<PAGE> 1
Filed Pursuant to Rule 424(b)(1)
ENTERPRISE FEDERAL BANCORP, INC.
7810 TYLERSVILLE SQUARE DRIVE
WEST CHESTER, OHIO 45069
March 18, 1999
Dear Shareholder:
On behalf of the board of directors, I cordially invite you to attend a
special meeting of shareholders of Enterprise Federal Bancorp, Inc., which will
be held at 10:00 a.m., Eastern Daylight Savings Time, on April 23, 1999, at the
Radisson Hotel, 11320 Chester Road, Sharonville, Ohio.
At the special meeting, you will be asked to consider and vote upon a
proposal to approve the affiliation agreement dated as of September 25, 1998
between Fifth Third Bancorp and Enterprise. Pursuant to the affiliation
agreement, Enterprise will merge into Fifth Third. The consummation of the
merger is subject to various conditions, including the receipt of Enterprise
shareholder approval and of all required regulatory approvals.
At the time the merger becomes effective, each share of common stock of
Enterprise will be canceled and converted, by virtue of the merger, into the
right to receive .68516 of a share of common stock of Fifth Third, subject to
adjustment in certain circumstances. Based on the closing price per share of
Fifth Third common stock on the Nasdaq National Market on March 16, 1999, the
value of the .68516 of a share of Fifth Third common stock was $50.06. The
actual value of the Fifth Third common stock to be received by Enterprise
shareholders will depend on the market price of Fifth Third common stock at the
time the merger becomes effective.
The proposed merger is discussed in detail in the accompanying proxy
statement/prospectus, as well as in the affiliation agreement which is included
as Annex A in the proxy statement/prospectus.
YOUR BOARD OF DIRECTORS HAS UNANIMOUSLY APPROVED THE MERGER AND RECOMMENDS
THAT YOU VOTE "FOR" THE PROPOSAL TO APPROVE THE AFFILIATION AGREEMENT. APPROVAL
OF THE PROPOSAL WILL ALSO AUTHORIZE THE BOARD OF DIRECTORS TO EXERCISE ITS
DISCRETION WHETHER TO PROCEED WITH THE MERGER IN THE EVENT THAT ENTERPRISE HAS
THE RIGHT TO EXERCISE ITS TERMINATION RIGHT, AS DESCRIBED IN THE PROXY
STATEMENT/ PROSPECTUS WITHOUT A RESOLICITATION OF SHAREHOLDERS.
THE AFFILIATION AGREEMENT MUST BE APPROVED BY THE AFFIRMATIVE VOTE OF AT
LEAST TWO-THIRDS OF THE ISSUED AND OUTSTANDING SHARES OF ENTERPRISE COMMON STOCK
ENTITLED TO VOTE. IN ADDITION, THE CONTROL SHARE ACQUISITION BY FIFTH THIRD OF
MORE THAN A MAJORITY OF THE VOTING POWER OF ENTERPRISE PURSUANT TO THE
AFFILIATION AGREEMENT MUST BE APPROVED BY A MAJORITY OF THE VOTING POWER OF
ENTERPRISE REPRESENTED IN PERSON OR BY PROXY AT THE SPECIAL MEETING, EXCLUDING
ANY SHARES OF ENTERPRISE COMMON STOCKS OWNED BY ANY OFFICER OF ENTERPRISE OR ANY
DIRECTOR OF ENTERPRISE WHO IS ALSO AN EMPLOYEE OF ENTERPRISE. AN ABSTENTION OR
FAILURE TO VOTE HAS THE SAME EFFECT AS A VOTE AGAINST THE PROPOSAL. IT IS,
THEREFORE, IMPORTANT THAT YOU VOTE.
Your vote is very important, regardless of the number of shares you own.
Please sign and return the proxy card in the postage-paid return envelope
provided for your convenience. This will not prevent you from voting in person,
but will assure that your vote is counted if you are unable to attend the
special meeting.
<PAGE> 2
Please vote and return your proxy today.
Sincerely,
Otto L. Keeton
Chairman of the Board, President and
Chief Executive Officer
IMPORTANT: If your shares of Enterprise common stock are held in the name
of a brokerage firm or nominee, only they can execute a proxy on your behalf. To
assure that your shares are voted, we urge you to telephone today the individual
responsible for your account at your brokerage firm and obtain instructions on
how to direct him or her to execute a proxy.
If you have any questions or need any help in voting your shares, please
telephone Thomas J. Noe, Chief Financial Officer at Enterprise, (513) 755-4600.
<PAGE> 3
ENTERPRISE FEDERAL BANCORP, INC.
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
TO BE HELD ON APRIL 23, 1999
NOTICE IS HEREBY GIVEN that a special meeting of shareholders of Enterprise
Federal Bancorp, Inc. will be held on April 23, 1999 at 10:00 a.m., Eastern
Daylight Savings Time, at the Radisson Hotel, 11320 Chester Road, Sharonville,
Ohio.
A proxy statement/prospectus and proxy card for the special meeting are
enclosed herewith. The special meeting is for the purpose of considering and
voting upon the following matters:
1. A proposal to approve the affiliation agreement dated as of
September 25, 1998 between Fifth Third Bancorp and Enterprise. Pursuant to
the affiliation agreement, Enterprise will merge into Fifth Third. At the
time the merger becomes effective, each share of common stock of Enterprise
will be converted by virtue of the merger into the right to receive .68516
of a share of Fifth Third common stock.
Approval of the proposal will also authorize the Enterprise board of
directors to exercise its discretion whether to proceed with the merger in
the event that Enterprise has the right to exercise its termination right
as described in the affiliation agreement without notice to, or a
resolicitation of, shareholders. See "Terms of the Affiliation
Agreement-Termination; Amendment; Waiver" in the accompanying proxy
statement/prospectus.
2. Such other business as may properly come before the special meeting
or any adjournments thereof. The board of directors is not aware of any
other business to come before the special meeting.
Pursuant to the Code of Regulations of Enterprise, the board of directors
has fixed March 11, 1999 as the record date, for the determination of
shareholders entitled to receive notice of, and to vote at, the special meeting
and any adjournments thereof. Any action may be taken on any of the foregoing
proposals at the special meeting on the date specified above, or on any date or
dates less than 30 days later to which, by original or later adjournment, the
meeting may be adjourned. Only holders of record of Enterprise common stock at
the close of business on the record date will be entitled to vote at the special
meeting or any adjournments thereof.
THE AFFIRMATIVE VOTE OF AT LEAST TWO-THIRDS OF THE ISSUED AND OUTSTANDING
SHARES OF ENTERPRISE COMMON STOCK ENTITLED TO VOTE IS REQUIRED TO APPROVE THE
AFFILIATION AGREEMENT. IN ADDITION, THE CONTROL SHARE ACQUISITION BY FIFTH THIRD
OF MORE THAN A MAJORITY OF THE VOTING POWER OF ENTERPRISE PURSUANT TO THE
AFFILIATION AGREEMENT MUST BE APPROVED BY A MAJORITY OF THE VOTING POWER OF
ENTERPRISE REPRESENTED IN PERSON OR BY PROXY AT THE SPECIAL MEETING, EXCLUDING
ANY ENTERPRISE COMMON STOCK OWNED BY ANY OFFICER OF ENTERPRISE OR ANY DIRECTOR
OF ENTERPRISE WHO IS ALSO AN EMPLOYEE OF ENTERPRISE. IN THE EVENT THERE ARE NOT
SUFFICIENT VOTES TO APPROVE THE FOREGOING PROPOSAL AT THE TIME OF THE SPECIAL
MEETING, THE SPECIAL MEETING MAY BE ADJOURNED BY A MAJORITY OF THE VOTES CAST IN
ORDER TO PERMIT FURTHER SOLICITATION OF PROXIES BY ENTERPRISE; PROVIDED,
HOWEVER, THAT NO PROXY WHICH IS VOTED AGAINST THE AFFILIATION AGREEMENT WILL BE
VOTED IN FAVOR OF ADJOURNMENT TO SOLICIT FURTHER PROXIES FOR SUCH PROPOSAL.
APPROVAL OF THE PROPOSAL WILL ALSO AUTHORIZE THE BOARD OF DIRECTORS TO
EXERCISE ITS DISCRETION WHETHER TO PROCEED WITH THE MERGER IN THE EVENT THAT
ENTERPRISE HAS THE RIGHT TO EXERCISE ITS TERMINATION RIGHT. ENTERPRISE EXPECTS
THAT THE ENTERPRISE BOARD OF DIRECTORS WOULD EXERCISE SUCH DISCRETION AND DECIDE
WHETHER TO TERMINATE THE AFFILIATION AGREEMENT WITHOUT A RESOLICITATION OF
SHAREHOLDERS.
THE PROXY STATEMENT/PROSPECTUS DESCRIBES YOUR RIGHTS TO DISSENT FROM THE
MERGER AND THE PROCEDURES YOU MUST FOLLOW TO EXERCISE THOSE RIGHTS.
YOUR VOTE IS IMPORTANT REGARDLESS OF THE NUMBER OF SHARES YOU OWN. EACH
SHAREHOLDER, WHETHER OR NOT HE OR SHE PLANS TO ATTEND THE SPECIAL MEETING, IS
REQUESTED TO SIGN, DATE AND RETURN THE ENCLOSED PROXY CARD WITHOUT DELAY IN THE
ENCLOSED POSTAGE-PAID ENVELOPE. ANY PROXY GIVEN BY A SHAREHOLDER MAY BE REVOKED
BEFORE IT IS EXERCISED BY SUBMITTING A LATER DATED PROXY, BY ATTENDING THE
SPECIAL MEETING AND VOTING IN PERSON OR BY GIVING NOTICE OF REVOCATION TO
ENTERPRISE IN WRITING ADDRESSED TO AND RECEIVED BY THE SECRETARY OF ENTERPRISE
BEFORE THE SPECIAL MEETING.
By Order of the Board of Directors
Otto L. Keeton
President and Chief Executive Officer
West Chester, Ohio
March 18, 1999
<PAGE> 4
------------------------------------------------------
PROXY STATEMENT FOR ENTERPRISE FEDERAL BANCORP, INC.
------------------------------------------------------
PROSPECTUS OF FIFTH THIRD BANCORP
------------------------------------------------------
The boards of directors of Enterprise Federal Bancorp, Inc. and Fifth Third
Bancorp have agreed that Fifth Third will acquire Enterprise in a merger. If the
merger is approved by the shareholders of Enterprise and all other closing
conditions are satisfied, each outstanding share of Enterprise common stock will
be exchanged for .68516 of a share of Fifth Third common stock. In connection
with the merger, Enterprise's wholly-owned subsidiary, Enterprise Federal
Savings Bank, a federally chartered stock savings bank, will be acquired by
Fifth Third Bank. The board of directors of Enterprise believes that the merger
is in Enterprise's and your best interests.
The merger cannot be completed unless the shareholders of Enterprise
approve the merger. Enterprise has scheduled a special meeting for its
shareholders to vote on this matter. The date, time and place of the special
meeting are as follows:
10:00 a.m., Eastern Daylight Savings Time
April 23, 1999
Radisson Hotel
11320 Chester Road
Sharonville, Ohio
Whether or not you plan to attend the special meeting, please take the time
to vote by completing and mailing the enclosed proxy card to us. If you sign,
date and mail your proxy card without indicating how you wish to vote, your
proxy will be counted as a vote in favor of the merger. If you fail to return
your card, the effect will be a vote against the merger. YOUR VOTE IS VERY
IMPORTANT.
Fifth Third common stock is traded on the Nasdaq National Market under the
symbol "FITB."
------------------------------------------------------
FOR A DESCRIPTION OF CERTAIN SIGNIFICANT CONSIDERATIONS IN CONNECTION WITH
THE MERGER AND RELATED MATTERS DESCRIBED IN THIS DOCUMENT, SEE "RISK FACTORS"
BEGINNING ON PAGE 8.
------------------------------------------------------
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR PASSED UPON THE
ADEQUACY OR ACCURACY OF THIS DOCUMENT. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
------------------------------------------------------
THE SHARES OF FIFTH THIRD COMMON STOCK ARE NOT SAVINGS ACCOUNTS, DEPOSITS
OR OTHER OBLIGATIONS OF ANY BANK OR SAVINGS ASSOCIATION AND ARE NOT INSURED BY
THE FEDERAL DEPOSIT INSURANCE CORPORATION OR ANY OTHER GOVERNMENTAL AGENCY.
------------------------------------------------------
The date of this Proxy Statement/Prospectus is March 18, 1999
<PAGE> 5
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
QUESTIONS AND ANSWERS ABOUT THE MERGER...................... 1
SUMMARY..................................................... 2
RISK FACTORS................................................ 8
THE SPECIAL MEETING......................................... 11
Purpose of the Special Meeting............................ 11
Voting and Revocability of Proxies........................ 11
Voting at the Special Meeting............................. 11
Solicitation of Proxies................................... 13
PROPOSAL -- MERGER OF ENTERPRISE INTO FIFTH THIRD........... 13
Structure of the Merger................................... 13
Corporate Governance...................................... 13
Merger Consideration...................................... 13
No Fractional Shares...................................... 13
Effective Time of the Merger.............................. 14
Exchange of Certificates.................................. 14
Background and Reasons for the Merger..................... 14
Opinion of Financial Advisor to Enterprise................ 16
Federal Income Tax Consequences........................... 19
Accounting Treatment...................................... 20
Resale of Fifth Third Common Stock by Affiliates.......... 20
Dissenters' Rights of Appraisal........................... 21
TERMS OF THE AFFILIATION AGREEMENT.......................... 22
Representations and Warranties............................ 22
Conduct Pending Merger.................................... 22
Conditions to Closing..................................... 23
Termination; Amendment; Waiver............................ 24
Interests of Certain Persons in the Merger................ 25
Effect on Enterprise Employees............................ 27
FIFTH THIRD BANCORP......................................... 28
Description of Business................................... 28
Recent Developments....................................... 28
Additional Information.................................... 29
ENTERPRISE FEDERAL BANCORP, INC. ........................... 30
Description of Business................................... 30
Additional Information.................................... 30
SELECTED HISTORICAL FINANCIAL DATA OF FIFTH THIRD........... 31
SELECTED HISTORICAL FINANCIAL DATA OF ENTERPRISE............ 33
</TABLE>
i
<PAGE> 6
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
DESCRIPTION OF CAPITAL STOCK AND COMPARATIVE RIGHTS OF
SHAREHOLDERS.............................................. 35
Voting Rights............................................. 35
Dividends................................................. 36
Preemptive Rights......................................... 37
Rights Upon Liquidation................................... 37
Indemnification and Personal Liability of Directors and
Officers............................................... 37
Shareholders' Meetings; Quorum............................ 37
Subscription, Conversion, Redemption Rights; Stock
Nonassessable.......................................... 37
Change of Control Provisions.............................. 38
EFFECT OF GOVERNMENTAL POLICIES............................. 39
REGULATION OF FINANCIAL INSTITUTIONS........................ 39
Holding Company Regulation................................ 39
Capital Requirements...................................... 41
Regulation of Banks....................................... 43
Regulation of Savings Banks............................... 43
LEGAL MATTERS............................................... 46
EXPERTS..................................................... 46
WHERE YOU CAN FIND MORE INFORMATION......................... 47
</TABLE>
ANNEXES:
<TABLE>
<S> <C>
Annex A: Affiliation Agreement dated as of September 25, 1998 by and
between Fifth Third Bancorp and Enterprise Federal Bancorp,
Inc. (excluding exhibits)
Annex B: Fairness Opinion of Charles Webb & Company
Annex C: Section 1701.85 of the Ohio Revised Code
Annex D: Acquiring Person Statement
</TABLE>
ii
<PAGE> 7
QUESTIONS AND ANSWERS ABOUT THE MERGER
Q: WHY DO ENTERPRISE AND FIFTH THIRD WANT TO MERGE?
A: Enterprise believes that shareholder value will be maximized and that its
customers will benefit through an affiliation with Fifth Third. Fifth Third
wants to better serve its customers in Enterprise's service areas and to
expand Fifth Third's presence in those markets.
Q: HOW WILL I BENEFIT?
A: The Enterprise board of directors believes that you will benefit by becoming
a shareholder of a bank holding company with a strong financial performance
record. The Enterprise board also believes that you will benefit from the
opportunity for potential future appreciation of Fifth Third common stock.
Q: WHAT WILL I RECEIVE FOR MY ENTERPRISE SHARES?
A: You will receive .68516 of a share of Fifth Third common stock for each
share of Enterprise common stock that you currently own. Fifth Third will
not issue any fractional shares. Instead, you will receive cash for any
fractional share owed to you in an amount based on the last trading price of
Fifth Third common stock on the effective date of the merger. As of March
16, 1999, the value of .68516 of a share of Fifth Third common stock was
$50.06.
Q: WHEN DO YOU EXPECT THE MERGER TO BE COMPLETED?
A: We hope to complete the merger as soon as possible after the special
meeting, assuming the required shareholder approval is obtained. The merger
is also subject to the approval of state banking regulatory authorities and
the satisfaction of other closing conditions.
Q: WHEN AND WHERE WILL THE SPECIAL MEETING TAKE PLACE?
A: The special meeting will be held at 10:00 a.m., Eastern Daylight Savings
Time, on April 23, 1999 at the Radisson Hotel, 11320 Chester Road,
Sharonville, Ohio.
Q: WHAT DO I NEED TO DO NOW?
A: After reviewing this document, indicate on your proxy card how you want to
vote, sign it and mail it in the enclosed return envelope as soon as
possible.
Q: HOW WILL MY SHARES BE VOTED IF I RETURN A BLANK PROXY CARD?
A: If you sign and send in your proxy and do not indicate how you want to vote,
your proxy will be counted as a vote in favor of the merger.
Q: WHAT WILL BE THE EFFECT IF I DO NOT VOTE?
A: If you do not return your proxy card, it will have the same effect as if you
voted "no."
Q: CAN I VOTE MY SHARES IN PERSON?
A: Yes. You may attend the special meeting and vote your shares in person,
rather than signing and mailing your proxy card.
Q: CAN I REVOKE MY PROXY AND CHANGE MY MIND?
A: Yes. You may take back your proxy up to and including the day of the special
meeting by following the directions on page 11. Then you can either change
your vote or attend the special meeting and vote in person.
Q: IF MY SHARES ARE HELD IN "STREET NAME" BY MY BROKER, WILL MY BROKER VOTE MY
SHARES FOR ME?
A: Your broker will vote your shares only if you instruct your broker on how to
vote. Your broker will send you directions on how you can instruct your
broker to vote. Your broker cannot vote your shares without instructions
from you.
Q: SHOULD I SEND IN MY STOCK CERTIFICATES NOW?
A: No. After the merger is completed, we will send you written instructions for
exchanging your stock certificates.
Q: WHO CAN ANSWER MY QUESTIONS ABOUT THE MERGER?
A: If you have more questions about the merger, please call Thomas J. Noe,
Chief Financial Officer at Enterprise, at (513) 755-4600.
1
<PAGE> 8
SUMMARY
This summary highlights selected information from this document and may not
contain all of the information that is important to you. To understand the
merger fully and for a more complete description of the legal terms of the
merger, you should read carefully this entire document, including the annexes,
and the documents we have referred you to. For more information about Fifth
Third and Enterprise, see "Where You Can Find More Information." (page 47)
THE COMPANIES
FIFTH THIRD BANCORP
38 FOUNTAIN SQUARE PLAZA
CINCINNATI, OHIO 45236
(513) 579-5300
Fifth Third is a registered multi-bank holding company, incorporated under
Ohio law, which conducts its principal activities through its banking and
non-banking subsidiaries. Fifth Third's ten subsidiary banks operate a general
banking business from 468 offices located throughout Ohio, Indiana, Kentucky,
Florida and Arizona. At December 31, 1998, on a consolidated basis, Fifth Third
had assets, deposits and shareholders' equity of approximately $28.9 billion,
$18.8 billion and $3.2 billion, respectively. Fifth Third common stock is traded
on the Nasdaq National Market under the symbol "FITB."
ENTERPRISE FEDERAL BANCORP, INC.
7810 TYLERSVILLE SQUARE DRIVE
WEST CHESTER, OHIO 45069
(513) 755-4600
Enterprise Federal Bancorp, Inc. is a unitary savings and loan holding company
incorporated under Ohio law. Enterprise owns all of the stock of Enterprise
Federal Savings Bank which is headquartered in West Chester, Ohio. Enterprise
Federal Savings Bank operates its main office and 10 full service branch offices
located within Hamilton, Butler, Clermont and Warren counties of Southwestern
Ohio which encompass Greater Cincinnati. At December 31, 1998, Enterprise, on a
consolidated basis, had total assets, total deposits and shareholders' equity of
approximately $544.1 million, $343.2 million and $38.7 million, respectively.
Enterprise common stock is traded on the Nasdaq National Market under the symbol
"EFBI."
THE MERGER
Pursuant to the affiliation agreement between Enterprise and Fifth Third dated
as of September 25, 1998, at the effective time of the merger, Enterprise will
merge with and into Fifth Third. In a simultaneous transaction, Enterprise
Federal Savings Bank will merge with and into Fifth Third Bank.
ENTERPRISE SHAREHOLDERS WILL RECEIVE
FIFTH THIRD STOCK IN THE MERGER
If the merger is approved, you will have the right to receive .68516 of a
share of Fifth Third common stock for each share of Enterprise common stock that
you presently own assuming you do not exercise dissenters' rights. Based on the
closing price per share of Fifth Third common stock on the Nasdaq National
Market on March 16, 1999, the value of .68516 of a share of Fifth Third common
stock was $50.06.
In the event of any stock dividends, reclassifications, recapitalization,
split-ups, exchanges of shares, distributions or combinations or subdivisions of
Fifth Third common stock or any other event or action which has a similar
economic effect before the merger is completed, the number of shares of Fifth
Third common stock which you have the right to receive will be adjusted so as to
give you the economic benefit of such event or action.
NO FRACTIONAL SHARES WILL BE ISSUED
Fifth Third will not issue any fractional shares. Instead, you will receive
cash for any fractional share of Fifth Third common stock owed to you in an
amount based on the last trading price of Fifth Third common stock on the date
on which the merger occurs.
TAX CONSEQUENCES OF THE MERGER
If you do not dissent to the merger, the exchange of shares will be tax-free
to you for federal income tax purposes, except for taxes payable on any cash you
receive for fractional shares. If you properly dissent to the merger, you will
generally be treated as having received cash in redemption for your shares and
will be subject to taxes payable on the cash payment. The material federal
income tax consequences are set out in greater detail on page 19.
2
<PAGE> 9
Tax matters are very complicated and the tax consequences of the merger to you
will depend on the facts of your own situation. You are urged to consult your
tax advisor for a full understanding of the tax consequences of the merger to
you.
REASONS FOR THE MERGER
The Enterprise board believes that in the rapidly changing environment of the
banking industry, Enterprise's long-term goal of enhancing shareholder value
will be reached by merging with Fifth Third. In addition, the Enterprise board
believes that the customers and community served by Enterprise will benefit from
the merger.
You can find a more detailed discussion of the background to the affiliation
agreement and Enterprise's and Fifth Third's reasons for the merger in this
document under "Proposal -- Merger of Enterprise into Fifth Third -- Background
and Reasons for the Merger," beginning on page 14.
OPINION OF FINANCIAL ADVISOR
In deciding to approve the merger, the Enterprise board considered an opinion
from Charles Webb & Company, the financial advisor to Enterprise, that the
merger consideration is fair from a financial viewpoint. This opinion is
attached as Annex B to this document. We encourage you to read and consider this
opinion.
RECOMMENDATION TO ENTERPRISE SHAREHOLDERS
The Enterprise board believes that the merger is in your best interests and
unanimously recommends that you vote "for" approval of the affiliation
agreement.
VOTE REQUIRED
The affiliation agreement must be approved by the affirmative vote of (1) at
least two-thirds of the shares of Enterprise common stock outstanding at the
close of business on March 11, 1999 and (2) pursuant to the Ohio Control Share
Acquisition Act, a majority of the voting power of Enterprise represented in
person or by proxy at the special meeting, excluding any shares of Enterprise
common stock owned by any officer of Enterprise or any director of Enterprise
who is also an employee of Enterprise.
Approval of the affiliation agreement will also authorize the Enterprise board
to exercise its discretion on whether to proceed with the merger in the event
Enterprise has the right to terminate the affiliation agreement. Such
determination may be without notice to, or the resolicitation of proxies from,
the Enterprise shareholders.
OWNERSHIP OF FIFTH THIRD FOLLOWING THE MERGER
Based on the number of shares of Fifth Third and Enterprise common stock
outstanding on the record date, Fifth Third will issue approximately 1,640,000
shares of its common stock to Enterprise shareholders in the merger. This will
constitute approximately 0.61% of the outstanding stock of Fifth Third
immediately after the merger.
CONDITIONS TO THE MERGER
Fifth Third and Enterprise will complete the merger only if certain conditions
are satisfied. Some of the conditions are listed below:
- the approval of the affiliation agreement by the Enterprise shareholders;
- the receipt of certain regulatory approvals under state banking laws and
expiration of any waiting periods; and
- the receipt by Fifth Third of non-competition agreements executed by certain
directors of Enterprise.
Certain of the conditions to the merger may be waived by the company entitled
to assert the condition.
RIGHT TO TERMINATE
The boards of directors of Fifth Third and Enterprise may jointly agree in
writing to terminate the affiliation agreement without completing the merger. In
addition, either company can individually terminate the affiliation agreement
if:
- the other party materially breaches any of the representations or warranties
it made or fails to comply with any of its obligations under the affiliation
agreement;
- the business, assets or financial condition of the other party materially
and adversely changes;
- the merger is not completed by June 30, 1999; or
- the Enterprise shareholders do not approve the affiliation agreement.
3
<PAGE> 10
INTERESTS OF CERTAIN PERSONS IN THE MERGER
When considering the Enterprise board's recommendation that Enterprise
shareholders vote in favor of the merger, you should be aware that certain
Enterprise directors and officers may have interests in the merger that are
different from, or in addition to, yours.
STOCK OPTIONS
At the effective time of the merger, all outstanding options to purchase
Enterprise common stock will be converted into options to purchase Fifth Third
common stock based on the exchange ratio and will become immediately
exercisable.
STOCK AWARDS
Also at the effective time of the merger, each participant in the Enterprise
Recognition and Retirement Plan will become fully vested in all shares awarded
to such participant under that plan.
EMPLOYEE STOCK OWNERSHIP PLAN
Since Fifth Third does not have an employee stock ownership plan, upon
compliance with the applicable requirements of the Internal Revenue Code and
ERISA and completion of other conditions set forth in a plan and timetable
prepared by Enterprise, the shares held in Enterprise's ESOP will be distributed
to participants. Based on the projected ESOP share allocation and loan balance
at March 16, 1999 it was estimated that the increase in value of additional or
accelerated ESOP allocations to be made as a result of the merger for
Enterprise's executive officers would be approximately $489,264 in the
aggregate.
PARTICIPATION IN FIFTH THIRD BENEFIT PLANS
Each employee of Enterprise and Enterprise Federal Savings Bank who becomes a
Fifth Third employee immediately subsequent to the merger, including executive
officers of Enterprise, will be entitled to participate in all employee benefit
plans sponsored by Fifth Third. Participation will be on the same terms and to
the same extent as similarly-situated employees of Fifth Third.
INDEMNIFICATION AND LIABILITY INSURANCE
Fifth Third will assume all provisions for indemnification and limitation of
liability now existing in favor of the directors and officers of Enterprise and
its subsidiaries. Fifth Third also will purchase and keep in effect for a
three-year period, a policy of directors' and officers' liability insurance
having liability limits and providing coverage for acts or omissions of the type
currently covered by Enterprise's existing directors' and officers' liability
insurance for acts or omissions occurring at or prior to the merger as long as
such coverage may be obtained on a commercially reasonable basis.
EFFECT ON ENTERPRISE EMPLOYEES
Fifth Third will consider employing as many of the employees of Enterprise and
Enterprise Federal Savings Bank who desire employment within the Fifth Third
holding company system to the extent of available positions and consistent with
Fifth Third's standard staffing levels and personnel policies.
The affiliation agreement also provides for the payment of severance amounts
to certain employees of Enterprise and Enterprise Federal Savings Bank.
Pursuant to their employment agreements with Enterprise, Otto L. Keeton,
President and Chief Executive Officer, Michael R. Meister, Vice President and
Chief Operating Officer, Thomas J. Noe, Vice President, Chief Financial Officer
and Treasurer and Steven M. Pomeroy, Vice President and Loan Officer, will
receive $669,414, $492,459, $412,618 and $291,826, respectively.
DISSENTERS' RIGHTS OF APPRAISAL
If you (1) do not vote to approve the affiliation agreement and (2) deliver a
written demand for payment of the fair cash value of your shares of Enterprise
common stock not later than ten days after the special meeting, you shall be
entitled, if and when the merger is consummated, to receive the fair cash value
of your shares of Enterprise common stock. Your right to receive the fair cash
value of your Enterprise shares, however, is contingent upon your strict
compliance with certain procedures set forth in Ohio Revised Code Section
1701.85, a copy of which is attached hereto as Annex C. If you wish to submit a
written demand for payment of the fair cash value of your shares of Enterprise
common stock, you should deliver such demand by May 3, 1999 to Thomas J. Noe,
Chief Financial Officer, Enterprise Federal Bancorp, Inc., 7810 Tylersville
Square Drive, West Chester, Ohio 45069.
4
<PAGE> 11
ACCOUNTING
Fifth Third expects the merger to qualify for pooling-of-interests accounting
treatment.
RECENT DEVELOPMENTS
Fifth Third's strategy for growth includes strengthening its presence in core
markets, expanding into contiguous markets and broadening its product offerings.
Consistent with this strategy, in addition to the merger, Fifth Third recently
entered into agreements to acquire Ashland Bankshares, Inc., a bank holding
company headquartered in Ashland, Kentucky, South Florida Bank Holding
Corporation, a bank holding company headquartered in Ft. Myers, Florida, and
Emerald Financial Corp., a savings and loan holding company headquartered in
Strongsville, Ohio. Based on the per share market value of Fifth Third common
stock on March 16, 1999, Fifth Third expects to issue Fifth Third shares with an
aggregate value of approximately $89.5 million, $32.1 million and $250.6 million
to shareholders of Ashland, South Florida and Emerald, respectively,
representing approximately 1.9% of Fifth Third's outstanding shares. The Ashland
and South Florida acquisitions are expected to be completed during the second
quarter of 1999, either shortly before or after the completion of the merger
with Enterprise. The Emerald acquisition is expected to be completed in the
third quarter of 1999.
