorp shareholders, as of the Effective Time.
Notwithstanding the provisions of this Section I.E., no adjustment to the
Exchange Ratio will be required in the event Fifth Third issues shares of Fifth
Third Common Stock in order to effect a pooling-of-interests transaction or
issue shares in another merger or acquisition transaction prior to the Effective
Time or is required to divest any of its assets as a condition to obtaining any
regulatory approval required to consummate the Merger or any other merger or
acquisition transaction.
F. When all necessary documents have been filed and recorded in accordance with
the laws of the States of Ohio and Delaware, and the Merger becomes effective,
the separate existence of CitFed Bancorp shall cease and CitFed Bancorp shall be
merged into Fifth Third (which will be the "Surviving Corporation"), and which
shall continue its corporate existence under the laws of the State of Ohio under
the name "Fifth Third Bancorp".
G. The Second Amended Articles of Incorporation, as amended, of Fifth Third of
record with the Secretary of State of Ohio as of the Effective Time shall be the
Articles of Incorporation of the Surviving Corporation, until further amended as
provided by law.
H. The Directors of Fifth Third who are in office at the Effective Time shall be
the directors of the Surviving Corporation, each of whom shall continue to serve
as a Director for the term for which he was elected, subject to the Code of
Regulations of the Surviving Corporation and in accordance with law. The
officers of Fifth Third who are in office at the time the Merger becomes
effective
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<PAGE> 4
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.
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II. REPRESENTATIONS AND WARRANTIES OF CITFED BANCORP.
CitFed Bancorp represents and warrants to Fifth Third that as of the date hereof
or as of the indicated date, as appropriate, and except as otherwise disclosed
in Schedule 1 hereto delivered by CitFed Bancorp to Fifth Third prior to the
execution of this Agreement by Fifth Third:
A. CitFed Bancorp (i) is duly incorporated, validly existing and in good
standing as a corporation under the corporation laws of the State of Delaware
and is a registered unitary savings and loan holding company under the HOLA;
(ii) is duly authorized to conduct the business in which it is engaged; (iii)
has 20,000,000 shares, $.01 par value per share, of CitFed Bancorp Common Stock
and 5,000,000 shares, $.01 par value per share, of preferred stock ("CitFed
Bancorp Preferred Stock") authorized pursuant to its Certificate of
Incorporation, which are the total number of shares CitFed Bancorp is authorized
to have outstanding; (iv) has no outstanding securities of any kind, nor any
outstanding options, warrants or other rights entitling another person to
acquire any securities of CitFed Bancorp of any kind, other than (a) 13,002,811
shares of CitFed Bancorp Common Stock, which presently are authorized, duly
issued and outstanding and fully paid and nonassessable, (b) options to purchase
a total of 520,155 shares of CitFed Bancorp Common Stock which were granted to
and are currently held by the employees, officers and directors of CitFed
Bancorp and/or its subsidiaries, (c) the option granted to Fifth Third pursuant
to the Stock Option Agreement, and (d) rights granted to holders of CitFed
Bancorp Common Stock (the "Rights") pursuant to the Stockholder Protection
Rights Agreement dated October 21, 1994 between the Company and Chemical Bank
(the "Rights Plan"), and (e) CitFed Bancorp's 8.25% Subordinated Notes due
September 1, 2003; (v)owns of record and beneficially free and clear of all
liens and encumbrances, all of the 4,025,000 outstanding shares of the capital
stock of the Thrift Subsidiary, $.01 par value per share; (vi) owns of record
and beneficially free and clear of all liens and encumbrances, all of the 750
outstanding shares of the capital stock of CitFed Mortgage Corporation of
America ("CMCA"), no par value per share; (vii) directly or through a
subsidiary, owns of record and beneficially free and clear of all liens and
encumbrances, all of the 10 outstanding shares of the capital stock of Dayton
Financial Services, Inc. ("DFSI"), $50.00 par value per share; (viii) directly
or through a subsidiary, owns of record and beneficially free and clear of all
liens and encumbrances, all of the 75 outstanding shares of the capital stock of
CF Property Management, Inc., doing business as "CitFed Investment Group"
("CIG"), no par value per share; and (ix) directly or through a subsidiary, owns
of record and beneficially free and clear of all liens and encumbrances, all of
the 247 outstanding shares of the Class B, non-voting common stock, no par value
per share of CFX Insurance Strategies Agency, Inc. ("CFX"). The following three
individuals own one share each of Class A voting common stock, no par value,
each of which is subject to a stock redemption agreement at a purchase price of
$500.00 per share: 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,
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<PAGE> 6
CMCA, DFSI, CIG and CFX (the Thrift Subsidiary, CMCA, DFSI, CIG and CFX are
collectively referred to herein as the "Subsidiaries").
B. 1. Thrift Subsidiary is duly incorporated, validly existing and in good
standing as a federal savings bank under the laws of the United States, and has
all the requisite power and authority to conduct the banking business as now
conducted by it; and Thrift Subsidiary does not have any outstanding securities
of any kind, nor any outstanding options, warrants or other rights entitling
another person to acquire any securities of any of the Thrift Subsidiary of any
kind, other than 4,025,000 shares of the capital stock, $.01 par value per
share, all owned of record and beneficially by CitFed Bancorp.
2. CMCA is duly incorporated, validly existing and in good standing as a
corporation under the laws of Ohio, and has all the requisite power and
authority to conduct the business as now conducted by it; and CMCA does not have
any outstanding securities of any kind, nor any outstanding options, warrants or
other rights entitling another person to acquire any securities of CMCA of any
kind, other than 750 shares of the capital stock, no par value per share, all
owned of record and beneficially by CitFed Bancorp or another Subsidiary.
3. DFSI is duly incorporated, validly existing and in good standing as a
corporation under the laws of Ohio, and has all the requisite power and
authority to conduct the business as now conducted by it; and DFSI does not have
any outstanding securities of any kind, nor any outstanding options, warrants or
other rights entitling another person to acquire any securities of DFSI of any
kind, other than 10 shares of the capital stock, $50.00 par value per share, all
owned of record and beneficially by CitFed Bancorp or another Subsidiary.
4. CIG is duly incorporated, validly existing and in good standing as a
corporation under the laws of Ohio, and has all the requisite power and
authority to conduct the business as now conducted by it; and CIG does not have
any outstanding securities of any kind, nor any outstanding options, warrants or
other rights entitling another person to acquire any securities of CIG of any
kind, other than 75 shares of the capital stock, no par value per share, all
owned of record and beneficially by CitFed Bancorp or another Subsidiary.
5. CFX is duly incorporated, validly existing and in good standing as a
corporation under the laws of Ohio, and has all the requisite power and
authority to conduct the business as now conducted by it; and CFX does not have
any outstanding securities of any kind, nor any outstanding options, warrants or
other rights entitling another person to acquire any securities of CFX of any
kind, other than 247 shares of the Class B, non-voting common stock, no par
value per share, all owned of record and beneficially by CitFed Bancorp or
another Subsidiary, and three shares of the Class A voting common stock, no par
value per share, one share of which is owned of record and beneficially by each
of Jerry L. Kirby, Joseph E. Balmer and Lamar E. Smith, for purposes of
complying with applicable insurance laws and regulations.
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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.
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<PAGE> 8
F. There are no actions, suits, proceedings, investigations or assessments of
any kind pending, or to the best knowledge of CitFed Bancorp, threatened against
CitFed Bancorp or any of the Subsidiaries which reasonably can be expected to
result in any material adverse change in the financial condition, operations or
business of CitFed Bancorp and the Subsidiaries on a consolidated or separate
basis.
G. Since March 31, 1997, to the date hereof CitFed Bancorp and each of the
Subsidiaries has been operated in the ordinary course of business, has not made
any changes in its respective capital or corporate structures, nor any material
changes in its methods of business operations and has not provided any increases
in employee salaries or benefits other than in the ordinary course of business.
Since March 31, 1997, to the date hereof CitFed Bancorp has not declared or paid
any dividends nor made any distributions of any other kind to its shareholders
other than its regular quarterly cash dividends.
H. CitFed Bancorp and each of the Subsidiaries have timely filed all federal,
state and local tax returns required to be filed (after giving effect to all
extensions) by them, respectively, and have paid or provided for all tax
liabilities shown to be due thereon or which have been assessed against them,
respectively. To the best knowledge of CitFed Bancorp, all tax returns filed by
CitFed Bancorp or the Subsidiaries through the date hereof constitute complete
and accurate representations of the tax liabilities of CitFed Bancorp and each
of the Subsidiaries for such years and accurately set forth all items (to the
extent required to be included or reflected in such returns) relevant to its
future tax liabilities, including the tax basis of its properties and assets in
all material respects. Neither CitFed Bancorp nor any of the Subsidiaries is
currently under audit nor has any of them been contacted for an audit and
neither CitFed Bancorp nor any of the Subsidiaries is engaged in any appeal
proceeding in connection with any state, Federal, or local tax filing. As of the
date hereof, neither CitFed Bancorp nor any of the Subsidiaries has reason to
believe that any condition exists with respect to the business or operation of
CitFed Bancorp or the Subsidiaries that might prevent or impede the Merger from
qualifying as a reorganization within the meaning of Section 368(a) of the Code
or for pooling-of-interests accounting treatment.
I. Neither CitFed Bancorp nor any of the Subsidiaries is a party to (i) any
written employment contracts or written contracts of any other kind with any of
its officers, directors or employees or (ii) any material contract, lease or
agreement of any other kind which is not assignable as a result of the merger
provided for herein without the consent of another party, except for contracts,
leases or agreements which do not have terms extending beyond six months from
the date of this Agreement or contracts, leases or agreements (excluding
contracts, leases and agreements pursuant to which credit has been extended by
any of the Subsidiaries) which do not require the annual expenditure of more
than $250,000.00 thereunder.
J. Since March 31, 1997, to the date hereof none of the Subsidiaries has
incurred any unusual or extraordinary loan losses which are material to CitFed
Bancorp and the Subsidiaries on a consolidated basis; to the best knowledge of
CitFed Bancorp and in light of the Subsidiaries' historical loan loss experience
and the Subsidiaries' management's analysis of the quality and
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<PAGE> 9
performance of its loan portfolio, as of September 30, 1997, reserves for loan
losses were, in the opinion of CitFed Bancorp, adequate to absorb all known and
reasonably anticipated losses as of such date.
K. Neither CitFed Bancorp nor any of the Subsidiaries has, directly or
indirectly, dealt with any broker or finder in connection with this transaction
and none of them has incurred or will incur any obligation for any broker's or
finder's fee or commission in connection with the transactions provided for in
this Agreement. CitFed Bancorp shall be solely responsible for payment of any
fees to any broker or finder purporting to represent CitFed Bancorp in the
transactions provided for in this Agreement.
L. 1. The directors of CitFed Bancorp, by resolution adopted by the unanimous
vote of all directors present at a meeting duly called and held in accordance
with applicable law, (a) have duly approved this Agreement, the Stock Option
Agreement and the transactions contemplated herein and therein, (b) have
directed that this Agreement be submitted to a vote of CitFed Bancorp's
shareholders at the annual or a special meeting of the shareholders to be called
for that purpose, and (c) have approved, and taken all action required by the
terms of the Rights Plan, to authorize the redemption of such Rights prior to or
at the Effective Time subject only to the payment of $.01 per Right to each
holder of a Right, all in accordance with and as required by law and in
accordance with the Certificate of Incorporation and Bylaws of CitFed Bancorp,
and with respect to clause (c), the Rights Plan.
