<PAGE> 1
Filed Pursuant to Rule 424(b)(3)
SOUTH FLORIDA BANK HOLDING CORPORATION
2017 McGregor Boulevard
Fort Myers, Florida 33901
April 2, 1999
Dear Shareholder:
On behalf of the board of directors, I cordially invite you to attend a
special meeting of shareholders of South Florida Bank Holding Corporation, which
will be held at 4:00 p.m., Eastern Daylight Savings Time, on May 12, 1999, at
1500 Colonial Boulevard, Ft. Myers, Florida.
At the special meeting, you will be asked to consider and vote upon a
proposal to approve the affiliation agreement dated as of October 22, 1998
between Fifth Third Bancorp and South Florida. Pursuant to the affiliation
agreement, South Florida will merge into Fifth Third. The consummation of the
merger is subject to various conditions, including the receipt of South Florida
shareholder approval and of all required regulatory approvals.
At the time the merger becomes effective, each share of common stock of
South Florida will be canceled and converted, by virtue of the merger, into the
right to receive .34800 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 31, 1999, the
value of the .34800 of a share of Fifth Third common stock was $22.95. The
actual value of the Fifth Third common stock to be received by South Florida
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 SOUTH FLORIDA
HAS THE RIGHT TO EXERCISE ITS TERMINATION RIGHT, AS DESCRIBED IN THE PROXY
STATEMENT/ PROSPECTUS. WE ANTICIPATE THE BOARD OF DIRECTORS WOULD EXERCISE SUCH
DISCRETION WITHOUT A RESOLICITATION OF SHAREHOLDERS.
THE AFFILIATION AGREEMENT MUST BE APPROVED BY THE AFFIRMATIVE VOTE OF AT
LEAST A MAJORITY OF THE ISSUED AND OUTSTANDING SHARES OF SOUTH FLORIDA COMMON
STOCK ENTITLED TO VOTE. AN ABSTENTION OR FAILURE TO VOTE HAS THE SAME EFFECT AS
A VOTE AGAINST THE PROPOSAL. IT IS, THEREFORE, IMPORTANT THAT YOU VOTE.
Your vote is very important, regardless of the number of shares you own.
Please sign and return the proxy card in the postage-paid return envelope
provided for your convenience. This will not prevent you from voting in person,
but will assure that your vote is counted if you are unable to attend the
special meeting.
Please vote and return your proxy today.
Sincerely,
William P. Valenti
President and Chief Executive Officer
IMPORTANT: If your shares of South Florida 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 William P. Valenti, President and Chief Executive Officer at South
Florida, (941) 334-2020.
<PAGE> 2
SOUTH FLORIDA BANK HOLDING CORPORATION
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
TO BE HELD ON MAY 12, 1999
NOTICE IS HEREBY GIVEN that a special meeting of shareholders of South
Florida Bank Holding Corporation will be held on May 12, 1999 at 4:00 p.m.,
Eastern Daylight Savings Time, at 1500 Colonial Boulevard, Ft. Myers, Florida.
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 October
22, 1998 between Fifth Third Bancorp and South Florida. Pursuant to the
affiliation agreement, South Florida will merge into Fifth Third. At the
time the merger becomes effective, each share of common stock of South
Florida will be converted by virtue of the merger into the right to receive
.34800 of a share of Fifth Third common stock, with cash paid in lieu of
fractional shares at the market value of Fifth Third common stock on the
effective date of the merger.
Approval of the proposal will also authorize the South Florida board
of directors to exercise its discretion whether to proceed with the merger
in the event that South Florida 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 bylaws of South Florida, the Board of Directors has fixed
March 30, 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 South Florida common stock at the close
of business on the record date will be entitled to vote at the special meeting
or any adjournments thereof.
THE AFFIRMATIVE VOTE OF AT LEAST A MAJORITY OF THE ISSUED AND OUTSTANDING
SHARES OF SOUTH FLORIDA COMMON STOCK ENTITLED TO VOTE IS REQUIRED TO APPROVE THE
AFFILIATION AGREEMENT. IN THE EVENT THERE ARE NOT SUFFICIENT VOTES TO APPROVE
THE FOREGOING PROPOSAL AT THE TIME OF THE MEETING, THE MEETING MAY BE ADJOURNED
BY A MAJORITY OF THE VOTES CAST IN ORDER TO PERMIT FURTHER SOLICITATION OF
PROXIES BY SOUTH FLORIDA; 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
SOUTH FLORIDA HAS THE RIGHT TO EXERCISE ITS TERMINATION RIGHT. SOUTH FLORIDA
EXPECTS THAT THE SOUTH FLORIDA BOARD OF DIRECTORS WOULD EXERCISE SUCH DISCRETION
AND DECIDE WHETHER TO TERMINATE THE AFFILIATION AGREEMENT WITHOUT A
RESOLICITATION OF SHAREHOLDERS.
SOUTH FLORIDA SHAREHOLDERS ARE ENTITLED TO ASSERT DISSENTERS' RIGHTS
PURSUANT TO THE FLORIDA BUSINESS COMBINATION ACT. THE PROXY STATEMENT/PROSPECTUS
DESCRIBES YOUR RIGHTS TO DISSENT FROM THE MERGER AND THE PROCEDURES YOU MUST
FOLLOW TO EXERCISE THOSE RIGHTS. A COPY OF THE DISSENTERS' RIGHTS PROVISIONS
ALSO IS ATTACHED TO THE ENCLOSED PROXY STATEMENT/PROSPECTUS AS ANNEX C.
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
<PAGE> 3
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 SOUTH FLORIDA IN WRITING ADDRESSED TO AND RECEIVED BY
THE SECRETARY OF SOUTH FLORIDA BEFORE THE SPECIAL MEETING.
By Order of the Board of Directors
William P. Valenti
President and Chief Executive Officer
Fort Myers, Florida
April 2, 1999
<PAGE> 4
------------------------------------------------------
PROXY STATEMENT FOR SOUTH FLORIDA BANK HOLDING CORPORATION
------------------------------------------------------
PROSPECTUS OF FIFTH THIRD BANCORP
------------------------------------------------------
The boards of directors of South Florida Bank Holding Corporation and Fifth
Third Bancorp have agreed that Fifth Third will acquire South Florida in a
merger. If the merger is approved by the shareholders of South Florida and all
other closing conditions are satisfied, each outstanding share of South Florida
common stock will be exchanged for .34800 of a share of Fifth Third common
stock. In connection with the merger, South Florida's wholly-owned bank
subsidiary, South Florida Bank, a Florida banking corporation, will be acquired
by Fifth Third Bank, Florida. The board of directors of South Florida believes
that the merger is in South Florida's and your best interests.
The merger cannot be completed unless the shareholders of South Florida
approve the merger. South Florida 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:
4:00 p.m., Eastern Daylight Savings Time
May 12, 1999
1500 Colonial Boulevard
Ft. Myers, Florida
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 7.
------------------------------------------------------
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 April 2, 1999
<PAGE> 5
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
QUESTIONS AND ANSWERS ABOUT THE MERGER...................... 1
SUMMARY..................................................... 2
RISK FACTORS................................................ 7
THE SPECIAL MEETING......................................... 10
Purpose of the Special Meeting............................ 10
Voting and Revocability of Proxies........................ 10
Vote Required............................................. 10
Solicitation of Proxies................................... 10
PROPOSAL -- MERGER OF SOUTH FLORIDA INTO FIFTH THIRD........ 11
Structure of the Merger................................... 11
Corporate Governance...................................... 11
Merger Consideration...................................... 11
No Fractional Shares...................................... 11
Effective Time of the Merger.............................. 12
Exchange of Certificates.................................. 12
Background of the Merger.................................. 12
Reasons for the Merger.................................... 15
Opinion of Financial Advisor to South Florida............. 15
Federal Income Tax Consequences........................... 20
Accounting Treatment...................................... 22
Resale of Fifth Third Common Stock by Affiliates.......... 22
Dissenters' Rights of Appraisal........................... 23
TERMS OF THE AFFILIATION AGREEMENT.......................... 24
Representations and Warranties............................ 24
Conduct Pending Merger.................................... 24
Conditions to Closing..................................... 25
Termination; Amendment; Waiver............................ 26
Interests of Certain Persons in the Merger................ 27
Effect on South Florida Employees......................... 28
FIFTH THIRD BANCORP......................................... 28
Description of Business................................... 28
Recent Developments....................................... 29
Additional Information.................................... 30
SOUTH FLORIDA BANK HOLDING CORPORATION...................... 30
Description of Business................................... 30
Additional Information.................................... 30
SELECTED HISTORICAL FINANCIAL DATA OF FIFTH THIRD........... 31
SELECTED HISTORICAL FINANCIAL DATA OF SOUTH FLORIDA......... 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......................................... 36
Rights Upon Liquidation................................... 37
Indemnification and Personal Liability of Directors and
Officers............................................... 37
Shareholders' Meetings; Quorum............................ 38
Subscription, Conversion, Redemption Rights; Stock
Nonassessable.......................................... 38
Change of Control Provisions.............................. 38
EFFECT OF GOVERNMENTAL POLICIES............................. 40
REGULATION OF FINANCIAL INSTITUTIONS........................ 40
Holding Company Regulation................................ 40
Capital Requirements...................................... 41
Regulation of Banks....................................... 41
LEGAL MATTERS............................................... 41
EXPERTS..................................................... 42
WHERE YOU CAN FIND MORE INFORMATION......................... 42
</TABLE>
ANNEXES:
<TABLE>
<S> <C>
Annex A: Affiliation Agreement dated as of October 22, 1998 by and
between Fifth Third Bancorp and South Florida Bank Holding
Corporation (excluding exhibits)
Annex B: Fairness Opinion of The Carson Medlin Company
Annex C: Sections 607.1301, 607.1302 and 607.1320 of the Florida
Business Corporation Act
</TABLE>
ii
<PAGE> 7
QUESTIONS AND ANSWERS ABOUT THE MERGER
Q: WHY DO SOUTH FLORIDA AND FIFTH THIRD WANT TO MERGE?
A: South Florida believes that shareholder value will be maximized and that its
customers will benefit from an affiliation with Fifth Third. Fifth Third
wants to expand Fifth Third's presence in South Florida's service areas.
Q: HOW WILL I BENEFIT?
A: The South Florida board of directors believes that you will benefit by
becoming a shareholder of a bank holding company with a strong financial
performance record. The South Florida 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 SOUTH FLORIDA SHARES?
A: You will receive .34800 of a share of Fifth Third common stock for each
share of South Florida 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
31, 1999, the value of .34800 of a share of Fifth Third common stock was
$22.95.
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 federal and state banking regulatory
authorities and the satisfaction of other closing conditions. We expect the
merger to be completed in June, 1999.
Q: WHEN AND WHERE WILL THE SPECIAL MEETING TAKE PLACE?
A: The special meeting will be held at 4:00 p.m., Eastern Daylight Savings
Time, on May 12, 1999 at 1500 Colonial Boulevard, Ft. Myers, Florida.
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 10. 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 William P. Valenti,
President and Chief Executive Officer at South Florida, at (941) 334-2020.
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 South Florida, see "Where You Can Find More Information." (page 42)
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 $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."
SOUTH FLORIDA BANK HOLDING CORPORATION
2017 MCGREGOR BOULEVARD
FT. MYERS, FLORIDA 33901
(941) 334-2020
South Florida is a registered bank holding company, incorporated under Florida
law, which conducts its principal activities through South Florida Bank. South
Florida Bank began operations in 1988 to serve the banking needs of the
residents of Fort Myers, Florida and surrounding communities. Currently, South
Florida Bank operates four banking offices in Lee County, Florida. At December
31, 1998, South Florida, on a consolidated basis, had assets of $90.2 million,
deposits of $77.0 million, and shareholders' equity of approximately $9.3
million.
THE MERGER
Pursuant to the affiliation agreement between South Florida and Fifth Third
dated as of October 22, 1998, at the effective time of the merger, South Florida
will merge into Fifth Third. Fifth Third will issue shares of its common stock
to the existing shareholders of South Florida in exchange for their shares. In a
simultaneous transaction, South Florida Bank will merge with and into Fifth
Third Bank, Florida.
SOUTH FLORIDA SHAREHOLDERS WILL RECEIVE
FIFTH THIRD STOCK IN THE MERGER
If the merger is approved, you will have the right to receive .34800 of a
share of Fifth Third common stock for each share of South Florida 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 31, 1999, the value of .34800 of a share of Fifth Third common
stock was $22.95.
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 benefits 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 received. The material federal
income tax consequences are set out in greater detail on page 20.
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 South Florida board believes that in the rapidly changing environment of
the banking industry, the long-term goal of enhancing shareholder value will be
met by merging with Fifth Third. In addition, the South Florida board believes
that the customers and communities of South Florida will benefit from the
merger.
You can find a more detailed discussion of the background to the affiliation
agreement and South Florida's and Fifth Third's reasons for the merger in this
document under "Proposal -- Merger of South Florida Into Fifth
Third -- Background of the Merger" and "-- Reasons for the Merger," beginning on
pages 12 and 15, respectively.
OPINION OF FINANCIAL ADVISOR
In deciding to approve the merger, the South Florida board considered an
opinion from The Carson Medlin Company, the financial advisor to South Florida,
that the merger consideration is fair from a financial viewpoint. This opinion
has been updated at March 31, 1999, the most recent practicable date prior to
the printing of this document and is attached as Annex B to this document. We
encourage you to read and consider this opinion.
RECOMMENDATION TO SOUTH FLORIDA SHAREHOLDERS
The South Florida 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 at least
a majority of the shares of South Florida common stock outstanding at the close
of business on March 30, 1999.
Approval of the affiliation agreement will also authorize the South Florida
board to exercise its discretion on whether to proceed with the merger in the
event South Florida has the right to terminate the affiliation agreement. Such
determination may be made without notice to, or the resolicitation of proxies
from, the South Florida shareholders.
OWNERSHIP OF FIFTH THIRD FOLLOWING THE MERGER
Based on the number of shares of Fifth Third and South Florida common stock
outstanding on the record date, Fifth Third will issue approximately 440,000
shares of its common stock to South Florida shareholders in connection with the
merger. This will constitute approximately .16% of the outstanding stock of
Fifth Third immediately after the merger.
CONDITIONS TO THE MERGER
Fifth Third and South Florida 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 South Florida shareholders;
- the receipt of certain regulatory approvals under federal and state banking
laws and expiration of any waiting periods;
- receipt by South Florida of an opinion from Graydon, Head & Ritchey, counsel
to Fifth Third, that the exchange of shares by South Florida shareholders
will be tax free to South Florida shareholders for federal income tax
purposes, except for fractional and dissenters' shares; and
- the receipt by Fifth Third of noncompetition agreements executed by the
directors of South Florida
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 South Florida 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 South Florida shareholders do not approve the affiliation agreement.
3
<PAGE> 10
INTERESTS OF CERTAIN PERSONS IN THE MERGER
When considering the South Florida board's recommendation that South Florida
shareholders vote in favor of the merger, you should be aware that certain South
Florida directors and officers may have interests in the merger that are
different from, or in addition to, yours.
William P. Valenti, President and Chief Executive Officer of South Florida,
and Harold S. Taylor, Executive Vice President and Senior Loan Officer of South
Florida, will receive cash payments equal to $273,031 and $131,793,
respectively, at the closing of the merger from South Florida pursuant to the
terms of their employment agreements with South Florida. Each employee of South
Florida and South Florida 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 South Florida, will 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.
Fifth Third will also assume all provisions for indemnification and limitation
of liability now existing in favor of the directors and officers of South
Florida 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 South Florida'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 SOUTH FLORIDA EMPLOYEES
Fifth Third will consider employing as many of the employees of South Florida
and South Florida 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 South Florida and South Florida Bank.
DISSENTERS' RIGHTS OF APPRAISAL
If you (1) do not vote in favor of the approval of the affiliation agreement,
(2) deliver written notice of your intent to demand payment of the value of your
South Florida common stock before the vote on the affiliation agreement is taken
and (3) file a notice of your election to dissent within 20 days after you
receive notice of the approval of the affiliation agreement, you will be
entitled, if and when the merger is consummated, to receive the fair cash value
of your shares of South Florida common stock rather than the merger
consideration. Your right to exercise your dissenter's rights, however, is
contingent upon your strict compliance with the requirement of Sections
607.1301, 607.1302 and 607.1320 of the Florida Business Corporation Act, a copy
of which is attached hereto as Annex C. If you intend to submit a written demand
for payment of the fair cash value of South Florida common stock you should
deliver written notice of such intent before May 12, 1999, to William P.
Valenti, President and Chief Executive Officer, South Florida Bank Holding
Corporation, 2017 McGregor Boulevard, Ft. Myers, Florida 33901.
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 Enterprise Federal Bancorp, Inc., a
Cincinnati, Ohio based savings and loan holding company, Ashland Bankshares,
Inc., a bank holding company headquartered in Ashland, Kentucky 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 31, 1999, Fifth Third expects to issue Fifth Third shares with an
aggregate value of approximately $108.1 million, $80.8 million and $226.2
million to shareholders of Enterprise, Ashland and Emerald, respectively,
representing approximately 2.4% of Fifth Third's outstanding shares. The
Enterprise and Ashland acquisitions are expected to be completed during the
second quarter of 1999 either shortly before or after the completion of the
merger with South Florida. The Emerald acquisition is expected to be completed
in the third quarter of 1999.
4
<PAGE> 11
MARKET PRICE AND DIVIDEND DATA
Fifth Third common stock is traded on the Nasdaq National Market under the
symbol "FITB." On October 21, 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 31, 1999, the most recent practicable date
prior to the printing of this document, the market prices (closing sales prices)
of Fifth Third common stock were $64.81 and $65.94, respectively.
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
-----------------------------
DIVIDENDS
HIGH LOW DECLARED
------ ------ ---------
<S> <C> <C> <C>
1996:
First Calendar Quarter...................................... $26.44 $19.33 $0.116
Second Calendar Quarter..................................... $25.78 $22.00 $0.116
Third Calendar Quarter...................................... $25.94 $22.11 $0.129
Fourth Calendar Quarter..................................... $33.00 $25.56 $0.129
1997:
First Calendar Quarter...................................... $39.78 $27.00 $0.129
Second Calendar Quarter..................................... $38.06 $30.94 $0.147
Third Calendar Quarter...................................... $44.33 $36.33 $0.147
Fourth Calendar Quarter..................................... $55.67 $41.08 $0.147
1998:
First Calendar Quarter...................................... $58.83 $49.50 $0.170
Second Calendar Quarter..................................... $63.13 $47.50 $0.170
Third Calendar Quarter...................................... $67.25 $49.25 $0.170
Fourth Calendar Quarter..................................... $74.13 $50.31 $0.200
1999:
First Calendar Quarter ..................................... $75.44 $62.38 $0.200
</TABLE>
South Florida common stock does not trade in any established public market.