COMPARATIVE MARKET PRICES AND DIVIDENDS
Fifth Third common stock and Enterprise common stock are traded on the
Nasdaq National Market under the symbols "FITB" and "EFBI," respectively. On
September 24, 1998, the business day immediately preceding the public
announcement of the execution of the affiliation agreement setting forth the
terms of the merger, and on March 16, 1999, the most recent practicable date
prior to the printing of this document, the market prices of Fifth Third common
stock and Enterprise common stock and the equivalent price per share of
Enterprise common stock giving effect to the merger were as follows:
<TABLE>
<CAPTION>
SEPTEMBER 24, MARCH 16,
1998 1999
------------- ---------
<S> <C> <C>
Fifth Third
Common Stock.............................................. $63.50 $73.06
(Closing sales price)
Enterprise
Common Stock.............................................. $29.00 $48.00
(Closing sales price)
Equivalent Price Per Share of Enterprise Common Stock....... $43.50 $50.06
</TABLE>
5
<PAGE> 12
The following table sets forth (in per share amounts), for the quarterly
periods indicated, the high and low sales prices and the dividends declared
during each quarterly period:
<TABLE>
<CAPTION>
FIFTH THIRD COMMON STOCK ENTERPRISE COMMON STOCK
--------------------------- ---------------------------
DIVIDENDS DIVIDENDS
HIGH LOW DECLARED HIGH LOW DECLARED
------ ------ --------- ------ ------ ---------
<S> <C> <C> <C> <C> <C> <C>
1996:
First Calendar Quarter...................... $26.44 $19.33 $0.116 $15.75 $14.25 $ --
Second Calendar Quarter..................... 25.78 22.00 0.116 15.00 14.00 --
Third Calendar Quarter...................... 25.94 22.11 0.129 14.75 12.75 --
Fourth Calendar Quarter..................... 33.00 25.56 0.129 16.00 13.75 1.00
1997:
First Calendar Quarter...................... 39.78 27.00 0.129 17.00 14.00 --
Second Calendar Quarter..................... 38.06 30.94 0.147 19.25 15.25 0.25
Third Calendar Quarter...................... 44.33 36.33 0.147 25.13 18.25 0.25
Fourth Calendar Quarter..................... 55.67 41.08 0.147 31.50 23.25 0.25
1998:
First Calendar Quarter...................... 58.83 49.50 0.170 35.25 29.50 0.25
Second Calendar Quarter..................... 63.13 47.50 0.170 34.00 27.00 0.25
Third Calendar Quarter...................... 67.25 49.25 0.170 43.50 24.88 0.25
Fourth Calendar Quarter..................... 74.13 50.31 0.200 49.00 35.00 0.25
1999:
First Calendar Quarter
(through March 16, 1999).................. 75.44 62.38 0.200 50.00 41.75 0.25
</TABLE>
6
<PAGE> 13
COMPARATIVE PER SHARE DATA
The following table sets forth certain per share information for both Fifth
Third and Enterprise at the dates indicated and for the periods then ended. The
equivalent values of such information are based on the exchange ratio of .68516
of a share of Fifth Third common stock for each share of Enterprise common
stock. Neither Enterprise nor Fifth Third can give any assurances that the
following table will accurately reflect figures and values applicable at the
date of completion of the merger.
<TABLE>
<CAPTION>
EQUIVALENT SHARES
ENTERPRISE FEDERAL BASIS - .68516
FIFTH THIRD BANCORP SHARES OF
-------------------------------------- ------------------- FIFTH THIRD
HISTORICAL PRO FORMA HISTORICAL COMMON STOCK
----------------- ----------------- ------------------- ------------------
BASIC DILUTED BASIC DILUTED BASIC DILUTED BASIC DILUTED
------ ------- ------ ------- ------- -------- ------ --------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
EARNINGS PER SHARE
Twelve months ended
December 31:
1998................. $ 1.80 $1.76 $ 1.80 $1.76 -- -- $1.23 $1.21
1997................. $ 1.76 $1.73 $ 1.76 $1.73 -- -- $1.21 $1.19
1996................. $ 1.45 $1.42 $ 1.45 $1.42 -- -- $0.99 $0.97
Twelve months ended
September 30:
1998................. -- -- -- -- $ 1.19 $1.10 -- --
1997................. -- -- -- -- $ 1.23 $1.17 -- --
1996................. -- -- -- -- $ 0.73 $0.70 -- --
DIVIDENDS DECLARED
PER SHARE
Twelve months ended
December 31:
1998................. $0.710 -- $0.710 -- -- -- $0.49 --
1997................. $0.569 -- $0.569 -- -- -- $0.39 --
1996................. $0.489 -- $0.489 -- -- -- $0.33 --
Twelve months ended
September 30:
1998................. -- -- -- -- $ 1.00 -- -- --
1997................. -- -- -- -- $ 1.50 -- -- --
1996................. -- -- -- -- $ 3.00 -- -- --
BOOK VALUE PER SHARE
At December 31:
1998................. $11.91 -- $11.98 -- $17.52 -- $8.16 --
</TABLE>
7
<PAGE> 14
RISK FACTORS
In making your determination as to how to vote on the merger, you should
consider the following factors:
RISKS RELATING TO THE MERGER
THE EXCHANGE RATIO IS FIXED AND WILL NOT BE ADJUSTED TO REFLECT ANY CHANGES IN
STOCK VALUE PRIOR TO THE EFFECTIVE TIME OF THE MERGER.
The precise value of the merger consideration to be paid to Enterprise's
shareholders will not be known at the time of the special meeting. The
affiliation agreement provides that .68516 of a share of Fifth Third common
stock will be issued in the merger in exchange for each share of Enterprise
common stock. This exchange ratio is fixed and will not be adjusted to reflect
any changes in the value of either Enterprise or Fifth Third common stock
between the date of the affiliation agreement and the effective time of the
merger. In addition, the value of Fifth Third common stock will fluctuate prior
to the effective time of the merger and may be higher or lower than on the date
of the affiliation agreement or the date of the special meeting.
ENTERPRISE'S SHAREHOLDERS WILL HAVE NO CONTROL OF FIFTH THIRD'S FUTURE
OPERATIONS.
Enterprise's shareholders own 100% of Enterprise and, in the aggregate,
have the power to approve or reject any matters requiring the approval of
shareholders under Ohio law and Enterprises' articles of incorporation. After
the merger, Enterprise's shareholders in the aggregate will hold approximately
0.61% of the outstanding shares of Fifth Third common stock. Even if all of the
former Enterprise shareholders voted in concert on all matters presented to
Fifth Third's shareholders from time to time, such number of Fifth Third shares
likely will not have a major impact on whether such proposals are approved or
rejected.
CERTAIN DIRECTORS AND EXECUTIVE OFFICERS OF ENTERPRISE WILL RECEIVE BENEFITS
IN THE MERGER IN ADDITION TO THE MERGER CONSIDERATION RECEIVED BY ALL OTHER
ENTERPRISE SHAREHOLDERS.
At the effective time of the merger, each participant in the Enterprise
Recognition and Retirement Plan will become fully vested in all shares of
Enterprise common stock awarded to him under the plan. Based on the closing
price of Enterprise common stock on the business day immediately preceding
public announcement of the merger ($29.00 on September 24, 1998) and the recent
closing price of Fifth Third common stock ($73.06 on March 16, 1999), the
estimated aggregate increase in the value of the shares subject to stock awards
held by Enterprise directors and executive officers would be approximately
$872,097. Such amounts exclude the value of all vested shares immediately before
the execution of the affiliation agreement but include the full value of all
unvested shares that will vest upon the consummation of the merger.
Also, all outstanding options to purchase Enterprise common stock will be
converted into options to purchase Fifth Third common stock based on the
exchange ratio and will become immediately exercisable.
In addition, upon completion of the merger, Otto L. Keeton, President and
Chief Executive Officer, Michael R. Meister, Vice President and Chief Operations
Officer, Thomas J. Noe, Vice President, Chief Financial Officer and Treasurer
and Steven M. Pomeroy, Vice President and Loan Officer, will receive $669,414,
$492,459, $412,618 and $291,826, respectively, as severance payments pursuant to
agreements with Enterprise.
In connection with the merger, shares held in Enterprise's ESOP will be
distributed to participants. Based on the projected ESOP share allocation and
loan balance at March 16, 1999, it was estimated that the increase in value of
additional or accelerated ESOP allocations to be made as a result of the merger
for Enterprise's executive officers would be approximately $489,264 in the
aggregate.
8
<PAGE> 15
ENTERPRISE MAY ENCOUNTER PROBLEMS IN CONTINUING TO OPERATE ENTERPRISE
INDEPENDENTLY THAT MAY DIMINISH THE VALUE OF ENTERPRISE'S STOCK IN THE FUTURE.
If the merger is not consummated, Enterprise's shareholders should be aware
that certain factors may reduce Enterprise's value if these potential problems
are not adequately resolved by Enterprise. These factors include:
- Enterprise is approaching maximum leverage that may cause an inability to
increase funding or raise deposits at a level necessary to support
required lending growth;
- a reduced growth rate in earnings resulting from lower asset growth
combined with a compression of the interest rate spreads;
- increased competition for deposits; and
- anticipated expenditures required to implement current technology to
remain competitive.
POST MERGER RISKS
FIFTH THIRD'S ACQUISITION STRATEGY COULD POSE RISKS.
Fifth Third has grown through acquisitions in recent years and anticipates
that it will make additional acquisitions in the future. Fifth Third frequently
evaluates strategic opportunities not only in the banking industry but also in
related financial service industries. One or more future acquisitions could be
material to Fifth Third. Fifth Third may need to issue more common stock to pay
for those acquisitions, which would further dilute the ownership interest of all
Fifth Third shareholders at the time of the acquisition. Acquisitions also could
require Fifth Third to use substantial cash or other liquid assets or to incur
debt. In those events, Fifth Third could become more susceptible to economic
downturns and competitive pressures.
FIFTH THIRD FACES INTENSE COMPETITION FOR FINANCIAL SERVICES.
Fifth Third competes with hundreds of commercial banks, savings and loans
and other financial services providers. In addition to the challenge of
attracting and retaining customers for traditional banking services, Fifth
Third's competitors now include securities dealers, brokers, mortgage bankers,
investment advisors and finance and insurance companies who seek to offer one
stop financial services to their customers that may include services that banks
have not been able or allowed to offer to their customers in the past. The
increasingly competitive environment is a result primarily of changes in
regulation, changes in technology and product delivery systems and the
accelerating pace of consolidation among financial services providers. Fifth
Third's ability to maintain its history of strong financial performance and
return on investment to shareholders will depend in part on Fifth Third's
ability to expand its scope of available financial services as needed to meet
the needs and demands of its customers.
FIFTH THIRD MAY ENCOUNTER DIFFICULTIES IN COMBINING THE OPERATIONS OF ACQUIRED
ENTITIES WITH FIFTH THIRD'S OWN OPERATIONS.
Because the markets and industries in which Fifth Third operates are highly
competitive, and because of the inherent uncertainties associated with the
integration of an acquired company, there can be no assurance that Fifth Third
will be able to realize fully the strategic objectives and operating
efficiencies in all of its acquisitions, including Enterprise. In addition,
Fifth Third may lose key personnel, either from the acquired entity or from
itself, as a result of acquisitions. These factors could contribute to the
benefits expected from acquisitions not being achieved within expected time
frames.
GOVERNMENTAL REGULATION AND LEGISLATION COULD LIMIT FIFTH THIRD'S FUTURE
GROWTH.
Fifth Third and its subsidiaries are subject to extensive state and federal
regulation, supervision, and legislation which govern almost all aspects of the
operations of Fifth Third and its subsidiaries. Such laws may change from time
to time and are primarily intended for the protection of consumers, depositors,
and the deposit insurance funds. The impact of any such changes may negatively
impact Fifth Third's ability to expand its services and to increase the value of
its business. In addition, Fifth Third's earnings are affected
9
<PAGE> 16
by the monetary policies of the Federal Reserve Board. Such policies, which
include regulating the national supply of bank reserves and bank credit, can
have a major effect upon the source and cost of funds and the rates of return
earned on loans and investments. The Federal Reserve influences the size and
distribution of bank reserves through its open market operations and changes in
cash reserve requirements against member bank deposits. We cannot predict what
effect any presently contemplated or future changes in the laws or regulations
or their interpretations would have on Fifth Third, but such changes could be
materially adverse to Fifth Third's shareholders.
CHANGES IN INTEREST RATES COULD REDUCE FIFTH THIRD'S INCOME AND CASH FLOWS.
Fifth Third's income and cash flows depend to a great extent on "interest
rate differentials" and the resulting net interest margins, i.e., the difference
between the interest rates earned on interest-earning assets such as loans and
investment securities, and the interest rates paid on interest-bearing
liabilities such as deposits and borrowings. These rates are highly sensitive to
many factors which are beyond Fifth Third's control, including general economic
conditions and the policies of various governmental and regulatory agencies, in
particular, the Federal Reserve Board. Changes in monetary policy, including
changes in interest rates, will influence the origination of loans, the purchase
of investments, the generation of deposits, and the rates received on loans and
investment securities and paid on deposits. Fluctuations in these areas may
adversely affect Fifth Third.
FIFTH THIRD'S OPERATIONS MUST BE YEAR 2000 COMPLIANT.
As with other bank holding companies and other businesses generally, Fifth
Third is exposed to the risk that the year 2000 could cause system failures
which could be disruptive to Fifth Third's operations. Although Fifth Third has
undertaken significant projects to minimize the risk that the year 2000 will
result in any significant problems for Fifth Third, some factors are not within
Fifth Third's direct control and could disrupt Fifth Third's operations.
FORWARD-LOOKING STATEMENTS MAY PROVE INACCURATE.
This document, including information included or incorporated by reference
herein contains or may contain forward-looking statements that involve risks and
uncertainties. This document contains certain forward-looking statements with
respect to the financial condition, results of operations, plans, objectives,
future performance and business of each of Fifth Third and Enterprise, including
statements preceded by, followed by or that include the words "believes,"
"expects," "anticipates" or similar expressions. These forward-looking
statements involve certain risks and uncertainties. Factors that may cause
actual results to differ materially from those contemplated by such
forward-looking statements include, among others, those risks discussed above.
10
<PAGE> 17
THE SPECIAL MEETING
This document and the accompanying form of proxy are being furnished to you
in connection with the solicitation by the board of directors of Enterprise of
proxies to be used at the special meeting to be held on April 23, 1999, at 10:00
a.m., Eastern Daylight Savings Time, at the Radisson Hotel, located at 11320
Chester Road, Sharonville, Ohio, and at any adjournments thereof. This document,
the enclosed Fifth Third 1998 Annual Report to Shareholders, Enterprise Form
10-K for the year ended September 30, 1998, and Enterprise Quarterly Report on
Form 10-Q for the three months ended December 31, 1998, and the enclosed form of
proxy are first being sent to you on or about March 23, 1999.
PURPOSE OF THE SPECIAL MEETING
The purpose of the special meeting of Enterprise shareholders is to approve
the affiliation agreement, and the transactions contemplated thereby, including
the merger of Enterprise with and into Fifth Third and the control share
acquisition by Fifth Third of more than a majority of the voting power of
Enterprise. Enterprise shareholders also may consider and vote upon such other
matters as are properly brought before the special meeting, including a proposal
to adjourn the special meeting to permit further solicitation of proxies by the
Enterprise board in the event that there are not sufficient votes to approve the
affiliation agreement at the time of the special meeting. However, no proxy
which is voted against the affiliation agreement will be voted in favor of
adjournment to solicit further proxies for such proposal. As of the date hereof,
the Enterprise board knows of no business that will be presented for
consideration at the special meeting, other than matters described in this
document.
VOTING AND REVOCABILITY OF PROXIES
Shareholders who execute proxies retain the right to revoke them at any
time prior to their exercise. Unless revoked, the shares represented by proxies
will be voted at the special meeting and all adjournments thereof. Proxies may
be revoked by written notice to Corporate Secretary, Enterprise Federal Bancorp,
Inc., 7810 Tylersville Square Drive, West Chester, Ohio 45069, by filing a later
dated proxy prior to a vote being taken on a particular proposal at the special
meeting or by attending the special meeting and voting in person.
Proxies solicited by the Enterprise board will be voted in accordance with
the directions given therein. IF YOU DO NOT INDICATE YOUR VOTE ON THE PROXY,
YOUR PROXY WILL BE VOTED FOR APPROVAL OF THE AFFILIATION AGREEMENT AND THE
TRANSACTIONS CONTEMPLATED THEREBY, INCLUDING THE MERGER. YOU ALSO WILL BE DEEMED
TO HAVE WAIVED THE APPRAISAL RIGHTS OF A DISSENTING SHAREHOLDER. The proxy
confers discretionary authority on the persons named therein to vote Enterprise
common stock with respect to matters incident to the conduct of the special
meeting. If any other business is presented at the special meeting, proxies will
be voted in accordance with the discretion of the proxy holders. Proxies marked
as abstentions will not be counted as votes cast and, therefore, will have the
same effect as a vote against the merger.
VOTING AT THE SPECIAL MEETING
REQUIRED SHAREHOLDER VOTE. The affirmative vote of at least two-thirds of
the shares of Enterprise common stock outstanding as of March 11, 1999 is
required for the approval of the affiliation agreement and the transactions
contemplated thereby. In addition, as discussed below under "-- Ohio Control
Share Acquisition Act," the affirmative votes of the holders of a majority of
the Enterprise common stock represented in person or by proxy at the special
meeting (excluding any shares owned by any officer of Enterprise or any director
of Enterprise who is also an employee of Enterprise), are required to approve
the proposal to approve the affiliation agreement.
We expect that substantially all of the 525,752 shares of Enterprise common
stock beneficially owned by directors and executive officers of Enterprise at
the March 11, 1999 record date (22% of the 2,389,760 total outstanding shares at
that date) will be voted for the approval of the affiliation agreement and the
transactions contemplated thereby.
11
<PAGE> 18
OHIO CONTROL SHARE ACQUISITION ACT. Section 1701.831 of the Ohio Revised
Code, the Ohio Control Share Acquisition Act, provides that any "control share
acquisition" of an Ohio issuing public corporation shall be made only with the
prior authorization of the shareholders of the issuing public corporation in
accordance with the provisions of the Ohio Control Share Acquisition Act. A
"control share acquisition" is defined under the Ohio Control Share Acquisition
Act to mean the acquisition, directly or indirectly, by any person of shares of
an issuing public corporation that, when added to all other shares of the
issuing public corporation such person owns, would entitle such person, directly
or indirectly, to exercise voting power in the election of directors within the
following ranges: more than 20%, more than 33 1/3%, and a majority. The merger
constitutes a "control share acquisition" under the Ohio Control Share
Acquisition Act.
The Ohio Control Share Acquisition Act also requires that the acquiring
person must deliver an acquiring person statement to the Ohio issuing public
corporation. The Ohio issuing public corporation must then call a special
meeting of its shareholders to vote upon the proposed acquisition within 50 days
after receipt of such acquiring person statement, unless the acquiring person
agrees to a later date. Enterprise received an acquiring person statement from
Fifth Third on March 11, 1999, a copy of which is attached hereto as Annex D,
and Enterprise's shareholders will have the opportunity to vote upon Fifth
Third's proposed acquisition at the special meeting.
The Ohio Control Share Acquisition Act further specifies that the
shareholders of the Ohio issuing public corporation must approve the proposed
control share acquisition by certain percentages at a special meeting of
shareholders at which a quorum is present. Accordingly, in order to comply with
the Ohio Control Share Acquisition Act, Fifth Third may only acquire the shares
of Enterprise upon the affirmative vote of (1) a majority of the voting power of
the shares of Enterprise common stock that is represented in person or by proxy
at the separate special meeting, and (2) a majority of the voting power of the
shares of Enterprise common stock that is represented in person or by proxy at
the special meeting excluding those shares of Enterprise common stock deemed to
be "interested shares" for purposes of the Ohio Control Share Acquisition Act.
"Interested shares" are defined under the Ohio Control Share Acquisition
Act to mean shares in respect of which the voting power is controlled by any of
the following persons: (1) an acquiring person (in this case, Fifth Third); (2)
any officer of Enterprise; and (3) any employee who is also a director of
Enterprise. "Interested shares" also include shares of Enterprise common stock
that are acquired by any person after the date of the first public disclosure of
the proposed merger (in this case September 24, 1998) and the date of the
special meeting, if either (1) the aggregate consideration paid by such person,
and any person acting in concert with him, for such shares of Enterprise common
stock exceeds $250,000, or (2) the number of shares acquired by such person, and
any person acting in concert with him, exceeds one-half of one percent of the
outstanding shares of Enterprise common stock. In order to determine whether any
shares acquired after September 24, 1998 constitute "interested shares" pursuant
to the preceding sentence, Enterprise will examine its stock records as of
September 24, 1998, as of the record date and as of the last business day
preceding the special meeting. If any record holder (other than a broker, bank
or other nominee) has increased his ownership interest by more than one-half of
one percent of the outstanding share of Enterprise common stock, or by a number
of shares in excess of $250,000 divided by the book value of a share of
Enterprise common stock during the period from September 24, 1998 through the
record date, such additional shares held by such holder will be deemed
"interested shares" upon receipt by Enterprise of a validly executed proxy card
from such a record holder. A record holder may rebut a presumption that shares
are "interested shares" by providing Enterprise with documentation satisfactory
to Enterprise's legal counsel establishing that such shares are not "interested
shares" within the definition of Section 1701.01(CC)(2) of the Ohio Revised
Code.
As of the record date, 379,928 of the shares of Enterprise common stock
held by employee directors and officers of Enterprise would be "interested
shares" under the Ohio Control Share Acquisition Act. Except as set forth in the
preceding paragraph, all other shares will be presumed to be disinterested
shares unless Enterprise acquires actual knowledge of facts that evidence such
shares must be deemed "interested shares."
12
<PAGE> 19
SOLICITATION OF PROXIES
Enterprise will pay all the costs of soliciting proxies, except that Fifth
Third will pay for the expenses of printing and mailing this document.
Enterprise will reimburse brokerage firms and other custodians, nominees and
fiduciaries for reasonable expenses incurred by them in sending proxy materials
to the beneficial owners of common stock. In addition to solicitations by mail,
directors, officers and regular employees of Enterprise may solicit proxies
personally or by telegraph or telephone without additional compensation.
Enterprise has retained D.F. King & Co., Inc., a proxy solicitation firm, to
assist in the solicitation. The fee to be paid to such firm is not expected to
exceed $5,000, plus reasonable out-of-pocket costs and expenses authorized by
Enterprise.
PROPOSAL -- MERGER OF ENTERPRISE INTO FIFTH THIRD
The following description summarizes all material terms of the affiliation
agreement. We urge you to read the affiliation agreement, a copy of which is
attached as Annex A to this document and is incorporated by reference into this
document.
STRUCTURE OF THE MERGER
Upon completion of the merger, Enterprise will merge with and into Fifth
Third and Enterprise will cease to exist as a separate entity. In a related
simultaneous transaction, Enterprise Federal Savings Bank will merge with and
into Fifth Third Bank.
CORPORATE GOVERNANCE
The respective boards of directors of Fifth Third and Fifth Third Bank
after the merger is consummated will consist of all of the members of such
boards of directors who are in office at the effective time of the merger. Such
directors will continue to serve for the term for which they were elected,
subject to the applicable code of regulations and in accordance with law. The
officers of Fifth Third and Fifth Third Bank after the merger is consummated
will be those officers who are in office at the effective time of the merger,
subject to the applicable code of regulations and in accordance with law.
MERGER CONSIDERATION
Each share of Enterprise common stock, excluding treasury shares and shares
that properly dissent to the merger that is issued and outstanding immediately
prior to the effective time of the merger will be canceled and converted, by
virtue of the merger and without further action, into the right to receive
.68516 of a share of Fifth Third common stock. In the event of any stock
dividends, reclassifications, recapitalizations, split-ups, exchanges of shares,
distributions or combinations or subdivisions of Fifth Third common stock or any
other event or action which has a similar economic effect before the effective
time of the merger, the exchange ratio will be adjusted so as to give
shareholders of Enterprise the economic benefit of such event or action.
THE VALUE OF THE FIFTH THIRD COMMON STOCK TO BE RECEIVED BY YOU WILL DEPEND
ON THE MARKET PRICE OF SHARES OF FIFTH THIRD COMMON STOCK AT THE EFFECTIVE TIME
OF THE MERGER. THE MARKET PRICE OF FIFTH THIRD COMMON STOCK IS SUBJECT TO CHANGE
AT ALL TIMES BASED ON THE FUTURE FINANCIAL CONDITION AND OPERATING RESULTS OF
FIFTH THIRD, FUTURE MARKET CONDITIONS AND OTHER FACTORS. ON SEPTEMBER 24, 1998,
THE BUSINESS DAY IMMEDIATELY PRECEDING PUBLIC ANNOUNCEMENT OF THE MERGER, FIFTH
THIRD'S COMMON STOCK CLOSED AT $63.50. BETWEEN SEPTEMBER 24, 1998 AND MARCH 16,
1999, FIFTH THIRD'S COMMON STOCK TRADED AS HIGH AS $75.44 AND AS LOW AS $50.31.
ON MARCH 16, 1999, FIFTH THIRD'S COMMON STOCK CLOSED AT $73.06. THE MARKET PRICE
OF FIFTH THIRD COMMON STOCK AT THE EFFECTIVE TIME OF THE MERGER MAY BE
SUBSTANTIALLY HIGHER OR LOWER THAN RECENT PRICES. YOU ARE ADVISED TO OBTAIN
CURRENT MARKET QUOTATIONS FOR FIFTH THIRD COMMON STOCK.
NO FRACTIONAL SHARES
Only whole shares of Fifth Third common stock will be issued in connection
with the merger. In lieu of fractional shares, each holder of Enterprise common
stock otherwise entitled to a fractional share of Fifth
13
<PAGE> 20
Third common stock will be paid, without interest, an amount equal to the amount
of such fraction multiplied by the closing price of Fifth Third common stock as
reported on the Nasdaq National Market on the date the merger is completed. No
shareholder will be entitled to interest, dividends, voting rights or other
rights in respect of any such fractional share.
EFFECTIVE TIME OF THE MERGER
Unless we agree otherwise, the effective time of the merger will occur on a
Friday which is as soon as is reasonably possible following the date on which
all conditions contained in the affiliation agreement have been met or waived,
including the expiration of all applicable waiting periods. It is anticipated
that the effective time of the merger will occur in May, 1999, although no
assurance can be given in this regard. Enterprise and Fifth Third each will have
the right, but not the obligation, to terminate the affiliation agreement if the
effective time of the merger does not occur on or before June 30, 1999, subject
to certain conditions.
EXCHANGE OF CERTIFICATES
After the effective time of the merger, you will cease to have any rights
as a shareholder of Enterprise, and your sole rights will pertain to the rights
to receive shares of Fifth Third common stock and cash in lieu of fractional
shares, if any, into which your shares of Enterprise common stock will have been
converted pursuant to the affiliation agreement or fair value in cash if you
perfect your dissenter's rights pursuant to Ohio law.
As soon as practicable after the effective time of the merger, if you have
not dissented to the merger, Fifth Third will send to you a letter of
transmittal for use in submitting to Fifth Third, acting as exchange agent,
certificates formerly representing shares of Enterprise common stock to be
exchanged for certificates representing Fifth Third common stock (and, to the
extent applicable, cash in lieu of fractional shares of Fifth Third common
stock) which you are entitled to receive as a result of the merger. You will
also receive instructions for handling lost Enterprise share certificates. You
will not be entitled to receive any dividends or other distributions which may
be payable to holders of record of Fifth Third common stock following the
effective time of the merger until you have surrendered and exchanged your
certificates evidencing ownership of Enterprise common stock. Any dividends
payable on Fifth Third common stock after the effective time of the merger will
be paid to the exchange agent and, upon receipt of the certificates representing
Enterprise common stock, the exchange agent will forward to you (1) certificates
representing your shares of Fifth Third common stock, (2) dividends declared
thereon subsequent to the effective time of the merger, without interest and (3)
the cash value of any fractional shares, without interest. You should not submit
share certificates until you have received written instructions to do so.
At the effective time of the merger, the stock transfer books of Enterprise
will be closed and no transfer of Enterprise common stock will thereafter be
made on such books. If a certificate formerly representing Enterprise common
stock is presented to Enterprise or Fifth Third, it will be forwarded to the
exchange agent for cancellation and exchange for a certificate representing
shares of Fifth Third common stock.
BACKGROUND AND REASONS FOR THE MERGER
Enterprise was organized in 1994 as the holding company for Enterprise
Federal Savings Bank of West Chester, Ohio in connection with Enterprise Federal
Savings Bank's conversion from a mutual savings and loan to a stock savings bank
in October 1994. Enterprise has faced significant competition in the Cincinnati
market area from other savings institutions and large regional commercial banks
which have substantial financial and marketing resources available to them.
Recently, competition in the banking and financial services industries has
increased significantly. This competition and costs associated with new
technology has materially impacted all financial institutions and especially
smaller institutions such as Enterprise.
Since becoming a unitary thrift holding company in October 1994, Enterprise
has, on an ongoing basis, reviewed its options to enhance shareholder value.
Enterprise's primary shareholder enhancement strategy has
14
<PAGE> 21
been to build a strong retail franchise. A significant step towards enhancing
shareholder value included internal growth and the three acquisitions described
below.
On July 18, 1997, Enterprise entered into a definitive agreement to acquire
North Cincinnati Savings Bank which conducted business through its main office
and one branch office, both of which were located in Hamilton County, Ohio. The
transaction was completed in February 1998 through cash payments of
approximately $2.5 million and the issuance of 225,168 shares of Enterprise
common stock.
On June 16, 1998, Enterprise entered into a definitive agreement to
purchase $70 million of deposits from three Cincinnati area branches of
Cornerstone Bank, at a premium of $4.2 million. The acquisition was funded with
$65.3 million in cash, which Enterprise will ultimately invest into loans and/or
mortgage-backed securities upon the closing of the transaction. As a result,
Enterprise continued on the path of building shareholder value through the
development of a strong retail franchise. This acquisition closed on October 26,
1998.
On July 6, 1998, Enterprise entered into an agreement to acquire Security
Savings Holding Company, Inc. the holding company for Security Savings
Association. Security Savings Association operated three offices in the Clermont
county communities of Milford, Day Heights and Batavia. The transaction was
accounted for using purchasing accounting for the price of $13 million. This
acquisition closed on November 20, 1998.
In June 1998, the board of directors of Enterprise requested that Charles
Webb & Company meet with them to review the current operations of Enterprise,
with a focus on the strategic opportunities to enhance shareholder value during
the next several years, the related risks of these options, and the current
merger and acquisition market. After a thorough review, the Enterprise board and
management identified certain factors which could limit the ability of
Enterprise to continue the historical earnings per share and stock price growth
of Enterprise in the future. These factors included, among others, (1) an
increasingly leveraged balance sheet combined with the potential inability to
increase funding or raise deposits at a level necessary to support required
lending growth; (2) a reduced growth rate in earnings resulting from lower asset
growth combined with a compression of the interest rate spreads; (3) the
increased competition for deposits; and (4) anticipated expenditures required to
implement current technology to remain competitive.
Considering these challenges, combined with the objective to continue
increasing shareholder value, the board decided to explore the opportunities for
a strategic alliance with a company which would further the board's objective of
enhancing shareholder value. Charles Webb was authorized by the board at the
July 1998 board meeting to begin the process of identifying potential strategic
partners and, if possible and prudent, begin the negotiation of a combination.
In July 1998, Charles Webb conducted a confidential inquiry regarding the
possible interest of six entities in pursuing a merger with, or acquisition of,
Enterprise. All six entities expressed an interest and, after signing a
confidentiality agreement, were provided with certain information on Enterprise,
including financial statements, loan and deposit summaries and other data. In
August 1998, two companies submitted preliminary, non-binding indications of
interest to acquire Enterprise on a stock for stock basis. Upon receipt of the
indications of interest, Charles Webb reviewed with the board the detail of the
indications of interest received. Additionally, Charles Webb reviewed with the
Enterprise board the relative value of each of the transactions to shareholders
of Enterprise.
It was determined that the Fifth Third proposal was the most attractive of
the two proposals considering price and other relevant factors, and the
Enterprise board elected to begin discussions with Fifth Third. Off-site due
diligence and discussion of the affiliation agreement was begun immediately.