2. CitFed Bancorp has the corporate power and authority to enter into this
Agreement and to carry out its obligations hereunder subject to certain required
regulatory and shareholder approvals. This Agreement, when executed and
delivered, will have been duly authorized and will constitute the valid and
binding obligation of CitFed Bancorp, enforceable against CitFed Bancorp in
accordance with its terms, except to the extent that (i) enforceability thereof
may be limited by insolvency, reorganization, liquidation, bankruptcy,
readjustment of debt or other laws of general application relating to or
affecting the enforcement of creditors' rights generally and (ii) the
availability of certain remedies may be precluded by general principles of
equity; subject, however, to the receipt of requisite regulatory approvals and
the approval of CitFed Bancorp's shareholders.
3. Neither the execution of this Agreement, nor the consummation of the
transactions contemplated hereby, (i) conflicts with, results in a breach of,
violates or constitutes a default under, CitFed Bancorp's Certificate of
Incorporation or Bylaws or, to the best knowledge of CitFed Bancorp, any
federal, state or local law, statute, ordinance, rule, regulation or court or
administrative order to which CitFed Bancorp or any of the Subsidiaries is
subject or bound; (ii) to the best knowledge of CitFed Bancorp, results in the
creation of or gives any person the right to create any material lien, charge,
encumbrance, or security agreement or any other material rights of others or
other material adverse interest upon any material right, property or asset
belonging to CitFed Bancorp or any of the Subsidiaries; (iii) conflicts with,
results in a breach of, violates or constitutes a default under, terminates or
gives any person the right to terminate, amend, abandon, or refuse to perform,
any material agreement, arrangement or commitment to which CitFed Bancorp or any
of
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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.
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P. There are no actions, proceedings or investigations pending before any
environmental regulatory body, with respect to or threatened against or
affecting CitFed Bancorp or any of the Subsidiaries in respect to any "facility"
owned, leased or operated by any of them (but excluding any "facility" as to
which sole interest of CitFed Bancorp or any of the Subsidiaries is that of a
lienholder or mortgagee, but including any "facility" to which title has been
taken pursuant to mortgage foreclosure or similar proceedings and including any
"facility" in which CitFed Bancorp or any of the Subsidiaries ever participated
in the financial management of such facility to a degree sufficient to
influence, or have the ability to influence, the facility's treatment of
hazardous waste) under the Comprehensive Environmental Response, Compensation
and Liability Act of 1980, as amended ("CERCLA"), or under any Federal, state,
local or municipal statue, ordinance or regulation in respect thereof, in
connection with any release of any toxic or "hazardous substance", pollutant or
contaminant into the "environment" which, if adversely determined, (a) would
require the payment by CitFed Bancorp or any of the Subsidiaries and/or require
CitFed Bancorp or any of the Subsidiaries to incur expenses of more than
$2,000,000 (whether or not covered by insurance) or (b) would otherwise have a
material adverse effect on CitFed Bancorp or any of the Subsidiaries, nor, to
the best knowledge of CitFed Bancorp after reasonable inquiry, is there any
reasonable basis for the institution of any such actions or proceedings or
investigations which is probable of assertion, nor are there any such actions or
proceedings or investigations in which CitFed Bancorp or any of the Subsidiaries
is a plaintiff or complainant. Neither CitFed Bancorp nor any of the
Subsidiaries is liable in any material respect under any applicable law for any
release by any of them or for any release by any other "person" of a hazardous
substance caused by the spilling, leaking, pumping, pouring, emitting, emptying,
discharging, injecting, escaping, leaching, dumping or disposing of hazardous
wastes or other chemical substances, pollutants or contaminants into the
environment, nor is CitFed Bancorp or any of the Subsidiaries liable for any
material costs (as a result of the acts or omissions of CitFed Bancorp or any of
the Subsidiaries or, to the best knowledge of CitFed Bancorp, as a result of the
acts or omissions of any other "person") of any remedial action including,
without limitation, costs arising out of security fencing, alternative water
supplies, temporary evacuation and housing and other emergency assistance
undertaken by any environmental regulatory body having jurisdiction over CitFed
Bancorp or any of the Subsidiaries to prevent or minimize any actual or
threatened release by CitFed Bancorp or any of the Subsidiaries of any hazardous
wastes or other chemical substances, pollutants and contaminants into the
environment which would endanger the public health or the environment. To the
best knowledge of CitFed Bancorp, no underground storage tank presently is
located on, nor has any such tank ever been located on, any property owned by
CitFed Bancorp or any of the Subsidiaries or any "facility" where CitFed Bancorp
or any of the Subsidiaries has exercised any significant management role. All
terms contained in quotation marks in this paragraph and the paragraph
immediately following shall have the meaning ascribed to such terms, and defined
in, CERCLA; in addition, toxic or hazardous substances, as used in this
paragraph and all paragraphs of this Section II.P., shall mean any material or
substance that is defined or classified as a "hazardous substance" pursuant to
section 101 of CERCLA or Section 311 of the Federal Water Pollution Control Act
(33 U.S.C. 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);
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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.
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
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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
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accounting principles in effect as of the date of this Agreement (GAAP), or
amounts not yet accrued for GAAP purposes but for which an obligation (which has
legally accrued and cannot legally be eliminated and which is subject to
reasonable estimate) exists for payment in the future which is attributable to
any Benefit Plan, including but not limited to (a) severance pay benefits, (b)
deferred compensation or unpaid bonuses, (c) any liabilities on account of the
change in control which will result from this Agreement, including any potential
20% excise tax under Section 4999 of the Code relating to excess parachute
payments under Section 280G of the Code, (d) any unpaid pension contributions
for the current plan year or any accumulated funding deficiency under Section
412 of the Code and related penalties under Section 4971 of the Code, including
unpaid pension contributions or funding deficiencies owed by members of a
controlled group of corporations which includes CitFed Bancorp or any of the
Subsidiaries and for which CitFed Bancorp or any of the Subsidiaries is liable
under applicable law, (e) any authorized but unpaid profit sharing contributions
or contributions under Section 401(k) and Section 401(m) of the Code, (f)
retiree health benefit coverage and (g) unpaid premiums for contributions
required under any group health plan to maintain such plan's coverage through
the Effective Time.
8. Defined Benefit Pension Plan Liabilities. CitFed Bancorp and each of the
Subsidiaries (or any pension plan maintained by any of them) have not incurred
any material liability to the PBGC or the IRS with respect to any Benefit Plan
which is a defined benefit pension plan, except for the payment of PBGC premiums
pursuant to Section 4007 of ERISA, all of which if due prior to the date of this
Agreement have been fully paid, and no PBGC reportable event under Section 4043
of ERISA has occurred with respect to any such pension plan. Except as otherwise
disclosed in Schedule 1, the benefit liabilities, as defined in Section
4001(a)(16) of ERISA, of each Benefit Plan subject to Title IV of ERISA, using
the actuarial assumptions that would be used by the PBGC in the event of
termination of such plan, do not exceed the fair market value of the assets of
such plan. Neither CitFed Bancorp, any of the Subsidiaries nor any controlled
group member of CitFed Bancorp or any of the Subsidiaries participates in, or
has incurred any liability under Sections 4201, 4063 or 4064 of ERISA for a
complete or partial withdrawal from a multiple employer plan or a multi-employer
plan (as defined in Section 3(37) of ERISA).
9. Independent Trustee. CitFed Bancorp and the Subsidiaries (a) have not
incurred any asserted or, to the best knowledge of CitFed Bancorp, unasserted
material liability for breach of duties assumed in connection with acting as an
independent trustee of any employee pension plan (as defined in Section 3(2) of
ERISA) which is intended to be qualified under Section 401(a) of the Code and
which is maintained by an employer unrelated in ownership to CitFed Bancorp or
any of the Subsidiaries, (b) have not authorized nor knowingly participated in a
material prohibited transaction under Section 406 of ERISA and not exempt under
Section 408 of ERISA and (c) have not received notice of any material actions,
suits or claims (other than routine claims for benefits) pending or threatened
against the unrelated employer or against them.
10. Retiree Benefits. Except as listed on Schedule 1 and identified as
"Retiree Liability", neither CitFed Bancorp nor any of the Subsidiaries have any
obligation to provide medical benefits, or life insurance benefits to or with
respect to retirees, former employees or any of their relatives.
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<PAGE> 15
11. Right to Amend and Terminate. Except as listed on Schedule 1, CitFed
Bancorp or one of the Subsidiaries has all power and authority necessary to
amend or terminate each Qualified Benefit Plan without incurring any penalty or
liability provided that, in the case of an employee pension benefit plan (as
defined in section 3(2) of ERISA), benefits accrued as of the date of amendment
or termination are not reduced.
R. The investment portfolios of CitFed Bancorp and each of the Subsidiaries
consist of securities in marketable form. Since March 31, 1997 to the date
hereof neither CitFed Bancorp nor any of the Subsidiaries has incurred any
unusual or extraordinary losses in its investment portfolio, and, except for
events relating to the business environment in general, including market
fluctuations, CitFed Bancorp is not aware of any events which are reasonably
certain to occur in the future and which reasonably can be expected to result in
any material adverse change in the quality or performance of CitFed Bancorp's
and the Subsidiaries' investment portfolio on a consolidated basis.
S. There are no actions, suits, claims, proceedings, investigations or
assessments of any kind pending, or to the best knowledge of CitFed Bancorp,
threatened against any of the directors or officers of CitFed Bancorp or any of
the Subsidiaries in their capacities as such, and no director or officer of
CitFed Bancorp or any of the Subsidiaries currently is being indemnified or
seeking to be indemnified by either CitFed Bancorp or any of the Subsidiaries
pursuant to applicable law or CitFed Bancorp's Certificate of Incorporation or
Bylaws or the Thrift Subsidiary's Charter or Bylaws, or the organization
documents of any of the other Subsidiaries.
T. There is no "business combination," "moratorium," "control share," or other
state anti-takeover statute or regulation or any agreement to which CitFed
Bancorp is a party which (i) prohibits or restricts CitFed Bancorp's ability to
perform its obligations under this Agreement, or its ability to consummate the
transactions contemplated hereby, (ii) would have the effect of invalidating or
voiding this Agreement, or any provisions hereof, or (iii) would subject Fifth
Third to any impediment or condition in connection with the exercise of any of
its rights under this Agreement.
U. CitFed Bancorp has taken all action required to be taken by it in order to
exempt this Agreement and the Stock Option Agreement (as hereinafter defined)
and the transactions contemplated hereby and thereby from, and this Agreement
and the Stock Option Agreement are exempt from the requirements of any such law
or regulation, including, without limitation, the laws of the State of Delaware,
including Section 203 of the General Corporation Law of the State of Delaware.
V. All interest rate swaps, caps, floors and option agreements and other
interest rate risk management arrangements, whether entered into for CitFed
Bancorp's own account or for the account of one or more of the Subsidiaries or
their customers, were entered into (i) in accordance with prudent banking
practices and all applicable laws, rules, regulations and regulatory policies
and (ii) with counterparties believed to be financially responsible at the time;
and each of them constitutes the valid and legally binding obligation of CitFed
Bancorp or one of the Subsidiaries,
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<PAGE> 16
enforceable in accordance with its terms (except as such enforceability may be
limited by applicable bankruptcy, insolvency, reorganization, moratorium,
fraudulent transfer and similar laws of general applicability relating to or
affecting creditors' rights or by general equity principles), and are in full
force and effect. Neither CitFed Bancorp or any of the Subsidiaries, nor to
CitFed Bancorp's knowledge any other party thereto, is in breach of any of its
obligations under any such agreement or arrangement.