The last sale of South Florida common stock occurred on March 2, 1999 at a price
of $17.50 per share. For calendar years 1997 and 1998, South Florida declared
cash dividends of $.20 per share which were paid in February 1998 and February
1999, respectively.
5
<PAGE> 12
COMPARATIVE PER SHARE DATA
The following table sets forth certain per-share information for both Fifth
Third and South Florida at the dates indicated and for the periods then ended.
The equivalent values of such information are based on the exchange ratio of
.34800 of a share of Fifth Third common stock for each share of South Florida
common stock. Neither South Florida 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 SHARE
BASIS -- .34800
OF A SHARE OF
FIFTH THIRD
FIFTH THIRD SOUTH FLORIDA COMMON STOCK
-------------------------------------- ---------------- ----------------
HISTORICAL PRO FORMA HISTORICAL
----------------- ----------------- ----------------
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 $1.37 $1.36 $0.63 $0.61
1997................. $ 1.76 $1.73 $ 1.76 $1.73 $1.18 $1.15 $0.61 $0.60
1996................. $ 1.45 $1.42 $ 1.45 $1.42 $0.83 $0.82 $0.50 $0.49
1995................. $ 1.31 $1.27 $ 1.31 $1.27 $0.59 $0.59 $0.46 $0.44
DIVIDENDS DECLARED
PER SHARE
Twelve months ended
December 31:
1998................. $0.710 $ -- $0.710 $ -- $0.20 $ -- $0.25 $ --
1997................. $0.569 $ -- $0.569 $ -- $0.20 $ -- $0.20 $ --
1996................. $0.489 $ -- $0.489 $ -- $ -- $ -- $0.17 $ --
1995................. $0.427 $ -- $0.427 $ -- $ -- $ -- $0.15 $ --
BOOK VALUE PER SHARE
At December 31, 1998: $11.91 $ -- $11.92 $ -- $7.38 $ -- $4.14 $ --
</TABLE>
6
<PAGE> 13
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 South Florida's
shareholders will not be known at the time of the special meeting. The
affiliation agreement provides that .34800 of a share of Fifth Third common
stock will be issued in the merger in exchange for each share of South Florida
common stock. This exchange ratio is fixed and will not be adjusted to reflect
any changes in the value of either South Florida 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 time of the special meeting.
NO MARKET EXISTS FOR SOUTH FLORIDA COMMON STOCK AND ITS VALUE IN THE MERGER
HAS BEEN SUBJECTIVELY DETERMINED.
South Florida's Board of Directors has subjectively determined that the
exchange ratio offered by Fifth Third is fair to South Florida's shareholders
and has received a financial opinion from The Carson Medlin Company to that
effect. South Florida's Board also believes that the financial terms of the
merger are the most favorable that South Florida could obtain at this time based
upon its negotiations with Fifth Third and other potential acquirors. However,
South Florida's securities are not traded on any securities exchange or other
public securities market. Therefore, the actual value of South Florida common
stock may be more or less than the proposed merger consideration.
SOUTH FLORIDA'S SHAREHOLDERS WILL HAVE NO CONTROL OF FIFTH THIRD'S FUTURE
OPERATIONS.
South Florida's shareholders own 100% of South Florida and, in the
aggregate, have the power to approve or reject any matters requiring the
approval of shareholders under Florida law and South Florida's articles of
incorporation. After the merger, South Florida's shareholders in the aggregate
will hold approximately 0.16% of the outstanding shares of Fifth Third common
stock. Even if all of the former South Florida 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 SOUTH FLORIDA WILL RECEIVE
BENEFITS IN THE MERGER IN ADDITION TO THE MERGER CONSIDERATION RECEIVED BY ALL
OTHER SOUTH FLORIDA SHAREHOLDERS.
Pursuant to the terms of separate employment agreements between South
Florida and William P. Valenti, President and Chief Executive Officer of South
Florida, and Harold S. Taylor, Executive Vice President and Senior Loan Officer
of South Florida, South Florida has agreed that it will pay, at the closing of
the merger, all amounts payable under the agreements entered into with them. As
to Mr. Valenti, the amount is $273,031 and, as to Mr. Taylor, $131,793. Under
the affiliation agreement, Fifth Third will assume all provisions for
indemnification and limitation of liability now existing in favor of the
directors and officers of South Florida 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 South Florida's existing
directors' and officers' liability insurance for acts or omission occurring at
or prior to the merger as long as such coverage may be obtained on a
commercially reasonable basis.
7
<PAGE> 14
SOUTH FLORIDA MAY ENCOUNTER PROBLEMS IN CONTINUING TO OPERATE SOUTH FLORIDA
INDEPENDENTLY THAT MAY DIMINISH THE VALUE OF SOUTH FLORIDA'S STOCK IN THE
FUTURE.
If the merger is not consummated, South Florida's shareholders should be
aware that South Florida's continuing operations will involve numerous risks. In
deciding to pursue the sale of South Florida, the South Florida directors
considered several factors including:
- the increasingly competitive banking environment in which South Florida
operates;
- the increased competition in both deposit and lending activities;
- the need to provide an array of securities and non-depository products to
South Florida customers to remain competitive with those afforded by
other larger and more diversified financial institutions;
- the increasing investment in intellectual property and data processing
systems required to remain current with technological developments and
customers' needs in a diversifying financial market;
- the inherent risks in relying on future internal growth and marketing
penetration to provide value to South Florida shareholders; and
- the prices being received for sales of financial institutions in the
prevailing market could decline over the ensuing years.
If these potential problems arose and are not adequately resolved by South
Florida, the value of South Florida's stock may diminish.
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 South Florida. 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.
8
<PAGE> 15
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 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 South
Florida, 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.
9
<PAGE> 16
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 South Florida
of proxies to be used at the special meeting to be held on May 12, 1999, at 4:00
p.m., Eastern Daylight Savings Time, at 1500 Colonial Boulevard, Ft. Myers,
Florida, and at any adjournments thereof. This document, the enclosed Fifth
Third 1998 Annual Report to Shareholders, the South Florida Form 10-KSB for the
year ended December 31, 1998 and the enclosed form of proxy are first being sent
to you on or about April 7, 1999.
PURPOSE OF THE SPECIAL MEETING
The purpose of the special meeting of South Florida shareholders is to
approve the affiliation agreement, and the transactions contemplated thereby,
including the merger of South Florida with and into Fifth Third. South Florida
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 South Florida 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 South
Florida 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 William P. Valenti, President and Chief
Executive Officer at South Florida Bank Holding Corporation, 2017 McGregor
Boulevard, Ft. Myers, Florida 33901, 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 South Florida 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 South
Florida 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.
VOTE REQUIRED
The affirmative vote of at least a majority of the shares of South Florida
common stock outstanding as of March 30, 1999, is required for the approval of
the affiliation agreement and the transactions contemplated thereby.
We expect that substantially all of the 283,863 shares of South Florida
common stock beneficially owned by directors and executive officers of South
Florida at the March 30, 1999 record date (22.4% of the 1,265,350 total
outstanding shares at that date) will be voted for the approval of the
affiliation agreement and the transactions contemplated thereby.
SOLICITATION OF PROXIES
South Florida will pay the costs of soliciting proxies, except that Fifth
Third will pay all expenses of printing and mailing this document. South Florida
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
10
<PAGE> 17
employees of South Florida may solicit proxies personally or by telegraph or
telephone without additional compensation.
PROPOSAL -- MERGER OF SOUTH FLORIDA 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, South Florida will merge with and into Fifth
Third and South Florida will cease to exist as a separate entity. In a related
simultaneous transaction, South Florida Bank will merge with and into Fifth
Third Bank, Florida.
CORPORATE GOVERNANCE
The respective boards of directors of Fifth Third and Fifth Third Bank,
Florida 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 as directors 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, Florida 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 South Florida 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 .34800 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 South Florida 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 OCTOBER 21, 1998,
THE BUSINESS DAY IMMEDIATELY PRECEDING PUBLIC ANNOUNCEMENT OF THE MERGER, FIFTH
THIRD'S COMMON STOCK CLOSED AT $64.81. BETWEEN OCTOBER 21, 1998 AND MARCH 31,
1999, FIFTH THIRD'S COMMON STOCK TRADED AS HIGH AS $75.44 AND AS LOW AS $62.38.
ON MARCH 31, 1999, FIFTH THIRD'S COMMON STOCK CLOSED AT $65.94. 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 South Florida
common stock otherwise entitled to a fractional share of Fifth Third common
stock will be paid therefor in cash, 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.
11
<PAGE> 18
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. We anticipate that
the effective time of the merger will occur in June, 1999, although no assurance
can be given in this regard. South Florida 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 South Florida, and your sole right will pertain to the right
to receive shares of Fifth Third common stock and cash in lieu of fractional
shares, if any, into which your shares of South Florida common stock will have
been converted pursuant to the affiliation agreement or fair value in cash if
you perfect your dissenters' rights pursuant to Florida 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 South Florida 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 South Florida 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 South Florida 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 your certificates
representing South Florida 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 South
Florida will be closed and no transfer of South Florida common stock will
thereafter be made on such books. If a certificate formerly representing South
Florida common stock is presented to South Florida 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 OF THE MERGER
From time to time over the past several years South Florida had been
contacted by investment bankers and other financial institutions inquiring as to
South Florida's interest in being acquired or merging on a "combination of
equals" basis. In August 1997, Ms. Colleen Kevetko, President of Fifth Third
Bank, Florida, contacted William P. Valenti, President and Chief Executive
Officer of South Florida, regarding the possible interest of Fifth Third in
acquiring South Florida. On August 20, 1997, Ms. Kevetko met with Mr. Valenti to
discuss Fifth Third and South Florida. Ms. Kevetko suggested South Florida
representatives meet with Mr. George Schaefer, President and Chief Executive
Officer of Fifth Third. On August 29, 1997, Dr. Ernest Hendry, Chairman of South
Florida, and Mr. Valenti met with Mr. Schaefer and Ms. Kevetko, who indicated
that Fifth Third was interested in pursuing an acquisition of South Florida. On
September 9, 1997, the South Florida board met to discuss the overtures received
from Fifth Third. The board directed Dr. Hendry to advise Mr. Schaefer of South
Florida's appreciation for Fifth Third's interest, and of South Florida's
desire, at that time, not to pursue a sale transaction. On September 17, 1997,
Dr. Hendry sent a letter to Mr. Schaefer pursuant to the board's instructions.
On February 26, 1998, subsequent to another request from Ms. Kevetko, Dr.
Hendry and Mr. Valenti met with Ms. Kevetko and Robert Niehaus, Executive Vice
President of Fifth Third. Mr. Niehaus offered to
12
<PAGE> 19
review certain South Florida financial information and provide a non-binding
assessment of an amount that Fifth Third might be willing to offer for an
acquisition of South Florida.
On April 13, 1998, Mr. Niehaus sent a letter to Mr. Valenti advising of
Fifth Third's preliminary indication of interest in pursuing an acquisition of
South Florida, subject to performance by Fifth Third of a due diligence review
and the negotiation of a definitive agreement. The proposed terms of the letter
include the payment of $19.00 per share for South Florida common stock, based
upon a fixed exchange ratio of .2203 share of Fifth Third common stock for each
share of South Florida common stock. On April 14, 1998, the South Florida board
met to review the letter received from Mr. Niehaus. The board decided that it
was not interested in pursuing a sale of South Florida upon the terms set forth
in the letter, but in view of the indication of interest received from Fifth
Third, asked Mr. Valenti to contact a financial advisor to assist the South
Florida board in evaluating South Florida's strategic position. Following the
meeting, Dr. Hendry sent a letter to Mr. Niehaus once again thanking Fifth Third
for its interest but indicating that South Florida did not desire to pursue a
transaction at that time.
On July 1, 1998, the respective boards of directors of South Florida and
South Florida Bank met. At the meeting, Mr. Steven W. Carson, President of The
Carson Medlin Company, made a presentation to the South Florida board on South
Florida's prospects, potential value and strategic alternatives. Mr. Carson also
reviewed the consolidation trend in the financial institutions industry for the
acquisition of community banks, select merger and acquisition transactions in
Florida over the past several years, the process for marketing a financial
institution for sale, and certain related pricing and fee factors. Following the
meeting, Mr. Carson was requested to submit a proposal for consideration by
South Florida to serve as financial advisor to South Florida. Management of
South Florida, pursuant to request of the South Florida board, also solicited an
engagement proposal from another investment banking firm.
On July 14, 1998, the South Florida board met to review proposed engagement
letters received from Carson Medlin and another investment banking firm. The
board approved engaging Carson Medlin to assist the board in the assessment of
South Florida's prospects, to render financial advisory and investment banking
services relating to a possible sale of all or substantially all of the stock or
assets of South Florida, and potentially render a fairness opinion on
consideration received in any acquisition transaction.
On July 20, 1998, South Florida signed an engagement letter retaining the
services of Carson Medlin.
On July 28, 1998, the South Florida board met to review a presentation by
Mr. Carson. Mr. Carson provided an overview of Carson Medlin's assessment of
South Florida's strategic position and potential alternative courses to enhance
and realize shareholder value. At the meeting, the directors discussed:
- their assessment of South Florida's prospects, including future
performance prospects;
- the range of prices that had been paid for sales of financial
institutions over recent periods;
- the desirability of providing liquidity for holders of South Florida
common stock;
- the risk that the prices being received for sales of financial
institutions in the prevailing market could decline over the ensuing
years;
- the consolidation trend in the financial institutions industry;
- the opportunities that bank mergers presented to South Florida;
- the financial institutions that might have an interest in pursuing a
transaction with South Florida;
- the increasingly competitive banking environment in which South Florida
operates;
- the increased competition in both deposit and lending activities; and
- the inherent risk in relying on future internal growth and marketing
penetration.
Without committing to any possible sale of South Florida at that time, the
board authorized Carson Medlin to compile a list of financial institutions that
might have an interest in pursuing an acquisition of South Florida.
13
<PAGE> 20
On August 11, 1998, Mr. Carson met with the South Florida board to discuss
further a possible sale of South Florida and acquirors who might have a possible
interest in pursuing an acquisition transaction. Following the discussion, the
directors authorized Mr. Carson to proceed with preliminary contacts. Commencing
August 27, 1998, Carson Medlin began contacting potential acquirers and sending
out confidentiality agreements and a confidential memorandum which had been
prepared setting forth certain information regarding South Florida.
From August 27, 1998 to September 3, 1998, Carson Medlin contacted 16
financial institutions regarding their interest in pursuing a possible
acquisition of South Florida. Several of the institutions, including Fifth
Third, requested additional information and held discussions with
representatives of Carson Medlin. On September 14, 1998, Carson Medlin and South
Florida representatives met with representatives of another financial
institution that had expressed an interest in acquiring South Florida and which
subsequently submitted a proposal for the acquisition of South Florida.
On September 22, 1998, Mr. Carson provided an analysis to the South Florida
board of initial indications received from prospects that had been targeted as
potential acquirers of South Florida. Mr. Carson reported that of the 16
potential acquirers that had been contacted, 10 financial institutions
(including Fifth Third) had entered into a confidentiality agreement and
received a confidential memorandum regarding South Florida. Six of the
institutions contacted did not express any interest in receiving a confidential
memorandum. As to the 10 institutions that elected to receive the confidential
memorandum, three declined to submit a bid to acquire South Florida. Mr. Carson
reviewed the seven proposals received from financial institutions. He also
reviewed the indications of interest received from the two highest bidders
(including Fifth Third) and provided an analysis of the proposed terms and
pricing of the transaction. The highest proposal exceeded the Fifth Third
proposal by less than 10%.
The South Florida board decided to pursue the Fifth Third proposal based
upon its belief, as well as that of Carson Medlin, that the Fifth Third stock
was a higher quality stock than the stock of the other bidder and that the Fifth
Third shares were more actively traded (as compared to the other bidder's
shares, which would were not then traded on Nasdaq) and thus offered more
potential liquidity to South Florida shareholders. After additional discussion,
the South Florida board determined to pursue additional discussions with Fifth
Third and directed Mr. Carson to request Fifth Third to further refine its
offer, and in particular to fix the exchange rate of .34800 shares of Fifth
Third common stock for each share of South Florida common stock. The South
Florida board felt that the then recent decline in Fifth Third shares afforded
an opportunity for potential upside to South Florida shareholders. The South
Florida board did not want to lose the benefit of this potential appreciation
and thus pursued a fixed exchange ratio. On October 16, 1998, as a result of the
appreciation in the Fifth Third shares in the interim, the Fifth Third exchange
ratio of .34800 shares of Fifth Third common stock exceeded the proposals
received from all other bidders.
On September 23, 1998, the South Florida board met to review a presentation
from Mr. Carson. Mr. Carson reported that Fifth Third had agreed to amend its
offer to provide for a fixed exchange ratio of .34800 shares of Fifth Third
common stock for South Florida common stock. Following the discussion, the board
authorized South Florida representatives to commence negotiation of the terms of
the definitive agreement with Fifth Third. On October 3, 1998, Fifth Third
performed a due diligence investigation of South Florida. During the ensuing
week, Fifth Third and South Florida representatives continued negotiating the
terms of a definitive agreement. The agreement was reviewed by the board of
directors of South Florida at a meeting held on October 13, 1998. The South
Florida board authorized South Florida's legal counsel to continue finalizing
the terms of the Agreement.
On October 20, 1998, the South Florida board reviewed the terms of the
affiliation agreement, and received presentations from South Florida's legal
counsel and Mr. Carson. At this meeting, legal counsel reviewed generally the
fiduciary obligations of directors in sales of financial institutions and
commented on the form of definitive agreement, the non-competition and affiliate
agreements to be entered into between South Florida's directors and executive
officers and Fifth Third, and the change of control provisions of employment
agreements previously entered into with several South Florida officers that
would arise as a result of the merger. See "Terms of the Affiliation
Agreement -- Interests of Certain Persons in the Merger."
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The South Florida board authorized South Florida's legal counsel to continue
discussions with Fifth Third for finalizing the terms of a definitive agreement.
On October 22, 1998, the South Florida board met to review the terms of the
affiliation agreement, and discuss related issues with South Florida's legal
counsel and Mr. Carson. At the meeting, Mr. Carson delivered Carson Medlin's
written opinion that the consideration to be received by the shareholders of
South Florida in the merger is fair, from a financial point of view. South
Florida's board then unanimously approved the affiliation agreement and the
transactions contemplated thereby. South Florida's management also was
authorized to execute the affiliation agreement, which was signed by Fifth Third
and South Florida effective October 22, 1998.