Upon completion of the due diligence and negotiation of the affiliation
agreement, a fixed exchange ratio of .68516 shares of Fifth Third stock for each
share of Enterprise common stock was confirmed.
On September 25, 1998, the board of directors of Enterprise met with
Charles Webb and Enterprise's legal counsel. At this meeting Enterprise's legal
counsel reviewed the terms of the affiliation agreement and the contemplated
transaction. Charles Webb delivered its opinion that the merger consideration
was fair, from a financial point of view, to the shareholders of Enterprise
common stock. After a thorough discussion of the
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<PAGE> 22
transaction, the board of directors of Enterprise voted unanimously to approve
the affiliation agreement and authorized execution of the affiliation agreement.
The terms of the affiliation agreement, including the merger consideration
to be paid to Enterprise's shareholders, were the result of arm's length
negotiations between the representatives of Fifth Third and Enterprise. Among
the factors considered by the board of directors of Enterprise in deciding to
approve and recommend the terms of the merger were the following:
- the merger consideration to be paid to Enterprise's shareholders in
relation to the market value, book value, earnings per share and dividend
rates of Enterprise common stock;
- information concerning the financial condition, results of operations,
capital levels, asset quality and prospects for Enterprise;
- industry and economic conditions;
- the impact of the merger on the depositors, employees, customers and
communities served by Enterprise;
- the opinion of Charles Webb as to the fairness of the merger
consideration, from a financial point of view, to the holders of
Enterprise common stock;
- the general structure of the transaction;
- the likelihood of receiving the required approvals in a timely manner;
and
- the ability of the combined entity to compete in relevant banking and
non-banking markets. In making its determination, the board of directors
of Enterprise did not ascribe relative weights to the factors which it
considered.
THE ENTERPRISE BOARD BELIEVES THAT THE MERGER IS IN THE BEST INTERESTS OF
ENTERPRISE AND ITS SHAREHOLDERS. THE BOARD UNANIMOUSLY RECOMMENDS THAT
ENTERPRISE SHAREHOLDERS VOTE FOR THE APPROVAL AND ADOPTION OF THE AFFILIATION
AGREEMENT AND THE TRANSACTIONS CONTEMPLATED THEREBY. For information regarding
interests of directors and executive officers of Enterprise in the merger, see
"Terms of the Affiliation Agreement -- Effect on Enterprise Employees" and
"-- Interests of Certain Persons in the Merger."
Fifth Third's primary reason for consummating the merger is to further a
long-range commitment of realigning and expanding its banking system to better
meet and satisfy the needs of its customers, including those in Enterprise's
service area. Fifth Third's acquisition strategy has generally been to fill in
its markets along the interstate highways in Ohio, Kentucky and Indiana. These
acquisitions are designed to strengthen Fifth Third's ability to compete in
these markets by increasing its presence, consumer access and sales force.
OPINION OF FINANCIAL ADVISOR TO ENTERPRISE
In June 1998, Charles Webb was retained by Enterprise to evaluate
Enterprise's strategic alternatives as part of a shareholder enhancement program
and to evaluate any specific proposals that might be received regarding an
acquisition of Enterprise. Charles Webb, as part of its investment banking
business, is regularly engaged in the evaluation of business and securities in
connection with mergers and acquisitions, negotiated underwritings, and
distributions of listed and unlisted securities. Charles Webb is familiar with
the market for common stocks of publicly-traded banks, thrifts and bank and
thrift holding companies. The Enterprise board selected Charles Webb on the
basis of the firm's reputation and its experience and expertise in transactions
similar to the merger and its prior work for and relationship with Enterprise.
Pursuant to its engagement, Charles Webb was asked to render an opinion as
to the fairness, from a financial point of view, of the merger consideration to
shareholders of Enterprise. Charles Webb delivered its opinion to the Enterprise
board that, as of September 25, 1998, the merger consideration is fair, from a
financial point of view, to the shareholders of Enterprise. No limitations were
imposed by the Enterprise board upon Charles Webb with respect to the
investigations made or procedures followed by it in rendering
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<PAGE> 23
its opinion. Charles Webb has consented to the inclusion herein of the summary
of its opinion to the Enterprise board and to the reference to the entire
opinion attached hereto as Annex B.
THE FULL TEXT OF THE OPINION OF CHARLES WEBB SETS FORTH CERTAIN ASSUMPTIONS
MADE, MATTERS CONSIDERED AND LIMITATIONS ON THE REVIEW UNDERTAKEN BY CHARLES
WEBB, AND SHOULD BE READ IN ITS ENTIRETY.
In rendering its opinion, Charles Webb:
- reviewed the affiliation agreement;
- reviewed Enterprise's and Fifth Third's Annual Reports, Proxy Statements
and Form 10-K's for the prior three fiscal years of 1997, 1996 and 1995
and certain other internal financial analysis considered relevant;
- discussed with senior management and the board of directors of Enterprise
and its wholly-owned subsidiary, Enterprise Federal Savings Bank, the
current position and prospective outlook for Enterprise;
- discussed with senior management of Fifth Third their operations,
financial performance and future plans and prospects;
- considered historical quotations, levels of activity and prices of
recorded transactions in Enterprise's and Fifth Third's common stock;
- reviewed financial and stock market data of other thrifts in a comparable
asset range to Enterprise;
- reviewed financial and stock market data of other thrifts in a comparable
asset range to Fifth Third; and
- reviewed certain recent business combinations with thrifts as the
acquired company, which Charles Webb deemed comparable in whole or in
part.
In rendering its opinion, Charles Webb assumed and relied upon the accuracy
and completeness of the financial information provided to it by Enterprise and
Fifth Third. In its review, with the consent of the Enterprise board, Charles
Webb did not undertake any independent verification of the information provided
to it, nor did it make any independent appraisal or evaluation of the assets or
liabilities nor of potential exposure resulting from Year 2000 issues of
Enterprise or Fifth Third, and potential or contingent liabilities of Enterprise
or Fifth Third.
ANALYSIS OF RECENT COMPARABLE ACQUISITION TRANSACTIONS. In rendering its
opinion, Charles Webb analyzed certain comparable merger and acquisition
transactions of both pending and completed thrift deals, comparing the
acquisition price relative to (1) tangible book value, (2) last twelve months'
earnings, (3) total deposits and (4) total assets, as well as the core deposit
premium, for completed and pending acquisitions, based on the following five
comparable groups:
- all thrift acquisitions since December 31, 1997 ("Recent Transactions");
- all thrift acquisitions since December 31, 1997 with a total transaction
value between $75 million and $150 million ("Comparable Transaction
Value");
- all thrift acquisitions since December 31, 1997 with the selling thrift
having equity to total assets of between 6% and 10% ("Comparable Equity
Ratio");
- all thrift acquisitions since December 31, 1997 with the selling thrift
having a return on average equity between 8% and 12% ("Comparable
Earnings Ratio"); and
- all thrift acquisitions since December 31, 1997 with the selling thrift
located in the Midwest ("Comparable Regional Deals").
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<PAGE> 24
The information in the following table summarizes the material information
analyzed by Charles Webb with respect to the merger.
<TABLE>
<CAPTION>
PRICE TO
-------------------------------------------- COREDEP
TANGBOOK LTM EPS(B) DEPOSITS ASSETS PREMIUM
(%) (X) (%) (%) (%)
-------- ---------- -------- ------ -------
<S> <C> <C> <C> <C> <C> <C>
CONSIDERATION -- $43.50 PER SHARE(A)
Based on 9/24/98 closing price
of Fifth Third................ 290.00 39.75 51.2 25.5 33.2
Pro Forma with two pending
acquisitions(c)............... 403.0 22.95 30.8 19.0 20.0
NUMBER MEDIAN FOR ALL DEALS SINCE DECEMBER 31, 1997
------ -------------------------------------------------------
RECENT TRANSACTION
Completed..................... 70 199.2 21.6 24.6 18.6 13.4
Pending....................... 50 203.4 25.8 31.4 22.5 17.9
COMPARABLE TRANSACTION VALUE
Completed..................... 11 212.3 17.7 24.1 17.7 15.1
Pending....................... 8 222.0 22.2 32.2 25.2 20.1
COMPARABLE EQUITY RATIO
Completed..................... 37 205.2 22.0 20.8 17.2 12.7
Pending....................... 25 249.9 26.1 28.0 20.7 21.6
COMPARABLE EARNINGS RATIOS
Completed..................... 28 192.0 21.1 28.4 20.3 15.0
Pending....................... 16 241.9 25.9 32.0 22.2 22.1
COMPARABLE REGIONAL DEALS
Completed..................... 26 187.2 22.6 27.1 20.1 13.1
Pending....................... 14 176.6 27.4 32.5 23.7 15.8
</TABLE>
- ---------------
(a) Based on Fifth Third's closing price of $63.50 on September 24, 1998 and the
exchange ratio of .68516.
(b) Last twelve months ending June 30, 1998 earnings per share was $1.32.
Annualized proforma earnings per share, assuming the completion of the two
pending acquisitions, was $2.05 per share.
(c) Reflects the pro forma effect of the then pending acquisition of certain
deposits and other assets from Cornerstone Bank and the pending acquisition
of Security Savings Holding Company, Inc.
Based on the above information, Charles Webb concluded that the multiples
implied by the .68516 exchange ratio and the implied per share price of $43.50,
exceeded the ranges of each mentioned comparable group, and relative to price to
tangible book and price to last twelve months' earnings per share exceeded
significantly all of the comparable groups. The summary is a complete
description in all material respects of the analysis performed by Charles Webb.
Selecting portions of Charles Webb's analysis or isolating certain aspects of
the comparable transactions without considering all analysis and factors, could
create an incomplete or potentially misleading view of the evaluation process.
In preparing its analysis, Charles Webb made numerous assumptions with
respect to industry performance, business and economic conditions and other
matters, many of which are beyond the control of Charles Webb and Enterprise.
The analyses performed by Charles Webb are not necessarily indicative of actual
values or future results, which may be significantly more or less favorable than
suggested by such analyses and do not purport to be appraisals or reflect the
prices at which a business may be sold.
Charles Webb will receive a fee of approximately $1 million for services
rendered in connection with advising and issuing a fairness opinion regarding
the merger. As of the date of the document, Charles Webb has received $100,000
of such fee. The remainder of the fee is due upon approval by shareholders of
the merger.
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<PAGE> 25
FEDERAL INCOME TAX CONSEQUENCES
Fifth Third and Enterprise believe that the merger will constitute a
reorganization within the meaning of Section 368(a) of the Internal Revenue
Code. If so, the federal income tax consequences will be:
- no gain or loss will be recognized by Enterprise as a result of the
merger;
- no gain or loss will be recognized by Fifth Third as a result of the
merger;
- no gain or loss will be recognized by a shareholder of Enterprise who
receives solely Fifth Third common stock in exchange for Enterprise
common stock pursuant to the terms of the affiliation agreement, except
to the extent of any cash received for any fractional share interest in
Fifth Third common stock to which the shareholder may be entitled;
- the aggregate federal income tax basis of the Fifth Third common stock
received by an Enterprise shareholder who receives solely Fifth Third
common stock in exchange for Enterprise common stock pursuant to the
terms of the affiliation agreement will be, in each instance, the same as
the aggregate federal income tax basis of the Enterprise common stock
surrendered in exchange therefore reduced by any amount allocated to a
fractional share of Fifth Third common stock with respect to which cash
is received;
- the holding period of the Fifth Third common stock received (including
any fractional share deemed received and redeemed for cash) by an
Enterprise shareholder will include, in each case, the period during
which the Enterprise common stock surrendered in exchange therefor was
held, provided that the Enterprise common stock was held as a capital
asset by such shareholder on the date of the exchange; and
- a holder of Enterprise common stock who receives cash in lieu of a
fractional share of Fifth Third common stock will, in general, recognize
capital gain under Section 302 of the Internal Revenue Code on the excess
of the amount received for such fractional share over the shareholder's
adjusted basis in such fractional share.
An Enterprise shareholder who perfects dissenters' rights with respect to
such person's shares of Enterprise common stock will, in general, recognize
capital gain under Section 302 of the Internal Revenue Code on the excess amount
received over the shareholder's adjusted basis in their Enterprise shares.
The foregoing discussion is intended only as a summary of the material
federal income tax consequences of the merger but it is not a complete analysis
or description of all potential tax effects of the merger. The foregoing
discussion, for example, does not address the tax consequences that may be
relevant to particular taxpayers in light of their personal circumstances (for
example, individuals who receive Fifth Third common stock in exchange for
Enterprise common stock acquired as a result of the exercise of employee stock
options or otherwise as compensation) or to taxpayers subject to special
treatment under the Internal Revenue Code (for example, insurance companies,
financial institutions, dealers in securities, tax-exempt organizations, foreign
corporations, foreign partnerships, or other foreign entities and individuals
who are not citizens or residents of the United States). Neither Fifth Third nor
Enterprise has requested or will request a ruling from the Internal Revenue
Service or an opinion of counsel with regard to any of the federal income tax
consequences of the merger.
No information is provided herein with respect to the tax consequences, if
any, of the merger under applicable state, local, foreign, and other tax laws.
The foregoing discussion is based upon the provisions of the Internal Revenue
Code, applicable Treasury regulations thereunder, Internal Revenue Service
rulings, and judicial decisions as in effect as of the date hereof. There can be
no assurance that future legislative, administrative, or judicial changes or
interpretations will not affect the accuracy of the statements or conclusions
set forth herein. Any such change could apply retroactively and could affect the
accuracy of such discussion.
You are urged to consult your own tax advisor as to the specific tax
consequences to you of the merger, including the application of federal, state,
local, foreign and other tax laws.
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<PAGE> 26
ACCOUNTING TREATMENT
The merger is intended to qualify for pooling-of-interests accounting
treatment. Under pooling-of-interests accounting treatment, as of the effective
time of the merger, the assets and liabilities of Enterprise will be added to
those of Fifth Third at their recorded book values and the shareholders' equity
account of Enterprise will be included on Fifth Third's consolidated balance
sheet.
RESALE OF FIFTH THIRD COMMON STOCK BY AFFILIATES
The shares of Fifth Third common stock to be issued to shareholders of
Enterprise in connection with the merger will be registered under the Securities
Act of 1933. The Fifth Third shares will be freely transferable under the
Securities Act, except for shares issued to affiliates of Enterprise or Fifth
Third at the time of the special meeting. An affiliate is a director, an
executive officer or a 10% or more shareholder at the time of the special
meeting.
Rule 145 under the Securities Act restricts the sale of Fifth Third common
stock received in the merger by affiliates. During the first year following the
effective time of the merger, affiliates of Enterprise who do not become
affiliates of Fifth Third may resell the Fifth Third common stock received by
them in connection with the merger upon compliance with the following conditions
of Rule 144:
- Fifth Third must have satisfied its reporting requirements under the
Exchange Act for the 12 months preceding the proposed sale;
- the number of shares sold in any three month period is limited to the
greater of (1) one percent of Fifth Third's shares outstanding or (2) the
average weekly trading volume during the four calendar weeks preceding
the sale; and
- the shares must be sold by a broker in a routine open market transaction
that does not involve the solicitation of orders for purchase.
Shares of Fifth Third common stock sold by (1) an affiliate's spouse or
relative living in the affiliate's household, or (2) any trust or estate in
which the affiliate or person listed in (1) collectively owns ten percent or
more of the beneficial interest or of which any such person serves as trustee or
executor, or (3) any corporation in which the affiliate or any person specified
in (1) beneficially owns at least ten percent of an equity interest, will be
aggregated with the number of shares sold by the affiliate for purposes of
determining whether the volume limitations of Rule 144 are exceeded.
After the one-year period, affiliates of Enterprise who are not affiliates
of Fifth Third may resell their shares without regard to the volume limitation
or manner of sale requirement so long as Fifth Third has satisfied its reporting
requirements under the Exchange Act during the prior twelve-month period.
If Fifth Third has not satisfied its reporting requirements, affiliates may
not resell their shares of Fifth Third common stock received in the merger until
two years have elapsed since completion of the merger. At such time, the shares
may be sold without any restriction.
Sales and other dispositions of Fifth Third common stock by any affiliate
of Enterprise who becomes an affiliate of Fifth Third in connection with the
merger, must be made in compliance with the requirements of Rule 144 set forth
above until such person has not been an affiliate of Fifth Third for at least
three months and a period of at least two years has elapsed since the date the
shares were acquired in connection with the merger.
Even if the shares are sold, pledged or donated in compliance with Rule
145, the shares will remain subject to Rule 145 in the hands of the recipient
until the restrictive period applicable to the affiliate transferor have
expired.
The affiliation agreement provides that Enterprise will use its best
efforts to cause each director, executive officer and other person who is deemed
by Enterprise to be an affiliate (for purposes of Rule 145 and for purposes of
qualifying the merger for pooling-of-interests accounting treatment) of
Enterprise to execute and deliver to Fifth Third a written agreement intended to
ensure compliance with the Securities Act
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<PAGE> 27
and to ensure that the merger will qualify for pooling-of-interests accounting
treatment. Under that agreement, affiliates of Enterprise may not dispose of any
shares received in the merger during the period beginning 30 days before the
merger and ending when financial results covering at least 30 days of
post-merger operations of Fifth Third have been published.
DISSENTERS' RIGHTS OF APPRAISAL
You are entitled to relief as a dissenting shareholder under Ohio Revised
Code Section 1701.85 only if you comply strictly with all of the procedural and
other requirements of Section 1701.85, a copy of which is attached hereto as
Annex C. The following is a description of the material terms of Section
1701.85.
An Enterprise shareholder who wishes to perfect his rights as a dissenting
shareholder in the event the affiliation agreement is approved and adopted:
- must be a record holder of the shares of Enterprise common stock as to
which he seeks relief on the record date;
- must not vote his shares of Enterprise common stock in favor of approval
and adoption of the affiliation agreement; and
- must deliver to Enterprise, not later than ten days after the special
meeting, a written demand for payment of the fair cash value of the
shares as to which he seeks relief. The written demand must state the
name of the shareholder, his address, the number of shares as to which he
seeks relief and the amount claimed as the fair cash value thereof.
Voting against the approval and adoption of the affiliation agreement will
not satisfy the requirements of a written demand for payment. Any written demand
for payment should be mailed or delivered to: Corporate Secretary, Enterprise
Federal Bancorp, Inc., 7810 Tylersville Square Drive, West Chester, Ohio 45069.
As the written demand must be delivered to Enterprise within the ten-day period
following the special meeting, we recommend that a dissenting shareholder use
certified or registered mail, return receipt requested, to confirm that he has
made a timely delivery.
If Enterprise sends the dissenting shareholder, at the address specified in
his demand, a request for the certificate(s) representing his shares, such
dissenting shareholder must deliver the certificate(s) to Enterprise within 15
days of the date Enterprise sent the request. Enterprise may endorse the
certificate(s) with a legend to the effect that the shareholder has demanded the
fair cash value of the shares represented by the certificate(s). If the
shareholder fails to deliver the certificate(s) within 15 days of the request,
Enterprise may terminate his right to dissent. Enterprise must notify the
shareholder of its election to terminate his rights as a dissenting shareholder
within 20 days after the lapse of the 15-day period.
If the dissenting shareholder and Enterprise cannot agree on the fair cash
value per share of the shares of Enterprise common stock, either may, within
three months after the service of the written demand by the shareholder, file a
petition in the Court of Common Pleas of Hamilton County, Ohio. If the court
finds that the shareholder is entitled to be paid the fair cash value of any
shares, the court may appoint one or more appraisers to receive evidence and to
recommend a decision on the amount of the fair cash value.
The fair cash value of a share of Enterprise common stock to which a
dissenting shareholder is entitled under Section 1701.85 will be determined as
of the day prior to the special meeting. Fair cash value will be computed as the
amount a willing seller and willing buyer would accept or pay if neither was
compelled to sell or buy, excluding any appreciation or depreciation in market
value resulting from the merger. Notwithstanding the foregoing, the fair cash
value may not exceed the amount specified in the shareholder's written demand.
The court will make a finding as to the fair cash value of a share and render
judgment against Enterprise for its payment with interest at such rate and from
such date as the court considers equitable. The court will assess or apportion
the costs of the proceedings as it considers equitable.
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<PAGE> 28
The rights of any dissenting shareholder will terminate if:
- the dissenting shareholder has not complied with Section 1701.85, unless
Enterprise, by its board of directors, waives such failure,
- Enterprise abandons or is finally enjoined or prevented from carrying
out, or the shareholders of Enterprise rescind their adoption of, the
affiliation agreement,
- the dissenting shareholder withdraws his written demand with the consent
of Enterprise, by its board of directors, or
- Enterprise and the dissenting shareholder have not agreed upon the fair
cash value per share of the Enterprise common stock and neither has
timely filed or joined in a petition in an appropriate court for a
determination of the fair cash value of the shares.
Because a proxy which does not contain voting instructions will be voted
for approval of the affiliation agreement, a shareholder who wishes to exercise
dissenters' rights must either (1) not sign and return his proxy or, (2) if he
signs and returns his proxy, vote against or abstain from voting on the approval
of the affiliation agreement.
For a discussion of the tax consequences to a shareholder who exercises
dissenters' rights, see "Proposal -- Merger of Enterprise into Fifth
Third -- Federal Income Tax Consequences."
TERMS OF THE AFFILIATION AGREEMENT
REPRESENTATIONS AND WARRANTIES
Fifth Third and Enterprise have made numerous representations and
warranties to each other relating to, among other things, the following:
- their incorporation, good standing, corporate power and similar corporate
matters;
- their capitalization;
- their authorization, execution, delivery and performance and the
enforceability of the affiliation agreement and the absence of
violations;
- compliance with laws and regulations;
- the absence of material changes since June 30, 1998; and
- their financial statements.
The affiliation agreement also contains representations and warranties of
Enterprise relating to employee benefit matters and the absence of undisclosed
liabilities and a representation and warranty by Fifth Third that it has enough
authorized Fifth Third common stock to accomplish the merger.
No representations or warranties made by either Enterprise or Fifth Third
will survive beyond the effective time of the merger.
CONDUCT PENDING MERGER
Except with the prior approval of Fifth Third or as necessary to permit the
directors of Enterprise to exercise their fiduciary duties, the affiliation
agreement provides that Enterprise and its representatives will
22
<PAGE> 29
not directly or indirectly, 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 Enterprise or Enterprise Federal Savings Bank;
- 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
- any similar transaction involving Enterprise or Enterprise Federal
Savings Bank (any such transaction being referred to herein as an
"Acquisition Transaction").
Subject to the exercise by the directors of Enterprise of their fiduciary
duties, Enterprise promptly shall communicate to Fifth Third the terms of any
proposal which it may receive in respect of an Acquisition Transaction and any
request by or indication of interest on the part of any third party with respect
to initiation of any Acquisition Transaction or discussions with respect
thereto.
In addition, Enterprise has agreed that prior to the effective time of the
merger, Enterprise will carry on its business in the ordinary course and will
give Fifth Third and Fifth Third's representatives reasonable access during
business hours to its books, records and properties. In addition without Fifth
Third's prior written consent, neither Enterprise nor Enterprise Federal Savings
Bank will, among other things:
- make any changes in its capital or corporate structures;
- issue any additional shares of Enterprise common stock or any other
equity securities other than pursuant to the exercise of options granted
prior to the date of the affiliation agreement;
- issue as borrower any long-term debt or convertible or other securities
of any kind, or right to acquire any of its securities;
- make any material changes in its method of business operations;
- make or become obligated to make any capital expenditures in excess of
$15,000;
- make or renew any agreement for services to be provided to Enterprise or
Enterprise Federal Savings Bank, or permit the automatic renewal of any
such agreement, except any agreement for services having a term of not
more than three months or requiring the expenditure of not more than
$15,000;
- with respect to Enterprise only, declare or pay any cash dividends on its
stock other than normal and customary dividends paid per quarter
consistent with past practices;
- pay any stock dividends or make any other distributions on its stock;
- provide any increases in employee salaries or benefits other than in the
ordinary course of business;
- 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; or
- sell or otherwise dispose of or encumber any portion of shares of the
capital stock of Enterprise Federal Savings Bank which are now owned by
it.
CONDITIONS TO CLOSING
The affiliation agreement must be approved by the affirmative vote of
holders of at least two-thirds of the outstanding shares of Enterprise common
stock entitled to vote and a majority of the shares of Enterprise common stock
represented in person or by proxy at the special meeting (excluding any shares
of Enterprise common stock owned by any executive officer of Enterprise or any
director of Enterprise who is also an employee of Enterprise). The merger also
must be approved in writing by the Ohio Division of Financial
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<PAGE> 30
Institutions, an application for which has been filed. No assurance can be given
that the required governmental approval will be forthcoming.
Fifth Third's and Enterprise's obligations to consummate the merger are
subject to additional conditions set forth in the affiliation agreement. These
include the absence at the effective time of the merger of any material actions,
proceedings or investigations of any kind pending or threatened with respect to
the transactions contemplated by the affiliation agreement and both institutions
having performed all of the obligations required of them under the affiliation
agreement.
Fifth Third's obligation to consummate the merger is further subject to
conditions set forth in the affiliation agreement, including:
- the continuing truth and accuracy in all material respects of all of the
representations and warranties of Enterprise;
- delivery by Enterprise's counsel of a legal opinion addressed to Fifth
Third relating to Enterprise's incorporation, good standing, corporate
power and authority to enter into the affiliation agreement;
- the aggregate amount of consolidated shareholders' equity of Enterprise
immediately prior to the effective time of the merger, as shown by and
reflected on its books and records of accounts on a consolidated basis in
accordance with generally accepted accounting principles consistently
applied, being not less than $37,000,000; and
- the total issued and outstanding shares of Enterprise common stock not
exceeding 2,437,856 shares.
In addition, Fifth Third's obligation to consummate the merger is subject
to the receipt of noncompetition agreements executed by each of the current
directors of Enterprise, with the exception of Steven Wilson. Pursuant to such
agreements, the Enterprise directors will be prohibited from engaging in any
retail or commercial deposit or lending business, asset management and all other
services which are customarily provided by banks or which are otherwise provided
by Fifth Third or its affiliates in the states of Ohio, Kentucky, Indiana,
Florida or Arizona for a period of two years commencing at the effective time of
the merger.
Enterprise's obligation to consummate the merger is further subject to
conditions set forth in the affiliation agreement, including:
- the continuing truth and accuracy in all material respects of Fifth
Third's representations and warranties;
- delivery by counsel employed by Fifth Third of a legal opinion addressed
to Enterprise relating to Fifth Third's incorporation, good standing,
corporate power and authority to enter into the affiliation agreement and
the validity and registration of the shares of Fifth Third common stock
to be issued to Enterprise shareholders; and
- registration by Fifth Third of the shares of Fifth Third common stock to
be issued to Enterprise shareholders and listing of those shares on the
Nasdaq National Market.
TERMINATION; AMENDMENT; WAIVER
The affiliation agreement may be terminated and the merger abandoned at any
time prior to the effective time of the merger by written notice delivered by
Fifth Third to Enterprise or by Enterprise to Fifth Third in the following
instances:
- if there has been a material misrepresentation, a material breach of
warranty or a material failure to comply with any covenant on the part of
the other party with respect to the representations, warranties and
covenants set forth in the affiliation agreement and such
misrepresentation, breach or failure to comply has not been cured within
30 days after notice, provided the party in default has no right to
terminate for its own default;
24
<PAGE> 31
- if the business or assets or financial condition of the other party have
materially and adversely changed from that in existence at June 30, 1998;
- if the merger has not been consummated by June 30, 1999, provided the
terminating party is not in material breach or default of any
representation, warranty or covenant contained in the affiliation
agreement on the date of such termination;
- by the mutual written consent of Fifth Third and Enterprise;
- automatically if Enterprise's shareholders fail to approve and adopt the
affiliation agreement; or
- if any event occurs which renders impossible the satisfaction in any
material respect one or more of the conditions to the obligations of the
other party to effect the merger, and non-compliance is not waived by the
unaffected party.
The affiliation agreement may be amended, modified or supplemented by the
written agreement of each of the parties, upon the authorization of each
company's respective board of directors at any time before or after approval of
the merger by Enterprise's shareholders. Approval of any amendment, modification
or supplement by Enterprise's shareholders is not required unless such action
would adversely change the consideration to be provided to such shareholders
pursuant to the affiliation agreement.
INTERESTS OF CERTAIN PERSONS IN THE MERGER
Shares of Enterprise common stock held by or for the benefit of directors
and executive officers of Enterprise will be canceled and converted into the
right to receive shares of Fifth Third common stock on the same basis as shares
held by other shareholders of Enterprise. In addition, directors and executive
officers of Enterprise may be deemed to have the following interests in the
merger that are different from, or in addition to, those of shareholders of
Enterprise.
STOCK OPTIONS. At the effective time of the merger, all outstanding
options to purchase Enterprise common stock under Enterprise's stock option plan
will be converted into options to purchase Fifth Third common stock and will
become immediately exercisable. The number of shares subject to stock options
will be adjusted to allow the holder, upon exercise, to receive shares of Fifth
Third common stock calculated by multiplying the exchange ratio by the number of
shares of Enterprise common stock subject to the Enterprise stock options, and
the exercise price of the Enterprise stock options will be adjusted by dividing
the exercise price per share by the exchange ratio.
ENTERPRISE RECOGNITION AND RETENTION PLAN. At the effective time of the
merger, each participant in the Enterprise Recognition and Retention Plan not
fully vested will, in accordance with the terms of the plan, become fully vested
in shares awarded to such participant under the plan and any dividends
previously paid with respect to such shares. Based on the closing price of
Enterprise common stock on the business day immediately preceding public
announcement of the merger ($29.00 on September 24, 1998) and the recent closing
price of Fifth Third common stock ($73.06 on March 16, 1999), it was estimated
that the aggregate increase in the value of the shares subject to the plan
awards held by Enterprise directors and executive officers, excluding the value
of all vested shares immediately before the execution of the affiliation
agreement, but including the full value of all unvested shares that will vest
upon the consummation of the merger, would be approximately $872,097. Of the
aggregate increase, Messrs. Keeton, Meister, Noe, Pomeroy, Kreeger, Marty and
Wilson and Ms. Mayer will receive approximately: $227,120, $181,707, $113,575,
$113,575, $59,030, $59,030, $59,030 and $59,030, respectively.
EMPLOYEE BENEFIT PLANS. Each employee of Enterprise and Enterprise Federal
Savings Bank who becomes an employee of Fifth Third or any of its subsidiaries
or affiliates at or immediately subsequent to the merger, including the
executive officers of Enterprise, 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 of Fifth Third. The former Enterprise employees will not be subject to
any exclusion or penalty for pre-existing conditions that were covered under the
Enterprise Federal Savings
25
<PAGE> 32
Bank's medical plan immediately prior to the effective time of the merger or any
waiting period relating to coverage under Fifth Third's medical plan.
The affiliation agreement also provides that if requested by Fifth Third,
Enterprise will take all actions necessary to discontinue any and all
contributions under any employee pension benefit plan (as defined in Section
3(2) of ERISA) as of a date not later than the effective time of the merger.
EMPLOYEE STOCK OWNERSHIP PLAN. Since Fifth Third does not currently have
an employee stock ownership plan for its employees, Enterprise's ESOP may be
terminated by Fifth Third, or other action taken, upon the completion of the
actions and events described below in this section.