III. REPRESENTATIONS AND WARRANTIES OF FIFTH THIRD
Fifth Third represents and warrants to CitFed Bancorp that as of the date hereof
or as of the indicated date, as appropriate:
A. Fifth Third is duly incorporated, validly existing and in good standing as a
corporation under the corporation laws of the State of Ohio, is a registered
bank holding company under the Bank Holding Company Act of 1956, as amended, and
is duly authorized to conduct the business in which it is engaged, and The Fifth
Third Bank is duly incorporated, validly existing and in good standing as a
corporation under the laws of the State of Ohio and is duly authorized to
conduct the business in which it is engaged.
B. Pursuant to Fifth Third's Second Amended Articles of Incorporation, as
amended, the total number of shares of capital stock it is authorized to have
outstanding is 300,500,000 of which 300,000,000 shares are classified as Fifth
Third Common Stock and 500,000 shares are classified as preferred stock without
par value ("Fifth Third Preferred Stock"). As of the close of business on
November 30, 1997, 155,163,554 shares of Fifth Third Common Stock were issued
and outstanding and 3,677,597 shares were held in its treasury. As of the date
of this Agreement, no shares of Fifth Third Preferred Stock have been issued.
Fifth Third does not have outstanding any stock options, subscription rights,
warrants or other securities entitling the holders to subscribe for or purchase
any shares of its capital stock other than options granted and to be granted to
employees and directors under its stock option plans. At November 30, 1997,
7,059,640 shares of Fifth Third Common Stock were reserved for issuance in
connection with outstanding options granted under its stock option plans and
2,116,683 shares were reserved for issuance under options to be granted in the
future.
C. All shares of Fifth Third Common Stock to be received by the shareholders of
CitFed Bancorp as a result of the Merger shall be, upon transfer or issuance,
validly issued, fully paid and non-assessable, and will not, upon such transfer
or issuance, be subject to the preemptive rights of any shareholder of Fifth
Third.
D. Fifth Third has furnished to CitFed Bancorp its audited consolidated
financial statements as at December 31, 1994, December 31, 1995 and December 31,
1996 and for the respective years then ended together with the opinions of its
independent public accountants associated therewith. Such consolidated financial
statements fairly present the consolidated financial condition of Fifth Third as
of their respective dates and for the respective periods covered thereby in
conformity with
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<PAGE> 17
generally accepted accounting principles consistently followed throughout the
periods covered thereby. Neither Fifth Third nor any significant subsidiaries of
Fifth Third have any material liabilities, obligations or indebtedness required
to be disclosed in such financial statements other than the liabilities,
obligations and indebtedness disclosed in such financial statements (including
footnotes). Fifth Third will furnish to CitFed Bancorp its audited consolidated
financial statements as at December 31, 1997 and for the year then ended
together with the opinions of its independent public accountants associated
therewith as soon as such statements are publicly available. Fifth Third has
also furnished to CitFed Bancorp its unaudited consolidated financial statements
as at September 30, 1997, and for the nine (9) months then ended, and shall
continue to furnish information for subsequent calendar quarter periods to
CitFed Bancorp as soon as such becomes publicly available until the Closing
Date.
E. Except for events relating to the business environment in general, the
effects of any acquisition transactions publicly announced by Fifth Third, and
the issuance by Fifth Third Capital Trust I of its 8.136% Capital Securities,
Series A and the related issuance by Fifth Third of its 8.136% Junior
Subordinated Deferrable Interest Debentures, Series A: (i) since December 31,
1996, to the date hereof there have been no material adverse changes in the
consolidated financial condition, operations or business of Fifth Third; (ii)
the chief executive officer and the chief financial officer of Fifth Third are
not aware of any events which have occurred since December 31, 1996, or which
are reasonably certain to occur in the future and which reasonably can be
expected to result in any material adverse change in the consolidated financial
condition, operations or business of Fifth Third; and (iii) since December 31,
1996, to the date hereof there have been no material changes in the methods of
business operations of Fifth Third and its subsidiaries.
F. 1. The Executive Committee of the Board of Directors of Fifth Third, by
resolution adopted by the members present at a meeting duly called and held, at
which meeting a quorum was at all times present and acting, has approved this
Agreement, including reserving for issuance to CitFed Bancorp shareholders in
accordance with this Agreement, a sufficient number of shares of Fifth Third
Common Stock. Approval and adoption of this Agreement by the shareholders of
Fifth Third is not required under Ohio law or under the Second Amended Articles
of Incorporation, as amended, or Code of Regulations of Fifth Third. No other
corporate action is necessary or required, including but not limited to approval
of this Agreement or the transaction contemplated herein by the Board of
Directors of Fifth Third.
2. Fifth Third has corporate power and authority to enter into this
Agreement and to carry out its obligations hereunder subject to certain required
regulatory approvals. This Agreement, when executed and delivered, will have
been duly authorized and will constitute the valid and binding obligation of
Fifth Third, enforceable in accordance with its terms, except to the extent that
(i) enforceability thereof may be limited by insolvency, reorganization,
liquidation, bankruptcy, readjustment of debt or other laws of general
application relating to or affecting the enforcement of creditors' rights
generally and (ii) the availability of certain remedies may be precluded by
general principles of equity; subject, however, to the receipt of requisite
regulatory approvals.
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<PAGE> 18
3. Neither the execution of this Agreement nor the consummation of the
transactions contemplated hereby, (i) conflicts with, results in a breach of,
violates or constitutes a default under, Fifth Third's Second Amended Articles
of Incorporation, as amended, or Code of Regulations or, to the best knowledge
of its chief executive officer and chief financial officer, any federal,
foreign, state or local law, statute, ordinance, rule, regulation or court or
administrative orders to which Fifth Third is subject or bound; (ii) to the best
knowledge of the chief executive officer and chief financial officer of Fifth
Third, result in the creation of or give any person the right to create any
material lien, charge, encumbrance, security agreement or any other material
rights of others or other material adverse interest upon any material right,
property or asset belonging to Fifth Third or any of its subsidiaries other than
such rights as may be given the shareholders of CitFed Bancorp pursuant to the
provisions of Sections 1701.84 and 1701.85 of the Ohio Revised Code; (iii)
conflicts with, results in a breach of, violates or constitutes a default under,
terminate or give any person the right to terminate, amend, abandon, or refuse
to perform, any material agreement, arrangement or commitment to which Fifth
Third is a party or by which Fifth Third's rights, properties or assets are
subject or bound; or (iv) accelerate or modify, or give any party thereto the
right to accelerate or modify, the time within which, or the terms according to
which, Fifth Third is to perform any duties or obligations or receive any rights
or benefits under any material agreement, arrangements or commitments.
G. Complete and accurate copies of (i) the Second Amended Articles of
Incorporation, as amended, and (ii) the Code of Regulations of Fifth Third in
force as of the date hereof have been delivered to CitFed Bancorp.
H. To the best knowledge of the chief executive officer and chief financial
officer of Fifth Third, neither Fifth Third nor any of its subsidiaries, nor any
employee, officer or director of any of them, has knowingly engaged in any
activity or omitted to take any action which, in any material way, has resulted
or could result in the violation of (i) any local, state or federal law or (ii)
any regulation, order, injunction or decree of any court or governmental body,
the violation of either of which could reasonably be expected to have a material
adverse effect on the financial condition Fifth Third and its subsidiaries taken
as a whole. To the best knowledge of Fifth Third, Fifth Third and its
subsidiaries possess all licenses, franchises, permits and other governmental
authorizations necessary for the continued conduct of their businesses without
material interference or interruption.
I. 1. To the best knowledge of Fifth Third, neither this Agreement nor any
report, statement, list, certificate or other information furnished or to be
furnished by Fifth Third to CitFed Bancorp or its agents pursuant to this
Agreement (including, without limitation, any information which shall be
supplied with respect to its business operations and financial condition for
inclusion in the proxy statement/prospectus and registration statement relating
to the merger) contains or shall contain (in the case of information relating to
the proxy statement/prospectus, at the time it is mailed, and, in the case of
the registration statement, at the time it becomes effective and, in the case of
the proxy statement/prospectus and the registration statement, at the time the
annual or special meeting of shareholders of CitFed Bancorp is held to consider
the adoption of this Agreement) an untrue statement of a material fact or omits
or shall omit to state a material fact necessary to make the
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<PAGE> 19
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
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thrift subsidiary's historical loan loss experience and their managements'
analysis of the quality and performance of their respective loan portfolios, as
of September 30, 1997, their consolidated reserves for loan losses are adequate
to absorb all known and reasonably anticipated losses as of such date.
L. Fifth Third and its subsidiaries have filed all federal, state and local tax
returns required to be filed (after giving effect to all extensions) by them,
respectively, and have paid or provided for all tax liabilities shown to be due
thereon or which have been assessed against them, respectively. To the best
knowledge of Fifth Third, all tax returns filed by Fifth Third and its
subsidiaries through the date hereof constitute complete and accurate
representations of the tax liabilities of Fifth Third and each of such
subsidiaries for such years and accurately set forth all items (to the extent
required to be included or reflected in such returns) relevant to its future tax
liabilities, including the tax basis of its properties and assets in all
material respects. Neither Fifth Third nor any of its subsidiaries is currently
under audit nor has any of them been contacted for an audit and neither Fifth
Third nor any of its subsidiaries is engaged in any appeal proceeding in
connection with any state, Federal, or local tax filing, which audit or appeal,
if decided adversely to Fifth Third, would have a material adverse affect on
Fifth Third or any of its subsidiaries.
M. Except for dealings with Salomon Brothers Inc and 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
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qualifying as a reorganization within the meaning of Section 368(a) of the Code
or (other than the reissuance of shares of Fifth Third Common Stock held as
treasury shares) for pooling-of-interests accounting treatment.
Q. There is no "business combination," "moratorium," "control share," or other
state anti-takeover statute or regulation or any agreement to which Fifth Third
is a party which (i) prohibits or restricts Fifth Third's ability to perform its
obligations under this Agreement, or its ability to consummate the transactions
contemplated hereby, (ii) would have the effect of invalidating or voiding this
Agreement, or any provisions hereof, or (iii) would subject CitFed Bancorp to
any impediment or condition in connection with the exercise of any of its rights
under this Agreement.
R. Fifth Third and its subsidiaries have good and marketable title to all of the
material properties and assets reflected in their separate statements of
financial condition as at December 31, 1996, and which are still owned by each
and each has good and marketable title to all material properties and assets
acquired by it after such date and still owned by it, subject to (i) any liens
and encumbrances that do not materially adversely impair the use of the
property, (ii) statutory liens for taxes not yet due and payable and (iii) minor
defects and irregularities in title that do not materially adversely impair the
use of the property.
S. There are no actions, proceedings or investigations pending before any
environmental regulatory body, with respect to or threatened against or
affecting Fifth Third or any of its subsidiaries in respect to any "facility"
owned, leased or operated by any of them (but excluding any "facility" as to
which sole interest of Fifth Third or any of its subsidiaries is that of a
lienholder or mortgagee, but including any "facility" to which title has been
taken pursuant to mortgage foreclosure or similar proceedings and including any
"facility" in which Fifth Third or any of its subsidiaries ever participated in
the financial management of such facility to a degree sufficient to influence,
or have the ability to influence, the facility's treatment of hazardous waste)
under the Comprehensive Environmental Response, Compensation and Liability Act
of 1980, as amended ("CERCLA"), or under any Federal, state, local or municipal
statue, ordinance or regulation in respect thereof, in connection with any
release of any toxic or "hazardous substance", pollutant or contaminant into the
"environment" which, if adversely determined, (a) would require the payment by
Fifth Third or any of its Subsidiaries and/or require Fifth Third or any of its
subsidiaries to incur expenses of more than $2,000,000 (whether or not covered
by insurance) or (b) would otherwise have a material adverse effect on Fifth
Third or any of its Subsidiaries, nor, to the best knowledge of Fifth Third
after reasonable inquiry, is there any reasonable basis for the institution of
any such actions or proceedings or investigations which is probable of
assertion, nor are there any such actions or proceedings or investigations in
which Fifth Third or any of its subsidiaries is a plaintiff or complainant.