REASONS FOR THE MERGER
The South Florida board believes that the merger is in the best interests
of South Florida and its shareholders. The South Florida board considered a
number of factors in deciding to approve and recommend the terms of the
affiliation agreement to South Florida shareholders, including the following:
- the terms of the proposed transaction;
- the financial condition, results of operations, and future prospects of
South Florida;
- the value of the consideration to be received by South Florida
shareholders relative to the book value and earnings per share of South
Florida common stock;
- the competitive and regulatory environment for financial institutions
generally;
- the fact that the merger will enable South Florida shareholders to
exchange their shares of South Florida common stock (for which there is
no established public trading market) for shares of common stock of a
larger and more diversified entity, the stock of which is more widely
held and more actively traded;,
- that the merger will enable South Florida shareholders to hold stock in a
financial institution that has historically paid higher cash dividends
for a longer term to its shareholders as compared to South Florida (which
only commenced paying cash dividends in 1998);
- the likelihood of receiving the requisite regulatory approvals;,
- that it is expected that the merger will be a tax-free transaction
(except in respect of cash received for South Florida common stock) for
federal income tax purposes; and
- the opinion received from The Carson Medlin Company that the
consideration to be received in the merger is fair, from a financial
point of view, to the shareholders of South Florida.
The South Florida board did not assign any relative or specific weights to
the foregoing factors, and individual directors may have given different weight
to different factors. THE SOUTH FLORIDA BOARD BELIEVES THAT THE MERGER IS IN THE
BEST INTERESTS OF SOUTH FLORIDA AND ITS SHAREHOLDERS AND UNANIMOUSLY RECOMMENDS
THAT SOUTH FLORIDA SHAREHOLDERS VOTE FOR THE APPROVAL AND ADOPTION OF THE
AFFILIATION AGREEMENT AND THE TRANSACTIONS CONTEMPLATED THEREBY.
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 South Florida's
service area. Fifth Third's acquisition strategy has generally been to expand
its existing markets. Fifth Third's acquisition of South Florida is designed to
strengthen Fifth Third's ability to compete in the Ft. Myers area by increasing
its presence, consumer access and sales force.
OPINION OF FINANCIAL ADVISOR TO SOUTH FLORIDA
Pursuant to a letter agreement dated July 15, 1998, Carson Medlin was
engaged to advise South Florida on potential strategic alternatives to enhance
shareholder value and to search for and assist South Florida in negotiations
with parties who might wish to acquire South Florida. In addition, Carson Medlin
was asked to
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render its opinion as to the fairness, from a financial point of view, of the
consideration to be received by South Florida shareholders in a resulting
transaction. South Florida selected Carson Medlin as its financial adviser on
the basis of Carson Medlin's historical relationship with South Florida and
Carson Medlin's experience and expertise in representing community banks in
acquisition transactions. Carson Medlin is an investment banking firm which
specializes in the securities of financial institutions located in the
southeastern United States. As part of its investment banking activities, Carson
Medlin is regularly engaged in the valuation of financial institutions and
transactions relating to their securities.
Carson Medlin delivered its written opinion dated October 22, 1998 to the
South Florida board stating that the consideration provided for in the
affiliation agreement is fair, from a financial point of view, to the
shareholders of South Florida. Carson Medlin subsequently confirmed such opinion
in writing as of March 31, 1999, the most recent practicable date prior to the
printing of this document.
The full text of Carson Medlin's written opinion dated March 31, 1999 is
attached as Annex B. It should be read in its entirety with respect to the
procedures followed, assumptions made, matters considered and qualification and
limitation on the review undertaken by Carson Medlin in connection with its
opinion. Carson Medlin's opinion is addressed to the South Florida board and is
substantially identical to the written opinion previously delivered to the South
Florida board dated October 22, 1998. This summary of Carson Medlin's opinion is
qualified in its entirety by reference to the full text of such opinion. Carson
Medlin's opinions to the South Florida board rendered in connection with the
merger do not constitute a recommendation to any South Florida shareholder
regarding how such stockholder should vote at the special meeting.
No limitations were imposed by the Florida board or management upon Carson
Medlin with respect to the investigations made or the procedures followed by
Carson Medlin in rendering its opinions.
The preparation of a financial fairness opinion involves various
determinations as to the most appropriate methods of financial analysis and the
application of those methods to the particular circumstances and, therefore, is
not readily susceptible to partial analysis or summary description. In
connection with rendering its opinions, Carson Medlin performed a variety of
financial analyses. Carson Medlin believes that its analyses must be considered
together as a whole and that selecting portions of such analyses and the facts
considered therein, without considering all other factors and analyses, could
create an incomplete or inaccurate view of the analyses and the process
underlying the rendering of Carson Medlin's opinions. In performing its
analyses, Carson Medlin made numerous assumptions with respect to industry
performance, business and economic conditions, and other matters, many of which
are beyond the control of Fifth Third and South Florida and which may not be
realized. Any estimates contained in Carson Medlin's analyses are not
necessarily predictive of future results or values, which may be significantly
more or less favorable than such estimates. Estimates of values of companies do
not purport to be appraisals or necessarily reflect the prices at which such
companies or their securities may actually be sold.
Carson Medlin has relied upon, without independent verification, the
accuracy and completeness of the information reviewed by it for the purpose of
rendering its opinions. Carson Medlin did not undertake any independent
evaluation or appraisal of the assets and liabilities of Fifth Third or South
Florida, nor was it furnished with any such appraisals. Carson Medlin is not
expert in the evaluation of loan portfolios, including under-performing or
non-performing assets, charge-offs or the allowance for loan losses; has not
reviewed any individual credit files of Fifth Third or South Florida; and has
assumed that the allowances for each of Fifth Third and South Florida are in the
aggregate adequate to cover such losses. In addition, Carson Medlin is not
expert in the evaluation of Year 2000 readiness, compliance, or expense
allocations and has assumed that Fifth Third and South Florida have each taken
appropriate steps or actions to properly address this issue. Carson Medlin's
opinion is necessarily based on economic, market and other conditions existing
on the date of its opinion, and on information as of various earlier dates made
available to it. Carson Medlin assumed that the merger will be recorded as a
pooling-of-interests under generally accepted accounting principles.
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In connection with its opinion, dated October 22, 1998, Carson Medlin
reviewed:
- the Agreement;
- the annual reports to shareholders of Fifth Third, including the audited
financial statements for the five years ended December 31, 1997;
- audited financial statements of South Florida for the five years ended
December 31, 1997;
- certain financial and operating information with respect to the business,
operations and prospects of Fifth Third and South Florida; and
- the unaudited interim financial statements of Fifth Third and South
Florida for the nine months ended September 30, 1998.
In addition, Carson Medlin:
- held discussions with members of the senior management of Fifth Third and
South Florida regarding the historical and current business operations,
financial condition and future prospects of their respective companies;
- reviewed the historical market prices and trading activity for the common
stock of Fifth Third and South Florida and compared them with those of
certain publicly traded companies which it deemed to be relevant;
- compared the results of operations of Fifth Third and South Florida with
those of certain financial institutions which it deemed to be relevant;
- compared the financial terms of the merger with the financial terms, to
the extent publicly available, of certain other recent business
combinations of financial institutions; and
- conducted such other studies, analyses, inquiries and examinations as
Carson Medlin deemed appropriate.
VALUATION METHODOLOGIES
The following is a summary of the principal analyses performed by Carson
Medlin in connection with its opinion provided to the South Florida board on
October 22, 1998.
SUMMARY OF PROPOSAL. Carson Medlin reviewed the terms of the proposed
merger, including the form of consideration, the exchange ratio, the closing
price of Fifth Third's Common Stock as of October 21, 1998, and the resulting
price per share of South Florida common stock pursuant to the proposed merger.
Under the terms of the Agreement, each outstanding share of South Florida common
stock will be converted into .34800 shares of Fifth Third's common stock
resulting in an indicated value of $22.55 per share based on the closing price
of Fifth Third's common stock on October 21, 1998 of $64 13/16 per share. Carson
Medlin calculated that the indicated value represented 315% of stated book value
at September 30, 1998, 36.8 times 1998 estimated fully taxed core earnings, a
28.4% core deposit premium at September 30, 1998 (defined as the aggregate
transaction value minus stated book value divided by core deposits) and 33.6% of
total assets of South Florida at September 30, 1998.
INDUSTRY COMPARATIVE ANALYSIS. In connection with rendering its opinion,
Carson Medlin compared selected operating results of South Florida to those of
52 publicly-traded community commercial banks in Alabama, Florida, Georgia,
Mississippi, North Carolina, South Carolina, Virginia and West Virginia (the
"SIBR Banks") as contained in the Southeastern Independent Bank Review(TM), a
proprietary research publication prepared by Carson Medlin quarterly since 1991.
The SIBR Banks range in asset size from approximately $128 million to $2.7
billion and in shareholders' equity from approximately $13.9 million to $272.0
million. Carson Medlin considers this group of financial institutions more
comparable to South Florida than larger, more widely traded regional financial
institutions. Carson Medlin compared, among other factors,
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profitability, capitalization, and asset quality of South Florida to these
financial institutions. Carson Medlin noted that based on results for the three
months ended March 31, 1998:
- South Florida had a fully taxed core earnings return on average assets of
1.03%, compared to mean return on average assets of 1.30% for the SIBR
Banks;
- South Florida had a return on average equity of 11.7%, compared to mean
return on average equity of 13.0% for the SIBR Banks;
- South Florida had common equity to total assets at March 31, 1998 of
9.07%, compared to mean common equity to total assets of 9.81% for the
SIBR Banks; and
- South Florida had nonperforming assets (defined as loans 90 days past
due, nonaccrual loans and other real estate) to total loans net of
unearned income and other real estate at March 31, 1998 of 1.36%,
compared to mean nonperforming assets to total loans net of unearned
income and other real estate of 0.94% for the SIBR Banks.
This comparison indicated that South Florida's financial performance was
below the average SIBR Bank for profitability factors, asset quality and
capitalization.
Carson Medlin also compared selected operating results of Fifth Third to
those of five other publicly-traded bank holding companies in the midwest. The
companies are: Comerica, Inc., Huntington Bancshares Incorporated, National City
Corp., Old Kent Financial Corp., and Star Banc Corp. Carson Medlin considers
this group of financial institutions comparable to Fifth Third as to financial
characteristics, operating philosophy, and the market for its stock. Carson
Medlin compared selected balance sheet data, asset quality, capitalization,
profitability ratios and market statistics using financial data at or for the
nine month period ended September 30, 1998 and market data as of October 21,
1998. This comparison showed, among other things, that:
- for the nine months ended September 30, 1998, Fifth Third's return on
average assets was 1.89% compared to a mean of 1.54% and a median of
1.55% for the comparable companies;
- for the nine months ended September 30, 1998, Fifth Third's return on
average equity was 18.60% compared to a mean of 18.99% and a median of
19.08% for the comparable companies;
- for the nine months ended September 30, 1998, Fifth Third's efficiency
ratio (defined as noninterest expense divided by the sum of noninterest
income and taxable equivalent net interest income before provision for
loan losses) was 42.6% compared to a mean of 56.0% and a median of 56.8%
for the comparable companies;
- at September 30, 1998, Fifth Third's stockholders' equity to total assets
was 10.98% compared to a mean of 8.42% and a median of 8.44% for the
comparable companies;
- at September 30, 1998, Fifth Third's nonperforming assets to total assets
were 0.48% compared to a mean of 0.35% and a median of 0.35% for the
comparable companies;
- at October 21, 1998, Fifth Third's price to trailing twelve months
earnings was 39.0 times compared to a mean of 19.8 times and a median of
18.9 times for the comparable companies;
- at October 21, 1998, Fifth Third's price to book value was 556% compared
to a mean of 349% and a median of 363% for the comparable companies.
This comparison indicated that Fifth Third's financial and stock
performance was above that of the comparable companies for most of the factors
considered.
COMPARABLE TRANSACTION ANALYSIS. Carson Medlin reviewed certain
information relating to 16 selected merger transactions involving commercial
banks in southwest Florida announced since January 1997. The acquiree/acquirors
in the comparable transactions were: First Independence Bank of Florida/The
Colonial BancGroup, Inc., Citizens National Bank & Trust/Gulf West Banks, Inc.,
Florida Gulfcoast Bancorp/Provident Bancorp, Indian Rocks State Bank/FNB Corp.,
South Florida Banking Company/The Colonial BancGroup,
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Inc., Mercantile Bank of Southwest Florida/FNB Corp., West Coast Bank/FNB Corp.,
First Central Bank/The Colonial BancGroup, Inc., Murdock Florida Bank/American
Bancshares, Key Florida Bancorp/Regions Financial Corp., First National Bank of
Tampa/Florida Banks, Inc., Seminole Bank/FNB Corp., Village Bankshares,
Inc./Regions Financial Corp., Citizens Holding Corp./FNB Corp., Guaranty Bank &
Trust/FNB Corp., and Northside Bank of Tampa/Republic Security Financial Corp.
Carson Medlin considered, among other factors, the earnings, capital level,
asset size and quality of assets of the acquired financial institutions. Carson
Medlin compared the transaction prices at the time of announcement to the stated
book value, earnings, core deposits and total assets of the acquired
institutions.
Carson Medlin calculated an average price to stated book value multiple for
the comparable transactions of 284.8% which indicated a value of South Florida
of $20.42 per share (based on South Florida's stated book value of $7.17 per
share at September 30, 1998). The consideration implied by multiplying the
exchange ratio and Fifth Third's common stock price as of October 21, 1998 was
$22.55 per share and implies a price to stated book value multiple of 315% which
is above the average of the range for the comparable transactions.
Carson Medlin calculated an average price to earnings multiple for the
comparable transactions of 24.6 times which indicated a value for South Florida
Bank of $15.01 per share (based on South Florida's 1998 estimated fully taxed
core earnings per share of $0.61 per share). The consideration implied by the
terms of the affiliation agreement is $22.55 per share and implies a price to
earnings multiple of 36.8 times which is above the average for the comparable
transactions.
Carson Medlin calculated an average core deposit premium for the comparable
transactions of 24.4%. The premium on South Florida's core deposits implied by
the terms of the affiliation agreement is 28.4%, above the average of the range
for the comparable transactions.
Finally, Carson Medlin calculated an average price as a percentage of total
assets for the comparable transactions of 19.4%. The percentage of total assets
implied by the terms of the affiliation agreement is approximately 33.6%, above
the average of the range for the comparable transactions.
No company or transaction used in Carson Medlin's analyses is identical to
Fifth Third, South Florida or the contemplated transaction. Accordingly, the
results of these analyses necessarily involves complex considerations and
judgments concerning differences in financial and operating characteristics of
Fifth Third and South Florida and other factors that could affect the value of
the companies to which they have been compared.
PRESENT VALUE ANALYSIS. Carson Medlin calculated the present value of
South Florida assuming that South Florida remained an independent bank. For
purposes of this analysis, Carson Medlin utilized certain projections of South
Florida's future growth of assets, earnings and dividends and assumed that the
South Florida common stock would be sold at the end of 5 years at 24.6 times of
projected 2003 earnings (based on the average of the Comparable Transactions).
This value was then discounted to present value utilizing discount rates of 12%
through 16%. These rates were selected because, in Carson Medlin's experience,
they represent the rates that investors in securities such as the South Florida
common stock would demand in light of the potential appreciation and risks. On
the basis of these assumptions, Carson Medlin calculated that the present value
of South Florida as an independent bank ranged from $17.78 per share to $21.14
per share. The consideration implied by the terms of the agreement was $22.55
per share which falls above the high end of the range under present value
analysis. Carson Medlin noted that the present value analysis was included
because it is a widely used valuation methodology, but noted that the results of
such methodology are highly dependent upon the numerous assumptions that must be
made, including assets and earnings growth rates, dividend payout rates,
terminal values and discount rates.
STOCK TRADING HISTORY. Carson Medlin reviewed and analyzed the historical
trading prices and volumes for the Fifth Third common stock on a monthly basis
from December 1995 to September 1998. Carson Medlin also compared price
performance of the Fifth Third common stock to the five comparable companies
over the past 24 quarters ended September 30, 1998 on a price to earnings and
price to book value basis.
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Carson Medlin considers Fifth Third common stock to be liquid and marketable in
comparison with these comparable companies and other bank holding companies.
This analysis showed that over the past 24 quarters, Fifth Third's common
stock has traded above the average of the comparable companies based on price to
trailing 12 months earnings. In the most recent quarter, Fifth Third's common
stock traded at 39.5 times earnings compared to 20.0 times for the comparable
companies. The analysis of Fifth Third's trading on a book value basis was
similar. In the most recent quarter, Fifth Third's common stock traded at 562%
of book value compared to 353% of book value for the comparable companies.
Carson Medlin also examined the trading prices and volumes of South Florida
common stock. South Florida common stock has not traded in volumes sufficient to
be meaningful. Therefore, Carson Medlin did not place any weight on the market
price of the South Florida common stock.
CONTRIBUTION ANALYSIS. Carson Medlin reviewed the relative contributions
in terms of various balance sheet and income statement components to be made by
South Florida and Fifth Third to the combined institution based on (i) balance
sheet data at September 30, 1998, and (ii) net income for the nine months ended
September 30, 1998. The income statement and balance sheet components analyzed
included total assets, net loans, total deposits, shareholders' equity, and net
income. This analysis showed that, while South Florida shareholders would own
approximately 0.2% of the aggregate outstanding shares of the combined
institution based on the exchange ratio, South Florida was contributing 0.3% of
total assets, 0.3% of loans, net of unearned income, 0.4% of total deposits,
0.3% of shareholders' equity, and 0.2% of pre-tax income for the nine months
ended September 30, 1998.
OTHER ANALYSIS. Carson Medlin also reviewed selected investment research
reports on and earnings estimates for Fifth Third.
The opinion expressed by Carson Medlin was based upon market, economic and
other relevant considerations as they existed and have been evaluated as of the
date of the opinion. Events occurring after the date of issuance of the opinion,
including but not limited to, changes affecting the securities markets, the
results of operations or material changes in the assets or liabilities of South
Florida could materially affect the assumptions used in preparing the opinion.
In connection with its opinion dated March 31, 1999, the most recent
practicable date prior to the printing of this document, Carson Medlin confirmed
the appropriateness of its reliance on the analyses used to render its October
22, 1998 opinion by performing procedures to update certain of such analyses and
reviewing the assumptions on which its analyses were based and the factors
considered in connection therewith.
FEDERAL INCOME TAX CONSEQUENCES
Fifth Third and South Florida will receive an opinion from Graydon, Head &
Ritchey that for federal income tax purposes the merger will constitute a
reorganization within the meaning of Section 368(a)(1)(A) of the Internal
Revenue Code.
In rendering its opinion, Graydon, Head & Ritchey will rely upon
representations contained in letters from Fifth Third and South Florida
delivered for purposes of the opinion. The opinion of Graydon, Head & Ritchey
will also be based on the assumption that the merger will be consummated in
accordance with the provisions of the affiliation agreement, that the merger
will qualify as a statutory merger under state law and that the representations
made by Fifth Third and South Florida in the affiliation agreement are accurate.
An opinion of counsel only represents counsel's best legal judgment on the
matters addressed in the opinion, and has no binding effect or official status
of any kind, and no assurance can be given that contrary positions may not be
taken by the Internal Revenue Service or a court considering the issues. Neither
Fifth Third nor South Florida has requested or will request a ruling from the
Internal Revenue Service with regard to any of the federal income tax
consequences of the merger.