Enterprise is required by the affiliation agreement to develop a written
description and timetable which shall be provided to and approved by Fifth Third
and its counsel, setting forth all actions necessary to: (1) make contributions
to the Enterprise ESOP and/or to have the ESOP sell unallocated shares under the
ESOP to fully repay the ESOP's existing loan, all in compliance with the
applicable requirements of ERISA and the Internal Revenue Code, including
Internal Revenue Code Sections 415 and 404; (2) amend the ESOP to authorize the
sale of unallocated shares to repay the loan, to provide for the allocation of
gain on the sale of unallocated shares in a manner that complies with the
position of the IRS in Private Letter Rulings 9648054 and 9426048 and to make
such other changes as may be necessary to implement the termination; (3)
terminate the ESOP; and (4) submit the ESOP to the Internal Revenue Service for
a determination letter that the ESOP, as so amended and terminated, continues to
be a qualified retirement plan and employee stock ownership plan under Sections
401(a) and 4975(e)(7) of the Internal Revenue Code. Upon development and
approval by Fifth Third of the written description and timetable, Enterprise
shall take such actions as described therein as are approved by Fifth Third.
Distribution of the shares and any other assets of the ESOP (1) shall not
occur until after the receipt of the foregoing IRS determination letter and (2)
shall occur prior to the effective time of the merger only with the express
written consent of Fifth Third, which shall not be unreasonably withheld. In
connection with the development of the written description and timetables
referred to above and resolution of the ESOP, Fifth Third and Enterprise have
agreed they intend that, to the extent not prohibited by applicable law, the
ESOP shall be maintained through the date of its final termination for the
exclusive benefit of individuals who had become ESOP participants on or before
the effective time of the merger.
At March 16, 1999, there were 63 participants in Enterprise's ESOP. At that
date, based on the projected ESOP share allocation and loan balance at March 16,
1999 it was estimated that the increase in value of additional or accelerated
ESOP allocations to be made as a result of the merger for Enterprise's executive
officers would be approximately $489,264. Of the aggregate increase, Messrs.
Keeton, Meister, Noe and Pomeroy will receive approximately $143,712, $136,800,
$114,576 and $94,176, respectively.
INDEMNIFICATION AND LIABILITY INSURANCE. The affiliation agreement
provides that all provisions for indemnification and limitation of liability now
existing in favor of the directors or officers of Enterprise and its
subsidiaries, arising under applicable Ohio and federal law and under the
Enterprise articles of incorporation and code of regulations, or under the
charter or bylaws of Enterprise Federal Savings Bank, shall be assumed by Fifth
Third and shall continue in full force and effect with respect to acts or
omissions occurring on or prior to the effective time of the merger for a period
of three years after the effective time of the merger or, in the case of claims
asserted prior to the third anniversary of the effective time of the merger
until such matters are resolved. Fifth Third also shall purchase and keep in
force for a three-year period, a policy of directors' and officers' liability
insurance having liability limits and providing coverage for acts or omissions
of the type currently covered by Enterprise's existing directors' and officers'
liability insurance for acts or omissions occurring at or prior to the effective
time of the merger, but only to the extent such insurance may be purchased or
kept in full force on commercially reasonable terms. Fifth Third and Enterprise
have agreed that such costs shall be commercially reasonable so long as they do
not exceed 150% of the annual costs currently paid for such coverage by
Enterprise. Fifth Third has agreed that all rights to indemnification existing
in favor of officers and directors and employees of Fifth Third affiliates shall
be accorded to officers and directors and employees of Enterprise or any of its
subsidiaries who become affiliated with any Fifth Third affiliate in such
capacities after the effective time of the merger and that such
26
<PAGE> 33
indemnification will relate to covered actions or inactions only after the
effective time of the merger. See also "Description of Capital Stock and
Comparative Rights of Shareholders -- Indemnification and Personal Liability of
Directors and Officers."
EFFECT ON ENTERPRISE EMPLOYEES
Fifth Third shall consider employing as many of the employees of Enterprise
and Enterprise Federal Savings Bank 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.
The affiliation agreement provides for the payment of severance amounts to
employees of Enterprise under certain conditions upon termination of employment
or specific other circumstances. In the case of officers or other exempt
employees of Enterprise or Enterprise Federal Savings Bank who do not have an
employment or severance agreement, such amounts will be equal to two weeks of
pay for each year of service up to a maximum of 16 weeks of pay with a minimum
of two weeks of pay. In the case of all other employees, such amounts will be
equal to two weeks of pay for each year of service up to a maximum of 12 weeks
of pay with a minimum of two weeks of pay.
Officers of Enterprise who have employment or severance agreements with
Enterprise or Enterprise Federal Savings Bank as of September 1, 1998, shall
receive the severance or termination payments provided for in their respective
agreements in lieu of any other severance payment from Enterprise or Fifth Third
in connection with the merger. Pursuant to the agreements, Otto L. Keeton,
President and Chief Executive Officer, Michael R. Meister, Vice President and
Chief Operating Officer, Thomas J. Noe, Vice President, Chief Financial Officer
and Treasurer, and Steven M. Pomeroy, Vice President and Loan Officer, will
receive $669,414, $492,459, $412,618 and $291,826, respectively.
27
<PAGE> 34
FIFTH THIRD BANCORP
DESCRIPTION OF BUSINESS
Fifth Third is an Ohio corporation organized in 1975 as a bank holding
company registered under the Bank Holding Company Act, and subject to regulation
by the Federal Reserve Board. Fifth Third, with its principal office located in
Cincinnati, is a multi-bank holding company that owns all of the outstanding
stock of nine commercial banks and one savings bank with 468 offices in Ohio,
Kentucky, Indiana, Florida and Arizona. Those institutions are: Fifth Third
Bank; Fifth Third Bank, Central Ohio; Fifth Third Bank, Northwestern Ohio, N.A.;
Fifth Third Bank, Ohio Valley; Fifth Third Bank, Western Ohio; Fifth Third Bank,
Florida; Fifth Third Bank, Northern Kentucky, Inc.; Fifth Third Bank, Kentucky,
Inc.; Fifth Third Bank, Indiana; and Fifth Third Bank, Southwest, F.S.B.
At December 31, 1998, Fifth Third, its affiliated banks and other
subsidiaries had consolidated total assets of $28.9 billion, consolidated total
deposits of $18.8 billion and consolidated total shareholders' equity of
approximately $3.2 billion.
Fifth Third, through its subsidiaries, engages primarily in commercial,
retail and trust banking, investment services and leasing activities and also
provides credit life, accident and health insurance, discount brokerage services
and property management for its properties. Those subsidiaries consist of The
Fifth Third Company, Fifth Third Securities, Inc., The Fifth Third Leasing
Company, Midwest Payment Systems, Inc., Fifth Third International Company,
Heartland Capital Management, Inc. and Fifth Third/The Ohio Company. Fifth
Third's affiliates provide a full range of financial products and services to
the retail, commercial, financial, governmental, educational and medical
sectors, including a wide variety of checking, savings and money market
accounts, and credit products such as credit cards, installment loans, mortgage
loans and leasing. Each of the banking affiliates has deposit insurance provided
by the FDIC through the Bank Insurance Fund and the Savings Association
Insurance Fund.
Fifth Third, through its banking subsidiaries, also participates in several
regional shared ATM networks, including "Money Station(R)," "Honor(R)" and
"Star." These networks include approximately 5,400, 42,000 and 44,000 ATMs,
respectively. All Fifth Third banking subsidiaries also participate in the "PLUS
System(R)" network, which is an international ATM network with approximately
625,000 ATMs.
Fifth Third is a corporate entity legally separate and distinct from its
affiliates. The principal source of Fifth Third's income is dividends from its
affiliates. There are certain regulatory restrictions as to the extent to which
the affiliates can pay dividends or otherwise supply funds to Fifth Third. See
"Description of Capital Stock and Comparative Rights of
Shareholders -- Dividends."
RECENT DEVELOPMENTS
Fifth Third's strategy for growth includes strengthening its presence in
core markets, expanding into contiguous markets and broadening its product
offerings.
Fifth Third believes it has an excellent track record in integrating
acquired businesses. Since 1989, Fifth Third has completed 25 acquisitions,
which have contributed to its growth. Consistent with this strategy, in addition
to the merger with Enterprise, Fifth Third recently entered into agreements to
acquire Ashland Bankshares, Inc. and South Florida Bank Holding Corporation.
ASHLAND BANKSHARES, INC. On September 9, 1998, Fifth Third agreed to
acquire Ashland Bankshares, Inc., a bank holding company based in Ashland,
Kentucky which owns Bank of Ashland, Inc. As of December 31, 1998, Ashland had
total assets of $171.1 million and total deposits of $141.4 million.
In connection with the acquisition of Ashland, shareholders of Ashland will
receive 9.754427 shares of Fifth Third common stock for each outstanding share
of Ashland capital stock. Fifth Third expects to issue approximately 1,225,000
shares of Fifth Third common stock to shareholders of Ashland. Based on the fair
market value per share of Fifth Third common stock as of March 16, 1999, such
shares would have an aggregate value of approximately $89.5 million. Fifth Third
expects that its acquisition of Ashland will be
28
<PAGE> 35
accounted for as a pooling-of-interests and will be completed in the second
quarter of 1999 near the time of the merger with Enterprise.
SOUTH FLORIDA BANK HOLDING CORPORATION. On October 22, 1998, Fifth Third
agreed to acquire South Florida Bank Holding Corporation, a bank holding company
based in Ft. Myers, Florida which owns South Florida Bank. As of December 31,
1998, South Florida had total assets of $90.2 million and total deposits of
$77.0 million.
In connection with the acquisition of South Florida, shareholders of South
Florida will receive .34800 shares of Fifth Third common stock for each
outstanding share of South Florida capital stock. Fifth Third expects to issue
approximately 440,000 shares of Fifth Third common stock to shareholders of
South Florida. Based on the fair market value per share of Fifth Third common
stock as of March 16, 1999, such shares would have an aggregate value of
approximately $32.1 million. Fifth Third expects that its acquisition of South
Florida will be accounted for as a pooling-of-interests and will be completed in
the second quarter of 1999 near the time of the merger with Enterprise.
EMERALD FINANCIAL CORP. On February 27, 1999, Fifth Third agreed to
acquire Emerald Financial Corp., a savings and loan holding company based in
Strongsville, Ohio, which owns the Strongsville Savings Bank. As of December 31,
1998, Emerald had total assets of $668.5 million and total deposits of $559.2
million.
In connection with the acquisition of Emerald, shareholders of Emerald will
receive .30 shares of Fifth Third common stock for each outstanding share of
Emerald capital stock. Fifth Third expects to issue approximately 3,430,000
shares of Fifth Third common stock to shareholders of Emerald. Based on the fair
market value per share of Fifth Third common stock as of March 16, 1999, such
shares would have an aggregate value of approximately $250.6 million. Fifth
Third expects that its acquisition of Emerald will be accounted for as a
pooling-of-interests and will be completed in the third quarter of 1999.
ADDITIONAL INFORMATION
For more detailed information about Fifth Third, reference is made to the
Fifth Third Annual Report on Form 10-K for the year ended December 31, 1998,
which is incorporated herein by reference, and to the Fifth Third 1998 Annual
Report to Shareholders which accompanies this document. See "Where You Can Find
More Information."
29
<PAGE> 36
ENTERPRISE FEDERAL BANCORP, INC.
DESCRIPTION OF BUSINESS
Enterprise was incorporated in the State of Ohio in April, 1994 in
connection with the conversion of Enterprise Federal Savings and Loan
Association from a mutual savings and loan association to a stock savings bank
to be known as Enterprise Federal Savings Bank. Enterprise sold 2,268,596 shares
of common stock in an offering to certain depositors, borrowers and members of
the general public. The offering was consummated on October 14, 1994 and, as a
result, Enterprise became a unitary savings and loan holding company.
Enterprise completed two acquisitions and one multi-branch purchase in
1998. On February 25, 1998, Enterprise completed its acquisition of North
Cincinnati Savings Bank, a state-chartered savings bank. On October 26, 1998,
Enterprise completed its acquisition of three branch offices of Cornerstone
Bank, a subsidiary of Western Ohio Financial Corp. On November 20, 2998,
Enterprise completed its acquisition of Security Savings Holding Company, Inc.,
a unitary thrift holding company.
Enterprise Federal Savings Bank is a federally-chartered stock savings bank
conducting business from its executive offices located in West Chester, Ohio,
and six full service offices located in Hamilton, Butler and Warren Counties,
Ohio. Enterprise Federal Savings Bank is a community-oriented savings bank which
has traditionally offered a wide variety of savings products to its retail
customers while concentrating its lending activities on real estate loans
secured by one-to-four family residential properties located primarily in
Hamilton, Butler and Warren Counties. Such loans amounted to $177.6 million or
64.5% of the total loan portfolio at September 30, 1998. To a significantly
lesser extent, Enterprise Federal Savings Bank focuses its lending activities on
commercial real estate loans, residential construction loans and multi-family
real estate loans. Enterprise Federal Savings Bank also invests in securities
issued by the United States government agencies or government-sponsored
enterprises.
ADDITIONAL INFORMATION
For more detailed information about Enterprise, reference is made to the
Enterprise Annual Report on Form 10-K for the year ended September 30, 1998,
which is incorporated herein by reference and which accompanies this document.
See "Where You Can Find More Information."
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<PAGE> 37
SELECTED HISTORICAL FINANCIAL DATA OF FIFTH THIRD
The following table sets forth certain historical financial data concerning
Fifth Third for the five years ended December 31, 1998. Financial data for all
periods has been restated to reflect the second quarter 1998 mergers with CitFed
Bancorp, Inc. and State Savings Company. Both mergers were accounted for as
poolings-of-interest.
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
------------------------------------------------------------------------
1998(2) 1997 1996(1) 1995 1994
---------- ---------- ---------- ---------- ----------
(IN THOUSANDS EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C> <C>
SUMMARY OF OPERATIONS:
Interest income.................................... $2,018,677 $1,919,083 $1,772,410 $1,518,713 $1,195,401
Interest expense................................... 1,015,853 1,006,833 931,377 825,497 558,091
---------- ---------- ---------- ---------- ----------
Net interest income................................ 1,002,824 912,250 841,033 693,216 637,310
Provision for credit losses........................ 109,171 90,095 68,382 45,934 41,183
---------- ---------- ---------- ---------- ----------
Net interest income after provision for credit
losses........................................... 893,653 822,155 772,651 647,282 596,127
Other operating income............................. 636,194 501,769 418,907 345,391 284,614
Operating expenses................................. 803,577 630,508 621,654 499,564 465,723
---------- ---------- ---------- ---------- ----------
Income before income taxes......................... 726,270 693,416 569,904 493,109 415,018
Applicable income taxes............................ 250,142 232,558 187,560 162,662 139,393
---------- ---------- ---------- ---------- ----------
Net income......................................... $ 476,128 $ 460,858 $ 382,344 $ 330,447 $ 275,625
========== ========== ========== ========== ==========
COMMON SHARE DATA:
Earnings per share................................. $ 1.80 $ 1.76 $ 1.45 $ 1.31 $ 1.12
Diluted earnings per share......................... 1.76 1.73 1.42 1.27 1.08
Cash dividends declared per share.................. .71 .56(8/9) .48(8/9) .42(2/3) .35(5/9)
Book value at period end........................... 11.91 10.52 9.56 8.23 6.97
Average shares outstanding (000's)................. 265,338 262,338 263,523 251.863 246,722
Average diluted shares outstanding (000's)......... 270,674 266,681 269,444 260,867 255,581
</TABLE>
- ---------------
(1) Operating expenses for 1996 include the special Savings Association
Insurance Fund assessment of $37.9 million pretax ($24.6 million after tax
or $.09 per share). For comparability, excluding the impact of this
assessment, net income, earnings per share and diluted earnings per share
would have been $407.0 million, $1.54 and $1.51, respectively.
(2) Provision for credit losses and operating expenses for 1998 include $16.7
million and $89.7 million of merger-related charges (total $106.4 million or
$.28 per share). For comparability, excluding the impact of these
merger-related charges, net income, earnings per share and diluted earnings
per share would have been $551.7 million, $2.08 and $2.04, respectively.
31
<PAGE> 38
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
--------------------------------------------------------------
1998(2) 1997 1996(1) 1995 1994
---------- ---------- ---------- ---------- ----------
(IN THOUSANDS EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C> <C>
FINANCIAL CONDITION AT PERIOD END:
Securities...................................... $8,420,638 $8,224,475 $7,826,797 $5,683,298 $4,925,105
Loans and leases................................ 17,779,023 17,312,943 16,034,523 14,813,197 12,992,774
Assets.......................................... 28,921,782 27,710,673 26,076,597 22,110,700 19,399,912
Deposits........................................ 18,780,355 19,019,896 18,161,327 16,090,989 13,931,299
Short-term borrowings........................... 3,693,927 3,650,931 3,581,173 2,064,095 2,703,054
Long-term debt and convertible subordinated
notes......................................... 2,288,151 1,508,683 1,199,101 1,364,438 665,791
Shareholders' equity............................ 3,178,522 2,762,836 2,561,335 2,102,738 1,727,115
RATIOS:
PROFITABILITY RATIOS:
Return on average assets........................ 1.93% 1.74% 1.64% 1.58% 1.54%
Return on average shareholders' equity.......... 18.7% 18.4% 17.4% 17.0% 16.9%
Net interest margin............................. 3.94% 3.84% 3.78% 3.67% 3.91%
Overhead ratio(3)............................... 42.3% 43.3% 45.0% 46.6% 49.2%
Other operating income to total income(4)....... 38.4% 35.2% 32.9% 32.9% 31.3%
Dividend payout................................. 40.3% 33.6% 34.8% 33.8% 32.3%
CAPITAL RATIOS:
Average shareholders' equity to average
assets........................................ 10.33% 9.48% 9.46% 9.31% 9.12%
Tier 1 risk-adjusted capital.................... 12.09% 11.19% 11.73% 11.43% 11.58%
Total risk-adjusted capital..................... 14.22% 13.54% 14.46% 14.69% 13.70%
Tier 1 leverage................................. 10.39% 9.50% 9.17% 9.46% 9.51%
RATIO OF EARNINGS TO FIXED CHARGES:(5)
Including deposit interest...................... 1.71x 1.68x 1.61x 1.59x 1.74x
Excluding deposit interest...................... 3.17x 3.37x 3.39x 3.22x 4.04x
CREDIT QUALITY RATIOS:
Reserve for credit losses to nonperforming
assets........................................ 517.04% 318.95% 279.94% 248.70% 345.11%
Reserve for credit losses to loans and leases
outstanding................................... 1.50% 1.45% 1.46% 1.51% 1.55%
Net charge-offs to average loans and leases
outstanding................................... .55% .45% .41% .23% .14%
Nonperforming assets to loans, leases and other
real estate owned............................. .29% .45% .52% .61% .45%
</TABLE>
- ---------------
(1) Operating expenses for 1996 exclude the impact of the special Savings
Association Insurance Fund assessment of $37.9 million pretax ($24.6 million
after tax or $.09 per share). Including the impact of this assessment,
return on average assets, return on average equity and the overhead ratio
were 1.55%, 16.3% and 47.9%, respectively.
(2) Provision for credit losses and operating expenses for 1998 exclude $16.7
million and $89.7 million of merger-related charges (total $106.4 million or
$.28 per share). Including the impact of these merger-related charges,
return on average assets, return on average equity and the overhead ratio
were 1.67%, 16.2% and 47.6%, respectively.
(3) Operating expenses divided by the sum of taxable-equivalent net interest
income and other operating income.
(4) Other operating income excluding securities gains and losses as a percent of
net interest income and other operating income excluding securities gains
and losses.
(5) Earnings represent income before income taxes plus fixed charges. Fixed
charges include interest expense and the proportion deemed representative of
the interest factor of rental expense.
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<PAGE> 39
SELECTED HISTORICAL FINANCIAL DATA OF ENTERPRISE
The following table sets forth certain historical financial data concerning
Enterprise. This information is based on information contained in Enterprise
Federal Bancorp, Inc.'s 1998 Annual Report on Form 10-K for the fiscal year
ended on September 30, 1998, and its Quarterly Report on Form 10-Q for the
three-month period ended December 31, 1998, both of which are enclosed with this
document and are incorporated by reference in this document and should be read
in conjunction therewith.
<TABLE>
<CAPTION>
THREE MONTHS ENDED
DECEMBER 31, YEARS ENDED SEPTEMBER 30,
----------------------- ----------------------------------------------------------
1998 1997 1998 1997 1996 1995 1994
---------- ---------- ---------- ---------- ---------- ---------- ------
(IN THOUSANDS EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C> <C> <C> <C>
SUMMARY OF OPERATIONS:
Net interest income......... $ 2,378 $ 1,973 $ 8,463 $ 7,130 $ 6,268 $ 5,719 $4,259
Provision for credit
losses.................... 45 45 180 165 90 -- 15
---------- ---------- ---------- ---------- ---------- ---------- ------
Net interest income after
provision for credit
losses.................... 2,333 1,928 8,283 6,965 6,178 5,719 4,244
Other operating income...... 80 68 543 726 994 464 76
Operating expenses(1)....... 1,567 1,209 5,082 4,066 4,973 3,410 2,356
---------- ---------- ---------- ---------- ---------- ---------- ------
Income before income
taxes..................... 846 787 3,744 3,625 2,199 2,773 1,964
Applicable income taxes..... 298 271 1,338 1,256 758 936 682
---------- ---------- ---------- ---------- ---------- ---------- ------
Net income.................. $ 548 $ 516 $ 2,406 $ 2,369 $ 1,441 $ 1,837 $1,282
========== ========== ========== ========== ========== ========== ======
COMMON SHARE DATA:(2)
Basic earnings per share.... $ .25 $ .27 $ 1.19 $ 1.23 $ .73 $ .90 $ N/A
Diluted earnings per
share..................... .23 .25 1.10 1.17 .70 .88 N/A
Cash dividends declared per
share..................... .25 .25 1.00 1.75 3.00 -- N/A
Book value at period end.... 17.52 16.31 16.94 15.82 15.97 17.66 N/A
Average shares
outstanding............... 2,181,958 1,904,663 2,024,637 1,920,482 1,984,616 2,046,991 N/A
Average diluted shares
outstanding............... 2,363,446 2,035,316 2,180,170 2,026,254 2,067,765 2,093,514 N/A
</TABLE>
- ---------------
(1) Operating expenses for the fiscal year ended September 30, 1996 include the
impact of the special Savings Association Insurance Fund assessment of
$770,000 pretax ($508,000 after tax or $.25 per diluted share).
33
<PAGE> 40
<TABLE>
<CAPTION>
THREE MONTHS ENDED
DECEMBER 31, YEARS ENDED SEPTEMBER 30,
----------------------- --------------------------------------------------------
1998 1997 1998 1997 1996 1995 1994
---------- ---------- ---------- -------- -------- -------- ----------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C>
FINANCIAL CONDITION AT PERIOD
END:
Securities................... $ 197,387 $ 81,948 $ 130,072 $ 67,655 $ 68,482 $ 73,567 $ 27,691
Loans and leases............. 298,556 195,372 250,922 191,096 149,050 110,830 100,288
Assets....................... 544,052 301,261 396,518 274,888 235,191 197,938 167,294
Deposits..................... 343,160 147,026 205,829 146,297 139,447 127,687 153,709
Short-term borrowings........ -- 25,000 -- 25,000 10,000 10,000 --
Long-term debt and
convertible subordinated
notes...................... 159,384 95,000 150,000 70,000 50,000 20,000 --
Shareholders' equity......... 38,745 32,387 37,460 31,424 33,056 38,474 12,458
RATIOS:
PROFITABILITY RATIOS:
Return on average
assets(1).................. .47% .72% .67% .93% .91% 1.07% .93%
Return on average
shareholders'
equity(1)(2)............... 5.75% 6.47% 6.79% 7.35% 5.45% 4.82% 10.85%
Net interest margin.......... 2.05% 2.32% 2.41% 2.84% 2.98% 3.38% 3.16%
Overhead ratio(1)(2)......... 63.75% 59.91% 56.43% 51.76% 57.88% 55.15% 54.54%
Other operating income to
total income(3)............ 3.36% 2.28% 2.39% 1.78% 1.71% 1.62% 1.76%
CAPITAL RATIOS:
Average shareholders' equity
to average assets.......... 8.10% 11.07% 9.92% 12.64% 16.61% 22.27% 8.59%
Tier 1 risk-adjusted
capital.................... 12.73% 17.76% 11.76% 18.67% 21.97% 30.66% 14.90%
Total risk-adjusted
capital.................... 13.24% 18.13% 12.11% 19.04% 22.38% 31.01% 15.42%
Tier 1 leverage.............. 5.94% 9.97% 6.78% 10.47% 11.74% 14.31% 7.38%
RATIO OF EARNINGS TO FIXED
CHARGES:(4)
Including deposit interest... 113.77% 122.67% 121.49% 130.41% 123.41% 142.16% 136.40%
Excluding deposit interest... 137.20% 149.56% 147.22% 178.46% 186.10% 474.22% 12,375.00%
CREDIT QUALITY RATIOS:
Reserve for credit losses to
nonperforming assets....... 1,303.63% 2,000.00% 2,032.69% 297.93% 201.97% 659.18% 304.72%
Reserve for credit losses to
loans and leases
outstanding................ .42% .32% .32% .30% .28% .29% .32%
Net charge-offs to average
loans and leases
outstanding................ .00% .00% .00% .00% .00% .00% .00%
Nonperforming assets to
loans, leases and other
real estate owned.......... .02% .02% .02% .10% .14% .03% .19%
</TABLE>
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(1) Operating expenses for 1996 exclude the impact of the special Savings
Association Insurance Fund assessment of $770,000 pretax ($508,000 after tax
or $.25 per diluted share). Including the impact of this assessment, return
on average assets, return on average equity and the overhead ratio was .67%,
4.03% and 68.48%, respectively.
(2) Operating expenses divided by the sum of taxable equivalent net interest
income and other operating income.
(3) Other operating income excluding securities gains and losses as a percent of
net interest income and other operating income excluding securities gains
and losses.
(4) Earnings represent income before income taxes plus fixed charges. Fixed
charges include interest expense and the proportion deemed representative of
the interest factor of rental expense.
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DESCRIPTION OF CAPITAL STOCK AND COMPARATIVE RIGHTS OF SHAREHOLDERS
Fifth Third and Enterprise are each corporations organized under the laws
of the State of Ohio.
Fifth Third is authorized to issue 500,000,000 shares of Fifth Third common
stock, no par value, and 500,000 shares of preferred stock, no par value. As of
February 1, 1999, Fifth Third had outstanding 267,147,048 shares of Fifth Third
common stock and no shares of Fifth Third preferred stock. Pursuant to Article
Fourth of Fifth Third's articles of incorporation, as amended, the board of
directors of Fifth Third may, without further action of the shareholders, (1)
divide into one or more new series the authorized shares of Fifth Third
preferred stock which have not previously been designated, (2) fix the number of
shares constituting any such new series, and (3) fix the dividend rates, payment
dates, whether dividend rights shall be cumulative or non-cumulative, conversion
rights, redemption rights (including sinking fund provisions) and liquidation
preferences. Except as otherwise provided by law, holders of any series of Fifth
Third preferred stock shall not be entitled to vote on any matter.
Enterprise is authorized to issue 4,000,000 shares of Enterprise common
stock, $0.01 per value per share. As of March 16, 1999, Enterprise had
outstanding 2,389,760 shares of Enterprise common stock.
Set forth below is a description of Fifth Third common stock and Enterprise
common stock. This description and analysis are brief summaries of relevant
provisions of the articles of incorporation and code of regulations of Fifth
Third and of the articles of incorporation and code of regulations of Enterprise
and are qualified in their entirety by reference to such documents.
VOTING RIGHTS
Holders of both Fifth Third common stock and Enterprise common stock are
entitled to one vote per share on all matters submitted to a vote of
shareholders.
The code of regulations of Fifth Third provides for the division of its
board of directors into two classes of approximately equal size. Directors of
Fifth Third's board of directors are elected for three-year terms, and the terms
of office of approximately one-third of the members of the classified board of
directors expire each year. This classification of the board of Fifth Third may
make it more difficult for a shareholder to acquire immediate control of Fifth
Third and remove management by means of a hostile takeover. Since the terms of
approximately one-third of the incumbent directors expire each year, at least
two annual elections are necessary for the shareholders to replace a majority of
directors, whereas a majority of the directors of a non-classified board of
directors may be replaced in one annual meeting.
The Enterprise board is also classified. The Enterprise board is divided
into two classes, each containing three directors; and the election of each
class of directors constitutes a separate election. Directors serve for terms of
two years and until their respective successors are duly elected and qualified,
or until their earlier resignation, removal from office or death. As a result of
the classification of the Enterprise board, a minimum of two annual meetings of
shareholders would be necessary for a majority of the members of the Enterprise
board to stand for election.
Fifth Third's articles of incorporation contain another potential
anti-takeover device. As stated above, Fifth Third is authorized to issue
500,000 shares of Fifth Third preferred stock, and its board of directors may
designate various characteristics and rights of such stock, including conversion
rights. Accordingly, as an anti-takeover measure, Fifth Third's board of
directors may authorize the conversion of shares of Fifth Third preferred stock
into any number of shares of Fifth Third common stock and thus dilute the
outstanding shares of Fifth Third common stock.
The holders of Fifth Third common stock have the right to vote cumulatively
in the election of directors. Under applicable Ohio law, unless a corporation's
articles of incorporation are amended to provide that no shareholder of the
corporation may cumulate his or her voting power, each shareholder has the right
to vote cumulatively in the election of directors of such corporation if (1)
written notice is given by any shareholder of such corporation to the president,
a vice president or the secretary of such corporation, not less than forty-
eight hours before the time fixed for holding the meeting at which directors are
to be elected, indicating that
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such shareholder desires that voting for the election of directors be
cumulative, and (2) announcement of the giving of such notice is made upon the
convening of the meeting by the chairman or the secretary or by or on behalf of
the shareholder giving such notice. In such event, each shareholder will be
entitled to cumulate such voting power as he or she possesses and to give one
nominee as many votes as the number of directors to be elected multiplied by the
number of his or her shares, or to distribute such votes on the same principle
among two or more candidates, as each shareholder sees fit. The availability of
cumulative voting rights enhances the ability of minority shareholders to obtain
representation on the board of directors.
Enterprise shareholders do not have a right to vote cumulatively in the
election of directors.
DIVIDENDS
Holders of Fifth Third common stock and Enterprise common stock are each
entitled to dividends as and when declared by the respective boards of directors
of each institution out of funds legally available for the payment of dividends.
Fifth Third and Enterprise have, in the past, declared and paid dividends on a
quarterly basis, and intend to continue to do so in the immediate future in such
amounts as their respective boards of directors shall determine.
Most of the revenues of Fifth Third and Enterprise available for payment of
dividends derive from amounts paid to each such corporation by its respective
subsidiaries. Under applicable banking law, the total of all dividends declared
in any calendar year by a national bank or a state-chartered bank may not,
without the approval of the Comptroller of the Currency, the Federal Reserve
Board, or the FDIC, as the case may be, exceed the aggregate of such bank's net
profits (as defined) and retained net profits for the preceding two years. Under
the law applicable to federally chartered savings associations, the amount of
dividends which a savings association may make without the approval of the
Office of Thrift Supervision depends upon the amount of capital possessed by
such savings association. Savings associations which, like Enterprise Federal
Savings Bank, have capital immediately prior to, and on a pro forma basis after
giving effect to, a proposed dividend that is equal to or greater than the
amount of their fully phased-in capital requirements, are generally authorized
to pay dividends during a calendar year up to the greater of 100% of their net
income during the calendar year plus the amount that would reduce by one-half
their surplus capital or 75% of net income during the most recent four quarters
(minus dividends previously paid over that period).