Neither Fifth Third nor any of its subsidiaries is liable in any material
respect under any applicable law for any release by any of them or for any
release by any other "person" of a hazardous substance caused by the spilling,
leaking, pumping, pouring, emitting, emptying, discharging, injecting, escaping,
leaching, dumping or disposing of hazardous wastes or other chemical substances,
pollutants or contaminants into the environment, nor is Fifth Third or any of
its subsidiaries liable for any material costs (as a result of the acts or
omissions of Fifth Third or any
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<PAGE> 22
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
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securities; make any material changes in its method of business operations;
make, enter into any agreement to make, or become obligated to make, any capital
expenditures in excess of the amounts set forth in CitFed Bancorp's capital
expenditures budget as delivered to Fifth Third prior to the date hereof; make,
enter into or renew any agreement for services to be provided to CitFed Bancorp
or the Subsidiaries or permit the automatic renewal of any such agreement,
except any agreement for services in the ordinary course of business consistent
with past practices, provided that CitFed Bancorp will consult with Fifth Third
prior to the renewal of any such agreement requiring the annual expenditure of
more than $150,000 (for this purpose the phrase "permit the automatic renewal"
includes the failure to send a notice of termination of such contract if such
failure would constitute a renewal); open for business any branch office which
has been approved by the appropriate regulatory authorities but not yet opened
or apply to the appropriate regulatory authorities to establish a new branch
office or expand any existing branch office; acquire, become obligated to
acquire, or enter into any agreement to acquire, any banking or non-banking
company or any branch offices of any such companies; make, declare, pay or set
aside for payment any cash dividends on its own stock other than normal and
customary cash dividends not to exceed $0.09 per quarter through June 30, 1998,
and $0.10 per quarter thereafter, paid in such amounts and at such times as
CitFed Bancorp historically has done on its common stock, provided this covenant
shall only apply to CitFed Bancorp and provided further that notwithstanding
anything to the contrary herein, Fifth Third and CitFed Bancorp shall cooperate
in selecting the Effective Time to ensure that the holders of CitFed Bancorp
Common Stock do not become entitled to receive both a dividend in respect of
their CitFed Bancorp Common Stock and a dividend in respect of the Fifth Third
Common Stock or fail to be entitled to receive any dividend with respect to any
quarterly period or portion thereof in which the Effective Time occurs; make,
declare, pay or set aside for payment any stock dividends or make any other
distributions on its stock other than cash dividends as described in the
immediately preceding clause; change or otherwise amend any Benefit Plans other
than as required by law or as contemplated herein; and provide any increases in
employee salaries or benefits other than in the ordinary course of business.
CitFed Bancorp agrees that it will not sell or otherwise dispose of or encumber
any of the shares of the capital stock of any of the Subsidiaries which are now
owned by it.
C. Except as required by applicable law or regulation, CitFed Bancorp and the
Subsidiaries shall not (a) implement or adopt any material change in their
interest rate risk management policies, procedures or practices; (b) fail to
follow its existing policies or practices with respect to managing their
exposure to interest rate risk; or (c) fail to use commercially reasonable means
to avoid any material increase in their aggregate exposure to interest rate
risk.
D. Not later than the 15th day prior to the mailing of CitFed Bancorp's proxy
statement with respect to the Merger, CitFed Bancorp shall deliver to Fifth
Third a list of each person that, to the best of its knowledge, is or is
reasonably likely to be, as of the date of the annual or special meeting called
to approve the Merger, deemed an "affiliate" of it as that term is used in Rule
145 under the Securities Act of 1933, as amended, or SEC Accounting Series
Releases 130 and 135 (the "CitFed Affiliates"). CitFed Bancorp shall use its
best efforts to cause each CitFed Affiliate to execute and
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deliver to Fifth Third on or before the mailing of such proxy statement an
agreement in the form of Appendix IV.D hereto.
V. COOPERATION AND OTHER OBLIGATIONS AND OTHER COVENANTS
A. Fifth Third will prepare and cause to be filed at its expense such
applications and other documents with the Board of Governors of the Federal
Reserve System, the Federal Deposit Insurance Corporation, the Ohio Division of
Banks, the OTS, and any other governmental agencies as are required to secure
the requisite approval of such agencies to the consummation of the transactions
provided for in this Agreement, and the parties shall cooperate in the
preparation of an appropriate registration statement, including the prospectus,
proxy statement, and such other documents necessary to comply with all federal
and state securities laws relating to the registration and issuance of the
shares of Fifth Third Common Stock to be issued to the shareholders of CitFed
Bancorp in this transaction (the expenses thereof, other than accounting, legal,
investment banking, financial consulting and associated expenses of CitFed
Bancorp and its affiliates, to be paid by Fifth Third), and any other laws
applicable to the transactions provided for in this Agreement. Fifth Third shall
use all reasonable efforts to file all regulatory applications within forty-five
(45) days of the date of this Agreement and the Registration/Proxy Statement
within sixty(60) days of the date of this Agreement, and to secure all such
approvals as promptly as practicable. CitFed Bancorp agrees that it will, as
promptly as practicable after request and at its own expense, provide Fifth
Third with all information and documents concerning CitFed Bancorp and the
Subsidiaries, as shall be required in connection with preparing such
applications, registration statements and other documents and in connection with
securing such approvals. Prior to filing any such applications or other
documents with the applicable governmental agencies, Fifth Third shall provide
copies thereof to CitFed Bancorp. CitFed Bancorp shall have the right to
review, comment on and approve the proxy statement and any amendments thereto
included in the registration statement in an appropriate manner prior to being
filed. CitFed Bancorp also shall have the right to review and comment on all
regulatory applications and responses in an appropriate manner prior to being
filed. Fifth Third agrees that it will, as promptly as practicable after request
and at its own expense, provide CitFed Bancorp with all information and
documents concerning Fifth Third and its subsidiaries as shall be required in
connection with preparing such applications, registration statements and other
documents which are to be prepared and filed by CitFed Bancorp and in connection
with approvals required to be obtained by CitFed Bancorp hereunder. Prior to
filing any such applications, statements or other documents with the applicable
governmental agency, CitFed Bancorp shall provide copies thereof to Fifth Third.
B. Fifth Third will take no action or omit to take any action that could (i)
delay consummation of the Merger, (ii) diminish the likelihood of the Merger
receiving all regulatory approvals or otherwise being consummated; or (iii)
prevent the Merger from qualifying as a reorganization under Section 368(a) of
the Code or for treatment under present accounting rules as a
pooling-of-interests.
C. Each of the parties hereto agrees to use its best efforts and to cooperate
with the other party in all reasonable respects in order to carry out and
consummate the transactions contemplated by this
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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
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determined as of the Effective Time disregarding and without reduction for cash
balance credits implemented at the request of Fifth Third pursuant to Section
V.F.5 below.
(2) Neither CitFed Bancorp nor any of its Subsidiaries, without the advance
written consent of Fifth Third shall (1) except to the extent necessary to carry
out the terms of this Agreement, or as required by applicable law, adopt any
amendments to the Qualified Benefit Plans after the date of this Agreement; or
(2) make any contributions to any Qualified Benefit Plan after the date of this
Agreement, except in the ordinary course of business consistent with past
practices.
(3) CitFed Bancorp or one or more of the Subsidiaries shall provide to
Fifth Third at least sixty (60) days prior to the Effective Time, documentation
reasonably satisfactory to Fifth Third demonstrating that the requirements of
Sections 404, 412, 415, 401(k) and (m) of the Code have been satisfied by all of
its Qualified Benefit Plans.
(4) With respect to any Benefit Plan that provides for vesting of benefits,
there shall be no discretionary acceleration of vesting without Fifth Third's
consent whether or not such discretionary acceleration of vesting is provided
under the terms of the Benefit Plan; provided that a Benefit Plan which pursuant
to its terms provides for an acceleration of vesting upon a change of control of
CitFed Bancorp shall not be deemed to involve a discretionary acceleration of
vesting and vesting thereunder shall accelerate as of the Effective Time.
(5) If Fifth Third so requests, CitFed Bancorp or one or more of the
Subsidiaries shall have amended CitFed Bancorp's defined benefit plan in the
manner directed by Fifth Third in order to provide for employees of CitFed
Bancorp and the Subsidiaries such cash balance credits as Fifth Third determines
would approximate the projected profit sharing plan contributions such employees
would receive after closing under the Fifth Third Bancorp Master Profit Sharing
Plan for a number of years determined by Fifth Third.
VI. CONDITIONS PRECEDENT TO CLOSING.
A. Conditions to the Obligations of Each of the Parties:
The obligation of each of the parties hereto to consummate the transactions
provided for herein is subject to the fulfillment on or prior to the Effective
Time of each of the following conditions:
1. The shareholders of CitFed Bancorp shall have duly adopted this
Agreement in accordance with and as required by law and in accordance with its
Certificate of Incorporation and Bylaws.
2. All necessary governmental and regulatory orders, consents, clearances
and approvals and requirements shall have been secured and satisfied for the
consummation of such transactions, including without limitation, those of the
Federal Reserve System, the Ohio Division of Banks, the OTS and the Federal
Deposit Insurance Corporation to the extent required.
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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.
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
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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.
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C. Conditions to the Obligations of CitFed Bancorp:
The obligation of CitFed Bancorp to consummate the transactions provided for
herein is subject to the fulfillment at or prior to the Effective Time of each
of the following conditions unless waived by CitFed Bancorp in a writing
delivered to Fifth Third which specifically refers to the condition or
conditions being waived:
1. All of the representations and warranties of Fifth Third set forth in
Section III of this Agreement shall be true and correct in all material respects
as of the date of this Agreement and at and as of the Closing Date as if each
such representation and warranty was given on and as of the Closing Date, except
(i) for any such representations and warranties made as of a specified date,
which shall be true and correct in all material respects as of such date and
(ii) for inaccuracies of representations and warranties which would not have, or
would not reasonably be expected to have, a material adverse effect on the
consolidated business or operations of Fifth Third.
2. Fifth Third shall have performed all of the obligations required of it
under the terms of this Agreement in all material respects, except for breaches
of obligations which would not have, or would not reasonably be expected to
have, any material adverse effect on the consolidated business or operations of
Fifth Third.
3. 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.
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6. Fifth Third shall have executed and delivered the Fifth Third Employment
Contracts (as defined in Section VII.B.4 below) and provide, or make provision
for payment of any and all severance payments described in Section VII below.
VII. ADDITIONAL COVENANTS
A. The Thrift Subsidiary shall be merged with and into Fifth Third Bank, to be
effective the Effective Time. The parties hereto agree to cooperate with one
another to effect the Subsidiary Merger. Upon consummation of the Subsidiary
Merger, the separate corporate existence of the Thrift Subsidiary shall cease by
operation of law.