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Because the merger will constitute a reorganization within the meaning of
Section 368(a)(1)(A) of the Internal Revenue Code, Graydon, Head & Ritchey's
opinion will state that for federal income tax purposes:
- no gain or loss will be recognized by South Florida 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 South Florida who
receives solely Fifth Third common stock in exchange for South Florida
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 a South Florida shareholder who receives solely Fifth Third
common stock in exchange for South Florida 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 South Florida common stock
surrendered in exchange therefor, 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 a South
Florida shareholder will include, in each case, the period during which
the South Florida common stock surrendered in exchange therefor was held,
provided that the South Florida common stock was held as a capital asset
by such shareholder on the date of the exchange;
- a holder of South Florida 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; and
- a South Florida shareholder who perfects dissenters' rights with respect
to such person's shares of South Florida 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 the
holder's South Florida shares.
The foregoing discussion is a summary of the material federal income tax
consequences of the merger. The foregoing discussion 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 South Florida 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).
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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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 South Florida will be added to
those of Fifth Third at their recorded book values and the shareholders' equity
account of South Florida 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
South Florida 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 South Florida 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 South Florida 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 (i) one percent of Fifth Third's shares outstanding or (ii)
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 South Florida 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 South Florida 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 South Florida will use its best
efforts to cause each director, executive officer and other person who is deemed
by South Florida to be an affiliate (for purposes of Rule 145 and for purposes
of qualifying the merger for pooling-of-interests accounting treatment) of South
Florida to execute and deliver to Fifth Third a written agreement intended to
ensure compliance with the
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Securities Act and to ensure that the merger will qualify as for
pooling-of-interests accounting treatment. Under that agreement, affiliates of
South Florida 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 exercise your dissenter's rights of appraisal under
Sections 607.1301, 607.1302 and 607.1320 of the Florida Business Corporation Act
(the "Dissenters' Statute"). You will be entitled to exercise dissenter's
rights, however, only if you comply strictly with all of the procedural and
other requirements of the Dissenters' Statute. The following is a description of
the material terms of the Dissenters Statute which is attached hereto as Annex
C.
Under the Dissenters' Statute, South Florida shareholders have the right to
dissent from the merger and demand payment of the fair value of their shares of
South Florida common stock. In order to properly exercise this right, each
dissenting South Florida shareholder:
- must give South Florida a written notice of his or her intent to dissent
from the proposal to approve the affiliation agreement and demand payment
for his or her shares if the merger is effectuated before the vote on the
affiliation agreement is taken at the special meeting; and
- must not vote in favor of the affiliation agreement. Merely voting
against the merger or abstaining from voting on the merger will not
satisfy the foregoing requirements. Any dissenting South Florida
shareholder who fails to satisfy the foregoing requirements as they apply
to his or her shares will not be entitled to payment for his or her
shares and will be bound by the terms of the affiliation agreement.
If the proposed action is approved by the required vote of the
shareholders, South Florida will mail a notice of such approval to all
shareholders who delivered a notice of intent to demand payment and refrained
from voting in favor of the proposed action. Within 20 days after South Florida
delivers the written notice of the approval to shareholders, any shareholder who
elects to dissent shall file with South Florida a notice of such election,
stating his name and address, the number of shares as to which he dissents and a
demand for payment of the fair value of his shares, and such shareholder shall
file an election to dissent and deposit his certificates with South Florida
simultaneously with the filing of the election to dissent. A shareholder who
fails to file his notice of election to dissent within the 20-day period will
forfeit his dissenters' rights.
Within 10 days after the later to occur of (1) the expiration of the 20-day
period in which South Florida shareholders may file their notices of election to
dissent, or (2) the consummation of the merger, but in no event later than 90
days from the date the shareholders approve the affiliation agreement, South
Florida must make a written offer to each dissenting shareholder, who has filed
his notice of election to dissent within the 20-day period, to pay an amount
South Florida estimates to be the fair value for such shares. South Florida's
written offer must be accompanied by its most recent balance sheet (the date of
which must be within 12 months of the date of the offer) and a profit and loss
statement for the 12-month period ended on the date of the balance sheet. The
dissenting shareholder shall have 30 days following South Florida's offer to
accept the offer. If the offer is accepted, South Florida shall pay the agreed
to value for the shares within 90 days of its making the offer, following which
the dissenting shareholder shall cease to have an interest in the shares.
If South Florida fails to make its offer within the prescribed period, or
if it makes an offer and the dissenting shareholder fails to accept the same
within the 30-day acceptance period, then South Florida, within 30 days after
receipt of a written demand from any dissenting shareholder which is given
within 60 days after the date of the consummation of the merger, will have the
option to file (within such 60-day period) an action in the appropriate court in
the county where the registered office of South Florida is located requesting
that the court determine the fair value of the shares. If South Florida fails to
institute the court proceeding, any dissenting shareholder may do so in the name
of South Florida. The judgment of the court will be plenary and exclusive and
all dissenters who are made parties will be entitled, after a hearing without
23
<PAGE> 30
a jury, to judgment for the amount the court determines is the fair value of the
shares which, at the discretion of the court, may include interest.
While costs and expenses of an appraisal proceeding will generally be borne
by South Florida, the court has equitable powers to assess any part of the costs
against all or some of the dissenters who are parties whose action in failing to
accept South Florida's offer the court finds to be arbitrary, vexatious or not
in good faith. The court has similar equitable powers to allocate among the
parties the fees and expenses of appraisers appointed by the court, but not the
fees and expenses of counsel or experts employed by any party.
The provisions of Florida law regarding dissenters' rights are technical
and complex. If you are contemplating the exercise of such rights you are urged
to consult with your legal counsel.
For a discussion of the tax consequences to a shareholder who exercises
dissenters' rights, see "Proposal -- Merger of South Florida Into Fifth
Third -- Federal Income Tax Consequences."
TERMS OF THE AFFILIATION AGREEMENT
REPRESENTATIONS AND WARRANTIES
Fifth Third and South Florida 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
South Florida 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 South Florida 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 South Florida to exercise their fiduciary duties, the affiliation
agreement provides that South Florida and its representatives will 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 South Florida or South Florida 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 South Florida or South Florida Bank
(any such transaction being referred to herein as an "Acquisition
Transaction").
Subject to the exercise by the directors of South Florida of their
fiduciary duties, South Florida promptly shall communicate to Fifth Third the
terms of any proposal which it may receive in respect of an Acquisition
24
<PAGE> 31
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.
South Florida has also agreed that prior to the effective time of the
merger it will carry on its business in the ordinary course. South Florida also
has agreed to 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 South Florida nor South
Florida Bank will, among other things:
- make any changes in its capital or corporate structures;
- issue any additional shares of South Florida 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 South Florida
or South Florida Bank, or permit the automatic renewal of any such
agreement, except any agreement for services having a term of not more
than six months or requiring the expenditure of not more than $15,000;
- with respect to South Florida 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 except for agreements disclosed to Fifth Third prior to
the date of the affiliation agreement; or
- sell or otherwise dispose of or encumber any portion of shares of the
capital stock of South Florida 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 a majority of the outstanding shares of South Florida common
stock entitled to vote. The merger also must be approved in writing by the
Federal Reserve Board and the Ohio Division of Financial Institutions and the
Florida Department of Banking and Finance, applications for which have been
filed. We cannot assure that the required governmental approvals will be
forthcoming.
Fifth Third's and South Florida's obligations to consummate the merger are
subject to additional conditions set forth in the affiliation agreement,
including, but not limited to, the absence at the effective time of 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 South Florida;
25
<PAGE> 32
- delivery by South Florida's counsel of a legal opinion addressed to Fifth
Third relating to South Florida's incorporation, good standing, corporate
power and authority to enter into the affiliation agreement;
- the aggregate amount of consolidated shareholders' equity of South
Florida 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 $9,000,000 (excluding cash
dividends paid); and
- the total issued and outstanding shares of South Florida common stock not
exceeding 1,272,475 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 South Florida. Pursuant to such agreements, the South Florida
directors will be prohibited from engaging in 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; except that
in the case of Mr. William P. Valenti the restrictive period shall be one year.
South Florida'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 South Florida 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 South Florida shareholders;
- registration by Fifth Third of the shares of Fifth Third common stock to
be issued to South Florida shareholders and listing of those shares on
the Nasdaq National Market; and
- receipt by it of an opinion of counsel to Fifth Third with respect to
certain tax matters.
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 South Florida or by South Florida 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;
- 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 South Florida;
- automatically if South Florida's shareholders fail to approve and adopt
the affiliation agreement; or
26
<PAGE> 33
- 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 South Florida's shareholders. Approval of any amendment,
modification or supplement by South Florida'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 South Florida common stock held by or for the benefit of
directors and executive officers of South Florida 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 South Florida. In addition, directors
and executive officers of South Florida may be deemed to have the following
interests in the merger that are different from, or in addition to, those of
shareholders of South Florida.
EMPLOYMENT AGREEMENTS. William P. Valenti, current President and Chief
Executive Officer of South Florida, and Harold S. Taylor, current Executive Vice
President and Senior Loan Officer of South Florida, shall receive all payments
owed under their respective employment agreements, including any change in
control payment owed thereunder, provided that each remains employed with South
Florida though the effective time of the merger. Under such employment
agreements, Mr. Valenti will receive $273,031, and Mr. Taylor will receive
$131,793 at the effective time of the merger.
EMPLOYEE BENEFIT PLANS. Each employee of South Florida and South Florida
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 South Florida, 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 South Florida employees will not be subject to any exclusion
or penalty for pre-existing conditions that were covered under South Florida
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 South Florida shall take all
actions necessary to freeze any employee pension benefit plan (as defined in
Section 3(2) of ERISA) as of a date at least 60 days preceding the effective
time of the merger so that no further contributions (including employee 401(k)
contributions) shall be made under such plans. In addition, if requested by
Fifth Third, South Florida will develop a plan and timetable for terminating any
or all of the employee pension benefit plans and the implementation of such
termination plan and timetable.
STOCK OPTIONS. At the effective time of the merger, all outstanding
options to purchase South Florida common stock under South Florida's stock
option plan will be terminated.
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 South Florida and its
subsidiaries, arising under applicable Florida and federal law and under the
South Florida articles of incorporation and bylaws, or under the articles or
bylaws of South Florida 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 South Florida'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 South Florida have
agreed
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<PAGE> 34
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 South Florida.
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 South Florida 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 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 SOUTH FLORIDA EMPLOYEES
Fifth Third shall consider employing at its affiliates as many of the
employees of South Florida and South Florida Federal 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 that prior to the
effective time of the merger, Fifth Third shall negotiate with each of William
P. Valenti, current President and Chief Executive Officer of South Florida, and
Harold S. Taylor, current Executive Vice President and Senior Loan Officer of
South Florida with the intent that each obtain positions with Fifth Third Bank,
Florida.
The affiliation agreement provides for the payment of severance amounts to
employees of South Florida under certain conditions upon termination of
employment or specific other circumstances. In the case of officers and other
exempt employees of South Florida or South Florida 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 who do not have
employment or severance agreement, 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 South Florida who have employment or severance agreements with
South Florida or South Florida Bank as of October 1, 1998, shall receive the
severance or termination payments provided for in their respective agreements in
lieu of any other severance payment from South Florida or Fifth Third in
connection with the merger; provided that no such payment would be considered an
"excess parachute payment" pursuant to Section 280(G) of the Internal Revenue
Code.
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 $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.
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<PAGE> 35
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 its 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, Fifth Third recently entered into agreements to acquire Ashland
Bankshares, Inc., Enterprise Federal Bancorp, Inc. and Emerald Financial Corp.
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 31, 1999, such
shares would have an aggregate value of approximately $80.8 million. Fifth Third
expects that its acquisition of Ashland 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 South Florida.
ENTERPRISE FEDERAL BANCORP, INC. On September 25, 1998, Fifth Third agreed
to acquire Enterprise Federal Bancorp, Inc., a savings and loan holding company
based in Cincinnati, Ohio which owns Enterprise Federal Savings Bank. As of
December 31, 1998, Enterprise Federal Bancorp, Inc. had total assets of $544.1
million and total deposits of $343.2 million.
In connection with the acquisition of Enterprise, shareholders of
Enterprise will receive .68516 of a share of Fifth Third common stock for each
outstanding share of Enterprise capital stock. Fifth Third expects to issue
approximately 1,640,000 shares of Fifth Third common stock to shareholders of
Enterprise. Based on the fair market value per share of Fifth Third common stock
as of March 31, 1999, such shares would have an aggregate value of approximately
$108.1 million. Fifth Third expects that its acquisition of Enterprise 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 South Florida.
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
29
<PAGE> 36
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 31, 1999, such shares would have an aggregate value of approximately
$226.2 million. Fifth Third expects that its acquisition of Emerald 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."
SOUTH FLORIDA BANK HOLDING CORPORATION
DESCRIPTION OF BUSINESS
South Florida is a one-bank holding company registered under the Bank
Holding Company Act. South Florida was incorporated under the laws of the State
of Florida on September 14, 1990. On January 30, 1991, South Florida acquired
all of the outstanding shares of common stock of South Florida Bank. As a bank
holding company, South Florida is a legal entity separate and distinct from the
South Florida Bank. At December 31, 1998, South Florida, its subsidiary South
Florida Bank, and South Florida Banks's two wholly-owned subsidiaries, New Town
Properties, Inc. and Valu Prop, Inc. had consolidated total assets of $90.2
million, total deposits of $77.0 million, and shareholders' equity of $9.3
million. South Florida's operating revenue and net income are derived solely
from South Florida Bank through dividends and management fees.
South Florida Bank was organized in 1988 to serve the banking needs of the
residents of the City of Fort Myers and the other surrounding communities. It
began operations on May 23, 1988. South Florida Bank is a Florida
state-chartered bank and its deposits are insured through the Bank Insurance
Fund of the FDIC. South Florida Bank primarily engages in the business of
attracting deposits from the general public and investing those funds in real
estate, commercial and consumer loans. South Florida Bank provides a full range
of deposit accounts and credit services, as well as most other traditional
commercial and consumer banking services, including safe deposit services and
automated teller cards, which allow access to regional ATM networks and permit
South Florida Bank's depositors to access their funds on a 24-hour basis in
areas outside South Florida Bank's geographic market through the honor system.
ADDITIONAL INFORMATION
For more detailed information about South Florida, reference is made to the
South Florida Annual Report on Form 10-KSB for the year ended December 31, 1998,
which is incorporated by reference. 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
---------- ---------- ---------- ---------- ----------
(DOLLARS 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.................. 0.71 .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
----------- ----------- ----------- ----------- -----------
(DOLLARS IN THOUSANDS)
<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%
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%
Dividend payout............................ 40.3% 33.6% 34.8% 33.8% 32.3%
RATIO OF EARNINGS TO FIXED CHARGES:(5)
Including deposit interest................. 1.71x 1.65x 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 standing.......................... 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 shareholders' 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 shareholders' 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 SOUTH FLORIDA
The following table sets forth certain historical financial data concerning
South Florida. This information is based on information contained in South
Florida's 1998 Annual Report on Form 10-KSB for the fiscal year ended on
December 31, 1998, which is enclosed with this document and is incorporated by
reference in this document and should be read in conjunction therewith.
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
-----------------------------------------------
1998 1997 1996 1995 1994
------- ------- ------- ------- -------
(DOLLARS IN THOUSANDS EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C> <C>
SUMMARY OF OPERATIONS:
Total interest income....................................... $6,215 $5,839 $4,870 $4,534 $3,749
Total interest expense...................................... 2,317 2,406 1,957 2,009 1,402
------ ------ ------ ------ ------
Net interest income....................................... $3,898 $3,433 $2,913 $2,525 $2,347
Provision for credit losses................................. -- -- -- 28 (75)
Net-interest income after provision for credit losses....... 3,898 3,433 2,913 2,497 2,422
Non-interest income......................................... 1,009 576 611 548 515
Non-interest expense........................................ 3,283 2,846 2,632 2,712 2,895
------ ------ ------ ------ ------
Income (loss) before income taxes......................... 1,624 1,163 892 333 42
Benefit for income taxes.................................... 55 261 108 260 --
------ ------ ------ ------ ------
Net income (loss)......................................... $1,679 $1,424 $1,000 $ 593 $ 42
====== ====== ====== ====== ======
Basic earnings per share................................ $ 1.37 $ 1.18 $ .83 $ .59 $ .04
====== ====== ====== ====== ======
Diluted earnings per share.............................. $ 1.36 $ 1.15 $ .82 $ .59 $ .04
====== ====== ====== ====== ======
Cash dividends per share.................................... $ 0.20 $ .20 $ -- $ -- $ --
Book value at period end.................................... $ 7.38 $ 6.29 $ 5.29 $ 4.50 $ 3.79
Average shares outstanding (000's).......................... 1,230 1,211 1,208 1,003 1,003
Average diluted shares outstanding (000's).................. 1,233 1,238 1,219 1,003 1,003
</TABLE>
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<PAGE> 40
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
---------------------------------------------------
1998 1997 1996 1995 1994
------- ------- ------- ------- -------
(DOLLARS IN THOUSANDS EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C> <C>
FINANCIAL CONDITION AT PERIOD END:
Securities......................................... $26,325 $24,552 $16,639 $17,867 $13,461
Loans and leases................................... 53,154 49,706 44,040 36,545 32,855
Assets............................................. 90,180 82,859 71,530 63,590 52,752
Deposits........................................... 77,025 73,099 63,888 55,991 48,136
Short-term borrowings.............................. 3,137 1,326 749 1,623 493
Long-term debt and convertible subordinated
notes............................................ -- -- -- -- --
Shareholders' equity............................... 9,344 7,622 6,408 5,386 3,803
RATIOS:
PROFITABILITY RATIOS:
Return on average assets........................... 1.97% 1.82% 1.57% 1.01% .08%
Return on average shareholders' equity............. 21.03% 21.39% 18.44% 14.89% 1.20%
Net interest margin................................ 4.01% 3.71% 3.91% 3.83% 4.27%
Overhead ratio..................................... 66.91% 71.00% 74.69% 88.26% 101.14%
Other operating income to total income............. 20.56% 14.37% 17.35% 17.81% 18.00%
CAPITAL RATIOS:
Average shareholders' equity to average assets..... 9.38% 8.49% 8.52% 6.48% 6.56%
Tier 1 risk-adjusted capital....................... 16.19% 14.20% 12.45% 12.07% 9.76%
Total risk-adjusted capital........................ 17.45% 15.46% 13.70% 13.33% 11.04%
Tier 1 leverage.................................... 10.00% 8.55% 8.82% 8.05% 6.92%
RATIO OF EARNINGS TO FIXED CHARGES:
Including deposit interest......................... 1.68x 1.47x 1.44x 1.16x 1.03x
Excluding deposit interest......................... 13.20x 11.05x 9.18x 4.01x 1.42x
CREDIT QUALITY RATIOS:
Reserve for credit losses to nonperforming
assets........................................... 91.24% 102.81% 112.00% 68.00% 35.00%
Reserve for credit losses to loans and leases
outstanding...................................... 1.67% 1.77% 2.05% 2.33% 4.09%
Net charge-offs to average loans and leases
outstanding...................................... (.01)% .05% (.13)% 1.52% (1.00)%
Nonperforming assets to loans, leases and other
real estate owned................................ 1.83% 1.71% 1.82% 3.39% 10.42%
</TABLE>
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<PAGE> 41
DESCRIPTION OF CAPITAL STOCK AND COMPARATIVE RIGHTS OF SHAREHOLDERS
Fifth Third is a corporation organized under the laws of the State of Ohio.