The affiliates of Fifth Third include both state and nationally chartered
banks. Under the applicable regulatory limitations, during the year 1998, the
affiliates of Fifth Third could declare aggregate dividends limited to their
1998 eligible net profits, as defined, and their retained 1997 and 1996 net
income, without the approval of their respective regulators. The Comptroller of
the Currency, banking authorities of the States of Ohio, Indiana, Kentucky and
Arizona, the principal regulators of such affiliates, have the statutory
authority to prohibit a depository institution under their supervision from
engaging in what, in their opinion, constitutes an unsafe or unsound practice in
conducting its banking or savings association business. The payment of dividends
could, depending upon the financial condition of affiliates, be deemed to
constitute such an unsafe or unsound practice. Neither Enterprise nor any
affiliate of Fifth Third has ever been prohibited from declaring dividends or
restricted in paying any dividends declared.
If, in the opinion of the applicable regulatory authority, a depository
institution under its jurisdiction is engaged in or is about to engage in an
unsafe or unsound practice (which, depending on the financial condition of the
depository institution, could include the payment of dividends), such authority
may require, after notice and hearing, that such bank cease and desist from the
practice. The Federal Reserve Board has similar authority with respect to bank
holding companies. In addition, the Federal Reserve Board, the Comptroller of
the Currency and the FDIC have issued policy statements which provide that
insured banks and bank holding companies should generally only pay dividends out
of current operating earnings. Finally, the regulatory authorities have
established guidelines with respect to the maintenance of appropriate levels of
capital by a bank, bank holding company, savings association or savings and loan
holding company under their jurisdiction. Compliance with the standards set
forth in such guidelines could limit the amount of dividends which Fifth Third
and Enterprise, and their respective affiliates, may pay.
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PREEMPTIVE RIGHTS
Neither shareholders of Fifth Third nor shareholders of Enterprise have
preemptive rights.
RIGHTS UPON LIQUIDATION
In the event of any liquidation, dissolution or winding up of Enterprise,
the holders of Enterprise common stock would be entitled to receive, after
payment or provision for payment of all debts and liabilities of Enterprise
(including the payment of all fees, taxes and other expenses incidental
thereto), the remaining assets of Enterprise available for distribution. With
respect to Fifth Third, Fifth Third's shareholders have identical rights on
liquidation, dissolution or winding up, subject to identical considerations in
the event of any issuance of Fifth Third preferred stock.
INDEMNIFICATION AND PERSONAL LIABILITY OF DIRECTORS AND OFFICERS
Fifth Third's code of regulations provides for the indemnification of each
director and officer of the corporation, to the fullest extent permitted by Ohio
law, against all expenses and liabilities reasonably incurred by or imposed on
him or her in connection with any proceeding or threatened proceeding in which
he or she may become involved by reason of his or her being or having been a
director or officer.
Article XII of the Enterprise articles of incorporation provides that a
director shall not be found to have violated his or her duties to Enterprise
unless it is shown by clear and convincing evidence that the director has not
acted in good faith, in a manner he or she reasonably believes to be in or not
opposed to the best interests of Enterprise, or with the care that an ordinarily
prudent person in a like position would use under similar circumstances, in any
action brought against a director. Article XIII further provides that a
director, in determining what he or she believes to be in the best interests of
Enterprise, shall consider Enterprise's shareholders and in his or her
discretion, may consider the following: (a) the interests of Enterprise's
employees, suppliers, creditors, and customers; (b) the economy of the state and
nation; (c) community and societal considerations; and (d) the long-term as well
as the short-term interests of Enterprise and its shareholders, including the
possibility that these interests may be best served by the continued
independence of Enterprise.
Article VII of the Enterprise articles of incorporation also provides for
the indemnification of each director and officer of Enterprise to the same
extent as that provided by Section 1701.13(E) of the Ohio Revised Code.
Fifth Third and Enterprise do not have any additional indemnification
agreements with their directors or executive officers.
If the merger is consummated, Fifth Third will assume all such obligations
of Enterprise for the indemnification of its officers and directors.
SHAREHOLDERS' MEETINGS; QUORUM
Special meetings of Fifth Third's shareholders may be called at any time by
the board of directors or by the shareholders of Fifth Third upon the written
application of the holders of at least 25% of all Fifth Third capital stock
entitled to vote on the matters to be considered at the meeting. Such
applications must set forth the purpose or purposes of the meeting. Special
meetings of Enterprise's shareholders may be called at any time by the chairman
of the board, the president, the directors by action or in a meeting, a majority
of the directors acting without a meeting or upon the written request of the
holders of 50% of all shares outstanding and entitled to vote at the meeting.
SUBSCRIPTION, CONVERSION, REDEMPTION RIGHTS; STOCK NONASSESSABLE
Neither Fifth Third common stock nor Enterprise common stock has
subscription or conversion rights, and there are no mandatory redemption
provisions applicable thereto. Shares of Fifth Third common stock issued to
shareholders of Enterprise pursuant to the affiliation agreement will be validly
issued, fully paid and
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non-assessable, and will not, upon such issuance, be subject to preemptive
rights of any shareholder of Fifth Third.
CHANGE OF CONTROL PROVISIONS
The articles of incorporation and code of regulations of each of Fifth
Third and Enterprise contain various provisions which could make more difficult
a change in control of each corporation or discourage a tender offer or other
plan to restructure each corporation.
The ability of Fifth Third to issue shares of Fifth Third common stock may
have the effect of delaying, deferring or preventing a change in control of
Fifth Third.
Articles XIV of the Enterprise articles provides that for a period of five
years from the effective date of the completion of the conversion of Enterprise
Federal Savings Bank from the mutual to stock form, October 14, 1994, no person
may directly or indirectly acquire the beneficial ownership of more than 10% of
any class of equity security of Enterprise unless such offer or acquisition is
approved by two-thirds of the Continuing Directors, as defined. This provision
does not apply to (1) any underwriter or member of an underwriting or selling
group involving a public sale or resale of securities of Enterprise or a
subsidiary of Enterprise, (2) any proxy granted to one or more of Enterprise's
"Continuing Directors," as defined, by a shareholder of Enterprise, or (3) any
employee benefit plans of Enterprise of a subsidiary thereof. In addition, for a
period of five years following October 14, 1994, each share beneficially owned
in violation of the foregoing percentage limitation, as determined by
Enterprise's board, shall not be entitled to vote in connection with any matter
submitted to shareholders for a vote. Additionally, Article XIV provides for
further restrictions on voting rights of shares owned in excess of 10% of any
class of equity security of Enterprise beyond five years after October 14, 1994,
any person acquires the beneficial ownership of more than 10% of any class of
equity security of Enterprise without the prior approval by two-thirds of the
Continuing Directors, then, with respect to each vote in excess of 10%, the
record holders of voting stock of Enterprise beneficially owned by such person
shall be entitled to cast only one-hundredth of one vote with respect to each
vote in excess of 10% of the voting power of the outstanding shares of voting
stock of Enterprise with such record holders would otherwise be entitled to cast
without giving effect to the provision, and the aggregate voting power of such
record holders shall be allocated proportionately among such record holder.
Article XIV would not affect the ability of any holder of less than 10% of
Enterprise's common stock to merely solicit revocable proxies and to vote the
shares represented by such proxies.
Article XV of Enterprise's articles requires the approval of the holders of
at least 80% of Enterprise's outstanding shares of voting stock, and a majority
of such shares not including shares deemed beneficially owned by a "Related
Person," as defined therein, to approve certain "Business Combinations," as
defined therein. Article XV requires approval of the shareholders in accordance
with the increased voting requirements in connection with any such transactions
except in cases where the proposed transaction has been approved in advance by
at least two-thirds of Enterprise's Continuing Directors (generally, those
members of Enterprise's Board of Directors who are not affiliated with the
Related Person and were directors before the Related Person became a Related
Person). The provisions of Article XV apply to any "Business Combination" which
is defined to include:
- any merger or consolidation of Enterprise with or into a Related Person;
- any sale, lease, exchange, mortgage, transfer or other disposition of all
or a substantial part of the assets of Enterprise or of a subsidiary of a
Related Person (the term "substantial part" is defined to include more
than 25% of Enterprise's total assets);
- any merger or consolidation of a Related Person with or into Enterprise
or a subsidiary;
- any sale, lease, exchange, mortgage, transfer or other disposition of all
or any substantial part of the assets of a Related Person to Enterprise
or a subsidiary;
- the issuance of any securities of Enterprise or a subsidiary to a Related
Person;
- the acquisition by Enterprise or a subsidiary of any securities of a
Related Person;
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- any reclassification of Enterprise common shares, or any recapitalization
involving the Enterprise common shares; and
- any agreement, contract or other arrangement providing for any of the
foregoing transactions.
EFFECT OF GOVERNMENTAL POLICIES
The earnings of both Enterprise and Fifth Third and their subsidiaries are
affected not only by domestic and foreign economic conditions, but also by the
monetary and fiscal policies of the United States and its agencies, particularly
the Federal Reserve Board, foreign governments and other official agencies. The
Federal Reserve Board can and does implement national monetary policy, such as
the curbing of inflation and combating of recession, by its open market
operations in United States Government securities, control of the discount rate
applicable to borrowings and the establishment of reserve requirements against
deposits and certain liabilities of depository institutions. The actions of the
Federal Reserve Board influence the growth of bank loans, investments and
deposits and affect interest rates charged on loans or paid on deposits. The
nature and impact of future changes in monetary and fiscal policies are not
predictable.
From time to time various proposals are made in the United States Congress
and in state legislatures and before various regulatory authorities that would
alter the powers or the existing regulatory framework for banks, bank holding
companies, savings banks and other financial institutions. It is impossible to
predict whether any of the proposals will be adopted and the impact, if any, of
such adoption on the business of Enterprise or Fifth Third and their
subsidiaries.
REGULATION OF FINANCIAL INSTITUTIONS
The following is a discussion of some of the regulatory requirements
applicable to bank holding companies, banks, savings and loan holding companies
and savings banks. To the extent that the following information describes
statutory and regulatory provisions, it is qualified in its entirety by
reference to the particular statutory and regulatory provisions. In addition to
being governed by federal and state laws specifically governing bank holding
companies, banks, savings and loan holding companies and savings banks, Fifth
Third, Enterprise and each of their respective subsidiaries are also governed by
the corporate law of their state of incorporation to the extent such law does
not conflict with the laws specifically governing bank holding companies, banks,
savings and loan holding companies and savings banks.
HOLDING COMPANY REGULATION
BANK HOLDING COMPANIES IN GENERAL. As a bank holding company, Fifth Third
is registered with and subject to regulation by the Federal Reserve Board. A
bank holding company is required to file with the Federal Reserve Board an
annual report and such additional information as the Federal Reserve Board may
require pursuant to the Bank Holding Company Act.
The Federal Reserve Board also may make examinations of a holding company
and each of its subsidiaries. The Bank Holding Company Act requires each bank
holding company to obtain the prior approval of the Federal Reserve Board before
it may acquire substantially all of the assets of any bank, or before it may
acquire ownership or control of any voting shares of any bank if, after such
acquisition, it would own or control directly or indirectly, more than 5% of the
voting shares of such bank.
The Bank Holding Company Act also restricts the types of businesses and
operations in which a bank holding company and its subsidiaries (other than bank
subsidiaries) may engage. Generally, permissible activities are limited to
banking and activities found by the Federal Reserve Board to be so closely
related to banking as to be a proper incident thereto.
SAVINGS AND LOAN HOLDING COMPANIES IN GENERAL. Enterprise is a savings and
loan holding company subject to the regulatory oversight, examination and
enforcement authority of the Office of Thrift Supervision. Enterprise is
required to register and file periodic reports with the Office of Thrift
Supervision. If the Office of Thrift Supervision determines that the
continuation of a particular activity by a savings and loan holding
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<PAGE> 46
company constitutes a serious threat to the financial condition of its
subsidiary institutions, the Office of Thrift Supervision may impose
restrictions on the holding company. Such restrictions may include limiting the
payment of dividends, transactions with affiliates or any other activities
deemed to pose a serious threat to the subsidiary institutions.
Generally, no savings and loan holding company may (1) acquire or retain
control of a savings association or another savings and loan holding company or
control the assets thereof or (2) acquire or retain more than 5% of the voting
shares of a savings association or holding company thereof, which is not a
subsidiary, without the prior written approval of the Director of the Office of
Thrift Supervision. Except with the prior approval of the Director of the Office
of Thrift Supervision, no director or officer of a savings and loan holding
company or person owning or controlling by proxy or otherwise more than 25% of
such company's stock may also acquire control of any savings institution, other
than a subsidiary institution, or any other savings and loan holding company.
The Director of the Office of Thrift Supervision may approve acquisitions
resulting in the formation of a multiple savings and loan holding company which
controls savings associations in more than one state, if (1) the multiple
savings and loan holding company involved controls a savings association which
operated a home or branch office in the state of the association to be acquired
as of March 5, 1987, (2) if the laws of the state in which the institution to be
acquired is located specifically permit institutions to be acquired by
state-chartered institutions or savings and loan holding companies located in
the state where the acquiring entity is located (or by a holding company that
controls such state-chartered savings institutions), or (3) in the case of
certain emergency thrift acquisitions.
Federal law provides that an insured institution shall be liable for any
loss incurred by the FDIC in connection with the default or potential default
of, or federal assistance provided to, an insured institution which is
controlled by the same holding company. Such loss would be apportioned among all
of the insured institutions controlled by the holding company.
Congress is considering legislation to eliminate the federal savings and
loan charter and the separate federal regulation of savings and loan
associations. Pursuant to such legislation, Congress may eliminate the Office of
Thrift Supervision, as a result of which Enterprise Federal Savings Bank may be
regulated under federal law as a bank or be required to change its charter. Such
change in regulation or charter would likely change the range of activities in
which Enterprise may engage and would probably subject Enterprise Federal
Savings Bank to more regulation by the FDIC.
In addition, Enterprise might become subject to different holding company
regulations which may limit the activities in which Enterprise may engage and
may subject Enterprise to other additional regulatory requirements, including
separate capital requirements. Enterprise cannot now predict when or whether
Congress may actually pass legislation regarding the regulatory requirements or
charter of Enterprise or Enterprise Federal Savings Bank. Although such
legislation may change the activities in which Enterprise or Enterprise Federal
Savings Bank are authorized to engage, it is not anticipated that the current
activities of Enterprise or Enterprise Federal Savings Bank will be materially
affected by those activity limits.
ACQUISITIONS OF SAVINGS ASSOCIATIONS BY HOLDING COMPANIES. Section 4 of
the Bank Holding Company Act prohibits bank holding companies from acquiring or
retaining shares of any company that is not a bank or is not engaging in any
activity other than managing and controlling banks, except under certain
circumstances. The primary exception permits bank holding companies to conduct
activities and acquire companies solely in activities the Federal Reserve Board
has determined in to be closely related to banking and a proper incident
thereto. Section 346 of the Reigle Community Development and Regulatory
Improvement Act of 1994 ("Section 346") amends amended Section 4 of the Bank
Holding Company Act to establish a new notice procedure for obtaining Federal
Reserve Board approval under Section 4(a)(2) and 4(c)(8) of the Bank Holding
Company Act. Under Section 346, a proposal requiring Federal Reserve Board
approval under Section 4(a)(2) or 4(c)(8) may be consummated 60 days after
providing the Federal Reserve Board with complete written notice of the
proposal, unless the notice period is extended as provided in the statute.
Section 346 also permits proposals to be consummated at any time during this
notice period if approved by the Federal Reserve Board during this period. This
interim rule replaced the application
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<PAGE> 47
procedures of Section 4(c)(8) of the Bank Holding Company Act with a new notice
procedure and streamlined the procedures for obtaining Federal Reserve Board
approval for nonbanking proposals in several respects. The interim rule
contemplates action by the Federal Reserve Board on nonbanking proposals
involving listed activities (including the acquisition of a thrift or thrift
assets) within 30 days after a notice containing all of the information required
by the rule has been received by the Federal Reserve Board. In approving the
activities contained in such a notice, the Federal Reserve Board is precluded
from opposing any restrictions on transactions between the bank holding company
and the acquired savings association, except as required by Section 23A or 23B
of the Federal Reserve Act or any other applicable law.
Section 18(c) of the Federal Deposit Insurance Act (12 U.S.C. 1828(c))
authorizes the Federal Reserve Board to approve the application of a bank to
effect a merger, consolidation, acquisition of assets or assumption of deposit
liabilities, and, incident thereto, to establish a branch or branches pursuant
to Section 9 of the Federal Reserve Act (12 U.S.C. 321) and Section 5(d)(3) of
the Federal Deposit Insurance Act (12 U.S.C. 1815(d)(3)) authorizes the Federal
Reserve Board to approve the application of a bank to effect a merger,
consolidation or acquisition of assets or assumption of deposit liabilities of a
savings association by a bank that is insured by the Bank Insurance Fund.
CAPITAL REQUIREMENTS
CAPITAL REQUIREMENTS FOR FIFTH THIRD. The Federal Reserve Board, the
Office of the Comptroller of the Currency and the FDIC maintain guidelines to
implement risk-based capital requirements for state member banks and bank
holding companies. The guidelines provide for a systematic analytical framework
that makes regulatory capital requirements more sensitive to differences in risk
profiles among banking organizations, takes off-balance sheet exposures into
explicit account in assessing capital adequacy and minimizes disincentives to
holding liquid, low-risk assets.
Under the guidelines, banking organizations are required to have capital
equivalent to 8% of assets, weighted by risk. Banking organizations must have at
least 4% Tier 1 capital, which consists of core capital elements including
common Shareholders' equity, retained earnings and perpetual preferred stock, to
risk weighted assets. The other half of required capital (Tier 2) can include,
among other supplementary capital elements, limited-life preferred stock and
subordinated debt and loan loss reserves up to certain limits.
Under Federal Reserve Board policy, a holding company is expected to act as
a source of financial strength to each subsidiary bank and to commit resources
to support each of its subsidiaries. This support may be required at times when,
absent such Board policy, the holding company may not find itself able to
provide it.
Fifth Third, and each of its subsidiary banks, is in compliance with both
the current leverage ratios and the final risk-based capital standards. As of
December 31, 1998, Fifth Third had a leverage ratio of 10.39%, its Tier 1
risk-based capital ratio was 12.09% and its total risk-based capital ratio was
14.22%.
CAPITAL REQUIREMENTS FOR ENTERPRISE. Enterprise Federal Savings Bank is
required by applicable law and regulations to meet certain minimum capital
requirements. The capital standards include a leverage limit, or core capital
requirement, a tangible capital requirement, and a risk-based capital
requirement.
For Enterprise Federal Savings Bank, the leverage limit requires "core
capital" of at least 3% of total assets. "Core capital" is comprised of common
stockholders' equity (including retained earnings), noncumulative perpetual
preferred stock and related surplus, minority interests in consolidated
subsidiaries, certain nonwithdrawable accounts and pledged deposits of mutual
associations.
The tangible capital requirement provides that Enterprise Federal Savings
Bank must maintain "tangible capital" of not less than 1.5% of its adjusted
total assets. "Tangible capital" is defined as core capital minus any
"intangible assets."
Pursuant to the risk-based capital requirement, Enterprise Federal Savings
Bank must maintain "risk-based capital" in an amount equal to not less than 8%
of risk-weighted assets. Risk-based capital is defined as core capital plus
certain additional items of capital.
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The Office of Thrift Supervision has adopted an interest rate risk
component to the risk-based capital requirement, though the implementation of
that component has been delayed. Pursuant to that requirement, a savings
association would have to measure the effect of an immediate 200 basis point
change in interest rates on the value of its portfolio, as determined under the
methodology established by the Office of Thrift Supervision. If the measured
interest rate risk is above the level deemed normal under the regulation, the
association will be required to deduct one-half of that excess exposure from its
total capital when determining its level of risk-based capital. Pending
implementation of the interest rate risk component, the Office of Thrift
Supervision has the authority to impose a higher individualized capital
requirement on any savings association it deems to have excess interest rate
risk. The Office of Thrift Supervision also may adjust the risk-based capital
requirement on an individual basis for any association to take into account
risks due to concentrations of credit and non-traditional activities.
The Office of Thrift Supervision and FDIC have adopted regulations
governing prompt corrective action to resolve the problems of capital deficient
and otherwise troubled savings associations and Non-member Banks. At each
successively lower defined capital category, an institution is subject to more
restrictive and numerous mandatory or discretionary regulatory actions or
limits, and the applicable agency has less flexibility in determining how to
resolve the problems of the institution. The agencies have defined these capital
levels as follows: (1) well-capitalized institutions must have total risk-based
capital of at least 10%, core or Tier 1 risk-based capital (consisting only of
items that qualify for inclusion in core or Tier 1 capital) of at least 6% and
core or Tier 1 capital of at least 5%; (2) adequately capitalized institutions
are those that meet the regulatory minimum of total risk-based capital of at
least 8%, core or Tier 1 risk-based capital (consisting only of items that
qualify for inclusion in core or Tier 1 capital) of at least 4% and core or Tier
1 capital of at least 4% (except for institutions receiving the highest
examination rating and with an acceptable level of risk, in which case the core
or Tier 1 capital level is at least 3%); (3) undercapitalized institutions are
those that do not meet regulatory limits, but that are not significantly
undercapitalized; (4) significantly undercapitalized institutions have total
risk-based capital of less than 6%, core or Tier 1 risk-based capital
(consisting only of items that qualify for inclusion in core or Tier 1 capital)
of less than 3% and core or Tier 1 capital of less than 3%; and (5) critically
undercapitalized institutions are those with core or Tier 1 capital of less than
2% of total assets. In addition, the agency generally can downgrade an
institution's capital category, notwithstanding its capital level, if, after
notice and opportunity for hearing, the institution is deemed to be engaging in
an unsafe or unsound practice, because it has not corrected deficiencies that
resulted in it receiving a less than satisfactory examination rating on matters
other than capital or it is deemed to be in an unsafe or unsound condition.
An undercapitalized institution must submit a capital restoration plan to
the applicable agency within 45 days after it becomes undercapitalized. Such
institution will be subject to increased monitoring and asset growth
restrictions and will be required to obtain prior approval for acquisitions,
branching and engaging in new lines of business. Furthermore, critically
undercapitalized institutions must be placed in conservatorship or receivership
within 90 days of reaching that capitalization level, except under limited
circumstances. The capital levels of Enterprise Federal Savings Bank at December
31, 1998, met the standards for well-capitalized institutions.
Federal law prohibits a financial institution from making a capital
distribution to anyone or paying management fees to any person having control of
the institution if, after such distribution or payment, the institution would be
undercapitalized. In addition, each company controlling an undercapitalized
institution must guarantee that the institution will comply with its capital
restoration plan until the institution has been adequately capitalized on an
average during each of the four preceding calendar quarters and must provide
adequate assurances of performance. The aggregate liability pursuant to such
guarantee is limited to the lesser of (a) an amount equal to 5% of the
institution's total assets at the time it became undercapitalized or (b) the
amount necessary to bring the institution into compliance with all capital
standards applicable to such institution at the time the institution fails to
comply with its capital restoration plan.
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REGULATION OF BANKS
The operations of the subsidiary banks of Fifth Third are subject to
requirements and restrictions under federal and state law, including
requirements to maintain reserves against deposits, restrictions on the types
and amounts of loans that may be granted and the interest that may be charged
thereon, and limitations on the types of investments that may be made and the
types of services which may be offered. Various consumer laws and regulations
also affect the operations of these banking subsidiaries.
National banks are subject to the supervision of and are regularly examined
by the Comptroller of the Currency. In addition, national banks may be members
of the Federal Reserve System and their deposits are insured by the FDIC and, as
such, may be subject to regulation and examination by each agency. State
chartered banking corporations are subject to federal and state regulation of
their business and activities, including, in the case of banks chartered in
Ohio, by the Ohio Division of Financial Institutions, in the case of banks
chartered in Kentucky, by the Kentucky Department of Financial Institutions, in
the case of banks chartered in Indiana, by the Indiana Department of Financial
Institutions, and in the case of banks chartered in Florida, the Florida
Department of Banking and Finance.
REGULATION OF SAVINGS BANKS
SUPERVISION AND EXAMINATION. The Office of Thrift Supervision is
responsible for the regulation and supervision of all savings associations,
including Enterprise Federal Savings Bank and Fifth Third's federal savings bank
subsidiary, Fifth Third Bank Southwest, F.S.B.
The Office of Thrift Supervision issues regulations governing the
operations of savings associations, regularly examines such institutions and
imposes assessments on savings associations based on their asset size to cover
the costs of this supervision and examination. It also promulgates regulations
that prescribe permissible activities for federally chartered associations,
including the types of lending that such associations may engage in and the
investments in real estate, subsidiaries and securities they may make. The
Office of Thrift Supervision also may initiate enforcement actions against
savings associations and certain persons affiliated with them for violations of
laws or regulations or for engaging in unsafe or unsound practices. If the
grounds provided by law exist, the Office of Thrift Supervision may appoint a
conservator or receiver for a savings association.
Savings associations are also subject to regulatory oversight under various
consumer protection and fair lending laws. These laws govern, among other
things, truth-in-lending disclosure, equal credit opportunity, fair credit
reporting and community reinvestment. Failure to abide by federal laws and
regulations governing community reinvestment could limit the ability of an
institution to open a new branch or engage in a merger transaction.
LIQUIDITY. The Office of Thrift Supervision's regulations require that a
savings association maintain an average daily balance of liquid assets (cash,
certain time deposits, bankers' acceptances, and specified United States
Government, state or federal agency obligations) equal to a monthly average of
not less than 4% of its net withdrawable savings deposits plus borrowings
payable in one year or less. Monetary penalties may be imposed upon associations
failing to meet liquidity requirements. The average eligible liquidity of
Enterprise Federal Savings Bank at December 31, 1998, was approximately $54.6
million, or 15.8%, and exceeded the applicable 5% liquidity requirement by
approximately $34.3 million.
QUALIFIED THRIFT LENDER TEST. Savings associations are required to meet
the QTL test. Prior to September 30, 1996, the QTL test required savings
associations to maintain a specified level of investments in assets that are
designated as qualifying thrift investments ("QTI"), which are generally related
to domestic residential real estate and manufactured housing and include credit
card, student and small business loans, and stock issued by any Federal Home
Loan Bank ("FHLB"), the FHLMC or the FNMA. Under this test 65% of an
institution's "portfolio assets" (total assets less goodwill and other
intangibles, property used to conduct business and 20% of liquid assets) must
consist of QTI on a monthly average basis in 9 out of every 12 months. Congress
created a second QTL test, effective September 30, 1996, pursuant to which a
savings association will qualify as a QTL thrift if at least 60% of the
institution's assets (on a tax basis) consist of
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specified assets (generally loans secured by residential real estate or
deposits, educational loans, cash and certain governmental obligations). The OTS
may grant exceptions to the QTL test under certain circumstances. If a savings
association fails to meet the QTL test, the association and its holding company
become subject to certain operating and regulatory restrictions. A savings
association that fails to meet the QTL test will not be eligible for new FHLB
advances. At December 31, 1998, Enterprise Federal Savings Bank met the QTL
test.
LIMITATIONS ON CAPITAL DISTRIBUTIONS. The Office of Thrift Supervision
imposes various restrictions or requirements on the ability of associations to
make capital distributions, including dividend payments. The Office of Thrift
Supervision's regulations also establish a three-tier system limiting capital
distributions according to ratings of associations based on their capital level
and supervisory condition.
Tier 1 consists of associations that, before and after the proposed
distribution, meet their fully phased-in capital requirements. Associations in
this category may make capital distributions during any calendar year equal to
the greater of 100% of net income, current year-to-date, plus 50% of the amount
by which the lesser of the association's tangible, core or risk-based capital
exceeds its fully phased-in capital requirement for such capital component, as
measured at the beginning of the calendar year, or the amount authorized for a
Tier 2 association. A Tier 1 association deemed to be in need of more than
normal supervision by the Office of Thrift Supervision may be downgraded to a
Tier 2 or Tier 3 association. Enterprise Federal Savings Bank meets the
requirements for a Tier 1 association and has not been notified of any need for
more than normal supervision.
Tier 2 consists of associations that before and after the proposed
distribution meet their current minimum, but not fully phased-in, capital
requirements. Associations in this category may make capital distributions of up
to 75% of net income over the most recent four-quarter period. Tier 3
associations do not meet current minimum capital requirements and must obtain
Office of Thrift Supervision approval of any capital distribution. Tier 2
associations that propose to make a capital distribution in excess of the noted
safe harbor level must also obtain Office of Thrift Supervision approval. Tier 2
associations proposing to make a capital distribution within the safe harbor
provisions and Tier 1 associations proposing to make any capital distribution
need only submit written notice to the Office of Thrift Supervision 30 days
prior to such distribution. The Office of Thrift Supervision may object to the
distribution during that 30-day period based on safety and soundness concerns.
As a subsidiary of Enterprise, Enterprise Federal Savings Bank is required
to give the Office of Thrift Supervision 30-days' notice prior to declaring any
dividend on its stock. The Office of Thrift Supervision may object to the
distribution during that 30-day period.
FDIC regulations provide that an insured depository institution shall make
no capital distribution if after making the distribution, the institution would
be undercapitalized.
LENDING LIMITS. The Office of Thrift Supervision regulations generally
limit the aggregate amount that Enterprise Federal Savings Bank can lend to one
borrower to an amount equal to 15% of the association's Lending Limit Capital. A
savings association may lend to one borrower an additional amount not to exceed
10% of the association's unimpaired capital and surplus, if the additional
amount is fully secured by certain forms of "readily marketable collateral."
Real estate is not considered "readily marketable collateral." Certain types of
loans are not subject to these limits. Notwithstanding the specified limits, an
association may lend to one borrower up to $500,000 for any purpose. In applying
these limits, the regulations require that loans to certain related borrowers be
aggregated. At December 31, 1998, Enterprise Federal Savings Bank was in
compliance with these lending limits.
DEPOSIT INSURANCE AND ASSESSMENTS. The FDIC is an independent federal
agency that insures the deposits, up to prescribed statutory limits, of
federally insured banks and thrifts and safeguards the safety and soundness of
the banking and thrift industries. The FDIC administers two separate insurance
funds, the Bank Insurance Fund for commercial banks and state savings banks and
the Savings Association Insurance Fund for savings associations. The FDIC has
examination authority over all insured depository institutions, including
Enterprise Federal Savings Bank, and has authority to initiate enforcement
actions against federally
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insured savings associations, if the FDIC does not believe the Office of Thrift
Supervision has taken appropriate action to safeguard safety and soundness and
the deposit insurance fund.
The FDIC is required to maintain designated levels of reserves in each
fund. The FDIC may increase assessment rates for either fund if necessary to
restore the fund's ratio of reserves to insured deposits to its target level
within a reasonable time and may decrease such rates if such target level has
been met. The FDIC has established a risk-based assessment system for both
Savings Association Insurance Fund and Bank Insurance Fund members. Under this
system, assessments vary based on the risk the institution poses to its deposit
insurance fund. The risk level is determined based on the institution's capital
level and the FDIC's level of supervisory concern about the institution.