B. 1. (a) Fifth Third intends (but is not obligated) to employ at Fifth Third or
other Fifth Third subsidiaries or affiliates as many of the CitFed Bancorp and
the Subsidiaries employees who desire employment within the Fifth Third holding
company system as possible, to the extent of available positions and consistent
with Fifth Third's standard staffing levels and personnel policies; provided
that such continuing employees will not be subject to any exclusion or penalty
for pre-existing conditions that were covered under the Subsidiaries' health and
welfare plan immediately prior to the Effective Time or any waiting period
relating to coverage under Fifth Third's health and welfare plan. Except as
provided in (b) below, each employee of CitFed Bancorp and the Subsidiaries who
becomes an employee of Fifth Third or any of its subsidiaries or affiliates at
or immediately subsequent to the Merger shall be entitled to participate in all
employee benefit plans sponsored by Fifth Third or its subsidiaries or
affiliates on the same terms and to the same extent as similarly situated
employees. Fifth Third shall merge the CitFed Federal Savings Bank 401(k) Profit
Sharing Plan into the Fifth Third Bancorp Master Profit Sharing Plan on or as
soon as reasonably practicable after the Effective Time if Fifth Third
determines in good faith that such merger will not jeopardize the tax exempt
status of the Fifth Third Bancorp Master Profit Sharing Plan. Except as provided
in (b) below, if the CitFed Federal Savings Bank 401(k) Profit Sharing Plan is
merged into the Fifth Third Bancorp Master Profit Sharing Plan, then upon said
merger, service taken into account under the CitFed Federal Savings Bank 401(k)
Profit Sharing Plan shall count as service taken into account for all purposes
under the Fifth Third Bancorp Master Profit Sharing Plan. If the CitFed Federal
Savings Bank 401(k) Profit Sharing Plan is not merged into the Fifth Third
Bancorp Master Profit Sharing Plan as of the Effective Time, it shall either (i)
be continued on a separate plan basis to the extent permissible under the Code
and ERISA until a subsequent merger of such plans takes place and the CitFed
Federal Savings Bank 401(k) Profit Sharing Plan shall in such case be amended as
of the Effective Time so as to provide employer contribution levels on a
comparable and equivalent basis to the benefits being provided under the Fifth
Third Bancorp Master Profit Sharing Plan but subject to the provisions of
Section V.F.5 hereof, or (ii) be terminated retroactive to the Effective Time
and all continuing employees of CitFed Bancorp and its Subsidiaries shall become
participants in the Fifth Third Bancorp Master Profit Sharing Plan at or as soon
as practicable after the Effective Time and shall be given credit for past
service for eligibility and vesting but not for benefit accrual purposes but
subject to the provisions of Section V.F.5 hereof. Employees shall receive past
service credit under the Fifth Third Bancorp Master Retirement Plan for
eligibility and vesting but not for benefit accrual purposes. For all other
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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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<PAGE> 33
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
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<PAGE> 34
the Subsidiaries (the "Indemnified Parties") against losses, claims, damages,
costs, expenses (including reasonable attorneys' fees), liabilities or
judgements or amounts that are paid in settlement (which settlement shall
require the prior written consent of Fifth Third) of or in connection with any
claim, action, suit, proceeding or investigation (a "Claim") in which an
Indemnified Party is, or is threatened to be made, a party or a witness based in
whole or in part on or arising in whole or in part out of the fact that such
person is or was a director or officer of CitFed Bancorp, of any of the
Subsidiaries if such Claim pertains to any matter or fact arising, existing or
occurring prior to the Effective Time (including, without limitation, the Merger
and the transactions contemplated by this Agreement), regardless of whether such
Claim is asserted or claimed prior to, at or after the Effective Time. Fifth
Third's assumption of the indemnification obligations of CitFed Bancorp, or any
of the Subsidiaries as provided herein shall continue for a period of five years
after the Effective Time or, in the case of claims asserted prior to the fifth
anniversary of the Effective Time until such matters are finally resolved. Any
Indemnified Party wishing to claim indemnification under this provision, upon
learning of any Claim shall notify Fifth Third (but the failure to so notify
Fifth Third shall not relieve Fifth Third from any liability which Fifth Third
may have under this section except to the extent Fifth Third is materially
prejudiced thereby). Notwithstanding the foregoing, the Indemnified Parties as a
group may retain only one law firm to represent them with resect to each matter
under this section unless there is, under applicable standards of professional
conduct, a conflict on any one significant issue between the positions of any
two or more Indemnified parties.
(ii) From and after the Effective Time, the directors, officers and
employees of CitFed Bancorp and its Subsidiaries who become directors, officers
or employees of Fifth Third or any of its subsidiaries, except for the
indemnification rights set forth in subparagraph (i) above, shall have
indemnification rights with prospective application only. The prospective
indemnification rights shall consist of such rights to which directors, officers
or employees of Fifth Third or the subsidiary by which such person is employed
are entitled under the provisions of the Articles of Incorporation of Fifth
Third or similar governing documents of Fifth Third or its applicable
subsidiaries, as in effect from time to time after the Effective Time, as
applicable, and provisions of applicable law as in effect form time to time
after the Effective Time.
(iii) The obligations of Fifth Third provided under this Section VII.C. are
intended to benefit, and be enforceable against Fifth Third directly by, the
Indemnified parties, and shall be binding on all respective successors of Fifth
Third.
(iv) Fifth Third shall also purchase and keep in force for a three year
period, a policy of directors' and officers' liability insurance to provide
coverage for acts or omissions of the type currently covered by CitFed Bancorp's
existing directors' and officers' liability insurance for acts or omission
occurring on or prior to the Effective Time, but only to the extent such
insurance may be purchased or kept in full force on commercially reasonable
terms taking into account the cost thereof and the benefits provided thereby. It
is agreed that such costs shall be commercially reasonable so long as the annual
cost does not exceed 150% of the annual cost currently paid for such coverage by
CitFed Bancorp and its Subsidiaries.
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<PAGE> 35
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 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
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<PAGE> 36
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
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<PAGE> 37
provided after the Effective Time by the third party recommended for such
purposes by Fifth Third. In the event this Agreement is terminated pursuant to
Section VIII hereof for any reason except a material breach or default by CitFed
Bancorp, and if, in such instance, CitFed Bancorp desires to convert to another
provider of data processing services, including, without limitation, item
processing and application processing, Fifth Third shall pay all costs and
expenses associated with such conversion.
K. Fifth Third and CitFed Bancorp shall agree with each other as to the form and
substance of any press release related to this Agreement or the transactions
contemplated hereby, and shall consult with each other as to the form and
substance of other public disclosures related thereto, provided, however, that
nothing contained herein shall prohibit either party from making any disclosure
which its counsel deems required by law.
L. Each party hereto shall bear and pay all costs and expenses incurred by it in
connection with the transactions contemplated by this Agreement, including,
without limitation, fees, costs and expenses of its own financial consultants,
investment bankers, accountants and counsel, without reduction or modification
in the number of shares of Fifth Third Common Stock to be issued hereunder. The
expenses of printing and mailing the prospectus/proxy statement shall be paid by
Fifth Third.
M. 1. Between the date hereof and the Closing Date, CitFed Bancorp shall
promptly advise Fifth Third in writing of any fact that, if existing or known at
the date hereof, would have been required to be set forth or disclosed in or
pursuant to this Agreement or of any fact that, if existing or known at the date
hereof, would have made any of the representations contained herein untrue to
any material extent, and which in each case, would be likely to have a material
adverse effect on CitFed Bancorp and its Subsidiaries, taken as a whole;
provided, however, that no information so disclosed to Fifth Third shall be
deemed an admission by CitFed Bancorp that such fact would be likely to have a
material adverse effect on CitFed Bancorp and its Subsidiaries, taken as a
whole, nor shall such information so disclosed to Fifth Third be deemed an
exception to any representation, warranty or covenant made by CitFed Bancorp
herein unless Fifth Third, in its sole discretion, agrees in writing to accept
such an exception.
2. Between the date hereof and the Closing Date, Fifth Third shall promptly
advise CitFed Bancorp in writing of any fact that, if existing or known at the
date hereof, would have been required to be set forth or disclosed in or
pursuant to this Agreement or of any fact that, if existing or known at the date
hereof, would have made any of the representations contained herein untrue to
any material extent, and which in each case, would be likely to have a material
adverse effect on CitFed Bancorp and its subsidiaries, taken as a whole;
provided, however, that no information so disclosed to Cit Fed Bancorp shall be
deemed an admission by Fifth Third that such fact would be likely to have a
material adverse effect on Fifth Third and its subsidiaries, taken as a whole,
nor shall such information so disclosed to CitFed Bancorp shall be deemed an
exception to any representation, warranty or covenant made by Fifth Third unless
CitFed Bancorp, in its sole discretion, agrees in writing to accept such an
exception.
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VIII. TERMINATION
A. This Agreement may be terminated at any time prior to the Effective Time by
written notice delivered by Fifth Third to CitFed Bancorp or by CitFed Bancorp
to Fifth Third in the following instances:
1. By Fifth Third or CitFed Bancorp, if there has been to the extent
contemplated in Section VI.B.1. and 2. and Section VI.C.1. and 2. herein, a
material misrepresentation, a material breach of warranty or a material failure
to comply with any covenant on the part of the other party with respect to the
representations, warranties, and covenants set forth herein and such
misrepresentations, breach or failure to comply has not been cured (if capable
of cure) within thirty (30) days after receipt of written notice, provided, the
party in default shall have no right to terminate for its own default.
2. By Fifth Third or CitFed Bancorp if the business or assets or financial
condition of the other party, in each case taken as a whole, shall have
materially and adversely changed from that in existence at September 30, 1997,
other than any such change attributable to or resulting from any change in law,
regulation or generally accepted accounting principles, changes in interest
rates, economic, financial or market conditions affecting the banking or thrift
industry generally or changes that may occur as a consequence of actions or
inactions that either party hereto is expressly obligated to take under this
Agreement (including without limitation the payment by either party of its
transaction expenses related to the actions contemplated by this Agreement).
3. By Fifth Third or CitFed Bancorp, if the merger transaction contemplated
herein has not been consummated by September 30, 1998, provided the terminating
party is not in material breach or default of any representations, warranty or
covenant contained herein on the date of such termination.
4. By the mutual written consent of Fifth Third and CitFed Bancorp.
5. By Fifth Third if any event occurs which renders impossible of
satisfaction in any material respect one or more of the conditions to the
obligations of Fifth Third to effect the Merger set forth in Sections VI.A. and
B. herein and non-compliance is not waived by Fifth Third.
6. By CitFed Bancorp if any event occurs which renders impossible of
satisfaction in any material respect one or more of the conditions to the
obligations of CitFed Bancorp to effect the Merger as set forth in Sections
VI.A. and C. herein and non-compliance is not waived by CitFed Bancorp.
7. By CitFed Bancorp if it determines by a vote of the majority of the
members of its Board of Directors, and notifies Fifth Third, at any time during
the five (5) day period commencing two (2) business days after the Determination
Date and if both of the following conditions are satisfied:
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(i) the Average Closing Price of Fifth Third Common Stock is less than
$64.40 (adjusted as set forth in the last sentence of this paragraph
VIII.A.7.); and
(ii) (x) the number obtained by dividing the Average Closing Price on the
Determination Date by the Starting Price (such number being referred
to herein as the "Fifth Third Ratio") shall be less than (y) the
number obtained by dividing the Index Price on the Determination Date
by the Index Price on the Starting Date and subtracting 0.20 from the
quotient in this clause (ii)(y) (such number being referred to herein
as the "Index Ratio");
If CitFed Bancorp elects to terminate this Agreement pursuant to this
Section VIII.A.7., it shall give notice to Fifth Third within the aforementioned
five (5) day period, provided such notice may be withdrawn at any time. During
the five (5) day period commencing with its receipt of such notice, Fifth Third
shall have the option of adjusting the Exchange Ratio to equal the lesser of (i)
a number equal to a quotient (rounded to the nearest one-thousandth), the
numerator of which is the product of $64.40 multiplied by the Exchange Ratio (as
then in effect) and the denominator of which is the Average Closing Price, and
(ii) a number equal to a quotient (rounded to the nearest one-thousandth), the
numerator of which is the Index Ratio multiplied by the Exchange Ratio (as then
in effect) and the denominator of which is the Fifth Third Ratio. If Fifth Third
makes an election contemplated by the preceding sentence, within such five-day
period, it shall give prompt written notice to CitFed Bancorp of such election
and the revised Exchange Ratio, whereupon no termination shall have occurred
pursuant to this Section VIII.A.7 and this Agreement shall remain in effect in
accordance with its terms (except as the Exchange Ratio shall have been so
modified), and any references in this Agreement to "Exchange Ratio" shall
thereafter be deemed to refer to the Exchange Ratio as adjusted pursuant to this
Section VIII.A.7.