South Florida is a corporation organized under the laws of the State of Florida.
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, 1998, 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, 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.
South Florida is authorized to issue 10,000,000 shares of South Florida
common stock, $0.01 per value per share. As of March 30, 1999, South Florida had
outstanding 1,265,350 shares of South Florida common stock.
Set forth below is a description of Fifth Third common stock and South
Florida 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 bylaws of South Florida and
are qualified in their entirety by reference to such documents.
VOTING RIGHTS
Holders of both Fifth Third common stock and South Florida common stock are
entitled to one vote per share on all matters submitted to a vote of
shareholders.
The code of regulations of Fifth Third provides for the division of its
board of directors into three classes of approximately equal size. Directors 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.
South Florida's articles of incorporation similarly provide for the
division of its board of directors into three classes of approximately equal
size, with the directors elected for three-year terms and the terms of office of
approximately one-third of the members of the board expiring each year.
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 such shareholder desires that voting for the
election of directors be cumulative, and (2) announcement of the
35
<PAGE> 42
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.
South Florida's articles of incorporation do not authorize it to issue
shares of preferred stock, nor do South Florida shareholders have a right to
vote cumulatively in the election of directors.
DIVIDENDS
Holders of Fifth Third common stock and South Florida 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 has in the past, declared and paid dividends on a quarterly basis,
and intends to continue to do so in the immediate future in such amounts as its
board of directors shall determine. South Florida commenced paying dividends on
an annual basis in 1998.
Most of the revenues of Fifth Third and South Florida 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.
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 and Kentucky,
the principal regulators of such affiliates, have the statutory authority to
prohibit a depository institution under their supervision from engaging in what,
in their opinion, constitutes an unsafe or unsound practice in conducting its
banking or savings association business. The payment of dividends could,
depending upon the financial condition of affiliates, be deemed to constitute
such an unsafe or unsound practice. No affiliate of Fifth Third has ever been
prohibited from declaring dividends or restricted in paying any dividends
declared. South Florida is not currently prohibited from declaring dividends or
restricted in paying any dividends declared, except as otherwise provided under
Florida law.
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 South Florida, and their respective affiliates, may pay.
PREEMPTIVE RIGHTS
Neither shareholders of Fifth Third nor shareholders of South Florida have
preemptive rights.
36
<PAGE> 43
RIGHTS UPON LIQUIDATION
In the event of any liquidation, dissolution or winding up of South
Florida, the holders of South Florida common stock would be entitled to receive,
after payment or provision for payment of all debts and liabilities of South
Florida (including the payment of all fees, taxes and other expenses incidental
thereto), the remaining assets of South Florida 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.
Under Florida law, a director of South Florida is not personally liable for
monetary damages to South Florida or any other person for any statement, vote,
decision or failure to act, regarding corporate management or policy, by the
director unless: (a) the director breached or failed to perform his duties as a
director, and (b) the director's breach of or failure to perform those duties
constitutes: (1) a violation of the criminal law, unless the director had
reasonable cause to believe his conduct was lawful or had no reasonable cause to
believe his conduct was unlawful, (2) a transaction in which the director
derived an improper personal benefit, (3) a payment of certain unlawful
dividends and distributions, (4) in a proceeding by or in the right of South
Florida to procure judgment in its favor or by or in the right of a shareholder,
conscious disregard for the best interests of South Florida, or willful
misconduct, or (5) in a proceeding by or in the right of someone other than
South Florida or a shareholder, recklessness or an act or omission which was
committed in bad faith or with malicious purpose or in a manner exhibiting
wanton and willful disregard of human rights, safety or property. This provision
absolves directors of South Florida of personal liability for negligence in the
performance of their duties, including gross negligence. It does not permit a
director to be exculpated, however, from liability for actions involving
conflicts of interest or breaches of the traditional "duty of loyalty" to South
Florida and its shareholders, and it does not affect the availability of
injunctive and other equitable relief as a remedy.
Florida law also allows the directors and officers of South Florida to be
indemnified against certain liabilities which they may incur in their capacity
as officers and directors. Such indemnification is generally available if the
individual acted in good faith and in a manner he or she reasonably believed to
be in, or not opposed to, the best interest of South Florida, and with respect
to any criminal proceeding, had no reasonable cause to believe his or her
conduct was unlawful. Indemnification may also be available unless a court of
competent jurisdiction establishes by final adjudication that the actions or
omissions of the executive are material to the cause of action so adjudicated
and constituted: (a) a violation of the criminal law, unless the executive had
reasonable cause to believe his or her conduct was lawful or had no reasonable
cause to believe his or her conduct was unlawful; (b) a transaction from which
the executive derived an improper personal benefit; or (c) willful misconduct or
conscious disregard for the best interest of South Florida in a proceeding by or
in the right of South Florida to procure a judgment in its favor or in a
proceeding by or in the right of a shareholder. South Florida's bylaws authorize
South Florida to indemnify its officers and directors to the extent permitted by
the statute. Further, to the extent that the proposed indemnitee is successful
on the merits or otherwise in the defense of any action, suit or proceeding (or
any claim, issue or matter therein) he or she must be indemnified against
expenses (including attorney's fees) actually and reasonably incurred by him or
her in connection with such proceeding.
South Florida maintains a directors' and officers' insurance policy
pursuant to which officers and directors of South Florida are entitled to
indemnification against certain liabilities, including reimbursement of certain
expenses.
Fifth Third and South Florida do not have any additional indemnification
agreements with their directors or executive officers.
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<PAGE> 44
If the merger is consummated, Fifth Third will assume all such obligations
of South Florida 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.
The presence in person or by proxy of the holders of a majority of the
shares of stock entitled to vote at a meeting on every matter that is to be
voted on constitutes a quorum under the code of regulations of Fifth Third and
under the bylaws of South Florida.
SUBSCRIPTION, CONVERSION, REDEMPTION RIGHTS; STOCK NONASSESSABLE
Neither Fifth Third common stock nor South Florida 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 South Florida pursuant to the affiliation agreement will be
validly issued, fully paid and non-assessable, and will not, upon such issuance,
be subject to preemptive rights of any shareholder of Fifth Third.
CHANGE OF CONTROL PROVISIONS
The articles of incorporation and code of regulations of Fifth Third
contain various provisions which could make more difficult a change in control
of Fifth Third or discourage a tender offer or other plan to restructure Fifth
Third. 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. Additionally, Ohio law contains provisions which would also make
more difficult a change in control of Fifth Third or discourage a tender offer
or other plan to restructure Fifth Third. The following discussion of some of
these provisions is qualified in its entirety by reference to those particular
statutory and regulatory provisions.
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 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.
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. In order to comply with the Ohio
Control Share Acquisition Act, the acquiring person may only acquire the shares
of the Ohio issuing public corporation upon the affirmative vote of (1) a
majority of the voting power of the shares of the Ohio issuing public
corporation 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 the Ohio issuing public corporation common stock that is represented in
person or by proxy at the special meeting excluding those shares of the Ohio
issuing public corporation common stock deemed to be "interested shares" for
purposes of the Ohio Control Share Acquisition Act.
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<PAGE> 45
"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: (a) an acquiring person; (b) any officer of the Ohio
issuing public corporation; or (c) any employee who is also a director of the
Ohio issuing public corporation. "Interested shares" also include shares of the
Ohio issuing public corporation common stock that are acquired by any person
after the date of the first public disclosure of the proposed merger and the
date of the special meeting, if either (a) the aggregate consideration paid by
such person, and any person acting in concert with him, for such shares of the
Ohio issuing public corporation common stock exceeds $250,000, or (b) the number
of shares acquired by such person, and any person acting in concert with him,
exceeds one-half of one percent of the outstanding shares of the Ohio issuing
public corporation common stock.
OHIO MERGER MORATORIUM STATUTE. Chapter 1704 of the Ohio Revised Code
prohibits an issuing public corporation from engaging in a certain transactions
with an interested shareholder for a period of three years following the date on
which the person become an interested shareholder unless, prior to such date,
the directors of the issuing public corporation approve either the transaction
or the acquisition of shares pursuant to which such person became an interested
shareholder. Fifth Third is an issuing public corporation for purposes of the
statute. An interested shareholder is any person who is the beneficial owner of
a sufficient number of shares to allow such person, directly or indirectly,
alone or with others, including affiliates and associates, to exercise or direct
the exercise of 10% of the voting power of the issuing public corporation in the
election of directors.
The transactions restricted by Chapter 1704 include:
- any merger, consolidation, combination, or majority share acquisition
between or involving an issuing public corporation and an interested
shareholder or an affiliate or associate of an interested shareholder;
- certain transfers of property, dividends, and issuance or transfers of
shares, from or by an Issuing public corporation or a subsidiary of an
issuing public corporation to, with, or for the benefit of an interested
shareholder or an affiliate or associate of an interested shareholder
unless such transaction is in the ordinary course of business of the
issuing public corporation on terms no more favorable to the interested
shareholder than those acceptable to third parties as demonstrated by
contemporaneous transactions; and
- certain transactions which (a) increase the proportionate share ownership
of an interested shareholder, (b) result in the adoption of a plan or
proposal for the dissolution, winding up of the affairs, or liquidation
of the issuing public corporation if such plan is proposed by or on
behalf of the interested Shareholder, or (c) pledge or extend the credit
or financial resources of the issuing public corporation to or for the
benefit of the interested shareholder.
After the initial three-year moratorium has expired, an issuing public
corporation may engage in a transaction subject to Chapter 1704 if (a) the
acquisition of shares pursuant to which the person became an interested
shareholder received the prior approval of the board of directors of the issuing
public corporation, (b) the transaction subject to Chapter 1704 is approved by
the affirmative vote of the holders of shares representing at least two-thirds
of the voting power of the issuing public corporation and by the holders of
shares representing at least a majority of voting shares which are not
beneficially owned by an interested shareholder or an affiliate or associate of
an interested shareholder, or (c) the transaction subject to Chapter 1704 meets
certain statutory tests designed to ensure that it be economically fair to all
shareholders.
OHIO TENDER OFFER PROCEDURES. Ohio law also provides that an offeror may
not make a tender offer or request or invitation for tenders that would result
in the offeror beneficially owning more than ten percent of any class of the
target company's equity securities unless such offeror files certain information
with the Ohio Division of Securities and provides such information to the target
company and the offerees within Ohio. The Ohio Division of Securities may
suspend the continuation of the control bid if it determines that the offeror's
filed information does not provide full disclosure to the offerees of all
material information concerning the control bid. The statute also provides that
an offeror may not acquire any equity security of a target company
39
<PAGE> 46
within two years of the offeror's previous acquisition of any equity security of
the same target company pursuant to a control bid unless the Ohio offerees may
sell such security to the offeror on substantially the same terms as provided by
the previous control bid. The statute does not apply to a transaction if either
the offeror or the target company is a savings and loan or bank holding company
and the proposed transaction requires federal regulatory approval. Accordingly,
this provision does not apply to the merger.
EFFECT OF GOVERNMENTAL POLICIES
The earnings of both South Florida 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 South Florida 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. 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 and banks, Fifth Third, South Florida 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 and banks.
HOLDING COMPANY REGULATION
As bank holding companies, Fifth Third and South Florida are registered
with and subject to regulation by the Federal Reserve Board. A bank holding
company is required to file with the Federal Reserve Board an annual report and
such additional information as the Federal Reserve Board may require pursuant to
the Bank Holding Company Act.
The Federal Reserve Board 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 five
percent 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.
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<PAGE> 47
CAPITAL REQUIREMENTS
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 eight percent of assets, weighted by risk. Banking organizations
must have at least four percent 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 are 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
14.32%.
South Florida and South Florida Bank are in compliance with both the
current leverage ratios and the final risk-based capital standards. As of
December 31, 1998, South Florida had a leverage ratio of 10.00%, its Tier 1
risk-based capital ratio was 16.19% and its total risk-based capital ratio was
17.45%.
REGULATION OF BANKS
The operations of the subsidiary banks of Fifth Third and of South Florida
Bank 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. Federal
savings banks are subject to the supervision and regulation of the Office of
Thrift Supervision. 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, by the Florida Department of Banking and Finance.
LEGAL MATTERS
Certain legal matters will be passed upon for South Florida by Smith,
Mackinnon, Greeley, Bowdoin & Edwards, P.A. 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 South Florida 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. Graydon, Head & Ritchey, Cincinnati, Ohio, will render its
opinion to South Florida and Fifth Third with respect to certain federal income
tax consequences of the merger.
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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 incorporated in this document by
reference from South Florida's Annual Report on Form 10-KSB for the year ended
December 31, 1998 have been audited by Brewer, Beemer, Keuhnhackl & Koon, P.A.,
independent auditors, as stated in their report and have been so incorporated in
reliance upon the report of such firm given upon their authority as experts in
accounting and auditing.
WHERE YOU CAN FIND MORE INFORMATION
Fifth Third and South Florida 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 South
Florida 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 South Florida'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 South Florida 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 South Florida for
the special meeting.
Fifth Third's common stock is traded on the Nasdaq National Market tier of
the Nasdaq Stock Market under the symbol "FITB." Documents filed by Fifth Third
with the Commission also can be inspected at the offices of the National
Association of Securities Dealers, Inc., 1735 K Street, N.W., Washington, D.C.
20006.
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 South Florida 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 this 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.
South Florida SEC Filings:
- South Florida's Annual Report on Form 10-KSB for the year ended December
31, 1998 (enclosed with this document); and
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<PAGE> 49
- South Florida's 1998 Annual Report to Shareholders (enclosed with this
document as an exhibit to South Florida's Annual Report on Form 10-KSB
for the year ended December 31, 1998).
Additional documents that Fifth Third and South Florida may file with the
SEC between the date of this document and the date of the special meeting of
South Florida'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 William P. Valenti, South
Florida Bank Holding Corporation, 2017 McGregor Boulevard, Fort Myers, FL 33901
(telephone number: (941) 334-2020) as relates to South Florida. In order to
ensure timely delivery of the documents, any request should be made by May 5,
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 APRIL 2, 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 ("Agreement") dated as of October 22, 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 SOUTH
FLORIDA BANK HOLDING CORPORATION, a corporation organized and existing under the
corporation laws of the State of Florida, with its principal office located in
Ft. Myers, Lee County, Florida ("South Florida Bank Holding").
W I T N E S S E T H:
WHEREAS, Fifth Third is a registered bank holding company under the Bank
Holding Company Act of 1956, as amended, and South Florida Bank Holding is a
registered bank holding company under the Bank Holding Company Act of 1956, as
amended;
WHEREAS, Fifth Third and South Florida Bank Holding desire to effect a
merger under the authority and provisions of the corporation laws of the State
of Ohio and the State of Florida pursuant to which at the Effective Time (as
herein defined in Article IX) South Florida Bank Holding will be merged into
Fifth Third, with Fifth Third to be and become the surviving corporation (the
"Merger");
WHEREAS, South Florida Bank Holding owns all of the outstanding stock of
South Florida Bank, a Florida banking corporation ("Bank Subsidiary") which, at
the Effective Time, will be merged with and into Fifth Third's wholly-owned
subsidiary The Fifth Third Bank of Florida, a Florida banking corporation
("Fifth Third Bank") with Fifth Third Bank to become the surviving corporation
(the "Subsidiary Merger");
WHEREAS, under the terms of this Agreement each of the issued and
outstanding shares of the Common Stock, $.01 par value per share, of South
Florida Bank Holding which are issued and outstanding (excluding any treasury
shares, any preferred shares and shares as to which dissenter's rights have been
asserted in accordance with Florida General Corporate Law ("Dissentering
Shares")) immediately prior to the Effective Time will, at the Effective Time,
be canceled and extinguished and in substitution therefor such South Florida
Bank Holding 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 South Florida Bank Holding, agree together as follows:
I. MODE OF EFFECTUATING CONVERSION OF SHARES
A. Upon the terms and conditions set forth in the Agreement, South Florida
Bank Holding shall be merged into Fifth Third.
B. At the Effective Time (as defined in Article IX), all of the shares of
Fifth Third Common Stock that are issued and outstanding or held by Fifth Third
as treasury shares immediately prior to the Effective Time will remain unchanged
and will remain outstanding or as treasury shares, as the case may be, of the
Surviving Corporation. 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
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shares of the class of capital stock of Fifth Third to which they are entitled
under the terms of the governing documents.
C. At the Effective Time, each of the shares of the Common Stock, $.01 par
value per share, of South Florida Bank Holding that is issued and outstanding
immediately prior to the Effective Time ("South Florida Bank Holding Common
Stock"), other than dissenting shares, will, when the Merger becomes effective,
be converted by virtue of the Merger and without further action, into .34800
shares of Fifth Third Common Stock (the "Exchange Ratio"), subject to adjustment
as provided in Article I, Section E below. All issued and outstanding shares of
the Preferred Stock of South Florida Bank Holding, if any, shall be canceled at
the Effective Time. At the Effective Time, all shares of South Florida Bank
Holding Common Stock held in treasury will be canceled and terminated and will
not be converted into shares of Fifth Third Common Stock.
D. At the Effective Time, all of the shares of South Florida Bank Holding
Common Stock, whether issued or unissued (including treasury shares), will be
canceled and extinguished and the holders of certificates for shares thereof
shall cease to have any rights as shareholders of South Florida Bank Holding,
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 South
Florida Bank Holding 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 South Florida Bank Holding 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 South Florida Bank Holding
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, calculated in accordance with the
Exchange Ratio based upon a value of the shares at the Effective Time. Within
seven (7) business days after the Effective Time, the Exchange Agent will send a
notice and transmittal form to each South Florida Bank Holding 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 South Florida Bank Holding 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 South Florida Bank Holding Common Stock shall be deemed for all corporate
purposes to evidence ownership of the number of full shares of Fifth Third
Common Stock into which the same shall have been converted; provided, however,
that dividends or distributions otherwise payable with respect to shares of
Fifth Third Common Stock into which South Florida Bank Holding Common Stock
shall have been so converted shall be paid with respect to such shares only when
the certificate or certificates evidencing shares of South Florida Bank Holding
Common Stock (other than Dissenting Shares) shall have been so surrendered (or
in lieu of surrendering such certificates in the case of lost, stolen, destroyed
or mislaid certificates, upon execution of such documentation as may be
reasonably required by Fifth Third) and thereupon any such dividends and
distributions shall be paid, without interest, to the holder entitled thereto
subject however to the operation of any applicable escheat or similar laws
relating to unclaimed funds.