Prior to October 1, 1996, the reserves of the Savings Association Insurance
Fund were below the level required by law, because a significant portion of the
assessments paid into the fund have been and are being used to pay the cost of
prior thrift failures, while the reserves of the Bank Insurance Fund met the
level required by law in May 1995. Because of the differing reserve levels of
the funds, deposit insurance assessments paid by healthy associations were
reduced significantly below the level paid by healthy savings associations
effective in mid-1995. Assessments paid by healthy savings associations exceeded
those paid by healthy commercial banks by approximately $.19 per 100 in deposits
in late 1995. Such excess equaled approximately $.23 per $100 in deposits
beginning in 1996.
Federal legislation, which was effective September 30, 1996, provided for
the recapitalization of the Savings Association Insurance Fund by means of a
special assessment of $.657 per $100 of Savings Association Insurance Fund
deposits held at March 31, 1995, in order to increase Savings Association
Insurance Fund reserves to the level required by law. Certain banks holding
Savings Association Insurance Fund-insured deposits were required to pay the
same special assessment on 80% of deposits at March 31, 1995. In addition, part
of the cost of prior thrift failures, which had previously been paid only by
Savings Association Insurance Fund members, will be paid by Bank Insurance Fund
members.
Enterprise Federal Savings Bank had $115.9 million in deposits at March 31,
1995, and paid a special assessment of $770,000 in September, 1995, which was
accounted for and recorded as of September 30, 1995. This assessment was
tax-deductible, but reduced earnings for the year ended September 30, 1995.
TRANSACTIONS WITH AFFILIATES AND INSIDERS. Loans to executive officers,
directors and principal shareholders and their related interests must conform to
the lending limit on loans to one borrower, and the total of such loans to
executive officers, directors, principal shareholders and their related
interests cannot exceed the association's Lending Limit Capital (or 200% of
Lending Limit Capital for qualifying institutions with less than $100 million in
deposits). Most loans to directors, executive officers and principal
shareholders must be approved in advance by a majority of the "disinterested"
members of the board of directors of the association with any "interested"
director not participating. All loans to directors, executive officers and
principal shareholders must be made on terms substantially the same as offered
in comparable transactions with the general public or as offered to all
employees in a company-wide benefit program, and loans to executive officers are
subject to additional limitations. Enterprise Federal Savings Bank was in
compliance with such restrictions at December 31, 1998.
All transactions between savings associations and their affiliates must
comply with Sections 23A and 23B of the Federal Reserve Act. An affiliate is any
company or entity which controls, is controlled by or is under common control
with the financial institution. In a holding company context, the parent holding
company of a savings association and any companies that are controlled by such
parent holding company are affiliates of the institution. Generally, Sections
23A and 23B of the Federal Reserve Act (i) limit the extent to which a financial
institution or its subsidiaries may engage in "covered transactions" with any
one affiliate to an amount equal to 10% of such institution's capital stock and
surplus for any one affiliate and 20% of such capital stock and surplus for the
aggregate of such transactions with all affiliates, and (ii) require that all
such transactions be on terms substantially the same, or at least as favorable
to the institution or the subsidiary, as those provided to a non-affiliate. The
term "covered transaction" includes the making of loans, purchase of assets,
issuance of a guarantee and similar types of transactions. In addition to limits
in Sections 23A and 23B, Enterprise Federal Savings Bank may not make any loan
or other extension of credit to an affiliate
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unless the affiliate is engaged only in activities permissible for a bank
holding company and may not purchase or invest in securities of any affiliate,
except shares of a subsidiary. Exemptions from Sections 23A or 23B of the
Federal Reserve Act may be granted only by the Federal Reserve Board. Enterprise
Federal Savings Bank was in compliance with these requirements at December 31,
1998.
FEDERAL RESERVE REQUIREMENTS. Federal Reserve Board regulations currently
require savings associations to maintain reserves of 3% of net transaction
accounts (primarily NOW accounts) up to $47.8 million (subject to an exemption
of up to $4.7 million), and of 10% of net transaction accounts in excess of
$47.8 million. At December 31, 1998, Enterprise Federal Savings Bank was in
compliance with its reserve requirements.
FEDERAL HOME LOAN BANK SYSTEM. The FHLBs provide credit to their members
in the form of advances. As members of the FHLB System, Enterprise Federal
Savings Bank is required to hold a minimum stock balance equal to the greater of
1.0% of its mortgage related assets, or 0.3% of its total assets. Enterprise is
in compliance with this requirement with an aggregate investment by Enterprise
Federal Savings Bank in FHLB stock of $9.7 million at December 31, 1998.
FHLB advances to member institutions who meet the QTL Test are generally
limited to 50% of the member's assets, less other advances. At December 31,
1998, the maximum limit on advances to Enterprise Federal Savings Bank was
approximately $271.3 million. The granting of advances is also subject to the
FHLB's collateral and credit underwriting guidelines.
Upon the origination or renewal of a loan or advance, FHLBs required to
obtain and to maintain a security interest in collateral in one or more of the
following categories: fully disbursed, whole first mortgage loans on improved
residential property or securities representing a whole interest in such loans;
securities issued, insured or guaranteed by the United States Government or an
agency thereof; deposits in any FHLB; or other real estate related collateral
(up to 30% of the member's capital) acceptable to the applicable FHLB, if such
collateral has a readily ascertainable value and the FHLB can perfect its
security interest in the collateral.
Each FHLB is required to establish standards of community investment or
service that its members must maintain for continued access to long-term
advances from the FHLBs. The standards take into account a member's performance
under the Community Reinvestment Act and its record of lending to first-time
home buyers.
LEGAL MATTERS
Certain legal matters will be passed upon for Enterprise by Elias, Matz,
Tiernan & Herrick L.L.P., Washington, D.C. Counsel employed by Fifth Third Bank
has rendered his opinion that the shares of Fifth Third common stock to be
issued to the shareholders of Enterprise in connection with the merger have been
duly authorized and, if issued pursuant to the affiliation agreement, will be
validly issued, fully paid and non-assessable under the current laws of the
State of Ohio.
EXPERTS
The consolidated financial statements incorporated in this document by
reference from Fifth Third Bancorp's Annual Report on Form 10-K for the year
ended December 31, 1998 have been audited by Deloitte & Touche LLP, independent
auditors, as stated in their report, which is incorporated herein by reference,
and have been so incorporated in reliance upon the report of such firm given
upon their authority as experts in accounting and auditing.
The consolidated financial statements of Enterprise incorporated in this
document by reference from Enterprise's Annual Report on Form 10-K for the year
ended September 30, 1998, have been audited by Grant Thornton LLP, independent
auditors, as stated in their report included therein, and have been so
incorporated in reliance upon the report of such firm given upon their authority
as experts in accounting and auditing.
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WHERE YOU CAN FIND MORE INFORMATION
Fifth Third and Enterprise file annual, quarterly and special reports,
proxy statements and other information with the SEC. You may read and copy
reports, proxy statements and other information filed by Fifth Third and
Enterprise at the SEC's public reference rooms at 450 Fifth Street, N.W.,
Washington, D.C. 20549; 7 World Trade Center, 13th Floor, New York, New York
10048; or Northwestern Atrium Center, 500 West Madison Street, Suite 1400,
Chicago, Illinois 60661-2511. Please call the SEC at 1-800-SEC-0330 for further
information about the public reference rooms. Fifth Third's and Enterprise's
reports, proxy statements and other information are also available from
commercial document retrieval services and at the SEC's website located at
http://www.sec.gov.
Fifth Third has filed a registration statement to register with the SEC the
shares of Fifth Third common stock to be issued to Enterprise shareholders in
the merger. This document is part of that registration statement and constitutes
a prospectus of Fifth Third as well as a proxy statement of Enterprise for the
special meeting.
Fifth Third common stock and Enterprise common stock are traded on the
Nasdaq National Market tier of the Nasdaq Stock Market under the symbols "FITB,"
and "EFBI," respectively. Documents filed by Fifth Third and Enterprise with the
Commission also can be inspected at the offices of the National Association of
Securities Dealers, Inc., 1735 K Street, N.W., Washington, D.C. 20006.
As allowed by SEC rules, this document does not contain all the information
that shareholders can find in the Fifth Third registration statement or the
exhibits to the Fifth Third registration statement.
The SEC allows Fifth Third and Enterprise to "incorporate by reference"
information into this document, which means that they can disclose important
information to shareholders by referring them to another document filed
separately with the SEC. The information incorporated by reference is deemed to
be part of this document, except for any information superseded by information
contained directly in the document.
This document incorporates by reference the documents set forth below:
Fifth Third SEC Filings:
- Fifth Third's Annual Report on Form 10-K for the year ended December 31,
1998;
- Pages 1 and 13 through 39 of Fifth Third's 1998 Annual Report to
Shareholders (enclosed with this document); and
- Fifth Third's Proxy Statement dated February 9, 1999.
Enterprise SEC Filings:
- Enterprise's Annual Report on Form 10-K for the year ended September 30,
1998 (enclosed with this document); and
- Enterprise's Quarterly Report on Form 10-Q for the quarter ended December
31, 1998 (enclosed with this document).
Additional documents that Fifth Third and Enterprise may file with the SEC
between the date of this Document and the date of the special meeting of
Enterprise's shareholders are also incorporated by reference. These include
periodic reports, such as Annual Reports on Form 10-K, Quarterly Reports on Form
10-Q and Current Reports on Form 8-K, as well as proxy statements.
Copies of any of the documents incorporated by reference (excluding
exhibits unless specifically incorporated therein) are available without charge
upon written or oral request from Paul L. Reynolds, Assistant Secretary, Fifth
Third Bancorp, Fifth Third Center, Cincinnati, Ohio 45263 (telephone number:
(513) 579-5300), as relates to Fifth Third, and from Thomas J. Noe, Chief
Financial Officer, Enterprise Federal Bancorp, Inc., 7810 Tylersville Square
Drive, West Chester, Ohio 45069, (telephone number:
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(513) 755-4600) as relates to Enterprise. In order to ensure timely delivery of
the documents, any request should be made by April 16, 1999.
YOU SHOULD RELY ONLY ON THE INFORMATION CONTAINED OR INCORPORATED BY
REFERENCE IN THIS DOCUMENT TO VOTE YOUR SHARES AT THE SPECIAL MEETING. NO ONE
HAS BEEN AUTHORIZED TO PROVIDE ANY INFORMATION THAT IS DIFFERENT FROM WHAT IS
CONTAINED IN THIS DOCUMENT. THIS DOCUMENT IS DATED MARCH 18, 1999. SHAREHOLDERS
SHOULD NOT ASSUME THAT THE INFORMATION CONTAINED IN THIS DOCUMENT IS ACCURATE AS
OF ANY DATE OTHER THAN THAT DATE, AND NEITHER THE MAILING OF THIS DOCUMENT TO
SHAREHOLDERS NOR THE ISSUANCE OF FIFTH THIRD COMMON STOCK IN THE MERGER WILL
CREATE ANY IMPLICATION TO THE CONTRARY.
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ANNEX A
AFFILIATION AGREEMENT
This Affiliation Agreement ("Affiliation Agreement") dated as of September
25, 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 ENTERPRISE FEDERAL BANCORP, INC., a corporation organized and existing under
the corporation laws of the State of Ohio, with its principal office located in
West Chester, Hamilton County, Ohio ("Enterprise").
WITNESSETH:
WHEREAS, Fifth Third is a registered bank holding company under the Bank
Holding Company Act of 1956, as amended, and Enterprise is a unitary savings and
loan holding company under Section 10 of the Home Owners Loan Act, as amended
("HOLA"), and Fifth Third and Enterprise desire to effect a merger under the
authority and provisions of the corporation laws of the State of Ohio pursuant
to which at the Effective Time (as herein defined in Section IX) Enterprise will
be merged into Fifth Third, with Fifth Third to be and become the surviving
corporation (the "Merger");
WHEREAS, Enterprise owns all of the outstanding stock of Enterprise Federal
Savings Bank ("Thrift Subsidiary") which, at the Effective Time, will be merged
with and into Fifth Third's wholly-owned subsidiary The Fifth Third Bank ("Fifth
Third Bank") with Fifth Third Bank to become the surviving corporation (the
"Subsidiary Merger"); and,
WHEREAS, under the terms of this Agreement each of the issued and
outstanding shares of the Common Stock, $.01 par value per share, of Enterprise
("Enterprise Common Stock") which are issued and outstanding (excluding treasury
shares and shares as to which dissenters' rights have been asserted and duly
perfected in accordance with Section 1701.85 of the Ohio General Corporate Law
("OGCL")("Dissenting Shares")) immediately prior to the Effective Time will at
the Effective Time be canceled and extinguished and in substitution therefor
such Enterprise shares will, at the Effective Time, be converted into shares of
the Common Stock, without par value, of Fifth Third ("Fifth Third Common
Stock"), all as more fully provided in this Agreement;
WHEREAS, the parties to this Agreement intend that the Merger qualify as a
"reorganization" within the meaning of Section 368(a)(1)(A) and related
provisions of the Internal Revenue Code of 1986, as amended (the "Code");
NOW, THEREFORE, in consideration of the mutual covenants herein contained,
Fifth Third and Enterprise, agree together as follows:
I. MODE OF EFFECTUATING CONVERSION OF SHARES
A. Upon the terms and conditions set forth in this Agreement, Enterprise
shall be merged into Fifth Third.
B. At the Effective Time 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. 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.
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C. 1. At the Effective Time, each of the shares of the Enterprise Common
Stock (excluding treasury shares and Dissenting Shares) will, when the Merger
becomes effective, be converted by virtue of the Merger and without further
action, into .68516 shares of Fifth Third Common Stock (the "Exchange Ratio"),
subject to adjustment as provided in Section I.F. below. All issued and
outstanding shares of the Preferred Stock of Enterprise, if any, shall be
canceled at the Effective Time. At the Effective Time, all shares of Enterprise
Common Stock held in treasury will be canceled and terminated and will not be
converted into shares of Fifth Third Common Stock.
2. At the Effective Time, each award, option, or other right to purchase or
acquire shares of Enterprise Common Stock pursuant to stock options ("Enterprise
Rights") granted by Enterprise under the 1994 Stock Option Plan ("Stock Plan"),
which are outstanding at the Effective Time, whether or not exercisable, shall
be converted into and become options with respect to Fifth Third Common Stock,
and Fifth Third shall assume each Enterprise Right, in accordance with the terms
of the Stock Plan and stock option agreement by which it is evidenced, except
from and after the Effective Time, (i) Fifth Third and its Compensation
Committee shall be substituted for the Committee of Enterprise's Board of
Directors (including, if applicable, the entire Board of Directors of
Enterprise) administering such Stock Plan, (ii) each Enterprise Right assumed by
Fifth Third may be exercised solely for shares of Fifth Third Common Stock,
(iii) the number of shares of Fifth Third Common Stock subject to such
Enterprise Right shall be equal to the number of shares of Enterprise Common
Stock subject to such Enterprise Right immediately prior to the Effective Time
multiplied by the Exchange Ratio, however, such number of Enterprise Rights
shall not exceed 226,860 shares in the aggregate, which amount equals the number
of Enterprise Rights in existence prior to August 1, 1998, and (iv) the per
share exercise price under each such Enterprise Right shall be adjusted by
dividing the per share exercise price under each such Enterprise Right by the
Exchange Ratio and rounding up to the nearest four decimal places.
Notwithstanding, the provisions of clause (iii) of the preceding sentence, Fifth
Third shall not be obligated to issue any fraction of a share of Fifth Third
Common Stock upon exercise of Enterprise Rights and any fraction of a share of
Fifth Third Common Stock that otherwise would be subject to a converted
Enterprise Right shall represent the right to receive a cash payment equal to
the product of such fraction and the difference between the market value of one
share of Fifth Third Common Stock and the adjusted per share exercise price of
such Enterprise Right. The market value of one share of Fifth Third Common Stock
shall be the last sale price of Fifth Third Common Stock on the NASD National
Market (as reported by The Wall Street Journal, or if not reported thereby, any
other authoritative source selected by Fifth Third) on the last trading day
preceding the Effective Time. In addition, notwithstanding the foregoing, each
Enterprise Right which is an "incentive stock option" shall be adjusted as
required by Section 424 of the Code so as not to constitute a modification,
extension, or renewal of the option, within the meaning of Section 424(h) of the
Code. Fifth Third agrees to take all reasonable steps which are necessary to
effectuate the foregoing provisions of this Section.
3. The grants pursuant to the Stock Plan shall continue in effect on the
terms and conditions (subject to the adjustments required by Section I.C.2 after
giving effect to the Merger), and Fifth Third shall take all reasonable steps to
comply with the terms of the Stock Plan to ensure, the extent reasonably
required by, and subject to the provisions of, the Stock Plan, the Enterprise
Rights which qualified as incentive stock options prior to the Effective Time
continue to qualify as incentive stock options after the Effective Time. At or
prior to the Effective Time, Fifth Third shall take all corporate action
necessary to reserve for issuance sufficient shares of Fifth Third Common Stock
for delivery upon exercise of Enterprise Rights assumed by it in accordance with
this Section. Within 60 days after the Effective Time, Fifth Third shall file a
registration statement on Form S-3 or Form S-8, as the case may be (or any
successor or appropriate forms), with respect to shares of Fifth Third Common
Stock subject to the Enterprise Rights assumed by Fifth Third in accordance with
this Section and shall use its reasonable efforts to maintain the effectiveness
of such registration statements and maintain the current status of the
prospectus or prospectuses contained therein), as well as comply with any
applicable state securities or "blue sky" laws, for so long as such options
remain outstanding.
D. At the Effective Time, all of the shares of Enterprise Common Stock,
whether issued or unissued (including treasury shares), will be canceled and
extinguished and the holders of certificates for shares thereof
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shall cease to have any rights as shareholders of Enterprise, 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 Enterprise Common Stock
shall have been converted by virtue of the Merger.
E. After the Effective Time, each holder of a certificate or certificates
for shares of Enterprise 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 Enterprise Common Stock shall have been
converted by the Merger pursuant to the Exchange Ratio, plus a cash payment for
any fraction of a share to which the holder is entitled, in lieu of such
fraction of a share. Within seven (7) business days after the Effective Time,
the Exchange Agent will send a notice and transmittal form to each Enterprise
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 Enterprise Common Stock in
exchange for new certificates of Fifth Third Common Stock. Until so surrendered,
each outstanding certificate that prior to the Effective Time represented shares
of Enterprise Common Stock (other than Dissenting Shares) shall be deemed for
all corporate purposes to evidence ownership of the number of full shares of
Fifth Third Common Stock into which the same shall have been converted;
provided, however, that dividends or distributions otherwise payable with
respect to shares of Fifth Third Common Stock into which Enterprise Common Stock
shall have been so converted shall be paid with respect to such shares only when
the certificate or certificates evidencing shares of Enterprise 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 s 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.
F. The Exchange Ratio referred to in Paragraph C of this Article I shall be
adjusted so as to give the Enterprise 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 a cash
dividend), 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 Enterprise shareholders, as of the Effective Time.
G. When all necessary documents have been filed and recorded in accordance
with the laws of the State of Ohio, and the Merger becomes effective, the
separate existence of Enterprise shall cease and Enterprise 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".
H. 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.
I. 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
Regulations of the Surviving Corporation and in accordance with law. The
officers of Fifth Third who are in office at the time the Merger becomes
effective shall be the officers of the Surviving Corporation, subject to the
Regulations of the Surviving Corporation and in accordance with law.
J. The Regulations of Fifth Third at the Effective Time shall be the
Regulations of the Surviving Corporation, until amended as provided therein and
in accordance with law.
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K. At the Effective Time, the effect of the Merger shall be as provided by
the applicable provisions of the OGCL. Without limiting the generality of the
foregoing, and subject thereto, at the Effective Time: the separate existence of
Enterprise shall cease; Fifth Third 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 Enterprise, and all obligations
owing by or due each of Fifth Third and Enterprise shall be vested in, and
become the obligations of, Fifth Third, without further act or deed, including,
without limitation, any liability to Dissenting Shareholders under Sections
1701.84 and 1701.85 of the OGCL; and all rights of creditors of each Fifth Third
and Enterprise shall be preserved unimpaired, and all liens upon the property of
each of Fifth Third and Enterprise shall be preserved unimpaired, on only the
property affected by such liens immediately prior to the Effective Time.
L. From time to time as and when requested by the Surviving Corporation, or
by its successors or assigns, the officers and Directors of Enterprise in office
at the Effective Time shall execute and deliver such instruments and shall take
or causes 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 Enterprise
and otherwise to carry out the purposes of this Agreement.
M. 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 OGCL. This Agreement shall not be filed with the Secretary of the State of
Ohio 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.
N. The Merger is intended to be a reorganization within the meaning of
Section 368(a) of the Code, and the Agreement is intended to be a "plan of
reorganization" within the meaning of the regulations promulgated under the Code
and for purposes of Section 354 and 361 of the Code.
O. 1. Each outstanding share of Enterprise Common Stock the holder of which
has perfected his right to dissent under the OGCL and has not effectively
withdrawn or lost such rights as of the Effective Time shall not be converted
into or represent a right to receive Fifth Third Common Stock, and the holder
thereof shall be entitled only to such rights as are granted by the OGCL.
Enterprise shall give Fifth Third prompt notice upon receipt by Enterprise of
any such written demands for payment of the fair value of such shares of
Enterprise Common Stock and of withdrawals of such demands and any other
instruments provided pursuant to the OGCL (any shareholder duly making such
demands being hereinafter called a "Dissenting Shareholder"). Any payments made
in respect of Dissenting Shares shall be made by the Surviving Corporation or
Fifth Third. If any Dissenting Shareholders shall effectively withdraw or lose
(through failure to perfect or otherwise) his right to such payment, such
holder's shares of Enterprise Common Stock shall be converted into a right to
receive Fifth Third Common Stock in accordance with the applicable provisions of
this Agreement.
2. No holder of Fifth Third Common Stock shall be entitled to relief as
dissenting shareholder pursuant to Section 1701.85 of the OGCL or otherwise.
II. REPRESENTATIONS AND WARRANTIES OF ENTERPRISE.
Enterprise 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 Enterprise to Fifth Third in
connection with the execution of this Agreement by Fifth Third:
A. Enterprise (i) is duly incorporated, validly existing and in good
standing as a corporation under the corporation laws of the State of Ohio 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
4,000,000 shares, $.01 par value per share, of Enterprise Common Stock and
1,000,000 shares, no par value per share, of Preferred Stock ("Enterprise
Preferred Stock") authorized pursuant to its Articles of Incorporation, which
are the total
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number of shares Enterprise 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 Enterprise of
any kind, other than (a) 2,210,996 shares of Enterprise Common Stock, which
presently are authorized, duly issued and outstanding and fully paid and
non-assessable, and (b) options to purchase a total of 226,860 shares of
Enterprise Common Stock which were granted to and are currently held by the
employees, officers and Directors of Enterprise and/or Thrift Subsidiary; and
(v) owns of record and beneficially free and clear of all liens and
encumbrances, all of the 100 outstanding shares of the capital stock of the
Thrift Subsidiary, $.01 par value per share. Enterprise has no direct or
indirect active subsidiaries other than Thrift Subsidiary.
B. Thrift Subsidiary is duly incorporated, validly existing and in good
standing as a Federal Savings Bank under the laws of the United States, and has
all the requisite power and authority to conduct the banking business as now
conducted by it; and Thrift Subsidiary 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 100 shares of the capital stock, $.01 par value per share, of
the Thrift Subsidiary owned of record and beneficially by Enterprise.
C. Enterprise has previously furnished to Fifth Third its audited,
consolidated balance sheets, statements of operations, statements of
stockholders' equity and cash flows as at September 30, 1997, and for the year
then ended, together with the opinions of its independent certified public
accountants associated therewith. Enterprise also has previously furnished to
Fifth Third the Thrift Financial Reports as filed with OTS of the Thrift
Subsidiary as at September 30, 1995, 1996 and 1997, for the years then ended.
Enterprise also has furnished to Fifth Third (i) its unaudited, consolidated
financial statements as at June 30, 1998, and for the three months and nine
months then ended, and (ii) the Thrift Financial Reports as filed with the OTS
of the Thrift Subsidiary for the quarter ended June 30, 1998. Such consolidated
financial statements of Enterprise fairly present the consolidated financial
condition of Enterprise as of the date thereof, and for the years or periods
covered thereby in conformity with generally accepted accounting principles
("GAAP"), 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
Enterprise or the Thrift Subsidiary required to be disclosed in the financial
statements so furnished other than the liabilities, obligations or indebtedness
disclosed in such financial statements (including footnotes). Enterprise 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 June 30, 1999,
Enterprise shall furnish Fifth Third with its audited or unaudited, consolidated
financial statements as at September 30, 1998, December 31, 1998 and March 31,
1999 and for the period then ended as soon as they are reasonably available.
D. Enterprise and the Thrift Subsidiary have good and marketable title to
all of the material properties and assets reflected in its separate statement of
financial condition as at June 30, 1998, 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 as disclosed in Schedule 1 and for events relating to the
business environment in general: (i) since June 30, 1998, to the date hereof
there have been no material adverse changes in the financial condition,
operations or business of Enterprise and the Thrift Subsidiary on a consolidated
basis; (ii) Enterprise is not aware of any events which have occurred since June
30, 1998 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 Enterprise and the Thrift Subsidiary on a consolidated basis, excluding in
each instance matters (which shall include but not be limited to changes in
general economic condition, changes in interest rates, changes in laws or
regulations or changes in GAAP) of general application to the thrift or banking
industry; and (iii) since June 30, 1998, to the date hereof there have been no
material changes in the methods of business operations of Enterprise and the
Thrift Subsidiary.
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F. Except as disclosed in Schedule 1, there are no actions, suits,
proceedings, investigations or assessments of any kind pending, or to the best
knowledge of Enterprise, threatened against Enterprise or the Thrift Subsidiary
which reasonably can be expected to result in any material adverse change in the
financial condition, operations or business of Enterprise and the Thrift
Subsidiary on a consolidated basis.
G. Except as disclosed in Schedule 1, since June 30, 1998, to the date
hereof Enterprise and the Thrift Subsidiary each has been operated in the
ordinary course of business, has not made any changes in its respective capital
or corporate structures and has not provided any increases in employee salaries
or benefits other than in the ordinary course of business. Except as disclosed
in Schedule 1, since June 30, 1998, to the date hereof Enterprise has not
declared or paid any dividends nor made any distributions of any other kind to
its shareholders.
H. Except as disclosed in Schedule 1, Enterprise and the Thrift Subsidiary
have timely filed all federal, state and local tax returns required to be filed
(after giving effect to all extensions) by them, respectively, and have paid or
provided for all tax liabilities shown to be due thereon or which have been
assessed against them, respectively. All tax returns filed by Enterprise or the
Thrift Subsidiary through the date hereof constitute complete and accurate
representations of the tax liabilities of Enterprise and the Thrift Subsidiary
for such years and accurately set forth all items (to the extent required to be
included or reflected in such returns) relevant to its future tax liabilities,
including the tax basis of its properties and assets in all material respects.
Neither Enterprise nor the Thrift Subsidiary is currently under audit nor have
either of them been contacted for an audit. Neither Enterprise nor the Thrift
Subsidiary is engaged in any appeal proceeding in connection with any return.
I. Except as disclosed in Schedule 1, neither Enterprise nor the Thrift
Subsidiary is a party to (i) any written employment contracts or written
contracts of any other kind with any of its officers, Directors or employees or
(ii) any material contract, lease or agreement of any other kind which is not
assignable as a result of the merger provided for herein without the consent of
another party, except for contracts, leases or agreements which do not have
terms extending beyond six months from the date of this Agreement or contracts,
leases or agreements (excluding contracts, leases and agreements pursuant to
which credit has been extended by the Thrift Subsidiary) which do not require
the annual expenditure of more than $15,000.00 thereunder.
J. Except as disclosed in Schedule 1, since June 30, 1998, to the date
hereof the Thrift Subsidiary has not incurred any unusual or extraordinary loan
losses which are material to Enterprise and the Thrift Subsidiary on a
consolidated basis; to the best knowledge of Enterprise and in light of the
Thrift Subsidiary's historical loan loss experience and its management's
analysis of the quality and performance of its loan portfolio, as of June 30,
1998, its reserve for loan losses was, in the opinion of Enterprise, adequate to
absorb all known and reasonably anticipated losses as of such date.
K. Except as disclosed in Schedule 1, neither Enterprise nor the Thrift
Subsidiary has, directly or indirectly, dealt with any broker or finder in
connection with this transaction and neither has incurred or will incur any
obligation for any broker's or finder's fee or commission in connection with the
transactions provided for in this Agreement.
L. 1. The Directors of Enterprise, by resolution adopted by the unanimous
vote of all Directors present at a meeting duly called and held in accordance
with applicable law, have duly approved this Agreement, and have directed that
this Agreement be submitted to a vote of Enterprise's shareholders at the annual
or a special meeting of the shareholders to be called for that purpose, all in
accordance with and as required by law and in accordance with the Articles of
Incorporation and Code of Regulations of Enterprise.
2. Enterprise 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. The Agreement, when executed and
delivered, will have been duly authorized and will constitute a valid and
binding obligation of Enterprise, 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
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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 Enterprise's shareholders.
3. Except as disclosed in Schedule 1, neither the execution of the
Agreement, nor the consummation of the transactions contemplated hereby, (i)
conflicts with, results in a breach of, violates or constitutes a default under,
Enterprise's Articles of Incorporation or Code of Regulations or, to the best
knowledge of Enterprise, any federal, state or local law, statute, ordinance,
rule, regulation or court or administrative order, or any agreement,
arrangement, or commitment, to which Enterprise or the Thrift Subsidiary is
subject or bound; (ii) to the best knowledge of Enterprise, 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 Enterprise or the Thrift Subsidiary; (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 Enterprise or the Thrift
Subsidiary is a party or by which Enterprise's or the Thrift Subsidiary's
rights, properties or assets are subject or bound; or (iv) to the best knowledge
of Enterprise, accelerates or modifies, or gives any party thereto the right to
accelerate or modify, the time within which, or the terms according to which,
Enterprise or the Thrift Subsidiary is to perform any duties or obligations or
receive any rights or benefits under any material agreements, arrangements or
commitments. For purposes of subparagraphs (iii) and (iv) immediately preceding,
material agreements, arrangements or commitments exclude agreements,
arrangements or commitments having a term expiring less than six months from the
date of this Agreement or which do not require the expenditure of more than
$15,000 (but shall include all agreements, arrangements or commitments pursuant
to which credit has been extended by the Thrift subsidiary).
M. Complete and accurate copies of the (i) Articles of Incorporation and
Code of Regulations of Enterprise and (ii) the Charter and Bylaws of the Thrift
Subsidiary in force as of the date hereof have been delivered to Fifth Third.
N. Except as disclosed in Schedule 1, neither Enterprise nor the Thrift
Subsidiary has 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 (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 Enterprise and the Thrift Subsidiary. To the best
knowledge of Enterprise and except as disclosed in Schedule 1, the Thrift
Subsidiary possesses all licenses, franchises, permits and other governmental
authorizations necessary for the continued conduct of its business without
material interference or interruption.
O. Neither this Agreement nor the Agreement of Merger nor any report,
statement, list, certificate or other information furnished by Enterprise or the
Thrift Subsidiary to Fifth Third or its agents in connection with this Agreement
or any of the transactions contemplated hereby (including, without limitation,
any information which has been or shall be supplied with respect to their
business operations and financial condition for inclusion in the proxy
statement/prospectus and registration statement relating to the merger) 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 Enterprise is held to consider the adoption
of this Agreement) an untrue statement of material fact or omits or shall omit
to state a material fact necessary to make the statements contained herein or
therein, in light of the circumstances in which they are made, not misleading.