For purposes of this Paragraph VIII.A.7, the following terms shall have the
meaning indicated:
"Average Closing Price" shall mean the average of the per share closing
prices of the Fifth Third Common Stock as reported on the NASDAQ National
Market System for the 20 consecutive trading days ending on the
Determination Date as reported by The Wall Street Journal, expressed in
decimal figures carried to five figures.
"Determination Date" means the tenth (10th) trading day prior to the
Closing Date.
"Index Group" means the nineteen (19) bank holding companies listed below,
the common stock of all of which shall be publicly traded and as to which
there shall not have been a publicly announced proposal since the Starting
Date and before the Determination Date for any such company to be acquired
or for such company to acquire another company or companies in transactions
with a value exceeding 25% of the acquiror's market
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<PAGE> 40
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:
<TABLE>
<CAPTION>
BANK HOLDING COMPANY Shares Outstanding Weighting %
as
of 9/30/97
<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 Weighing Factors above, which were calculated with
reference to the outstanding shares
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<PAGE> 41
listed above) of the closing prices on such date of the common stock of the
companies comprising the Index Group.
"Starting Date" means January 13, 1998.
"Starting Price" means $80.50 per share.
If Fifth Third or any company belonging to the Index Group declares or
effects a stock dividend, reclassification, recapitalization, split-up,
combination, exchange of shares or similar transaction between the Starting Date
and the Determination Date, the prices for the common stock of such company
shall be appropriately adjusted for the purposes of applying this Paragraph
VIII.A.7.
B. If CitFed Bancorp shareholders, acting at a meeting held for the purpose of
voting upon this Agreement, fail to adopt the Agreement in the manner required
by law, then this Agreement shall be deemed to be automatically terminated,
provided that CitFed Bancorp must be in compliance with Section IV.A.
C. Upon termination as provided in this Section, this Agreement, except for the
provisions of Sections VII.D., H., J. and K. hereof shall be void and of no
further force or effect, and, except as provided in Section VII.H. hereof,
neither party hereto not in material breach or default of its representations,
warranties and covenants hereunder shall have any liability of any kind to the
other party including but not limited to liability for expenses incurred by the
other party in connection with this transaction; provided that no such
termination shall relieve a breaching party from liability for any uncured
willful breach of a covenant, undertaking, representation or warranty giving
rise to such termination.
D. Fifth Third and CitFed Bancorp agree that irreparable damage would occur and
that neither Fifth Third nor CitFed Bancorp would have any adequate remedy at
law in the event that any of the provisions of this Agreement are not performed
in accordance with their specific terms or were otherwise breached. If any
action is brought by either party to enforce this Agreement, the other party
shall waive the defense that there is an adequate remedy at law. It is
accordingly agreed that the parties shall be entitled to an injunction or
injunctions to prevent breaches of this Agreement and to enforce specifically
the terms and provisions of this Agreement in any federal court located in the
State of Ohio or in Ohio state court, this being in addition to any other remedy
to which they are entitled at law or in equity.
IX. CLOSING AND EFFECTIVE TIME
The consummation of the transactions contemplated by this Agreement shall take
place at a closing to be held at the offices of Fifth Third in Cincinnati, Ohio
on a Friday which is as soon as is reasonably possible following the date that
all of the conditions precedent to closing set forth in Section VI hereof,
including the waiting period required by any banking or bank holding company
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<PAGE> 42
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.
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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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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
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Name: Jerry L. Kirby
Title: Chairman and CEO
Attest: /s/ John H. Curp
-------------------------------------
Name: John H. Curp
Title: Secretary
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EXHIBIT 4.1
STOCK OPTION AGREEMENT
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STOCK OPTION AGREEMENT, dated as of January 13, 1998, between CITFED
BANCORP., INC., a corporation organized and existing under the corporation laws
of the State of Delaware ("Issuer"), and FIFTH THIRD BANCORP, an Ohio
corporation ("Grantee").
W I T N E S S E T H:
WHEREAS, Grantee and Issuer have entered into an Affiliation Agreement (the
"Merger Agreement");
WHEREAS, as an inducement to the willingness of Grantee to continue to
pursue the transactions contemplated by the Merger Agreement, Issuer has agreed
to grant Grantee the Option (as hereinafter defined); and
WHEREAS, the Board of Directors of Issuer has approved the grant of the
Option and the Merger Agreement prior to the date hereof;
NOW, THEREFORE, in consideration of the foregoing and the mutual covenants
and agreements set forth herein and in the Merger Agreement, the parties hereto
agree as follows:
1. (a) Issuer hereby grants to Grantee an unconditional, irrevocable option
(the "Option") to purchase, subject to the terms hereof, up to an aggregate of
3,230,411 fully paid and nonassessable shares of the common stock, par value
$.01 per share, of Issuer ("Common Stock") at a price per share equal to the
last reported sale price per share of Common Stock as reported on the NASDAQ
National Market System on January 13, 1998; provided, however, that in the event
Issuer issues or agrees to issue any shares of Common Stock (other than shares
of Common Stock issued pursuant to stock options granted prior to the date
hereof) at a price less than such price per share (as adjusted pursuant to
subsection (b) of Section 5), such price shall be equal to such lesser price
(such price, as adjusted if applicable, the "Option Price"); provided, further,
that in no event shall the number of shares for which this Option is exercisable
exceed 19.9% of the issued and outstanding shares of Common Stock. The number of
shares of Common Stock that may be received upon the exercise of the Option and
the Option Price are subject to adjustment as herein set forth.
(b) In the event that any additional shares of Common Stock are issued or
otherwise become outstanding after the date of this Agreement (other than
pursuant to this Agreement and other than pursuant to an event described in
Section 5(a) hereof), the number of shares of Common Stock subject to the Option
shall be increased so that, after such issuance, such number together with any
shares of Common Stock previously issued pursuant hereto, equals 19.9% of the
number of shares of Common Stock then issued and outstanding. Nothing contained
in this Section l(b) or elsewhere in this Agreement shall be deemed to authorize
Issuer to issue shares in breach any provision of the Merger Agreement.
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2. (a) The Holder (as hereinafter defined) may exercise the Option, in
whole or part, if, but only if, both an Initial Triggering Event (as hereinafter
defined) and a Subsequent Triggering Event (as hereinafter defined) shall have
occurred prior to the occurrence of an Exercise Termination Event (as
hereinafter defined), provided that the Holder shall have sent the written
notice of such exercise (as provided in subsection (e) of this Section 2) within
six (6) months following such Subsequent Triggering Event (or such later period
as provided in Section 10). Each of the following shall be an Exercise
Termination Event: (i) the Effective Time of the Merger; (ii) termination of the
Merger Agreement in accordance with the provisions thereof if such termination
occurs prior to the occurrence of an Initial Triggering Event except a
termination by Grantee pursuant to Section VIII(A)(1) of the Merger Agreement
(but only if the breach giving rise to the termination was willful) (a "Listed
Termination"); or (iii) the passage of eighteen (18) months (or such longer
period as provided in Section 10) after termination of the Merger Agreement if
such termination follows the occurrence of an Initial Triggering Event or is a
Listed Termination. The term "Holder" shall mean the holder or holders of the
Option. Notwithstanding anything to the contrary contained herein, the Option
may not be exercised at any time when Grantee shall be in material breach of the
Merger Agreement such that Issuer shall be entitled to terminate the Merger
Agreement pursuant to Section VIII(A)(1) thereof and (ii) this Agreement shall
automatically terminate upon the proper termination of the Merger Agreement by
Issuer pursuant to either (x) Section VIII(A)(1) thereof as a result of the
material breach by Grantee or (y) Section VIII.A.7.
(b) The term "Initial Triggering Event" shall mean any of the following
events or transactions occurring on or after the date hereof:
(i) Issuer or any Significant Subsidiary (as defined in Rule 1-02 of
Regulation S-X promulgated by the Securities and Exchange Commission (the
"SEC")) (an "Issuer Subsidiary"), without having received Grantee's prior
written consent, shall have entered into an agreement to engage in an
Acquisition Transaction (as hereinafter defined) with any person (the term
"person" for purposes of this Agreement having the meaning assigned thereto
in Sections 3(a)(9) and 13(d)(3) of the Securities Exchange Act of 1934, as
amended (the "1934 Act"), and the rules and regulations thereunder) other
than Grantee or any of its Subsidiaries (each a "Grantee Subsidiary") or
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
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transaction, provided any such transaction is not entered into in violation
of the terms of the Merger Agreement), (y) a purchase, lease or other
acquisition of all or any substantial part of the assets or deposits of
Issuer or any Issuer Subsidiary, or (z) a purchase or other acquisition
(including by way of merger, consolidation, share exchange or otherwise) of
securities representing 10% or more of the voting power of Issuer or any
Issuer Subsidiary and (b) "Subsidiary" shall have the meaning set forth in
Rule 12b-2 under the 1934 Act;
(ii) Any person other than the Grantee or any Grantee Subsidiary shall
have acquired beneficial ownership or the right to acquire beneficial
ownership of 10% or more of the outstanding shares of Common Stock (the
term "beneficial ownership" for purposes of this Agreement having the
meaning assigned thereto in Section 13(d) of the 1934 Act, and the rules
and regulations thereunder);
(iii) The shareholders of Issuer shall have voted and failed to adopt
the Merger Agreement at a meeting which has been held for that purpose or
any adjournment or postponement thereof, or such meeting shall not have
been held in violation of the Merger Agreement or shall have been cancelled
prior to termination of the Merger Agreement if, prior to such meeting (or
if such meeting shall not have been held or shall have been cancelled,
prior to such termination), it shall have been publicly announced that any
person (other than Grantee or any of its Subsidiaries) shall have made, or
publicly disclosed an intention to make, a proposal to engage in an
Acquisition Transaction;
(iv) The Issuer Board shall have withdrawn or modified (or publicly
announced its intention to withdraw or modify) in any manner adverse in any
respect to Grantee its recommendation that the shareholders of Issuer
approve the transactions contemplated by the Merger Agreement, or Issuer or
any Issuer Subsidiary shall have authorized, recommended, proposed (or
publicly announced its intention to authorize, recommend or propose) an
agreement to engage in an Acquisition Transaction with any person other
than Grantee or a Grantee Subsidiary;
(v) Any person other than Grantee or any Grantee Subsidiary shall have
filed with the SEC a registration statement or tender offer materials with
respect to a potential exchange or tender offer that would constitute an
Acquisition Transaction (or filed a preliminary proxy statement with the
SEC with respect to a potential vote by its shareholders to approve the
issuance of shares to be offered in such an exchange offer);
(vi) Issuer shall have willfully breached any covenant or obligation
contained in the Merger Agreement in anticipation of engaging in an
Acquisition Transaction, and following such breach Grantee would be
entitled to terminate the Merger Agreement (whether immediately or after
the giving of notice or passage of time or both);
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(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,
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provided that the failure or refusal of the Issuer to designate such a
bank account or accept surrender of this Agreement shall not preclude the Holder
from exercising the Option .