F. The Exchange Ratio referred to in Paragraph C of this Article I shall
be adjusted so as to give the South Florida Bank Holding 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 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 South Florida Bank Holding
shareholders, as of the Effective Time.
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G. When all necessary documents have been filed and recorded in accordance
with the laws of the State of Ohio and State of Florida, and the Merger becomes
effective, the separate existence of South Florida Bank Holding shall cease and
South Florida Bank Holding 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.
K. At the Effective Time, the effect of the Merger and the Subsidiary
Merger shall be as provided by the applicable provisions of the laws of the
State of Ohio and the State of Florida. Without limiting the generality of the
foregoing, and subject thereto, at the Effective Time: the separate existence of
South Florida Bank Holding 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 South Florida
Bank Holding, and all obligations owing by or due each of Fifth Third and South
Florida Bank Holding 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 Florida law; and all rights of creditors of
each of Fifth Third and South Florida Bank Holding shall be preserved
unimpaired, and all liens upon the property of each of Fifth Third and South
Florida Bank Holding 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 South Florida
Bank Holding 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 South Florida Bank Holding 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 laws of the State of Ohio and the State of Florida. This Agreement and any
Certificates of Merger shall not be filed with the Secretary of the State of
Ohio or the State of Florida 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 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.
II. REPRESENTATIONS AND WARRANTIES OF SOUTH FLORIDA BANK HOLDING.
South Florida Bank Holding 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 South Florida Bank Holding
to Fifth Third in connection with the execution of this Agreement by Fifth
Third:
A. South Florida Bank Holding (i) is duly incorporated, validly existing
and in good standing as a corporation under the corporation laws of the State of
Florida and is a registered bank holding company
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under the Bank Holding Company Act of 1956, as amended,; (ii) is duly authorized
to conduct the business in which it is engaged; (iii) has 10,000,000 shares,
$.01 par value per share, of South Florida Bank Holding Common Stock authorized
pursuant to its Articles of Incorporation, which are the total number of shares
South Florida Bank Holding 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 South Florida
Bank Holding of any kind, other than (a) 1,265,350 shares of South Florida Bank
Holding Common Stock, which presently are authorized, duly issued and
outstanding and fully paid and non-assessable, and (b) options to purchase a
total of 7,125 shares of South Florida Bank Holding Common Stock which were
granted to and are currently held by the officers of South Florida Bank Holding
and/or Bank Subsidiary; and (v) owns of record and beneficially free and clear
of all liens and encumbrances, all of the 796,475 outstanding shares of the
capital stock of the Bank Subsidiary, $5.50 par value per share. South Florida
Bank Holding has no direct or indirect subsidiaries other than Bank Subsidiary.
B. Bank Subsidiary is duly incorporated, validly existing and in good
standing as a banking corporation under the laws of the State of Florida, and
has all the requisite power and authority to conduct the banking business as now
conducted by it; and Bank 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 Bank Subsidiary of any
kind, other than 796,475 shares of the capital stock, $5.50 par value per share,
of all of the Bank Subsidiary owned of record and beneficially by South Florida
Bank Holding.
C. South Florida Bank Holding has previously furnished to Fifth Third its
audited, consolidated balance sheets, statements of operations, statements of
stockholders' equity and cash flows as at December 31, 1997, and for the year
then ended, together with the opinions of its independent certified public
accountants associated therewith. South Florida Bank Holding also has previously
furnished to Fifth Third audited, consolidated balance sheets, statements of
operations, statements of stockholders' equity and cash flows as at December 31,
1994, 1995, 1996. South Florida Bank Holding also has furnished to Fifth Third
its unaudited, consolidated financial statements as at March 31, 1998, for the
three (3) months then ended, June 30, 1998, for the six (6) months then ended,
and of the Bank Subsidiary for the quarters ending March 31, 1998 and June 30,
1998. Such audited consolidated financial statements of South Florida Bank
Holding fairly present the consolidated financial condition of South Florida
Bank Holding as of the date thereof, and for the years or periods covered
thereby in conformity with generally accepted accounting principles,
consistently applied ("GAAP"). There are no material liabilities, obligations or
indebtedness of South Florida Bank Holding or the Bank 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). South Florida Bank Holding shall furnish Fifth Third with unaudited,
consolidated financial statements as at September 30, 1998 and as at March 31,
1999 and for the quarters then ended as soon as practicable, and shall continue
to furnish such financial information for subsequent monthly and quarterly
periods to Fifth Third as soon as practicable until the Closing Date. In the
event that the Closing Date does not occur before March 31, 1999, South Florida
Bank Holding shall furnish Fifth Third with its audited, consolidated financial
statements as at December 31, 1998 for the quarter and year then ended and its
unaudited, consolidated financial as soon as they are reasonably available.
D. South Florida Bank Holding and the Bank 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, business or prospects of South Florida Bank Holding and the Bank
Subsidiary on a consolidated or separate basis; (ii) South Florida Bank Holding
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
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condition, operations, business or prospects of South Florida Bank Holding and
the Bank Subsidiary on a consolidated or separate 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 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 South Florida Bank Holding and the Bank
Subsidiary.
F. Except as disclosed in Schedule 1, there are no actions, suits,
proceedings, investigations or assessments of any kind pending, or to the best
knowledge of South Florida Bank Holding, threatened against South Florida Bank
Holding or the Bank Subsidiary which reasonably can be expected to result in any
material adverse change in the financial condition, operations, business or
prospects of South Florida Bank Holding and the Bank Subsidiary on a
consolidated or separate basis.
G. Except as disclosed in Schedule 1, since June 30, 1998, to the date
hereof South Florida Bank Holding and the Bank Subsidiary each has been operated
in the ordinary course of business, has not made any changes in its respective
capital or corporate structures, nor any material changes in its methods of
business operations and has not provided any increases in employee salaries or
benefits other than in the ordinary course of business. Except as disclosed in
Schedule 1, since June 30, 1998, to the date hereof South Florida Bank Holding
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, South Florida Bank Holding and the
Bank 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 South Florida Bank Holding or the Bank Subsidiary through the date
hereof constitute complete and accurate representations of the tax liabilities
of South Florida Bank Holding and the Bank 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.
I. Except as disclosed in Schedule 1, neither South Florida Bank Holding
nor the Bank 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 Bank 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 Bank Subsidiary has not incurred any unusual or extraordinary loan
losses which are material to South Florida Bank Holding and the Bank Subsidiary
on a consolidated basis; to the best knowledge of South Florida Bank Holding and
in light of the Bank 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 South
Florida Bank Holding, adequate to absorb all known and reasonably anticipated
losses as of such date.
K. Except as disclosed in Schedule 1, neither South Florida Bank Holding
nor the Bank 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 South Florida Bank Holding, 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 South Florida Bank
Holding's shareholders at the annual or a special meeting of the shareholders to
be called for that purpose, all
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in accordance with and as required by law and in accordance with the Articles of
Incorporation and Bylaws of South Florida Bank Holding.
2. South Florida Bank Holding 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 obligations of South Florida Bank Holding, enforceable in
accordance with its terms, subject, however, to the receipt of requisite
regulatory approvals and the approval of South Florida Bank Holding's
shareholders.
3. Except as disclosed in Schedule 1, neither the execution of the
Agreement, nor the consummation of the transactions contemplated hereby and
thereby, (i) conflicts with, results in a breach of, violates or constitutes a
default under, South Florida Bank Holding's Articles of Incorporation or Bylaws
or, to the best knowledge of South Florida Bank Holding, any federal, state or
local law, statute, ordinance, rule, regulation or court or administrative
order, or any agreement, arrangement, or commitment, to which South Florida Bank
Holding or the Bank Subsidiary is subject or bound; (ii) to the best knowledge
of South Florida Bank Holding, 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 South Florida
Bank Holding or the Bank Subsidiary; (iii) except as disclosed in Schedule 1,
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 South
Florida Bank Holding or the Bank Subsidiary is a party or by which South Florida
Bank Holding's or the Bank Subsidiary's rights, properties or assets are subject
or bound; or (iv) to the best knowledge of South Florida Bank Holding,
accelerates or modifies, or gives any party thereto the right to accelerate or
modify, the time within which, or the terms according to which, South Florida
Bank Holding or the Bank 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 Bank Subsidiary).
M. Complete and accurate copies of the (i) Articles of Incorporation and
Bylaws of South Florida Bank Holding, and (ii) the Articles of Incorporation and
Bylaws of the Bank Subsidiary in force as of the date hereof have been delivered
to Fifth Third.
N. Except as disclosed in Schedule 1, neither South Florida Bank Holding
nor the Bank Subsidiary nor any employee, officer or Director of any of them has
knowingly engaged in any activity or omitted to take any action which, in any
material way, has resulted or could result in the violation of (i) any local,
state or federal law (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, operation, business or prospects of
South Florida Bank Holding and the Bank Subsidiary, taken as whole. To the best
knowledge of South Florida Bank Holding and except as disclosed in Schedule 1,
the Bank Subsidiary possesses all licenses, franchises, permits and other
governmental authorizations necessary for the continued conduct of its business
without material interference or interruption.
O. Except as disclosed in Schedule 1, neither this Agreement nor the
Agreement of Merger nor any report, statement, list, certificate or other
information furnished by South Florida Bank Holding or the Bank 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
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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 South Florida Bank Holding 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 threatened against or affecting South Florida Bank Holding or the Bank
Subsidiary in respect to any "facility" owned, leased or operated by any of them
(but excluding any "facility" as to which sole interest of South Florida Bank
Holding or the Bank 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 South
Florida Bank Holding or the Bank 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 statue,
ordinance or regulation in respect thereof, in connection with any release of
any toxic or "hazardous substance", pollutant or contaminant into the
"environment" which, if adversely determined, (a) would require the payment by
South Florida Bank Holding or the Bank Subsidiary and/or require South Florida
Bank Holding or the Bank 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 the financial condition, operations or prospects of South
Florida Bank Holding or the Bank Subsidiary, nor, to the best knowledge of South
Florida Bank Holding after reasonable inquiry, is there any reasonable basis for
the institution of any such actions or proceedings or investigations which is
probable of assertion, nor are there any such actions or proceedings or
investigations in which South Florida Bank Holding or the Bank Subsidiary is a
plaintiff or complainant. Neither South Florida Bank Holding nor the Bank
Subsidiary is liable in any material respect under any applicable law for any
release by either of them or for any release by any other "person" of a
hazardous substance caused by the spilling, leaking, pumping, pouring, emitting,
emptying, discharging, injecting, escaping, leaching, dumping or disposing of
hazardous wastes or other chemical substances, pollutants or contaminants into
the environment, nor is South Florida Bank Holding or the Bank Subsidiary liable
for any material costs (as a result of the acts or omissions of South Florida
Bank Holding or the Bank Subsidiary or, to the best knowledge of South Florida
Bank Holding, 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 South Florida Bank Holding or the Bank Subsidiary to prevent
or minimize any actual or threatened release by South Florida Bank Holding or
the Bank 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 South Florida
Bank Holding each "facility" owned, leased or operated by South Florida Bank
Holding or the Bank Subsidiary (but excluding any "facility" as to which the
sole interest of South Florida Bank Holding or the Bank 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 South Florida Bank Holding or the Bank 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
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would not have a material adverse effect on the business, operations, financial
condition and prospects of South Florida Bank Holding and the Bank 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 South Florida Bank Holding
or the Bank Subsidiary for the benefit of employees, former employees or
Directors of South Florida Bank Holding or the Bank 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.
2. Plan Documents, Reports and Filings. Except as disclosed on Schedule
1, South Florida Bank Holding or the Bank 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) satisfied the
requirements of Section 401(a) of the Internal Revenue Code of 1986, as amended
through the date hereof (the "Code"), as amended by all of the laws referred to
in Section 1 of Revenue Procedure 93-39, such determination letter has not been
revoked or threatened to be revoked by the IRS, and the scope of such
determination letter is complete and does not exclude consideration of any of
the requirements or matters referred to in Sections 4.02 through 4.04 of Revenue
Procedure 93-39; (b) such Qualified Benefit Plan is in material compliance with
all qualification requirements of Section 401(a) of the Code; (c) such Qualified
Benefit Plan is in substantial compliance with all notice, reporting and
disclosure requirements of ERISA and the Code; (d) any Qualified Benefit Plan
which is an ESOP as defined in Section 4975(e)(7) of the Code (an "ESOP
Qualified Benefit Plan") is in material compliance with the applicable
qualification requirements of Section 409 of the Code; and (e) any previously
terminated Qualified Benefit Plan was terminated in material compliance with the
requirements of ERISA and the Code, has received a favorable determination
letter therefor, and the liabilities of such Qualified Benefit Plan and the
requirements of the Pension Benefit Guaranty Corporation ("PBGC") were fully
satisfied, and (f) any and all amendments to the Qualified Benefit Plan 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 South Florida Bank Holding, in compliance with
applicable Code provisions; (b) such Welfare Benefit Plan has been, to the best
knowledge of South Florida Bank Holding, 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 South Florida Bank Holding, operated in substantial compliance with
such COBRA requirements.
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5. Prohibited Transactions. 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 and
no ESOP Plan Qualified Benefit Plan is leveraged.
6. Lawsuits or Claims. No material actions, suits or claims (other than
routine claims of benefits) are pending or, to the best knowledge of South
Florida Bank Holding, threatened against any Benefit Plan or against South
Florida Bank Holding or the Bank 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 South Florida Bank Holding and the Bank Subsidiary
or, if not, in Schedule 1. For purposes hereof, the term "Unfunded Liabilities"
shall mean any amounts properly accrued to date under GAAP, or amounts not yet
accrued for GAAP purposes but for which an obligation (which has legally accrued
and cannot legally be eliminated and which is subject to reasonable estimate)
exists for payment in the future which is attributable to any Benefit Plan,
including but not limited to (a) severance pay benefits, (b) deferred
compensation or unpaid bonuses, (c) any liabilities on account of the change in
control which will result from this Agreement, including any potential 20%
excise tax under Section 4999 of the Code relating to excess parachute payments
under Section 280G of the Code, (d) any unpaid pension contributions for the
current plan year or any accumulated funding deficiency under Section 412 of the
Code and related penalties under Section 4971 of the Code, including unpaid
pension contributions or funding deficiencies owed by members of a controlled
group of corporations which includes South Florida Bank Holding or the Bank
Subsidiary and for which South Florida Bank Holding or the Bank 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. South Florida Bank Holding
and the Bank 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 South Florida Bank Holding, the Bank Subsidiary nor
any controlled group member of South Florida Bank Holding or the Bank 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. South Florida Bank Holding and the Bank
Subsidiaries (a) have not incurred any asserted or, to the best knowledge of
South Florida Bank Holding, 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 South Florida Bank Holding or the Bank
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", South Florida Bank Holding and Bank 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.
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11. Right to Amend and Terminate. Except as listed on Schedule 1, South
Florida Bank Holding or Bank Subsidiary has all power and authority necessary to
amend or terminate each Benefit Plan without incurring any penalty or liability
provided that, in the case of an employee pension benefit plan (as defined in
Section 3(2) of ERISA), benefits accrued as of the date of amendment or
termination are not reduced.
12. 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 South Florida Bank Holding and the Bank
Subsidiary consist of securities in marketable form. Except as disclosed in
Schedule 1, since June 30, 1998 to the date hereof neither South Florida Bank
Holding nor the Bank Subsidiary has incurred any unusual or extraordinary losses
in its investment portfolio, and, except for matters of general application to
the bank or banking industry (including, but not limited to, changes in laws or
regulations or GAAP) or for events relating to the business environment in
general, including market fluctuations and changes in interest rates, South
Florida Bank Holding 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 South Florida Bank
Holding's and the Bank 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 South Florida Bank Holding, threatened against any of the Directors
or officers of South Florida Bank Holding or the Bank Subsidiary in their
capacities as such, and no Director or officer of South Florida Bank Holding or
the Bank Subsidiary currently is being indemnified or seeking to be indemnified
by either South Florida Bank Holding or the Bank Subsidiary pursuant to
applicable law or South Florida Bank Holding's Articles of Incorporation or
Bylaws or the Bank Subsidiary's Articles of Incorporation or Bylaws.
T. There is no "business combination," "moratorium," "control share," or
other state anti-takeover statute or regulation or any agreement to which South
Florida Bank Holding is a party which (i) prohibits or restricts South Florida
Bank Holding'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 if its rights under this Agreement.
U. All interest rate swaps, caps, floors and option agreements and other
interest rate risk management arrangements, whether entered into for South
Florida Bank Holding'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 South Florida Bank Holding. Neither South Florida
Bank Holding nor its subsidiaries, nor to its knowledge any other party thereto
is, in any respect material to South Florida Bank Holding on a consolidated
basis, in breach of any of its obligations under any such agreement or
arrangement.
III. REPRESENTATIONS AND WARRANTIES OF FIFTH THIRD
Fifth Third represents and warrants to South Florida Bank Holding 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
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Company Act of 1956, as amended, and is duly authorized to conduct the business
in which it is engaged, and Fifth Third Bank is duly incorporated, validly
existing and in good standing as a banking corporation under the laws of the
State of Florida and is duly authorized to conduct the business in which it is
engaged.
B. Pursuant to Fifth Third's Second Amended Articles of Incorporation, as
amended, the total number of shares of capital stock it is authorized to have
outstanding is 300,500,000 of which 300,000,000 shares are classified as Common
Stock without par value ("Fifth Third Common Stock") and 500,000 shares are
classified as Preferred Stock without par value. As of the close of business on
September 30, 1998, 266,724,258 shares of Fifth Third Common Stock were issued
and outstanding and 1,116,365 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,
13,797,576 shares of Fifth Third Common Stock were reserved for issuance in
connection with outstanding options granted under its stock option plans and
11,172,669 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 South Florida Bank Holding 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 South Florida Bank Holding its
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. 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 South Florida Bank
Holding its unaudited consolidated financial statements as at June 30, 1998 and
September 30, 1998 and for the three (3) months then ended a soon as such
statements publicly are available, and shall continue to furnish information for
subsequent calendar quarter periods to South Florida Bank Holding 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 South Florida Bank Holding
shareholders in accordance with this Agreement, a sufficient number of shares of
Fifth Third Common Stock. Approval and adoption of this Agreement by the
shareholders of Fifth Third is not required under Ohio law or under the Second
Amended Articles of Incorporation, as amended, or Code of Regulations of Fifth
Third.
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 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
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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 and thereby, does or will (i) conflict with,
result in a breach of, violate or constitute a default, under Fifth Third's
Second Amended Articles of Incorporation, as amended, or Code of Regulations or,
to the best knowledge of its chief executive officer and chief financial
officer, any federal, foreign, state or local law, statute, ordinance, rule,
regulation or court or administrative order, or any agreement, arrangement, or
commitment to which Fifth Third is subject or bound; (ii) to the best knowledge
of the chief executive officer and chief financial officer of Fifth Third,
result in the creation of or give any person the right to create any material
lien, charge, encumbrance, security agreement or any other material rights of
others or other material adverse interest upon any material right, property or
asset belonging to Fifth Third or any of its subsidiaries other than such rights
as may be given the shareholders of South Florida Bank Holding pursuant to the
provisions of Sections 607.1301 through 607.1303 of the Florida 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 South Florida Bank Holding.