P. Except as disclosed in Schedule 1, there are no actions, proceedings or
investigations pending before any environmental regulatory body, with respect to
or, to the best knowledge of Enterprise, threatened against or affecting
Enterprise or the Thrift Subsidiary in respect to any "facility" owned, leased
or operated by either
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of them (but excluding any "facility" as to which sole interest of Enterprise or
the Thrift Subsidiary 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 Enterprise or the
Thrift Subsidiary ever participated in the financial management of such facility
to a degree sufficient to influence, or have the ability to influence, the
facility's treatment of hazardous waste) under the Comprehensive Environmental
Response, Compensation and Liability Act of 1980, as amended ("CERCLA"), or
under any Federal, state, local or municipal statute, ordinance or regulation in
respect thereof, in connection with any release of any toxic or "hazardous
substance", pollutant or contaminant into the "environment" which, if adversely
determined, (a) would require the payment by Enterprise or the Thrift Subsidiary
and/or require Enterprise or the Thrift Subsidiary to incur expenses of more
than $15,000 (whether or not covered by insurance) or (b) would otherwise have a
material adverse effect on Enterprise or the Thrift Subsidiary, nor are there
any such actions or proceedings or investigations in which Enterprise or the
Thrift Subsidiary is a plaintiff or complainant. Neither Enterprise nor the
Thrift Subsidiary is liable in any material respect under any applicable law for
any release by either of them or, to the best knowledge of Enterprise, 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 Enterprise or the Thrift
Subsidiary liable for any material costs (as a result of the acts or omissions
of Enterprise or the Thrift Subsidiary or, to the best knowledge of Enterprise,
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 Enterprise or the Thrift Subsidiary to prevent or minimize any actual or
threatened release by Enterprise or the Thrift Subsidiary of any hazardous
wastes or other chemical substances, pollutants and contaminants into the
environment which would endanger the public health or the environment. All terms
contained in quotation marks in this paragraph and the paragraph immediately
following shall have the meaning ascribed to such terms, and defined in, CERCLA.
Except as disclosed in Schedule 1, to the best knowledge of Enterprise each
"facility" owned, leased or operated by Enterprise or the Thrift Subsidiary (but
excluding any "facility" as to which the sole interest of Enterprise or the
Thrift Subsidiary 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 Enterprise or the
Thrift Subsidiary ever participated in the financial management of such facility
to a degree sufficient to influence, or have the ability to influence, the
facility's treatment of hazardous waste) 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 Enterprise and the Thrift Subsidiary 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 Enterprise or the Thrift
Subsidiary for the benefit of employees, former employees or Directors of
Enterprise or the Thrift Subsidiary and shall include (a) any qualified
retirement plan such as a pension, profit sharing, stock bonus plan or employee
stock ownership plan ("ESOP"), (b) any plan, program or arrangement providing
deferred compensation, bonus deferral or incentive benefits, whether funded
through trust or otherwise, and (c) any welfare plan, program or policy
providing vacation, severance, salary continuation, supplemental unemployment,
disability, life, health coverage, retiree health, Voluntary Employees'
Beneficiary Association, medical expense reimbursement or dependent care
assistance benefits, in any such foregoing case without regard to whether the
Benefit Plan constitutes an employee benefit plan under Section 3(3) of the
Employee Retirement Income Security Act of 1974, as amended ("ERISA"), or the
number of employees covered under such Benefit Plan.
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2. Plan Documents, Reports and Filings. Except as disclosed on Schedule 1,
Enterprise or the Thrift Subsidiary has provided true, complete and correct
copies of all plan documents, if any, comprising each Benefit Plan, together
with, when applicable, (a) the most recent summary plan description, (b) the
most recent actuarial and financial reports and the most recent annual reports
filed with any governmental agency and (c) all Internal Revenue Service ("IRS")
or other governmental agency rulings and determination letters or any open
requests for IRS rulings or letters with respect to Benefit Plans.
3. Qualified Retirement Plan Compliance. With respect to each Benefit Plan
which is an employee pension benefit plan (as defined in section 3(2) of ERISA)
other than any such plan that meets the "top-hat" exception under section 201(1)
of ERISA (a "Qualified Benefit Plan"), except as disclosed on Schedule 1: (a)
the IRS has issued a determination letter which determined that such Qualified
Benefit Plan (as amended by any and all amendments except for the First and
Second Amendments to the ESOP and any amendments to the defined benefit plan)
satisfied the requirements of section 401(a) of 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
Enterprise, 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 Enterprise, 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; (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; and (f) any and all amendments to the Qualified
Benefit Plans not covered by an IRS determination letter do not adversely affect
the qualified and tax exempt status of such plans.
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 Enterprise, in compliance with applicable Code
provisions; (b) such Welfare Benefit Plan has been, to the best knowledge of
Enterprise, 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
Enterprise, operated in substantial compliance with such COBRA requirements.
5. Prohibited Transactions. To the best knowledge of Enterprise, no
prohibited transaction under Section 406 of ERISA and not exempt under Section
408 of ERISA has occurred with respect to any Benefit Plan which would result,
with respect to any person, in (a) the imposition, directly or indirectly, of a
material excise tax under Section 4975 of the Code or (b) material fiduciary
liability under Section 409 of ERISA.
6. Lawsuits or Claims. Except as disclosed in Schedule 1, no material
actions, suits or claims (other than routine claims of benefits) are pending or,
to the best knowledge of Enterprise, threatened against any Benefit Plan or
against Enterprise or the Thrift Subsidiary 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 Enterprise and the Thrift Subsidiary or, if not,
in Schedule 1. For purposes hereof, the term "Unfunded Liabilities" shall mean
any amounts properly accrued to date under generally accepted accounting
principles in effect as of the date of this Agreement (GAAP), or amounts not yet
accrued for GAAP purposes but for which an obligation (which has legally accrued
and cannot legally be eliminated and which is subject to reasonable estimate)
exists for payment in the future which is attributable to any Benefit Plan,
including but not limited to (a) severance pay benefits, (b) deferred
compensation or unpaid bonuses, (c) any liabilities on account of the change in
control which will result from this Agreement, including any potential 20%
excise tax under Section 4999 of the
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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 Enterprise or the Thrift Subsidiary and for which Enterprise or the
Thrift Subsidiary 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. Enterprise and the Thrift
Subsidiary (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 Enterprise, the Thrift Subsidiary nor any controlled group
member of Enterprise or the Thrift Subsidiary 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. Enterprise and the Thrift Subsidiaries (a) have not
incurred any asserted or, to the best knowledge of Enterprise, 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 Enterprise or the
Thrift Subsidiary, (b) have not authorized nor knowingly participated in a
material prohibited transaction under Section 406 of ERISA and not exempt under
Section 408 of ERISA and (c) have not received notice of any material actions,
suits or claims (other than routine claims for benefits) pending or threatened
against the unrelated employer or against them.
10. Retiree Benefits. Except as listed on Schedule 1 and identified as
"Retiree Liability", Enterprise and Thrift Subsidiary have no obligation to
provide medical benefits, or life insurance benefits to or with respect to
retirees, former employees or any of their relatives.
11. Right to Amend and Terminate. Except as listed on Schedule 1,
Enterprise or Thrift Subsidiary has all power and authority necessary to amend
or terminate each Benefit Plan without incurring any material 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.
12. SERP Liability. Enterprise represents that its Board of Directors has
approved an unfunded Supplemental Employee Retirement Plan (the "SERP").
Enterprise represents that it has or will cancel the SERP prior to the Effective
Time and that it will not make any distributions therefrom to any of its
employees or the employees of the Thrift Subsidiary.
13. Material. For purposes of this Paragraph Q as a whole, the term
"material" in connection with a liability shall mean a liability or loss, taxes,
penalties, interest and related legal fees in the total amount of $15,000 or
more, with such determination being made on the basis of the aggregate affected
participants of a Benefit Plan and not with respect to any single participant.
R. The investment portfolios of Enterprise and the Thrift Subsidiary
consist of securities in marketable form. Except as disclosed in Schedule 1,
since June 30, 1998 to the date hereof neither Enterprise nor the Thrift
Subsidiary has incurred any unusual or extraordinary losses in the aggregate
value of its investment portfolio, and, except for matters of general
application to the thrift or banking industry (including, but not limited to,
changes in laws or regulations or generally accepted accounting principles) or
for events relating to the business environment in general, including market
fluctuations and changes in interest rates, Enterprise is
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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 Enterprise's and the Thrift Subsidiary's investment
portfolio on a consolidated basis.
S. Except as disclosed in Schedule 1, there are no actions, suits, claims,
proceedings, investigations or assessments of any kind pending, or to the best
knowledge of Enterprise, threatened against any of the Directors or officers of
Enterprise or the Thrift Subsidiary in their capacities as such, and no Director
or officer of Enterprise or the Thrift Subsidiary currently is being indemnified
or seeking to be indemnified by either Enterprise or the Thrift Subsidiary
pursuant to applicable law or Enterprise's Articles of Incorporation or Code of
Regulations or the Thrift Subsidiary's Charter or Bylaws.
T. All representations and warranties contained in this Section II shall
expire at the Effective Time, and, thereafter, neither Enterprise nor the Thrift
Subsidiary nor any officer or director of either of them shall have any
liability or obligations with respect thereto.
V. There is no "business combination," "moratorium," "control share," or
other state anti-takeover statute or regulation or any agreement to which
Enterprise is a party which (i) prohibits or restricts Enterprise'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.
W. All interest rate swaps, caps, floors and option agreements and other
interest rate risk management arrangements, whether entered into for
Enterprise's own account, or for the account of one or more of its subsidiaries
or their customers, were entered into (i) in accordance with prudent banking
practices and all material applicable laws, rules, regulations and regulatory
policies and (ii) with counter-parties reasonably believed to be financially
responsible at the time; and each of them constitutes the valid and legally
binding obligation of it or one of its subsidiaries, enforceable in accordance
with its terms (except as such enforceability may be limited by applicable
bankruptcy, insolvency, reorganization, moratorium, fraudulent transfer and
similar laws of general applicability relating to or affecting creditors' rights
or by general equity principles), and are in full force and effect (except to
the extent that they have been fully performed or terminated) in all respects
material to Enterprise. Neither Enterprise nor its subsidiaries, nor to its
knowledge any other party thereto is in breach of any of its obligations under
any such agreement or arrangement which breach will have material adverse effect
on the business, operations or financial condition of Enterprise on a
consolidated basis.
III. REPRESENTATIONS AND WARRANTIES OF FIFTH THIRD
Fifth Third represents and warrants to Enterprise 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. The outstanding
shares of capital stock or other ownership interests of each direct, significant
subsidiary have been duly authorized and validly issued, are fully paid and
non-assessable, and are directly owned by Fifth Third free and clear of all
liens ad encumbrances. All of such subsidiaries are duly authorized to conduct
business in which they are engaged, unless such failure to obtain or maintain
such authorization will not have a material adverse effect on Fifth Third, as a
whole.
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 Fifth Third Common
Stock and 500,000 shares are classified as Preferred Stock without par value. As
of the close of business on July 31, 1998, 266,516,245 shares of Fifth Third
Common Stock were issued and
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outstanding and 1,379,594 shares were held in its treasury. As of the date of
this Agreement, no shares of its Preferred Stock have been issued. Fifth Third
does not have outstanding any stock options, subscription rights, warrants or
other securities entitling the holders to subscribe for or purchase any shares
of its capital stock other than options granted and to be granted to employees
and Directors under its stock option plans. At July 31, 1998, 14,147,556 shares
of Fifth Third Common Stock were reserved for issuance in connection with
outstanding options granted under its stock option plans and 11,252,259 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 Enterprise as a result of the merger pursuant to the terms of
this Agreement 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 Enterprise its audited consolidated
financial statements as at December 31, 1997, December 31, 1996 and December 31,
1995 and for the respective years then ended together with the opinions of its
independent public accountants associated therewith. Fifth Third has also
furnished to Enterprise its unaudited, consolidated financial statements as at
June 30, 1998 and for the three and six month periods then ended. Such
consolidated financial statements fairly present the consolidated financial
condition of Fifth Third as of their respective dates and for the respective
periods covered thereby in conformity with GAAP 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 Enterprise its
unaudited consolidated financial statements as at September 30, 1998 and for the
nine (9) months then ended a soon as such statements are publicly available, and
shall continue to furnish information for subsequent calendar quarter periods to
Enterprise as soon as such becomes publicly available until the Closing Date.
E. Except for events relating to the business environment in general: (i)
since June 30, 1998, 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 June 30, 1998, 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 June 30, 1998,
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 Enterprise 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, the regulations of the NASDAQ NMS or
under the Second Amended Articles of Incorporation, as amended, or Code of
Regulations of Fifth Third.
2. Fifth Third has corporate power and authority to enter into this
Agreement and 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 the constitute a valid and binding obligation of
Fifth Third, enforceable in accordance with its terms, except to the extent that
(i) enforceability thereof may be limited by insolvency, reorganization,
liquidation, bankruptcy, readjustment of debt or other laws of general
application relating to or affecting the enforcement of creditors' rights
generally and (ii) the availability of certain remedies may be precluded by
general principles of equity, subject, however, to the receipt of requisite
regulatory approvals.
3. Neither the execution of this Agreement nor the consummation of the
transactions contemplated hereby, does or will (i) conflict with, result in a
breach of, violate or constitute a default, under Fifth Third's Second Amended
Articles of Incorporation, as amended, or Code of Regulations or, to the best
knowledge of its chief executive officer and chief financial officer, any
federal, foreign, state or local law, statute, ordinance,
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rule, regulation or court or administrative order, or any agreement,
arrangement, or commitment to which Fifth Third is subject or bound; (ii) to the
best knowledge of the chief executive officer and chief financial officer of
Fifth Third, result in the creation of or give any person the right to create
any material lien, charge, encumbrance, security agreement or any other material
rights of others or other material adverse interest upon any material right,
property or asset belonging to Fifth Third or any of its subsidiaries other than
such rights as may be given the shareholders of Enterprise pursuant to the
provisions of Sections 1701.84 and 1701.85 of the Ohio Revised Code; (iii)
terminate or give any person the right to terminate, amend, abandon, or refuse
to perform any material agreement, arrangement or commitment to which Fifth
Third is a party or by which Fifth Third's rights, properties or assets are
subject or bound; or (iv) accelerate or modify, or give any party thereto the
right to accelerate or modify, the time within which, or the terms according to
which, Fifth Third is to perform any duties or obligations or receive any rights
or benefits under any material agreement, arrangements or commitments.
G. Complete and accurate copies of (i) the Second Amended Articles of
Incorporation, as amended, and (ii) the Code of Regulations of Fifth Third in
force as of the date hereof have been delivered to Enterprise.
H. To the best knowledge of the chief executive officer and chief financial
officer of Fifth Third, neither Fifth Third nor any of its subsidiaries has
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 or which could reasonably be
expected to have a material adverse effect on the financial condition Fifth
Third and its subsidiaries taken as a whole. To the best knowledge of the chief
executive officer and chief financial officer of Fifth Third, Fifth Third and
its subsidiaries possess all licenses, franchise, permits and other governmental
authorizations necessary for the continued conduct of their businesses without
material interference or interruption.
I. 1. To the best knowledge of the chief executive officer and chief
financial officer of Fifth Third, neither this Agreement nor any report,
statement, list, certificate or other information furnished or to be furnished
by Fifth Third to Enterprise or its agents in connection with this Agreement or
any of the transactions contemplated hereby (including, without limitation, any
information which has been or shall be supplied with respect to its business
operations and financial condition for inclusion in the proxy
statement/prospectus and registration statement relating to the merger) contains
or shall contain (in the case of information relating to the proxy
statement/prospectus, at the time it is mailed, and, in the case of the
registration statement, at the time it becomes effective and, in the case of the
proxy statement/prospectus and the registration statement, at the time the
annual or special meeting of shareholders of Enterprise is held to consider the
adoption of this Agreement) an untrue statement of a material fact or omits or
shall omit to state a material fact necessary to make the statements contained
herein or therein, in light of the circumstances in which they are made, not
misleading.
2. Fifth Third has furnished to Enterprise 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, 1997, and reports on Form 10-Q for the quarters ended March 31
and June 30, 1998;
b. any Current Report on Form 8-K with respect to any event occurring
after June 30, 1998 and prior to the date of this Agreement;
c. any report filed by Fifth Third to amend or modify any of the
reports described above; and
d. all proxy statements prepared in connection with meetings of Fifth
Third's shareholders held or to be held subsequent to June 30, 1998.
The information set forth in the documents described in this subsection 2
(including all exhibits thereto and all documents incorporated therein by
reference) did not, as of the dates on which such reports were filed with the
SEC, (a) contain any untrue statement of a material fact, (b) omit any material
fact required to be
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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 June 30, 1998 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 Enterprise. Fifth Third timely shall
furnish Enterprise with copies of all reports filed by Fifth Third with the SEC
subsequent to the date of this Agreement and until the Closing Date.
J. There are no actions, suits, proceedings, investigations or assessments
of any kind pending or, to the best knowledge of the chief executive officer and
chief financial officer of Fifth Third, threatened against Fifth Third or any
Fifth Third subsidiary, which reasonably can be expected to result in any
material adverse change in the consolidated financial condition, operations or
business of Fifth Third.
K. Since June 30, 1998 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 of the chief executive officer and chief financial officer
of Fifth Third, and in the light of any banking or thrift subsidiary's
historical loan loss experience and their managements' analysis of the quality
and performance of their respective loan portfolios, as of June 30, 1998, their
consolidated reserves for loan losses are adequate to absorb all known and
reasonably anticipated losses as of such date.
L. Fifth Third and its subsidiaries have filed all federal, state and local
tax returns required to be filed (after giving effect to all extensions) by
them, respectively, and have paid or provided for all tax liabilities shown to
be due thereon or which have been assessed against them, respectively.
M. Fifth Third has not, directly or indirectly, dealt with any broker or
finder in connection with this transaction and has not incurred and will not
incur any obligation for any broker's or finder's fee or commission in
connection with the transactions provided for in this Agreement.
N. Fifth Third has no unfunded liabilities with respect to any Benefit Plan
(as such term is defined in subparagraph Q.1. of Section II hereof, but applied
to Fifth Third, its subsidiaries and affiliates) that are material, either
individually or in the aggregate, to Fifth Third on a consolidated basis and
that have not been recorded and disclosed as required by GAAP in the most recent
year-end, audited financial statements of Fifth Third supplied to Enterprise
pursuant to Paragraph D of Section III hereof.
O. The investment portfolios of Fifth Third and its subsidiaries and
affiliates consist of securities in marketable form. Since June 30, 1998, 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 is not aware of the existence of any
factor that would materially delay or materially hinder issuance of any of the
required regulatory approvals necessary to consummate the Merger or the other
transactions contemplated hereby.
Q. All representations and warranties contained in this Section III shall
expire at the Effective Time, and thereafter, neither Fifth Third nor any
officer or Director of Fifth Third shall have any further liability or
obligation with respect thereto, except for any misrepresentations, breaches of
warranties or violations of covenants that were made with intent to defraud.
IV. OBLIGATIONS OF ENTERPRISE BETWEEN THE DATE OF THIS AGREEMENT AND THE
EFFECTIVE TIME.
A. Enterprise, 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
this transaction has been declared effective by the Securities and Exchange
Commission (the "SEC") and under all applicable state securities laws for the
purpose of approving and adopting this
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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
Enterprise intends to inform the shareholders of Enterprise in the proxy
materials relating to the annual or special meeting that all Directors of
Enterprise presently intend to vote all shares of Enterprise 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 Enterprise, subject only to such
Directors' fiduciary obligations.
B. (i) Consistent with GAAP, Enterprise agrees that on or before the
Effective Time based on a review of the Thrift Subsidiary's loan losses, current
classified assets and commercial, multi-family and residential mortgage loans
and investment portfolio, Enterprise 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, provided that no
adjustment to general valuation allowances or reserves shall be made until
immediately prior to the Effective Time and all conditions precedent to the
obligations of the parties hereto have either been satisfied or waived as
confirmed by such parties in writing. Fifth Third shall provide such assistance
and direction to Enterprise as is necessary in conforming to such policies,
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, Enterprise and the Thrift
Subsidiary each will be operated in the ordinary course of business, and neither
of them will, without the prior written consent of Fifth Third, which consent
shall not be unreasonably withheld: make any changes in its capital or corporate
structures; issue any additional shares of its Common Stock other than pursuant
to the exercise of options granted prior to the date hereof; 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 or convertible or
other securities of any kind, or right to acquire any of its securities; make
any material changes in its method of business operations; make, enter into any
agreement to make, or become obligated to make, any capital expenditures in
excess of $15,000; make, enter into or renew any agreement for services to be
provided to Enterprise or the Thrift Subsidiary or permit the automatic renewal
of any such agreement, except any agreement for services having a term of not
more than three months or requiring the expenditure of not more than $15,000
(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), and, except as disclosed in Schedule 1; 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, other than such Agreements existing on the date hereof and disclosed
to Fifth Third; declare or pay any cash dividends on its own stock other than
normal and customary cash dividends per quarter paid in such amounts and at such
times as Enterprise historically has done on its Common Stock, provided this
covenant shall only apply to Enterprise; pay 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.
Enterprise agrees that it will not sell or otherwise dispose of or encumber any
of the shares of the capital stock of the Thrift Subsidiary which are now owned
by it other than in connection with a loan from Fifth Third to Enterprise.
C. Except as required by applicable law or regulation, except for actions
taken with the consent of Fifth Third, Enterprise and the Thrift Subsidiary
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 that the 15th day prior to the mailing of Enterprise's proxy
statement with respect to the Merger, Enterprise 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
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Accounting Series Releases 130 and 135 (the "Enterprise Affiliates"). Enterprise
shall use its best efforts to cause each Enterprise Affiliate to execute and
deliver to Fifth Third on or before the mailing of such proxy statement an
agreement in the form of Appendix 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 Office of Thrift Supervision, 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 Enterprise in this transaction (the expenses thereof, other than
accounting, legal, investment banking, financial consulting and associated
expenses of Enterprise 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 such applications within
ninety (90) days of the date of this Agreement and to secure all such approvals.
Enterprise agrees that it will, as promptly as practicable after request and at
its own expense, provide Fifth Third with all information and documents
concerning Enterprise and Thrift Subsidiary, 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 Enterprise. Fifth Third agrees that it
will, as promptly as practicable after request and at its own expense, provide
Enterprise with all information and documents concerning Fifth Third and its
subsidiaries as shall be required in connection with preparing such
applications, registration statements and the documents which are to be prepared
and filed by Enterprise and in connection with approvals required to be obtained
by Enterprise hereunder. Prior to filing any such applications, statements or
other documents with the applicable governmental agency, Enterprise shall
provide, at least five (5) days prior to the filing date, copies thereof to
Fifth Third.
B. Each of the parties hereto agrees to use its best efforts and to
cooperate with the other party in all reasonable respects in order to carry out
and consummate the transactions contemplated by this Agreement at the earliest
practicable time including, without limitation, the filing of applications,
notices and other documents with, and obtaining approval from, appropriate
governmental regulatory agencies.
C. Enterprise agrees to permit Fifth Third, its officers, employees,
accountants, agents and attorneys, and Fifth Third agrees to permit Enterprise,
its officers, employees, accountants, agents and attorneys, to have reasonable
access during business hours to their respective books, records and properties,
and those of the Thrift Subsidiary and The Fifth Third Bank as well, for the
purpose of making a detailed examination, or updating and amplifying prior
examinations, of the financial condition, assets, liabilities, legal compliance,
affairs and the conduct of the business of Enterprise and the Thrift Subsidiary
or Fifth Third or The Fifth Third Bank, as the case may be, prior to the
Effective Time, and also to permit the monitoring of the foregoing on an ongoing
basis (such rights of examination and monitoring to be subject to the
confidentiality obligations set forth in such Paragraph VII.D. hereof);
provided, however, that any such examination by Fifth Third or Enterprise shall
not relieve Fifth Third or Enterprise 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.
D. If all options have not been exercised prior to the Effective Time, such
options shall be converted to options to purchase Fifth Third Common Stock based
on the exchange ratio with the option exercise price adjusted accordingly to
take into account the change in the number of options.
E. (1) Enterprise shall develop a written description and timetable which
shall be provided to and approved by Fifth Third and its counsel, setting forth
all actions necessary to: (i) make contributions to the Enterprise Federal
Employee Stock Ownership Plan ("ESOP") and/or to have the ESOP sell unallocated
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shares under the ESOP to fully repay the ESOP's existing loan, all in compliance
with the applicable requirements of ERISA and the Internal Revenue Code,
including Code Sections 415 (as interpreted by the IRS in Private Letter Rulings
9648054 and 9426048) and 404; (ii) amend the ESOP to authorize the sale of
unallocated shares to repay the loan, to provide for the allocation of gain on
the sale of unallocated shares in a manner that complies with the position of
the IRS in Private Letter Rulings 9648054 and 9426048 and to make such other
changes as may be necessary to implement the termination; (iii) terminate the
ESOP; and (iv) submit the ESOP to the Internal Revenue Service for a
determination letter that the ESOP, as so amended and terminated, continues to
be a qualified retirement plan and employee stock ownership plan under Sections
401(a) and 4975(e)(7) of the Code. Upon development and approval by Fifth Third
of said written description and timetable, Enterprise shall take such actions as
described therein as are approved by Fifth Third. Distribution of the shares and
any other assets of the ESOP shall (i) not occur until after the receipt of the
foregoing IRS determination letter and (ii) occur prior to the Effective Time
only with the express written consent of Fifth Third, which shall not be
unreasonably withheld. In connection with the development of the written
description and timetables referred to above and resolution of the ESOP, the
parties agree they intend that, to the extent not prohibited by applicable law,
the ESOP shall be maintained through the date of its final termination for the
exclusive benefit of individuals who had become ESOP participants on or before
the Effective Time.
(2) Except as provided in (1) above, if requested by Fifth Third,
Enterprise or Thrift Subsidiary shall take all actions necessary to freeze the
Qualified Benefit Plans as of a date not later than the Effective Time such that
no further contributions (including employee 401(k) contributions) shall be made
under the Qualified Benefit Plans.
(3) If Fifth Third so requests, Enterprise or the Thrift Subsidiary shall
develop a plan and timetable for terminating any or all of the Qualified Benefit
Plans other than the ESOP, and, with the advance written approval of Fifth
Third, shall proceed with the implementation of said termination plan and
timetable.
(4) Except as provided in (1) above, Enterprise and Thrift Subsidiary,
without the advance written consent of Fifth Third shall not (1) adopt any
amendments to the Qualified Benefit Plans after the date of this Agreement; or
(2) make any distributions from the Qualified Benefit Plans after the date of
this Agreement, other than distributions in the normal administration of the
Qualified Benefit Plans; or (3) make any contributions to the Qualified Benefit
Plans (except 401(k) employee contributions) after the date of this Agreement;
or (4) take any action reducing or restricting the availability of FECO or
surplus under the defined benefit plan.
(5) Enterprise or Thrift Subsidiary 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, 416, 401(k) and (m) of the Code have been satisfied by all of its
Qualified Benefit Plans.
(6) 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
Enterprise shall not be deemed to involve a discretionary acceleration of
vesting and vesting thereunder shall accelerate as of the Effective Time.
(7) Each participant in the Enterprise Recognition and Retention Plan
("RRP") not fully vested will, in accordance with the terms of the RRP, become
fully vested in plan share awards thereunder and any dividends previously paid
with respect to such plan shares as of the Effective Time. As soon as
practicable after the execution of this Agreement, Enterprise and Fifth Third
will cooperate to cause the RRP to be amended and other action taken, in a
manner reasonably acceptable to Enterprise and Fifth Third, to provide that the
RRP will terminate upon the Effective Time; provided, however, that (i) any
distribution of shares under the RRP will be effected in accordance with the
requirements, if any, of federal and state securities laws and regulations, and
(ii) all distributions from the RRP after the Effective Time shall be in shares
of Fifth Third Common Stock. No action shall be taken that would adversely
affect the rights of plan participants who hold outstanding grants or awards of
shares of Enterprise Common Stock, whether before or
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after the Effective Time. As of August 1, 1998, the total number of shares
awarded under the RRP was 90,744. No further grants or awards have been or shall
be made under the RRP after August 1, 1998.
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 Enterprise shall have duly approved and adopted
this Agreement in accordance with and as required by law and in accordance
with its Articles of Incorporation and Code of Regulations.
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 Office of Thrift Supervision and the Federal Deposit Insurance
Corporation to the extent required.
3. Prior to or at the Effective Time, no material investigation by any
state or federal agency shall have been threatened or instituted seeking to
enjoin or prohibit, or enjoining or prohibiting, the transactions
contemplated hereby and no material governmental action or proceeding shall
have been threatened or instituted before any court or government body or
authority, seeking to enjoin or prohibit, or enjoining or prohibiting, the
transactions contemplated hereby other than investigations, actions and
proceedings which have been withdrawn prior to or at the Effective Time
without material adverse effect to Fifth Third or Enterprise 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 Enterprise which specifically refers to the condition or conditions being
waived:
1. All of the representations and warranties of Enterprise 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 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.
2. Enterprise shall have performed all of the obligations required of
it under the terms of this Agreement in all material respects.
3. Elias, Matz, Tiernan & Herrick L.L.P., counsel for Enterprise and
the Thrift Subsidiary, 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 Enterprise 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 GAAP, consistently
applied, shall not be less than $37,000,000. For purposes of this
subparagraph 4 to Section VI.B., (A) any expenses or accruals after the
date hereof relating to (i) the adjustments contemplated by Section
IV.B.(i) herein, (ii) termination or funding of any of Enterprise's or the
Thrift Subsidiary's Benefit Plans, as contemplated herein, (iii) expenses
associated with the Merger or (iv) market value adjustments to the
investment portfolio of Enterprise and the Thrift
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Subsidiary shall be excluded for purposes of calculation of Enterprise's
shareholders' equity as contemplated herein prior to the Effective Time.
5. Fifth Third's independent certified public accountants shall have
reviewed the unaudited consolidated financial statements of Enterprise as
at the end of the month immediately preceding the Effective Time, as well
as the unaudited separate financial statements of the Thrift Subsidiary 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 Enterprise or the Thrift Subsidiary that should
be made in order for such financial statements to (i) be in conformity with
GAAP, consistently applied, excluding the presentation of footnotes, and
(ii) accurately state the financial condition and results of operations of
Enterprise and the Thrift Subsidiary.
6. The receipt of a certificate from Enterprise and the Thrift
Subsidiary, 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 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) it has
met and fully complied in all material respects with all of the obligations
required of it under the terms of this Agreement.
7. The total issued and outstanding shares of Enterprise Common Stock
shall not exceed 2,437,856 shares including all options to purchase
Enterprise Common Stock. Attached hereto on Schedule 1 is a list of all
options to acquire Enterprise Common Stock, the holders thereof, the dates
of issuance, the vesting schedules and the price per share of such options.