(g) At such closing, simultaneously with the delivery of immediately
available funds as provided in subsection (f) of this Section 2, Issuer shall
deliver to the Holder a certificate or certificates representing the number of
shares of Common Stock purchased by the Holder and, if the Option should be
exercised in part only, a new Option evidencing the rights of the Holder thereof
to purchase the balance of the shares purchasable hereunder.
(h) Certificates for Common Stock delivered at a closing hereunder may be
endorsed with a restrictive legend that shall read substantially as follows:
"The transfer of the shares represented by this certificate is subject
to certain provisions of an agreement, dated as of January 13, 1998,
between the registered holder hereof and Issuer and to resale restrictions
arising under the Securities Act of 1933, as amended. A copy of such
agreement is on file at the principal office of Issuer and will be provided
to the holder hereof without charge upon receipt by Issuer of a written
request therefor."
It is understood and agreed that: (i) the reference to the resale restrictions
of the Securities Act of 1933, as amended (the "1933 Act") in the above legend
shall be removed by delivery of substitute certificate(s) without such reference
if the Holder shall have delivered to Issuer a copy of a letter from the staff
of the SEC, or an opinion of counsel, in form and substance reasonably
satisfactory to Issuer, to the effect that such legend is not required for
purposes of the 1933 Act; (ii) the reference to the provisions of this Agreement
in the above legend shall be removed by delivery of substitute certificate(s)
without such reference if the shares have been sold or transferred in compliance
with the provisions of this Agreement and under circumstances that do not
require the retention of such reference in the opinion of Counsel to the Holder;
and (iii) the legend shall be removed in its entirety if the conditions in the
preceding clauses (i) and (ii) are both satisfied. In addition, such
certificates shall bear any other legend as may be required by law.
(i) Upon the giving by the Holder to Issuer of the written notice of
exercise of the Option provided for under subsection (e) of this Section 2 and
the tender of the applicable purchase price in immediately available funds, the
Holder shall be deemed subject to the receipt of any necessary
regulatory approvals to be the holder of record of the shares of Common Stock
issuable upon such exercise, notwithstanding that the stock transfer books of
Issuer shall then be closed or that certificates representing such shares of
Common Stock shall not then be actually delivered to the Holder. Issuer shall
pay all expenses, and any and all United States federal, state and local taxes
and other charges that may be payable in connection with the preparation, issue
and delivery of stock certificates under this Section 2 in the name of the
Holder or its assignee, transferee or designee.
3. Issuer agrees: (i) that it shall at all times maintain, free from
preemptive rights, sufficient authorized but unissued or treasury shares of
Common Stock so that the Option may be exercised
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without additional authorization of Common Stock after giving effect to all
other options, warrants, convertible securities and other rights to purchase
Common Stock; (ii) that it will not, by charter amendment or through
reorganization, consolidation, merger, dissolution or sale of assets, or by any
other voluntary act, avoid or seek to avoid the observance or performance of any
of the covenants, stipulations or conditions to be observed or performed
hereunder by Issuer; (iii) promptly to take all action as may from time to time
be required (including (x) complying with all applicable premerger notification,
reporting and waiting period requirements specified in 15 U.S.C. Section 18a and
regulations promulgated thereunder and (y) in the event, under the Savings and
Loan Holding Company Act ("SLHCA"), or the Change in Bank Control Act of 1978,
as amended, or any state or other federal banking law, prior approval of or
notice to the OTS or to any state or other federal regulatory authority is
necessary before the Option may be exercised, cooperating fully with the Holder
in preparing such applications or notices and providing such information to the
OTS or such state or other federal regulatory authority as they may require) in
order to permit the Holder to exercise the Option and Issuer duly and
effectively to issue shares of Common Stock pursuant hereto; and (iv) promptly
to take all action provided herein to protect the rights of the Holder against
dilution.
4. This Agreement (and the Option granted hereby) are exchangeable, without
expense, at the option of the Holder, upon presentation and surrender of this
Agreement at the principal office of Issuer, for other Agreements providing for
Options of different denominations entitling the holder thereof to purchase, on
the same terms and subject to the same conditions as are set forth herein, in
the aggregate the same number of shares of Common Stock purchasable hereunder.
The terms "Agreement" and "Option" as used herein include any Agreements and
related Options for which this Agreement (and the Option granted hereby) may be
exchanged. Upon receipt by Issuer of evidence reasonably satisfactory to it of
the loss, theft, destruction or mutilation of this Agreement, and (in the case
of loss, theft or destruction) of reasonably satisfactory indemnification, and
upon surrender and cancellation of this Agreement, if mutilated, Issuer will
execute and deliver a new Agreement of like tenor and date. Any such new
Agreement executed and delivered shall constitute an additional contractual
obligation on the part of Issuer, whether or not the Agreement so lost, stolen,
destroyed or mutilated shall at any time be enforceable by anyone.
5. In addition to the adjustment in the number of shares of Common Stock
that are purchasable upon exercise of the Option pursuant to Section 1 of this
Agreement, the number of shares of Common Stock purchasable upon the exercise of
the Option and the Option Price shall be subject to adjustment from time to time
as provided in this Section 5.
(a) In the event of any change in, or distributions in respect of, the
Common Stock by reason of stock dividends, split-ups, mergers,
recapitalizations, combinations, subdivisions, conversions, exchanges of shares
or the like, the type and number of shares of Common Stock purchasable upon
exercise hereof shall be appropriately adjusted and proper provision shall be
made so that, in the event that any additional shares of Common Stock are to be
issued or otherwise become outstanding as a result of any such change (other
than pursuant to an exercise of the Option), the number of
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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
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be filed hereunder. If requested by any such Holder in connection with such
registration, Issuer shall become a party to any underwriting agreement relating
to the sale of such shares, but only to the extent of obligating itself in
respect of representations, warranties, indemnities and other agreements
customarily included in such underwriting agreements for Issuer. Upon receiving
any request under this Section 6 from any Holder, Issuer agrees to send a copy
thereof to any other person known to Issuer to be entitled to registration
rights under this Section 6, in each case by promptly mailing the same, postage
prepaid, to the address of record of the persons entitled to receive such
copies. Notwithstanding anything to the contrary contained herein, in no event
shall the number of registrations that Issuer is obligated to effect be
increased by reason of the fact that there shall be more than one Holder as a
result of any assignment or division of this Agreement.
7. (a) At any time after the occurrence of a Repurchase Event (as defined
below) (i) at the request of the Holder, delivered prior to an Exercise
Termination Event (or such later period as provided in Section 10), Issuer (or
any successor thereto) shall repurchase the Option from the Holder at a price
(the "Option Repurchase Price") equal to the amount by which (A) the
market/offer price (as defined below) exceeds (B) the Option Price, multiplied
by the number of shares for which this Option may then be exercised and (ii) at
the request of the owner of Option Shares from time to time (the "Owner"),
delivered prior to an Exercise Termination Event (or such later period as
provided in Section 10), Issuer (or any successor thereto) shall repurchase such
number of the Option Shares from the Owner as the Owner shall designate at a
price (the "Option Share Repurchase Price") equal to the market/offer price
multiplied by the number of Option Shares so designated. The term "market/offer
price" shall mean the highest of (i) the price per share of Common Stock at
which a tender or exchange offer therefor has been made, (ii) the price per
share of Common Stock to be paid by any third party pursuant to an agreement
with Issuer, (iii) the highest closing price for shares of Common Stock within
the six-month period immediately preceding the date the Holder gives notice of
the required repurchase of this Option or the Owner gives notice of the required
repurchase of Option Shares, as the case may be, or (iv) in the event of a sale
of all or any substantial part of Issuer's assets or deposits, the sum of the
net price paid in such sale for such assets or deposits and the current market
value of the remaining net assets of Issuer as determined by a nationally
recognized investment banking firm selected by the Holder or the Owner, as the
case may be, and reasonably acceptable to Issuer, divided by the number of
shares of Common Stock of Issuer outstanding at the time of such sale. In
determining the market/offer price, the value of consideration other than cash
shall be determined by a nationally recognized investment banking firm selected
by the Holder or Owner, as the case may be, and reasonably acceptable to Issuer.
(b) The Holder and the Owner, as the case may be, may exercise its right to
require Issuer to repurchase the Option and any Option Shares pursuant to this
Section 7 by surrendering for such purpose to Issuer, at its principal office, a
copy of this Agreement or certificates for Option Shares, as applicable,
accompanied by a written notice or notices stating that the Holder or the Owner,
as the case may be, elects to require Issuer to repurchase this Option and/or
the Option Shares in accordance with the provisions of this Section 7. As
promptly as practicable, and in any event within five business days after the
surrender of the Option and/or certificates representing Option
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Shares and the receipt of such notice or notices relating thereto, Issuer shall
deliver or cause to be delivered to the Holder the Option Repurchase Price
and/or to the Owner the Option Share Repurchase Price therefor or the portion
thereof that Issuer is not then prohibited under applicable law and regulation
from so delivering.
(c) To the extent that Issuer is prohibited under applicable law or
regulation, or as a consequence of administrative policy, from repurchasing the
Option and/or the Option Shares in full, Issuer shall immediately so notify the
Holder and/or the Owner and thereafter deliver or cause to be delivered, from
time to time, to the Holder and/or the Owner, as appropriate, the portion of the
Option Repurchase Price and the Option Share Repurchase Price, respectively,
that it is no longer prohibited from delivering, within five business days after
the date on which Issuer is no longer so prohibited; provided, however, that if
Issuer at any time after delivery of a notice of repurchase pursuant to
paragraph (b) of this Section 7 is prohibited under applicable law or
regulation, or as a consequence of administrative policy, from delivering to the
Holder and/or the Owner, as appropriate, the Option Repurchase Price and the
Option Share Repurchase Price, respectively, in full (and Issuer hereby
undertakes to use its reasonable best efforts to obtain all required regulatory
and legal approvals and to file any required notices as promptly as practicable
in order to accomplish such repurchase), the Holder or Owner may revoke its
notice of repurchase of the Option and/or the Option Shares whether in whole or
to the extent of the prohibition, whereupon, in the latter case, Issuer shall
promptly (i) deliver to the Holder and/or the Owner, as appropriate, that
portion of the Option Repurchase Price and/or the Option Share Repurchase Price
that Issuer is not prohibited from delivering; and (ii) deliver, as appropriate,
either (A) to the Holder, a new Agreement evidencing the right of the Holder to
purchase that number of shares of Common Stock obtained by multiplying the
number of shares of Common Stock for which the surrendered Agreement was
exercisable at the time of delivery of the notice of repurchase by a fraction,
the numerator of which is the Option Repurchase Price less the portion thereof
theretofore delivered to the Holder and the denominator of which is the Option
Repurchase Price, and/or (B) to the Owner, a certificate for the Option Shares
it is then so prohibited from repurchasing. If an Exercise Termination Event
shall have occurred prior to the date of the notice by Issuer described in the
first sentence of this subsection (c), or shall be scheduled to occur at any
time before the expiration of a period ending on the thirtieth day after such
date, the Holder shall nonetheless have the right to exercise the Option until
the expiration of such 30-day period.
(d) For purposes of this Section 7, a "Repurchase Event" shall be deemed to
have occurred upon the occurrence of any of the following events or transactions
after the date hereof:
(i) the acquisition by any person (other than Grantee or any Grantee
Subsidiary) of beneficial ownership of 50% or more of the then outstanding
Common Stock; or
(ii) the consummation of any Acquisition Transaction described in
Section 2(b)(i) hereof, except that the percentage referred to in clause
(z) shall be 50%.
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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
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similar as possible and in no event less advantageous to the Holder. The issuer
of the Substitute Option shall also enter into an agreement with the then Holder
or Holders of the Substitute Option in substantially the same form as this
Agreement (after giving effect for such purpose to the provisions of Section 9),
which agreement shall be applicable to the Substitute Option.