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 of which could
reasonably be expected to have a material adverse effect on the financial
condition Fifth Third and its subsidiaries taken as a whole. To the best
knowledge of the chief executive officer and chief financial officer of Fifth
Third, Fifth Third and its subsidiaries possess all licenses, 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 South Florida Bank Holding 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 South Florida Bank Holding 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 South Florida Bank Holding 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;
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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 Article II,
Section I, Subsection 2 (including all exhibits thereto and all documents
incorporated therein by reference) did not, as of the dates on which such
reports were filed with the SEC, (a) contain any untrue statement of a material
fact, (b) omit any material fact required to be stated therein or necessary to
make the statements contained therein, in light of the circumstances under which
they were made, not misleading, or (c) omit any material exhibit required to be
filed therewith. Prior to the date hereof no event has occurred subsequent to
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
South Florida Bank Holding. Fifth Third timely shall furnish South Florida Bank
Holding 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,
business or prospects 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 and belief of the chief executive officer and chief
financial officer of Fifth Third, and in the light of any banking or Bank
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 Section Q.1. of Article 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 South Florida
Bank Holding pursuant to Section D of Article 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.
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IV. OBLIGATIONS OF SOUTH FLORIDA BANK HOLDING BETWEEN THE DATE OF THIS AGREEMENT
AND THE
EFFECTIVE TIME.
A. South Florida Bank Holding, 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 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 South Florida Bank Holding intends to
inform the shareholders of South Florida Bank Holding in the proxy materials
relating to the annual or special meeting that all Directors of South Florida
Bank Holding presently intend to vote all shares of South Florida Bank Holding
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 South Florida Bank
Holding, subject only to such Directors' fiduciary obligations.
B. (i) Consistent with GAAP, South Florida Bank Holding agrees that on or
before the Effective Time based on a review of the Bank Subsidiary's loan
losses, current classified assets and commercial, multi-family and residential
mortgage loans and investment portfolio, South Florida Bank Holding 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 South Florida Bank Holding
as is necessary in conforming to such polices, practices, procedures and asset
dispositions which are mutually agreeable between the date of this Agreement
until the Effective Time; and (ii) from the date of this Agreement until the
Effective Time, South Florida Bank Holding and the Bank 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; 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 South Florida Bank Holding or the Bank 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); 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 South Florida Bank Holding
historically has done on its Common stock, provided this covenant shall only
apply to South Florida Bank Holding; 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.
South Florida Bank Holding agrees that it will not sell or otherwise dispose of
or encumber any of the shares of the capital stock of the Bank Subsidiary which
are now owned by it.
C. Except as required by applicable law or regulation and except for
actions taken with the consent of Fifth Third, neither South Florida Holding nor
the Bank Subsidiary shall (a) implement or adopt any material
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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 South Florida Bank
Holding's proxy statement with respect to the Merger, South Florida Bank Holding
shall deliver to Fifth Third a list of each person that, to the best of its
knowledge, is or is reasonably likely to be, as of the date of the annual or
special meeting called to approve the Merger, deemed an "affiliate" of it as
that term is used in Rule 145 under the Securities Act of 1933, as amended, or
SEC Accounting Series Releases 130 and 135 (the "South Florida Bank Holding
Affiliates"). South Florida Bank Holding shall use its best efforts to cause
each South Florida Bank Holding 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 Florida Division of Banks, and any other governmental agencies as are
required to secure the requisite approval of such agencies to the consummation
of the transactions provided for in this Agreement, and 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 South Florida Bank Holding in this transaction (the expenses
thereof, other than accounting, legal, investment banking, financial consulting
and associated expenses of South Florida Bank Holding 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. South Florida Bank Holding agrees that it will, as
promptly as practicable after request and at its own expense, provide Fifth
Third with all information and documents concerning South Florida Bank Holding
and Bank 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 South Florida Bank Holding. Fifth Third shall promptly provide
to South Florida Bank Holding copies of all applications filed with the
governmental agencies relating to the transactions contemplated by this
Agreement, and correspondence sent from and to Fifth Third with respect to such
applications. Fifth Third agrees that it will, as promptly as practicable after
request and at its own expense, provide South Florida Bank Holding with all
information and documents concerning Fifth Third and its subsidiaries as shall
be required in connection with preparing such applications, registration
statements and other documents which are to be prepared and filed by South
Florida Bank Holding and in connection with approvals required to be obtained by
South Florida Bank Holding hereunder. Prior to filing any such applications,
statements or other documents with the applicable governmental agency, South
Florida Bank Holding 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. South Florida Bank Holding agrees to permit Fifth Third, its officers,
employees, accountants, agents and attorneys, and Fifth Third agrees to permit
South Florida Bank Holding, its officers, employees, accountants, agents and
attorneys, to have reasonable access during business hours to their respective
books, records and properties, and those of the Bank Subsidiary and 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 South Florida Bank
Holding and the Bank Subsidiary or Fifth Third or Fifth Third Bank, as the case
may be, prior to the Effective Time, and
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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 South Florida Bank Holding shall not relieve Fifth
Third or South Florida Bank Holding 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,
South Florida Bank Holding shall terminate its stock option plan, and any
outstanding stock options at the Effective Time.
E. (1) South Florida Bank Holding or Bank Subsidiary shall take all
actions necessary to freeze the Qualified Benefit Plans as of a date at least
sixty (60) days preceding the Effective Time such that no further contributions
(including employee 401(k) contributions) shall be made under the Qualified
Benefit Plans.
(2) If Fifth Third so requests, South Florida Bank Holding or the Bank
Subsidiary shall develop a plan and timetable for terminating any or all of the
Qualified Benefit Plans and, with the advance written approval of Fifth Third,
shall proceed with the implementation of said termination plan and timetable.
(3) South Florida Bank Holding and Bank Subsidiary, without the advance
written consent of Fifth Third shall not (a) adopt any amendments to the
Qualified Benefit Plans after the date of this Agreement; or (b) make any
distributions from the Qualified Benefit Plans after the date of this Agreement;
or (c) make any contributions to the Qualified Benefit Plans (except 401(k)
employee contributions) after the date of this Agreement; or (d) take any action
reducing or restricting the availability of surplus under the defined benefit
plan.
(4) South Florida Bank Holding or Bank 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.
(5) 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 South Florida Bank Holding shall not be deemed to involve a
discretionary acceleration of vesting and vesting thereunder shall accelerate as
of the Effective Time.
VI. CONDITIONS PRECEDENT TO CLOSING.
A. Conditions to the Obligations of Each of the Parties:
The obligation of each of the parties hereto to consummate the transactions
provided for herein is subject to the fulfillment on or prior to the Effective
Time of each of the following conditions:
1. The shareholders of South Florida Bank Holding shall have duly
approved and adopted this Agreement in accordance with and as required by
law and in accordance with its Certificate of Incorporation and Bylaws.
2. All necessary governmental and regulatory orders, consents,
clearances and approvals and requirements shall have been secured and
satisfied for the consummation of such transactions, including without
limitation, those of the Federal Reserve System, the Ohio Division of
Banks, the Florida Division of Banks 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
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proceedings which have been withdrawn prior to or at the Effective Time
without material adverse effect to Fifth Third or South Florida Bank
Holding 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 South Florida Bank Holding which specifically refers to the condition or
conditions being waived:
1. All of the representations and warranties of South Florida Bank
Holding set forth in Article 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. South Florida Bank Holding shall have performed all of the
obligations required of it under the terms of this Agreement in all
material respects.
3. Smith, Mackinnon, Greeley, Bowdoin & Edwards, P.A., counsel for
South Florida Bank Holding and the Bank 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 South Florida Bank Holding as of September
30, 1998 and 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, shall not be less than $9,000,000. For purposes of
this Subparagraph 4 to Article VI, Section B, (A) any expenses or accruals
after the date hereof relating to (i) the adjustments contemplated by
Article IV, Section B (i) herein, (ii) termination or funding of any of
South Florida Bank Holding's or the Bank Subsidiary's Benefit Plans, as
contemplated herein, (iii) expenses associated with the Merger, (iv) market
value adjustments to the investment portfolio of South Florida Bank Holding
and the Bank Subsidiary, or (v) dividends paid by South Florida Bank
Holding in accordance with the terms of this Agreement, shall be excluded
for purposes of calculation of South Florida Bank Holding's and the Bank
Subsidiary'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 South Florida
Bank Holding as at the end of the month immediately preceding the Effective
Time, as well as the unaudited separate financial statements of the Bank
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 South Florida Bank Holding or the Bank
Subsidiary that should be made in order for such financial statements to
(i) be in conformity with GAAP excluding the presentation of footnotes, and
(ii) accurately state the financial condition and results of operations of
South Florida Bank Holding and each of the Bank Subsidiary, and such
modifications, in either case, would have a material adverse effect on the
financial condition of South Florida Bank Holding or any of the Bank
Subsidiary.
6. The receipt of a certificate from South Florida Bank Holding and
each of the Bank 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 Article 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
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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 South Florida Bank
Holding Common Stock shall not exceed 1,272,475 shares including all
options to purchase South Florida Bank Holding Common Stock.
8. (a) In consideration of the consummation of this transaction, the
Directors of South Florida Bank Holding shall execute and deliver to Fifth
Third an agreement by which the Directors shall agree for a period of (A)
two (2) years after the Effective Time for all Directors other than William
P. Valenti and (B) one (1) year from the Effective Time for William P.
Valenti, 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 the Fifth Third or an Affiliate relating to
Banking Services of any type, (v) endeavor or entice away from the 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 Article VI, 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 in writing by the Director to
Fifth Third. Notwithstanding the foregoing, (a) in the event William P.
Valenti becomes an employee of Fifth Third Bank at the Effective Time on
terms mutually acceptable to Fifth Third Bank and Mr. Valenti, he will not
be obligated to execute the aforementioned agreement, and (b) the
aforementioned non-competition agreement will not be deemed to apply to the
rendering of any legal services by Mr. James Humphry as outside counsel,
directly by Mr. Humphry or by members of any law firm in which he is a
member or employee, to any bank, savings and loan or other financial
institution with which he may now or hereafter have a lawyer/client
relationship.
(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.
(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.
C. Conditions to the Obligations of South Florida Bank Holding:
The obligation of South Florida Bank Holding 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
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following conditions unless waived by South Florida Bank Holding 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 Article 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 South Florida Bank Holding 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 Article 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 South Florida Bank Holding shareholders hereunder with the
SEC pursuant to the Securities Act of 1933, as amended, and with all
applicable state securities authorities. The registration statement with
respect thereto shall have been declared effective by the SEC and all
applicable state securities authorities and no stop order shall have been
issued. The shares of Fifth Third Common Stock to be issued to the South
Florida Bank Holding shareholders hereunder shall have been authorized for
trading on the National Market System of the National Association of
Securities Dealers upon official notice of issuance.
6. Fifth Third's Trust Department, as the Exchange Agent, will
acknowledge in writing to South Florida Bank Holding 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 South Florida Bank Holding
pursuant to this Agreement, and (ii) sufficient cash to be paid to the
South Florida Bank Holding shareholders for fractional shares.
7. South Florida Bank Holding shall have received a written opinion
from Fifth Third's counsel, Graydon, Head & Ritchey, in a form reasonably
satisfactory to South Florida Bank Holding and Fifth Third, to the effect
that the exchange of shares in the Merger of South Florida Bank Holding
Common Stock for Fifth Third Common Stock will not give rise to gain or
loss to the shareholders of South Florida Bank Holding with respect to such
exchange of shares, the federal income tax basis of the shares of Fifth
Third Common Stock received in exchange for the shares of South Florida
Bank Holding Common Stock will be equal to the holder's basis of the South
Florida Bank Holding Common Stock surrendered in exchange therefor, and the
holding period of such Fifth Third Common Stock will include the holding
period of the South Florida Bank Holding Common Stock surrendered in
exchange therefor.
8. South Florida Bank Holding shall have received from its financial
advisor a letter, dated within five days of the date of the Proxy Statement
to the effect that, in the opinion of such firm, the consideration to be
paid in the Merger is fair, from a financial point of view, to the holders
of South Florida Bank Holding Common Stock. South Florida will deliver a
copy of such letter to Fifth Third within two (2) business days after such
letter is issued.
VII. ADDITIONAL COVENANTS
A. The Bank Subsidiary shall be merged with and into Fifth Third Bank, to
be effective the Effective Time. The parties hereto agree to cooperate with one
another to effect such merger. Upon consummation of
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any merger of the Bank Subsidiary, the separate corporate existence of the Bank
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 South Florida Bank Holding and
Bank Subsidiary employees who desire employment within 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 Bank Subsidiary's
medical plan immediately prior to the Effective Time or any waiting period
relating to coverage under Fifth Third's medical plan. For the purposes of
participation and vesting (but not benefit accrual under any employee benefit
plans of Fifth Third other than South Florida Bank Holding benefit plans) under
Fifth Third employee benefit plans, the service of the employees of South
Florida Bank Holding prior to the Effective Time shall be treated as service
with Fifth Third. For purposes of applying any deductible limitations, out of
pocket minimums, or health certification requirements under any health group
plan made available to South Florida Bank Holding employees and their dependents
after the Merger, South Florida Bank Holding employees shall not be treated as
new hires and shall be given appropriate credit for their participation
immediately prior to the Merger in any South Florida Bank Holding Plan that
constituted a group health plan.
2. Those employees of South Florida Bank Holding and the Bank 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 South Florida Bank Holding or the Bank 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 South Florida Bank Holding of those employees
it will not be hiring in order that such employees terminated by South Florida
Bank Holding 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 South Florida Bank Holding or the Bank Subsidiary who has
an employment or severance agreement with South Florida Bank Holding or the Bank
Subsidiary as of October 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") as their sole severance
payments from South Florida Bank Holding and Fifth Third in connection with the
Merger, (provided that the Contract Payments owed under employment agreements
shall be limited to be base salary only to be paid under the remaining terms
under such employment agreements). 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. Notwithstanding the foregoing, Fifth Third agrees
that South Florida Holding shall honor the terms of the employment agreements
between South Florida Bank Holding and each of William P. Valenti and Harold S.
Taylor, copies of which are attached hereto on Schedule 1, including the payment
of any "change in control" payments owed thereunder, provided that each remains
employed with South Florida Bank Holding up through the Effective Time. Such
employment agreements shall not be amended without the prior written consent of
Fifth Third. Prior to the Effective Time, Fifth Third shall negotiate with each
of William P. Valenti and Harold S. Taylor with the intent that each of such
employees obtain positions with Fifth Third Bank as "at will" employees of
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Fifth Third Bank on terms mutually acceptable to Fifth Third Bank and each of
William P. Valenti and Harold S. Taylor.
C. (i) From and after the Effective Time, Fifth Third shall assume the
obligations of South Florida Bank Holding, Bank Subsidiary and any of their
subsidiaries arising under applicable Ohio, Florida and Federal law in existence
as of the date hereof or as amended prior to the Effective Time and under the
South Florida Bank Holding Articles of Incorporation and Code of Regulations or
Bank Subsidiary Articles of Incorporation 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 South Florida Bank Holding, Bank 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 South Florida Bank Holding, the Bank Subsidiary or
any of their subsidiaries if such Claim pertains to any matter or fact arising,
existing or occurring prior to the Effective Time (including, without
limitation, the merger and the transactions contemplated by this Agreement),
regardless of whether such Claim is asserted or claimed prior to, at or after
the Effective Time. Fifth Third 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 South Florida Bank Holding Articles
of Incorporation or Bylaws or Bank Subsidiary's Articles of Incorporation or
Bylaws. Fifth Third's assumption of the indemnification obligations of South
Florida Bank Holding, Bank 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 South Florida Bank Holding 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 Article VII,
Section 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 South Florida
Bank Holding'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 100% of the annual costs currently paid for such coverage by South
Florida Bank Holding.
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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 South
Florida Bank Holding concerning South Florida Bank Holding or the Bank
Subsidiary. South Florida Bank Holding 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 returned to South Florida Bank Holding or Fifth Third,
as the case may be, and shall not be used by Fifth Third or South Florida Bank
Holding, as the case may be, in any way detrimental to South Florida Bank
Holding 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 South Florida Bank Holding to Mr. William P. Valenti, President
and CEO, South Florida Bank Holding Corporation, 2017 McGregor Blvd., Ft. Myers,
Florida 33901, with a copy to John P. Greeley, Esq., Smith, Mackinnon, Greeley,
Bowdoin & Edwards, P.A. Law Firm, Suite 800 Citrus Center, 255 Orange Avenue,
Orlando, Florida 32801; and 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
South Florida Bank Holding 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 Article X hereof.
G. During the period from the date of this Agreement to the Effective
Time, except with the prior approval of Fifth Third, South Florida Bank Holding
shall not, and shall not permit its representatives to, directly or indirectly,
subject to the exercise by the Directors of South Florida Bank Holding of their
fiduciary duties, initiate, solicit, negotiation 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
South Florida Bank Holding or the Bank 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
South Florida Bank Holding or the Bank Subsidiary (any such transaction being
referred to herein as an "Acquisition Transaction"). South Florida Bank Holding
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. South
Florida bank Holding shall immediately cease and cause to be terminated any
activities, discussions or negotiations concerning or provide any confidential
information to, or have any discussions with, any person relating to any
Acquisition Transaction.
H. Fifth Third and South Florida Bank Holding 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 the
Closing Date, this subsection shall be of no further force or effect.
I. Upon the request of Fifth Third and at the sole option of Fifth Third,
South Florida Holding and the Bank Subsidiary shall execute and deliver to
Midwest Payment Systems, Inc. ("MPS") an agreement to convert all electronic
funds transfer ("EFT") related services to MPS and the Jeanie(R) system. Such
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Agreement shall provide that MPS will be the exclusive provider of such services
to South Florida Bank Holding and the Bank Subsidiary for a period of five (5)
years from the date such agreements are executed. Fifth Third agrees that the
cost of the conversion of South Florida Bank Holding and the Bank Subsidiary to
EFT provided by MPS and conversion to the Jeanie(R) system (including, without
limitation, the cost of all card reissue, signage and penalties relating to
terminating its current EFT relationships) will be paid by Fifth Third. Fifth
Third further agrees that the costs and fees to South Florida Bank Holding and
the Bank Subsidiaries for the Jeanie(R) service shall not exceed those charged
by the current EFT service provider of South Florida Bank Holding and the Bank
Subsidiary, subject to any increases in such costs and fees which would
otherwise be permitted under their current EFT processing agreements. In the
event this Agreement is terminated pursuant to Article VIII hereof for any
reason except a material breach or default by South Florida Bank Holding, and
if, in such instance, South Florida Bank Holding desires to convert to another
provider of EFT services, Fifth Third shall pay all costs and expenses
associated with such conversion, provided, however, such costs and expenses are
reasonable when compared to costs and expenses ordinarily charged in the EFT
services industry. In no event shall South Florida Bank Holding or the Bank
Subsidiary be required to take any actions pursuant to this Paragraph I or
otherwise under this Agreement or the Agreement of merger that are contrary to
any applicable law, regulation, rule or order or which constitute a breach of
the fiduciary duties of the directors of South Florida Bank Holding or the Bank
Subsidiary.