8. (a) In consideration of the consummation of this transaction, the
Directors of Enterprise, with exception of Steven Wilson, shall execute and
deliver to Fifth Third an agreement by which the Directors shall agree for
a period of two (2) years after the Effective Time to refrain from directly
or indirectly, whether for their own account or for the account of any
other person, firm, corporation, or other business organization, (i) in the
states of Ohio, Kentucky, Indiana, Florida or Arizona, engage in providing
Banking Services (as defined below) on behalf of any other business
organization who is a competitor of Fifth Third, (ii) provide Banking
Services to any Client (as defined below), (iii) make any statement or take
any actions that may interfere with Fifth Third's or any Affiliate's
business relationships with any Client, (iv) contact either directly or
indirectly any Client or otherwise induce or attempt to induce any Client
to enter into any business relationship with any person or firm other than
Fifth Third or an Affiliate relating to Banking Services of any type, (v)
endeavor or entice away from Fifth Third any person who the Director has
actual knowledge that such person is, or was at any time during the period
the Director was employed by Fifth Third or during the Restricted Period,
employed by or associated with Fifth Third as an executive, officer,
employee, manager, salesperson, consultant, independent contractor,
representative or other agent, or (vi) take any actions that may interfere
with Fifth Third's property rights in lists of Clients or otherwise
diminish the value of such lists to Fifth Third. Notwithstanding any
provision contained in this Section 8, the restrictions contained herein
shall not be applicable to any activity of the Director or any activity of
his or her spouse which existed at the time of this Agreement and which was
disclosed by the Director to Fifth Third, and may be waived by Fifth Third
with respect to one or more Directors in writing at any time and from time
to tie in Fifth Third's sole discretion after receipt of a written request
from any Director.
(b) The term "Restricted Period" shall mean the period beginning on
the Effective Date and ending two years thereafter.
(c) The term "Banking Services" shall mean retail or commercial
deposit or lending business, asset management and all other services which
are customarily provided by banks or which are otherwise provided by Fifth
Third or its affiliates.
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(d) For all purposes of this Agreement, the term "Client" shall mean
all persons or entities who are or were clients of Fifth Third at the date
of termination of employment or at any time during the two year period
prior to the date of termination of the Director's term, any potential
clients who to the Director's actual knowledge, have been identified and
contacted by a representative of Fifth Third. The term "Client" shall not
include any member of the Employee's immediate family, as defined under
Rule 16a-1 of the Securities Exchange Act of 1934, as amended (the
"Exchange Act") or any trust of which the Employee or any member of his
immediate family (as defined in Rule 16a-1 of the Exchange Act) is a
trustee or beneficiary.
9. The transaction contemplated by the Purchase and Assumption
Agreement, dated June 16, 1998, between Enterprise and Cornerstone Savings
Association (the "Cornerstone Agreement"), shall have been satisfactorily
consummated in accordance with the terms thereof. Enterprise shall have
delivered to Fifth Third copies of the executed versions of the Cornerstone
Agreement and all exhibits, schedules and amendments thereto. In addition,
Enterprise shall deliver to Fifth Third all regulatory filings and all
approvals or denials of such regulatory bodies with authority to approve
such transaction. Enterprise shall not amend the terms of the Cornerstone
Agreement without the prior written consent of Fifth Third.
10. The transaction contemplated by the Agreement and Plan of
Reorganization, dated as of July 2, 1998, among Enterprise, the Thrift
Subsidiary and Security Savings Holding Company, Inc. and Security Savings
Association (the "Security Savings Agreement"), shall have been
satisfactorily consummated in accordance with the terms thereof. Enterprise
shall have delivered to Fifth Third copies of the executed versions of the
Security Savings Agreement and all exhibits, schedules and amendments
thereto. In addition, Enterprise shall deliver to Fifth Third all
regulatory filings and all approvals or denials of such regulatory bodies
with authority to approve such transaction. Enterprise shall not amend the
terms of the Security Savings Agreement without the prior written consent
of Fifth Third.
C. Conditions to the Obligations of Enterprise:
The obligation of Enterprise to consummate the transactions provided for
herein and in the Agreement of Merger is subject to the fulfillment at or prior
to the Effective Time of each of the following conditions unless waived by
Enterprise 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 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.
2. Fifth Third shall have performed all of the obligations required of
it under the terms of this Agreement and the Agreement of Merger in all
material respects.
3. Paul L. Reynolds, counsel for Fifth Third, shall have delivered an
opinion addressed to Enterprise in substantially the form appended hereto
as Appendix B.
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
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) 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.
5. Fifth Third shall have registered its shares of Common Stock to be
issued to the Enterprise 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
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been issued. The shares of Fifth Third Common Stock to be issued to the
Enterprise shareholders hereunder shall have been authorized for trading on
the NASDAQ NMS upon official notice of issuance.
6. Fifth Third's Trust Department, as the Exchange Agent, will
acknowledge in writing to Enterprise that it is in receipt of (i)
certificates representing a whole number of shares of Fifth Third Common
Stock to be issued to the shareholders of Enterprise pursuant to this
Agreement, and (ii) sufficient cash to be paid to the Enterprise
shareholders for fractional shares.
VII. ADDITIONAL COVENANTS
A. The Thrift Subsidiary shall be merged with and into Fifth Third Bank, to
be effective on the Effective Time. The parties hereto agree to cooperate with
one another to effect such merger. Upon consummation of any merger of the Thrift
Subsidiary, the separate corporate existence of the Thrift Subsidiary shall
cease by operation of law.
B. 1. Fifth Third shall consider employing at Fifth Third or other Fifth
Third subsidiaries or affiliates as many of the Enterprise and Thrift Subsidiary
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 Thrift Subsidiary's medical plan
immediately prior to the Effective Time or any waiting period relating to
coverage under Fifth Third's medical plan.
2. Those employees of Enterprise and the Thrift Subsidiary who do not have
an employment or severance agreement and who are not to be employed by Fifth
Third 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
thirty (30) days after the Effective Time, and who sign and deliver a
termination and release agreement in the form attached as Appendix C hereto,
shall be entitled to severance pay equal to, in the case of officers and all
other exempt employees of Enterprise or the Thrift Subsidiary, two (2) weeks of
pay for each year of service up to a maximum of sixteen (16) weeks pay with a
minimum of two (2) weeks of pay; and in the case of all other employees two (2)
weeks of pay for each year of service up to a maximum of twelve (12) weeks pay
for these purposes and a minimum of two (2) weeks of pay; if there has been a
break in an employee's period of employment, the prior period shall be added to
the current period of employment. Fifth Third shall provide sufficient
notification to Enterprise of those employees it will not be hiring in order
that such employees terminated by Enterprise can be given appropriate notice of
termination in advance of the effectiveness thereof. Nothing contained in this
Paragraph VII.B.2 shall be construed or interpreted to limit or modify in any
way Fifth Third's at will employment policy.
3. Any officer of Enterprise or the Thrift Subsidiary who has an employment
or severance agreement with Enterprise or the Thrift Subsidiary as of September
1, 1998 (each a "Contract Officer") shall receive as of the Effective Time, the
severance or termination payments provided for in their respective employment
agreements ("Contract Payments") (provided that the Contract Payments owed under
employment agreements which are defined as "base salary and bonuses under
employee benefit plans" shall be limited to be based upon base salary and cash
bonus payments actually paid to the employee and shall not include ESOP
distributions, profit sharing distributions, share allocations on account of an
RRP (as defined herein), automobile lease payment reimbursements and other
distributions of stock or retirement benefits paid to the employee) and shall
not receive any severance payments from Enterprise and Fifth Third in connection
with the Merger, pursuant to Section VII. B.2. As a condition to receiving their
Contract Payments each Contract Officer shall sign and deliver to Fifth Third a
termination and release agreement. All such agreements shall be in the form
attached hereto as Appendix C. Notwithstanding the foregoing or any other
provision of this Agreement, in no event shall any Contract Officer receive any
payment that would be considered an "Excess Parachute Payment" pursuant to
Section 280(G) of the Code.
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C. (i) From and after the Effective Time, Fifth Third shall assume the
obligations of Enterprise and Thrift Subsidiary arising under applicable Ohio
and Federal law in existence as of the date hereof or as amended prior to the
Effective Time and under the Enterprise Articles of Incorporation and Code of
Regulations or Thrift Subsidiary Charter or Bylaws 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 or director of Enterprise, Thrift Subsidiary, or any of their
subsidiaries (the "Indemnified Parties") against losses, claims, damages, costs,
expenses (including reasonable attorneys' fees), liabilities or judgments 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 Enterprise or the Thrift Subsidiary 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 shall pay expenses
in advance of the final disposition of any such action or proceeding to each
Indemnified Party to the full extent permitted by law and under the Enterprise
Articles of Incorporation or Code of Regulations or Thrift Subsidiary's Charter
or Bylaws. Fifth Third's assumption of the indemnification obligations of
Enterprise, Thrift Subsidiary or any of their subsidiaries as provided herein
shall continue for a period of three years after the Effective Time or, in the
case of claims asserted prior to the third 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 respect 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 Enterprise 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 from 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 (3) year
period, a policy of directors' and officers' liability insurance to provide
coverage for acts or omissions of the type currently covered by Enterprise's
existing directors' and officers' liability insurance for acts or omissions
occurring on or prior to the Effective Time, but only to the extent such
insurance may be purchased or kept in full force on commercially reasonable
terms taking into account the cost thereof and the benefits provided thereby. It
is agreed that such costs shall be commercially reasonable so long as they do
not exceed 150% of the annual costs currently paid for such coverage by
Enterprise.
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 any
non-public, confidential information disclosed to it by Enterprise concerning
Enterprise or the Thrift Subsidiary. Enterprise will not disclose to others,
shall not use in respect of its (or any of its subsidiaries) business
operations, and will hold in confidence any non-public, confidential information
disclosed to it concerning Fifth Third or any of its affiliates. In the event
the Merger is not completed, all non-public financial statements, documents and
materials, and all copies thereof, shall be
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returned to Enterprise or Fifth Third, as the case may be, and shall not be used
by Fifth Third or Enterprise, as the case may be, in any way detrimental to
Enterprise or Fifth Third.
E. All notices under this Agreement or under the Agreement of Merger shall be in
wiring and shall be sufficient in all respects if delivered in person or mailed
by certified mail, return receipt requested, with postage prepaid and addressed,
if to Enterprise to Mr. Otto L. Keeton, Enterprise Federal Bancorp, Inc., 7810
Tylersville Square Drive, West Chester, Ohio 45069 with a copy to Kevin
Houlihan, Esq., Elias, Matz, Tiernan & Herrick L.L.P.,12th Floor,734 15th
Street, N.W., Washington, D.C. 20005; 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., Senior 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
Enterprise 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. 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, Enterprise shall not, and shall
not permit its representatives to, directly or indirectly, subject to the
exercise by the Directors of Enterprise 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 Enterprise or the Thrift
Subsidiary 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 Enterprise or the Thrift Subsidiary (any such
transaction being referred to herein as an "Acquisition Transaction"). Subject
to the exercise by the Directors of Enterprise of their fiduciary duties,
Enterprise promptly shall communicate to Fifth Third the terms of any proposal
which it may receive in respect of an Acquisition Transaction and any request by
or indication of interest on the part of any third party with respect to
initiation of any Acquisition Transaction or discussions with respect thereto.
H. Fifth Third and Enterprise 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 subsection shall be of no further force or effect.
I. Enterprise and the Thrift Subsidiary shall to continue operate under their
existing agreement with Midwest Payment Systems, Inc. ("MPS") by which MPS
performs all electronic funds transfer ("EFT") and related services and by which
Enterprise and the Thrift Subsidiary participate in the Jeanie(R) system. Such
Agreement provides that MPS will be the exclusive provider of such services to
Enterprise and the Thrift Subsidiary.
J. Fifth Third and Enterprise 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 thereby, and shall consult with each other as to the
form and substance of other public disclosures related thereto, provided,
however, that nothing contained herein shall prohibit either party from making
any disclosure which its counsel deems required by law, and provided, further,
however, that Fifth Third shall not be required to incorporate any comments from
Enterprise into such releases or public filings unless determined to be
appropriate by Fifth Third in good faith.
K. 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
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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.
L. 1. Between the date hereof and the Closing Date, Enterprise 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 Enterprise and its subsidiaries, taken as a whole, provided,
however, that no such information so disclosed to Fifth Third shall be deemed an
exception to any representation, warranty or covenant made by Enterprise unless
Fifth Third, in its sole discretion, agrees in writing to accept such exception.
2. Between the date hereof and the Closing Date, Fifth Third shall promptly
advise Enterprise 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 Enterprise and its subsidiaries, taken as a whole, provided,
however, that no such information so disclosed to Enterprise shall be deemed an
exception to any representation, warranty or covenant made by Fifth Third unless
Enterprise, in its sole discretion, agrees in writing to accept such exception.
VIII. TERMINATION
A. This Agreement may be terminated at any time prior to the Effective Time
by written notice delivered by Fifth Third to Enterprise or by Enterprise to
Fifth Third in the following instances:
1. By Fifth Third or Enterprise, 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 Enterprise, in each case taken as a whole, if the
business or assets or financial condition of the other party shall have
materially and adversely changed from that in existence at June 30, 1998, other
than any such change attributable to or resulting from any change in law,
regulation or GAAP, 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.
3. By Fifth Third or Enterprise, if the merger transaction contemplated
herein has not been consummated by June 30, 1999, 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 Enterprise.
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 Enterprise if any event occurs which renders impossible of
satisfaction in any material respect one or more of the conditions of the
obligations of Enterprise to effect the Merger as set forth in Sections VI.A.
and C. herein and non-compliance is not waived by Enterprise.
B. If Enterprise shareholders, acting at a meeting held for the purpose of
voting upon this Agreement and the Agreement of Merger, fail to approve such
agreements in the manner required by law, then this
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Agreement and the Agreement of Merger shall be deemed to be automatically
terminated, provided that Enterprise must be in compliance with Article IV
Section A hereof.
C. Upon termination as provided in this Section, this Agreement and the
Agreement of Merger, except for the provisions of Paragraphs D, H, J and K of
Section VII hereof shall be void and of no further force or effect, and, except
as provided in Paragraph H of Section VII 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.
IX. CLOSING AND EFFECTIVE TIME
The consummation of the transactions contemplated by this Agreement shall
take place at a closing to be held at the offices of Fifth Third in Cincinnati,
Ohio on a Friday which is as soon as is reasonably possible following the date
that all of the conditions precedent to closing set forth in Section VI hereof,
including the waiting period required by any banking or bank holding company
regulatory agency after its approval of the Merger is issued before the
transaction may be consummated, have been fully met or effectively waived (the
"Closing Date"). Pursuant to the filing of articles or a certificate of merger
(which shall be acceptable to Enterprise and Fifth Third) with the Secretary of
the State of Ohio 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 Enterprise and Fifth Third upon the authorization of each company's
respective Board of Directors at any time before or after approval of the Merger
and this Agreement by the shareholders of Enterprise, but after any such
approval by the shareholders of Enterprise no amendment shall be made (without
further shareholder approval) which changes in any manner adverse to such
shareholders the consideration to be provided to such shareholders pursuant to
this Agreement and the Agreement of Merger.
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 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 Fifth Third Common Stock shall
thereafter continue to be publicly traded and issuable to Enterprise
shareholders pursuant to the terms of this Agreement.
XII. COUNTERPARTS
This Agreement may be executed in any number of counterparts, each of which
shall be deemed an original for all purposes but such counterparts taken
together shall constitute one and the same instrument.
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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
By: /s/ ROBERT P. NIEHAUS
------------------------------------
Robert P. Niehaus
Executive Vice President
Attest: /s/ PAUL L. REYNOLDS
----------------------------------
Paul L. Reynolds
Assistant Secretary
(SEAL)
ENTERPRISE FEDERAL BANCORP, INC.
By: /s/ OTTO L. KEETON
------------------------------------
Otto L. Keeton
President
Attest: /s/ THOMAS J. NOE
----------------------------------
Thomas J. Noe
Chief Financial Officer
(SEAL)
A-26
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ANNEX B
September 25, 1998
Board of Directors
Enterprise Federal Bancorp, Inc.
7810 Tylersville Square Drive
West Chester, Ohio 45069
Dear Lady and Gentlemen:
You have requested our opinion as an independent investment banking firm
regarding the fairness, from a financial point of view, to the stockholders of
Enterprise Federal Bancorp, Inc. ("Enterprise" or the "Company"), of the
consideration to be received by such stockholders in the merger (the "Merger")
between the Company and Fifth Third Bancorp ("Fifth Third"). We have not been
requested to opine as to, and our opinion does not in any manner address, the
Company's underlying business decision to proceed with or effect the Merger.
Pursuant to the Affiliation Agreement, dated September 25,1998, by and
among the Company and Fifth Third (the "Agreement"), at the effective time of
the Merger, Fifth Third will acquire all of the Company's issued and outstanding
shares of common stock. The holders of the Company's common stock will receive
in exchange for each share of Company common stock, shares of Fifth Third common
stock based on an exchange ratio of .68516 shares of Fifth Third common stock
for each share of Company common stock.
In addition, the holders of unexercised and outstanding options awarded
pursuant to the Company's 1994 Stock Option Plan will receive merger
consideration as described in Section I-C.2. of the Agreement. The complete
terms of the proposed transaction are described in the Agreement, and this
summary is qualified in its entirety by reference thereto.
Charles Webb & Company, a Division of Keefe, Bruyette & Woods, Inc., as
part of its investment banking business, is regularly engaged in the evaluation
of businesses and securities in connection with mergers and acquisitions,
negotiated underwritings, and distributions of listed and unlisted securities.
We are familiar with the market for common stocks of publicly traded banks,
savings institutions and bank and savings institution holding companies.
In connection with this opinion we reviewed certain financial and other
business data supplied to us by the Company including (i) Annual Reports, Proxy
Statements and Form 10-Ks for the years ended September 30, 1995, 1996 and 1997,
(ii) Form 10-Qs for the quarters ended December 31, 1997, March 31, 1998, and
June 30, 1998 and other information we deemed relevant. We discussed with senior
management and the boards of directors of the Company and its wholly owned
subsidiary, Enterprise Federal Savings Bank, the current position and
prospective outlook for the Company. We considered historical quotations and the
prices of recorded transactions in the Company's common stock since its initial
public offering. We reviewed financial and stock market data of other savings
institutions, particularly in the midwestern region of the United States, and
the financial and structural terms of several other recent transactions
involving mergers and acquisitions of savings institutions or proposed changes
of control of comparably situated companies.
For Fifth Third, we reviewed the audited financial statements, 10-K's, and
Proxy Statements for the fiscal years ended December 31, 1997, 1996, and 1995,
10-Qs for the quarters ended March 31, 1998 and June 30, 1998 and certain other
information deemed relevant. We also discussed with senior management of Fifth
Third, the current position and prospective outlook for Fifth Third.
For purposes of this opinion we have relied, without independent
verification, on the accuracy and completeness of the material furnished to us
by the Company and Fifth Third and the material otherwise made available to us,
including information from published sources, and we have not made any
independent effort to verify such data. With respect to the financial
information, including forecasts and asset valuations we received from the
Company, we assumed (with your consent) that they had been reasonably prepared
reflecting the best currently available estimates and judgment of the Company's
management. In addition, we have not made or obtained any independent appraisals
or evaluations of the assets or liabilities, and potential
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Board of Directors
Enterprise Federal Bancorp, Inc.
September 25, 1998
Page 2
and/or contingent liabilities of the Company or Fifth Third. We have further
relied on the assurances of management of the Company and Fifth Third that they
are not aware of any facts that would make such information inaccurate or
misleading. We express no opinion on matters of a legal, regulatory, tax or
accounting nature or the ability of the Merger, as set forth in the Agreement,
to be consummated.
In rendering our opinion, we have assumed that in the course of obtaining
the necessary approvals for the Merger, no restrictions or conditions will be
imposed that would have a material adverse effect on the contemplated benefits
of the Merger to the Company or the ability to consummate the Merger. Our
opinion is based on the market, economic and other relevant considerations as
they exist and can be evaluated on the date hereof.
Consistent with the engagement letter with you, we have acted as financial
advisor to the Company in connection with the Merger and will receive a fee for
such services, all of which is contingent upon the consummation of the Merger.
In addition, the Company has agreed to indemnify us for certain liabilities
arising out of our engagement by the Company in connection with the Merger.
Based upon and subject to the foregoing, as outlined in the foregoing
paragraphs and based on such other matters as we considered relevant, it is our
opinion that as of the date hereof, the consideration to be received by the
stockholders of the Company in the Merger is fair, from a financial point of
view, to the stockholders of the Company.
This opinion may not, however, be summarized, excerpted from or otherwise
publicly referred to without our prior written consent, although this opinion
may be included in its entirety in the proxy statement of the Company used to
solicit stockholder approval of the Merger. It is understood that this letter is
directed to the Board of Directors of the Company in its consideration of the
Agreement, and is not intended to be and does not constitute a recommendation to
any stockholder as to how such stockholder should vote with respect to the
Merger.
Very truly yours,
/s/ Charles Webb & Company,
a Division of Keefe, Bruyette, & Woods, Inc.
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<PAGE> 83
ANNEX C
OHIO REVISED CODE
TITLE XVII CORPORATIONS -- PARTNERSHIPS
CHAPTER 1701: GENERAL CORPORATION LAW
SEC. 1701.85 QUALIFICATIONS OF AND PROCEDURES FOR DISSENTING SHAREHOLDERS
(A) (1) A shareholder of a domestic corporation is entitled to relief as a
dissenting shareholder in respect of the proposals described in sections
1701.74, 1701.76, and 1701.84 of the Revised Code, only in compliance with this
section.
(2) If the proposal must be submitted to the shareholders of the
corporation involved, the dissenting shareholder shall be a record holder of the
shares of the corporation as to which he seeks relief as of the date fixed for
the determination of shareholders entitled to notice of a meeting of the
shareholders at which the proposal is to be submitted, and such shares shall not
have been voted in favor of the proposal. Not later than ten days after the date
on which the vote on the proposal was taken at the meeting of the shareholders,
the dissenting shareholder shall deliver to the corporation a written demand for
payment to him of the fair cash value of the shares as to which he seeks relief,
which demand shall state his address, the number and class of such shares, and
the amount claimed by him as the fair cash value of the shares.
(3) The dissenting shareholder entitled to relief under division (C) of
section 1701.84 of the Revised Code in the case of a merger pursuant to section
1701.80 of the Revised Code and a dissenting shareholder entitled to relief
under division (E) of section 1701.84 of the Revised Code in the case of a
merger pursuant to section 1701.801 of the Revised Code shall be a record holder
of the shares of the corporation as to which he seeks relief as of the date on
which the agreement of merger was adopted by the directors of that corporation.
Within twenty days after he has been sent the notice provided in section 1701.80
or 1701.801 of the Revised Code, the dissenting shareholder shall deliver to the
corporation a written demand for payment with the same information as that
provided for in division (A)(2) of this section.
(4) In the case of a merger or consolidation, a demand served on the
constituent corporation involved constitutes service on the surviving or the new
entity, whether the demand is served before, on, or after the effective date of
the merger or consolidation.
(5) If the corporation sends to the dissenting shareholder, at the address
specified in his demand, a request for the certificates representing the shares
as to which he seeks relief, the dissenting shareholder, within fifteen days
from the date of the sending of such request, shall deliver to the corporation
the certificates requested so that the corporation may forthwith endorse on them
a legend to the effect that demand for the fair cash value of such shares has
been made. The corporation promptly shall return such endorsed certificates to
the dissenting shareholder. A dissenting shareholder's failure to deliver such
certificates terminates his rights as a dissenting shareholder, at the option of
the corporation, exercised by written notice sent to the dissenting shareholder
within twenty days after the lapse of the fifteen-day period, unless a court for
good cause shown otherwise directs. If shares represented by a certificate on
which such a legend has been endorsed are transferred, each new certificate
issued for them shall bear a similar legend, together with the name of the
original dissenting holder of such shares. Upon receiving a demand for payment
from a dissenting shareholder who is the record holder of uncertificated
securities, the corporation shall make an appropriate notation of the demand for
payment in its shareholder records. If uncertificated shares for which payment
has been demanded are to be transferred, any new certificate issued for the
shares shall bear the legend required for certificated securities as provided in
this paragraph. A transferee of the shares so endorsed, or of uncertificated
securities where such notation has been made, acquires only such rights in the
corporation as the original dissenting holder of such shares had immediately
after the service of a demand for payment of the fair cash value of the shares.
A request under this paragraph by the corporation is not an admission by the
corporation that the shareholder is entitled to relief under this section.
(B) Unless the corporation and the dissenting shareholder have come to an
agreement on the fair cash value per share of the shares as to which the
dissenting shareholder seeks relief, the dissenting shareholder or
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the corporation, which in case of a merger or consolidation may be the surviving
or new entity, within three months after the service of the demand by the
dissenting shareholder, may file a complaint in the court of common pleas of the
county in which the principal office of the corporation that issued the shares
is located or was located when the proposal was adopted by the shareholders of
the corporation, or, if the proposal was not required to be submitted to the
shareholders, was approved by the directors. Other dissenting shareholders,
within that three-month period, may join as plaintiffs or may be joined as
defendants in any such proceeding, and any two or more such proceedings may be
consolidated. The complaint shall contain a brief statement of the facts,
including the vote and the facts entitling the dissenting shareholder to the
relief demanded. No answer to such a complaint is required. Upon the filing of
such a complaint, the court, on motion of the petitioner, shall enter an order
fixing a date for a hearing on the complaint and requiring that a copy of the
complaint and a notice of the filing and of the date for hearing be given to the
respondent or defendant in the manner in which summons is required to be served
or substituted service is required to be made in other cases. On the day fixed
for the hearing on the complaint or any adjournment of it, the court shall
determine from the complaint and from such evidence as is submitted by either
party whether the dissenting shareholder is entitled to be paid the fair cash
value of any shares and, if so, the number and class of such shares. If the
court finds that the dissenting shareholder is so entitled, the court may
appoint one or more persons as appraisers to receive evidence and to recommend a
decision on the amount of the fair cash value. The appraisers have such power
and authority as is specified in the order of their appointment. The court
thereupon shall make a finding as to the fair cash value of a share and shall
render judgment against the corporation for the payment of it, with interest at
such rate and from such date as the court considers equitable. The costs of the
proceeding, including reasonable compensation to the appraisers to be fixed by
the court, shall be assessed or apportioned as the court considers equitable.
The proceeding is a special proceeding and final orders in it may be vacated,
modified, or reversed on appeal pursuant to the Rules of Appellate Procedure
and, to the extent not in conflict with those rules, Chapter 2505. of the
Revised Code. If, during the pendency of any proceeding instituted under this
section, a suit or proceeding is or has been instituted to enjoin or otherwise
to prevent the carrying out of the action as to which the shareholder has
dissented, the proceeding instituted under this section shall be stayed until
the final determination of the other suit or proceeding. Unless any provision in
division (D) of this section is applicable, the fair cash value of the shares
that is agreed upon by the parties or fixed under this section shall be paid
within thirty days after the date of final determination of such value under
this division, the effective date of the amendment to the articles, or the
consummation of the other action involved, whichever occurs last. Upon the
occurrence of the last such event, payment shall be made immediately to a holder
of uncertificated securities entitled to such payment. In the case of holders of
shares represented by certificates, payment shall be made only upon and
simultaneously with the surrender to the corporation of the certificates
representing the shares for which the payment is made.
(C) If the proposal was required to be submitted to the shareholders of the
corporation, fair cash value as to those shareholders shall be determined as of
the day prior to the day on which the vote by the shareholders was taken and, in
the case of a merger pursuant to section 1701.80 or 1701.801 of the Revised
Code, fair cash value as to shareholders of a constituent subsidiary corporation
shall be determined as of the day before the adoption of the agreement of merger
by the directors of the particular subsidiary corporation. The fair cash value
of a share for the purposes of this section is the amount that a willing seller
who is under no compulsion to sell would be willing to accept and that a willing
buyer who is under no compulsion to purchase would be willing to pay, but in no
event shall the fair cash value of a share exceed the amount specified in the
demand of the particular shareholder. In computing such fair cash value, any
appreciation or depreciation in market value resulting from the proposal
submitted to the directors or to the shareholders shall be excluded.
(D) (1) The right and obligation of a dissenting shareholder to receive
such fair cash value and to sell such shares as to which he seeks relief, and
the right and obligation of the corporation to purchase such shares and to pay
the fair cash value of them terminates if any of the following applies:
(a) The dissenting shareholder has not complied with this section,
unless the corporation by its directors waives such failure;
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(b) The corporation abandons the action involved or is finally
enjoined or prevented from carrying it out, or the shareholders rescind
their adoption of the action involved;
(c) The dissenting shareholder withdraws his demand, with the consent
of the corporation by its directors;
(d) The corporation and the dissenting shareholder have not come to an
agreement as to the fair cash value per share, and neither the shareholder
nor the corporation has filed or joined in a complaint under division (B)
of this section within the period provided in that division.
(2) For purposes of division (D)(1) of this section, if the merger or
consolidation has become effective and the surviving or new entity is not a
corporation, action required to be taken by the directors of the corporation
shall be taken by the general partners of a surviving or new partnership or the
comparable representatives of any other surviving or new entity.
(E) From the time of the dissenting shareholder's giving of the demand
until either the termination of the rights and obligations arising from it or
the purchase of the shares by the corporation, all other rights accruing from
such shares, including voting and dividend or distribution rights, are
suspended. If during the suspension, any dividend or distribution is paid in
money upon shares of such class or any dividend, distribution, or interest is
paid in money upon any securities issued in extinguishment of or in substitution
for such shares, an amount equal to the dividend, distribution, or interest
which, except for the suspension, would have been payable upon such shares or
securities, shall be paid to the holder of record as a credit upon the fair cash
value of the shares. If the right to receive fair cash value is terminated other
than by the purchase of the shares by the corporation, all rights of the holder
shall be restored and all distributions which, except for the suspension, would
have been made shall be made to the holder of record of the shares at the time
of termination.
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ANNEX D
ACQUIRING PERSON STATEMENT
1. The identity of the "Acquiring Person" is: Fifth Third Bancorp, a
corporation organized and existing under the laws of the State of Ohio and
registered as a bank holding company under the Bank Holding Company Act of 1956,
as amended (the "Acquiring Person").
2. This Acquiring Person Statement is being given by the Acquiring Person
pursuant to Section 1701.831 of the Ohio Revised Code.
3. The number of common shares, $.01 par value, of Enterprise Federal
Bancorp, Inc., a corporation organized and existing under the laws of the State
of Ohio and a savings and loan holding company under Section 10 of the Home
Owners Loan Act, as amended, owned, directly or indirectly, by the Acquiring
Person on the date of this statement is: None.
4. The range of voting power, described in division (Z)(1) of Section
1701.01 of the Ohio Revised Code, under which the proposed control share
acquisition will, if and on the date it is consummated, falls is (c) a majority
or more of such voting power.
5. The proposed control share acquisition is to be consummated on the terms
contained in the affiliation agreement dated as of September 25, 1998 between
the Acquiring Person and Enterprise Federal Bancorp, Inc. (the "Affiliation
Agreement"), a copy of which is attached hereto as Exhibit A.
6. The acquiring Person hereby represents that the proposed control share
acquisition, if consummated in accordance with the terms of the Affiliation
Agreement, will not be contrary to law and hereby further represents that the
Acquiring Person has the financial capacity to make the proposed control share
acquisition.
IN WITNESS WHEREOF, the undersigned has caused this Acquiring Person
Statement to be executed and delivered to Enterprise Federal Bancorp, Inc. this
11th day of March, 1999.
FIFTH THIRD BANCORP
By: /s/ PAUL L. REYNOLDS
------------------------------------
Name: Paul L. Reynolds
Title: Assistant Secretary
D-1