(d) The Substitute Option shall be exercisable for such number of shares of
Substitute Common Stock as is equal to the Assigned Value multiplied by the
number of shares of Common Stock for which the Option was exercisable
immediately prior to the event described in the first sentence of Section 8(a),
divided by the Average Price. The exercise price of the Substitute Option per
share of Substitute Common Stock shall then be equal to the Option Price
multiplied by a fraction, the numerator of which shall be the number of shares
of Common Stock for which the Option was exercisable immediately prior to the
event described in the first sentence of Section 8(a) and the denominator of
which shall be the number of shares of Substitute Common Stock for which the
Substitute Option is exercisable.
(e) In no event, pursuant to any of the foregoing paragraphs, shall the
Substitute Option be exercisable for more than 19.9% of the shares of Substitute
Common Stock outstanding prior to exercise of the Substitute Option. In the
event that the Substitute Option would be exercisable for more than 19.9% of the
shares of Substitute Common Stock outstanding prior to exercise but for this
clause (e), the issuer of the Substitute Option (the "Substitute Option Issuer")
shall make a cash payment to Holder equal to the excess of (i) the value of the
Substitute Option without giving effect to the limitation in this clause (e)
over (ii) the value of the Substitute Option after giving effect to the
limitation in this clause (e). This difference in value shall be determined by a
nationally recognized investment banking firm selected by the Holder.
(f) Issuer shall not enter into any transaction described in subsection (a)
of this Section 8 unless the Acquiring Corporation and any person that controls
the Acquiring Corporation assume in writing all the obligations of Issuer
hereunder.
9. (a) At the request of the holder of the Substitute Option (the
"Substitute Option Holder"), the issuer of the Substitute Option (the
"Substitute Option Issuer") shall repurchase the Substitute Option from the
Substitute Option Holder at a price (the "Substitute Option Repurchase Price")
equal to the amount by which (i) the Highest Closing Price (as hereinafter
defined) exceeds (ii) the exercise price of the Substitute Option, multiplied by
the number of shares of Substitute Common Stock for which the Substitute Option
may then be exercised, and at the request of the owner (the "Substitute Share
Owner") of shares of Substitute Common Stock (the "Substitute Shares"), the
Substitute Option Issuer shall repurchase the Substitute Shares at a price (the
"Substitute Share Repurchase Price") equal to the Highest Closing Price
multiplied by the number of Substitute Shares so designated. The term "Highest
Closing Price" shall mean the highest closing price for shares of Substitute
Common Stock within the six-month period immediately preceding the date the
Substitute Option Holder gives notice of the required repurchase of the
Substitute Option or the Substitute Share Owner gives notice of the required
repurchase of the Substitute Shares, as applicable.
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(b) The Substitute Option Holder and the Substitute Share Owner, as the
case may be, may exercise its respective rights to require the Substitute Option
Issuer to repurchase the Substitute Option and the Substitute Shares pursuant to
this Section 9 by surrendering for such purpose to the Substitute Option Issuer,
at its principal office, the agreement for such Substitute Option (or, in the
absence of such an agreement, a copy of this Agreement) and/or certificates for
Substitute Shares accompanied by a written notice or notices stating that the
Substitute Option Holder or the Substitute Share Owner, as the case may be,
elects to require the Substitute Option Issuer to repurchase the Substitute
Option and/or the Substitute Shares in accordance with the provisions of this
Section 9. As promptly as practicable and in any event within five business days
after the surrender of the Substitute Option and/or certificates representing
Substitute Shares and the receipt of such notice or notices relating thereto,
the Substitute Option Issuer shall deliver or cause to be delivered to the
Substitute Option Holder the Substitute Option Repurchase Price and/or to the
Substitute Share Owner the Substitute Share Repurchase Price therefor or the
portion thereof which the Substitute Option Issuer is not then prohibited under
applicable law and regulation from so delivering.
(c) To the extent that the Substitute Option Issuer is prohibited under
applicable law or regulation, or as a consequence of administrative policy, from
repurchasing the Substitute Option and/or the Substitute Shares in part or in
full, the Substitute Option Issuer shall immediately so notify the Substitute
Option Holder and/or the Substitute Share Owner and thereafter deliver or cause
to be delivered, from time to time, to the Substitute Option Holder and/or the
Substitute Share Owner, as appropriate, the portion of the Substitute Option
Repurchase Price and/or the Substitute Share Repurchase Price, respectively,
which it is no longer prohibited from delivering, within five (5) business days
after the date on which the Substitute Option Issuer is no longer so prohibited;
provided, however, that if the Substitute Option Issuer is at any time after
delivery of a notice of repurchase pursuant to subsection (b) of this Section 9
prohibited under applicable law or regulation, or as a consequence of
administrative policy, from delivering to the Substitute Option Holder and/or
the Substitute Share Owner, as appropriate, the Substitute Option Repurchase
Price and the Substitute Share Repurchase Price, respectively, in full (and the
Substitute Option Issuer shall use its reasonable best efforts to receive all
required regulatory and legal approvals as promptly as practicable in order to
accomplish such repurchase), the Substitute Option Holder and/or Substitute
Share Owner may revoke its notice of repurchase of the Substitute Option or the
Substitute Shares either in whole or to the extent of prohibition, whereupon, in
the latter case, the Substitute Option Issuer shall promptly (i) deliver to the
Substitute Option Holder or Substitute Share Owner, as appropriate, that portion
of the Substitute Option Repurchase Price or the Substitute Share Repurchase
Price that the Substitute Option Issuer is not prohibited from delivering; and
(ii) deliver, as appropriate, either (A) to the Substitute Option Holder, a new
Substitute Option evidencing the right of the Substitute Option Holder to
purchase that number of shares of the Substitute Common Stock obtained by
multiplying the number of shares of the Substitute Common Stock for which the
surrendered Substitute Option was exercisable at the time of delivery of the
notice of repurchase by a fraction, the numerator of which is the Substitute
Option Repurchase Price less the portion thereof theretofore delivered to the
Substitute Option Holder and the denominator of which is the Substitute Option
Repurchase Price, and/or (B) to the Substitute Share Owner, a certificate for
the Substitute
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Option Shares it is then so prohibited from repurchasing. If an Exercise
Termination Event shall have occurred prior to the date of the notice by the
Substitute Option Issuer described in the first sentence of this subsection (c),
or shall be scheduled to occur at any time before the expiration of a period
ending on the thirtieth day after such date, the Substitute Option Holder shall
nevertheless have the right to exercise the Substitute Option until the
expiration of such 30-day period.
10. The 30-day, 6-month, 12-month, 18-month or 24-month periods for
exercise of certain rights under Sections 2, 6, 7, 9, 12 and 14 shall be
extended: (i) to the extent necessary to obtain all regulatory approvals for the
exercise of such rights (for so long as the Holder, Owner, Substitute Option
Holder or Substitute Share Owner, as the case may be, is using commercially
reasonable efforts to obtain such regulatory approvals), and for the expiration
of all statutory waiting periods; and (ii) to the extent necessary to avoid
liability under Section 16(b) of the 1934 Act by reason of such exercise.
11. Issuer hereby represents and warrants to Grantee as follows:
(a) Issuer has full corporate power and authority to execute and deliver
this Agreement and to consummate the transactions contemplated hereby. The
execution and delivery of this Agreement and the consummation of the
transactions contemplated hereby have been duly and validly authorized by the
Issuer Board prior to the date hereof and no other corporate proceedings on the
part of Issuer are necessary to authorize this Agreement or to consummate the
transactions so contemplated. This Agreement has been duly and validly executed
and delivered by Issuer.
(b) Issuer has taken all necessary corporate action to authorize and
reserve and to permit it to issue, and at all times from the date hereof through
the termination of this Agreement in accordance with its terms will have
reserved for issuance upon the exercise of the Option, that number of shares of
Common Stock equal to the maximum number of shares of Common Stock at any time
and from time to time issuable hereunder, and all such shares, upon issuance
pursuant thereto, will be duly authorized, validly issued, fully paid,
nonassessable, and will be delivered free and clear of all claims, liens,
encumbrance and security interests and not subject to any preemptive rights.
12. Neither of the parties hereto may assign any of its rights or
obligations under this Agreement or the Option created hereunder to any other
person, without the express written consent of the other party, except that in
the event a Subsequent Triggering Event shall have occurred prior to an Exercise
Termination Event, Grantee, subject to the express provisions hereof, may assign
in whole or in part its rights and obligations hereunder; provided, however,
that until the date 15 days following the date on which the OTS has approved an
application by Grantee to acquire the shares of Common Stock subject to the
Option, Grantee may not assign its rights under the Option except in (i) a
widely dispersed public distribution, (ii) a private placement in which no one
party acquires the right to purchase in excess of 2% of the voting shares of
Issuer, (iii) an assignment to a single party (e.g., a broker or investment
banker) for the purpose of conducting a widely dispersed public distribution on
Grantee's behalf or (iv) any other manner approved by the OTS.
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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
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have occurred if not for the provisions of this Section 14(c) (during which
period Grantee may exercise any of its rights hereunder, including any and all
rights pursuant to this Section 14).
15. The parties hereto acknowledge that damages would be an inadequate
remedy for a breach of this Agreement by either party hereto and that the
obligations of the parties hereto shall be enforceable by either party hereto
through injunctive or other equitable relief. In connection therewith both
parties waive the posting of any bond or similar requirement.
16. If any term, provision, covenant or restriction contained in this
Agreement is held by a court or a federal or state regulatory agency of
competent jurisdiction to be invalid, void or unenforceable, the remainder of
the terms, provisions and covenants and restrictions contained in this Agreement
shall remain in full force and effect, and shall in no way be affected, impaired
or invalidated. If for any reason such court or regulatory agency determines
that the Holder is not permitted to acquire, or Issuer is not permitted to
repurchase pursuant to Section 7, the full number of shares of Common Stock
provided in Section l(a) hereof (as adjusted pursuant to Section l(b) or Section
5 hereof), it is the express intention of Issuer to allow the Holder to acquire
or to require Issuer to repurchase such lesser number of shares as may be
permissible, without any amendment or modification hereof.
17. All notices, requests, claims, demands and other communications
hereunder shall be deemed to have been duly given when delivered in person, by
fax, telecopy, or by registered or certified mail (postage prepaid, return
receipt requested) at the respective addresses of the parties set forth in the
Merger Agreement.
18. This Agreement shall be governed by and construed in accordance with
the laws of the State of Delaware, without regard to the conflict of law
principles thereof (except to the extent that mandatory provisions of Federal
law are applicable).
19. This Agreement may be executed in two or more counterparts, each of
which shall be deemed to be an original, but all of which shall constitute one
and the same agreement.
20. Except as otherwise expressly provided herein, each of the parties
hereto shall bear and pay all costs and expenses incurred by it or on its behalf
in connection with the transactions contemplated hereunder, including fees and
expenses of its own financial consultants, investment bankers, accountants and
counsel.
21. Except as otherwise expressly provided herein or in the Merger
Agreement, this Agreement contains the entire agreement between the parties with
respect to the transactions contemplated hereunder and supersedes all prior
arrangements or understandings with respect thereof, written or oral. The terms
and conditions of this Agreement shall inure to the benefit of and be binding
upon the parties hereto and their respective successors and permitted assignees.
Nothing in this Agreement, expressed or implied, is intended to confer upon any
party, other than the parties
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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.
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Its: President & Chief Executive Officer
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CITFED BANCORP, INC.
By: /s/ Jerry L. Kirby
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Its: President & CEO
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