J. Fifth Third and South Florida Bank Holding 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 South Florida Bank Holding 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 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, South Florida Bank
Holding 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 South Florida Bank Holding 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 South Florida Bank Holding 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 South Florida Bank Holding 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 Fifth Third and its subsidiaries,
taken as a whole, provided, however, that no such information so disclosed to
South Florida Bank Holding shall be deemed an exception to any representation,
warranty or covenant made by Fifth Third unless South Florida Bank Holding, in
its sole discretion, agrees in writing to accept such exception.
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VIII. TERMINATION
A. This Agreement may be terminated at any time prior to the Effective
Time by written notice delivered by Fifth Third to South Florida Bank Holding or
by South Florida Bank Holding to Fifth Third in the following instances:
1. By Fifth Third or South Florida Bank Holding, if there has been to
the extent contemplated in Article VI, Sections B.1. and 2. and Article VI,
Sections 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 South Florida Bank Holding, 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 South Florida Bank Holding, 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 South Florida Bank
Holding.
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 Article VI,
Sections A. and B. herein and non-compliance is not waived by Fifth Third.
6. By South Florida Bank Holding if any event occurs which renders
impossible of satisfaction in any material respect one or more of the
conditions of the obligations of South Florida Bank Holding to effect the
Merger as set forth in Article VI, Sections A. and C. herein and
non-compliance is not waived by South Florida Bank Holding.
B. If South Florida Bank Holding shareholders, acting at a meeting held
for the purpose of voting upon this Agreement and the Agreement of Merger, fail
to approve such agreements in the manner required by law, then this Agreement
and the Agreement of Merger shall be deemed to be automatically terminated,
provided that South Florida Bank Holding.
C. Upon termination as provided in this Section, this Agreement and the
Agreement of Merger, except for the provisions of Sections D, H, J and K of
Article VII hereof shall be void and of no further force or effect, and, except
as provided in Section H of Article 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 Article 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 South Florida Bank Holding and Fifth Third) with
the Secretary of the State of Ohio and the Secretary of
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State of Florida 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 South Florida Bank Holding 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 South Florida
Bank Holding, but after any such approval by the shareholders of South Florida
Bank Holding 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 its Common Stock shall
thereafter continue to be publicly traded and issuable to South Florida Bank
Holding shareholders pursuant to the terms of this Agreement.
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XII. COUNTERPARTS
This Agreement may be executed in any number of counterparts, each of which
shall be deemed an original for all purposes but such counterparts taken
together shall constitute one and the same instrument.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the date hereinabove set forth.
<TABLE>
<S> <C>
FIFTH THIRD BANCORP
(SEAL) By: /s/ ROBERT P. NIEHAUS
--------------------------------------------------------
Robert P. Niehaus, Executive Vice President
Attest: /s/ PAUL L. REYNOLDS
--------------------------------------------------------
Paul L. Reynolds, Assistant Secretary
SOUTH FLORIDA BANK HOLDING CORPORATION
(SEAL) By: /s/ R. ERNEST HENDRY
--------------------------------------------------------
R. Ernest Hendry, Chairman of the Board of Directors
Attest: /s/ WILLIAM P. VALENTI
-------------------------------------------------
William P. Valenti, President and Chief Executive
Officer
</TABLE>
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ANNEX B
March 31, 1999
Board of Directors
South Florida Bank Holding Corporation
2017 McGregor Blvd.
Ft. Myers, FL 33901
Members of the Board:
You have requested our opinion as to the fairness, from a financial point
of view, of the consideration to be received by the shareholders of South
Florida Bank Holding Corporation ("South Florida") under the terms of a certain
Affiliation Agreement dated October 22, 1998 (the "Agreement") pursuant to which
South Florida will be merged into and with Fifth Third Bancorp, Cincinnati, OH
("Fifth Third") (the "Merger"). Under the terms of the Agreement, each of the
outstanding shares of South Florida Common Stock shall be converted into 0.348
shares of Fifth Third Common Stock. The foregoing summary of the Merger is
qualified in its entirety by reference to the Agreement.
The Carson Medlin Company is a National Association of Securities Dealers,
Inc. (NASD) member investment banking firm, which specializes in the securities
of southeastern United States financial institutions. As part of our investment
banking activities, we are regularly engaged in the valuation of southeastern
United States financial institutions and transactions relating to their
securities. We regularly publish our research on independent community banks
regarding their financial and stock price performance. We are familiar with the
commercial banking industry in Florida and the major commercial banks operating
in that market. We have been retained by South Florida in a financial advisory
capacity to render our opinion hereunder, for which we will receive
compensation.
In reaching our opinion, we have analyzed the respective financial
positions, both current and historical, of Fifth Third and South Florida. We
have reviewed: (i) the Agreement; (ii) the annual reports to shareholders of
Fifth Third, including audited financial statements for the six years ended
December 31, 1998; (iii) audited financial statements of South Florida for the
six years ended December 31, 1998; (iv) certain financial and operating
information with respect to the business, operations and prospects of Fifth
Third and South Florida; and (v) the Proxy Statement/Prospectus. We also: (a)
held discussions with members of the senior management of Fifth Third and South
Florida regarding historical and current business operations, financial
condition and future prospects of their respective companies; (b) reviewed the
historical market prices and trading activity for the common stocks of Fifth
Third and South Florida and compared them with those of certain publicly traded
companies which we deemed to be relevant; (c) compared the results of operations
of Fifth Third and South Florida with those of certain banking companies which
we deemed to be relevant; (d) compared the financial terms of the Merger with
the financial terms, to the extent publicly available, of certain other recent
business combinations of commercial banking organizations; and (e) conducted
such other studies, analyses, inquiries and examinations as we deemed
appropriate.
We have relied upon and assumed, without independent verification, the
accuracy and completeness of all information provided to us. We have not
performed or considered any independent appraisal or evaluation of the assets of
Fifth Third or South Florida. The opinion we express herein is necessarily based
upon market, economic and other relevant considerations as they exist and can be
evaluated as of the date of this letter.
Based upon the foregoing, it is our opinion that the consideration provided
for in the Agreement is fair, from a financial point of view, to the
shareholders of South Florida Bank Holding Corporation.
Very truly yours,
/s/ The Carson Medlin Company
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<PAGE> 77
ANNEX C
TITLE XXXVI BUSINESS ORGANIZATIONS
CHAPTER 607 CORPORATIONS
607.1301 DISSENTERS' RIGHTS; DEFINITIONS.
The following definitions apply to ss. 607.1302 and 607.1320:
(1) "Corporation" means the issuer of the shares held by a dissenting
shareholder before the corporate action or the surviving or acquiring
corporation by merger or share exchange of that issuer.
(2) "Fair value," with respect to a dissenter's shares, means the value of
the shares as of the close of business on the day prior to the shareholders'
authorization date, excluding any appreciation or depreciation in anticipation
of the corporate action unless exclusion would be inequitable.
(3) "Shareholders' authorization date" means the date on which the
shareholders' vote authorizing the proposed action was taken, the date on which
the corporation received written consents without a meeting from the requisite
number of shareholders in order to authorize the action, or, in the case of a
merger pursuant to s. 607.1104, the day prior to the date on which a copy of the
plan of merger was mailed to each shareholder of record of the subsidiary
corporation.
607.1302 RIGHT OF SHAREHOLDERS TO DISSENT.
(1) Any shareholder of a corporation has the right to dissent from, and
obtain payment of the fair value of his or her shares in the event of, any of
the following corporate actions:
(a) Consummation of a plan of merger to which the corporation is a
party:
1. If the shareholder is entitled to vote on the merger, or
2. If the corporation is a subsidiary that is merged with its
parent under s. 607.1104, and the shareholders would have been entitled
to vote on action taken, except for the applicability of s. 607.1104;
(b) Consummation of a sale or exchange of all, or substantially all,
of the property of the corporation, other than in the usual and regular
course of business, if the shareholder is entitled to vote on the sale or
exchange pursuant to s. 607.1202, including a sale in dissolution but not
including a sale pursuant to court order or a sale for cash pursuant to a
plan by which all or substantially all of the net proceeds of the sale will
be distributed to the shareholders within 1 year after the date of sale;
(c) As provided in s. 607.0902(11), the approval of a control-share
acquisition;
(d) Consummation of a plan of share exchange to which the corporation
is a party as the corporation the shares of which will be acquired, if the
shareholder is entitled to vote on the plan;
(e) Any amendment of the articles of incorporation if the shareholder
is entitled to vote on the amendment and if such amendment would adversely
affect such shareholder by:
1. Altering or abolishing any preemptive rights attached to any of
his or her shares;
2. Altering or abolishing the voting rights pertaining to any of
his or her shares, except as such rights may be affected by the voting
rights of new shares then being authorized of any existing or new class
or series of shares;
3. Effecting an exchange, cancellation, or reclassification of any
of his or her shares, when such exchange, cancellation, or
reclassification would alter or abolish the shareholder's voting rights
or alter his or her percentage of equity in the corporation, or
effecting a reduction or cancellation of accrued dividends or other
arrearages in respect to such shares;
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4. Reducing the stated redemption price of any of the shareholder's
redeemable shares, altering or abolishing any provision relating to any
sinking fund for the redemption or purchase of any of his or her shares,
or making any of his or her shares subject to redemption when they are
not otherwise redeemable;
5. Making noncumulative, in whole or in part, dividends of any of
the shareholder's preferred shares which had theretofore been
cumulative;
6. Reducing the stated dividend preference of any of the
shareholder's preferred shares; or
7. Reducing any stated preferential amount payable on any of the
shareholder's preferred shares upon voluntary or involuntary
liquidation; or
(f) Any corporate action taken, to the extent the articles of
incorporation provide that a voting or nonvoting shareholder is entitled to
dissent and obtain payment for his or her shares.
(2) A shareholder dissenting from any amendment specified in paragraph
(1)(e) has the right to dissent only as to those of his or her shares which
are adversely affected by the amendment.
(3) A shareholder may dissent as to less than all the shares
registered in his or her name. In that event, the shareholder's rights
shall be determined as if the shares as to which he or she has dissented
and his or her other shares were registered in the names of different
shareholders.
(4) Unless the articles of incorporation otherwise provide, this
section does not apply with respect to a plan of merger or share exchange
or a proposed sale or exchange of property, to the holders of shares of any
class or series which, on the record date fixed to determine the
shareholders entitled to vote at the meeting of shareholders at which such
action is to be acted upon or to consent to any such action without a
meeting, were either registered on a national securities exchange or
designated as a national market system security on an interdealer quotation
system by the National Association of Securities Dealers, Inc., or held of
record by not fewer than 2,000 shareholders.
(5) A shareholder entitled to dissent and obtain payment for his or
her shares under this section may not challenge the corporate action
creating his or her entitlement unless the action is unlawful or fraudulent
with respect to the shareholder or the corporation.
607.1320 PROCEDURE FOR EXERCISE OF DISSENTERS' RIGHTS.
(1) (a) If a proposed corporate action creating dissenters' rights under s.
607.1302 is submitted to a vote at a shareholders' meeting, the meeting notice
shall state that shareholders are or may be entitled to assert dissenters'
rights and be accompanied by a copy of ss. 607.1301, 607.1302, and 607.1320. A
shareholder who wishes to assert dissenters' rights shall:
1. Deliver to the corporation before the vote is taken written
notice of the shareholder's intent to demand payment for his or her
shares if the proposed action is effectuated, and
2. Not vote his or her shares in favor of the proposed action. A
proxy or vote against the proposed action does not constitute such a
notice of intent to demand payment.
(b) If proposed corporate action creating dissenters' rights under s.
607.1302 is effectuated by written consent without a meeting, the
corporation shall deliver a copy of ss. 607.1301, 607.1302, and 607.1320 to
each shareholder simultaneously with any request for the shareholder's
written consent or, if such a request is not made, within 10 days after the
date the corporation received written consents without a meeting from the
requisite number of shareholders necessary to authorize the action.
(2) Within 10 days after the shareholders' authorization date, the
corporation shall give written notice of such authorization or consent or
adoption of the plan of merger, as the case may be, to each shareholder who
filed a notice of intent to demand payment for his or her shares pursuant to
paragraph (1)(a) or, in the case of action authorized by written consent, to
each shareholder, excepting any who voted for, or consented in writing to, the
proposed action.
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(3) Within 20 days after the giving of notice to him or her, any
shareholder who elects to dissent shall file with the corporation a notice of
such election, stating the shareholder's name and address, the number, classes,
and series of shares as to which he or she dissents, and a demand for payment of
the fair value of his or her shares. Any shareholder failing to file such
election to dissent within the period set forth shall be bound by the terms of
the proposed corporate action. Any shareholder filing an election to dissent
shall deposit his or her certificates for certificated shares with the
corporation simultaneously with the filing of the election to dissent. The
corporation may restrict the transfer of uncertificated shares from the date the
shareholder's election to dissent is filed with the corporation.
(4) Upon filing a notice of election to dissent, the shareholder shall
thereafter be entitled only to payment as provided in this section and shall not
be entitled to vote or to exercise any other rights of a shareholder. A notice
of election may be withdrawn in writing by the shareholder at any time before an
offer is made by the corporation, as provided in subsection (5), to pay for his
or her shares. After such offer, no such notice of election may be withdrawn
unless the corporation consents thereto. However, the right of such shareholder
to be paid the fair value of his or her shares shall cease, and the shareholder
shall be reinstated to have all his or her rights as a shareholder as of the
filing of his or her notice of election, including any intervening preemptive
rights and the right to payment of any intervening dividend or other
distribution or, if any such rights have expired or any such dividend or
distribution other than in cash has been completed, in lieu thereof, at the
election of the corporation, the fair value thereof in cash as determined by the
board as of the time of such expiration or completion, but without prejudice
otherwise to any corporate proceedings that may have been taken in the interim,
if:
(a) Such demand is withdrawn as provided in this section;
(b) The proposed corporate action is abandoned or rescinded or the
shareholders revoke the authority to effect such action;
(c) No demand or petition for the determination of fair value by a
court has been made or filed within the time provided in this section; or
(d) A court of competent jurisdiction determines that such shareholder
is not entitled to the relief provided by this section.
(5) Within 10 days after the expiration of the period in which shareholders
may file their notices of election to dissent, or within 10 days after such
corporate action is effected, whichever is later (but in no case later than 90
days from the shareholders' authorization date), the corporation shall make a
written offer to each dissenting shareholder who has made demand as provided in
this section to pay an amount the corporation estimates to be the fair value for
such shares. If the corporate action has not been consummated before the
expiration of the 90-day period after the shareholders' authorization date, the
offer may be made conditional upon the consummation of such action. Such notice
and offer shall be accompanied by:
(a) A balance sheet of the corporation, the shares of which the
dissenting shareholder holds, as of the latest available date and not more
than 12 months prior to the making of such offer; and
(b) A profit and loss statement of such corporation for the 12-month
period ended on the date of such balance sheet or, if the corporation was
not in existence throughout such 12-month period, for the portion thereof
during which it was in existence.
(6) If within 30 days after the making of such offer any shareholder
accepts the same, payment for his or her shares shall be made within 90 days
after the making of such offer or the consummation of the proposed action,
whichever is later. Upon payment of the agreed value, the dissenting shareholder
shall cease to have any interest in such shares.
(7) If the corporation fails to make such offer within the period specified
therefor in subsection (5) or if it makes the offer and any dissenting
shareholder or shareholders fail to accept the same within the period of 30 days
thereafter, then the corporation, within 30 days after receipt of written demand
from any dissenting shareholder given within 60 days after the date on which
such corporate action was effected, shall, or at its election at any time within
such period of 60 days may, file an action in any court of competent
jurisdiction
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<PAGE> 80
in the county in this state where the registered office of the corporation is
located requesting that the fair value of such shares be determined. The court
shall also determine whether each dissenting shareholder, as to whom the
corporation requests the court to make such determination, is entitled to
receive payment for his or her shares. If the corporation fails to institute the
proceeding as herein provided, any dissenting shareholder may do so in the name
of the corporation. All dissenting shareholders (whether or not residents of
this state), other than shareholders who have agreed with the corporation as to
the value of their shares, shall be made parties to the proceeding as an action
against their shares. The corporation shall serve a copy of the initial pleading
in such proceeding upon each dissenting shareholder who is a resident of this
state in the manner provided by law for the service of a summons and complaint
and upon each nonresident dissenting shareholder either by registered or
certified mail and publication or in such other manner as is permitted by law.
The jurisdiction of the court is plenary and exclusive. All shareholders who are
proper parties to the proceeding are entitled to judgment against the
corporation for the amount of the fair value of their shares. The court may, if
it so elects, appoint one or more persons as appraisers to receive evidence and
recommend a decision on the question of fair value. The appraisers shall have
such power and authority as is specified in the order of their appointment or an
amendment thereof. The corporation shall pay each dissenting shareholder the
amount found to be due him or her within 10 days after final determination of
the proceedings. Upon payment of the judgment, the dissenting shareholder shall
cease to have any interest in such shares.
(8) The judgment may, at the discretion of the court, include a fair rate
of interest, to be determined by the court.
(9) The costs and expenses of any such proceeding shall be determined by
the court and shall be assessed against the corporation, but all or any part of
such costs and expenses may be apportioned and assessed as the court deems
equitable against any or all of the dissenting shareholders who are parties to
the proceeding, to whom the corporation has made an offer to pay for the shares,
if the court finds that the action of such shareholders in failing to accept
such offer was arbitrary, vexatious, or not in good faith. Such expenses shall
include reasonable compensation for, and reasonable expenses of, the appraisers,
but shall exclude the fees and expenses of counsel for, and experts employed by,
any party. If the fair value of the shares, as determined, materially exceeds
the amount which the corporation offered to pay therefor or if no offer was
made, the court in its discretion may award to any shareholder who is a party to
the proceeding such sum as the court determines to be reasonable compensation to
any attorney or expert employed by the shareholder in the proceeding.
(10) Shares acquired by a corporation pursuant to payment of the agreed
value thereof or pursuant to payment of the judgment entered therefor, as
provided in this section, may be held and disposed of by such corporation as
authorized but unissued shares of the corporation, except that, in the case of a
merger, they may be held and disposed of as the plan of merger otherwise
provides. The shares of the surviving corporation into which the shares of such
dissenting shareholders would have been converted had they assented to the
merger shall have the status of authorized but unissued shares of the surviving
corporation.
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